Regulation and Rates

12 Months Ended

Dec. 31, 2023

Note 14 — Regulation and Rates

Deferred Operations and Maintenance Costs

Cleco Power defers operations and maintenance costs that it believes are prudently incurred and probable of recovery from its retail customers. These costs are recorded in Other deferred charges on Cleco’s and Cleco Power’s Consolidated Balance Sheets. As part of the filed application for Cleco Power’s current rate case, Cleco Power is seeking approval from the LPSC to recover these costs through its new rates, which are anticipated to be effective on July 1, 2024. At December 31, 2023, and 2022, Cleco Power had $9.9 million and $5.3 million, respectively, recorded for these costs.

FRP

Effective July 1, 2021, and as approved by the LPSC, under the terms of the current 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. On June 30, 2023, Cleco Power filed an application with the LPSC through the rate case process for a new FRP, with anticipated new rates being effective July 1, 2024. Cleco Power has responded to multiple sets of LPSC data requests. On February 5, 2024, and February 9, 2024, the intervenors and LPSC Staff filed direct testimony, respectively. Cleco Power anticipates filing rebuttal testimony on April 3, 2024, in accordance with the revised procedural schedule.

In September 2023, the LPSC approved Cleco Power’s monitoring report for the 12 months ending June 30, 2022, indicating no refund was due. In October 2023, Cleco Power filed its monitoring report for the 12 months ending June 30, 2023, with the LPSC, indicating no refund was due. On January 31, 2024, Cleco Power received the LPSC Staff’s draft report indicating no refund and no material findings. Due to the nature of the regulatory process, management is not able to determine the timing of the approval of this report.

Regulatory Disallowance

St. Mary Clean Energy Center

On September 21, 2022, the LPSC approved a settlement disallowing recovery of $15.0 million of the planning and construction costs associated with the St. Mary Clean Energy Center. This disallowance resulted in a $13.8 million

impairment charge and a reduction of the associated property, plant, and equipment net book value. The impairment charge was recorded in Regulatory disallowance on Cleco’s and Cleco Power’s Consolidated Statements of Income. The settlement also resulted in a refund to Cleco Power’s retail customers totaling $10.4 million, which was given back to customers as bill credits in October 2022. The $10.4 million refund consisted of $6.6 million for costs recovered in periods prior to September 30, 2022, and $3.8 million for costs recovered from October 1, 2022, until Cleco Power’s base rates reset, which is expected to be on July 1, 2024, in its next FRP. The refund of costs recovered prior to September 30, 2022, was recorded in Electric customer credits, with the remainder recorded as a regulatory asset on Cleco’s and Cleco Power’s Consolidated Balance Sheets. On October 1, 2022, Cleco Power began amortizing the regulatory asset to Electric customer credits on Cleco’s and Cleco Power’s Consolidated Statements of Income.

Dolet Hills Prudency Review

Cleco Power is seeking recovery for stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station as well as deferred fuel and other mine-related closure costs. Recovery of these costs is subject to a prudency review by the LPSC, which is currently in progress. On February 2, 2024, the Administrative Law Judge released a final recommendation indicating a partial disallowance of the recovery of fuel costs and a refund of related costs previously recovered from customers. Cleco Power believes and continues to assert that the related costs were prudently incurred and should be recoverable. However, management has estimated that a loss resulting from a potential disallowance is probable. The estimated range of potential loss is between $58.7 million and $228.0 million. As a result, Cleco Power accrued an estimated contingent loss of $58.7 million at December 31, 2023. This amount was recorded in Provision for rate refund on Cleco’s and Cleco Power’s Balance Sheets and Electric customer credits on Cleco’s and Cleco Power’s Statements of Income. Cleco Power is seeking a settlement to resolve this matter and move forward with the securitization process. Due to the nature of the regulatory process, the outcome and timing of the resolution of this matter is uncertain. For more information about the Dolet Hills prudency review, see Note 16 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Dolet Hills Prudency Review.”

TCJA

Effective July 1, 2021, and as approved by the LPSC, 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, 2023, Cleco Power had $211.5 million accrued for the excess ADIT, of which $21.9 million is reflected in current regulatory liabilities.

Teche Unit 3

In July 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 in May 2023. However, in April 2023, Cleco Power filed notices with MISO and the LPSC to delay the retirement of Teche Unit 3. In May 2023, Cleco Power filed an Attachment Y with MISO requesting retirement of Teche Unit 3, barring any violations of specific applicable reliability standards. On January 30, 2024, Cleco Power filed a notice with the LPSC to retire Teche Unit 3 in June 2024.