Under the current regulatory environment, Cleco Power believes these regulatory assets will be fully recoverable; however, if in the future, as a result of regulatory changes or competition, Cleco Power’s ability to recover these regulatory assets would no longer be probable, then to the extent that such regulatory assets were determined not to be recoverable, Cleco Power would be required to write-down such assets. In

addition, potential deregulation of the industry, or possible future changes in the method of rate regulation of Cleco Power, could require discontinuance of the application of the authoritative guidance on regulated operations.

The following table summarizes Cleco Power’s regulatory assets and liabilities:


Cleco Power
					REMAINING RECOVERY PERIOD (YRS.)
(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Regulatory assets
Acadia Unit 1 acquisition costs	$	1,834	$	1,913	17.25
Accumulated deferred fuel (1)	81,928		56,826		Various
Affordability study	12,060		13,094		8.75
AFUDC equity gross-up	64,251		66,574		Various	(2)
AMI deferred revenue requirement	1,636		2,045		3.5
AROs (1)(8)	16,653		15,141
Bayou Vista to Segura transmission project deferred revenue requirement	3,765		1,392		0.75
Coughlin transaction costs	823		845		26.75
COVID-19 executive order (8)	2,953		2,953
Deferred storm restoration costs - Hurricane Delta (6)	21		17,113
Deferred storm restoration costs - Hurricane Ida (7)	9,350		37,617
Deferred storm restoration costs - Hurricane Laura (6)	90		54,282
Deferred storm restoration costs - Hurricane Zeta (6)	2		3,296
Deferred storm restoration costs - Winter Storms Uri & Viola	—		1,912
Dolet Hills Power Station closure costs (8)	147,021		145,844

Energy efficiency	588		1,645		0.5
Financing costs (1)	6,549		6,826		Various	(3)
Interest costs	3,272		3,459		Various	(2)
Lignite Mine closure costs (8)	136,071		136,980
Madison Unit 3 property taxes (9)	13,028		8,362
Non-service cost of postretirement benefits	14,472		12,950		Various	(2)
Other assets	8,792		11,224		Various
Postretirement costs	108,524		117,773		Various	(4)
Production operations and maintenance expenses	9,017		11,058		Various	(5)
Rodemacher Unit 2 deferred costs (8)	11,210		6,931
St. Mary Clean Energy Center	8,607		6,089		2.75

Training costs	5,813		5,929		37.25
Tree trimming costs	7,056		9,092		2.5
Total regulatory assets	675,386		759,165
Regulatory liabilities


Deferred taxes, net	(49,099)		(95,544)		Various

Storm reserves	(118,002)		—
Total regulatory liabilities	(167,101)		(95,544)
Total regulatory assets, net	$	508,285	$	663,621
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at September 30, 2022, and December 31, 2021, respectively. All other assets are earning a return on investment. (2) Amortized over the estimated lives of the respective assets. (3) Amortized over the terms of the related debt issuances. (4) Amortized over the average service life of the remaining plan participants. (5) Deferral is recovered over the following three-year regulatory period. (6) From June 1, 2021, through August 31, 2022, these were being recovered through the interim storm recovery rate. For more information, see Note 17 — “Storm Securitization and Cost Recovery.” (7) Currently not in a recovery period. The balance remaining represents amounts under a prudency review by the LPSC. (8) Currently not in a recovery period. (9) Property taxes paid for the year ended December 31, 2021, are being recovered over 12 months beginning July 1, 2022.

The following table summarizes Cleco’s net regulatory assets and liabilities:


Cleco
(THOUSANDS)	AT SEPT. 30, 2022		AT DEC. 31, 2021
Total Cleco Power regulatory assets, net	$	508,285	$	663,621
2016 Merger adjustments *
Fair value of long-term debt	106,599		112,150
Postretirement costs	11,933		13,424
Financing costs	6,990		7,248
Debt issuance costs	4,671		4,920
Total Cleco regulatory assets, net	$	638,478	$	801,363

* Cleco regulatory assets include acquisition accounting adjustments as a result of the 2016 Merger.

Deferred Storm Restoration Costs

In 2020 and 2021, Cleco Power’s distribution and transmission systems sustained damage from four separate hurricanes, Hurricanes Laura, Delta, Zeta, and Ida, and two severe winter storms, Winter Storms Uri and Viola. Cleco Power established a separate regulatory asset to track and defer non-capital expenses associated with each corresponding storm, as approved by the LPSC.

On June 22, 2022, through Cleco Securitization I, Cleco Power completed a securitized financing of Storm Recovery Property, which included the previously mentioned storm restoration costs that were deferred as regulatory assets. In connection with that securitization financing, Cleco Securitization I used the net proceeds from its issuance of storm recovery bonds to purchase the Storm Recovery Property from Cleco Power. Prior to September 1, 2022, the costs for Hurricanes Laura, Delta, and Zeta were recovered through the interim storm recovery rate. The balances remaining at September 30, 2022, for Hurricanes Laura, Delta, and Zeta are due to the timing of collections of the interim storm rate and are expected to be funded by the storm reserve in the first quarter of 2023. The costs remaining at September 30, 2022, for Hurricane Ida are currently under a prudency review by the LPSC. Cleco Power is unable to determine the outcome or timing of such review. For more information on the storm securitization financing, see Note 17 — “Storm Securitization and Cost Recovery.”

Storm Reserves

On June 22, 2022, in conjunction with the storm securitization financing and pursuant to the financing order issued by the LPSC on April 1, 2022, newly funded storm reserves for future storm restoration costs and Hurricane Ida storm restoration costs were established. Upon securitization, Cleco Power withdrew $79.6 million from the LPSC approved Hurricane Ida storm reserve. At September 30, 2022, Cleco Power had a balance of $15.4 million related to the Hurricane Ida storm reserve, with the current portion of $9.4 million in Other current liabilities on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets. The current portion represents those deferred storm costs recorded in the related Hurricane Ida regulatory asset that are currently under a prudency review by the LPSC. At September 30, 2022, Cleco Power had a storm reserve balance of $102.6 million for future storm restoration costs.

St. Mary Clean Energy Center

Cleco Power has a regulatory asset for the revenue requirements related to the planning and construction costs

incurred for the St. Mary Clean Energy Center. On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million, which resulted in a $13.8 million impairment charge and a reduction of the associated property, plant, and equipment net book value. The approved settlement also included refunding $10.4 million to Cleco Power’s retail customers. As a result, a regulatory asset of $3.8 million was recognized for the incurred refund liability for retail revenues that will continue to be collected until Cleco Power’s current base rates are reset in its next rate case, which is expected on July 1, 2024. At September 30, 2022, the St. Mary Clean Energy Center regulatory asset consisted of $4.8 million for the original revenue requirement included in current base rates and $3.8 million for the incurred refund liability. On October 1, 2022, Cleco Power began amortizing the $3.8 million regulatory asset to Electric customer credits on its Condensed Consolidated Statement of Income as amounts are collected from customers. For more information on the settlement and disallowance, see Note — 11 “Regulation and Rates — St. Mary Clean Energy Center” and Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”