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Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Note 1 — Summary of Significant Accounting Policies
In 2022, Cleco Holdings engaged in a strategic review process related to its investment in Cleco Cajun. In March 2023, Cleco Holdings’ management, with the support of its Board of Managers, committed to a plan of action for the disposition of the Cleco Cajun Sale Group, with a sale probable and subject to customary regulatory and Board of Managers approvals. As a result, Cleco Holdings’ management determined that the criteria under GAAP for the Cleco Cajun Sale Group to be classified as held for sale were met and a sale will represent a strategic shift that will have a major effect on Cleco’s future operations and financial results. Therefore, the Cleco Cajun Sale Group is presented as discontinued operations. The financial information for historical periods provided in this report has been recast to present the results of operations and financial position of the Cleco Cajun Sale Group as discontinued operations. Cleco has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these condensed consolidated financial statements exclude amounts related to discontinued operations, assets held for sale, and liabilities held for sale for all periods presented. For more information, see Note 3 — “Discontinued Operations.”
Principles of Consolidation
The accompanying condensed consolidated financial statements of Cleco include the accounts of Cleco and its majority-owned subsidiaries after elimination of intercompany accounts and transactions.
Following the formation of Cleco Securitization I and the closing of the storm recovery securitization financing on June 22, 2022, Cleco Power became the primary beneficiary of Cleco Securitization I, and as a result, the financial statements of Cleco Securitization I are consolidated with the financial statements of Cleco Power. For additional information about
Cleco Securitization I, see Note 13 — “Variable Interest Entities.”
Basis of Presentation
The condensed consolidated financial statements of Cleco and Cleco Power have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements and adjusted for discontinued operations. Because the interim condensed consolidated financial statements and the accompanying notes do not include all of the information and notes required by GAAP for annual financial statements, the condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments that are necessary for a fair statement of the financial position and results of operations of Cleco and Cleco Power. Amounts reported in Cleco’s and Cleco Power’s interim financial statements are not necessarily indicative of amounts expected for the annual periods due to the effects of seasonal temperature variations on energy consumption, regulatory rulings, the timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices, discrete income tax items, and other factors.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those
estimates. For information on recent authoritative guidance and its effect on financial results, see Note 2 — “Recent Authoritative Guidance.” For information on discontinued operations, see Note 3 — “Discontinued Operations.”estricted Cash and Cash Equivalents
Various agreements to which Cleco is subject contain covenants that restrict its use of cash. As certain provisions under these agreements are met, cash is transferred out of related escrow accounts and becomes available for its intended purposes and/or general corporate purposes.
Cleco’s and Cleco Power’s restricted cash and cash equivalents consisted of the following:
Cleco
(THOUSANDS)AT SEPT. 30, 2023AT DEC. 31, 2022
Current
Cleco Power’s storm restoration costs - Hurricane Ida$— $9,409 
Cleco Securitization I’s operating expenses and storm recovery bond issuance costs and debt service6,356 14,140 
Total current6,356 23,549 
Non-current
Diversified Lands’ mitigation escrow23 23 
Cleco Power’s future storm restoration costs111,995 103,306 
Cleco Power’s storm restoration costs - Hurricane Ida— 6,086 
Total non-current112,018 109,415 
Total restricted cash and cash equivalents$118,374 $132,964 

Cleco Power
(THOUSANDS)AT SEPT. 30, 2023AT DEC. 31, 2022
Current
Storm restoration costs - Hurricane Ida$— $9,409 
Cleco Securitization I’s operating expenses and storm recovery bond issuance costs6,356 14,140 
Total current6,356 23,549 
Non-current
Future storm restoration costs111,995 103,306 
Storm restoration costs - Hurricane Ida— 6,086 
Total non-current111,995 109,392 
Total restricted cash and cash equivalents$118,351 $132,941 

On September 20, 2023, the LPSC approved a settlement for the prudency review of the remaining unrecovered Hurricane Ida storm restoration costs deferred as a regulatory asset. The settlement allowed Cleco Power to withdraw the remaining unrecovered Hurricane Ida storm restoration costs,
plus a carrying charge through September 2023, from the Hurricane Ida storm reserve. The settlement also approved the transfer of the remaining balance of the Hurricane Ida storm reserve to the restricted reserve for future storm restoration costs. As a result of the settlement, the corresponding Hurricane Ida restricted cash and cash equivalents was reduced by $10.3 million and the remaining balance was transferred to the restricted cash and cash equivalents account for future storm restoration costs. For more information about the regulatory asset and storm reserves, see Note 5 — “Regulatory Assets and Liabilities — Storm Reserves.”
Reserves for Credit Losses
Customer accounts receivable are recorded at the invoiced amount and do not bear interest. Customer accounts receivable are generally considered to become past due 20 days after the billing date. Cleco recognizes write-offs within the allowance for credit losses once all recovery methods have been exhausted. It is the policy of management to review accounts receivable and unbilled revenue monthly using a reserve matrix based on historical bad debt write-offs, as well as current and forecasted economic conditions, to establish a credit loss estimate. Management’s historical credit loss analysis included periods of economic recessions, natural disasters, and temporary changes to collection policies. Due to the critical necessity of electricity, none of these past events have significantly impacted Cleco’s credit loss rates.
As a result of the market price volatility of natural gas throughout 2022, Cleco experienced significant increases to the pass-through fuel component of retail customer energy bills. Due to these increased customer costs, along with the impacts of a 40-year high inflation rate, Cleco experienced increases in credit loss reserves. These factors have not been and are not expected to be material to Cleco’s results of operations, financial condition, or cash flows.
During the third quarter of 2023, Cleco's service territory experienced sustained record high temperatures resulting in an increase in usage by its customers. In anticipation of higher customer costs and high heat conditions, Cleco temporarily suspended disconnections and the utilization of collection agencies for the month of August and most of September 2023, resulting in no additional charge-offs during these months. On September 25, 2023, Cleco resumed disconnection and collection activities.
Although Cleco’s service territory experienced various external impacts, Cleco’s credit losses at September 30, 2023, were still within range of its historical credit loss analysis.
The tables below present the changes in the allowance for credit losses by receivable for Cleco and Cleco Power:
Cleco
FOR THE THREE MONTHS ENDED SEPT. 30, 2023FOR THE NINE MONTHS ENDED SEPT. 30, 2023
(THOUSANDS)ACCOUNTS
RECEIVABLE
OTHER*
TOTALACCOUNTS
RECEIVABLE
OTHER*
TOTAL
Balances, beginning of period$1,252 $1,638 $2,890 $1,147 $1,638 $2,785 
Current period provision1,106 — 1,106 3,252 — 3,252 
Charge-offs(325)— (325)(3,071)— (3,071)
Recovery215 — 215 920 — 920 
Balances, Sept. 30, 2023$2,248 $1,638 $3,886 $2,248 $1,638 $3,886 
* Loan held at Diversified Lands that was fully reserved at December 31, 2020.
FOR THE THREE MONTHS ENDED SEPT. 30, 2022FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)ACCOUNTS
RECEIVABLE
OTHER*
TOTALACCOUNTS
RECEIVABLE
OTHER*
TOTAL
Balances, beginning of period$1,190 $1,638 $2,828 $1,302 $1,638 $2,940 
Current period provision939 — 939 2,149 — 2,149 
Charge-offs(894)— (894)(2,899)— (2,899)
Recovery263 — 263 946 — 946 
Balances, Sept. 30, 2022$1,498 $1,638 $3,136 $1,498 $1,638 $3,136 
* Loan held at Diversified Lands that was fully reserved at December 31, 2020.
Cleco Power
FOR THE THREE MONTHS ENDED SEPT. 30, 2023
FOR THE NINE MONTHS ENDED SEPT. 30, 2023
(THOUSANDS)ACCOUNTS RECEIVABLE
Balances, beginning of period$1,252 $1,147 
Current period provision1,106 3,252 
Charge-offs(325)(3,071)
Recovery215 920 
Balances, Sept. 30, 2023$2,248 $2,248 

FOR THE THREE MONTHS ENDED SEPT. 30, 2022
FOR THE NINE MONTHS ENDED SEPT. 30, 2022
(THOUSANDS)ACCOUNTS RECEIVABLE
Balances, beginning of period$1,190 $1,302 
Current period provision939 2,149 
Charge-offs(894)(2,899)
Recovery263 946 
Balances, Sept. 30, 2022$1,498 $1,498