Regulatory Assets and Liabilities

3 Months Ended

Mar. 31, 2024


Note 5 — Regulatory Assets and Liabilities

Cleco Power recognizes an asset for certain costs capitalized or deferred for recovery from customers and recognizes a liability for amounts expected to be returned to customers or collected for future expected costs. Cleco Power records these assets and liabilities based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered or refunded through the ratemaking process.

Under the current regulatory environment, Cleco Power believes these regulatory assets will be fully recoverable. 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 MAR. 31, 2024		AT DEC. 31, 2023
Regulatory assets
Acadia Unit 1 acquisition costs	$	1,675	$	1,701	15.75
Accumulated deferred fuel (1)	9,382		11,627		Various
Affordability study	9,992		10,337		7.25
AFUDC equity gross-up	59,606		60,381		Various	(2)
AMI deferred revenue requirement	818		954		2
AROs (8)	8,526		20,094

Coughlin transaction costs	776		784		25.25
COVID-19 executive order (8)	3,071		3,039
Deferred lignite and mine closure costs (7)	134,739		136,076
Deferred storm restoration costs - Hurricane Delta (6)	88		88

Deferred storm restoration costs - Hurricane Laura (6)	367		367
Deferred storm restoration costs - Hurricane Zeta (6)	7		7

Deferred taxes, net	44,157		43,866		Various
Dolet Hills Power Station closure costs (7)	122,495		147,323


Financing costs (1)	5,994		6,087		Various	(3)
Interest costs	2,899		2,961		Various	(2)
Madison Unit 3 property taxes	13,372		13,297		Various	(9)
Non-service cost of postretirement benefits	14,482		14,526		Various	(2)
Other	9,268		10,483		Various
Postretirement costs	64,399		64,399		Various	(4)
Production operations and maintenance expenses	5,980		7,002		Various	(5)
Rodemacher Unit 2 deferred costs (8)	21,264		19,282

St. Mary Clean Energy Center	2,722		3,705		1.25

Training costs	5,579		5,618		35.75
Tree trimming costs	2,979		3,657		1
Total regulatory assets	544,637		587,661
Regulatory liabilities


Deferred taxes, net	(12,531)		(21,939)		Various

Storm reserves	(112,906)		(111,509)
Total regulatory liabilities	(125,437)		(133,448)
Total regulatory assets, net	$	419,200	$	454,213
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at March 31, 2024, and December 31, 2023. 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. The storm recovery surcharge became effective on September 1, 2022. (7) Currently not in a recovery period. In the second quarter of 2024, Cleco Power intends to file an application with the LPSC for a financing order for securitization of these costs. For more information, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Dolet Hills Prudency Review.” (8) Currently not in a recovery period. (9) Beginning July 1, 2021, property taxes paid for the year ended December 31, are being amortized over the subsequent 12 months beginning July 1.

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


Cleco
(THOUSANDS)	AT MAR. 31, 2024		AT DEC. 31, 2023
Total Cleco Power regulatory assets, net	$	419,200	$	454,213
2016 Merger adjustments (1)
Fair value of long-term debt	95,493		97,345
Postretirement costs	8,952		9,448
Financing costs	6,474		6,560
Debt issuance costs	4,171		4,254
Total Cleco regulatory assets, net	$	534,290	$	571,820

(1) Cleco regulatory assets include acquisition accounting adjustments as a result of the 2016 Merger.

Deferred Lignite and Mine Closure Costs and Dolet Hills Power Station Closure Costs

In 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine and to include and defer certain accelerated mine closing costs in fuel and related ratemaking treatment. In 2021, the LPSC approved the establishment of a regulatory asset for certain lignite costs that would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs related to the closure of the mine.

In 2020, Cleco Power revised depreciation rates for the Dolet Hills Power Station to utilize the December 31, 2021, expected end-of-life and early retirement of the Dolet Hills Power Station and defer depreciation expense to a regulatory asset for the amount in excess of the previously approved depreciation rates by the LPSC. The Dolet Hills Power Station was retired on December 31, 2021.

In 2022, Cleco Power filed an application with the LPSC requesting approval of the regulatory treatment and recovery of stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station over 20 years as well as recovery of deferred fuel and mine-related costs. On April 19, 2024, the LPSC approved an uncontested settlement that contains a provision for a $40.0 million reduction in the regulatory asset associated with the Dolet Hills Power Station. Therefore, at March 31, 2024, this amount was recorded as a reduction to the associated regulatory asset on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets and an increase to Depreciation and amortization on Cleco’s and Cleco Power’s Statements of Income. For more information about the settlement, see Note 13 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Dolet Hills Prudency Review.”