Regulatory Assets and Liabilities

3 Months Ended

Mar. 31, 2025


Note 5 — 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 on regulated operations.

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


Cleco Power
					REMAINING RECOVERY PERIOD (YRS.)
(THOUSANDS)	AT MAR. 31, 2025		AT DEC. 31, 2024
Regulatory assets
Acadia Unit 1 acquisition costs	$	1,569	$	1,596	14.75
Accumulated deferred fuel(1)	6,470		457		Various	(2)
Affordability study	8,614		8,959		6.25
AFUDC equity gross-up	56,510		57,284		Various	(3)
AMI deferred revenue requirement	273		409		1
AROs(4)	11,481		11,073

Coughlin transaction costs	746		753		24.25
COVID-19 executive order	3,095		3,372		2.25
Deferred lignite and mine closure costs and Dolet Hills Power Station closure costs	—		258,951





Deferred taxes, net	7,942		2,008		Various	(2)
Dolet Hills carrying charge(4)	5,914		4,729



Financing costs(1)	5,625		5,717		Various	(5)
Interest costs	2,650		2,712		Various	(3)
Madison Unit 3 property taxes	14,567		14,196		Various	(6)
Non-service cost of postretirement benefits	13,930		14,057		Various	(3)
Postretirement costs	58,089		58,089		Various	(7)
Production operations and maintenance expenses	3,901		4,939		Various	(8)
Rodemacher Unit 2 deferred costs(4)	29,306		27,265

Solar development costs(4)	2,122		2,122
St. Mary Clean Energy Center	435		870		0.25

Training costs	5,423		5,462		34.75
Tree trimming costs(9)	264		943
Other	15,894		12,920		Various	(2)
Total regulatory assets	254,820		498,883
Regulatory liabilities


Deferred taxes, net	(6,827)		(6,827)		Various	(2)
Energy transition reserve(10)	(40,627)		—
Interest earned on energy transition reserve(10)	(50)		—

Residential revenue decoupling(10)	(3,000)		(3,000)
Storm reserve	(70,922)		(76,178)
Total regulatory liabilities	(121,426)		(86,005)
Total regulatory assets, net	$	133,394	$	412,878
(1) Represents regulatory assets for past expenditures that were not earning a return on investment at March 31, 2025, and December 31, 2024. All other assets are earning a return on investment. (2) For more information on the remaining recovery period, see Part II, Item 8, “Financial Statements and Supplementary Data — Note 6 — Regulatory Assets and Liabilities” for the disclosures for each specific regulatory asset or liability in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2024. (3) Amortized over the estimated lives of the respective assets. (4) Currently not in a recovery period. (5) Amortized over the terms of the related debt issuances. (6) Beginning July 1, 2021, property taxes paid for the year ended December 31, are being amortized over the subsequent 12 months beginning July 1. (7) Amortized over the average service life of the remaining plan participants. (8) Deferral is recovered over the following three-year regulatory period. (9) Will be fully amortized in May 2025. (10) Currently not in a refund period.

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


Cleco
(THOUSANDS)	AT MAR. 31, 2025		AT DEC. 31, 2024
Total Cleco Power regulatory assets, net	$	133,394	$	412,878
2016 Merger adjustments(1)
Fair value of long-term debt	88,091		89,941
Postretirement costs	6,964		7,461
Financing costs	6,131		6,217
Debt issuance costs	3,838		3,921
Total Cleco regulatory assets, net	$	238,418	$	520,418

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

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. At December 31, 2024, Cleco Power had $136.8 million recorded for the Deferred lignite and mine closure costs regulatory asset and $122.2 million recorded for the Dolet Hills Power Station closure costs regulatory asset. These regulatory assets are recorded in Regulatory assets - current on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets.

On March 12, 2025, through Cleco Securitization II, Cleco Power completed a securitization financing of Energy Transition Property, which included full recovery of the previously mentioned Dolet Hills Power Station costs that were deferred as regulatory assets, and at March 31, 2025, the balance was reduced to zero on Cleco’s and Cleco Power’s Condensed Consolidated Balance Sheets.

For more information about the securitization financing, see Note 14 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — LPSC Audits and Reviews — Dolet Hills Securitization.”

Energy Transition Reserve

On March 12, 2025, in conjunction with the securitization financing and pursuant to the financing order issued by the LPSC on November 20, 2024, a newly funded energy transition reserve for reimbursement of Dolet Hills Power Station energy transition costs and for future energy transition costs was established. Any surplus that remains in the reserve after all Dolet Hills Power Station energy transition costs are prudently incurred will be refunded to Cleco Power’s retail electric customers using its incremental investment cost recovery rider. In addition, Cleco Power established a regulatory liability for the interest earned on the restricted cash for the newly funded energy transition reserve. Per the financing order, Cleco Power will refund this interest annually through the incremental investment cost recovery rider. For more information on the restricted cash for the energy transition reserve, see Note 1 — “Summary of Significant Accounting Policies — Restricted Cash and Cash Equivalents.”

Storm Reserve

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. 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. At March 31, 2025, Cleco Power had a storm reserve balance of $70.9 million, net of $46.0 million of accumulated storm restoration costs.