Quick question for anyone familiar with Entergy Louisiana's fuel adjustment clause. Our industrial client in Lake Charles is seeing monthly fuel adjustments that seem to lag actual natural gas price movements by 2-3 months. Is Entergy using average gas prices or spot prices for their fuel clause calculations? The tariff language in Schedule FRP is pretty vague about timing. Client wants to understand if there's a forecasting component that might create arbitrage opportunities.
Entergy fuel clause methodology question
Estelle, most utilities use 2-3 month lagged gas prices in their fuel clauses because they need time to calculate and file the adjustments with regulators. Entergy probably uses Henry Hub monthly average prices with a 60-90 day lag. The forecasting component usually only applies to coal and purchased power contracts, not gas generation.
Reggie's on target. Entergy Texas uses Henry Hub with 2-month lag in their fuel clause. The lag creates natural hedging - when gas prices spike suddenly, customers get some protection in the short term. But it also means you don't immediately benefit when prices crash. Not much arbitrage opportunity since the methodology is pretty standard across the industry.