Entergy’s (NYSE:ETR) Entergy Texas, Inc., (ETI), on May 15 said that it has filed a rate plan with Texas regulators that would result in a $2.36 increase per month on the average residential customer’s bill.
That amount reflects the net effect to recover new investments in rates, while also reducing total costs to consumers by accounting for tax savings, the company said, referencing the Tax Cuts and Jobs Act (TCJA) of 2017. Following the passage of the TCJA, the company will flow back more than $200m to customers over the next two years, ETI said, noting that that sum represents funds that it had collected from customers according to IRS rules to pay future taxes at the higher tax rate that is no longer in effect.
According to the company’s rate filing made with the Public Utility Commission of Texas, ETI’s application supports an increase in base and rider rates designed to collect a total non-fuel retail amount of about $926m per year, an increase of $16.7m, or 1.84% on average across all customer classes – including fuel, the request represents an increase of 1.16%.
ETI noted that it has calculated its revenue requirement based on an overall weighted average cost of capital of 8.23%, an equity ratio of 50.9%, a long-term debt ratio of 49.1%, a cost of long-term debt of 5.73%, and a return on equity of 10.65%.
ETI said that its proposed rates and revenues reflect the inclusion of federal income tax reductions due to the TCJA and a TCJA Rider that is designed to return about $201.7m of unprotected excess accumulated deferred federal income taxes over a period of two years.
The application is based on a 12-month test year ending Dec. 31, 2017, ETI said, adding that it has engaged in a multi-year capital investment plan in order to improve service quality and reliability by installing planned upgrades and necessary expansion of its transmission and distribution systems, as well as its generation fleet.
ETI noted that since April 1, 2013, it has closed to plant about $1.4bn of capital additions, including the rebuilding of aging infrastructure and implementing new software and systems to assure customers continue to receive reliable service at the lowest reasonable cost.
The company said that it expects to continue to make significant investments in transmission and distribution infrastructure to serve customer needs, and has committed to new projects expected to yield considerable net benefits for customers, such as the Montgomery County Power Station and advanced metering infrastructure technology. ETI said that by the end of 2020, it expects to invest more than $1.9bn in electric infrastructure to serve customers.
Among other things, the company also noted that it proposes to create a regulatory asset of about $20.5m to support recovery of the expenses incurred to repair damages to its system caused by last year’s Hurricane Harvey. The company said that it further proposes a regulatory asset of about $41.1m, amortized over a three-year period, to address its historical storm reserve deficit.