Regulatory Assets and Liabilities

12 Months Ended

Dec. 31, 2024

Regulatory Assets and Liabilities Disclosure [Abstract]

Regulatory Assets and Liabilities

Note 6 — Regulatory Assets and Liabilities

Cleco Power recognizes an asset for certain costs capitalized or deferred for recovery from customers and recognizes a liability for amounts expected to be returned to customers or collected for future expected costs. Cleco Power records these assets and liabilities based on regulatory approval and management’s ongoing assessment that it is probable these

items will be recovered or refunded through the ratemaking process.

Under the current regulatory environment, Cleco Power estimates these regulatory assets are probable of full recovery. If in the future, as a result of regulatory changes or competition, Cleco Power’s ability to recover these regulatory assets would no longer be probable, then to the extent that such regulatory assets were determined not to be recoverable,

Cleco Power would be required to write-down such assets. In addition, potential deregulation of the industry or possible future changes in the method of rate regulation of Cleco Power, could require discontinuance of the application of the authoritative guidance of regulated operations.

The following table summarizes Cleco Power’s regulatory assets and liabilities:

Cleco Power
	AT DEC. 31,				REMAINING RECOVERY PERIOD (YRS.)
(THOUSANDS)	2024		2023
Regulatory assets
Acadia Unit 1 acquisition costs	$	1,596	$	1,701	15
Accumulated deferred fuel (1)	457		11,627		Various	(7)
Affordability study	8,959		10,337		6.5
AFUDC equity gross-up	57,284		60,381		Various	(2)
AMI deferred revenue requirement	409		954		1.25
AROs (6)	11,073		20,094
Coughlin transaction costs	753		784		24.5
COVID-19 executive order	3,372		3,039		2.5
Deferred lignite and mine closure costs (6)	136,778		136,076
Deferred storm restoration costs	—		462
Deferred taxes, net	2,008		43,866		Various	(7)
Dolet Hills carrying charge(6)	4,729		—
Dolet Hills Power Station closure costs (6)	122,173		147,323
Financing costs (1)	5,717		6,087		Various	(3)
Interest costs	2,712		2,961		Various	(2)
Madison Unit 3 property taxes	14,196		13,297		Various	(8)
Non-service cost of postretirement benefits	14,057		14,526		Various	(2)
Postretirement costs	58,089		64,399		Various	(4)
Production operations and maintenance expenses	4,939		7,002		Various	(5)
Rodemacher Unit 2 deferred costs (6)	27,265		19,282
Solar development costs (6)	2,122		—
St. Mary Clean Energy Center	870		3,705		0.5
Training costs	5,462		5,618		35
Tree trimming costs	943		3,657		0.25
Other	12,920		10,483		Various	(7)
Total regulatory assets	498,883		587,661
Regulatory liabilities
Deferred taxes, net	(6,827)		(21,939)		Various	(7)
Residential revenue decoupling (9)	(3,000)		—
Storm reserves	(76,178)		(111,509)
Total regulatory liabilities	(86,005)		(133,448)
Total regulatory assets, net	$	412,878	$	454,213
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at December 31, 2024, and 2023, respectively. All other assets are earning a return on investment. (2) Amortized over the estimated lives of the respective assets. (3) Amortized over the terms of the related debt issuances. (4) Amortized over the average service life of the remaining plan participants. (5) Deferral is recovered over the following three-year regulatory period. (6) Currently not in a recovery period. (7) For more information on the remaining recovery period, refer to the following disclosures for each specific regulatory asset or liability. (8) Beginning July 1, 2021, property taxes paid for the year ended December 31, are being amortized over the subsequent 12 months beginning July 1. (9) Currently not in a refund period.

The following table summarizes Cleco’s net regulatory assets and liabilities:

Cleco
	AT DEC. 31,
(THOUSANDS)	2024		2023
Total Cleco Power regulatory assets, net	$	412,878	$	454,213
2016 Merger adjustments (1)
Fair value of long-term debt	89,941		97,345
Postretirement costs	7,461		9,448
Financing costs	6,217		6,560
Debt issuance costs	3,921		4,254
Total Cleco regulatory assets, net	$	520,418	$	571,820

(1) Cleco regulatory assets include acquisition accounting adjustments as a result of the 2016 Merger.

Acadia Unit 1 Acquisition Costs

In 2009, the LPSC approved Cleco Power’s request to establish a regulatory asset for costs incurred as a result of the acquisition by Cleco Power of Acadia Unit 1 and half of Acadia Power Station’s related common facilities. In 2010, Cleco Power began recovering the Acadia Unit 1 acquisition costs over a 30-year period.

Accumulated Deferred Fuel

Cleco Power is allowed to recover the cost of fuel used for electric generation and power purchased for utility customers through the LPSC-established FAC or related wholesale contract provisions, which enable Cleco Power to pass on to its customers substantially all such charges. The difference between fuel and purchased power revenues collected from retail and wholesale customers and the current fuel and purchased power costs is generally recorded as Accumulated deferred fuel on Cleco Power’s Consolidated Balance Sheet. At December 31, 2024, Accumulated deferred fuel decreased $11.2 million, primarily due to lower mark-to-market losses on gas-related derivative contracts and the expiration of a significant wholesale customer contract, partially offset by the timing of fuel revenue collections. For 2024, approximately 89% of Cleco Power’s total fuel cost was regulated by the LPSC.

Affordability Study

In July 2021, as approved by the LPSC in Cleco Power’s prior retail rate plan, Cleco Power was allowed to establish a regulatory asset related to outside consulting fees for the assessment of Cleco Power’s practices and assistance in the identification of potential cost savings opportunities, while maintaining superior levels of employee safety, reliability, customer service, environmental stewardship, community involvement, and regulatory transparency. In 2021, the regulatory asset began being amortized over 10 years.

AFUDC Equity Gross-Up

Cleco Power capitalizes equity AFUDC as a cost component of construction projects. Cleco Power has recorded a regulatory asset to recover the tax gross-up related to the equity component of AFUDC. These costs are being amortized over the estimated lives of the respective assets constructed.

AMI Deferred Revenue Requirement

In 2011, the LPSC approved Cleco Power’s stipulated settlement in Docket No. U-31393 allowing Cleco Power to

defer the estimated revenue requirements for the AMI project as a regulatory asset. In 2014, the LPSC approved Cleco Power’s recovery of the AMI regulatory asset over the average life of the AMI meters, or 11 years, and Cleco Power began recovering the AMI deferred revenue requirement.

AROs

Cleco Power recorded an ARO liability for the retirement of certain ash disposal facilities. The ARO regulatory asset represents the accretion of the ARO liability and the depreciation of the related assets. For more information on the ARO regulatory asset that was reclassified to the Dolet Hills Power Station Closure Costs regulatory asset, see “— Deferred Lignite and Mine Closure Costs and Dolet Hills Power Station Closure Costs.”

Coughlin Transaction Costs

In January 2014, the LPSC authorized Cleco Power to create a regulatory asset for the transaction costs related to the transfer of Coughlin from Evangeline to Cleco Power. In 2014, Cleco Power began recovering the Coughlin transaction costs over a 35-year period.

COVID-19 Executive Order

In March 2020, the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment. This order resulted in an increase of expenses and a loss of revenue for Cleco Power. In April 2020, the LPSC issued an order allowing utilities to establish a regulatory asset for expenses incurred from the suspension of disconnections and collection of late fees imposed by the LPSC executive order. On July 1, 2020, the LPSC issued an order terminating the moratorium on disconnections effective July 16, 2020. Cleco began resuming disconnections and late fees and utilizing collection agencies in October 2020. As approved by the LPSC in Cleco Power’s current retail rate plan, beginning on July 1, 2024, the lost revenues and incremental costs associated with the COVID-19 executive order are being amortized over three years.

Deferred Lignite and Mine Closure Costs and Dolet Hills Power Station Closure Costs

In 2020, Cleco Power and SWEPCO made a joint filing with the LPSC seeking authorization to close the Oxbow mine and to include and defer certain accelerated mine closing costs in fuel and related ratemaking treatment. In 2021, the LPSC approved the establishment of a regulatory asset for certain lignite costs that would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs related to the closure of the mine.

In 2020, Cleco Power revised depreciation rates for the Dolet Hills Power Station to utilize the December 31, 2021, expected end-of-life and early retirement of the Dolet Hills Power Station and defer depreciation expense to a regulatory asset for the amount in excess of the previously approved depreciation rates by the LPSC. The Dolet Hills Power Station was retired on December 31, 2021.

In 2022, Cleco Power filed an application with the LPSC requesting approval of the regulatory treatment and recovery of stranded and decommissioning costs associated with the retirement of the Dolet Hills Power Station over 20 years as well as recovery of deferred fuel and mine-related costs. On April 19, 2024, the LPSC approved an uncontested settlement that contains a provision for a $40.0 million reduction in the regulatory asset associated with the Dolet Hills Power Station.

This amount was recorded as a reduction to the associated regulatory asset on Cleco’s and Cleco Power’s Consolidated Balance Sheets and an increase to Depreciation and amortization on Cleco’s and Cleco Power’s Statements of Income. At June 30, 2024, $12.3 million of the ARO regulatory asset, which is related to the Dolet Hills Power Station, was reclassified to the Dolet Hills Power Station Closure Costs regulatory asset. This amount was included in the related securitization application filed with the LPSC on May 17, 2024. Management anticipates the securitization of these costs to close by the end of March 2025, and as a result, reclassified these costs as current Regulatory assets on Cleco’s and Cleco Power’s Consolidated Balance Sheets.

For more information about the settlement, see Note 16 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Dolet Hills Prudency Review.”

Deferred Storm Restoration Costs

In 2020 and 2021, Cleco Power’s distribution and transmission systems sustained substantial damage from four separate hurricanes, Hurricanes Laura, Delta, Zeta, and Ida, and two severe winter storms, Winter Storms Uri and Viola. Cleco Power established a separate regulatory asset to track and defer non-capital expenses associated with each corresponding storm, as approved by the LPSC.

On June 22, 2022, through Cleco Securitization I, Cleco Power completed a securitized financing of Storm Recovery Property, which included the previously mentioned storm restoration costs that were deferred as regulatory assets. In connection with that securitization financing, Cleco Securitization I used the net proceeds from its issuance of storm recovery bonds to purchase the Storm Recovery Property from Cleco Power. Prior to September 1, 2022, certain costs for Hurricanes Laura, Delta, and Zeta were recovered through the interim storm recovery rate. On September 30, 2023, the LPSC approved a settlement allowing Cleco Power to withdraw the remaining unrecovered Hurricane Ida storm restoration costs, plus a carrying charge through September 2023, totaling $10.3 million from the Hurricane Ida storm reserve. On November 1, 2024, Cleco Power received approval from the LPSC to withdraw the remaining $0.4 million of under-collected costs recorded for Hurricanes Laura, Delta, and Zeta from the storm reserve.

Dolet Hills Carrying Charge

On November 20, 2024, the LPSC authorized Cleco Power to establish an additional regulatory asset to accrue a carrying charge at Cleco Power’s weighted average cost of capital on the total of the related Dolet Hills Power Station regulatory assets that will be included in the principal balance of the securitization financing, which is expected to close by the end of March 2025. The amount will be recovered over one year beginning on July 1, 2025, through Cleco Power’s incremental cost recovery rider.

Financing Costs

In 2011, Cleco Power entered into and settled two treasury rate locks. Of the $26.8 million in settlements, $7.4 million was deferred as a regulatory asset relating to ineffectiveness of the hedge relationships. Also in 2011, Cleco Power entered into a forward starting swap contract. These derivatives were entered into in order to mitigate the interest rate exposure on coupon payments related to forecasted debt issuances. In 2013, the

forward starting interest rate swap was settled at a loss of $3.3 million. Cleco Power deferred $2.9 million of the losses as a regulatory asset, which is being amortized over the terms of the related debt issuances.

Interest Costs

Cleco Power’s deferred interest costs include additional deferred capital construction financing costs authorized by the LPSC. These costs are being amortized over the estimated lives of the respective assets.

Madison Unit 3 Property Taxes

Beginning in July 2021, as approved by the LPSC in Cleco Power’s prior retail rate plan, Cleco Power is allowed to recover property taxes paid for Madison Unit 3, including a carrying charge at Cleco Power’s weighted average cost of capital, grossed up for income taxes. The amount included in the cost recovery mechanism each year will amortize over 12 months.

Non-Service Cost of Postretirement Benefits

In 2018, FASB’s amended guidance related to defined benefit pension and other postretirement plans became effective. The amendment allows only the service cost component of net benefit cost to be eligible for capitalization within property, plant, and equipment. Beginning in 2018, Cleco Power’s non-service cost previously eligible for capitalization into property, plant, and equipment are being deferred to a regulatory asset and will be amortized over the estimated lives of the respective assets.

Postretirement Costs

Cleco Power recognizes the funded status of its postretirement benefit plans as a net liability or asset. The net liability or asset is defined as the difference between the benefit obligation and the fair market value of plan assets. For defined benefit pension plans, the benefit obligation is the projected benefit obligation. Historically, the LPSC has allowed Cleco Power to recover pension plan expense. Cleco Power, therefore, recognizes a regulatory asset based on its determination that these costs can be collected from customers. These costs are amortized to pension expense over the average service life of the remaining plan participants (approximately six years as of December 31, 2024, for Cleco’s plan) when it exceeds certain thresholds. The amount and timing of the recovery will be based on the changing funded status of the pension plan in future periods. For more information on Cleco’s pension plan and adoption of these authoritative guidelines, see Note 11 — “Pension Plan and Employee Benefits.”

Production Operations and Maintenance Expenses

Annually, Cleco Power is allowed to defer, as a regulatory asset, production operations and maintenance expenses, net of fuel and payroll, above the retail jurisdictional portion of $29.7 million, adjusted annually for a growth factor (deferral threshold). The amount of the regulatory asset is capped at $25.0 million. The LPSC allows Cleco Power to recover the amount deferred in any calendar year over the following three-year regulatory period, beginning on July 1, when the annual rates are set. Cleco Power deferred $2.0 million in 2024 and had no deferral in 2023.

Rodemacher Unit 2 Deferred Costs

As a result of environmental regulations enacted during 2020, Cleco Power revised Rodemacher Unit 2’s expected end-of-life

to coincide with its application to the EPA for an alternative closure date of October 17, 2028. Rodemacher Unit 2’s depreciation expense in excess of the previously LPSC-approved depreciation rates are deferred to a regulatory asset.

Solar Development Costs

In July 2022, Cleco Power entered into a long-term agreement to purchase, among other things, the output, capacity, and current and future environmental resource credits of a 240-MW solar electric generation facility to be constructed in DeSoto Parish, Louisiana and owned by a third party. On September 17, 2024, the LPSC approved the agreement and authorized Cleco Power to establish a regulatory asset for the stipulated settlement of development costs incurred through December 31, 2023, associated with the long-term agreement. As approved by the LPSC, Cleco Power will begin amortizing these costs over 25 years once it begins purchasing power from the third party, which is expected by January 2027.

St. Mary Clean Energy Center

Cleco Power has a regulatory asset for the revenue requirements related to the planning and construction costs incurred for the St. Mary Clean Energy Center. As approved by the LPSC in Cleco Power’s prior retail rate plan, the regulatory asset began being amortized over four years on July 1, 2021.

In September 2022, the LPSC approved a settlement refunding $10.4 million to Cleco Power’s retail customers, which was refunded to customers in October 2022. The $10.4 million refund consisted of $6.6 million for costs recovered in periods prior to September 30, 2022, and $3.8 million for costs recovered from October 1, 2022, until Cleco Power’s base rates were reset with its new retail rate plan on July 1, 2024.

Training Costs

In 2008, the LPSC approved Cleco Power’s request to establish a regulatory asset for training costs associated with existing processes and technology for new employees at Madison Unit 3. Recovery of these expenditures was approved by the LPSC in 2009. In 2010, Cleco Power began amortizing the regulatory asset over a 50-year period.

Tree Trimming Costs

In 2016, the LPSC approved Cleco Power to defer and recover through its base rates tree trimming costs. The LPSC authorized a deferral up to $11.0 million, excluding debt carrying costs. Cleco Power is currently collecting deferred tree trimming costs through its base rates and expects them to be fully amortized by the second quarter of 2025.

Cleco Holdings’ 2016 Merger Adjustments

As a result of the 2016 Merger, Cleco implemented acquisition accounting, which eliminated AOCI at the Cleco consolidated level on the date of the 2016 Merger. Cleco will continue to recover expenses related to certain postretirement costs; therefore, Cleco recognized a regulatory asset based on its determination that these costs that are probable of recovery continue to be collected from customers. These costs will be amortized to Other operations expense over the average remaining service period of participating employees. Cleco will also continue to recover financing costs associated with the settlement of two treasury rate locks and a forward starting swap contract that were previously recognized in AOCI. Additionally, as a result of the 2016 Merger, a regulatory asset

was recorded for debt issuance costs that were eliminated at Cleco, and a regulatory asset was recorded for the difference between the carrying value and the fair value of long-term debt. These regulatory assets are being amortized over the terms of the related debt issuances, unless the debt is redeemed prior to maturity, at which time any unamortized related regulatory asset will be derecognized.

Other

Annually, as approved in Cleco Power’s prior retail rate plan, Cleco Power is allowed to defer, as a regulatory asset, the undercollection of revenues related to the Northlake Transmission Agreement. The amount recorded in the regulatory asset will be amortized over the following regulatory period, beginning on July 1. At December 31, 2024, and 2023, Cleco Power had a regulatory asset of $2.5 million and $1.0 million, respectively, relating to the Northlake Transmission Agreement.

In addition, the LPSC approved recovery of other previously deferred costs associated with Cleco Power’s current and prior retail rate plan, which began being amortized over three years on July 1, 2024. At December 31, 2024, and 2023, Cleco Power had a regulatory asset of $4.5 million and $2.9 million, respectively, recorded for these deferred costs.

In June 2017, the LPSC approved the establishment of a regulatory asset upon the completion of the Coughlin Pipeline project for the revenue requirement associated with the project, until Cleco Power’s prior retail rate plan was approved. As approved by the LPSC in Cleco Power’s prior rate case, the regulatory asset began being amortized over four years on July 1, 2021. At December 31, 2024, and 2023, Cleco Power had a regulatory asset of $0.7 million and $2.0 million, respectively, recorded for the deferred revenue associated with the Coughlin Pipeline project.

In 2021, the Louisiana state corporate income tax rate decreased from 8% to 7.5% and the state deduction for federal income taxes paid was eliminated, effective for income tax periods beginning on or after January 1, 2022. These changes resulted in an increase in income tax expense. Therefore, Cleco Power established a regulatory asset for the increased revenue requirements associated with the income tax expense in excess of the amount previously approved by the LPSC. At December 31, 2023, Cleco Power had a balance of $4.5 million related to this regulatory asset. At June 30, 2024, as approved by the LPSC in Cleco Power's current rate case, $5.5 million for the total costs recorded for the associated regulatory asset were netted with the excess ADIT liability recorded in the Deferred taxes, net regulatory asset. For more information on the excess ADIT liability, see “— Deferred Taxes, Net.”

Cleco Power recovers increases in property taxes through its base rates. Additionally, as approved by the LPSC in Cleco Power’s current retail rate plan, increases in property taxes that are related to the industrial tax exemption program roll-offs will be recovered through the incremental costs recovery rider. At December 31, 2024, Cleco Power had a regulatory asset of $0.6 million for these costs.

On July 1, 2024, as approved by the LPSC in Cleco Power’s current retail rate plan, Cleco Power established a regulatory asset for right-of-way vegetation management costs to mitigate potential disruptions to its transmission and distribution system. At December 31, 2024, Cleco Power had $4.6 million recorded for these costs.

Deferred Taxes, Net

The regulatory assets and liabilities recorded for deferred income taxes represent the effect of tax benefits or detriments that must be flowed through to customers as they are received or paid. The amounts deferred are attributable to differences between book and tax recovery periods. Tax effects of changes in tax laws must be recognized in the period in which the law is enacted. Also, deferred tax assets and liabilities must be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled.

In 2017, the TCJA was enacted. Changes in the IRC from the TCJA had a material impact on the Registrants’ financial statements in 2017. At December 31, 2024, and 2023, Cleco and Cleco Power had $189.6 million and $211.5 million, respectively, accrued for the excess ADIT as a result of the TCJA. For more information on the status of the TCJA regulatory liability, see Note 14 — “Regulation and Rates — TCJA.”

On December 4, 2024, the Louisiana state corporate income tax rate decreased from 7.5% to 5.5%, effective for the income tax periods beginning on or after January 1, 2025.

At December 31, 2024, Cleco and Cleco Power recorded a $64.9 million decrease in Regulatory assets - deferred taxes, net for the flowthrough effects of state income taxes. For more information, see Note 12 — “Income Taxes — Tax Rate Changes.”

Residential Revenue Decoupling

Under the terms of Cleco Power’s new retail rate plan, effective July 1, 2024, Cleco Power implemented a residential revenue decoupling mechanism through its infrastructure and incremental cost recovery rider that provides a charge or credit to its residential customers for any under or over collection of residential base revenue as a result of changes in usage driven by weather or other measures. The under or over collection of residential base revenue is assessed on Cleco

Power’s rate year and an associated credit or charge for decoupling, not to exceed $3.0 million, will be adjusted through the infrastructure and incremental cost recovery rider for July 2025 and 2026, respectively.

Storm Reserves

Cleco Power has a storm reserve to fund future storm restoration costs. Accumulated storm restoration costs that are probable of recovery from retail customers are netted against the storm reserve. At December 31, 2023, Cleco Power had a storm reserve balance of $111.5 million, net of $2.5 million of accumulated restoration costs. During 2024, Cleco Power’s service territory was impacted by multiple severe weather events resulting in significant storm restoration costs. At December 31, 2024, Cleco Power had a storm reserve balance of $76.2 million, net of $43.3 million of accumulated storm restoration costs. For more information on the storm restoration costs associated with severe weather events that impacted Cleco Power’s service territory, see Note 20 — “Storm Restoration.”