Regulation and Rates

12 Months Ended

Dec. 31, 2022

Note 13 — Regulation and Rates

Regulatory Refunds

Provision for rate refund on Cleco’s and Cleco Power’s Consolidated Balance Sheets consisted primarily of the following:


			AT DEC. 31,
(THOUSANDS)	2022		2021
Cleco Katrina/Rita storm recovery charges	$	—	$	1,611
FRP	$	—	$	1,229
Site-specific industrial customer	$	903	$	833

TCJA	$	2,057	$	2,057

Cleco Katrina/Rita Storm Recovery Charges

Prior to the repayment of the Cleco Katrina/Rita storm recovery bonds in March 2020, Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers to pay administrative fees, interest, and principal on the Cleco Katrina/Rita storm recovery bonds. In April 2021, after payments for all final administrative and winding up activities of Cleco Katrina/Rita were made, Cleco Katrina/Rita transferred its remaining restricted cash to Cleco Power. In September 2022, $1.6 million was refunded to retail customers in the form of bill credits as approved by the LPSC on July 27, 2022.

FRP

Prior to July 1, 2021, Cleco Power’s annual retail earnings were subject to an FRP established by the LPSC in June 2014. The 2014 FRP allowed Cleco Power to earn a target ROE of 10.0%, while providing the opportunity to earn up to 10.9%. Additionally, 60% of retail earnings between 10.9% and 11.75%, and all retail earnings over 11.75% were required to be refunded to customers. On June 16, 2021, the LPSC approved Cleco Power’s new FRP. Effective July 1, 2021, under the terms of the new FRP, Cleco Power is allowed to earn a target ROE of 9.5%, while providing the opportunity to earn up to 10.0%. Additionally, 60.0% of retail earnings between 10.0% and 10.5% and all retail earnings over 10.5%, are required to be refunded to customers. The amount of credits due to customers, if any, is determined by Cleco Power and the LPSC annually. Cleco Power’s next base rate case is required to be filed with the LPSC on or before March 31, 2023.

On October 31, 2022, a monitoring report was filed for the 12 months ending June 30, 2022, indicating no refund was due. The LPSC staff is currently reviewing the report and Cleco Power has responded to data requests. Cleco Power anticipates the approval of this report in the third quarter of 2023.

Cleco Power continued to accrue the annual cost of service savings resulting from the 2016 Merger Commitments through June 30, 2021. Beginning July 1, 2021, the annual cost of service savings are included in Cleco Power’s current retail rate plan. Cleco Power had $1.2 million accrued for the period of July 1, 2019, through June 30, 2020, which was refunded to customers in September 2022.

St. Mary Clean Energy Center

In August 2019, the St. Mary Clean Energy Center was placed in service. The planning and construction costs for this facility

are currently being recovered through Cleco Power’s base rates and were subject to a prudency review by the LPSC. On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million of those costs, 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, which was given back to customers as bill credits in October 2022. For more information about the settlement and disallowance, see Note 15 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Prudency Reviews — St. Mary Clean Energy Center.”

TCJA

The provisions of the TCJA reduced the top federal statutory corporate income tax rate from 35% to 21%. In July 2019, the LPSC approved Cleco Power’s rate refund of $79.2 million, plus interest, for the reduction in the statutory federal tax rate for the period from January 2018 to June 2020. The refund was credited to customers over 12 months beginning August 1, 2019.

In 2020, the LPSC approved Cleco Power’s extension of the TCJA bill credits at the same rate as determined in the initial TCJA refund of approximately $7.0 million per month. The extension was for the period of August 2020 through June 30, 2021. The $7.0 million monthly refund consisted of approximately $4.4 million, which was to be funded by the unprotected excess ADIT, and approximately $2.6 million, which is the change in the federal statutory corporate income tax rate from 35% to 21%. At December 31, 2022, Cleco Power had $2.1 million accrued for the estimated federal tax-related benefits from the TCJA.

On June 16, 2021, the LPSC approved Cleco Power’s current retail rate plan which includes the settlement of the TCJA protected and unprotected excess ADIT. Effective July 1, 2021, all retail customers will continue receiving bill credits resulting from the TCJA. The target retail portion of the unprotected excess ADIT is approximately $2.5 million monthly and will be credited over a period of three years concluding on June 30, 2024. The retail portion of the protected excess ADIT will be credited until the full amount of the protected excess ADIT has been returned to Cleco Power’s customers through bill credits. At December 31, 2022, Cleco Power had $257.4 million accrued for the excess ADIT, of which $42.9 million is reflected in current regulatory liabilities.

Teche Unit 3

On September 7, 2021, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3, barring any violations of specific applicable reliability standards. In December 2021, Cleco Power filed notices with the LPSC and MISO to suspend the retirement of Teche Unit 3. As a result, on March 15, 2022, Cleco Power refunded to MISO $4.3 million for capital expenditures paid by third parties while operating Teche Unit 3 as a system support resource unit.

On July 13, 2022, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3, barring any violations of specific applicable reliability standards. On January 31, 2023, Cleco Power filed a notice with the LPSC to retire Teche Unit 3 on May 31, 2023.