Regulation and Rates

3 Months Ended

Mar. 31, 2024


Note 11 — 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 Condensed 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 March 31, 2024, and December 31, 2023, Cleco Power had $10.4 million and $9.9 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.

In October 2023, Cleco Power filed its monitoring report for the 12 months ended 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. Cleco Power anticipates LPSC approval of the report in the second quarter of 2024.

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 filed rebuttal testimony on April 3, 2024, in accordance with the revised procedural schedule. Pre-hearing statements with the LPSC are due on May 10, 2024.

Dolet Hills Regulatory Refund

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. On February 2, 2024, the ALJ released a final recommendation indicating a partial disallowance of the recovery of fuel costs and a refund of related costs previously recovered from customers.

Management estimated that a loss resulting from a potential disallowance was probable, and as a result, Cleco Power accrued an estimated contingent loss of $58.7 million at December 31, 2023. On April 19, 2024, the LPSC approved an uncontested settlement that contains a provision for refunding $20.0 million per year to Cleco Power’s retail customers as a credit to their bills during the third quarters of 2024, 2025, and 2026 for a total of $60.0 million. Therefore, at March 31, 2024, an additional $1.3 million was recorded in Provision for rate refund on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets and Electric customer credits on Cleco’s and Cleco Power’s Condensed Consolidated 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.”

TCJA

Effective July 1, 2021, under Cleco Power’s current retail rate plan, all retail customers continued receiving bill credits resulting from the TCJA. The target retail portion of the unprotected excess ADIT is approximately $2.5 million monthly and is 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 March 31, 2024, Cleco Power had $200.4 million accrued for the excess ADIT, of which $12.5 million is reflected in current regulatory liabilities.

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. In January 2024, Cleco Power filed a notice with the LPSC to retire Teche Unit 3 in June 2024. Cleco Power has no outstanding financial obligations to MISO for operating Teche Unit 3 as a system support resource unit.