Company Requests Increase in Non-Fuel Rates

Little Rock, Ark. – Entergy Arkansas, Inc. officials expect fuel cost reductions will result in slightly lower customer bills as the company filed an application today with the Arkansas Public Service Commission for an upward adjustment to its non-fuel rates – otherwise known as base rates. Company officials said that they expect overall customer bills to be lower this time next year, even with APSC approval of an increase in the non-fuel portion of the bill and the recovery of extraordinary restoration costs incurred as a result of last January’s ice storm.

Actions to Stabilize Bills

Beginning this month, a downward adjustment to the fuel and purchased power part of the bill lowered typical residential bills of 1,000 kilowatt-hours by $3.46 per month, going from $110.17 to $106.71. A storm damage recovery rider to pay for extraordinary damage from 2008 storms will expire this winter and bills will decrease by an additional 82 cents per kWh.

In addition, Entergy Arkansas expects a reduction in the FERC-imposed production cost equalization rider (Rider PCA) beginning in July 2010.

These reductions are expected to more than offset the requested increase in base rates.

“Customers have been impacted by high fuel costs over the past several years, and it is good news that Entergy Arkansas will be able to keep customer bills relatively low for the foreseeable future,” said Hugh McDonald, president and chief executive officer, Entergy Arkansas, Inc. “We expect lower fuel prices to more than offset an increase in base rates.”

The Need for New Base Rates

“The base rate level under which we currently operate has not increased in 24 years,” McDonald said. “Base rates cover construction and operation of power plants and transmission and distribution grids, as well as customer service. A base rate increase assures we will be able to meet these requirements, which include additional infrastructure investment in poles, wire, transformers, and generation capacity. While energy demand in our service area and costs have increased more than 100 percent since 1985, our base rates have stayed the same.”

“While we have had significant efficiency improvements and reduction of costs, the situation has reached a critical point as growth has declined and the costs of materials, equipment and labor have increased to the point where an increase in the base rate portion of the bill is necessary in order for us to assure reliable service in the future.”

The company has requested a base rate increase of $223 million. If not for the offsetting effect from lower fuel costs, the proposed new base rates would result in an increase of $7.86 on a typical residential bill of 1,000 kilowatt-hours per month, or about 26 cents per day. This increase would include the costs of the company’s 2008 purchase of the Ouachita Power Facility and the costs of restoration associated with the January 2009 ice storm that devastated the northern half of the state. It would also include $800 million of additional investment in transmission, distribution and generation utility infrastructure since Entergy Arkansas’ last base rate case, as well as an overall increase in the costs of providing service to customers in Arkansas. It also takes into account the lower sales. This increase is necessary to continue to provide reliable service to our customers in the future.

Also included in today’s filing is a proposal for a formula rate-setting mechanism that adjusts rates up or down on an annual basis to allow for more frequent reviews by the Arkansas Public Service Commission of the company’s cost and investments. This mechanism would encourage continued efficiencies by the company.

Energy Efficiency Programs

In a separate filing in July, Entergy Arkansas indicated a need for regulatory changes to implement full-scale energy efficiency programs that are intended to help Entergy Arkansas customers save money on their electricity bills. In today’s filing the company included a specific cost-recovery proposal that will make it possible to expand its energy efficiency programs to further help customers use less energy and lower bills.

“Energy efficiency programs can be very beneficial to our customers, especially in these difficult times, and we are working to promote these programs,” McDonald said.

Entergy Arkansas, Inc. provides electricity to 684,000 customers in 63 counties. It is engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, and it is the second-largest nuclear generator in the United States. Entergy delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas.

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