Entergy Affirms Adj EPS Guidance For 2022 And 2023-2025

(RTTNews) - Entergy corp. (ETR) affirmed its adjusted earnings per share guidance for 2022 and adjusted earnings per share outlooks for 2023-2025. The Federal Energy Regulatory Commission on December 23, 2022 issued two orders in ongoing proceedings involving the customer rate impacts of the Grand Gulf Nuclear Station. System Energy Resources Inc or SERI operates Grand Gulf and owns or leases 90% of the station, the company said.

Entergy said it disagreed with some elements of FERC's findings, in particular its ruling on the sale leaseback claim. But it is pleased that FERC's remedy results in no additional refunds due to customers beyond those already provided in 2021 on the uncertain tax positions taken by SERI.

In the uncertain tax position issue, FERC's orders address a series of decommissioning uncertain tax positions that SERI took in order to benefit customers. SERI assumed the risk of Internal Revenue Service penalties and interest that could have resulted from unsuccessful portions of these positions.

The IRS ultimately allowed over $100 million of an uncertain tax position SERI took in 2015. The remedy in FERC's order directed SERI to compute a refund based on the accumulated deferred income tax, or ADIT, amounts resulting from the IRS's partial allowance of SERI's 2015 decommissioning uncertain tax position.

Consistent with FERC's order, upon resolution with the IRS of the 2015 uncertain tax position, SERI began to provide an ongoing rate base credit for the ADIT associated with the successful portion of the uncertain tax position, which is estimated to result in a benefit of $69 million to customers over the remaining expected life of Grand Gulf.

Additionally, in 2021, SERI provided a one-time credit of $25 million inclusive of interest for the ADIT created by the 2015 decommissioning uncertain tax position, which is consistent with the directives of FERC's order. Therefore, SERI's position is that it has already satisfied the remedy required in FERC's order.

FERC's order also specified that the remedy must not "reestablish" ADIT balances for tax positions that were denied by the IRS, as SERI received no tax benefits from tax positions that were not successful.

On the sale leaseback case, the FERC's order calls for SERI to refund approximately $149 million, including interest, resulting from the disallowance of $17 million in annual lease payments from 2015 through 2022. Taking into account SERI's previous settlement with the Mississippi Public Service Commission, the total sale leaseback refund amount is $89 million.

The FERC's order also states that SERI can no longer collect $17 million in annual lease payments on a prospective basis. Net of the Entergy Mississippi settlement, the prospective exclusion would be approximately $10 million annually (pre-tax).

SERI disagrees with the ruling on the sale leaseback claim and will seek rehearing. This sale leaseback renewal was entered into to lower costs to customers, which is a benefit that FERC previously recognized.