UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One) | |
| |
X | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
| For the Fiscal Year Ended December 31, 20092010 |
| OR |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
| For the transition period from ____________ to ____________ |
Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. | | Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. |
1-11299 | ENTERGY CORPORATION (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 72-1229752 | | 1-31508 | ENTERGY MISSISSIPPI, INC. (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 64-0205830 |
| | | | |
| | | | |
1-10764 | ENTERGY ARKANSAS, INC. (an Arkansas corporation) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 71-0005900 | | 0-05807 | ENTERGY NEW ORLEANS, INC. (a Louisiana corporation) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3700 72-0273040 |
| | | | |
| | | | |
0-20371 | ENTERGY GULF STATES LOUISIANA, L.L.C. (a Louisiana limited liability company) 446 North Boulevard Baton Rouge, Louisiana 70802 Telephone (800) 368-3749 74-0662730 | | 1-34360 | ENTERGY TEXAS, INC. (a Texas corporation) 350 Pine Street Beaumont, Texas 77701 Telephone (409) 981-2000 61-1435798 |
| | | | |
| | | | |
1-32718 | ENTERGY LOUISIANA, LLC (a Texas limited liability company) 446 North Boulevard Baton Rouge, Louisiana 70802 Telephone (800) 368-3749 75-3206126 | | 1-09067 | SYSTEM ENERGY RESOURCES, INC. (an Arkansas corporation) Echelon One 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 72-0752777 |
Securities registered pursuant to Section 12(b) of the Act:
Registrant | Title of Class | Name of Each Exchange on Which Registered |
| | |
Entergy Corporation | Common Stock, $0.01 Par Value – 189,198,163179,037,924 shares outstanding at January 29, 201031, 2011 | New York Stock Exchange, Inc. Chicago Stock Exchange, Inc. |
| | |
Entergy Arkansas, Inc. | Mortgage Bonds, 6.7% Series due April 2032 Mortgage Bonds, 6.0%5.75% Series due November 2032 2040 | New York Stock Exchange, Inc. New York Stock Exchange, Inc.
|
| | |
Entergy Louisiana, LLC | Mortgage Bonds, 7.6%6.0% Series due April 2032March 2040 | New York Stock Exchange, Inc. |
| Mortgage Bonds, 5.875% Series due June 2041 | New York Stock Exchange, Inc. |
| | |
Entergy Mississippi, Inc. | Mortgage Bonds, 6.0% Series due November 2032 Mortgage Bonds, 7.25% Series due December 2032
| New York Stock Exchange, Inc. |
| Mortgage Bonds, 6.20% Series due April 2040 | New York Stock Exchange, Inc. |
| | |
Entergy Texas, Inc. | Mortgage Bonds, 7.875% Series due June 2039 | New York Stock Exchange, Inc. |
Securities registered pursuant to Section 12(g) of the Act:
Registrant | Title of Class |
| |
Entergy Arkansas, Inc. | Preferred Stock, Cumulative, $100 Par Value Preferred Stock, Cumulative, $0.01 Par Value |
| |
Entergy Gulf States Louisiana, L.L.C. | Common Membership Interests |
| |
Entergy Mississippi, Inc. | Preferred Stock, Cumulative, $100 Par Value |
| |
Entergy New Orleans, Inc. | Preferred Stock, Cumulative, $100 Par Value |
| |
Entergy Texas, Inc. | Common Stock, no par value |
Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.
| Yes | | No |
| | | |
Entergy Corporation | Ö | | |
Entergy Arkansas, Inc. | | | Ö |
Entergy Gulf States Louisiana, L.L.C. | | | Ö |
Entergy Louisiana, LLC | | | Ö |
Entergy Mississippi, Inc. | | | Ö |
Entergy New Orleans, Inc. | | | Ö |
Entergy Texas, Inc. | | | Ö |
System Energy Resources, Inc. | | | Ö |
Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
| Yes | | No |
| | | |
Entergy Corporation | | | Ö |
Entergy Arkansas, Inc. | | | Ö |
Entergy Gulf States Louisiana, L.L.C. | | | Ö |
Entergy Louisiana, LLC | | | Ö |
Entergy Mississippi, Inc. | | | Ö |
Entergy New Orleans, Inc. | | | Ö |
Entergy Texas, Inc. | | | Ö |
System Energy Resources, Inc. | | | Ö |
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether Entergy Corporation has submitted electronically and posted on Entergy'sEntergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy Resources have submitted electronically and posted on Entergy'sEntergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants'registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [Ö]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "accelerated“accelerated filer," "large” “large accelerated filer,"” and "smaller“smaller reporting company"company” in Rule 12b-2 of the Securities Exchange Act of 1934.
| Large accelerated filer | | Accelerated filer | | Non-accelerated Non-accelerated filer
| | Smaller reporting company |
| | | | | | | |
Entergy Corporation | Ö | | | | | | |
Entergy Arkansas, Inc. | | | | | Ö | | |
Entergy Gulf States Louisiana, L.L.C. | | | | | Ö | | |
Entergy Louisiana, LLC | | | | | Ö | | |
Entergy Mississippi, Inc. | | | | | Ö | | |
Entergy New Orleans, Inc. | | | | | Ö | | |
Entergy Texas, Inc. | | | | | Ö | | |
System Energy Resources, Inc. | | | | | Ö | | |
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Act.) Yes o No þ
System Energy Resources meets the requirements set forth in General Instruction I(1) of Form 10-K and is therefore filing this Form 10-K with reduced disclosure as allowed in General Instruction I(2). System Energy Resources is reducing its disclosure by not including Part III, Items 10 through 13 in its Form 10-K.
The aggregate market value of Entergy Corporation Common Stock, $0.01 Par Value, held by non-affiliates as of the end of the second quarter of 2009,2010, was $15.2$13.4 billion based on the reported last sale price of $77.52$71.62 per share for such stock on the New York Stock Exchange on June 30, 2009.2010. Entergy Corporation is the sole holder of the common stock of Entergy Arkansas, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. Entergy Corporation is the sole holder of the common stock of Entergy Louisiana Holdings, Inc., which is the sole holder of the common membership interests in Entergy Louisiana, LLC. Entergy Corporation is the sole holder of the common stock of EGS Holdings, Inc., which is the solesol e holder of the common membership interests in Entergy Gulf States Louisiana, L.L.C.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders, to be held May 7, 2010,6, 2011, are incorporated by reference into Part III hereof.
| SEC Form 10-K Reference Number | Page Number |
| | |
Definitions | | ivi |
Entergy's Business | | ix |
| | |
| Part I.II. Item 1.7. | 1 |
| | 2 |
| | 3 |
Report of Management | | 4 |
Entergy Corporation and Subsidiaries | | 12 |
Management's Financial Discussion and Analysis
| Part II. Item 7. | 5 |
Plan to Pursue Separation of Non-Utility Nuclear
| | 5 |
Results of Operations
| | 10 |
Liquidity and Capital Resources
| | 20 |
| | 3523 |
| | 4429 |
| | 4731 |
| | 5438 |
| | 39 |
| Part II. Item 6. | 5540 |
| | 5641 |
| Part II. Item 8. | 5743 |
| Part II. Item 8. | 5844 |
| Part II. Item 8. | 6046 |
| Part II. Item 8. | 6248 |
| Part II. Item 8. | 6349 |
| Part I. Item 1. | |
| | 194185 |
| Part I. Item 1. | 185 |
| | 194186 |
| | 196186 |
| | 187 |
| | 200192 |
| | 203195 |
| | 206198 |
| | 209201 |
| | 210201 |
| | 202 |
| Part I. Item 1. | 203 |
| | 203 |
| | 206 |
| | 207 |
| | 207 |
| Part I. Item 1. | 208 |
| Part I. Item 1. | 208 |
| | 208 |
| | 209 |
| | 209 |
| | 211 |
| | 212213 |
Non-Utility Nuclear
| Part I. Item 1. | 212 |
| | 212225 |
| | 214227 |
| | 216228 |
Other Business Activities
| | 216 |
Non-Nuclear Wholesale Assets Business
| Part I. Item 1. | 216 |
Property
| | 217 |
Entergy-Koch
| Part I. Item 1. | 217 |
Regulation of Entergy's Business
| Part I. Item 1. | 218 |
Energy Policy Act of 2005
| | 218 |
Federal Power Act
| | 218 |
State Regulation
| | 219 |
Regulation of the Nuclear Power Industry
| | 220 |
Environmental Regulation
| | 222 |
Litigation
| | 235 |
Employees
| | 239 |
| Part I. Item 1A. | 240229 |
Unresolved Staff Comments | Part I. Item 1B. | None |
| | |
| Part II. Item 7. | 258249 |
| | 249 |
| | 252 |
| | 257 |
| | 258 |
| | 258 |
| | 259 |
| | 259 |
| | 261 |
State and Local Rate Regulation
| | 266 |
Co-Owner-Initiated Proceedings at the FERC
| | 268 |
Federal Regulation
| | 269 |
Utility Restructuring
| | 269 |
Nuclear Matters
| | 269 |
Environmental Risks
| | 269 |
Critical Accounting Estimates
| | 270 |
New Accounting Pronouncements
| | 271 |
| | 272263 |
Income Statements For the Years Ended December 31, 2009, 2008, and 2007
| Part II. Item 8. | 273 |
Statements of Cash Flows For the Years Ended December 31, 2009, 2008,
and 2007
| Part II. Item 8. | 275 |
Balance Sheets, December 31, 2009 and 2008
| Part II. Item 8. | 276 |
Statements of Retained Earnings for the Years Ended December 31, 2009,
2008, and 2007
| Part II. Item 8. | 278 |
Selected Financial Data - Five-Year Comparison
| Part II. Item 6. | 279 |
Entergy Gulf States Louisiana, L.L.C. | | |
Management's Financial Discussion and Analysis
| Part II. Item 7. | 280 |
Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy
Gulf States Louisiana and Entergy Texas
| | 280 |
Results of Operations
| | 281 |
Liquidity and Capital Resources
| | 285 |
State and Local Rate Regulation
| | 290 |
Federal Regulation
| | 292 |
Industrial and Commercial Customers
| | 292 |
Nuclear Matters
| | 293 |
Environmental Risks
| | 293 |
Critical Accounting Estimates
| | 293 |
New Accounting Pronouncements
| | 294 |
Report of Independent Registered Public Accounting Firm
| | 295 |
Income Statements For the Years Ended December 31, 2009, 2008, and 2007
| Part II. Item 8. | 296 |
Statements of Cash Flows For the Years Ended December 31, 2009, 2008,
and 2007
| Part II. Item 8. | 297 |
Balance Sheets, December 31, 2009 and 2008
| Part II. Item 8. | 298 |
Statements of Members' Equity and Comprehensive Income for the Years
Ended December 31, 2009, 2008, and 2007
| Part II. Item 8. | 300 |
Selected Financial Data - Five-Year Comparison
| Part II. Item 6. | 301 |
Entergy Louisiana, LLC | | |
Management's Financial Discussion and Analysis
| Part II. Item 7. | 302 |
Results of Operations
| | 302 |
Liquidity and Capital Resources
| | 305 |
State and Local Rate Regulation
| | 312 |
Federal Regulation
| | 314 |
Industrial and Commercial Customers
| | 314 |
Nuclear Matters
| | 314 |
Environmental Risks
| | 315 |
Critical Accounting Estimates
| | 315 |
New Accounting Pronouncements
| | 316 |
Report of Independent Registered Public Accounting Firm
| | 317 |
Income Statements For the Years Ended December 31, 2009, 2008, and 2007
| Part II. Item 8. | 318 |
Statements of Cash Flows For the Years Ended December 31, 2009, 2008,
and 2007
| Part II. Item 8. | 319 |
Balance Sheets, December 31, 2009 and 2008
| Part II. Item 8. | 320 |
Statements of Members' Equity and Comprehensive Income for the Years
Ended December 31, 2009, 2008, and 2007
| Part II. Item 8. | 322 |
Selected Financial Data - Five-Year Comparison
| Part II. Item 6. | 323 |
Entergy Mississippi, Inc. | | |
Management's Financial Discussion and Analysis
| Part II. Item 7. | 324 |
Results of Operations
| | 324 |
Liquidity and Capital Resources
| | 327 |
State and Local Rate Regulation
| | 331 |
Federal Regulation
| | 332 |
Critical Accounting Estimates
| | 332 |
New Accounting Pronouncements
| | 334 |
Report of Independent Registered Public Accounting Firm
| | 335 |
Income Statements For the Years Ended December 31, 2009, 2008, and 2007
| Part II. Item 8. | 336 |
Statements of Cash Flows For the Years Ended December 31, 2009, 2008,
and 2007
| Part II. Item 8. | 337 |
Balance Sheets, December 31, 2009 and 2008
| Part II. Item 8. | 338 |
Statements of Retained Earnings for the Years Ended December 31, 2009,
2008, and 2007
| Part II. Item 8. | 340 |
Selected Financial Data - Five-Year Comparison
| Part II. Item 6. | 341 |
Entergy New Orleans, Inc. | | |
Management's Financial Discussion and Analysis
| Part II. Item 7. | 342 |
Results of Operations
| | 342 |
Hurricane Katrina
| | 344 |
Liquidity and Capital Resources
| | 346 |
State and Local Rate Regulation
| | 349 |
Federal Regulation
| | 350 |
Environmental Risks
| | 351 |
Critical Accounting Estimates
| | 351 |
New Accounting Pronouncements
| | 352 |
Report of Independent Registered Public Accounting Firm
| | 353 |
Income Statements For the Years Ended December 31, 2009, 2008, and
2007
| Part II. Item 8. | 354 |
Statements of Cash Flows For the Years Ended December 31, 2009, 2008,
and 2007
| Part II. Item 8. | 355 |
Balance Sheets, December 31, 2009 and 2008
| Part II. Item 8. | 356 |
Statements of Retained Earnings for the Years Ended December 31, 2009,
2008, and 2007
| Part II. Item 8. | 358 |
Selected Financial Data - Five-Year Comparison
| Part II. Item 6. | 359 |
Entergy Texas, Inc. | | |
Management's Financial Discussion and Analysis
| Part II. Item 7. | 360 |
Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy
Gulf States Louisiana and Entergy Texas
| | 360 |
Results of Operations
| | 361 |
Liquidity and Capital Resources
| | 364 |
Electric Industry Restructing
| | 369 |
State and Local Rate Regulation
| | 370 |
Federal Regulation
| | 372 |
Industrial and Commercial Customers
| | 372 |
Environmental Risks
| | 372 |
Critical Accounting Estimates
| | 373 |
New Accounting Pronouncements
| | 374 |
Report of Independent Registered Public Accounting Firm
| | 375 |
| Part II. Item 8. | 376264 |
| Part II. Item 8. | 377265 |
| Part II. Item 8. | 266 |
| Part II. Item 8. | 268 |
| Part II. Item 6. | 269 |
| | |
| Part II. Item 7. | 270 |
| | 270 |
| | 273 |
| | 279 |
| | 281 |
| | 281 |
| | 281 |
| | 282 |
| | 282 |
| | 283 |
| | 285 |
| Part II. Item 8. | 286 |
| Part II. Item 8. | 287 |
| Part II. Item 8. | 288 |
| Part II. Item 8. | 290 |
| Part II. Item 6. | 291 |
| | |
| Part II. Item 7. | 292 |
| | 292 |
| | 295 |
| | 303 |
| | 304 |
| | 304 |
| | 304 |
| | 305 |
| | 305 |
| | 306 |
| | 307 |
| Part II. Item 8. | 308 |
| Part II. Item 8. | 309 |
| Part II. Item 8. | 310 |
| Part II. Item 8. | 312 |
| Part II. Item 6. | 313 |
| | |
| Part II. Item 7. | 314 |
| | 314 |
| | 316 |
| | 320 |
| | 321 |
| | 322 |
| | 323 |
| | 325 |
| Part II. Item 8. | 326 |
| Part II. Item 8. | 327 |
| Part II. Item 8. | 328 |
| Part II. Item 8. | 330 |
| Part II. Item 6. | 331 |
| | |
| Part II. Item 7. | 332 |
| | 332 |
| | 334 |
| | 335 |
| | 338 |
| | 340 |
| | 340 |
| | 340 |
| | 342 |
| | 343 |
| Part II. Item 8. | 344 |
| Part II. Item 8. | 345 |
| Part II. Item 8. | 346 |
| Part II. Item 8. | 348 |
| Part II. Item 6. | 349 |
| | |
| Part II. Item 7. | 350 |
| | 350 |
| | 353 |
| | 358 |
| | 358 |
| | 360 |
| | 360 |
| | 360 |
| | 360 |
| | 362 |
| | 363 |
| Part II. Item 8. | 364 |
| Part II. Item 8. | 365 |
| Part II. Item 8. | 366 |
| Part II. Item 8. | 368 |
| Part II. Item 6. | 369 |
| | |
| Part II. Item 7. | 370 |
| | 370 |
| | 370 |
| | 374 |
| | 374 |
| | 374 |
| | 375 |
| | 377 |
| Part II. Item 8. | 378 |
Paid-in Capital forCash Flows For the Years Ended December 31, 2010, 2009, 2008,
| Part II. Item 8. | 379 |
| Part II. Item 8. | 380 |
| Part II. Item 8. | 382 |
| Part II. Item 6. | 381 |
System Energy Resources, Inc. | | 383 |
Management's Financial Discussion and AnalysisProperties | Part II. Item 7. | 382 |
Results of Operations
| | 382 |
Liquidity and Capital Resources
| | 382 |
Nuclear Matters
| | 385 |
Environmental Risks
| | 385 |
Critical Accounting Estimates
| | 386 |
New Accounting Pronouncements
| | 387 |
Report of Independent Registered Public Accounting Firm
| | 388 |
Income Statements For the Years Ended December 31, 2009, 2008, and 2007
| Part II. Item 8. | 389 |
Statements of Cash Flows For the Years Ended December 31, 2009, 2008,
and 2007
| Part II. Item 8. | 391 |
Balance Sheets, December 31, 2009 and 2008
| Part II. Item 8. | 392 |
Statements of Retained Earnings for the Years Ended December 31, 2009,
2008, and 2007
| Part II. Item 8. | 394 |
Selected Financial Data - Five-Year Comparison
| Part II. Item 6. | 395 |
Properties | Part I. Item 2. | 396384 |
| Part I. Item 3. | 396384 |
Submission of Matters to a Vote of Security Holders | Part I. Item 4. | 396 |
| Part I and Part III. Item 10. | 396384 |
| Part II. Item 5. | 398386 |
| Part II. Item 6. | 399387 |
| Part II. Item 7. | 399387 |
| Part II. Item 7A. | 400387 |
| Part II. Item 8. | 400388 |
| Part II. Item 9. | 400388 |
| Part II. Item 9A. | 400388 |
| Part II. Item 9A. | 402390 |
| Part III. Item 10. | 410398 |
| Part III. Item 11. | 415403 |
| Part III. Item 12. | 470457 |
| Part III. Item 13. | 474460 |
| Part III. Item 14. | 475461 |
| Part IV. Item 15. | 478464 |
| | 479465 |
| | 487473 |
| | 489474 |
| | S-1 |
| | E-1 |
This combined Form 10-K is separately filed by Entergy Corporation and its seven "Registrant Subsidiaries"“Registrant Subsidiaries”: Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representations whatsoever as to any other company.
The report should be read in its entirety as it pertains to each respective reporting company. No one section of the report deals with all aspects of the subject matter. Separate Item 6, 7, and 8 sections are provided for each reporting company, except for the Notes to the financial statements. The Notes to the financial statements for all of the reporting companies are combined. All Items other than 6, 7, and 8 are combined for the reporting companies.
In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "may," "will," "could," "project," "believe," "anticipate," "intend," "expect," "estimate," "continue," "potential," "plan," "predict," "forecast," and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements involve a number of risks and uncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors, (b) Management's Financial Discussion and Analysis, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):
· | resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, and implementation of legislation ending the Texas transition to competition, and other regulatory proceedings, including those related to Entergy's System Agreement or any successor agreement or arrangement, Entergy's utility supply plan, recovery of storm costs, and recovery of fuel and purchased power costs |
· | changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, the operations of the independent coordinator of transmission for Entergy's utility service territory and transition to a successor or alternative arrangement, including possible participation in a regional transmission organization, and the application of more stringent transmission reliability requirements or market power criteria by the FERC |
· | changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of nuclear generating facilities, particularly those owned or operated by the Non-Utility NuclearEntergy Wholesale Commodities business, and the effects of new or existing safety concerns regarding nuclear power plants and nuclear fuel |
· | resolution of pending or future applications for license renewals or modifications of nuclear generating facilities |
· | the performance of and deliverability of power from Entergy's generating plants,generation resources, including the capacity factors at its nuclear generating facilities |
· | Entergy's ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities |
· | prices for power generated by Entergy's merchant generating facilities, the ability to hedge, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Non-Utility NuclearEntergy Wholesale Commodities nuclear plants and |
· | the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy's ability to meet credit support requirements for fuel and power supply contracts |
· | volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities |
· | changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation |
· | changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances, and changes in costs of compliance with environmental and other laws and regulations |
· | uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal |
FORWARD-LOOKING INFORMATION (Concluded)
· | variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes and ice storms (including most recently, Hurricane Gustav and Hurricane Ike and the January 2009 ice storm in Arkansas) and recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance |
FORWARD-LOOKING INFORMATION (Concluded)
· | effects of climate change and environmental and other regulatory obligations intended to compel reductions in carbon dioxide emissions |
· | Entergy's ability to manage its capital projects and operation and maintenance costs |
· | Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms |
· | the economic climate, and particularly economic conditions in Entergy's Utility service territory and the Northeast United States and events that could influence economic conditions in those areas |
· | the effects of Entergy's strategies to reduce tax payments |
· | changes in the financial markets, particularly those affecting the availability of capital and Entergy's ability to refinance existing debt, execute share repurchase programs, and fund investments and acquisitions |
· | actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies' ratings criteria |
· | changes in inflation and interest rates |
· | the effect of litigation and government investigations or proceedings |
· | the potential effects of threatened or actual terrorism and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion |
· | Entergy's ability to attract and retain talented management and directors |
· | changes in accounting standards and corporate governance |
· | declines in the market prices of marketable securities and resulting funding requirements for Entergy's defined benefit pension and other postretirement benefit plans |
· | changes in decommissioning trust fund values or earnings or in the timing of or cost to decommission nuclear plant sites |
· | factors that could lead to impairment of long-lived assets |
· | the ability to successfully complete merger, acquisition, or divestiture plans, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture, and the success of the business following a merger, acquisition, or divestituredivestiture. |
· | and the risks inherent in the contemplated Non-Utility Nuclear spin-off, joint venture, and related transactions. Entergy Corporation cannot provide any assurances that the spin-off or any of the proposed transactions related thereto will be completed, nor can it give assurances as to the terms on which such transactions will be consummated. The transaction is subject to certain conditions precedent, including regulatory approvals and the final approval by the Board. |
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Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym | Term | |
| | |
AEEC | Arkansas Electric Energy Consumers | |
AFUDC | Allowance for Funds Used During Construction | |
ALJ | Administrative Law Judge | |
ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One Steam Electric Generating Station (nuclear), owned by Entergy Arkansas | |
APSC | Arkansas Public Service Commission | |
Board | Board of Directors of Entergy Corporation | |
Cajun | Cajun Electric Power Cooperative, Inc. | |
capacity factor | Actual plant output divided by maximum potential plant output for the period |
CDBG | Community Development Block Grant |
City Council or Council | Council of the City of New Orleans, Louisiana |
CPI-U | Consumer Price Index - Urban |
DOE | United States Department of Energy | |
EITFD. C. Circuit | FASB's Emerging Issues Task ForceU.S. Court of Appeals for the District of Columbia | |
Entergy | Entergy Corporation and its direct and indirect subsidiaries | |
Entergy Corporation | Entergy Corporation, a Delaware corporation | |
Entergy Gulf States, Inc. | Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas | |
Entergy Gulf States Louisiana | Entergy Gulf States Louisiana, L.L.C., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. | |
Entergy-Koch | A joint venture equally owned by subsidiaries of Entergy and Koch Industries, Inc. Entergy-Koch'sEntergy-Koch’s pipeline and trading businesses were sold in 2004. | |
Entergy Texas | Entergy Texas, Inc., a company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires. | |
Entergy Wholesale Commodities | Entergy’s non-utility business segment primarily comprised of the ownership and operation of six nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by those plants to wholesale customers | |
EPA | United States Environmental Protection Agency |
EPDC | Entergy Power Development Corporation, a wholly-owned subsidiary of Entergy Corporation |
ERCOT | Electric Reliability Council of Texas | |
FASB | Financial Accounting Standards Board |
FEMA | Federal Emergency Management Agency |
FERC | Federal Energy Regulatory Commission | |
firm LD | Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract | |
FSPFitzPatrick | FASB Staff PositionJames A. FitzPatrick Nuclear Power Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
Grand Gulf | Unit No. 1 of Grand Gulf Steam Electric GeneratingNuclear Station (nuclear), 90% owned or leased by System Energy | |
GWh | Gigawatt-hour(s), which equals one million kilowatt-hours | |
Independence | Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power | |
Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment | |
DEFINITIONS (Continued)
Abbreviation or Acronym | Term |
| |
Indian Point 3 | Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
IRS | Internal Revenue Service |
ISO | Independent System Operator |
kV | Kilovolt |
kW | Kilowatt, which equals one thousand watts |
kWh | Kilowatt-hour(s) |
LDEQ | Louisiana Department of Environmental Quality |
LPSC | Louisiana Public Service Commission |
Mcf | 1,000 cubic feet of gas |
MMBtu | One million British Thermal Units |
MPSC | Mississippi Public Service Commission |
MW | Megawatt(s), which equals one thousand kilowatt(s) |
MWh | Megawatt-hour(s) |
Nelson Unit 6 | Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned by Entergy Gulf States Louisiana (57.5%) and Entergy Texas (42.5%) |
Net debt ratio | Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents |
Net MW in operation | Installed capacity owned and operated |
Non-Utility Nuclear | Entergy's business segment that owns and operates six nuclear power plants and sells electric power produced by those plants to wholesale customers |
NRC | Nuclear Regulatory Commission |
NYPA | New York Power Authority |
OASIS | Open Access Same Time Information Systems |
PPAOffsetting positions | Purchased power agreementTransactions for the purchase of energy, generally to offset a firm LD transaction which was used as a placeholder until a unit-contingent transaction could be originated and executed |
production costPalisades | CostPalisades Power Plant (nuclear), owned by an Entergy subsidiary in $/MMBtu associated with delivering gas, excluding the cost ofEntergy Wholesale Commodities business segment |
Pilgrim | Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the gasEntergy Wholesale Commodities business segment |
PRP | Potentially responsible party (a person or entity that may be responsible for remediation of environmental contamination) |
PUCT | Public Utility Commission of Texas |
PUHCA 1935 | Public Utility Holding Company Act of 1935, as amended |
PUHCA 2005 | Public Utility Holding Company Act of 2005, which repealed PUHCA 1935, among other things |
PURPA | Public Utility Regulatory Policies Act of 1978 |
Registrant Subsidiaries | Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. |
Ritchie Unit 2 | Unit 2 of the R.E. Ritchie Steam Electric Generating Station (gas/oil) |
River Bend | River Bend Steam Electric Generating Station (nuclear), owned by Entergy Gulf States Louisiana |
RTO | Regional transmission organization |
SEC | Securities and Exchange Commission |
SFAS | Statement of Financial Accounting Standards as promulgated by the FASB |
SMEPA | South Mississippi Electric Power Association, which owns a 10% interest in Grand Gulf |
spark spread | Dollar difference between electricity prices per unit and natural gas prices after assuming a conversion ratio for the number of natural gas units necessary to generate one unit of electricity |
System Agreement | Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources |
System Energy | System Energy Resources, Inc. |
System Fuels | System Fuels, Inc. |
DEFINITIONS (Concluded)
Abbreviation or Acronym | Term |
| |
System Fuels | System Fuels, Inc. |
TWh | Terawatt-hour(s), which equals one billion kilowatt-hours |
unit-contingent | Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages |
Unit Power Sales Agreement | Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy'sEnergy’s share of Grand Gulf |
UK | The United Kingdom of Great Britain and Northern Ireland |
Utility | Entergy'sEntergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
Utility operating companies | Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
Vermont Yankee | Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
Waterford 3 | Unit No. 3 (nuclear) of the Waterford Steam Electric Generating Station, 100% owned or leased by Entergy Louisiana |
weather-adjusted usage | Electric usage excluding the effects of deviations from normal weather |
White Bluff | White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas |
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ENTERGY'S BUSINESS
Entergy is an integrated energy company engaged primarily in electric power production and retail electric distribution operations. Entergy owns and operates power plants with approximately 30,000 MW of aggregate electric generating capacity, and Entergy is the second-largest nuclear power generator in the United States. Entergy delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. Entergy generated annual revenues of $10.7 billion in 2009 and had approximately 15,000 employees as of December 31, 2009.ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.Entergy Wholesale Commodities.
· | The Utilitygenerates, transmits, distributes, business segment includes the generation, transmission, distribution, and sellssale of electric power in a four-state service territoryterritories in four states that includesinclude portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business. |
· | The Non-Utility NuclearEntergy Wholesale Commodities ownsbusiness segment includes the ownership and operatesoperation of six nuclear power plants located in the northern United States and sellsthe sale of the electric power produced by those plants primarily to wholesale customers. This business also provides services to other nuclear power plant owners. As discussed furtherEntergy Wholesale Commodities also owns interests in "Management's Financial Discussionnon-nuclear power plants that sell the electric power produced by those plants to wholesale customers while it focuses on improving operating and Analysis," in November 2007, the Board approved a plan to pursue a separationfinancial performance of the Non-Utility Nuclear business from Entergy through a tax-free spin-off of Non-Utility Nuclear to Entergy shareholders.these plants, consistent with Entergy’s market-based point-of-view. |
In additionthe fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear business segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization. The prior period financial information in this Form 10-K has been restated to reflect the change in reportable segments.
Following are the percentages of Entergy’s consolidated revenues and net income generated by its two primary, reportable, operating segments Entergy also operatesand the non-nuclear wholesalepercentage of total assets business. The non-nuclear wholesale assets business sells to wholesale customers the electric power producedheld by power plants that it owns while it focuses on improving performance and exploring sales or restructuring opportunities for its power plants. Such opportunities are evaluated consistent with Entergy's market-based point-of-view.them:
| | % of Revenue | | % of Net Income | | % of Total Assets |
Segment | | 2010 | | 2009 | | 2008 | | 2010 | | 2009 | | 2008 | | 2010 | | 2009 | | 2008 |
| | | | | | | | | | | | | | | | | | |
Utility | | 78 | | 75 | | 79 | | 65 | | 57 | | 49 | | 80 | | 80 | | 79 |
Entergy Wholesale Commodities | | 22 | | 25 | | 21 | | 39 | | 51 | | 64 | | 26 | | 30 | | 25 |
Parent & Other | | - | | - | | - | | (4) | | (8) | | (13) | | (6) | | (10) | | (4) |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
OPERATING INFORMATION | |
For the Years Ended December 31, 2009, 2008, and 2007 | |
| | | | | | | | | |
| | Utility (a) | | | Non-Utility Nuclear | | Entergy Consolidated (a) | |
| | (In Thousands) | |
2009 | | | | | | | | | |
Operating revenues | | $ | 8,055,353 | | | $ | 2,555,254 | | | $ | 10,745,650 | |
Operating expenses | | $ | 6,731,528 | | | $ | 1,553,686 | | | $ | 8,461,124 | |
Other income | | $ | 235,968 | | | $ | 64,603 | | | $ | 169,708 | |
Interest and other charges | | $ | 462,206 | | | $ | 55,884 | | | $ | 570,444 | |
Income taxes | | $ | 388,682 | | | $ | 379,266 | | | $ | 632,740 | |
Net income | | $ | 708,905 | | | $ | 631,020 | | | $ | 1,251,050 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
2008 | | | | | | | | | | | | |
Operating revenues | | $ | 10,318,630 | | | $ | 2,558,378 | | | $ | 13,093,756 | |
Operating expenses | | $ | 9,078,502 | | | $ | 1,434,425 | | | $ | 10,810,589 | |
Other income | | $ | 161,512 | | | $ | 46,360 | | | $ | 169,287 | |
Interest and other charges | | $ | 425,216 | | | $ | 53,926 | | | $ | 608,921 | |
Income taxes | | $ | 371,281 | | | $ | 319,107 | | | $ | 602,998 | |
Net income | | $ | 605,144 | | | $ | 797,280 | | | $ | 1,240,535 | |
| | | | | | | | | | | | |
2007 | | | | | | | | | | | | |
Operating revenues | | $ | 9,255,075 | | | $ | 2,029,666 | | | $ | 11,484,398 | |
Operating expenses | | $ | 7,910,659 | | | $ | 1,312,577 | | | $ | 9,428,030 | |
Other income | | $ | 164,383 | | | $ | 87,256 | | | $ | 255,055 | |
Interest and other charges | | $ | 422,382 | | | $ | 34,738 | | | $ | 637,052 | |
Income taxes | | $ | 382,025 | | | $ | 230,407 | | | $ | 514,417 | |
Net income | | $ | 704,393 | | | $ | 539,200 | | | $ | 1,159,954 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
CASH FLOW INFORMATION |
For the Years Ended December 31, 2009, 2008, and 2007 |
| | | | | | | | | | | | |
| | Utility (a) | | | Non-Utility Nuclear | | Entergy Consolidated (a) | |
| | (In Thousands) |
2009 | | | | | | | | | | | | |
Net cash flow provided by operating activities | | $ | 1,586,020 | | | $ | 2,434,449 | | | $ | 2,933,158 | |
Net cash flow used in investing activities | | $ | (1,465,824 | ) | | $ | (1,978,037 | ) | | $ | (2,094,394 | ) |
Net cash flow provided by (used in) financing activities | | $ | 553,107 | | | $ | (474,028 | ) | | $ | (1,048,388 | ) |
| | | | | | | | | | | | |
2008 | | | | | | | | | | | | |
Net cash flow provided by operating activities | | $ | 2,379,258 | | | $ | 1,255,284 | | | $ | 3,324,328 | |
Net cash flow used in investing activities | | $ | (2,845,157 | ) | | $ | (471,590 | ) | | $ | (2,590,096 | ) |
Net cash flow provided by (used in) financing activities | | $ | 250,309 | | | $ | (799,861 | ) | | $ | (70,757 | ) |
| | | | | | | | | | | | |
2007 | | | | | | | | | | | | |
Net cash flow provided by operating activities | | $ | 1,807,769 | | | $ | 879,940 | | | $ | 2,559,770 | |
Net cash flow used in investing activities | | $ | (1,238,487 | ) | | $ | (883,397 | ) | | $ | (2,117,731 | ) |
Net cash flow provided by (used in) financing activities | | $ | (368,909 | ) | | $ | 47,705 | | | $ | (221,586 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
FINANCIAL POSITION INFORMATION |
As of December 31, 2009 and 2008 |
| | | | | | | | | | | | |
| | Utility (a) | | | Non-Utility Nuclear | | Entergy Consolidated (a) | |
| | (In Thousands) |
2009 | | | | | | | | | | | | |
Current assets | | $ | 3,102,516 | | | $ | 2,625,482 | | | $ | 4,534,161 | |
Other property and investments | | $ | 2,294,191 | | | $ | 3,229,677 | | | $ | 3,618,700 | |
Property, plant and equipment - net | | $ | 19,253,914 | | | $ | 3,911,195 | | | $ | 23,389,402 | |
Deferred debits and other assets | | $ | 5,044,111 | | | $ | 824,455 | | | $ | 5,822,334 | |
Current liabilities | | $ | 2,678,278 | | | $ | 439,206 | | | $ | 3,193,997 | |
Non-current liabilities | | $ | 19,756,470 | | | $ | 5,325,411 | | | $ | 25,245,897 | |
Shareholders' equity | | $ | 7,073,474 | | | $ | 4,826,192 | | | $ | 8,707,360 | |
| | | | | | | | | | | | |
2008 | | | | | | | | | | | | |
Current assets | | $ | 3,067,301 | | | $ | 1,737,474 | | | $ | 5,160,389 | |
Other property and investments | | $ | 2,089,231 | | | $ | 1,697,893 | | | $ | 3,237,544 | |
Property, plant and equipment - net | | $ | 18,595,892 | | | $ | 3,592,359 | | | $ | 22,429,114 | |
Deferred debits and other assets | | $ | 5,057,723 | | | $ | 820,469 | | | $ | 5,789,771 | |
Current liabilities | | $ | 3,635,614 | | | $ | 318,082 | | | $ | 3,765,894 | |
Non-current liabilities | | $ | 18,217,228 | | | $ | 3,359,490 | | | $ | 24,573,303 | |
Shareholders' equity | | $ | 6,770,794 | | | $ | 4,170,623 | | | $ | 8,060,592 | |
| | | | | | | | | | | | |
(a) In addition to the two operating segments presented here, Entergy Consolidated also includes Entergy Corporation (parent company), other business activity, and intercompany eliminations, including the non-nuclear wholesale assets business and earnings on the proceeds of sales of previously-owned businesses. | |
| | | | | | | | | | | |
2010 Compared to 2009
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2010 to 2009 showing how much the line item increased or (decreased) in comparison to the prior period:
| | Utility | | Entergy Wholesale Commodities | | Parent & Other | | Entergy |
| | (In Thousands) |
| | | | | | | | |
2009 Consolidated Net Income (Loss) | | $708,905 | | $641,094 | | ($98,949) | | $1,251,050 |
| | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 357,211 | | (163,518) | | 8,622 | | 202,315 |
Other operation and maintenance expenses | | 112,384 | | 124,758 | | (18,550) | | 218,592 |
Taxes other than income taxes | | 28,872 | | 2,717 | | (1,149) | | 30,440 |
Depreciation and amortization | | (24,112) | | 11,413 | | (182) | | (12,881) |
Gain on sale of business | | - | | 44,173 | | - | | 44,173 |
Other income | | (14,915) | | 66,222 | | (25,681) | | 25,626 |
Interest charges | | 31,035 | | (6,461) | | (19,851) | | 4,723 |
Other | | 7,758 | | 19,728 | | - | | 27,486 |
Income taxes | | 65,545 | | (53,606) | | (27,440) | | (15,501) |
| | | | | | | | |
2010 Consolidated Net Income (Loss) | | $829,719 | | $489,422 | | ($48,836) | | $1,270,305 |
Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics.
In November 2007 the Board approved a plan to pursue a separation of Entergy’s non-utility nuclear business from Entergy through a spin-off of the business to Entergy shareholders. In April 2010, Entergy announced that it planned to unwind the business infrastructure associated with the proposed spin-off transaction. As a result of the plan to unwind the business infrastructure, Entergy recorded expenses for the write-off of certain capitalized costs incurred in connection with the planned spin-off transaction. These costs are discussed in more detail below throughout this section.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The following showsNet Revenue
Utility
Following is an analysis of the principal subsidiaries and affiliates within Entergy's business segments. Companies that file reports and other information with the SEC under the Securities Exchange Act of 1934 are identifiedchange in bold-faced type.net revenue comparing 2010 to 2009.
| | Amount |
| | Entergy Corporation
| | (In Millions) |
| | |
2009 net revenue | | $4,694 |
Volume/weather | | 231 |
Retail electric price | | 137 |
Provision for regulatory proceedings | | 26 |
Rough production cost equalization | | 19 |
ANO decommissioning trust | | (24) |
Fuel recovery | | (44) |
Other | | 12 |
2010 net revenue | | $5,051 |
The volume/weather variance is primarily due to an increase of 8,362 GWh, or 8%, in billed electricity usage in all retail sectors, including the effect on the residential sector of colder weather in the first quarter 2010 compared to 2009 and warmer weather in the second and third quarters 2010 compared to 2009. The industrial sector reflected strong sales growth on continuing signs of economic recovery. The improvement in this sector was primarily driven by inventory restocking and strong exports with the chemicals, refining, and miscellaneous manufacturing sectors leading the improvement.
The retail electric price variance is primarily due to:
· | increases in the formula rate plan riders at Entergy Gulf States Louisiana effective November 2009, January 2010, and September 2010, at Entergy Louisiana effective November 2009, and at Entergy Mississippi effective July 2009; |
· | a base rate increase at Entergy Arkansas effective July 2010; |
· | rate actions at Entergy Texas, including base rate increases effective in May and August 2010; |
· | a formula rate plan provision of $16.6 million recorded in the third quarter 2009 for refunds that were made to customers in accordance with settlements approved by the LPSC; and |
· | the recovery in 2009 by Entergy Arkansas of 2008 extraordinary storm costs, as approved by the APSC, which ceased in January 2010. The recovery of storm costs is offset in other operation and maintenance expenses. |
See Note 2 to the financial statements for further discussion of the proceedings referred to above.
The provision for regulatory proceedings variance is primarily due to provisions recorded in 2009 at Entergy Arkansas. See Note 2 to the financial statements for a discussion of regulatory proceedings affecting Entergy Arkansas.
The rough production cost equalization variance is due to an additional $18.6 million allocation recorded in the second quarter of 2009 for 2007 rough production cost equalization receipts ordered by the PUCT to Texas retail customers over what was originally allocated to Entergy Texas prior to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 2007, as discussed in Note 2 to the financial statements.
The ANO decommissioning trust variance is primarily related to the deferral of investment gains from the ANO 1 and 2 decommissioning trust. The gains resulted in an increase in interest and investment income and a corresponding increase in regulatory charges with no effect on net income in accordance with regulatory treatment.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $2,364 |
Nuclear realized price changes | | (96) |
Nuclear volume | | (60) |
Other | | (8) |
2010 net revenue | | $2,200 |
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $164 million, or 7%, in 2010 compared to 2009 primarily due to results from its nuclear operations. The net revenue decrease was primarily due to lower pricing in its contracts to sell nuclear power and lower nuclear volume resulting from more planned and unplanned outage days in 2010. Included in net revenue is $46 million and $53 million of amortization of the Palisades purchased power agreement in 2010 and 2009, respectively, which is non-cash revenue and is discussed in Note 15 to the financial statements. Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for 2010 and 2009:
| | 2010 | | 2009 |
| | | | |
Net MW in operation at December 31 | | 4,998 | | 4,998 |
Average realized revenue per MWh | | $59.16 | | $61.07 |
GWh billed | | 39,655 | | 40,981 |
Capacity factor | | 90% | | 93% |
Refueling Outage Days: | | | | |
FitzPatrick | | 35 | | - |
Indian Point 2 | | 33 | | - |
Indian Point 3 | | - | | 36 |
Palisades | | 26 | | 41 |
Pilgrim | | - | | 31 |
Vermont Yankee | | 29 | | - |
Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 42,682 GWh in 2010 and 43,969 GWh in 2009, with average realized revenue per MWh of $59.04 in 2010 and $60.46 in 2009.
Entergy Wholesale Commodities estimates that it will have a total of approximately 90 nuclear refueling outage days resulting from three planned outages in 2011.
Realized Price per MWh for Entergy Wholesale Commodities Nuclear Plants
When Entergy acquired the six nuclear power plants included in the Entergy Wholesale Commodities segment the buyers also entered into purchased power agreements with each of the sellers. For four of the plants, the 688 MW Pilgrim, 838 MW FitzPatrick, 1,028 MW Indian Point 2, and 1,041 MW Indian Point 3 plants, the original purchased power agreements with the sellers expired in 2004. The purchased power agreement with the seller of the 605 MW Vermont Yankee plant extends into 2012, and the purchased power agreement with the seller of the 798 MW Palisades plant extends into 2022. The majority of the existing contracts for sales of power from the other four plants
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
expire by the end of 2012. The recent economic downturn and negative trends in the energy commodity markets have resulted in lower natural gas prices and therefore lower market prices for electricity in the New York and New England power regions. Entergy Wholesale Commodities’ nuclear business experienced a decrease in realized price per MWh to $59.16 in 2010 from $61.07 in 2009, and is almost certain to experience a decrease again in 2011 because, as shown in the contracted sale of energy table in “Market and Credit Risk Sensitive Instruments,” Entergy Wholesale Commodities has sold forward 96% of its planned nuclear energy output for 2011 for an average contracted energy price of $53 per MWh. In addition, Entergy Wholesale Commodities has sold forward 87% of its planned energy output for 2012 for an average contracted energy price of $49 per MWh.
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $1,837 million for 2009 to $1,949 million for 2010 primarily due to:
· | an increase of $70 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and also Note 11 to the financial statements for further discussion of benefits costs; |
· | an increase of $25 million in fossil expenses resulting from higher outage costs in 2010 primarily because the scope of the outages was greater than in 2009; |
· | an increase of $17 million in transmission and distribution expenses resulting from increased vegetation contract work; |
· | an increase of $13 million in nuclear expenses primarily due to higher nuclear labor and contract costs; |
· | an increase of $12.5 million due to the capitalization in 2009 of Ouachita Plant service charges previously expensed; and |
· | an increase of $11 million due to the amortization of Entergy Texas rate case expenses. See Note 2 to the financial statements for further discussion of the Entergy Texas rate case settlement. |
The increase was partially offset by:
· | a decrease of $19.4 million due to 2008 storm costs at Entergy Arkansas which were deferred per an APSC order and were recovered through revenues in 2009; |
· | a decrease of $16 million due to higher write-offs of uncollectible customer accounts in 2009; and |
· | charges of $14 million in 2009 due to the Hurricane Ike and Hurricane Gustav storm cost recovery settlement agreement, as discussed further in Note 2 to the financial statements. |
Other income decreased primarily due to:
· | a decrease of $50 million in carrying charges on storm restoration costs because of the completion of financing or securitization of the costs, as discussed further in Note 2 to the financial statements; and |
· | a gain of $16 million recorded in 2009 on the sale of undeveloped real estate by Entergy Louisiana Properties, LLC. |
The decrease was partially offset by:
· | an increase of $24 million due to investment gains from the ANO 1 and 2 decommissioning trust, as discussed above; |
· | an increase of $14 million resulting from higher earnings on decommissioning trust funds; and |
· | an increase of distributions of $13 million earned by Entergy Louisiana and $7 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company. The distributions on preferred membership interests are eliminated in consolidation and have no effect on net income because the investment is in another Entergy subsidiary. See Note 2 to the financial statements for discussion of these investments in preferred membership interests. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Interest charges increased primarily due to an increase in long-term debt outstanding resulting from net debt issuances by certain of the Utility operating companies in the second half of 2009 and in 2010. See Notes 4 and 5 to the financial statements for details of long-term debt outstanding.
Depreciation and amortization expenses decreased primarily due to a decrease in depreciation rates at Entergy Arkansas as a result of the rate case settlement agreement approved by the APSC in June 2010.
Entergy Wholesale Commodities
Other operation and maintenance expenses increased from $922 million for 2009 to $1,047 million for 2010 primarily due to:
· | the write-off of $64 million of capital costs, primarily for software that will not be utilized, and $16 million of additional costs incurred in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; |
· | an increase of $36 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and also Note 11 to the financial statements for further discussion of benefits costs; |
· | spending of $15 million related to tritium remediation work at the Vermont Yankee site; and |
· | the write-off of $10 million of capitalized engineering costs associated with a potential uprate project that will not be pursued. |
The gain on sale resulted from the sale of Entergy’s ownership interest in the Harrison County Power Project 550 MW combined-cycle plant to two Texas electric cooperatives that owned a minority share of the plant. Entergy sold its 61 percent share of the plant for $219 million and realized a pre-tax gain of $44.2 million on the sale.
Other income increased primarily due to $86 million in charges in 2009 resulting from the recognition of impairments that are not considered temporary of certain equity securities held in Entergy Wholesale Commodities’ decommissioning trust funds, partially offset by a decrease of $28 million in realized earnings on the decommissioning trust funds.
Interest charges decreased primarily due to a decrease in fees paid to Entergy Corporation for providing collateral in the form of guarantees in connection with some of the Entergy Wholesale Commodities agreements to sell power. The guarantee fees paid are intercompany transactions and are eliminated in consolidation. The decrease was substantially offset by the write-off of $39 million of debt financing costs, primarily incurred for a $1.2 billion credit facility that will not be used, in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business.
Parent & Other
Other income decreased primarily due to increases in the distributions paid of $13 million to Entergy Louisiana and $7 million to Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company, as discussed above.
Interest charges decreased primarily due to lower borrowings, including the redemption of $267 million of notes payable in December 2009, as well as lower interest rates on borrowings under Entergy Corporation’s revolving credit facility.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Income Taxes
The effective income tax rate for 2010 was 32.7%. The difference in the effective income tax rate versus the statutory rate of 35% in 2010 was primarily due to:
· | a favorable Tax Court decision holding that the U.K. Windfall Tax can be used as a credit for purposes of computing the U.S. foreign tax credit, which allowed Entergy to reverse a provision for uncertain tax positions of $43 million, included in Parent and Other, on the issue. See Note 3 to the financial statements for further discussion of this tax litigation; |
· | a $19 million tax benefit recorded in connection with Entergy’s decision to unwind the infrastructure created for the planned spin-off of its non-utility nuclear business; and |
· | the recognition of a $14 million Louisiana state income tax benefit related to storm cost financing. |
Partially offsetting the decreased effective income tax rate was a charge of $16 million resulting from a change in tax law associated with the recently enacted federal healthcare legislation, as discussed below in “Critical Accounting Estimates” and state income taxes and certain book and tax differences for Utility plant items.
The effective income tax rate for 2009 was 33.6%. The reduction in the effective income tax rate versus the federal statutory rate of 35% in 2009 is primarily due to:
· | recognition of a capital loss of $73.1 million resulting from the sale of preferred stock of a Entergy Wholesale Commodities subsidiary to a third party; |
· | reduction of a valuation allowance of $24.3 million on state loss carryovers; |
· | reduction of a valuation allowance of $16.2 million on a federal capital loss carryover; |
· | reduction of the provision for uncertain tax positions of $15.2 million resulting from settlements and agreements with taxing authorities; |
· | adjustment to state income taxes of $13.8 million for Entergy Wholesale Commodities to reflect the effect of a change in the methodology of computing Massachusetts state income taxes as required by that state’s taxing authority; and |
· | additional deferred tax benefit of approximately $8 million associated with writedowns on nuclear decommissioning qualified trust securities. |
These reductions were partially offset by increases related to book and tax differences for utility plant items and state income taxes at the Utility operating companies.
See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rates, and for additional discussion regarding income taxes.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
2009 Compared to 2008
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2009 to 2008 showing how much the line item increased or (decreased) in comparison to the prior period:
| | Utility | | Entergy Wholesale Commodities | | Parent & Other | | Entergy |
| | (In Thousands) |
| | | | | | | | |
2008 Consolidated Net Income (Loss) | | $605,144 | | $798,227 | | ($162,836) | | $1,240,535 |
| | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 105,167 | | (6,968) | | (765) | | 97,434 |
Other operation and maintenance expenses | | (30,423) | | 86,131 | | (47,660) | | 8,048 |
Taxes other than income taxes | | (2,173) | | 8,840 | | 240 | | 6,907 |
Depreciation and amortization | | 37,409 | | 14,917 | | (411) | | 51,915 |
Other income | | 74,456 | | (17,598) | | (56,437) | | 421 |
Interest charges | | 36,990 | | (22,479) | | (52,988) | | (38,477) |
Other | | 16,658 | | 12,546 | | 1 | | 29,205 |
Income taxes | | 17,401 | | 32,612 | | (20,271) | | 29,742 |
| | | | | | | | |
2009 Consolidated Net Income (Loss) | | $708,905 | | $641,094 | | ($98,949) | | $1,251,050 |
Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $4,589 |
Volume/weather | | 57 |
Retail electric price | | 33 |
Fuel recovery | | 31 |
Provision for regulatory proceedings | | (26) |
Other | | 10 |
2009 net revenue | | $4,694 |
The volume/weather variance is primarily due to increased electricity usage primarily during the unbilled sales period in addition to the negative effect of Hurricane Gustav and Hurricane Ike in 2008. Electricity usage by industrial customers decreased, however, by 6%. The overall decline of the economy led to lower usage affecting both the large customer industrial segment as well as small and mid-sized industrial customers, who are also being affected by overseas competition. The effect of the industrial sales volume decrease is mitigated, however, by the fixed charge basis of many industrial customers’ rates, which causes average price per KWh sold to increase as the fixed charges are spread over lower volume.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The retail electric price increase is primarily due to:
· | rate increases that were implemented at Entergy Texas in January 2009; |
· | an increase in the formula rate plan rider at Entergy Gulf States Louisiana and Entergy Louisiana effective September 2008 and November 2009; |
· | the recovery of 2008 extraordinary storm costs at Entergy Arkansas as approved by the APSC, effective January 2009. The recovery of 2008 extraordinary storm costs is discussed in Note 2 to the financial statements; |
· | an increase in the capacity acquisition rider related to the Ouachita plant acquisition at Entergy Arkansas. The net income effect of the Ouachita plant cost recovery is limited to a portion representing an allowed return on equity with the remainder offset by Ouachita plant costs in other operation and maintenance expenses, depreciation expenses and taxes other than income taxes; |
· | an increase in the formula rate plan rider at Entergy Mississippi in July 2009; |
· | an Energy Efficiency rider at Entergy Texas, which was effective December 31, 2008, that is substantially offset in other operation and maintenance expenses; and |
· | an increase in the Attala power plant costs recovered through the power management rider by Entergy Mississippi. The net income effect of this recovery is limited to a portion representing an allowed return on equity with the remainder offset by Attala power plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes. |
The retail electric price increase was partially offset by:
· | a credit passed on to Louisiana retail customers as a result of the Act 55 storm cost financings that began in the third quarter of 2008; |
· | a formula rate plan refund of $16.6 million to customers in November 2009 in accordance with a settlement approved by the LPSC. See Note 2 to the financial statements for further discussion of the settlement; and |
· | a net decrease in the formula rate plans effective August 2008 at Entergy Louisiana and Entergy Gulf States Louisiana to remove interim storm cost recovery upon the Act 55 financing of storm costs as well as the storm damage accrual. A portion of the decrease is offset in other operation and maintenance expenses. See Note 2 to the financial statements for further discussion of the formula rate plans. |
The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
The provision for regulatory proceedings variance is primarily due to provisions recorded in 2009 at Entergy Arkansas. See Note 2 to the financial statements for a discussion of regulatory proceedings affecting Entergy Arkansas.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $2,371 |
Nuclear volume | | (53) |
Palisades purchased power amortization | | (23) |
Nuclear realized price changes | | 67 |
Other | | 2 |
2009 net revenue | | $2,364 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased slightly by $7 million, or 0.3%, in 2009 compared to 2008 primarily due to results from its nuclear operations. Higher pricing in its contracts to sell nuclear power was partially offset by lower nuclear volume resulting from more refueling outage days in 2009 compared to 2008. Included in net revenue is $53 million and $76 million of amortization of the Palisades purchased power agreement in 2009 and 2008, respectively, which is non-cash revenue and is discussed in Note 15 to the financial statements. Following are key performance measures for Entergy Wholesale Commodities’ nuclear plants for 2009 and 2008:
| | 2009 | | 2008 |
| | | | |
Net MW in operation at December 31 | | 4,998 | | 4,998 |
Average realized revenue per MWh | | $61.07 | | $59.51 |
GWh billed | | 40,981 | | 41,710 |
Capacity factor | | 93% | | 95% |
Refueling Outage Days: | | | | |
FitzPatrick | | - | | 26 |
Indian Point 2 | | - | | 26 |
Indian Point 3 | | 36 | | - |
Palisades | | 41 | | - |
Pilgrim | | 31 | | - |
Vermont Yankee | | - | | 22 |
Overall, including its non-nuclear plants, Entergy Wholesale Commodities billed 43,969 GWh in 2009 and 44,747 GWh in 2008, with average realized revenue per MWh of $60.46 in 2009 and $60.73 in 2008.
Other Income Statement Items
Utility
Other operation and maintenance expenses decreased from $1,867 million for 2008 to $1,837 million for 2009. The variance includes the following:
· | a decrease due to the write-off in the fourth quarter 2008 of $52 million of costs previously accumulated in Entergy Arkansas’s storm reserve and $16 million of removal costs associated with the termination of a lease, both in connection with the December 2008 Arkansas Court of Appeals decision in Entergy Arkansas’s base rate case. The base rate case is discussed in more detail in Note 2 to the financial statements; |
· | a decrease due to the capitalization of Ouachita plant service charges of $12.5 million previously expensed; |
· | a decrease of $22 million in loss reserves in 2009, including a decrease in storm damage reserves as a result of the completion of the Act 55 storm cost financing at Entergy Gulf States Louisiana and Entergy Louisiana; |
· | a decrease of $16 million in payroll-related and benefits costs; |
· | prior year storm damage charges as a result of several storms hitting Entergy Arkansas’s service territory in 2008, including Hurricane Gustav and Hurricane Ike in the third quarter 2008. Entergy Arkansas discontinued regulatory storm reserve accounting beginning July 2007 as a result of the APSC order issued in Entergy Arkansas’s rate case. As a result, non-capital storm expenses of $41 million were charged to other operation and maintenance expenses. In December 2008, $19.4 million of these storm expenses were deferred per an APSC order and were recovered through revenues in 2009; |
· | an increase of $35 million in fossil expenses primarily due to higher plant maintenance costs and plant outages; |
· | an increase of $22 million in nuclear expenses primarily due to increased nuclear labor and contract costs; |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | an increase of $14 million due to the reinstatement of storm reserve accounting at Entergy Arkansas effective January 2009; |
· | an increase of $14 million due to the Hurricane Ike and Hurricane Gustav storm cost recovery settlement agreement, as discussed below under “Liquidity and Capital Resources - Sources of Capital - Hurricane Gustav and Hurricane Ike”; |
· | an increase of $8 million in customer service costs primarily as a result of write-offs of uncollectible customer accounts; and |
· | a reimbursement of $7 million of costs in 2008 in connection with a litigation settlement. |
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Other income increased primarily due to:
· | an increase in distributions of $25 million earned by Entergy Louisiana and $9 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company. The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy’s net income because the investment is in another Entergy subsidiary. See Note 2 to the financial statements for a discussion of these investments in preferred membership interests; |
· | carrying charges of $35 million on Hurricane Ike storm restoration costs as authorized by Texas legislation in the second quarter 2009; |
· | an increase of $15 million in allowance for equity funds used during construction due to more construction work in progress primarily as a result of Hurricane Gustav and Hurricane Ike; and |
· | a gain of $16 million recorded on the sale of undeveloped real estate by Entergy Louisiana Properties, LLC. |
These increases in other income were partially offset by a decrease of $14 million in taxes collected on advances for transmission projects and a decrease of $18 million resulting from lower interest earned on the decommissioning trust funds and short-term investments.
Interest charges increased primarily due to an increase in long-term debt outstanding resulting from debt issuances by certain of the Utility operating companies in the second half of 2008 and in 2009.
Entergy Wholesale Commodities
Other operation and maintenance expenses increased from $836 million in 2008 to $922 million in 2009 primarily due to $46 million in outside service costs and incremental labor costs related to the then planned spin-off of Entergy’s non-utility nuclear business. Also contributing to the increase were higher nuclear labor and regulatory costs.
Other income decreased primarily due to $86 million in charges in 2009 compared to $50 million in charges in 2008 resulting from the recognition of impairments of certain equity securities held in Entergy Wholesale Commodities’ decommissioning trust funds that are not considered temporary. The decrease was partially offset by increases in interest income and realized earnings from the decommissioning trust funds and interest income from loans to Entergy subsidiaries.
Parent & Other
Other operation and maintenance expenses decreased for the parent company, Entergy Corporation, primarily due to a decrease in outside services costs of $38 million related to the then planned spin-off of Entergy’s non-utility nuclear business.
Other income decreased primarily due to:
· | an increase in the elimination for consolidation purposes of interest income from Entergy subsidiaries; and |
· | increases in the elimination for consolidation purposes of distributions earned of $25 million by Entergy Louisiana and $9 million by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company, as discussed above. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Interest charges decreased primarily due to lower interest rates on borrowings under Entergy Corporation’s revolving credit facility.
Income Taxes
The effective income tax rate for 2009 was 33.6%. See “2010 Compared to 2009 – Income Taxes” above for an explanation of the difference between the effective income tax rate versus the federal statutory rate of 35% for 2009.
The effective income tax rate for 2008 was 32.7%. The reduction in the effective income tax rate versus the federal statutory rate of 35% in 2008 is primarily due to:
· | recognition of a capital loss of $202 million on the liquidation of an Entergy Wholesale Commodities subsidiary; |
· | reduction of the provision for uncertain tax positions of $44.3 million resulting from settlements and agreements with taxing authorities; and |
· | an adjustment to state income taxes of approximately $18.8 million for Entergy Wholesale Commodities to reflect the effect of a change in the methodology of computing Massachusetts state income taxes resulting from legislation passed in the third quarter 2008. |
These factors were partially offset by:
· | income taxes of $16.1 million recorded on redemption payments received by an Entergy Wholesale Commodities subsidiary; and |
· | book and tax differences for utility plant items and state income taxes at the Utility operating companies, including the flow-through treatment of the Entergy Arkansas write-offs referenced above. |
See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rates, and for additional discussion regarding income taxes.
This section discusses Entergy’s capital structure, capital spending plans and other uses of capital, sources of capital, and the cash flow activity presented in the cash flow statement.
Capital Structure
Entergy’s capitalization is balanced between equity and debt, as shown in the following table.
| | 2010 | | 2009 |
| | | | |
Debt to capital | | 57.3% | | 57.4% |
Effect of excluding Arkansas and Texas securitization bonds | | (2.0)% | | (1.8)% |
Debt to capital, excluding securitization bonds (1) | | 55.3% | | 55.6% |
Effect of subtracting cash | | (3.2)% | | (4.1)% |
Net debt to net capital, excluding securitization bonds (1) | | 52.1% | | 51.5% |
(1) | Calculation excludes the Arkansas and Texas securitization bonds, which are non-recourse to Entergy Arkansas and Entergy Texas, respectively. |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Long-term debt, including the currently maturing portion, makes up substantially all of Entergy’s total debt outstanding. Following are Entergy’s long-term debt principal maturities and estimated interest payments as of December 31, 2010. To estimate future interest payments for variable rate debt, Entergy used the rate as of December 31, 2010. The amounts below include payments on the Entergy Louisiana and System Energy sale-leaseback transactions, which are included in long-term debt on the balance sheet.
Long-term debt maturities and estimated interest payments | | 2011 | | 2012 | | 2013 | | 2014-2015 | | after 2015 |
| | (In Millions) |
| | | | | | | | | | |
Utility | | $653 | | $677 | | $1,205 | | $1,354 | | $10,554 |
Entergy Wholesale Commodities | | 34 | | 31 | | 20 | | 43 | | 46 |
Parent and Other | | 143 | | 1,683 | | 43 | | 630 | | 559 |
Total | | $830 | | $2,391 | | $1,268 | | $2,027 | | $11,159 |
Note 5 to the financial statements provides more detail concerning long-term debt outstanding.
Entergy Corporation has a revolving credit facility that expires in August 2012 and has a borrowing capacity of $3.5 billion. Entergy Corporation also has the ability to issue letters of credit against the total borrowing capacity of the credit facility. The facility fee is currently 0.125% of the commitment amount. Facility fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the year ended December 31, 2010 was 0.78% on the drawn portion of the facility.
As of December 31, 2010, amounts outstanding and capacity available under the $3.5 billion credit facility are:
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) |
| | | | | | |
$3,466 | | $1,632 | | $25 | | $1,809 |
Under covenants contained in Entergy Corporation’s credit facility and in one of the indentures governing Entergy Corporation’s senior notes, Entergy is required to maintain a consolidated debt ratio of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility and in one of the indentures governing the Entergy Corporation senior notes is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with these covenants. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit fa cility’s maturity date may occur and there may be an acceleration of amounts due under Entergy Corporation’s senior notes.
Capital lease obligations are a minimal part of Entergy’s overall capital structure, and are discussed in Note 10 to the financial statements. Following are Entergy’s payment obligations under those leases:
| 2011 | | 2012 | | 2013 | | 2014-2015 | | after 2015 | |
| (In Millions) |
| | | | | | | | | | |
Capital lease payments | $6 | | $6 | | $7 | | $9 | | $44 | |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas each had credit facilities available as of December 31, 2010 as follows:
Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of Dec. 31, 2010 |
| | | | | | | | |
UtilityEntergy Arkansas | | Non-Utility NuclearApril 2011 | | Other Businesses$75.125 million (b) | | 2.75% | | - |
Entergy Gulf States Louisiana | | August 2012 | | $100 million (c) | | 0.67% | | - |
Entergy Louisiana | | August 2012 | | $200 million (d) | | 0.67% | | - |
Entergy Mississippi | | May 2011 | | $35 million (e) | | 2.01% | | - |
Entergy Mississippi | | May 2011 | | $25 million (e) | | 2.01% | | - |
Entergy Mississippi | | May 2011 | | $10 million (e) | | 2.01% | | - |
Entergy Texas | | August 2012 | | $100 million (f) | | 0.74% | | - |
(a) | The interest rate is the weighted average interest rate as of December 31, 2010 applied, or that would be applied, to outstanding borrowings under the facility. |
(b) | The credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization. Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable. |
(c) | The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2010, no letters of credit were outstanding. The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(d) | The credit facility allows Entergy Louisiana to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2010, no letters of credit were outstanding. The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(e) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable. Entergy Mississippi is required to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(f) | The credit facility allows Entergy Texas to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2010, no letters of credit were outstanding. The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to the terms of the credit agreement, securitization bonds are excluded from debt and capitalization in calculating the debt ratio. |
Operating Lease Obligations and Guarantees of Unconsolidated Obligations
Entergy has a minimal amount of operating lease obligations and guarantees in support of unconsolidated obligations. Entergy’s guarantees in support of unconsolidated obligations are not likely to have a material effect on Entergy’s financial condition or results of operations. Following are Entergy’s payment obligations as of December 31, 2010 on non-cancelable operating leases with a term over one year:
| 2011 | | 2012 | | 2013 | | 2014-2015 | | after 2015 | |
| (In Millions) |
| | | | | | | | | | |
Operating lease payments | $88 | | $77 | | $69 | | $124 | | $188 | |
The operating leases are discussed in Note 10 to the financial statements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Summary of Contractual Obligations of Consolidated Entities
Contractual Obligations | | 2011 | | 2012-2013 | | 2014-2015 | | after 2015 | | Total |
| | (In Millions) |
| | | | | | | | | | |
Long-term debt (1) | | $830 | | $3,659 | | $2,027 | | $11,159 | | $17,675 |
Capital lease payments (2) | | $6 | | $13 | | $9 | | $44 | | $72 |
Operating leases (2) | | $88 | | $146 | | $124 | | $188 | | $546 |
Purchase obligations (3) | | $1,772 | | $3,114 | | $2,663 | | $5,061 | | $12,610 |
(1) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(2) | Lease obligations are discussed in Note 10 to the financial statements. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. Almost all of the total are fuel and purchased power obligations. |
In addition to the contractual obligations, Entergy currently expects to contribute approximately $368.8 million to its pension plans and approximately $78 million to other postretirement plans in 2011; although the required pension contributions will not be known with more certainty until the January 1, 2011 valuations are completed by April 1, 2011.
Also in addition to the contractual obligations, Entergy has $805 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
Capital Funds Agreement
Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:
· | maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); |
· | permit the continued commercial operation of Grand Gulf; |
· | pay in full all System Energy indebtedness for borrowed money when due; and |
· | enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy’s rights in the agreement as security for the specific debt. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Capital Expenditure Plans and Other Uses of Capital
Following are the amounts of Entergy’s planned construction and other capital investments by operating segment for 2011 through 2013:
Planned construction and capital investments | | 2011 | | 2012 | | 2013 |
| | | (In Millions) |
| | | | | | | |
Maintenance Capital: | | | | | | |
| Utility: | | | | | | |
| Generation | | $126 | | $135 | | $123 |
| Transmission | | 193 | | 209 | | 207 |
| Distribution | | 440 | | 451 | | 448 |
| Other | | 89 | | 100 | | 90 |
| Total | | 848 | | 895 | | 868 |
| Entergy Wholesale Commodities | | 93 | | 93 | | 111 |
| | | 941 | | 988 | | 979 |
Capital Commitments: | | | | | | |
| Utility: | | | | | | |
| Generation | | $1,098 | | $1,071 | | $628 |
| Transmission | | 213 | | 252 | | 223 |
| Distribution | | 30 | | 26 | | 14 |
| Other | | 44 | | 46 | | 57 |
| Total | | 1,385 | | 1,395 | | 922 |
| Entergy Wholesale Commodities | | 273 | | 268 | | 264 |
| | | 1,658 | | 1,663 | | 1,186 |
Total | | $2,599 | | $2,651 | | $2,165 |
Maintenance Capital refers to amounts Entergy plans to spend on routine capital projects that are necessary to support reliability of its service, equipment, or systems and to support normal customer growth.
Capital Commitments refers to non-routine capital investments for which Entergy is either contractually obligated, has Board approval, or otherwise expects to make to satisfy regulatory or legal requirements. Amounts reflected in this category include the following:
· | The currently planned construction or purchase of additional generation supply sources within the Utility’s service territory through the Utility’s portfolio transformation strategy, including Entergy Louisiana’s planned purchase of Acadia Unit 2, which is discussed below, and three resources identified in the Summer 2009 Request for Proposal, including a self-build option at Entergy Louisiana’s Ninemile site. |
· | Entergy Louisiana’s Waterford 3 steam generators replacement project, which is discussed in further detail below. |
· | System Energy’s planned approximate 178 MW uprate of the Grand Gulf nuclear plant. The project is currently expected to cost $575 million, including transmission upgrades. On November 30, 2009, the MPSC issued a Certificate of Public Convenience and Necessity for implementation of the uprate. |
· | Transmission improvements and upgrades designed to provide greater transmission flexibility in the Entergy System. |
· | Spending to comply with current and anticipated North American Electric Reliability Corporation transmission planning requirements. |
· | Entergy Wholesale Commodities investments associated with specific investments such as dry cask storage, nuclear license renewal efforts, component replacement across the fleet, NYPA value sharing, wedgewire screens at Indian Point, and spending in response to the Indian Point Independent Safety Evaluation. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Environmental compliance spending. Entergy continues to review potential environmental spending needs and financing alternatives for any such spending, and future spending estimates could change based on the results of this continuing analysis. |
· | Continued rebuilding of the Entergy New Orleans gas system damaged during Hurricane Katrina. |
The Utility’s owned generating capacity remains short of customer demand, and its supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. Estimated capital expenditures are also subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.
Acadia Unit 2 Purchase Agreement
In October 2009, Entergy Louisiana announced that it has signed an agreement to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer. The Acadia Energy Center, which entered commercial service in 2002, consists of two combined-cycle gas-fired generating units, each nominally rated at 580 MW. Entergy Louisiana proposes to acquire 100 percent of Acadia Unit 2 and a 50 percent ownership interest in the facility’s common assets for approximately $300 million. In a separate transaction, Cleco Power acquired Acadia Unit 1 and the other 50 percent interest in the facility’s common assets. Upon closing the transaction, Cleco Power will serve as operator for the entire facility. 160; Entergy Louisiana has committed to sell one-third of the output of Unit 2 to Entergy Gulf States Louisiana in accordance with terms and conditions detailed under the existing Entergy System Agreement. Entergy Louisiana’s purchase of the plant is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies.
Entergy Louisiana and Acadia Power Partners also have entered into two purchase power agreements that are intended to provide access to the capacity and energy output of the unit during the period before the acquisition closes. The initial purchase power agreement was a call option agreement that commenced on June 1, 2010 and terminated on September 30, 2010. Beginning October 1, 2010, Entergy Louisiana began purchasing 100 percent of the output of Acadia Unit 2 under a tolling agreement. The LPSC has approved both purchase power agreements.
In December 2010, Entergy Louisiana and Entergy Gulf States Louisiana filed an executed uncontested settlement term sheet, which was approved by the LPSC in January 2011. The term sheet provides for three scenarios allowing the transaction to proceed, depending upon the outcome of a FERC ruling on modifications to a System Agreement schedule to include acquisition adjustments. If the FERC approves the modifications to the System Agreement schedule prior to closing, Entergy Louisiana will purchase 100 percent of the plant and sell one-third of the output to Entergy Gulf States Louisiana as proposed. In the other two scenarios, Entergy Louisiana will retain and include in rates 100 percent of the unit for a period of up to one year, at which time Entergy Louisiana must file either to permanently retain 1 00 percent ownership of the unit or enter into a joint ownership arrangement with Entergy Gulf States Louisiana pursuant to which Entergy Gulf States Louisiana would purchase one-third of the unit. The commercial issues associated with joint ownership of a single generation unit are being evaluated, and it is possible Entergy Louisiana may seek approvals to purchase the full output of the unit permanently. Closing of the sale to Entergy Louisiana is expected to occur by the end of the first quarter 2011.
Waterford 3 Steam Generator Replacement Project
Entergy Louisiana planned to replace the Waterford 3 steam generators, along with the reactor vessel closure head and control element drive mechanisms, in the spring 2011. Replacement of these components is common to pressurized water reactors throughout the nuclear industry. In December 2010, Entergy Louisiana advised the LPSC that the replacement generators will not be completed and delivered by the manufacturer in time to install them during the spring 2011 refueling outage. During the final steps in the manufacturing process, the manufacturer discovered separation of stainless steel cladding from the carbon steel base metal in the channel head of both replacement steam generators (RSGs), in areas beneath and adjacent to the divider plate. As a result of this damage, the manufacturer will be unable to meet the contractual delivery deadlines, and the RSGs cannot be installed in the
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
spring 2011. After the manufacturer completes its analysis of the cause of the failure and repair options, Entergy Louisiana will work with the manufacturer to fully develop and evaluate repair options and to revise the project schedule. In the interim, the spring 2011 outage has been converted to a normal refueling outage and inspection. Prior to the delay, Entergy Louisiana estimated that it would spend approximately $511 million on this project, and the planned construction expenditures estimate given above includes approximately $190 million in 2011 for the completion of this project. A revised estimate will be made after the development of the new project schedule, although it is likely that the estimated cost will increase, including increased carrying cost due to the delayed construction period.
In June 2008, Entergy Louisiana filed with the LPSC for approval of the replacement project, including full cost recovery. Following discovery and the filing of testimony by the LPSC staff and an intervenor, the parties entered into a stipulated settlement of the proceeding. The LPSC unanimously approved the settlement in November 2008. The settlement resolved the following issues: 1) the accelerated degradation of the steam generators is not the result of any imprudence on the part of Entergy Louisiana; 2) the decision to undertake the replacement project at the then-estimated cost of $511 million is in the public interest, is prudent, and would serve the public convenience and necessity; 3) the scope of the replacement project is in the public interest; 4) undertaking the replacement project at the t arget installation date during the 2011 refueling outage is in the public interest; and 5) the jurisdictional costs determined to be prudent in a future prudence review are eligible for cost recovery, either in an extension or renewal of the formula rate plan or in a full base rate case including necessary proforma adjustments. Upon completion of the replacement project, the LPSC will undertake a prudence review with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs. In June 2010, Entergy Louisiana filed an application at the LPSC to certify the estimated first year revenue requirement associated with the project. In January 2011 the procedural schedule in the proceeding was suspended pending the development and filing of a revised project schedule and cost estimate.
Dividends and Stock Repurchases
Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and future investment opportunities. At its January 2011 meeting, the Board declared a dividend of $0.83 per share, which is the same quarterly dividend per share that Entergy has paid since second quarter 2010. The prior quarterly dividend per share was $0.75. Entergy paid $604 million in 2010, $577 million in 2009, and $573 million in 2008 in cash dividends on its common stock.
In accordance with Entergy’s stock-based compensation plan, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plan, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plan.
In addition to the authority to fund grant exercises, in January 2007 the Board approved a program under which Entergy is authorized to repurchase up to $1.5 billion of its common stock. In January 2008, the Board authorized an incremental $500 million share repurchase program to enable Entergy to consider opportunistic purchases in response to equity market conditions. Entergy completed both the $1.5 billion and $500 million programs in the third quarter 2009. In October 2009 the Board granted authority for an additional $750 million share repurchase program which was completed in the fourth quarter 2010. In October 2010 the Board granted authority for an additional $500 million share repurchase program. The amount of repurchases may vary as a result of material changes in busine ss results or capital spending or new investment opportunities, or if limitations in the credit markets continue for a prolonged period.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Sources of Capital
Entergy’s sources to meet its capital requirements and to fund potential investments include:
· | internally generated funds; |
· | cash on hand ($1.29 billion as of December 31, 2010); |
· | bank financing under new or existing facilities; and |
Circumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses, including unscheduled plant outages and storms, could affect the timing and level of internally generated funds in the future.
Provisions within the Articles of Incorporation or pertinent indentures and various other agreements relating to the long-term debt and preferred stock of certain of Entergy Corporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred stock. As of December 31, 2010, under provisions in their mortgage indentures, Entergy Arkansas and Entergy Mississippi had restricted retained earnings unavailable for distribution to Entergy Corporation of $458 million and $240.8 million, respectively, and Entergy Louisiana had member’s equity unavailable for distribution to Entergy Corporation of $465 million. All debt and common and preferred equity issuances by the Registrant Subsidiaries require prior regulatory approval and their preferred equity and debt issuances are also subject to issuance tests set forth in corporate charters, bond indentures, and other agreements. Entergy believes that the Registrant Subsidiaries have sufficient capacity under these tests to meet foreseeable capital needs.
The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy (except securities with maturities longer than one year issued by Entergy Arkansas and Entergy New Orleans, which are subject to the jurisdiction of the APSC and the City Council, respectively). No regulatory approvals are necessary for Entergy Corporation to issue securities. The current FERC-authorized short-term borrowing limits are effective through October 2011, as established by a FERC order issued in October 2009. Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through July 2011. Entergy Arkansas has obtained long-term financing authorization from the A PSC that extends through December 2012. Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through July 2012. In addition to borrowings from commercial banks, the FERC short-term borrowing orders authorized the Registrant Subsidiaries to continue as participants in the Entergy System money pool. The money pool is an intercompany borrowing arrangement designed to reduce Entergy’s subsidiaries’ dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed authorized limits. As of December 31, 2010, Entergy’s Registrant Subsidiaries had no outstanding short-term borrowings from external sources. See Notes 4 and 5 to the financial statements for further discussion of Entergy’s borrowing limits and authorizations.
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to portions of Entergy's service territories in Louisiana and Texas, and to a lesser extent in Arkansas and Mississippi. The storms resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. In October 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans drew a total of $229 million from their funded storm reserves.
In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings). In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. In July 2010 the LCDA
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. See Note 2 to the financial statements for additional discussion of the Act 55 financings.
In November 2009, Entergy Texas Restoration Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds) to finance Entergy Texas Hurricane Ike and Hurricane Gustav restoration costs. See Note 2 to the financial statements for a discussion of the proceeding approving the issuance of the securitization bonds and see Note 5 to the financial statements for a discussion of the terms of the securitization bonds.
In the third quarter 2009, Entergy settled with its insurer on its Hurricane Ike claim and Entergy Texas received $75.5 million in proceeds (Entergy received a total of $76.5 million).
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas's transmission and distribution lines, equipment, poles, and other facilities. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. In June 2010 the APSC issued a financing order authorizing the issuance of approximately $126.3 million in storm cost recovery bonds, which includes carrying costs of $11.5 million and $4.6 million of up-front financing costs. See Note 5 to the financial statements for a discussion of the August 2010 issuance of the securitization bonds.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses. Entergy pursued a broad range of initiatives to recover storm restoration and business continuity costs, including obtaining reimbursement of certain costs covered by insurance and pursuing recovery thro ugh existing or new rate mechanisms regulated by the FERC and local regulatory bodies, including the issuance of securitization bonds.
Storm Cost Financings
Louisiana
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana . In August 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. See Note 2 to the financial statements for additional discussion of the Act 55 financings.
Community Development Block Grants
In December 2005, the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included Community Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007, the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
Cash Flow Activity
As shown in Entergy’s Statements of Cash Flows, cash flows for the years ended December 31, 2010, 2009, and 2008 were as follows:
| | | 2010 | | 2009 | | 2008 |
| | | (In Millions) |
| | | | | | | |
Cash and cash equivalents at beginning of period | | $1,710 | | $1,920 | | $1,253 |
| | | | | | |
Cash flow provided by (used in): | | | | | | |
| Operating activities | | 3,926 | | 2,933 | | 3,324 |
| Investing activities | | (2,574) | | (2,094) | | (2,590) |
| Financing activities | | (1,767) | | (1,048) | | (70) |
Effect of exchange rates on cash and cash equivalents | | - | | (1) | | 3 |
| Net increase (decrease) in cash and cash equivalents | | (415) | | (210) | | 667 |
| | | | | | | |
Cash and cash equivalents at end of period | | $1,295 | | $1,710 | | $1,920 |
Operating Cash Flow Activity
2010 Compared to 2009
Entergy’s cash flow provided by operating activities increased $993 million in 2010 compared to 2009 primarily due to the receipt in July 2010 of $703 million from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings for Hurricane Gustav and Hurricane Ike. The Act 55 storm cost financings are discussed in more detail above and also in Note 2 to the financial statements. In addition, the absence of the Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration spending that occurred in 2009 also contributed to the increase. These factors were partially offset by an increase of $323 million in pension contributions at Utility and Entergy Wholesale Commodities and a decrease in net revenue a t Entergy Wholesale Commodities. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and also Note 11 to the financial statements for further discussion of pension funding.
2009 Compared to 2008
Entergy’s cash flow provided by operating activities decreased by $391 million in 2009 compared to 2008 primarily due to the receipt in 2008 of $954 million from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings, Arkansas ice storm restoration spending, and increases in nuclear refueling outage spending and spin-off costs for the non-utility nuclear business. These factors were partially offset by a decrease of $94 million in income tax payments, a decrease of $155 million in pension contributions at Utility and Entergy Wholesale Commodities, increased collection of fuel costs, and higher spending in 2008 on Hurricane Gustav and Hurricane Ike storm restoration.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
2010 Compared to 2009
Net cash used in investing activities increased $480 million in 2010 compared to 2009 primarily due to the following activity:
· | an increase in net uses of cash for nuclear fuel purchases, which was caused by the consolidation of the nuclear fuel company variable interest entities that is discussed in Note 18 to the financial statements. With the consolidation of the nuclear fuel company variable interest entities, their purchases of nuclear fuel from Entergy are now eliminated in consolidation, whereas before 2010 they were a source of investing cash flows; |
· | the investment of a total of $290 million in Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm reserve escrow accounts as a result of their Act 55 storm cost financings, which are discussed in Note 2 to the financial statements; |
· | an increase in construction expenditures, primarily in the Entergy Wholesale Commodities business, as decreases for the Utility resulting from Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration spending in 2009 were offset by spending on various projects; and |
· | proceeds of $219 million in 2010 from the sale of Entergy’s ownership interest in the Harrison County Power Project 550 MW combined-cycle power plant to two Texas electric cooperatives that owned a minority share of the plant. |
2009 Compared to 2008
Net cash used in investing activities decreased by $496 million in 2009 compared to 2008. The following significant investing cash flow activity occurred in 2009 and 2008:
· | Construction expenditures were $281 million lower in 2009 than in 2008 primarily due to Hurricane Gustav and Hurricane Ike restoration spending in 2008. |
· | In March 2008, Entergy Gulf States Louisiana purchased the Calcasieu Generating Facility, a 322 MW simple-cycle, gas-fired power plant located near the city of Sulphur in southwestern Louisiana, for approximately $56 million. |
· | In September 2008, Entergy Arkansas purchased the Ouachita Plant, a 789 MW gas-fired plant located 20 miles south of the Arkansas state line near Sterlington, Louisiana, for approximately $210 million (In November 2009, Entergy Arkansas sold one-third of the plant to Entergy Gulf States Louisiana). |
· | Receipt in 2009 of insurance proceeds from Entergy Texas’s Hurricane Ike claim and in 2008 of insurance proceeds from Entergy New Orleans’s Hurricane Katrina claim. |
· | The investment of $45 million in escrow accounts for construction projects in 2008 and the withdrawal of $36 million of those funds from escrow accounts in 2009. |
Financing Activities
2010 Compared to 2009
Net cash used in financing activities increased $719 million in 2010 compared to 2009 primarily because long-term debt activity used approximately $307 million of cash in 2010 and provided approximately $160 million of cash in 2009. The most significant net use for long-term debt activity was by Entergy Corporation, which reduced its 5-year credit facility balance by $934 million and repaid a total of $275 million of notes and bank term loans, while issuing $1 billion of notes in 2010. For the details of Entergy’s long-term debt outstanding see Note 5 to the financial statements herein. In addition, Entergy Corporation repurchased $879 million of its common stock in 2010 and repurchased $613 million of its common stock in 2009. Entergy 217;s stock repurchases are discussed further in the “Capital Expenditure Plans and Other Uses of Capital - Dividends and Stock Repurchases” section above.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
2009 Compared to 2008
Net cash used in financing activities increased $978 million in 2009 compared to 2008 primarily because long-term debt activity provided approximately $160 million of cash in 2009 and provided approximately $970 million of cash in 2008. Also, Entergy Corporation repurchased $613 million of its common stock in 2009 and repurchased $512 million of its common stock in 2008.
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that the Utility operating companies and System Energy charge for their services significantly influence Entergy’s financial position, results of operations, and liquidity. These companies are regulated and the rates charged to their customers are determined in regulatory proceedings. Governmental agencies, including the APSC, the City Council, the LPSC, the MPSC, the PUCT, and the FERC, are primarily responsible for approval of the rates charged to customers. Following is a summary of the Utility operating companies’ authorized returns on common equity and current retail base rates. The Utility operating companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery proceedings are discussed in Note 2 to the financial statements.
Company | | Authorized Return on Common Equity | | |
| | | | |
Entergy Arkansas | | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
| Entergy Arkansas, Inc. | | | Entergy Nuclear Operations, Inc. | | | Entergy-Koch, LP | | | Non-Nuclear Wholesale Assets |
| EGS Holdings, Inc. | | | Entergy Nuclear Finance, LLC | | | (50% ownership) (liquidated December 2009) | | | |
| Entergy Gulf States Louisiana L.L.C. | | | Entergy Nuclear Generation Co. (Pilgrim)9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
| | | | |
| Entergy Louisiana Holdings, Inc | | | Entergy Nuclear FitzPatrick LLC9.45%- 11.05% | | | | | | | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Asset Management, Inc.Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| Entergy Louisiana, LLC | | | Entergy Nuclear Indian Point 2, LLC | | | | | | | Entergy Power, Inc. |
| Entergy Mississippi, Inc. | | | Entergy Nuclear Indian Point 3, LLC | | | | | | | |
| Entergy New Orleans, Inc.Mississippi | | | Entergy Nuclear Palisades, LLC10.79%- 13.05% | | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
| Entergy Texas, Inc.New Orleans | | | Entergy Nuclear Vermont Yankee, LLC10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a settlement approved by the City Council. |
| | | | |
| System Energy Resources, Inc.Entergy Texas | | | Entergy Nuclear, Inc.10.125% | | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a settlement of Entergy Texas's base rate case approved by the PUCT. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Federal Regulation
System Agreement
The FERC regulates wholesale rates (including Entergy Utility intrasystem energy exchanges pursuant to the System Agreement) and interstate transmission of electricity, as well as rates for System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proce edings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement. See Note 2 to the financial statements for discussions of this litigation.
Entergy Arkansas and Entergy Mississippi Notices of Termination of System Agreement Participation and Related APSC Investigation
Citing its concerns that the benefits of its continued participation in the current form of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC.
In October 2007 the MPSC issued a letter confirming its belief that Entergy Mississippi should exit the System Agreement in light of the recent developments involving the System Agreement. The MPSC letter also requested that Entergy Mississippi advise the MPSC regarding the status of the Utility operating companies’ effort to develop successor arrangements to the System Agreement and advise the MPSC regarding Entergy Mississippi’s position with respect to withdrawal from the System Agreement. In November 2007, pursuant to the provisions of the System Agreement, Entergy Mississippi provided its written notice to terminate its participation in the System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authoriz ed by the FERC.
On February 2, 2009, Entergy Arkansas and Entergy Mississippi filed with the FERC their notices of cancellation to effectuate the termination of their participation in the Entergy System Agreement, effective December 18, 2013 and November 7, 2015, respectively. While the FERC had indicated previously that the notices should be filed 18 months prior to Entergy Arkansas’s termination (approximately mid-2012), the filing explains that resolving this issue now, rather than later, is important to ensure that informed long-term resource planning decisions can be made during the years leading up to Entergy Arkansas’s withdrawal and that all of the Utility operating companies are properly positioned to continue to operate reliably following Entergy Arkansas’s an d, eventually, Entergy Mississippi’s, departure from the System Agreement. Entergy Arkansas and Entergy Mississippi requested that the FERC accept the proposed notices of cancellation without further proceedings. Various parties intervened or filed protests in the proceeding, including the APSC, the LPSC, the MPSC, and the City Council.
In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month notice period without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a result of withdrawal. The FERC stated that it expected Entergy and all interested parties to move forward and develop details of all needed successor arrangements and encouraged Entergy to file its Section 205 filing for post 2013 arrangements as soon as possible. In February 2011 the FERC denied the LPSC’s and the City Council’s rehearing requests. The LPSC has appealed the FERC’s decision to the U.S. Court of Appe als for the District of Columbia.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The APSC had previously commenced an investigation, in 2004, into whether Entergy Arkansas’s continued participation in the System Agreement is in the best interests of its customers. The Entergy Arkansas president, Hugh McDonald, filed testimony with the APSC in response to requests by the APSC. In addition, Mr. McDonald has appeared before the APSC at public hearings for questioning. In December 2007, the APSC ordered Mr. McDonald to file testimony each month with the APSC detailing progress toward development of successor arrangements, beginning in March 2008, and Mr. McDonald has done so. In his September 2009 testimony Mr. McDonald reported to the APSC the results of a related study. According to the study the total estima ted cost to establish the systems and staff the organizations to perform the necessary planning and operating functions for a stand-alone Entergy Arkansas operation are estimated at approximately $23 million, including $18 million to establish generation-related functions and $5 million to modify transmission-related information systems. Incremental costs for ongoing staffing and systems costs are estimated at approximately $8 million. Cost and implementation schedule estimates will continue to be re-evaluated and refined as additional, more detailed analysis is completed. The study did not assess the effect of stand-alone operation on Entergy Arkansas’s generation resource requirements. Entergy Arkansas expects it would take approximately two years to implement stand-alone operations for Entergy Arkansas.
In February 2010 the APSC issued an order announcing a refocus of its ongoing investigation of Entergy Arkansas's post-System Agreement operation. The order describes the APSC's "stated purpose in opening this inquiry to conduct an investigation regarding the prudence of [Entergy Arkansas] entering into a successor ESA [Entergy System Agreement] as opposed to becoming a stand-alone utility upon its exit from the ESA, and whether [Entergy Arkansas], as a standalone utility, should join the SPP RTO. It is the [APSC's] intention to render a decision regarding the prudence of [Entergy Arkansas] entering into a successor ESA as opposed to becoming a stand-alone utility upon its exit from the ESA, as well as [Entergy Arkansas'] RTO participation by the end of calendar yea r 2010. In parallel with this Docket, the [APSC] will be actively involved and will be closely watching to see if any meaningful enhancement will be made to a new Enhanced Independent Coordinator of Transmission (“E-ICT") Agreement through the efforts of the [Entergy Transmission System] stakeholders, Entergy, and the newly formed and federally-recognized [Entergy Regional State Committee] in 2010." Later, in April 2010, the APSC issued an order that directs Entergy Arkansas also to consider joining the Midwest ISO RTO as a stand-alone utility.
Entergy Arkansas filed testimony and participated in a March 2010 evidentiary hearing in the proceeding. Entergy Arkansas noted in its testimony that it was not reasonable to complete a comprehensive evaluation of strategic options by the end of 2010 and that forcing a decision would place parties in the untenable position of making critical decisions based on insufficient information. Entergy Arkansas outlined three options for post-System Agreement operation of its electrical system: 1) Entergy Arkansas self providing its generation planning and operating functions as a stand-alone company; 2) Entergy Arkansas plus coordination agreements with third parties in which Entergy Arkansas self provides some planning and operations functions, but also enters i nto one or more coordinating or pooling agreements with third parties; and 3) Successor Arrangements under which Entergy Arkansas plans for its own generation resources but enters into a new generation commitment and dispatch agreement with other Utility operating companies under a successor agreement intended to avoid the litigation previously experienced. Entergy Arkansas’s plan is expected to lead to a decision in late 2011 regarding which option to implement; however, Entergy Arkansas anticipates pursuing during this time several elements that are common to all options. In an attempt to reach understanding of complex issues, Entergy Arkansas proposed to hold a series of technical conferences targeting specific subjects. Technical conferences have been held and another evidentiary hearing in the proceeding was held in August 2010.
An additional technical conference is scheduled in March 2011. As stated by an APSC order: “The scope of the technical conference includes the Charles River Associates (“CRA”) Federal Energy Regulatory Commission (“FERC”) - directed cost/benefit study of all Entergy Operating Companies (‘‘Entergy OpCos”) becoming full members in the Southwest Power Pool Regional Transmission Organization (“SPP RTO”); the CRA APSC-directed addendum study considering Entergy Arkansas, Inc. (“EAI”) as a stand-alone member of the SPP RTO; and the CRA APSC-directed addendum study considering EAI as a stand-alone member of the Midwest Independent Transmission System Operator (“MISO”); as well as the CRA EAI/Entergy S ervices, Inc. (“ESI”)-directed additional addendum studies (including a cost/benefit study of all Entergy Op Cos becoming members of MISO).”
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
A procedural schedule has been established in the proceeding that, among other things: (1) requires Entergy Arkansas to file its assessment and recommendations regarding each of the strategic reorganization options by May 12, 2011 and (2) sets an evidentiary hearing to begin September 7, 2011.
The Utility operating companies continue to meet with various interested parties to discuss a proposed framework for successor arrangements to the current System Agreement. An initial draft of the successor arrangements, referred to as the Commitment, Operations, and Dispatch Agreement or “CODA,” was provided to state regulators on September 16, 2010. The draft CODA was based on three overarching principles: voluntary coordinated resource planning; centralized commitment, operations, and dispatch (so that the resources of all Utility operating companies are operated to serve the combined loads of those companies); and coordinated transmission operations. In contrast to the current System Agreement, which requires joint generation resource plan ning, the draft CODA is intended to establish a resource planning regime that reflects the resource needs of each Utility operating company’s jurisdictional customers so that each Utility operating company would realize the benefits and costs of its own generation planning decisions.
Prior to that time, in early April 2010, Entergy Corporation and the Utility operating companies determined in connection with their decision-making process that it is appropriate to agree and commit that no Utility operating company will enter voluntarily into successor arrangements with the other Utility operating companies if its retail regulator finds successor arrangements are not in the public interest. Hugh McDonald, Entergy Arkansas president, notified the APSC of this decision, and explained the decision and commitment, in a letter filed with the APSC on April 26, 2010.
LPSC and City Council Action Related to the Entergy Arkansas and Entergy Mississippi Notices of Termination
In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the potential for a new agreement. Likewise, the New Orleans City Council opened a docket to gather information on progress towards a successor agreement. The LPSC subsequently passed a resolution stating that it cannot evaluate successor arrangements without having certainty about System Agreement exit obligations.
Independent Coordinator of Transmission
In 2000, the FERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of independent RTOs (regional transmission organizations). Delays in implementing the FERC RTO order occurred due to a variety of reasons, including the fact that utility companies, other stakeholders, and federal and state regulators have had to work to resolve various issues related to the establishment of such RTOs.
In November 2006, after nearly a decade of effort, including filings, orders, technical conferences, and proceedings at the FERC, the Utility operating companies installed the Southwest Power Pool (SPP) as their Independent Coordinator of Transmission (ICT). The installation does not transfer control of Entergy’s transmission system to the ICT, but rather vests with the ICT responsibility for:
· | granting or denying transmission service on the Utility operating companies’ transmission system. |
· | administering the Utility operating companies’ OASIS node for purposes of processing and evaluating transmission service requests and ensuring compliance with the Utility operating companies’ obligation to post transmission-related information. |
· | developing a base plan for the Utility operating companies’ transmission system that will result in the ICT making the determination on whether costs of transmission upgrades should be rolled into the Utility operating companies’ transmission rates or directly assigned to the customer requesting or causing an upgrade to be constructed. This should result in a transmission pricing structure that ensures that the Utility operating companies’ retail native load customers are required to pay for only those upgrades necessary to reliably serve their needs. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | serving as the reliability coordinator for the Entergy Operations, Inc.transmission system. |
· | overseeing the operation of the weekly procurement process (WPP). |
· | | evaluating interconnection-related investments already made on the Entergy Nuclear Fuels Company | | | | | | | |
| Entergy Services, Inc. | | | Entergy Nuclear Nebraska LLC | | | | |
| System Fuels, Inc. | | | Entergy Nuclear Power Marketing LLC | | | | for purposes of determining the future allocation of the uncredited portion of these investments, pursuant to a detailed methodology. The ICT agreement also clarifies the rights that customers receive when they fund a supplemental upgrade. |
StrategyIn October 2008 the FERC issued an order accepting a tariff amendment establishing that the WPP shall take effect at a date to be determined, after completion of successful simulation trials and the ICT’s endorsement of the WPP’s implementation. On January 16, 2009, the Utility operating companies filed a compliance filing with the FERC that included the ICT’s endorsement of the WPP implementation, subject to the FERC’s acceptance of certain additional tariff amendments and the completion of simulation testing and certain other items. The Utility operating companies filed the tariff amendments supported by the ICT on the same day. The amendments proposed to further amend the WPP to (a) limit supplier offers in the WPP to on-peak pe riods and (b) eliminate the granting of certain transmission service through the WPP.
On March 17, 2009, the FERC issued an order conditionally approving the proposed modification to the WPP to allow the process to be implemented the week of March 23, 2009. In its order approving the requested modifications, the FERC imposed additional conditions related to the ICT arrangement and indicated it was going to evaluate the success of the ICT arrangement, including the cost and benefits of implementing the WPP and whether the WPP goes far enough to address the transmission access issues that the ICT and WPP were intended to address. The FERC, in conjunction with the APSC, the LPSC, the MPSC, the PUCT, and the City Council, hosted a conference on June 24, 2009, to discuss the ICT arrangement and transmission access on the Entergy transmission system. In compliance with the FERC’s March 2009 order, in November 2009 the Utility operating companies filed with the FERC a process for evaluating the modification or replacement of the current ICT and WPP arrangements.
During the conference, several issues were raised by regulators and market participants, including the adequacy of the Utility operating companies’ capital investment in the transmission system, the Utility operating companies’ compliance with the existing North American Electric Reliability Corporation (NERC) reliability planning standards, the availability of transmission service across the system, and whether the Utility operating companies could have purchased lower cost power from merchant generators located on the transmission system rather than running their older generating facilities. On July 20, 2009, the Utility operating companies filed comments with the FERC responding to the issues raised during the conference. The comments explain that: 1) the Utility operating companies believe that the ICT arrangement has fulfilled its objectives; 2) the Utility operating companies’ transmission planning practices comply with laws and regulations regarding the planning and operation of the transmission system; and 3) these planning practices have resulted in a system that meets applicable reliability standards and is sufficiently robust to allow the Utility operating companies both to substantially increase the amount of transmission service available to third parties and to make significant amounts of economic purchases from the wholesale market for the benefit of the Utility operating companies’ retail customers. The Utility operating companies also explain that, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies’ transmission system that limits the ability of the Utility operating companies as well as other parties to fully utilize the generating resources that have been granted transmission service. Additionally, the Utility operating companies commit in their response to exploring and working on potential reforms or alternatives for the ICT arrangement that could take effect following the initial term. The Utility operating companies’ comments also recognize that NERC is in the process of amending certain of its transmission reliability planning standards and that the amended standards, if approved by the FERC, will result in more stringent transmission planning criteria being applicable in the future. The FERC may also make other changes to transmission reliability standards. These changes to the reliability standards would result in increased capital expenditures by the Utility operating companies.
The Entergy Regional State Committee (E-RSC), which is comprised of representatives from all of the Utility operating companies' retail regulators, has been formed to consider several of these issues related to Entergy's transmission system. Among other things, the E-RSC in concert with the FERC plan to conduct a cost/benefit analysis comparing the ICT arrangement and a proposal under which Entergy would join the Southwest Power Pool RTO. The scope of the study was expanded in July 2010 to consider Entergy joining the Midwest ISO RTO as another alternative.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In September 2010, as modified in October 2010, the Utility operating companies filed a request for a two-year interim extension, with certain modifications, of the ICT arrangement, which was scheduled to expire on November 17, 2010. The filing stated that, if approved by the E-RSC during its October 20-21, 2010 meeting, the Utility operating companies will make a subsequent filing with the FERC to provide the E-RSC with the authority to, upon unanimous approval of all E-RSC members, (1) propose modifications to cost allocation methodology for transmission projects and (2) add transmission projects to the construction plan. On October 13, 2010, the LPSC issued an order approving proposals filed by Entergy Louisiana and Entergy Gulf States Louisiana to modify the cur rent ICT arrangement and to give the E-RSC authority in the two areas as described above. On October 20, 2010, the E-RSC unanimously voted in favor of the proposal granting the E-RSC authority in the two areas described above. The Utility operating companies have filed the necessary revisions to the Entergy OATT to implement the E-RSC's new authority. In November 2010 the FERC approved extension of the ICT arrangement for two years. In December 2010 the FERC approved the proposal to provide the E-RSC with authority in the two areas described above.
On September 30, 2010, the consultant presented its cost/benefit analysis of the Entergy and Cleco regions joining the SPP RTO. The cost/benefit analysis indicates that the Entergy region, including entities beyond the Utility operating companies, would realize a net cost of $438 million to a net benefit of $387 million, primarily depending upon transmission cost allocation issues. Addendum studies, including studies related to Entergy Arkansas and the Utility operating companies joining the Midwest ISO, are due to be completed by the end of the first quarter 2011. Pursuant to a schedule established by an LPSC ALJ, Entergy Gulf States Louisiana and Entergy Louisiana expect to make a filing in May 2011 that sets forth the results of the analysis of the ava ilable options and preliminary recommendations regarding which option is in the public interest. The other Utility operating companies expect to make similar filings at that time.
Notice to SERC Reliability Corporation Regarding Reliability Standards
Entergy aspireshas notified the SERC Reliability Corporation (SERC) of potential violations of certain North American Electric Reliability Corporation (NERC) reliability standards, including certain Critical Infrastructure Protection, Facility Connection, and System Protection Coordination standards. Entergy is working with the SERC to achieve industry-leading total shareholder returnsprovide information concerning these potential violations. The Energy Policy Act of 2005 provides authority to impose civil penalties for violations of the Federal Power Act and FERC regulations.
U.S. Department of Justice Investigation
In September 2010, Entergy was notified that the U.S. Department of Justice had commenced a civil investigation of competitive issues concerning certain generation procurement, dispatch, and transmission system practices and policies of the Utility operating companies. The investigation is ongoing.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Market risk is the risk of changes in an environmentally responsible fashionthe value of commodity and financial instruments, or in future net income or cash flows, in response to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the following significant market risks:
· | The commodity price risk associated with the sale of electricity by the Entergy Wholesale Commodities business. |
· | The interest rate and equity price risk associated with Entergy’s investments in pension and other postretirement benefit trust funds. See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trust funds. |
· | The interest rate and equity price risk associated with Entergy’s investments in nuclear plant decommissioning trust funds, particularly in the Entergy Wholesale Commodities business. See Note 17 to the financial statements for details regarding Entergy’s decommissioning trust funds. |
· | The interest rate risk associated with changes in interest rates as a result of Entergy’s issuances of debt. Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization. See Notes 4 and 5 to the financial statements for the details of Entergy’s debt outstanding. |
The Utility business has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by leveragingtheir retail rate regulators, the scale and expertise inherent in its core nuclear and utility operations. Entergy's scope includes electricity generation, transmission and distribution as well asUtility operating companies hedge exposure to natural gas transportationprice volatility.
Entergy’s commodity and distribution.financial instruments are exposed to credit risk. Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy focusesis also exposed to a potential demand on operational excellenceliquidity due to credit support requirements within its supply or sales agreements.
Commodity Price Risk
Power Generation
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with an emphasisits customers and sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Entergy Wholesale Commodities also sells unforced capacity from its nuclear plants to load-serving entities, which allows those companies to meet specified reserve and related requirements placed on safety, reliability, customer service, sustainability, cost efficiency,them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward fixed price power contracts consist of contracts to sell energy only, contracts to sell capacity only, and risk management.bundled contracts in which it sells both capacity a nd energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy also focuses on portfolio managementWholesale Commodities to deliver MWh of energy to its counterparties, make periodic buy, build, hold,capacity available to them, or sell decisions based upon its analytically-derived pointsboth. The following is a summary as of view, which are updated as market conditions evolve.December 31, 2010 of the amount of Entergy Wholesale Commodities’ nuclear power plants’ planned energy output that is sold forward under physical or financial contracts:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | �� | | | | | | | | | |
Percent of planned generation sold forward: | | | | | | | | | | |
| Unit-contingent | | 79% | | 59% | | 34% | | 14% | | 12% |
| Unit-contingent with guarantee of availability (1) | | 17% | | 14% | | 6% | | 3% | | 3% |
| Firm LD | | 3% | | 24% | | 0% | | 8% | | 0% |
| Offsetting positions | | (3)% | | (10)% | | 0% | | 0% | | 0% |
| Total energy sold forward | | 96% | | 87% | | 40% | | 25% | | 15% |
Planned generation (TWh) (4) | | 41 | | 41 | | 40 | | 41 | | 41 |
Average revenue under contract per MWh (2) (3) | | $53 | | $49 | | $47 | | $51 | | $51 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Availability of SEC filings and other information on Entergy's website(1) | A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees. |
(2) | The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant, which is through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far. |
(3) | Average revenue under contract may fluctuate due to positive or negative basis differences, option premiums, costs to convert firm LD to unit-contingent, and other risk management costs. Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA. |
(4) | Assumes license renewal for plants whose current licenses expire within five years. License renewal applications are in process for four units, as follows (with current license expirations in parentheses): Vermont Yankee (March 2012), Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015). |
Entergy electronically files reportsestimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on December 31, 2010 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $17 million in 2011. Entergy estimates that, based on December 31, 2009 market conditions, planned generation volume, and hedged position, a $10 per MWh change in the annual average energy price would have had a corresponding effect on pre-tax net income of $53 million in 2010.
Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, NYPA and the subsidiaries that own the FitzPatrick and Indian Point 3 plants amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, the Entergy subsidiaries agreed to make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Entergy subsidiaries will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million.& #160; The annual payment for each year’s output is due by January 15 of the following year. Entergy will record the liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. In 2010, 2009, and 2008, Entergy Wholesale Commodities recorded a $72 million liability for generation during each of those years. An amount equal to the liability was recorded each year to the plant asset account as contingent purchase price consideration for the plants. This amount will be depreciated over the expected remaining useful life of the plants.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At December 31, 2010, based on power prices at that time, Entergy had credit exposure of $14 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commo dities segment) transactions, $20 million of guarantees that support letters of credit, and $5 million of posted cash collateral to the ISOs. As of December 31, 2010, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $123 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2010, Entergy would have been required to provide approximately $78 million of additional cash or letters of credit under some of the agreements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As of December 31, 2010, the counterparties or their guarantors for 99.7% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2015 have public investment grade credit ratings and 0.3% is with load-serving entities without public credit ratings.
In addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary as of December 31, 2010 of the amount of the Entergy Wholesale Commodities nuclear plants’ installed capacity that is sold forward, and the blended amount of the Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is sold forward:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | | | | | | | | | | |
Percent of capacity sold forward: | | | | | | | | | | |
| Bundled capacity and energy contracts | | 25% | | 18% | | 16% | | 16% | | 16% |
| Capacity contracts | | 37% | | 29% | | 26% | | 10% | | 0% |
| Total capacity sold forward | | 62% | | 47% | | 42% | | 26% | | 16% |
Planned net MW in operation | | 4,998 | | 4,998 | | 4,998 | | 4,998 | | 4,998 |
Average revenue under contract per kW per month | | $2.6 | | $3.0 | | $3.1 | | $3.5 | | $- |
(applies to capacity contracts only) | | | | | | | | | | |
| | | | | | | | | | |
Blended Capacity and Energy Recap (based on revenues) | | | | | | | | | | |
% of planned generation and capacity sold forward | | 96% | | 87% | | 40% | | 26% | | 15% |
Average revenue under contract per MWh | | $54 | | $51 | | $50 | | $53 | | $52 |
The preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy’s financial position or results of operations.
Nuclear Decommissioning Costs
Entergy subsidiaries own nuclear generation facilities in both its Utility and Entergy Wholesale Commodities business units. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service, and money is collected and deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates:
· | Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by annual factors ranging from approximately 3% to 3.5%. A 50 basis point change in this assumption could change the ultimate cost of decommissioning a facility by as much as an approximate average of 20% to 25%. To the extent that a high probability of license renewal is assumed, a change in the estimated inflation or cost escalation rate has a larger effect on the undiscounted cash flows because the rate of inflation is factored into the calculation for a longer period of time. |
· | Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant’s retirement must be estimated. A high probability that the plant’s license will be renewed and operate for some time beyond the original license term has currently been assumed for purposes of calculating the decommissioning liability for a number of Entergy’s nuclear units. Second, an assumption must be made whether decommissioning will begin immediately upon plant retirement, or whether the plant will be held in “safestore” status for later decommissioning, as permitted by applicable regulations. While the effect of these assumptions cannot be determined with pr ecision, a change of assumption of either renewal or use of a “safestore” status can possibly change the present value of these obligations. Future revisions to appropriately reflect changes needed to the estimate of decommissioning costs will affect net income, only to the extent that the estimate of any reduction in the liability exceeds the amount of the undepreciated asset retirement cost at the date of the revision, for unregulated portions of Entergy’s business. Any increases in the liability recorded due to such changes are capitalized and depreciated over the asset’s remaining economic life. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. However the DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy is continuing to pursue damages claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and mainta ining these facilities can have a significant effect (as much as an average of 20% to 30% of estimated decommissioning costs). Entergy’s decommissioning studies may include cost estimates for spent fuel storage. However, these estimates could change in the future based on the timing of the opening of an appropriate facility designated by the federal government to receive spent nuclear fuel. |
· | Technology and Regulation – Over the past several years, more practical experience with the actual decommissioning of facilities has been gained and that experience has been incorporated in to Entergy’s current decommissioning cost estimates. However, given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur and affect current cost estimates. If regulations regarding nuclear decommissioning were to change, this could have a potentially significant effect on cost estimates. The effect of these potential changes is not presently determinable. |
· | Interest Rates - The estimated decommissioning costs that form the basis for the decommissioning liability recorded on the balance sheet are discounted to present values using a credit-adjusted risk-free rate. When the decommissioning cost estimate is significantly changed requiring a revision to the decommissioning liability and the change results in an increase in cash flows, that increase is discounted using a current credit-adjusted risk-free rate. Under accounting rules, if the revision in estimate results in a decrease in estimated cash flows, that decrease is discounted using the previous credit-adjusted risk-free rate. Therefore, to the extent that one of the factors noted above changes resulting in a significant increase in estimated cash flows, current int erest rates will affect the calculation of the present value of the additional decommissioning liability. |
In the first quarter 2009, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in an $8.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the second quarter 2009, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $4.2 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the fourth quarter 2009, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $78.7 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement obligation asset that will be depreciated over the remaining life of the unit.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Impairment of Long-lived Assets and Trust Fund Investments
Entergy has significant investments in long-lived assets in all of its segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment whenever there are indications that impairments may exist. This evaluation involves a significant degree of estimation and uncertainty. In the Utility business, portions of River Bend are not included in rate base, which could reduce the revenue that would otherwise be recovered for the applicable portions of its generation. In the Entergy Wholesale Commodities business, Entergy’s investments in merchant nuclear generation assets are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses are not renewed. Entergy’s investments in merchant non-nuclear generation assets are subject to impairment if adverse market conditions arise.
In order to determine if Entergy should recognize an impairment of a long-lived asset that is to be held and used, accounting standards require that the sum of the expected undiscounted future cash flows from the asset be compared to the asset’s carrying value. The carrying value of the asset includes any capitalized asset retirement cost associated with the SEC, including annual reportsrecording of an additional decommissioning liability, therefore changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded; if such cash flows are less than the carrying value, Entergy is required to record an impairment charge to write the asset down to its fair value.& #160; If an asset is held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value.
These estimates are based on Form 10-K, quarterly reports on Form 10-Q,a number of key assumptions, including:
· | Future power and fuel prices - Electricity and gas prices have been very volatile in recent years, and this volatility is expected to continue. This volatility necessarily increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows. |
· | Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, the market for such assets is volatile and the value of individual assets is impacted by factors unique to those assets. |
· | Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant impact on operations could cause a significant change in these assumptions. |
· | Timing - Entergy currently assumes, for a number of its nuclear units, that the plant’s license will be renewed. A change in that assumption could have a significant effect on the expected future cash flows and result in a significant effect on operations. |
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
21, 2012, when the current reports on Form 8-K, proxies,CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and amendmentsfor storage of spent fuel. Second, the Vermont Public Service Board must vote to such reports. The public may read and copy any materials thatrenew the CPG. On March 3, 2008, Entergy filesfiled an application with the SEC atVPSB to renew its CPG. On February 24, 2010, a bill to approve the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on thecontinued operation of Vermont Yankee was advanced to a vote in the Public Reference RoomVermont Senate and defeated by callinga margin of 26 to 4. Neither house of the SEC at 1-800-SEC-0330.Vermont General Assembly has voted on a similar bill since that time.
If Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 includes a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued operations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The SEC also maintainsnet carrying value of the plan t, including nuclear fuel, is $424 million as of December 31, 2010.
Effective January 1, 2009, Entergy adopted an internet site that contains reports, proxyaccounting pronouncement providing guidance regarding recognition and information statements, and other information regarding registrants that file electronically withpresentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the SEC at http://www.sec.gov. Additionally, information about Entergy, includingintent to sell or more likely than not will be required to sell the debt security before recovery of its reports filed with the SEC, is available without charge through its website, http://www.entergy.com. Reports filed with the SEC are available as soon as reasonably practicable after they are filed electronically with the SEC. Entergy uses its website to disclose important information to investors. Entergy is providing the address to its Internet site solely for the information of investors.amortized costs. Further, if Entergy does not intendexpect to recover the addressentire amortized cost basis of the debt security, an other-than-temporary-impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). For debt securities held as of January 1, 2009 for which an active linkothe r-than-temporary impairment had previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other than temporary impairments relating to credit losses on debt securities in 2010 or 2009. The assessment of whether an investment in an equity security has suffered an other than temporary impairment continues to otherwise incorporatebe based on a number of factors including, first, whether Entergy has the contentsability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of inve stments. As discussed in Note 1 to the financial statements, unrealized losses that are not considered temporarily impaired are recorded in earnings for Entergy Wholesale Commodities. Entergy Wholesale Commodities recorded charges to other income of $1 million in 2010, $86 million in 2009, and $50 million in 2008 resulting from the recognition of impairments of certain securities held in its decommissioning trust funds that are not considered temporary. Additional impairments could be recorded in 2011 to the extent that then current market conditions change the evaluation of recoverability of unrealized losses.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the websiteplans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility and E ntergy Wholesale Commodities segments.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Assumptions
Key actuarial assumptions utilized in determining these costs include:
· | Discount rates used in determining future benefit obligations; |
· | Projected health care cost trend rates; |
· | Expected long-term rate of return on plan assets; and |
· | Rate of increase in future compensation levels. |
Entergy reviews these assumptions on an annual basis and adjusts them as necessary. The falling interest rate environment and worse-than-expected performance of the financial equity markets in 2008, partially offset by recoveries in 2009 and 2010, have impacted Entergy’s funding and reported costs for these benefits. In addition, these trends have caused Entergy to make a number of adjustments to its assumptions.
In selecting an assumed discount rate to calculate benefit obligations, Entergy reviews market yields on high-quality corporate debt and matches these rates with Entergy’s projected stream of benefit payments. Based on recent market trends, the discount rates used to calculate its qualified pension benefit obligation decreased from a range of 6.10% to 6.30% for its specific pension plans in 2009 to a range of 5.6% to 5.7% in 2010. The discount rate used to calculate its other postretirement benefit obligation also decreased from 6.10% in 2009 to 5.5% in 2010. Entergy’s assumed discount rates used to calculate the 2008 pension and other postretirement obligations were 6.75% and 6.7%, respectively.
Entergy reviews actual recent cost trends and projected future trends in establishing health care cost trend rates. Based on this review, Entergy’s health care cost trend rate assumption used in calculating the December 31, 2010 accumulated postretirement benefit obligation was an 8.5% increase in health care costs in 2011 gradually decreasing each successive year, until it reaches a 4.75% annual increase in health care costs in 2019 and beyond for pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees.
The assumed rate of increase in future compensation levels used to calculate benefit obligations was 4.23% in 2010 and 2009.
In determining its expected long-term rate of return on plan assets used in calculation of benefit plan costs, Entergy reviews past long-term performance, asset allocations, and long-term inflation assumptions. Entergy targets an asset allocation for its qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities. The target allocations for Entergy’s non-taxable postretirement benefit assets are 55% equity securities and 45% fixed-income securities and, for its taxable other postretirement benefit assets, 35% equity securities and 65% fixed-income securities. Entergy’s expected long-term rate of return on qualified pension assets and non-taxable other postretirement assets used to calculate qualified pension and other postretirement benefits costs was 8.5% and 7.75% , respectively for 2010 and 8.5% for both qualified and other postretirement benefit costs for 2009 and 2008. Entergy’s expected long-term rates of return on qualified pension assets and non-taxable other postretirement assets used to calculate 2011 qualified pension and other postretirement benefits costs were 8.5% and 7.75%, respectively. Entergy’s expected long-term rates of return on taxable other postretirement assets used to calculate other postretirement benefits costs were 5.5% in 2011 and 2010, 6% in 2009 and 5.5% in 2008.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Discount rate | | (0.25%) | | $13,682 | | $131,414 |
Rate of return on plan assets | | (0.25%) | | $7,634 | | - |
Rate of increase in compensation | | 0.25% | | $6,367 | | $30,374 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Health care cost trend | | 0.25% | | $6,500 | | $34,291 |
Discount rate | | (0.25%) | | $4,375 | | $40,557 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Accounting Mechanisms
Effective December 31, 2006, accounting standards required an employer to recognize in its balance sheet the funded status of its benefit plans. Refer to Note 11 to the financial statements for a further discussion of Entergy’s funded status.
In accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into this report.expense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees.
Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Costs and Funding
In 2010, Entergy’s total qualified pension cost was $147.1 million. Entergy anticipates 2011 qualified pension cost to be $154 million. Pension funding was $454 million for 2010. Entergy’s contributions to the pension trust are currently estimated to be approximately $368.8 million in 2011, although the required pension contributions will not be known with more certainty until the January 1, 2011 valuations are completed by April 1, 2011.
Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall which, under the Pension Protection Act, must be funded over a seven-year rolling period. The
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on a calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets and the funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury; therefore, periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.
Total postretirement health care and life insurance benefit costs for Entergy in 2010 were $111.1 million, including $26.6 million in savings due to the estimated effect of future Medicare Part I, Item 1D subsidies. Entergy expects 2011 postretirement health care and life insurance benefit costs to be $114.7 million. This includes a projected $33 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy contributed $75 million to its postretirement plans in 2010. Entergy’s current estimate of contributions to its other postretirement plans is continuedapproximately $78 million in 2011.
Federal Healthcare Legislation
The Patient Protection and Affordable Care Act (PPACA) became federal law on page 194.March 23, 2010, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 became federal law and amended certain provisions of the PPACA. These new federal laws change the law governing employer-sponsored group health plans, like Entergy's plans, and include, among other things, the following significant provisions:
· | A 40% excise tax on per capita medical benefit costs that exceed certain thresholds; |
· | Change in coverage limits for dependants; and |
· | Elimination of lifetime caps. |
The total impact of PPACA is not yet determinable because technical guidance regarding application must still be issued. Additionally, ongoing litigation and political discussions are in progress regarding the constitutionality of and the potential repeal of health care reform, although whether that occurs and what parts of health care reform would be invalidated or repealed is not yet known. Entergy will continue to monitor these developments to determine the possible impact on Entergy as a result of PPACA. Entergy is participating in the programs currently provided for under PPACA, such as the early retiree reinsurance program, which may provide for some limited reimbursements of certain claims for early retirees aged 55 to 64 who are not yet eligible for Medicare.
One provision of the new law that is effective in 2013 eliminates the federal income tax deduction for prescription drug expenses of Medicare beneficiaries for which the plan sponsor also receives the retiree drug subsidy under Part D. Entergy receives subsidy payments under the Medicare Part D plan and therefore in the first quarter 2010 recorded a reduction to the deferred tax asset related to the unfunded other postretirement benefit obligation. The offset was recorded as a $16 million charge to income tax expense or, for the Utility, including each Registrant Subsidiary, as a regulatory asset.
Other Contingencies
As a company with multi-state domestic utility operations and a history of international investments, Entergy is subject to a number of federal, state, and international laws and regulations and other factors and conditions in the areas in which it operates, which potentially subject it to environmental, litigation, and other risks. Entergy periodically evaluates its exposure for such risks and records a reserve for those matters which are considered probable and estimable in accordance with generally accepted accounting principles.
Environmental
Entergy must comply with environmental laws and regulations applicable to the handling and disposal of hazardous waste. Under these various laws and regulations, Entergy could incur substantial costs to restore properties consistent with the various standards. Entergy conducts studies to determine the extent of any required remediation and has recorded reserves based upon its evaluation of the likelihood of loss and expected dollar amount for each issue. Additional sites could be identified which require environmental remediation for which Entergy could be liable. The amounts of environmental reserves recorded can be significantly affected by the following external events or conditions:
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Changes to existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. |
· | The identification of additional sites or the filing of other complaints in which Entergy may be asserted to be a potentially responsible party. |
· | The resolution or progression of existing matters through the court system or resolution by the EPA. |
Litigation
Entergy has been named as defendant in a number of lawsuits involving employment, ratepayer, and injuries and damages issues, among other matters. Entergy periodically reviews the cases in which it has been named as defendant and assesses the likelihood of loss in each case as probable, reasonably estimable, or remote and records reserves for cases which have a probable likelihood of loss and can be estimated. Notes 2 and 8 to the financial statements include more detail on ratepayer and other lawsuits and management’s assessment of the adequacy of reserves recorded for these matters. Given the environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is named as a defendant, however, the ultimate outcome of the litigation Entergy is exposed to has the potential to materially affect the results of operations of Entergy, or its operating company subsidiaries.
Uncertain Tax Positions
Entergy’s operations, including acquisitions and divestitures, require Entergy to evaluate risks such as the potential tax effects of a transaction, or warranties made in connection with such a transaction. Entergy believes that it has adequately assessed and provided for these types of risks, where applicable. Any reserves recorded for these types of issues, however, could be significantly affected by events such as claims made by third parties under warranties, additional transactions contemplated by Entergy, or completion of reviews of the tax treatment of certain transactions or issues by taxing authorities. Entergy does not expect a material adverse effect on earnings from these matters.
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
REPORT OF MANAGEMENTDividends and Stock Repurchases
ManagementDeclarations of Entergy Corporation and its subsidiaries has prepared and is responsible fordividends on Entergy’s common stock are made at the financial statements and related financial information included in this document. To meet this responsibility, management establishes and maintains a system of internal controls designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements in accordance with generally accepted accounting principles. This system includes communication through written policies and procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility and training of personnel. This system is also tested by a comprehensive internal audit program.
Entergy management assesses the effectiveness of Entergy's internal control over financial reporting on an annual basis. In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizationsdiscretion of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherent limitationsBoard. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon Entergy’s earnings, financial strength, and can provide only reasonable assurance with respect to financial statement preparation and presentation.
Entergy Corporation andfuture investment opportunities. At its January 2011 meeting, the Registrant Subsidiaries' independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the effectivenessBoard declared a dividend of Entergy's internal control over financial reporting as of December 31, 2009,$0.83 per share, which is included hereinthe same quarterly dividend per share that Entergy has paid since second quarter 2010. The prior quarterly dividend per share was $0.75. Entergy paid $604 million in 2010, $577 million in 2009, and $573 million in 2008 in cash dividends on pages 402 through 409.its common stock.
In addition,accordance with Entergy’s stock-based compensation plan, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the Audit Committee ofplan, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of Directors, composed solely of independent Directors, meets withgrants under the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal controls, and auditing and financial reporting matters. The Audit Committee appoints the independent auditors annually, seeks shareholder ratification of the appointment, and reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present, providing free access to the Audit Committee.plan.
Based on management's assessment of internal controls using the COSO criteria, management believes that Entergy and each of the Registrant Subsidiaries maintained effective internal control over financial reporting as of December 31, 2009. Management further believes that this assessment, combined with the policies and procedures noted above, provides reasonable assurance that Entergy's and each of the Registrant Subsidiaries' financial statements are fairly and accurately presented in accordance with generally accepted accounting principles.
J. WAYNE LEONARD
Chairman of the Board and Chief Executive Officer of Entergy Corporation
| LEO P. DENAULT
Executive Vice President and Chief Financial Officer of Entergy Corporation
|
HUGH T. MCDONALD
Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc.
| E. RENAE CONLEY
Chair of the Board, President, and Chief Executive Officer of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC
|
HALEY R. FISACKERLY
Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc.
| RODERICK K. WEST
Chairman, President, and Chief Executive Officer of Entergy New Orleans, Inc.
|
JOSEPH F. DOMINO
Chairman of the Board, President, and Chief Executive Officer of Entergy Texas, Inc.
| JOHN T. HERRON
Chairman, President, and Chief Executive Officer of System Energy Resources, Inc.
|
THEODORE H. BUNTING, JR.
Senior Vice President and Chief Accounting Officer (and acting principal financial officer) of Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and Entergy Texas, Inc.
| WANDA C. CURRY
Vice President and Chief Financial Officer of System Energy Resources, Inc.
|
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.
· | Utility generates, transmits, distributes, and sells electric power in service territories in four states that include portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business.
|
· | Non-Utility Nuclear owns and operates six nuclear power plants located in the northern United States and sells the electric power produced by those plants primarily to wholesale customers. This business also provides services to other nuclear power plant owners.
|
In addition to its two primary, reportable, operating segments, Entergy also operates the non-nuclear wholesale assets business. The non-nuclear wholesale assets business sellsauthority to wholesale customers the electric power produced by power plants that it owns while it focuses on improving performance and exploring sales or restructuring opportunities for its power plants. Such opportunities are evaluated consistent with Entergy's market-based point-of-view.
Following are the percentages of Entergy's consolidated revenues and net income generated by its operating segments and the percentage of total assets held by them:
| | % of Revenue | | % of Net Income | | % of Total Assets |
Segment | | 2009 | | 2008 | | 2007 | | 2009 | | 2008 | | 2007 | | 2009 | | 2008 | | 2007 |
| | | | | | | | | | | | | | | | | | |
Utility | | 75 | | 79 | | 80 | | 57 | | 49 | | 61 | | 80 | | 77 | | 78 |
Non-Utility Nuclear | | 24 | | 19 | | 18 | | 50 | | 64 | | 46 | | 28 | | 21 | | 21 |
Parent Company & Other Business Segments | | 1 | | 2 | | 2 | | (7) | | (13) | | (7) | | (8) | | 2 | | 1 |
Plan to Pursue Separation of Non-Utility Nuclear
In Novemberfund grant exercises, in January 2007 the Board approved a planprogram under which Entergy is authorized to pursue a separation of the Non-Utility Nuclear business from Entergy through a tax-free spin-off of the Non-Utility Nuclear business to Entergy shareholders. Upon completion of the Board-approved spin-off plan, Enexus Energy Corporation, a wholly-owned subsidiary of Entergy, would be a new, separate, and publicly-traded company. In addition, under the plan, Enexus and Entergy are expected to enter into a nuclear services business joint venture, EquaGen LLC, with 50% ownership by Enexus and 50% ownership by Entergy. The EquaGen board of managers would be comprised of equal membership from both Entergy and Enexus.
Once the spin-off transaction is complete, Entergy Corporation's shareholders will own all Entergy common stock and will receive a distribution of 80.1 percent of the Enexus common shares. Entergy will transfer the remaining Enexus common shares to a trust. While held by the trust, the Enexus common shares will be voted by the trustee in the same proportion as the other Enexus common shares on any matter submitted to a vote of the Enexus shareholders. Within a period ofrepurchase up to 18 months after the spin-off, Entergy is expected to exchange the Enexus common shares retained in the trust for Entergy common shares. Enexus common shares not ultimately exchanged, if any, will be distributed to Entergy shareholders.
Enexus' business would be substantially comprised of Non-Utility Nuclear's assets, including its six nuclear power plants, and Non-Utility Nuclear's power marketing operation. Entergy Corporation's remaining business would primarily be comprised of the Utility business. EquaGen would operate the nuclear assets owned by Enexus under the Board-approved plan, and provide certain services to the Utility's nuclear operations. EquaGen would also be expected to offer nuclear services to third parties, including decommissioning, plant relicensing, plant operations, and ancillary services.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In connection with the spin-off, Enexus is currently expected to incur up to $4.0 billion of debt prior to completion of the spin-off. Currently, the debt is expected to be incurred in the following transactions:
· | Enexus is expected to issue up to $2.0 billion of debt securities in partial consideration of Entergy's transfer to it of the Non-Utility Nuclear business. |
· | These debt securities are expected to be exchanged for up to $2.0 billion of debt securities that Entergy plans to issue prior to the spin-off. If the exchange occurs, the holders of the debt securities that Entergy plans to issue prior to the spin-off would become holders of up to $2.0 billion of Enexus debt securities. |
· | Enexus is expected to issue up to $2.0 billion of debt securities directly to third party investors. |
Out of existing cash on hand and the proceeds Enexus would receive from the issuance of debt securities directly to third party investors, it expects to retain approximately $750 million, which it intends to use for working capital and other general corporate purposes. In addition, Enexus is expected to apply up to $500 million of the proceeds from the issuance of these debt securities to provide cash collateral as credit support for reimbursement obligations in respect of letters of credit. All of the remaining proceeds, plus any remaining cash on hand, are expected to be transferred to Entergy to settle Enexus' intercompany indebtedness owed to Entergy, including indebtedness that Entergy will transfer to Enexus in the spin-off, and to purchase certain assets from Entergy. Enexus will not receive any proceeds from either the issuance of the up to $2.0$1.5 billion of its debt securities orcommon stock. In January 2008, the exchange of its debt securities forBoard authorized an incremental $500 million share repurchase program to enable Entergy debt securities.to consider opportunistic purchases in response to equity market conditions. Entergy expects to usecompleted both the proceeds that it receives from$1.5 billion and $500 million programs in the issuance of its debt securities to reduce outstanding Entergy debt. The amount to be paid to Entergy, the amount and term of the debt Enexus would incur, and the type of debt and entity that would incur the debt have not been finally determined, but would be determined prior to the spin-off. A number of factors could affect this final determination, and the amount of debt ultimately incurred could be different from the amount disclosed.
Enexus executed a $1.175 billion credit facility in December 2008.third quarter 2009. In October 2009 Enexus executed Amendment No. 1 to itsthe Board granted authority for an additional $750 million share repurchase program which was completed in the fourth quarter 2010. In October 2010 the Board granted authority for an additional $500 million share repurchase program. The amount of repurchases may vary as a result of material changes in busine ss results or capital spending or new investment opportunities, or if limitations in the credit facility, increasing the total credit facility amount to $1.2 billion from $1.175 billion. Enexus is not permitted to draw down the facility until certain customary and transactional conditions related to the spin-off are met on or prior to July 1, 2010. Enexus may enter into other financing arrangements meant to support Enexus' working capital and general corporate needs and credit support obligations arising from hedging and normal course of business requirements.
Entergy and Enexus intend to launch the financing relating to the spin-off after requisite regulatory approvals are received and when market conditions are favorablemarkets continue for such an issuance. Entergy expects the transaction to qualify for tax-free treatment for U.S. federal income tax purposes for both Entergy and its shareholders. Entergy received a private letter ruling from the IRS regarding certain requirements for tax-free treatment. In addition, a supplemental ruling request has been filed with the IRS to reflect changes to the initial spin-off plan. Final terms of the transaction and spin-off completion are subject to several conditions, including the final approval of the Board.
Regulatory Proceedings Regarding the Spin-Off
NRC
Entergy Nuclear Operations, Inc., the current NRC-licensed operator of the Non-Utility Nuclear plants, filed an application in July 2007 with the NRC seeking indirect transfer of control of the operating licenses for the six Non-Utility Nuclear power plants, and supplemented that application in December 2007 to incorporate the planned business separation. Entergy Nuclear Operations, Inc., which is expected to be wholly-owned by EquaGen, would remain the operator of the plants after the spin-off. Entergy Operations, Inc., the current NRC-licensed operator of Entergy's five Utility nuclear plants, would remain a wholly-owned subsidiary of Entergy and would continue to be the operator of the Utility nuclear plants. In the December 2007 supplement to the NRC application, Entergy Nuclear Operations, Inc. provided additional information regarding the spin-off transaction, organizational structure, technical and financial qualifications, and general corporate information. On July 28, 2008, the NRC staff approved the license transfers associated with the proposed new ownership structure of EquaGen, the proposed licensed operator, as well as the transfers to Enexus of the ownership of Big Rock Point, FitzPatrick, Indian Point Units 1, 2
prolonged period.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
FERC
Pursuant to Federal Power Act section 203, in February 2008 an application was filed with the FERC requesting approval for the indirect disposition and transfer of control of jurisdictional facilities of a public utility. The FERC issued an order in June 2008 authorizing the requested indirect disposition and transfer of control. In August 2009 an amended application was filed with the FERC to reflect the transfer to the exchange trust by Entergy of the 19.9 percent of Enexus' common stock shares. In September 2009 the FERC approved the amended application.Contents
Vermont
On January 28, 2008, Entergy Nuclear Vermont Yankee, LLC and Entergy Nuclear Operations, Inc. requested approval from the Vermont Public Service Board (VPSB) for the indirect transfer of control, consent to pledge assets, issue guarantees and assign material contracts, amendment to certificate of public good, and replacement of guaranty and substitution of a credit support agreement for Vermont Yankee. Several parties intervened in the proceeding. Discovery has been completed in this proceeding, in which parties could ask questions about or request the production of documents related to the transaction.
In addition, the Vermont Department of Public Service (VDPS), which is the public advocate in proceedings before the VPSB, prefiled its initial and rebuttal testimony in the case in which the VDPS took the position that Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations, Inc. have not demonstrated that the restructuring promotes the public good because its benefits do not outweigh the risks, raising concerns that the target rating for Enexus' debt is below investment grade and that the company may not have the financial capability to withstand adverse financial developments, such as an extended outage. The VDPS testimony also expressed concern about the EquaGen joint venture structure and Enexus' ability, under the operating agreement between Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations, Inc., to ensure that Vermont Yankee is well-operated. Two distribution utilities that buy Vermont Yankee power prefiled testimony that also expressed concerns about the structure but found that there was a small net benefit to the restructuring. The VPSB conducted hearings on July 28-30, 2008, during which it considered the testimony prefiled by Entergy Nuclear Vermont Yankee, Entergy Nuclear Operations, Inc., the VDPS, and the two distribution utilities. Subsequently, Entergy Nuclear Operations, Inc. supplied supplemental data to the VPSB outlining the enhanced transaction structure detailed in the amended petition filed in New York (discussed below). On October 8, 2009, a memorandum of understanding was filed with the VPSB outlining an agreement reached with the VDPS, which, if approved by the VPSB, would result in approval of the spin-off transaction in Vermont.
In connection with this memorandum of understanding, Enexus agreed to provide a $100 million working capital facility to Entergy Nuclear Vermont Yankee and to obtain a $60 million letter of credit to fund operating expenses after operations cease at Vermont Yankee. In addition, Enexus agreed that if it has not obtained a credit rating of one notch below investment grade (e.g., a rating of BB+ by S&P) or higher by January 1, 2014, then Enexus will furnish to Entergy Nuclear Vermont Yankee a second letter of credit in the amount of $50 million to support Vermont Yankee's operations, which must be from a financial institution with a rating of A or higher from S&P, or in the alternative, a financial institution with a similar rating from a nationally respected credit rating agency that is of similar and appropriate credit quality. Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations have prefiled testimony explaining this memorandum of understanding and updating the VPSB on the financial structure of the transactions and moved to amend their petition to include Enexus. To assist the VPSB in making its determinations and deciding what, if any, further proceedings are needed, the VPSB, on November 20, 2009, issued information requests to the three companies and to the VDPS. The companies filed their responses on December 9, 2009 and the VDPS filed its responses on December 24, 2009. A VPSB decision on the memorandum of understanding is pending.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
On January 27, 2010, Vermont Governor Jim Douglas issued a statement directing the Commissioner of the VDPS to request a stay from the VPSB of the spin-off proceedings pending an ongoing investigation relating to elevated levels of tritium found in Vermont Yankee groundwater monitoring wells. The Governor's statement further indicated that he would not ask the Vermont General Assembly to consider Vermont Yankee license renewal during its 2010 session. The governor's statement also expressed concerns about potential decommissioning costs and about inconsistent information related to underground piping at Vermont Yankee carrying radionuclides that was provided by Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations, Inc. in a proceeding before the VPSB related to extending operation of Vermont Yankee beyond its current operating license. On February 3, 2010, the VDPS staff filed its motion for a stay of the spin-off proceedings. Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations, Inc. filed a memorandum in opposition to the request for a stay with the VPSB on February 18, 2010.
New York
On January 28, 2008, Entergy Nuclear FitzPatrick, LLC, Entergy Nuclear Indian Point 2, LLC, Entergy Nuclear Indian Point 3, LLC, Entergy Nuclear Operations, Inc., and Enexus filed a petition with the New York Public Service Commission (NYPSC) requesting a declaratory ruling regarding corporate reorganization or in the alternative an order approving the transaction and an order approving debt financing. Petitioners also requested confirmation that the corporate reorganization will not have an effect on Entergy Nuclear FitzPatrick's, Entergy Nuclear Indian Point 2's, Entergy Nuclear Indian Point 3's, and Entergy Nuclear Operations, Inc.'s status as lightly regulated entities in New York, given that they will continue to be competitive wholesale generators. The New York State Attorney General's Office, Westchester County, and other intervenors filed objections to the business separation and to the transfer of the FitzPatrick and Indian Point Energy Center nuclear power plants, arguing that the debt associated with the spin-off could threaten access to adequate financial resources for those nuclear power plants and because the New York State Attorney General's Office believes Entergy must file an environmental impact statement assessing the proposed corporate restructuring. In addition to the New York State Attorney General's Office, several other parties also requested to be added to the service list for this proceeding.
On May 23, 2008, the NYPSC issued its Order Establishing Further Procedures in this matter. In the order, the NYPSC determined that due to the nuclear power plants' unique role in supporting the reliability of electric service in New York, and their large size and unique operational concerns, a more searching inquiry of the transaction will be conducted than if other types of lightly-regulated generation were at issue. Accordingly, the NYPSC assigned an ALJ to preside over this proceeding and prescribed a sixty (60) day discovery period. The order provided that after at least sixty (60) days, the ALJ would establish when the discovery period would conclude. The NYPSC stated that the scope of discovery will be tightly bounded by the public interest inquiry relevant to this proceeding; namely, adequacy and security of support for the decommissioning of the New York nuclear facilities; financial sufficiency of the proposed capital structure in supporting continued operation of the facilities; and, arrangements for managing, operating and maintaining the facilities. The NYPSC also stated that during the discovery period, the NYPSC Staff may conduct technical conferences to assist in the development of a full record in this proceeding.
On July 23, 2008, the ALJs issued a ruling concerning discovery and seeking comments on a proposed process and schedule. In the ruling, the ALJs proposed a process for completing a limited, prescribed discovery process, to be followed three weeks later by the filing of initial comments addressing defined issues, with reply comments due two weeks after the initial comment deadline. Following receipt of all comments, a ruling will be made on whether, and to what extent, an evidentiary hearing is required. The ALJs asked the parties to address three specific topic areas: (1) the financial impacts related to the specific issues previously outlined by the NYPSC; (2) other obligations associated with the arrangement for managing, operating and maintaining the facilities; and (3) the extent that New York Power Authority (NYPA) revenues from value sharing payments under the value sharing
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
agreements between Entergy and NYPA would decrease. The ALJs have indicated that the potential financial effect of the termination of the value sharing payments on NYPA and New York electric consumers are factors the ALJs believe should be considered by the NYPSC in making its public interest determination.
In August 2008, Non-Utility Nuclear entered into a resolution of a dispute with NYPA over the applicability of the value sharing agreements to the FitzPatrick and Indian Point 3 nuclear power plants after the spin-off. Under the resolution, Non-Utility Nuclear agreed not to treat the separation as a "Cessation Event" that would terminate its obligation to make the payments under the value sharing agreements. As a result, after the spin-off, Enexus would continue to be obligated to make payments to NYPA due under the amended and restated value sharing agreements described above. For further discussion of the value sharing agreements, see Note 15 to the financial statements herein.
In August 2009, Enexus filed with the NYPSC an amended petition for an order approving the reorganization and associated debt financings. The amended petition describes proposed enhancements to the corporate reorganization. These proposed enhancements include a commitment to reserve at least $350 million of liquidity, a $1.0 billion reduction in long-term bonds to $3.5 billion, an increase in the initial cash balance left at Enexus to $750 million from the original $250 million, and obtaining an up to $500 million cash-collateralized letter of credit facility that will provide letters of credit for commodity-related and non-hedging-related commercial transactions. The amended petition requested that the NYPSC: issue an order approving the corporate reorganization and associated financings; confirm the corporate reorganization will have no impact on the Enexus companies' status as lightly regulated entities; and issue a negative declaration and undertake no further review under the New York State Environmental Quality Review Act.
On August 21, 2009, the ALJs issued a Ruling Concerning Scope, Process, and Schedule that determined that additional record development was warranted in light of the changes contained in the amended petition. The August 21, 2009 ruling limited the issues requiring further record development to environmental significance under the New York State Environmental Quality Review Act and whether Enexus will be at least as capable as Entergy in meeting all financial and other obligations related to the ownership and operation of the New York nuclear facilities. In early November 2009 the New York State Attorney General's Office, the New York Department of Public Service's Staff, and Westchester County filed initial comments on the amended petition stating their opposition to Enexus' request in the amended petition. Various filings continued to be made into January 2010 in accordance with the procedures and schedule ordered by the ALJs, and the New York State Attorney General's Office, the New York Department of Public Service's Staff, and Westchester County continue to oppose the transaction.
At a hearing on February 11, 2010, the NYPSC discussed Entergy's petition and issued a press release later that same day. The press release states, in part, that the NYPSC "received a report from senior Staff of the Department of Public Service (Staff) addressing a petition submitted by Entergy Corporation.... In its report, Staff concluded that the transaction, as proposed, was not in the public interest, and Staff provided the [NYPSC] information regarding the implications of rejecting the proposal versus making changes to the proposed transaction to improve the long-term financial stability of the three nuclear power plants in New York and to provide ratepayer benefits. The [NYPSC] will consider these topics in more detail at a later date. Staff concluded that the proposed transaction was problematic because the amount of debt leverage employed to finance Enexus is excessive when the business risks of this new merchant nuclear plant enterprise are considered. The principles behind the conditions proposed by Staff are to assure the immediate financial viability of Enexus by mitigating near-term liquidity risk related to debt covenants through a reduction of $550 million in the debt issued by Enexus, to assure the Enexus’s [sic] long-term financial capabilities through the maintenance of a specified bond rating or ratio of debt-to-equity market value, and to provide New York ratepayers some of the potential hedging benefits of nuclear power in periods of rising commodity prices. If the [NYPSC] decides to impose these conditions, or similar conditions addressing the previously stated principles, it is expected that the [NYPSC] will consider the comments of interested parties. Comments would then be analyzed and the matter brought back for final deliberations at the earliest possible [NYPSC] session."
The NYPSC currently has meetings scheduled for March 4 and March 25, 2010 at which it may consider the proposed transaction again.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
ResultsSources of OperationsCapital
Entergy’s sources to meet its capital requirements and to fund potential investments include:
· | internally generated funds; |
· | cash on hand ($1.29 billion as of December 31, 2010); |
· | bank financing under new or existing facilities; and |
Circumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses, including unscheduled plant outages and storms, could affect the timing and level of internally generated funds in the future.
Provisions within the Articles of Incorporation or pertinent indentures and various other agreements relating to the long-term debt and preferred stock of certain of Entergy Corporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred stock. As of December 31, 2010, under provisions in their mortgage indentures, Entergy Arkansas and Entergy Mississippi had restricted retained earnings unavailable for distribution to Entergy Corporation of $458 million and $240.8 million, respectively, and Entergy Louisiana had member’s equity unavailable for distribution to Entergy Corporation of $465 million. All debt and common and preferred equity issuances by the Registrant Subsidiaries require prior regulatory approval and their preferred equity and debt issuances are also subject to issuance tests set forth in corporate charters, bond indentures, and other agreements. Entergy believes that the Registrant Subsidiaries have sufficient capacity under these tests to meet foreseeable capital needs.
The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy (except securities with maturities longer than one year issued by Entergy Arkansas and Entergy New Orleans, which are subject to the jurisdiction of the APSC and the City Council, respectively). No regulatory approvals are necessary for Entergy Corporation to issue securities. The current FERC-authorized short-term borrowing limits are effective through October 2011, as established by a FERC order issued in October 2009. Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through July 2011. Entergy Arkansas has obtained long-term financing authorization from the A PSC that extends through December 2012. Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through July 2012. In addition to borrowings from commercial banks, the FERC short-term borrowing orders authorized the Registrant Subsidiaries to continue as participants in the Entergy System money pool. The money pool is an intercompany borrowing arrangement designed to reduce Entergy’s subsidiaries’ dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed authorized limits. As of December 31, 2010, Entergy’s Registrant Subsidiaries had no outstanding short-term borrowings from external sources. See Notes 4 and 5 to the financial statements for further discussion of Entergy’s borrowing limits and authorizations.
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to portions of Entergy's service territories in Louisiana and Texas, and to a lesser extent in Arkansas and Mississippi. The storms resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. In October 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans drew a total of $229 million from their funded storm reserves.
In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings). In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. In July 2010 the LCDA
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. See Note 2 to the financial statements for additional discussion of the Act 55 financings.
In November 2009, Entergy Texas Restoration Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds) to finance Entergy Texas Hurricane Ike and Hurricane Gustav restoration costs. See Note 2 to the financial statements for a discussion of the proceeding approving the issuance of the securitization bonds and see Note 5 to the financial statements for a discussion of the terms of the securitization bonds.
In the third quarter 2009, Entergy settled with its insurer on its Hurricane Ike claim and Entergy Texas received $75.5 million in proceeds (Entergy received a total of $76.5 million).
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas's transmission and distribution lines, equipment, poles, and other facilities. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. In June 2010 the APSC issued a financing order authorizing the issuance of approximately $126.3 million in storm cost recovery bonds, which includes carrying costs of $11.5 million and $4.6 million of up-front financing costs. See Note 5 to the financial statements for a discussion of the August 2010 issuance of the securitization bonds.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses. Entergy pursued a broad range of initiatives to recover storm restoration and business continuity costs, including obtaining reimbursement of certain costs covered by insurance and pursuing recovery thro ugh existing or new rate mechanisms regulated by the FERC and local regulatory bodies, including the issuance of securitization bonds.
Storm Cost Financings
Louisiana
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana . In August 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. See Note 2 to the financial statements for additional discussion of the Act 55 financings.
Community Development Block Grants
In December 2005, the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included Community Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007, the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
Cash Flow Activity
As shown in Entergy’s Statements of Cash Flows, cash flows for the years ended December 31, 2010, 2009, and 2008 were as follows:
| | | 2010 | | 2009 | | 2008 |
| | | (In Millions) |
| | | | | | | |
Cash and cash equivalents at beginning of period | | $1,710 | | $1,920 | | $1,253 |
| | | | | | |
Cash flow provided by (used in): | | | | | | |
| Operating activities | | 3,926 | | 2,933 | | 3,324 |
| Investing activities | | (2,574) | | (2,094) | | (2,590) |
| Financing activities | | (1,767) | | (1,048) | | (70) |
Effect of exchange rates on cash and cash equivalents | | - | | (1) | | 3 |
| Net increase (decrease) in cash and cash equivalents | | (415) | | (210) | | 667 |
| | | | | | | |
Cash and cash equivalents at end of period | | $1,295 | | $1,710 | | $1,920 |
Operating Cash Flow Activity
2010 Compared to 2009
Entergy’s cash flow provided by operating activities increased $993 million in 2010 compared to 2009 primarily due to the receipt in July 2010 of $703 million from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings for Hurricane Gustav and Hurricane Ike. The Act 55 storm cost financings are discussed in more detail above and also in Note 2 to the financial statements. In addition, the absence of the Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration spending that occurred in 2009 also contributed to the increase. These factors were partially offset by an increase of $323 million in pension contributions at Utility and Entergy Wholesale Commodities and a decrease in net revenue a t Entergy Wholesale Commodities. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and also Note 11 to the financial statements for further discussion of pension funding.
2009 Compared to 2008
Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other business segments, and Entergy comparingEntergy’s cash flow provided by operating activities decreased by $391 million in 2009 compared to 2008 showing how much the line item increased or (decreased) in comparison to the prior period:
| | Utility | | Non-Utility Nuclear | | Parent & Other | | Entergy |
| | (In Thousands) |
| | | | | | | | |
2008 Consolidated Net Income (Loss) | | $605,144 | | $797,280 | | ($161,889) | | $1,240,535 |
| | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | | | | | | | |
Other operation and maintenance expenses | | (30,423) | | 76,007 | | (37,536) | | 8,048 |
Taxes other than income taxes | | (2,173) | | 8,379 | | 701 | | 6,907 |
Depreciation and amortization | | 37,409 | | 14,832 | | (326) | | 51,915 |
Other income | | 74,456 | | 18,243 | | (92,278) | | 421 |
Interest charges | | 36,990 | | 1,958 | | (77,425) | | (38,477) |
Other | | 16,658 | | 12,542 | | 5 | | 29,205 |
Income taxes | | 17,401 | | 60,159 | | (47,818) | | 29,742 |
| | | | | | | | |
2009 Consolidated Net Income (Loss) | | $708,905 | | $631,020 | | ($88,875) | | $1,251,050 |
Refer to "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES" which accompanies Entergy Corporation's financial statements in this report for further information with respect to operating statistics.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $4,589 |
Volume/weather | | 57 |
Retail electric price | | 33 |
Fuel recovery | | 31 |
Provision for regulatory proceedings | | (26) |
Other | | 10 |
2009 net revenue | | $4,694 |
The volume/weather variance is primarily due to the receipt in 2008 of $954 million from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings, Arkansas ice storm restoration spending, and increases in nuclear refueling outage spending and spin-off costs for the non-utility nuclear business. These factors were partially offset by a decrease of $94 million in income tax payments, a decrease of $155 million in pension contributions at Utility and Entergy Wholesale Commodities, increased electricity usage primarily during the unbilled sales periodcollection of fuel costs, and higher spending in addition to the negative effect of2008 on Hurricane Gustav and Hurricane Ike in 2008. Electricity usage by industrial customers decreased, however, by 6%. The overall decline of the economy led to lower usage affecting both the large customer industrial segment as well as small and mid-sized industrial customers, who are also being affected by overseas competition. The effect of the industrial sales volume decrease is mitigated, however, by the fixed charge basis of many industrial customers' rates, which causes average price per KWh sold to increase as the fixed charges are spread over lower volume.storm restoration.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
2010 Compared to 2009
Net cash used in investing activities increased $480 million in 2010 compared to 2009 primarily due to the following activity:
· | an increase in net uses of cash for nuclear fuel purchases, which was caused by the consolidation of the nuclear fuel company variable interest entities that is discussed in Note 18 to the financial statements. With the consolidation of the nuclear fuel company variable interest entities, their purchases of nuclear fuel from Entergy are now eliminated in consolidation, whereas before 2010 they were a source of investing cash flows; |
· | the investment of a total of $290 million in Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm reserve escrow accounts as a result of their Act 55 storm cost financings, which are discussed in Note 2 to the financial statements; |
· | an increase in construction expenditures, primarily in the Entergy Wholesale Commodities business, as decreases for the Utility resulting from Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration spending in 2009 were offset by spending on various projects; and |
· | proceeds of $219 million in 2010 from the sale of Entergy’s ownership interest in the Harrison County Power Project 550 MW combined-cycle power plant to two Texas electric cooperatives that owned a minority share of the plant. |
2009 Compared to 2008
Net cash used in investing activities decreased by $496 million in 2009 compared to 2008. The following significant investing cash flow activity occurred in 2009 and 2008:
· | Construction expenditures were $281 million lower in 2009 than in 2008 primarily due to Hurricane Gustav and Hurricane Ike restoration spending in 2008. |
· | In March 2008, Entergy Gulf States Louisiana purchased the Calcasieu Generating Facility, a 322 MW simple-cycle, gas-fired power plant located near the city of Sulphur in southwestern Louisiana, for approximately $56 million. |
· | In September 2008, Entergy Arkansas purchased the Ouachita Plant, a 789 MW gas-fired plant located 20 miles south of the Arkansas state line near Sterlington, Louisiana, for approximately $210 million (In November 2009, Entergy Arkansas sold one-third of the plant to Entergy Gulf States Louisiana). |
· | Receipt in 2009 of insurance proceeds from Entergy Texas’s Hurricane Ike claim and in 2008 of insurance proceeds from Entergy New Orleans’s Hurricane Katrina claim. |
· | The investment of $45 million in escrow accounts for construction projects in 2008 and the withdrawal of $36 million of those funds from escrow accounts in 2009. |
Financing Activities
2010 Compared to 2009
Net cash used in financing activities increased $719 million in 2010 compared to 2009 primarily because long-term debt activity used approximately $307 million of cash in 2010 and provided approximately $160 million of cash in 2009. The most significant net use for long-term debt activity was by Entergy Corporation, which reduced its 5-year credit facility balance by $934 million and repaid a total of $275 million of notes and bank term loans, while issuing $1 billion of notes in 2010. For the details of Entergy’s long-term debt outstanding see Note 5 to the financial statements herein. In addition, Entergy Corporation repurchased $879 million of its common stock in 2010 and repurchased $613 million of its common stock in 2009. Entergy 217;s stock repurchases are discussed further in the “Capital Expenditure Plans and Other Uses of Capital - Dividends and Stock Repurchases” section above.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
2009 Compared to 2008
Net cash used in financing activities increased $978 million in 2009 compared to 2008 primarily because long-term debt activity provided approximately $160 million of cash in 2009 and provided approximately $970 million of cash in 2008. Also, Entergy Corporation repurchased $613 million of its common stock in 2009 and repurchased $512 million of its common stock in 2008.
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that the Utility operating companies and System Energy charge for their services significantly influence Entergy’s financial position, results of operations, and liquidity. These companies are regulated and the rates charged to their customers are determined in regulatory proceedings. Governmental agencies, including the APSC, the City Council, the LPSC, the MPSC, the PUCT, and the FERC, are primarily responsible for approval of the rates charged to customers. Following is a summary of the Utility operating companies’ authorized returns on common equity and current retail base rates. The Utility operating companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery proceedings are discussed in Note 2 to the financial statements.
Company | | Authorized Return on Common Equity | | |
| | | | |
Entergy Arkansas | | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
| | | | |
Entergy Louisiana | | 9.45%- 11.05% | | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| | | | |
Entergy Mississippi | | 10.79%- 13.05% | | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a settlement approved by the City Council. |
| | | | |
Entergy Texas | | 10.125% | | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a settlement of Entergy Texas's base rate case approved by the PUCT. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Federal Regulation
System Agreement
The FERC regulates wholesale rates (including Entergy Utility intrasystem energy exchanges pursuant to the System Agreement) and interstate transmission of electricity, as well as rates for System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proce edings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement. See Note 2 to the financial statements for discussions of this litigation.
Entergy Arkansas and Entergy Mississippi Notices of Termination of System Agreement Participation and Related APSC Investigation
Citing its concerns that the benefits of its continued participation in the current form of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC.
In October 2007 the MPSC issued a letter confirming its belief that Entergy Mississippi should exit the System Agreement in light of the recent developments involving the System Agreement. The MPSC letter also requested that Entergy Mississippi advise the MPSC regarding the status of the Utility operating companies’ effort to develop successor arrangements to the System Agreement and advise the MPSC regarding Entergy Mississippi’s position with respect to withdrawal from the System Agreement. In November 2007, pursuant to the provisions of the System Agreement, Entergy Mississippi provided its written notice to terminate its participation in the System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authoriz ed by the FERC.
On February 2, 2009, Entergy Arkansas and Entergy Mississippi filed with the FERC their notices of cancellation to effectuate the termination of their participation in the Entergy System Agreement, effective December 18, 2013 and November 7, 2015, respectively. While the FERC had indicated previously that the notices should be filed 18 months prior to Entergy Arkansas’s termination (approximately mid-2012), the filing explains that resolving this issue now, rather than later, is important to ensure that informed long-term resource planning decisions can be made during the years leading up to Entergy Arkansas’s withdrawal and that all of the Utility operating companies are properly positioned to continue to operate reliably following Entergy Arkansas’s an d, eventually, Entergy Mississippi’s, departure from the System Agreement. Entergy Arkansas and Entergy Mississippi requested that the FERC accept the proposed notices of cancellation without further proceedings. Various parties intervened or filed protests in the proceeding, including the APSC, the LPSC, the MPSC, and the City Council.
In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month notice period without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a result of withdrawal. The FERC stated that it expected Entergy and all interested parties to move forward and develop details of all needed successor arrangements and encouraged Entergy to file its Section 205 filing for post 2013 arrangements as soon as possible. In February 2011 the FERC denied the LPSC’s and the City Council’s rehearing requests. The LPSC has appealed the FERC’s decision to the U.S. Court of Appe als for the District of Columbia.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The retail electric price increase is primarily due to:
· | rate increases that were implemented at Entergy Texas in January 2009; |
· | an increase in the formula rate plan rider at Entergy Gulf States Louisiana and Entergy Louisiana effective September 2008 and November 2009; |
· | the recovery of 2008 extraordinary storm costs at Entergy Arkansas as approved by the APSC, effective January 2009. The recovery of 2008 extraordinary storm costs is discussed in Note 2 to the financial statements; |
· | an increase in the capacity acquisition rider related to the Ouachita plant acquisition at Entergy Arkansas. The net income effect of the Ouachita plant cost recovery is limited to a portion representing an allowed return on equity with the remainder offset by Ouachita plant costs in other operation and maintenance expenses, depreciation expenses and taxes other than income taxes; |
· | an increase in the formula rate plan rider at Entergy Mississippi in July 2009; |
· | an Energy Efficiency rider at Entergy Texas, which was effective December 31, 2008, that is substantially offset in other operation and maintenance expenses; and |
· | an increase in the Attala power plant costs recovered through the power management rider by Entergy Mississippi. The net income effect of this recovery is limited to a portion representing an allowed return on equity with the remainder offset by Attala power plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes. |
The retail electric price increase was partially offset by:
· | a credit passed on to Louisiana retail customers as a result of the Act 55 storm cost financings that began in the third quarter of 2008; |
· | a formula rate plan refund of $16.6 million to customers in November 2009 in accordance with a settlement approved by the LPSC. See Note 2 to the financial statements for further discussion of the settlement; and |
· | a net decrease in the formula rate plans effective August 2008 at Entergy Louisiana and Entergy Gulf States Louisiana to remove interim storm cost recovery upon the Act 55 financing of storm costs as well as the storm damage accrual. A portion of the decrease is offset in other operation and maintenance expenses. See Note 2 to the financial statements for further discussion of the formula rate plans. |
The fuel recovery variance resulted primarily fromAPSC had previously commenced an adjustment to deferred fuel costsinvestigation, in 2004, into whether Entergy Arkansas’s continued participation in the fourth quarterSystem Agreement is in the best interests of its customers. The Entergy Arkansas president, Hugh McDonald, filed testimony with the APSC in response to requests by the APSC. In addition, Mr. McDonald has appeared before the APSC at public hearings for questioning. In December 2007, the APSC ordered Mr. McDonald to file testimony each month with the APSC detailing progress toward development of successor arrangements, beginning in March 2008, and Mr. McDonald has done so. In his September 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revisiontestimony Mr. McDonald reported to the fuel adjustment clause methodology.APSC the results of a related study. According to the study the total estima ted cost to establish the systems and staff the organizations to perform the necessary planning and operating functions for a stand-alone Entergy Arkansas operation are estimated at approximately $23 million, including $18 million to establish generation-related functions and $5 million to modify transmission-related information systems. Incremental costs for ongoing staffing and systems costs are estimated at approximately $8 million. Cost and implementation schedule estimates will continue to be re-evaluated and refined as additional, more detailed analysis is completed. The study did not assess the effect of stand-alone operation on Entergy Arkansas’s generation resource requirements. Entergy Arkansas expects it would take approximately two years to implement stand-alone operations for Entergy Arkansas.
In February 2010 the APSC issued an order announcing a refocus of its ongoing investigation of Entergy Arkansas's post-System Agreement operation. The provision for regulatory proceedings varianceorder describes the APSC's "stated purpose in opening this inquiry to conduct an investigation regarding the prudence of [Entergy Arkansas] entering into a successor ESA [Entergy System Agreement] as opposed to becoming a stand-alone utility upon its exit from the ESA, and whether [Entergy Arkansas], as a standalone utility, should join the SPP RTO. It is primarily duethe [APSC's] intention to provisions recordedrender a decision regarding the prudence of [Entergy Arkansas] entering into a successor ESA as opposed to becoming a stand-alone utility upon its exit from the ESA, as well as [Entergy Arkansas'] RTO participation by the end of calendar yea r 2010. In parallel with this Docket, the [APSC] will be actively involved and will be closely watching to see if any meaningful enhancement will be made to a new Enhanced Independent Coordinator of Transmission (“E-ICT") Agreement through the efforts of the [Entergy Transmission System] stakeholders, Entergy, and the newly formed and federally-recognized [Entergy Regional State Committee] in 2009 at2010." Later, in April 2010, the APSC issued an order that directs Entergy Arkansas. See Note 2Arkansas also to consider joining the financial statements forMidwest ISO RTO as a discussion of regulatory proceedings affecting Entergy Arkansas.stand-alone utility.
Entergy Arkansas filed testimony and participated in a March 2010 evidentiary hearing in the proceeding. Entergy Arkansas noted in its testimony that it was not reasonable to complete a comprehensive evaluation of strategic options by the end of 2010 and that forcing a decision would place parties in the untenable position of making critical decisions based on insufficient information. Entergy Arkansas outlined three options for post-System Agreement operation of its electrical system: 1) Entergy Arkansas self providing its generation planning and operating functions as a stand-alone company; 2) Entergy Arkansas plus coordination agreements with third parties in which Entergy Arkansas self provides some planning and operations functions, but also enters i nto one or more coordinating or pooling agreements with third parties; and 3) Successor Arrangements under which Entergy Arkansas plans for its own generation resources but enters into a new generation commitment and dispatch agreement with other Utility operating companies under a successor agreement intended to avoid the litigation previously experienced. Entergy Arkansas’s plan is expected to lead to a decision in late 2011 regarding which option to implement; however, Entergy Arkansas anticipates pursuing during this time several elements that are common to all options. In an attempt to reach understanding of complex issues, Entergy Arkansas proposed to hold a series of technical conferences targeting specific subjects. Technical conferences have been held and another evidentiary hearing in the proceeding was held in August 2010.
An additional technical conference is scheduled in March 2011. As stated by an APSC order: “The scope of the technical conference includes the Charles River Associates (“CRA”) Federal Energy Regulatory Commission (“FERC”) - directed cost/benefit study of all Entergy Operating Companies (‘‘Entergy OpCos”) becoming full members in the Southwest Power Pool Regional Transmission Organization (“SPP RTO”); the CRA APSC-directed addendum study considering Entergy Arkansas, Inc. (“EAI”) as a stand-alone member of the SPP RTO; and the CRA APSC-directed addendum study considering EAI as a stand-alone member of the Midwest Independent Transmission System Operator (“MISO”); as well as the CRA EAI/Entergy S ervices, Inc. (“ESI”)-directed additional addendum studies (including a cost/benefit study of all Entergy Op Cos becoming members of MISO).”
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Non-Utility NuclearA procedural schedule has been established in the proceeding that, among other things: (1) requires Entergy Arkansas to file its assessment and recommendations regarding each of the strategic reorganization options by May 12, 2011 and (2) sets an evidentiary hearing to begin September 7, 2011.
Following is an analysisThe Utility operating companies continue to meet with various interested parties to discuss a proposed framework for successor arrangements to the current System Agreement. An initial draft of the changesuccessor arrangements, referred to as the Commitment, Operations, and Dispatch Agreement or “CODA,” was provided to state regulators on September 16, 2010. The draft CODA was based on three overarching principles: voluntary coordinated resource planning; centralized commitment, operations, and dispatch (so that the resources of all Utility operating companies are operated to serve the combined loads of those companies); and coordinated transmission operations. In contrast to the current System Agreement, which requires joint generation resource plan ning, the draft CODA is intended to establish a resource planning regime that reflects the resource needs of each Utility operating company’s jurisdictional customers so that each Utility operating company would realize the benefits and costs of its own generation planning decisions.
Prior to that time, in net revenue comparing 2009early April 2010, Entergy Corporation and the Utility operating companies determined in connection with their decision-making process that it is appropriate to 2008.agree and commit that no Utility operating company will enter voluntarily into successor arrangements with the other Utility operating companies if its retail regulator finds successor arrangements are not in the public interest. Hugh McDonald, Entergy Arkansas president, notified the APSC of this decision, and explained the decision and commitment, in a letter filed with the APSC on April 26, 2010.
LPSC and City Council Action Related to the Entergy Arkansas and Entergy Mississippi Notices of Termination
In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the potential for a new agreement. Likewise, the New Orleans City Council opened a docket to gather information on progress towards a successor agreement. The LPSC subsequently passed a resolution stating that it cannot evaluate successor arrangements without having certainty about System Agreement exit obligations.
Independent Coordinator of Transmission
In 2000, the FERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of independent RTOs (regional transmission organizations). Delays in implementing the FERC RTO order occurred due to a variety of reasons, including the fact that utility companies, other stakeholders, and federal and state regulators have had to work to resolve various issues related to the establishment of such RTOs.
In November 2006, after nearly a decade of effort, including filings, orders, technical conferences, and proceedings at the FERC, the Utility operating companies installed the Southwest Power Pool (SPP) as their Independent Coordinator of Transmission (ICT). The installation does not transfer control of Entergy’s transmission system to the ICT, but rather vests with the ICT responsibility for:
· | | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $2,334 |
Volume variance | | (53) |
Palisades purchased power amortization | | (23) |
Realized price changes | | 67 |
Other | | (2) |
2009 net revenue | | $2,323 granting or denying transmission service on the Utility operating companies’ transmission system. |
· | administering the Utility operating companies’ OASIS node for purposes of processing and evaluating transmission service requests and ensuring compliance with the Utility operating companies’ obligation to post transmission-related information. |
As shown in the table above, net revenue for Non-Utility Nuclear decreased slightly by $11 million, or 0.5%, in 2009 compared to 2008. Higher pricing in its contracts to sell power was partially offset by lower volume resulting from more refueling outage days in 2009 compared to 2008. Included in net revenue is $53 million and $76 million of amortization of the Palisades purchased power agreement in 2009 and 2008, respectively, which is non-cash revenue and is discussed in Note 15 to the financial statements. Following are key performance measures for 2009 and 2008:
| | 2009 | | 2008 |
| | | | |
Net MW in operation at December 31 | | 4,998 | | 4,998 |
Average realized price per MWh | | $61.07 | | $59.51 |
GWh billed | | 40,981 | | 41,710 |
Capacity factor | | 93% | | 95% |
Refueling Outage Days: | | | | |
FitzPatrick | | - | | 26 |
Indian Point 2 | | - | | 26 |
Indian Point 3 | | 36 | | - |
Palisades | | 41 | | - |
Pilgrim | | 31 | | - |
Vermont Yankee | | - | | 22 |
Realized Price per MWh
When Non-Utility Nuclear acquired its six nuclear power plants it also entered into purchased power agreements with each of the sellers. For four of the plants, the 688 MW Pilgrim, 838 MW FitzPatrick, 1,028 MW Indian Point 2, and 1,041 MW Indian Point 3 plants, the original purchased power agreements with the sellers expired in 2004. The purchased power agreement with the seller of the 605 MW Vermont Yankee plant extends into 2012, and the purchased power agreement with the seller of the 798 MW Palisades plant extends into 2022. Market prices in the New York and New England power markets, where the four plants with original purchased power agreements that expired in 2004 are located, increased since the purchase of these plants, and the contracts that Non-Utility Nuclear entered into after the original contracts expired, as well as realized day ahead and spot market sales, have generally been at higher prices than the original contracts. Non-Utility Nuclear's annual average realized price per MWh increased from $39.40 for 2003 to $61.07 for 2009. Power prices increased in the period from 2003 through 2008 primarily because of increases in the price of natural gas. Natural gas prices increased in the period from 2003 through 2008 primarily
· | developing a base plan for the Utility operating companies’ transmission system that will result in the ICT making the determination on whether costs of transmission upgrades should be rolled into the Utility operating companies’ transmission rates or directly assigned to the customer requesting or causing an upgrade to be constructed. This should result in a transmission pricing structure that ensures that the Utility operating companies’ retail native load customers are required to pay for only those upgrades necessary to reliably serve their needs. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
because of rising production costs and limited imports of liquefied natural gas, both caused by global demand and increases in the price of crude oil. In addition, increases in the price of power during this period were caused secondarily by rising heat rates, which in turn were caused primarily by load growth outpacing new unit additions. The majority of the existing long-term contracts for power from these four plants expire by the end of 2012. The recent economic downturn and negative trends in the energy commodity markets have resulted in lower natural gas prices and therefore current prevailing market prices for electricity in the New York and New England power regions are generally below the prices in Non-Utility Nuclear's existing contracts in those regions. Therefore, it is uncertain whether Non-Utility Nuclear will continue to experience increases in its annual realized price per MWh or what contract prices for power Non-Utility Nuclear will be able to obtain as its existing long-term contracts expire. As shown in the contracted sale of energy table in "Market and Credit Risk Sensitive Instruments," Non-Utility Nuclear has sold forward 88% of its planned energy output in 2010 for an average contracted energy price of $57 per MWh.
Other Income Statement Items
Utility
Other operation and maintenance expenses decreased from $1,867 million for 2008 to $1,837 million for 2009. The variance includes the following:
· | a decrease due toserving as the write-off inreliability coordinator for the fourth quarter 2008 of $52 million of costs previously accumulated in Entergy Arkansas's storm reserve and $16 million of removal costs associated with the termination of a lease, both in connection with the December 2008 Arkansas Court of Appeals decision in Entergy Arkansas's base rate case. The base rate case is discussed in more detail in Note 2 to the financial statements;transmission system. |
· | a decrease due tooverseeing the capitalizationoperation of Ouachita plant service charges of $12.5 million previously expensed;the weekly procurement process (WPP). |
· | a decreaseevaluating interconnection-related investments already made on the Entergy System for purposes of $22 million in loss reserves in 2009, including a decrease in storm damage reserves as a resultdetermining the future allocation of the completion of the Act 55 storm cost financing at Entergy Gulf States Louisiana and Entergy Louisiana; |
· | a decrease of $16 million in payroll-related and benefits costs; |
· | prior year storm damage charges as a result of several storms hitting Entergy Arkansas' service territory in 2008, including Hurricane Gustav and Hurricane Ike in the third quarter 2008. Entergy Arkansas discontinued regulatory storm reserve accounting beginning July 2007 as a result of the APSC order issued in Entergy Arkansas' rate case. As a result, non-capital storm expenses of $41 million were charged to other operation and maintenance expenses. In December 2008, $19.4 millionuncredited portion of these storm expenses were deferred per an APSC order and were recovered through revenues in 2009; |
· | an increase of $35 million in fossil expenses primarily dueinvestments, pursuant to higher plant maintenance costs and plant outages; |
· | an increase of $22 million in nuclear expenses primarily due to increased nuclear labor and contract costs; |
· | an increase of $14 million due toa detailed methodology. The ICT agreement also clarifies the reinstatement of storm reserve accounting at Entergy Arkansas effective January 2009; |
· | an increase of $14 million due to the Hurricane Ike and Hurricane Gustav storm cost recovery settlement agreement, as discussed below under "Liquidity and Capital Resources - Sources of Capital - Hurricane Gustav and Hurricane Ike";
|
· | an increase of $8 million in customer service costs primarily asrights that customers receive when they fund a result of write-offs of uncollectible customer accounts; and |
· | a reimbursement of $7 million of costs in 2008 in connection with a litigation settlement.supplemental upgrade. |
DepreciationIn October 2008 the FERC issued an order accepting a tariff amendment establishing that the WPP shall take effect at a date to be determined, after completion of successful simulation trials and amortization expenses increased primarily duethe ICT’s endorsement of the WPP’s implementation. On January 16, 2009, the Utility operating companies filed a compliance filing with the FERC that included the ICT’s endorsement of the WPP implementation, subject to an increasethe FERC’s acceptance of certain additional tariff amendments and the completion of simulation testing and certain other items. The Utility operating companies filed the tariff amendments supported by the ICT on the same day. The amendments proposed to further amend the WPP to (a) limit supplier offers in plant in service.the WPP to on-peak pe riods and (b) eliminate the granting of certain transmission service through the WPP.
Other income increased primarily due to:On March 17, 2009, the FERC issued an order conditionally approving the proposed modification to the WPP to allow the process to be implemented the week of March 23, 2009. In its order approving the requested modifications, the FERC imposed additional conditions related to the ICT arrangement and indicated it was going to evaluate the success of the ICT arrangement, including the cost and benefits of implementing the WPP and whether the WPP goes far enough to address the transmission access issues that the ICT and WPP were intended to address. The FERC, in conjunction with the APSC, the LPSC, the MPSC, the PUCT, and the City Council, hosted a conference on June 24, 2009, to discuss the ICT arrangement and transmission access on the Entergy transmission system. In compliance with the FERC’s March 2009 order, in November 2009 the Utility operating companies filed with the FERC a process for evaluating the modification or replacement of the current ICT and WPP arrangements.
· | an increase in distributions of $25 million earned by Entergy Louisiana and $9 million earned by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company. The distributions on preferred membership interests are eliminated in consolidation and have no effect on Entergy's net income because the investment is in another Entergy subsidiary. See Note 2 to the financial statements for a discussion of these investments in preferred membership interests; |
During the conference, several issues were raised by regulators and market participants, including the adequacy of the Utility operating companies’ capital investment in the transmission system, the Utility operating companies’ compliance with the existing North American Electric Reliability Corporation (NERC) reliability planning standards, the availability of transmission service across the system, and whether the Utility operating companies could have purchased lower cost power from merchant generators located on the transmission system rather than running their older generating facilities. On July 20, 2009, the Utility operating companies filed comments with the FERC responding to the issues raised during the conference. The comments explain that: 1) the Utility operating companies believe that the ICT arrangement has fulfilled its objectives; 2) the Utility operating companies’ transmission planning practices comply with laws and regulations regarding the planning and operation of the transmission system; and 3) these planning practices have resulted in a system that meets applicable reliability standards and is sufficiently robust to allow the Utility operating companies both to substantially increase the amount of transmission service available to third parties and to make significant amounts of economic purchases from the wholesale market for the benefit of the Utility operating companies’ retail customers. The Utility operating companies also explain that, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies’ transmission system that limits the ability of the Utility operating companies as well as other parties to fully utilize the generating resources that have been granted transmission service. Additionally, the Utility operating companies commit in their response to exploring and working on potential reforms or alternatives for the ICT arrangement that could take effect following the initial term. The Utility operating companies’ comments also recognize that NERC is in the process of amending certain of its transmission reliability planning standards and that the amended standards, if approved by the FERC, will result in more stringent transmission planning criteria being applicable in the future. The FERC may also make other changes to transmission reliability standards. These changes to the reliability standards would result in increased capital expenditures by the Utility operating companies.
The Entergy Regional State Committee (E-RSC), which is comprised of representatives from all of the Utility operating companies' retail regulators, has been formed to consider several of these issues related to Entergy's transmission system. Among other things, the E-RSC in concert with the FERC plan to conduct a cost/benefit analysis comparing the ICT arrangement and a proposal under which Entergy would join the Southwest Power Pool RTO. The scope of the study was expanded in July 2010 to consider Entergy joining the Midwest ISO RTO as another alternative.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | carrying charges of $35 million on Hurricane Ike storm restoration costs as authorized by Texas legislation in the second quarter 2009; |
· | an increase of $15 million in allowance for equity funds used during construction due to more construction work in progress primarily as a result of Hurricane Gustav and Hurricane Ike; and |
· | a gain of $16 million recorded on the sale of undeveloped real estate by Entergy Louisiana Properties, LLC. |
Interest charges increased primarily due to an increase in long-term debt outstanding resulting from debt issuances by certain of the Utility operating companies in the second half of 2008 and in 2009.Contents
Non-Utility Nuclear
Other operation and maintenance expenses increased from $773 million in 2008 to $849 million in 2009 primarily due to $46 million in outside service costs and incremental labor costs related to the planned spin-off of the Non-Utility Nuclear business. Also contributing to the increase were higher nuclear labor and regulatory costs.
Other income increased primarily due to increases in interest income and realized earnings from the decommissioning trust funds and interest income from loans to Entergy subsidiaries. These increases were partially offset by $86 million in charges in 2009 compared to $50 million in charges in 2008 resulting from the recognition of impairments of certain equity securities held in Non-Utility Nuclear's decommissioning trust funds that are not considered temporary.
Parent & Other
Other operation and maintenance expenses decreased for the parent company, Entergy Corporation, primarily due to a decrease in outside services costs of $38 million related to the planned spin-off of the Non-Utility Nuclear business.
Other income decreased primarily due to:
· | an increase in the elimination for consolidation purposes of interest income from Entergy subsidiaries; and |
· | increases in the elimination for consolidation purposes of distributions earned of $25 million by Entergy Louisiana and $9 million by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company, as discussed above. |
Interest charges decreased primarily due to lower interest rates on borrowings under Entergy Corporation's revolving credit facility.
Income Taxes
The effective income tax rate for 2009 was 33.6%. The reduction in the effective income tax rate versus the federal statutory rate of 35% in 2009 is primarily due to:
· | a tax benefit of approximately $28 million recognized on a capital loss resulting from the sale of preferred stock of Entergy Asset Management, Inc., a non-nuclear wholesale subsidiary, to a third party; |
· | the recognition of state loss carryovers in the amount of $24.3 million that had been subject to a valuation allowance; |
· | the recognition of a federal capital loss carryover of $16.2 million that had been subject to a valuation allowance; |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | settlements and agreements with taxing authorities resulting in a release $15.2 million of certain items from the provision for uncertain tax positions; |
· | an adjustment to state income taxes of $13.8 million for Non-Utility Nuclear to reflect the effect of a change in the methodology of computing Massachusetts state income taxes as required by that state's taxing authority; and |
· | an additional deferred tax benefit of approximately $8 million associated with writedowns on nuclear decommissioning qualified trust securities. |
These reductions were partially offset by increases related to book and tax differences for utility plant items and state income taxes atIn September 2010, as modified in October 2010, the Utility operating companies.companies filed a request for a two-year interim extension, with certain modifications, of the ICT arrangement, which was scheduled to expire on November 17, 2010. The filing stated that, if approved by the E-RSC during its October 20-21, 2010 meeting, the Utility operating companies will make a subsequent filing with the FERC to provide the E-RSC with the authority to, upon unanimous approval of all E-RSC members, (1) propose modifications to cost allocation methodology for transmission projects and (2) add transmission projects to the construction plan. On October 13, 2010, the LPSC issued an order approving proposals filed by Entergy Louisiana and Entergy Gulf States Louisiana to modify the cur rent ICT arrangement and to give the E-RSC authority in the two areas as described above. On October 20, 2010, the E-RSC unanimously voted in favor of the proposal granting the E-RSC authority in the two areas described above. The Utility operating companies have filed the necessary revisions to the Entergy OATT to implement the E-RSC's new authority. In November 2010 the FERC approved extension of the ICT arrangement for two years. In December 2010 the FERC approved the proposal to provide the E-RSC with authority in the two areas described above.
On September 30, 2010, the consultant presented its cost/benefit analysis of the Entergy and Cleco regions joining the SPP RTO. The effective income tax rate for 2008 was 32.7%. The reductioncost/benefit analysis indicates that the Entergy region, including entities beyond the Utility operating companies, would realize a net cost of $438 million to a net benefit of $387 million, primarily depending upon transmission cost allocation issues. Addendum studies, including studies related to Entergy Arkansas and the Utility operating companies joining the Midwest ISO, are due to be completed by the end of the first quarter 2011. Pursuant to a schedule established by an LPSC ALJ, Entergy Gulf States Louisiana and Entergy Louisiana expect to make a filing in May 2011 that sets forth the results of the analysis of the ava ilable options and preliminary recommendations regarding which option is in the effective income tax rate versus the federal statutory rate of 35% in 2008 is primarily due to:public interest. The other Utility operating companies expect to make similar filings at that time.
· | a capital loss recognized for income tax purposes on the liquidation of Entergy Power Generation, LLC in the third quarter 2008, which resulted in an income tax benefit of approximately $79.5 million. Entergy Power Generation, LLC was a holding company in Entergy's non-nuclear wholesale assets business; |
· | recognition of tax benefits of $44.3 million associated with the loss on sale of stock of Entergy Asset Management, Inc., a non-nuclear wholesale subsidiary, as a result of a settlement with the IRS; and |
· | an adjustment to state income taxes for Non-Utility Nuclear to reflect the effect of a change in the methodology of computing Massachusetts state income taxes resulting from legislation passed in the third quarter 2008, which resulted in an income tax benefit of approximately $18.8 million. |
These factors were partially offset by:
· | income taxes recorded by Entergy Power Generation, LLC, prior to its liquidation, resulting from the redemption payments it received in connection with its investment in Entergy Nuclear Power Marketing, LLC during the third quarter 2008, which resulted in an income tax expense of approximately $16.1 million; and |
· | book and tax differences for utility plant items and state income taxes at the Utility operating companies, including the flow-through treatment of the Entergy Arkansas write-offs discussed above. |
Notice to SERC Reliability Corporation Regarding Reliability Standards
See Note 3Entergy has notified the SERC Reliability Corporation (SERC) of potential violations of certain North American Electric Reliability Corporation (NERC) reliability standards, including certain Critical Infrastructure Protection, Facility Connection, and System Protection Coordination standards. Entergy is working with the SERC to the financial statementsprovide information concerning these potential violations. The Energy Policy Act of 2005 provides authority to impose civil penalties for a reconciliationviolations of the federal statutory rateFederal Power Act and FERC regulations.
U.S. Department of 35.0% toJustice Investigation
In September 2010, Entergy was notified that the effective income tax rates,U.S. Department of Justice had commenced a civil investigation of competitive issues concerning certain generation procurement, dispatch, and for additional discussion regarding income taxes.transmission system practices and policies of the Utility operating companies. The investigation is ongoing.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
2008 Compared to 2007
Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other business segments, and Entergy comparing 2008 to 2007 showing how much the line item increased or (decreased) in comparison to the prior period:
| | Utility | | Non-Utility Nuclear | | Parent & Other | | Entergy |
| | (In Thousands) |
| | | | | | | | |
2007 Consolidated Net Income (Loss) | | $704,393 | | $539,200 | | ($83,639) | | $1,159,954 |
| | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | | | | | | | |
Other operation and maintenance expenses | | 10,877 | | 13,289 | | 68,942 | | 93,108 |
Taxes other than income taxes | | 1,544 | | 9,137 | | (2,787) | | 7,894 |
Depreciation and amortization | | 38,898 | | 27,351 | | 899 | | 67,148 |
Other income | | (2,871) | | (40,896) | | (42,001) | | (85,768) |
Interest charges | | 2,834 | | 19,188 | | (50,153) | | (28,131) |
Other | | 23,735 | | 38,558 | | 6 | | 62,299 |
Income taxes | | (10,744) | | 88,700 | | 10,625 | | 88,581 |
| | | | | | | | |
2008 Consolidated Net Income (Loss) | | $605,144 | | $797,280 | | ($161,889) | | $1,240,535 |
Refer to "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES" which accompanies Entergy Corporation's financial statements in this report for further information with respect to operating statistics.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing 2008 to 2007.Contents
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $4,618 |
Purchased power capacity | | (25) |
Volume/weather | | (14) |
Retail electric price | | 9 |
Other | | 1 |
2008 net revenue | | $4,589 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The volume/weather varianceMarket risk is primarily duethe risk of changes in the value of commodity and financial instruments, or in future net income or cash flows, in response to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the effect of less favorable weather compared to the same period in 2007 and decreased electricity usage primarily during the unbilled sales period. Hurricane Gustav and Hurricane Ike, which hit the Utility's service territories in September 2008, contributed an estimated $46 million to the decrease in electricity usage. Industrial sales were also depressed by the continuing effects of the hurricanes and, especially in the latter part of the year, because of the overall decline of the economy, leading to lower usage in the latter part of the year affecting both the large customer industrial segment as well as small and mid-sized industrial customers. The decreases in electricity usage were partially offset by an increase in residential and commercial customer electricity usage that occurred during the periods of the year not affected by the hurricanes.
The retail electric price variance is primarily due to:following significant market risks:
· | an increase in the Attala power plant costs recovered through the power management rider by Entergy Mississippi. The net income effect of this recovery is limited to a portion representing an allowed return on equitycommodity price risk associated with the remainder offsetsale of electricity by Attala power plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes;the Entergy Wholesale Commodities business. |
· | a storm damage rider that became effectiveThe interest rate and equity price risk associated with Entergy’s investments in October 2007 at Entergy Mississippi;pension and other postretirement benefit trust funds. See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trust funds. |
· | an Energy Efficiency rider that became effectiveThe interest rate and equity price risk associated with Entergy’s investments in November 2007 at Entergy Arkansas. |
The establishment of the storm damage rider and the Energy Efficiency rider results in an increase in rider revenue and a corresponding increase in other operation and maintenance expense with no impact on net income. The retail electric price variance was partially offset by:
· | the absence of interim storm recoveries through the formula rate plans at Entergy Louisiana and Entergy Gulf States Louisiana which ceased upon the Act 55 financing of storm costsnuclear plant decommissioning trust funds, particularly in the third quarter 2008; andEntergy Wholesale Commodities business. See Note 17 to the financial statements for details regarding Entergy’s decommissioning trust funds. |
· | a credit passed on to customersThe interest rate risk associated with changes in interest rates as a result of Entergy’s issuances of debt. Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization. See Notes 4 and 5 to the Act 55 storm cost financings.financial statements for the details of Entergy’s debt outstanding. |
Refer to "Liquidity and Capital Resources - Hurricane Katrina and Hurricane Rita" below and Note 2The Utility business has limited exposure to the financial statements for a discussioneffects of market risk because it operates primarily under cost-based rate regulation. To the interim recovery of storm costs andextent approved by their retail rate regulators, the Act 55 storm cost financings.Utility operating companies hedge exposure to natural gas price volatility.
Non-Utility NuclearEntergy’s commodity and financial instruments are exposed to credit risk. Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy is also exposed to a potential demand on liquidity due to credit support requirements within its supply or sales agreements.
Following is an analysis of the change in net revenue comparing 2008 to 2007.Commodity Price Risk
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $1,839 |
Realized price changes | | 309 |
Palisades acquisition | | 98 |
Volume variance (other than Palisades) | | 73 |
Fuel expenses (other than Palisades) | | (19) |
Other | | 34 |
2008 net revenue | | $2,334 |
Power Generation
As showna wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the table above, net revenue for Non-Utility Nuclear increasedday ahead or spot markets. In addition to selling the energy produced by $495 million, or 27%,its plants, Entergy Wholesale Commodities also sells unforced capacity from its nuclear plants to load-serving entities, which allows those companies to meet specified reserve and related requirements placed on them by the ISOs in 2008 compared to 2007 primarily due to higher pricing in itstheir respective areas. Entergy Wholesale Commodities’ forward fixed price power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity a nd energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy to its counterparties, make capacity available to them, or both. The following is a summary as of December 31, 2010 of the amount of Entergy Wholesale Commodities’ nuclear power additional production available from the acquisition of Palisades in April 2007, and fewer outage days. In addition to the refueling outages shown in the table below, 2007plants’ planned energy output that is sold forward under physical or financial contracts:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | �� | | | | | | | | | |
Percent of planned generation sold forward: | | | | | | | | | | |
| Unit-contingent | | 79% | | 59% | | 34% | | 14% | | 12% |
| Unit-contingent with guarantee of availability (1) | | 17% | | 14% | | 6% | | 3% | | 3% |
| Firm LD | | 3% | | 24% | | 0% | | 8% | | 0% |
| Offsetting positions | | (3)% | | (10)% | | 0% | | 0% | | 0% |
| Total energy sold forward | | 96% | | 87% | | 40% | | 25% | | 15% |
Planned generation (TWh) (4) | | 41 | | 41 | | 40 | | 41 | | 41 |
Average revenue under contract per MWh (2) (3) | | $53 | | $49 | | $47 | | $51 | | $51 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
| | 2008 | | 2007 |
| | | | |
Net MW in operation at December 31 | | 4,998 | | 4,998 |
Average realized price per MWh | | $59.51 | | $52.69 |
GWh billed | | 41,710 | | 37,570 |
Capacity factor | | 95% | | 89% |
Refueling Outage Days: | | | | |
FitzPatrick | | 26 | | - |
Indian Point 2 | | 26 | | - |
Indian Point 3 | | - | | 24 |
Palisades | | - | | 42 |
Pilgrim | | - | | 33 |
Vermont Yankee | | 22 | | 24 |
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $1,856 million for 2007 to $1,867 million for 2008. The variance includes:
· | the write-off in the fourth quarter 2008 of $52 million of costs previously accumulated in Entergy Arkansas's storm reserve and $16 million of removal costs associated with the termination of a lease, both in connection with the December 2008 Arkansas Court of Appeals decision in Entergy Arkansas's base rate case. The base rate case is discussed in more detail in Note 2 to the financial statements; |
· | a decrease of $39 million in payroll-related and benefits costs; |
· | a decrease of $21 million related to expenses recorded in 2007 in connection with the nuclear operations fleet alignment, as discussed above; |
· | a decrease of approximately $23 million as a result of the deferral or capitalization of storm restoration costs for Hurricane Gustav and Hurricane Ike, which hit the Utility's service territories in September 2008; |
· | an increase of $18 million in storm damage charges as a result of several storms hitting Entergy Arkansas' service territory in 2008, including Hurricane Gustav and Hurricane Ike in the third quarter 2008. Entergy Arkansas discontinued regulatory storm reserve accounting beginning July 2007 as a result of the APSC order issued in Entergy Arkansas' base rate case. As a result, non-capital storm expenses of $41 million were charged in 2008 to other operation and maintenance expenses. In December 2008, $19 million of these storm expenses were deferred per an APSC order and will be recovered through revenues in 2009. See Note 2 to the financial statements for discussion of the APSC order; and |
· | an increase of $17 million in fossil plant expenses due to the Ouachita plant acquisition in 2008. |
Depreciation and amortization expenses increased primarily due to:Contents
· | a revision in the third quarter 2007 related to depreciation on storm cost-related assets. Recoveries of the costs of those assets are now through the Act 55 financing of storm costs, as approved by the LPSC in the third quarter 2007. See "Liquidity and Capital Resources - Hurricane Katrina and Hurricane Rita" below and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing; |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | a revision in the fourth quarter 2008 of estimated depreciable lives involving certain intangible assets in accordance with formula rate plan treatment; and |
· | an increase in plant in service. |
Other income decreased primarily due to the cessation of carrying charges on storm restoration costs as a result of the Louisiana Act 55 storm cost financing approved in 2007 and lower interest earned on the decommissioning trust funds. This decrease was substantially offset by dividends earned of $29.5 million by Entergy Louisiana and $10.3 million by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company. The dividends on preferred stock are eliminated in consolidation and have no effect on net income since the investment is in another Entergy subsidiary.
Non-Utility Nuclear
Other operation and maintenance expenses increased from $760 million in 2007 to $773 million in 2008. This increase was primarily due to deferring costs for amortization from three refueling outages in 2008 compared to four refueling outages in 2007 and to a $34 million increase associated with owning the Palisades plant, which was acquired in April 2007, for the entire period. The increase was partially offset by a decrease of $29 million related to expenses recorded in 2007 in connection with the nuclear operations fleet alignment, as discussed above.
Depreciation and amortization expenses increased from $99 million in 2007 to $126 million in 2008 as a result of the acquisition of Palisades in April 2007, which contributed $12 million to the increase, as well as other increases in plant in service.
Other income decreased primarily due to $50 million in charges to interest income in 2008 resulting from the recognition of impairments of certain equity securities held in Non-Utility Nuclear's decommissioning trust funds that are not considered temporary.
Other expenses increased due to increases of $23 million in nuclear refueling outage expenses and $15 million in decommissioning expenses that primarily resulted from the acquisition of Palisades in April 2007.
Parent & Other
Other operation and maintenance expenses increased for the parent company, Entergy Corporation, primarily due to outside services costs of $69 million related to the planned spin-off of the Non-Utility Nuclear business.
Other income decreased primarily due to the elimination for consolidation purposes of dividends earned of $29.5 million by Entergy Louisiana and $10.3 million by Entergy Gulf States Louisiana on investments in preferred membership interests of Entergy Holdings Company, as discussed above.
Interest charges decreased primarily due to lower interest rates on borrowings under Entergy Corporation's revolving credit facility.
Income Taxes
The effective income tax rate for 2008 was 32.7%. The reduction in the effective income tax rate versus the federal statutory rate of 35% in 2008 is primarily due to:
· | a capital loss recognized for income tax purposes on the liquidation of Entergy Power Generation, LLC in the third quarter 2008, which resulted in an income tax benefit of approximately $79.5 million. Entergy Power Generation, LLC was a holding company in Entergy's non-nuclear wholesale assets business; |
· | recognition of tax benefits of $44.3 million associated with the loss on sale of stock of Entergy Asset Management, Inc., a non-nuclear wholesale subsidiary, as a result of a settlement with the IRS; and |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | an adjustment to state income taxes for Non-Utility Nuclear to reflect the effect of a change in the methodology of computing Massachusetts state income taxes resulting from legislation passed in the third quarter 2008, which resulted in an income tax benefit of approximately $18.8 million. |
These factors were partially offset by:
· | income taxes recorded by Entergy Power Generation, LLC, prior to its liquidation, resulting from the redemption payments it received in connection with its investment in Entergy Nuclear Power Marketing, LLC during the third quarter 2008, which resulted in an income tax expense of approximately $16.1 million; and |
· | book and tax differences for utility plant items and state income taxes at the Utility operating companies, including the flow-through treatment of the Entergy Arkansas write-offs discussed above. |
The effective income tax rate for 2007 was 30.7%. The reduction in the effective income tax rate versus the federal statutory rate of 35% in 2007 is primarily due to:
· | a reduction in income tax expense due to a step-up in the tax basis on the Indian Point 2 non-qualified decommissioning trust fund resulting from restructuring of the trusts, which reduced deferred taxes on the trust fund and reduced current tax expense; |
· | the resolution of tax audit issues involving the 2002-2003 audit cycle; |
· | an adjustment to state income taxes for Non-Utility Nuclear to reflect the effect of a change in the methodology of computing New York state income taxes as required by that state's taxing authority; |
· | book and tax differences related to the allowance for equity funds used during construction; and |
· | the amortization of investment tax credits. |
These factors were partially offset by book and tax differences for utility plant items and state income taxes at the Utility operating companies.
See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rates, and for additional discussion regarding income taxes.
Liquidity and Capital Resources
This section discusses Entergy's capital structure, capital spending plans and other uses of capital, sources of capital, and the cash flow activity presented in the cash flow statement.
Capital Structure
Entergy's capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital percentage from 2008 to 2009 is primarily the result of an increase in shareholders' equity primarily due to an increase in retained earnings, partially offset by repurchases of common stock, along with a decrease in borrowings under Entergy Corporation's revolving credit facility. The increase in the debt to capital percentage from 2007 to 2008 is primarily the result of additional borrowings under Entergy Corporation's revolving credit facility.
| | 2009 | | 2008 | | 2007 |
| | | | | | |
Net debt to net capital at the end of the year | | 53.5% | | 55.6% | | 54.7% |
Effect of subtracting cash from debt | | 3.8% | | 4.1% | | 2.9% |
Debt to capital at the end of the year | | 57.3% | | 59.7% | | 57.6% |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.(1) | A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees. |
(2) | The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant, which is through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far. |
(3) | Average revenue under contract may fluctuate due to positive or negative basis differences, option premiums, costs to convert firm LD to unit-contingent, and other risk management costs. Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA. |
(4) | Assumes license renewal for plants whose current licenses expire within five years. License renewal applications are in process for four units, as follows (with current license expirations in parentheses): Vermont Yankee (March 2012), Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015). |
Long-term debt, includingEntergy estimates that a $10 per MWh change in the currently maturing portion, makesannual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on December 31, 2010 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $17 million in 2011. Entergy estimates that, based on December 31, 2009 market conditions, planned generation volume, and hedged position, a $10 per MWh change in the annual average energy price would have had a corresponding effect on pre-tax net income of $53 million in 2010.
Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, NYPA and the subsidiaries that own the FitzPatrick and Indian Point 3 plants amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, the Entergy subsidiaries agreed to make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Entergy subsidiaries will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up substantially allto an annual cap of Entergy's total debt outstanding. Following$48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million.& #160; The annual payment for each year’s output is due by January 15 of the following year. Entergy will record the liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. In 2010, 2009, and 2008, Entergy Wholesale Commodities recorded a $72 million liability for generation during each of those years. An amount equal to the liability was recorded each year to the plant asset account as contingent purchase price consideration for the plants. This amount will be depreciated over the expected remaining useful life of the plants.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are Entergy'salso acceptable forms of collateral. At December 31, 2010, based on power prices at that time, Entergy had credit exposure of $14 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commo dities segment) transactions, $20 million of guarantees that support letters of credit, and $5 million of posted cash collateral to the ISOs. As of December 31, 2010, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $123 million for a $1 per MMBtu increase in gas prices in both the short-and long-term debt principal maturities and estimated interest paymentsmarkets. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2009. To estimate future interest payments for variable rate debt,2010, Entergy used the rate aswould have been required to provide approximately $78 million of December 31, 2009. The figures below include payments on the Entergy Louisiana and System Energy sale-leaseback transactions, which are included in long-term debt on the balance sheet.
Long-term debt maturities and estimated interest payments | | 2010 | | 2011 | | 2012 | | 2013-2014 | | after 2014 |
| | (In Millions) |
| | | | | | | | | | |
Utility | | $863 | | $796 | | $596 | | $1,590 | | $9,865 |
Non-Utility Nuclear | | 36 | | 33 | | 31 | | 41 | | 65 |
Parent Company and Other Business Segments | | 328 | | 122 | | 2,587 | | - | | - |
Total | | $1,227 | | $951 | | $3,214 | | $1,631 | | $9,930 |
Note 5 to the financial statements provides more detail concerning long-term debt.
Entergy Corporation has a revolving credit facility that expires in August 2012 and has a borrowing capacity of $3.5 billion. Entergy Corporation also has the ability to issueadditional cash or letters of credit against the total borrowing capacityunder some of the credit facility. The facility fee is currently 0.09% of the commitment amount. Facility fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the year ended December 31, 2009 was 1.377% on the drawn portion of the facility.
As of December 31, 2009, amounts outstanding and capacity available under the $3.5 billion credit facility are:
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) |
| | | | | | |
$3,500 | | $2,566 | | $28 | | $906 |
Under covenants contained in Entergy Corporation's credit facility and in the indenture governing Entergy Corporation's senior notes, Entergy is required to maintain a consolidated debt ratio of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation's credit facility and in the indenture governing the Entergy Corporation senior notes is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit facility's maturity date may occur and there may be an acceleration of amounts due under Entergy Corporation's senior notes.agreements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Capital lease obligations, includingAs of December 31, 2010, the counterparties or their guarantors for 99.7% of the planned energy output under contract for Entergy Wholesale Commodities nuclear fuel leases, are a minimal part of Entergy's overall capital structure,plants through 2015 have public investment grade credit ratings and are discussed in Note 10 to the financial statements. Following are Entergy's payment obligations under those leases:0.3% is with load-serving entities without public credit ratings.
| 2010 | | 2011 | | 2012 | | 2013-2014 | | after 2014 | |
| (In Millions) |
Capital lease payments, including nuclear fuel leases | $212 | | $319 | | $3 | | $4 | | $28 | |
Notes payable includes borrowings outstandingIn addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on credit facilities with original maturities of less than one year. Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas each had credit facilities availablethem by the ISO in their area. Following is a summary as of December 31, 20092010 of the amount of the Entergy Wholesale Commodities nuclear plants’ installed capacity that is sold forward, and the blended amount of the Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is sold forward:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | | | | | | | | | | |
Percent of capacity sold forward: | | | | | | | | | | |
| Bundled capacity and energy contracts | | 25% | | 18% | | 16% | | 16% | | 16% |
| Capacity contracts | | 37% | | 29% | | 26% | | 10% | | 0% |
| Total capacity sold forward | | 62% | | 47% | | 42% | | 26% | | 16% |
Planned net MW in operation | | 4,998 | | 4,998 | | 4,998 | | 4,998 | | 4,998 |
Average revenue under contract per kW per month | | $2.6 | | $3.0 | | $3.1 | | $3.5 | | $- |
(applies to capacity contracts only) | | | | | | | | | | |
| | | | | | | | | | |
Blended Capacity and Energy Recap (based on revenues) | | | | | | | | | | |
% of planned generation and capacity sold forward | | 96% | | 87% | | 40% | | 26% | | 15% |
Average revenue under contract per MWh | | $54 | | $51 | | $50 | | $53 | | $52 |
The preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as follows:critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy’s financial position or results of operations.
Nuclear Decommissioning Costs
Entergy subsidiaries own nuclear generation facilities in both its Utility and Entergy Wholesale Commodities business units. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service, and money is collected and deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates:
Company
| · | Expiration Date
| | Amount of
Facility
| | Interest Rate (a)
| | Amount Drawn as
Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by annual factors ranging from approximately 3% to 3.5%. A 50 basis point change in this assumption could change the ultimate cost of Dec. 31, 2009decommissioning a facility by as much as an approximate average of 20% to 25%. To the extent that a high probability of license renewal is assumed, a change in the estimated inflation or cost escalation rate has a larger effect on the undiscounted cash flows because the rate of inflation is factored into the calculation for a longer period of time. |
| | | | | | | | |
Entergy Arkansas | | April 2010 | | $88 million (b) | | 5.00% | | - |
Entergy Gulf States Louisiana | | August 2012 | | $100 million (c) | | 0.71% | | - |
Entergy Louisiana | | August 2012 | | $200 million (d) | | 0.64% | | - |
Entergy Mississippi | | May 2010 | | $35 million (e) | | 1.98% | | - |
Entergy Mississippi | | May 2010 | | $25 million (e) | | 1.98% | | - |
Entergy Mississippi | | May 2010 | | $10 million (e) | | 1.91% | | - |
Entergy Texas | | August 2012 | | $100 million (f) | | 0.71% | | - |
(a)· | The interest rate isTiming - In projecting decommissioning costs, two assumptions must be made to estimate the weighted average interest ratetiming of plant decommissioning. First, the date of the plant’s retirement must be estimated. A high probability that the plant’s license will be renewed and operate for some time beyond the original license term has currently been assumed for purposes of calculating the decommissioning liability for a number of Entergy’s nuclear units. Second, an assumption must be made whether decommissioning will begin immediately upon plant retirement, or whether the plant will be held in “safestore” status for later decommissioning, as permitted by applicable regulations. While the effect of December 31, 2009 appliedthese assumptions cannot be determined with pr ecision, a change of assumption of either renewal or that would be applieduse of a “safestore” status can possibly change the present value of these obligations. Future revisions to appropriately reflect changes needed to the outstanding borrowings under the facility. |
(b) | The credit facility requires Entergy Arkansas to maintain a debt ratioestimate of 65% or less of its total capitalization and contains an interest rate floor of 5%. Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable. |
(c) | The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2009, no letters of credit were outstanding. The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuantdecommissioning costs will affect net income, only to the termsextent that the estimate of any reduction in the credit agreement,liability exceeds the amount of debt assumed by Entergy Texas ($168 million as of December 31, 2009 and $770 million as of December 31, 2008) is excluded from debt and capitalization in calculating the debt ratio. |
(d) | The credit facility allows Entergy Louisiana to issue letters of credit againstundepreciated asset retirement cost at the borrowing capacitydate of the facility. Asrevision, for unregulated portions of December 31, 2009, no letters of credit were outstanding. The credit agreement requires Entergy LouisianaEntergy’s business. Any increases in the liability recorded due to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(e) | Borrowings undersuch changes are capitalized and depreciated over the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable. Entergy Mississippi is required to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(f) | The credit facility allows Entergy Texas to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2009, no letters of credit were outstanding. The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to the terms of the credit agreement, securitization bonds are excluded from debt and capitalization in calculating the debt ratio.asset’s remaining economic life. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Operating Lease Obligations and Guarantees of Unconsolidated Obligations· | Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. However the DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy is continuing to pursue damages claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and mainta ining these facilities can have a significant effect (as much as an average of 20% to 30% of estimated decommissioning costs). Entergy’s decommissioning studies may include cost estimates for spent fuel storage. However, these estimates could change in the future based on the timing of the opening of an appropriate facility designated by the federal government to receive spent nuclear fuel. |
· | Technology and Regulation – Over the past several years, more practical experience with the actual decommissioning of facilities has been gained and that experience has been incorporated in to Entergy’s current decommissioning cost estimates. However, given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur and affect current cost estimates. If regulations regarding nuclear decommissioning were to change, this could have a potentially significant effect on cost estimates. The effect of these potential changes is not presently determinable. |
· | Interest Rates - The estimated decommissioning costs that form the basis for the decommissioning liability recorded on the balance sheet are discounted to present values using a credit-adjusted risk-free rate. When the decommissioning cost estimate is significantly changed requiring a revision to the decommissioning liability and the change results in an increase in cash flows, that increase is discounted using a current credit-adjusted risk-free rate. Under accounting rules, if the revision in estimate results in a decrease in estimated cash flows, that decrease is discounted using the previous credit-adjusted risk-free rate. Therefore, to the extent that one of the factors noted above changes resulting in a significant increase in estimated cash flows, current int erest rates will affect the calculation of the present value of the additional decommissioning liability. |
In the first quarter 2009, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in an $8.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the second quarter 2009, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $4.2 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the fourth quarter 2009, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $78.7 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement obligation asset that will be depreciated over the remaining life of the unit.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Impairment of Long-lived Assets and Trust Fund Investments
Entergy has significant investments in long-lived assets in all of its segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment whenever there are indications that impairments may exist. This evaluation involves a minimal amountsignificant degree of operating lease obligationsestimation and guarantees in supportuncertainty. In the Utility business, portions of unconsolidated obligations. Entergy's guarantees in support of unconsolidated obligationsRiver Bend are not likelyincluded in rate base, which could reduce the revenue that would otherwise be recovered for the applicable portions of its generation. In the Entergy Wholesale Commodities business, Entergy’s investments in merchant nuclear generation assets are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses are not renewed. Entergy’s investments in merchant non-nuclear generation assets are subject to impairment if adverse market conditions arise.
In order to determine if Entergy should recognize an impairment of a long-lived asset that is to be held and used, accounting standards require that the sum of the expected undiscounted future cash flows from the asset be compared to the asset’s carrying value. The carrying value of the asset includes any capitalized asset retirement cost associated with the recording of an additional decommissioning liability, therefore changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded; if such cash flows are less than the carrying value, Entergy is required to record an impairment charge to write the asset down to its fair value.& #160; If an asset is held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value.
These estimates are based on a number of key assumptions, including:
· | Future power and fuel prices - Electricity and gas prices have been very volatile in recent years, and this volatility is expected to continue. This volatility necessarily increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows. |
· | Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, the market for such assets is volatile and the value of individual assets is impacted by factors unique to those assets. |
· | Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant impact on operations could cause a significant change in these assumptions. |
· | Timing - Entergy currently assumes, for a number of its nuclear units, that the plant’s license will be renewed. A change in that assumption could have a significant effect on the expected future cash flows and result in a significant effect on operations. |
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a material effecttwo-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
If Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 includes a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued operations of nuclear facilities. In preparing its 2010 financial condition or resultsstatements Entergy evaluated these factors and concluded that the carrying value of operations. Following are Entergy's payment obligationsVermont Yankee is not impaired as of December 31, 2009 on non-cancelable operating leases with a term over one year:2010. The net carrying value of the plan t, including nuclear fuel, is $424 million as of December 31, 2010.
| 2010 | | 2011 | | 2012 | | 2013-2014 | | after 2014 | |
| (In Millions) |
| | | | | | | | | | |
Operating lease payments | $95 | | $79 | | $66 | | $117 | | $173 | |
Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and presentation of other-than-temporary impairments related to investments in debt securities. The operating leasesassessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary-impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). For debt securities held as of January 1, 2009 for which an othe r-than-temporary impairment had previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other than temporary impairments relating to credit losses on debt securities in 2010 or 2009. The assessment of whether an investment in an equity security has suffered an other than temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of inve stments. As discussed in Note 101 to the financial statements.statements, unrealized losses that are not considered temporarily impaired are recorded in earnings for Entergy Wholesale Commodities. Entergy Wholesale Commodities recorded charges to other income of $1 million in 2010, $86 million in 2009, and $50 million in 2008 resulting from the recognition of impairments of certain securities held in its decommissioning trust funds that are not considered temporary. Additional impairments could be recorded in 2011 to the extent that then current market conditions change the evaluation of recoverability of unrealized losses.
Summary of Contractual Obligations of Consolidated EntitiesQualified Pension and Other Postretirement Benefits
Contractual Obligations | | 2010 | | 2011-2012 | | 2013-2014 | | after 2014 | | Total |
| | (In Millions) |
| | | | | | | | | | |
Long-term debt (1) | | $1,227 | | $4,165 | | $1,631 | | $9,930 | | $16,953 |
Capital lease payments (2) | | $212 | | $322 | | $4 | | $28 | | $566 |
Operating leases (2) | | $95 | | $145 | | $117 | | $173 | | $530 |
Purchase obligations (3) | | $1,649 | | $2,793 | | $1,689 | | $5,692 | | $11,823 |
Entergy sponsors qualified, defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility and E ntergy Wholesale Commodities segments.Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Assumptions
Key actuarial assumptions utilized in determining these costs include:
(1)· | Includes estimated interest payments. Long-term debt is discussedDiscount rates used in Note 5 to the financial statements.determining future benefit obligations; |
(2)· | Capital lease payments include nuclear fuel leases. Lease obligations are discussedProjected health care cost trend rates; |
· | Expected long-term rate of return on plan assets; and |
· | Rate of increase in Note 10 to the financial statements. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. Almost all of the total are fuel and purchased power obligations.future compensation levels. |
Entergy reviews these assumptions on an annual basis and adjusts them as necessary. The falling interest rate environment and worse-than-expected performance of the financial equity markets in 2008, partially offset by recoveries in 2009 and 2010, have impacted Entergy’s funding and reported costs for these benefits. In addition, these trends have caused Entergy to make a number of adjustments to its assumptions.
In selecting an assumed discount rate to calculate benefit obligations, Entergy reviews market yields on high-quality corporate debt and matches these rates with Entergy’s projected stream of benefit payments. Based on recent market trends, the discount rates used to calculate its qualified pension benefit obligation decreased from a range of 6.10% to 6.30% for its specific pension plans in 2009 to a range of 5.6% to 5.7% in 2010. The discount rate used to calculate its other postretirement benefit obligation also decreased from 6.10% in 2009 to 5.5% in 2010. Entergy’s assumed discount rates used to calculate the 2008 pension and other postretirement obligations were 6.75% and 6.7%, respectively.
Entergy reviews actual recent cost trends and projected future trends in establishing health care cost trend rates. Based on this review, Entergy’s health care cost trend rate assumption used in calculating the December 31, 2010 accumulated postretirement benefit obligation was an 8.5% increase in health care costs in 2011 gradually decreasing each successive year, until it reaches a 4.75% annual increase in health care costs in 2019 and beyond for pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees.
The assumed rate of increase in future compensation levels used to calculate benefit obligations was 4.23% in 2010 and 2009.
In determining its expected long-term rate of return on plan assets used in calculation of benefit plan costs, Entergy reviews past long-term performance, asset allocations, and long-term inflation assumptions. Entergy targets an asset allocation for its qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities. The target allocations for Entergy’s non-taxable postretirement benefit assets are 55% equity securities and 45% fixed-income securities and, for its taxable other postretirement benefit assets, 35% equity securities and 65% fixed-income securities. Entergy’s expected long-term rate of return on qualified pension assets and non-taxable other postretirement assets used to calculate qualified pension and other postretirement benefits costs was 8.5% and 7.75% , respectively for 2010 and 8.5% for both qualified and other postretirement benefit costs for 2009 and 2008. Entergy’s expected long-term rates of return on qualified pension assets and non-taxable other postretirement assets used to calculate 2011 qualified pension and other postretirement benefits costs were 8.5% and 7.75%, respectively. Entergy’s expected long-term rates of return on taxable other postretirement assets used to calculate other postretirement benefits costs were 5.5% in 2011 and 2010, 6% in 2009 and 5.5% in 2008.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Discount rate | | (0.25%) | | $13,682 | | $131,414 |
Rate of return on plan assets | | (0.25%) | | $7,634 | | - |
Rate of increase in compensation | | 0.25% | | $6,367 | | $30,374 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Health care cost trend | | 0.25% | | $6,500 | | $34,291 |
Discount rate | | (0.25%) | | $4,375 | | $40,557 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Accounting Mechanisms
Effective December 31, 2006, accounting standards required an employer to recognize in its balance sheet the funded status of its benefit plans. Refer to Note 11 to the contractual obligations,financial statements for a further discussion of Entergy’s funded status.
In accordance with pension accounting standards, Entergy expectsutilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees.
Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Costs and Funding
In 2010, Entergy’s total qualified pension cost was $147.1 million. Entergy anticipates 2011 qualified pension cost to make payments of approximately $61be $154 million. Pension funding was $454 million for 2010. Entergy’s contributions to the years 2010-2012 primarily relatedpension trust are currently estimated to Hurricane Katrina restoration work, includingbe approximately $55$368.8 million of continued gas rebuild work at Entergy New Orleans. Also, Entergy currently expects to contribute approximately $270 million to its pension plans and approximately $76.4 million to other postretirement plans in 2010;2011, although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also,2011.
Minimum required funding calculations as determined under Pension Protection Act guidance pursuant toare performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall which, under the Pension Protection Act, of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve,must be interpreted through technical corrections bills, and discussed within the industry and congressional lawmakers. Any changes to the Pension Protection Act asfunded over a result of these discussions and efforts may affect the level of Entergy's pension contributions in the future.seven-year rolling period. The
Also in addition to the contractual obligations, Entergy has $328 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
Capital Funds Agreement
Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:
· | maintain System Energy's equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); |
· | permit the continued commercial operation of Grand Gulf; |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on a calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets and the funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury; therefore, periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.
Total postretirement health care and life insurance benefit costs for Entergy in 2010 were $111.1 million, including $26.6 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy expects 2011 postretirement health care and life insurance benefit costs to be $114.7 million. This includes a projected $33 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy contributed $75 million to its postretirement plans in 2010. Entergy’s current estimate of contributions to its other postretirement plans is approximately $78 million in 2011.
Federal Healthcare Legislation
The Patient Protection and Affordable Care Act (PPACA) became federal law on March 23, 2010, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 became federal law and amended certain provisions of the PPACA. These new federal laws change the law governing employer-sponsored group health plans, like Entergy's plans, and include, among other things, the following significant provisions:
· | payA 40% excise tax on per capita medical benefit costs that exceed certain thresholds; |
· | Change in full all System Energy indebtednesscoverage limits for borrowed money when due;dependants; and |
· | enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy's rights in the agreement as security for the specific debt.Elimination of lifetime caps. |
Capital Expenditure PlansThe total impact of PPACA is not yet determinable because technical guidance regarding application must still be issued. Additionally, ongoing litigation and Other Usespolitical discussions are in progress regarding the constitutionality of Capitaland the potential repeal of health care reform, although whether that occurs and what parts of health care reform would be invalidated or repealed is not yet known. Entergy will continue to monitor these developments to determine the possible impact on Entergy as a result of PPACA. Entergy is participating in the programs currently provided for under PPACA, such as the early retiree reinsurance program, which may provide for some limited reimbursements of certain claims for early retirees aged 55 to 64 who are not yet eligible for Medicare.
Following areOne provision of the amountsnew law that is effective in 2013 eliminates the federal income tax deduction for prescription drug expenses of Entergy's planned constructionMedicare beneficiaries for which the plan sponsor also receives the retiree drug subsidy under Part D. Entergy receives subsidy payments under the Medicare Part D plan and therefore in the first quarter 2010 recorded a reduction to the deferred tax asset related to the unfunded other postretirement benefit obligation. The offset was recorded as a $16 million charge to income tax expense or, for the Utility, including each Registrant Subsidiary, as a regulatory asset.
Other Contingencies
As a company with multi-state domestic utility operations and a history of international investments, Entergy is subject to a number of federal, state, and international laws and regulations and other capital investments by operating segmentfactors and conditions in the areas in which it operates, which potentially subject it to environmental, litigation, and other risks. Entergy periodically evaluates its exposure for 2010 through 2012:such risks and records a reserve for those matters which are considered probable and estimable in accordance with generally accepted accounting principles.
Planned construction and capital investments | | 2010 | | 2011 | | 2012 |
| | | (In Millions) |
| | | | | | | |
Maintenance Capital: | | | | | | |
| Utility | | $776 | | $783 | | $822 |
| Non-Utility Nuclear | | 92 | | 140 | | 123 |
| Parent and Other | | 9 | | 7 | | 8 |
| | | 877 | | 930 | | 953 |
Capital Commitments: | | | | | | |
| Utility | | 991 | | 1,578 | | 926 |
| Non-Utility Nuclear | | 349 | | 220 | | 219 |
| | | 1,340 | | 1,798 | | 1,145 |
Total | | $2,217 | | $2,728 | | $2,098 |
Maintenance Capital refers to amounts Entergy plans to spend on routine capital projects that are necessary to support reliability of its service, equipment, or systems and to support normal customer growth.Environmental
Capital Commitments refersEntergy must comply with environmental laws and regulations applicable to non-routine capital investmentsthe handling and disposal of hazardous waste. Under these various laws and regulations, Entergy could incur substantial costs to restore properties consistent with the various standards. Entergy conducts studies to determine the extent of any required remediation and has recorded reserves based upon its evaluation of the likelihood of loss and expected dollar amount for each issue. Additional sites could be identified which require environmental remediation for which Entergy is either contractually obligated, has Board approval,could be liable. The amounts of environmental reserves recorded can be significantly affected by the following external events or otherwise expects to make to satisfy regulatory or legal requirements. Amounts reflected in this category include the following:conditions:
· | The currently planned construction or purchase of additional generation supply sources within the Utility's service territory through the Utility's portfolio transformation strategy, including Entergy Louisiana's planned purchase of Acadia Unit 2, which is discussed below. |
· | Entergy Louisiana's Waterford 3 steam generators replacement project, which is discussed below. |
· | System Energy's planned approximate 178 MW uprate of the Grand Gulf nuclear plant. The project is currently expected to cost $575 million, including transmission upgrades. On November 30, 2009, the MPSC issued a Certificate of Public Convenience and Necessity for implementation of the uprate. |
· | Transmission improvements and upgrades designed to provide greater transmission flexibility in the Entergy System. |
· | Initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In addition, Entergy temporarily suspended reviews of the two license applications for the sites and will explore alternative nuclear technologies for this project. |
· | Spending to comply with current and anticipated North American Electric Reliability Corporation transmission planning requirements and NRC security requirements. |
· | Non-Utility Nuclear investments including dry cask spent fuel storage, nuclear license renewal efforts, component replacement across the fleet, NYPA value sharing, spending in response to the Indian Point Independent Safety Evaluation and spending to comply with revised NRC security requirements. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Environmental compliance spending, including approximately $420 million for the 2010-2012 period for installation of scrubbers and low NOx burners at Entergy Arkansas' White Bluff coal plant, which under current environmental regulations must be operational by September 2013. Entergy Arkansas has requested a variance from that date, however, because the EPA has recently expressed concerns about Arkansas' Regional Haze State Implementation Plan and questioned the appropriateness of issuing an air permit prior to its approval of that plan. The White Bluff project is currently suspended, but the latest conceptual cost estimate indicates Entergy Arkansas' share of the project could cost approximately $465 million. Entergy continues to review potential environmental spending needs and financing alternatives for any such spending, and future spending estimates could change based on the results of this continuing analysis. |
Acadia Unit 2 Purchase Agreement
In October 2009, Entergy Louisiana announced that it has signed an agreement to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer. The Acadia Energy Center, which entered commercial service in 2002, consists of two combined-cycle gas-fired generating units, each nominally rated at 580 MW. Entergy Louisiana proposes to acquire 100 percent of Acadia Unit 2 and a 50 percent ownership interest in the facility’s common assets for approximately $300 million. In a separate transaction entered into earlier this year, Cleco Power is acquiring Acadia Unit 1 and the other 50 percent interest in the facility’s common assets. Upon closing the transaction, Cleco Power will serve as operator for the entire facility. Entergy Louisiana has committed to sell one third of the output of Unit 2 to Entergy Gulf States Louisiana in accordance with terms and conditions detailed under the existing Entergy System Agreement.Contents
Entergy Louisiana's purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. Closing is expected to occur in late 2010 or early 2011. Entergy Louisiana and Acadia Power Partners also have entered into a purchase power agreement for 100 percent of the output of Acadia Unit 2 that is expected to commence on May 1, 2010 and is set to expire at the closing of the acquisition transaction. Entergy Louisiana has filed with the LPSC for approval of the transaction, and no party filed an opposition to the purchase power agreement and it has been forwarded to the LPSC for its review. The parties have agreed to a procedural schedule for the acquisition that would lead to LPSC consideration of the matter at its January 2011 meeting and includes a hearing before the ALJ in September 2010.
Waterford 3 Steam Generator Replacement Project
Entergy Louisiana plans to replace the Waterford 3 steam generators, along with the reactor vessel closure head and control element drive mechanisms, in 2011. Replacement of these components is common to pressurized water reactors throughout the nuclear industry. The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials associated with these components within the reactor coolant system. The issue is applicable to Waterford 3 and is managed in accordance with standard industry practices and guidelines. Routine inspections of the steam generators during Waterford 3's Fall 2006 refueling outage identified additional degradation of certain tube spacer supports in the steam generators that required repair beyond that anticipated prior to the outage. Corrective measures were successfully implemented to permit continued operation of the steam generators. While potential future replacement of these components had been contemplated, additional steam generator tube and component degradation necessitates replacement of the steam generators as soon as reasonably achievable. The earliest the new steam generators can be manufactured and delivered for installation is 2011. A mid-cycle outage performed in 2007 supports Entergy Louisiana's 2011 replacement strategy. The reactor vessel head and control element drive mechanisms will be replaced at the same time, utilizing the same reactor building construction opening that is necessary for the steam generator replacement.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In June 2008, Entergy Louisiana filed with the LPSC for approval of the project, including full cost recovery. Following discovery and the filing of testimony by the LPSC staff and an intervenor, the parties entered into a stipulated settlement of the proceeding. The LPSC unanimously approved the settlement in November 2008. The settlement resolved the following issues: 1) the accelerated degradation of the steam generators is not the result of any imprudence on the part of Entergy Louisiana; 2) the decision to undertake the replacement project at the current estimated cost of $511 million is in the public interest, is prudent, and would serve the public convenience and necessity; 3) the scope of the replacement project is in the public interest; 4) undertaking the replacement project at the target installation date during the 2011 refueling outage is in the public interest; and 5) the jurisdictional costs determined to be prudent in a future prudence review are eligible for cost recovery, either in an extension or renewal of the formula rate plan or in a full base rate case including necessary pro forma adjustments. Upon completion of the replacement project, the LPSC will undertake a prudence review with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs.· | Changes to existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. |
· | The identification of additional sites or the filing of other complaints in which Entergy may be asserted to be a potentially responsible party. |
· | The resolution or progression of existing matters through the court system or resolution by the EPA. |
In July 2009, the LPSC granted Entergy Louisiana's motion to dismiss, without prejudice, its application seeking recovery of cash earnings on construction work in progress (CWIP) for the steam generator replacement project, acknowledging Entergy Louisiana's right, at any time, to seek cash earnings on CWIP if Entergy Louisiana believes that circumstances or projected circumstances are such that a request for cash earnings on CWIP is merited. The cash earnings on CWIP application had been consolidated with a similar request for the Little Gypsy repowering project, which was also dismissed in response to the same motion.Litigation
Entergy Louisiana estimates thathas been named as defendant in a number of lawsuits involving employment, ratepayer, and injuries and damages issues, among other matters. Entergy periodically reviews the cases in which it will spend approximately $511 millionhas been named as defendant and assesses the likelihood of loss in each case as probable, reasonably estimable, or remote and records reserves for cases which have a probable likelihood of loss and can be estimated. Notes 2 and 8 to the financial statements include more detail on this project, including $299 million overratepayer and other lawsuits and management’s assessment of the 2010-2011 period.adequacy of reserves recorded for these matters. Given the environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is named as a defendant, however, the ultimate outcome of the litigation Entergy is exposed to has the potential to materially affect the results of operations of Entergy, or its operating company subsidiaries.
Little Gypsy Repowering ProjectUncertain Tax Positions
In April 2007,Entergy’s operations, including acquisitions and divestitures, require Entergy Louisiana announcedto evaluate risks such as the potential tax effects of a transaction, or warranties made in connection with such a transaction. Entergy believes that it intended to pursue the solid fuel repoweringhas adequately assessed and provided for these types of a 538 MW unit at its Little Gypsy plant, andrisks, where applicable. Any reserves recorded for these types of issues, however, could be significantly affected by events such as claims made by third parties under warranties, additional transactions contemplated by Entergy, Gulf States Louisiana filed subsequently with the LPSC seeking certification to participate in one-thirdor completion of reviews of the project. Petroleum coke and coal would be the unit's primary fuel sources. In July 2007,tax treatment of certain transactions or issues by taxing authorities. Entergy Louisiana filed with the LPSC for approval of the repowering project. In addition to seekingdoes not expect a finding that the project is in the public interest, the filing with the LPSC asked that Entergy Louisiana be allowed to recover a portion of the project's financing costs during the construction period.material adverse effect on earnings from these matters.
The accounting standard-setting process, including projects between the LPSC votedFASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in favor offinal pronouncements. Final pronouncements that result from these projects could have a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project's economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/material effect on Entergy’s future net income or financial markets. On April 1, 2009, Entergy Louisiana complied with the LPSC's directive and recommended that the project be suspended for an extended period of time of three years or more. Entergy Louisiana estimated that its total costs for the project, if suspended, including actual spending to date and estimated contract cancellation costs, would be approximately $300 million. Entergy Louisiana had obtained all major environmental permits required to begin construction. A longer-term suspension places these permits at risk and may adversely affect the project's economics and technological feasibility. On May 22, 2009, the LPSC issued an order declaring that Entergy Louisiana's decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent. In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the project and seeking recovery over a five-year period of the project costs. The parties to the proceeding agreed to a procedural schedule that results in a hearing in October 2010. Entergy Louisiana currently estimates that its total costs for the project, if canceled, will be approximately $215 million, of which approximately $193 million was incurred through December 31, 2009.position.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Dividends and Stock Repurchases
Declarations of dividends on Entergy'sEntergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy'sEntergy’s common stock dividends based upon Entergy'sEntergy’s earnings, financial strength, and future investment opportunities. At its January 20102011 meeting, the Board declared a dividend of $0.75$0.83 per share, which is the same quarterly dividend per share that Entergy has paid since thirdsecond quarter 2007.2010. The prior quarterly dividend per share was $0.75. Entergy paid $604 million in 2010, $577 million in 2009, and $573 million in 2008 and $507 million in 2007 in cash dividends on its common stock.
In accordance with Entergy'sEntergy’s stock-based compensation plan, Entergy periodically grants stock options to its key employees, which may be exercised to obtain shares of Entergy'sEntergy’s common stock. According to the plan, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy'sEntergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plan.
In addition to the authority to fund grant exercises, in January 2007 the Board approved a program under which Entergy is authorized to repurchase up to $1.5 billion of its common stock. In January 2008, the Board authorized an incremental $500 million share repurchase program to enable Entergy to consider opportunistic purchases in response to equity market conditions. Entergy completed both the $1.5 billion and $500 million programs in the third quarter 2009. In October 2009 the Board granted authority for an additional $750 million share repurchase program which was completed in the fourth quarter 2010. In October 2010 the Board granted authority for an additional $500 million share repurchase program.
The amount of repurchases may vary as a result of material changes in businessbusine ss results or capital spending or new investment opportunities, or if limitations in the credit markets continue for a prolonged period.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Sources of Capital
Entergy'sEntergy’s sources to meet its capital requirements and to fund potential investments include:
· | internally generated funds; |
· | cash on hand ($1.711.29 billion as of December 31, 2009)2010); |
· | bank financing under new or existing facilities; and |
Circumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses, including unscheduled plant outages and storms, could affect the timing and level of internally generated funds in the future.
Provisions within the Articles of Incorporation or pertinent indentures and various other agreements relating to the long-term debt and preferred stock of certain of Entergy Corporation'sCorporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred stock. As of December 31, 2009,2010, under provisions in their mortgage indentures, Entergy Arkansas and Entergy Mississippi had restricted retained earnings unavailable for distribution to Entergy Corporation of $461.6$458 million and $236$240.8 million, respectively.respectively, and Entergy Louisiana had member’s equity unavailable for distribution to Entergy Corporation of $465 million. All debt and common and preferred equity issuances by the Registrant Subsidiaries require prior regulatory approval and their preferred equity and debt issuances are also subject to issuance tests set forth in corporate charters, bond indentures, and other agreements. Entergy believes that the Registrant Subsidiaries have sufficient capacity under these tests to meet foreseeable capital needs.
The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy (except securities with maturities longer than one year issued by Entergy Arkansas and Entergy New Orleans, which are subject to the jurisdiction of the APSC and the City Council, respectively). No regulatory approvals are necessary for Entergy Corporation to issue securities. The current FERC-authorized short-term borrowing limits are effective through October 2011, as established by a FERC order issued in October 14, 2009. Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizationauthorizations from the FERC andthat extend through July 2011. Entergy Arkansas
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
has obtained long-term financing authorization from the APSC. The long-term securities issuances ofA PSC that extends through December 2012. Entergy New Orleans are limited to amounts authorized byhas obtained long-term financing authorization from the City Council and the current authorizationthat extends through August 2010.July 2012. In addition to borrowings from commercial banks, the FERC short-term borrowing orders authorized the Registrant Subsidiaries to continue as participants in the Entergy System money pool. The money pool is an intercompany borrowing arrangement designed to reduce Entergy's subsidiaries'Entergy’s subsidiaries’ dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed authorized limits. As of December 31, 2009, Entergy's subsidiaries2010, Entergy’s Registrant Subsidiaries had no outstanding short-term borrowings from external sources. See Notes 4 and 5 to the financial statements for further discussion of Entergy'sEntergy’s borrowing limits and authorizations.
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to portions of Entergy's service territories in Louisiana and Texas, and to a lesser extent in Arkansas and Mississippi. The storms resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. In October 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans drew a total of $229 million from their funded storm reserves.
Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana made a supplemental filing to, among other things, recommend recoveryand the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and replenishmentissuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings). In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm reservesdamage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. In July 2010 the LCDA
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana Act 55 (passed in 2007) financing.and transferred $150.3 million directly to Entergy Gulf States Louisiana. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana recovereddo not report the bonds on their costs from Hurricane Katrinabalance sheets because the bonds are the obligation of the LCDA, and Hurricane Rita primarily by Act 55 financing, as discussed below. On December 30, 2009,there is no recourse against Entergy, Entergy Gulf States Louisiana andor Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that, if approved, provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amountevent of $90 million and Entergy Louisiana's storm reserve ina bond default. See Note 2 to the amountfinancial statements for additional discussion of $200 million whenthe Act 55 financing is accomplished. The parties to the proceeding have agreed to a procedural schedule that includes March/April 2010 hearing dates for both the recoverability and the method of recovery proceedings.financings.
Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas' request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6.8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. In November 2009, Entergy Texas Restoration Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds). to finance Entergy Texas Hurricane Ike and Hurricane Gustav restoration costs. See Note 2 to the financial statements for a discussion of the proceeding approving the issuance of the securitization bonds and see Note 5 to the financial statements for a discussion of the November 2009 issuanceterms of the securitization bonds.
In the third quarter 2009, Entergy settled with its insurer on its Hurricane Ike claim and Entergy Texas received $75.5 million in proceeds (Entergy received a total of $76.5 million).
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas'Arkansas's transmission and distribution lines, equipment, poles, and other facilities. On January 30, 2009, the APSC issued an order inviting and encouraging electric public utilities to file specific proposals for the recovery of extraordinary storm restoration expenses associated with the ice storm. On February 16, 2009, Entergy Arkansas filed a request with the APSC for an accounting order authorizing deferral of the operating and maintenance cost portion of Entergy Arkansas' ice storm restoration costs pending their recovery. The APSC issued such an order in March 2009 subject to certain conditions, including that if Entergy Arkansas seeks to recover the deferred costs, those costs will be subject to investigation for whether they are incremental, prudent, and reasonable. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. On February 1,In June 2010 Entergy Arkansas requestedthe APSC issued a financing order to issueauthorizing the issuance of approximately $127.5$126.3 million in storm cost recovery bonds, which includedincludes carrying costs of $11.7$11.5 million and $4.6 million of up-front financing costscosts. See Note 5 to paythe financial statements for ice storm restoration because Entergy Arkansas' analysis demonstrates retail customers will benefit from lower costs using securitization. The APSC has established a procedural schedule that includes a hearing in April 2010 and states that the APSC will issue its final order by June 15, 2010. Entergy Arkansas' September 2009 general rate filing also requested recoverydiscussion of the January 2009 ice storm costs over 10 years if it was expected thatAugust 2010 issuance of the securitization would not produce lower costs for customers, and Entergy Arkansas will remove this request if the APSC approves securitization.bonds.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility'sUtility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses. Entergy pursued a broad range of initiatives to recover storm restoration and business continuity costs, including obtaining reimbursement of certain costs covered by insurance and pursuing recovery throughthro ugh existing or new rate mechanisms regulated by the FERC and local regulatory bodies, including the issuance of securitization bonds.
Insurance Claims
Entergy has received a total of $317 million as of December 31, 2009 on its Hurricane Katrina and Hurricane Rita insurance claims, including the settlements of its Hurricane Katrina claims with each of its two excess insurers. Entergy has substantially completed its insurance recoveries related to Hurricane Katrina and Hurricane Rita.
Storm Cost Financings
Louisiana
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to Act 64 traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 3, 2008, the Louisiana State Bond Commission granted preliminary approval for the Act 55 financings. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
On July 29, 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
On. In August 26, 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana fromand Entergy Louisiana do not report the LURC,bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn fromor Entergy Louisiana in the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest unitsevent of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Texas
In July 2006, Entergy Texas filed an application with the PUCT with respect to its Hurricane Rita reconstruction costs incurred through March 2006. The filing asked the PUCT to determine the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Texas allocates those costs among its retail customer classes. In December 2006, the PUCT approved $381 million of reasonable and necessary hurricane reconstruction costs incurred through March 31, 2006, plus carrying costs, as eligible for recovery. After netting expected insurance proceeds, the amount is $353 million.
In April 2007, the PUCT issued its financing order authorizing the issuance of securitization bonds to recover the $353 million of hurricane reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits.bond default. See Note 52 to the financial statements for aadditional discussion of the June 2007 issuance of the securitization bonds.Act 55 financings.
Community Development Block Grants
In December 2005, the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that includes $11.5 billion inincluded Community Development Block GrantsGrant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowsallowed state and local leaders to fund individual recovery priorities. The bill includes language that permits funding to be provided for infrastructure restoration.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
New Orleans
In March 2006, Entergy New Orleans provided a justification statement to state and local officials in connection with its pursuit of CDBG funds to mitigate Hurricane Katrina restoration costs that otherwise would be borne by customers. The statement included all the estimated costs of Hurricane Katrina damage, as well as a lost customer base component intended to help offset the need for storm-related rate increases. In October 2006, the Louisiana Recovery Authority Board endorsed a resolution proposing to allocate $200 million in CDBG funds to Entergy New Orleans to defray gas and electric utility system repair costs in an effort to provide rate relief for Entergy New Orleans customers. The proposal was developed as an action plan amendment and published for public comment. State lawmakers approved the action plan in December 2006, and the U. S. Department of Housing and Urban Development approved it in February 2007. Entergy New Orleans filed applications seeking City Council certification of its storm-related costs incurred through December 2006. Entergy New Orleans supplemented this request to include the estimated future cost of the gas system rebuild.
In March 2007, the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans' estimated costs of $465 million for its gas system rebuild. In April 2007, Entergy New Orleans executed an agreement with the Louisiana Office of Community Development (OCD) under which $200 million of CDBG funds will be made available to Entergy New Orleans. Entergy New Orleans submitted the agreement to the bankruptcy court, which approved it on April 25, 2007.plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007.2007 and $19.2 million in 2010.
Mississippi
In March 2006, the Governor of Mississippi signed a law that established a mechanism by which the MPSC could authorize and certify an electric utility financing order and the state could issue bonds to finance the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities. Because of the passage of this law and the possibility of Entergy Mississippi obtaining CDBG funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for a review of Entergy Mississippi's total storm restoration costs in an Application for an Accounting Order proceeding. In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later, Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its Hurricane Katrina infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount included the $89 million of Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. Entergy Mississippi's filing stated that the amount actually financed through the state bonds would be net of any CDBG funds that Entergy Mississippi received.
In October 2006, the Mississippi Development Authority approved for payment and Entergy Mississippi received $81 million in CDBG funding for Hurricane Katrina costs. The MPSC then issued a financing order authorizing the issuance of state bonds to finance $8 million of Entergy Mississippi's certified Hurricane Katrina restoration costs and $40 million for an increase in Entergy Mississippi's storm damage reserve. $30 million of the storm damage reserve was set aside in a restricted account. A Mississippi state entity issued the bonds in May 2007, and Entergy Mississippi received proceeds of $48 million. Entergy Mississippi does not report the bonds on its balance sheet because the bonds are the obligation of the state entity, and there is no recourse against Entergy Mississippi in the event of a bond default.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cash Flow Activity
As shown in Entergy'sEntergy’s Statements of Cash Flows, cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | 2009 | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 |
| | | (In Millions) | | | (In Millions) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $1,920 | | $1,253 | | $1,016 | Cash and cash equivalents at beginning of period | | $1,710 | | $1,920 | | $1,253 |
| | | | | | | |
Effect of reconsolidating Entergy New Orleans in 2007 | | - | | - | | 17 | |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 2,933 | | 3,324 | | 2,560 | Operating activities | | 3,926 | | 2,933 | | 3,324 |
| Investing activities | | (2,094) | | (2,590) | | (2,118) | Investing activities | | (2,574) | | (2,094) | | (2,590) |
| Financing activities | | (1,048) | | (70) | | (222) | Financing activities | | (1,767) | | (1,048) | | (70) |
Effect of exchange rates on cash and cash equivalents | Effect of exchange rates on cash and cash equivalents | | (1) | | 3 | | - | Effect of exchange rates on cash and cash equivalents | | - | | (1) | | 3 |
| Net increase (decrease) in cash and cash equivalents | | (210) | | 667 | | 220 | Net increase (decrease) in cash and cash equivalents | | (415) | | (210) | | 667 |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $1,710 | | $1,920 | | $1,253 | Cash and cash equivalents at end of period | | $1,295 | | $1,710 | | $1,920 |
Operating Cash Flow Activity
2010 Compared to 2009
Entergy’s cash flow provided by operating activities increased $993 million in 2010 compared to 2009 primarily due to the receipt in July 2010 of $703 million from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings for Hurricane Gustav and Hurricane Ike. The Act 55 storm cost financings are discussed in more detail above and also in Note 2 to the financial statements. In addition, the absence of the Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration spending that occurred in 2009 also contributed to the increase. These factors were partially offset by an increase of $323 million in pension contributions at Utility and Entergy Wholesale Commodities and a decrease in net revenue a t Entergy Wholesale Commodities. See “Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” below and also Note 11 to the financial statements for further discussion of pension funding.
2009 Compared to 2008
Entergy'sEntergy’s cash flow provided by operating activities decreased by $391 million in 2009 compared to 2008 primarily due to the receipt in 2008 of $954 million from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings, Arkansas ice storm restoration spending, and increases in nuclear refueling outage spending and spin-off costs at Non-Utility Nuclear.for the non-utility nuclear business. These factors were partially offset by a decrease of $94 million in income tax payments, a decrease of $155 million in pension contributions at Utility and Non-Utility Nuclear,Entergy Wholesale Commodities, increased collection of fuel costs, and higher spending in 2008 on Hurricane Gustav and Hurricane Ike storm restoration.
2008 Compared to 2007
Entergy's cash flow provided by operating activities increased by $765 million in 2008 compared to 2007. Following are cash flows from operating activities by segment:
· | Utility provided $2,379 million in cash from operating activities in 2008 compared to providing $1,809 million in 2007 primarily due to proceeds of $954 million received from the Louisiana Utilities Restoration Corporation as a result of the Louisiana Act 55 storm cost financings. The Act 55 storm cost financings are discussed in more detail in Note 2 to the financial statements. A decrease in income tax payments of $290 million also contributed to the increase. Offsetting these factors were the net effect of Hurricane Gustav and Hurricane Ike which reduced operating cash flow by $444 million in 2008 as a result of costs associated with system repairs and lower revenues due to customer outages, the receipt of $181 million of Community Development Block Grant funds by Entergy New Orleans in 2007, and a $100 million increase in pension contributions in 2008. |
· | Non-Utility Nuclear provided $1,255 million in cash from operating activities in 2008 compared to providing $880 million in 2007, primarily due to an increase in net revenue, partially offset by an increase in operation and maintenance costs, both of which are discussed in "Results of Operations." |
· | Parent & Other used $310 million in cash in operating activities in 2008 compared to using $129 million in 2007 primarily due to an increase in income taxes paid of $69 million and outside services costs of $69 million related to the planned spin-off of the Non-Utility Nuclear business. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
2010 Compared to 2009
Net cash used in investing activities increased $480 million in 2010 compared to 2009 primarily due to the following activity:
· | an increase in net uses of cash for nuclear fuel purchases, which was caused by the consolidation of the nuclear fuel company variable interest entities that is discussed in Note 18 to the financial statements. With the consolidation of the nuclear fuel company variable interest entities, their purchases of nuclear fuel from Entergy are now eliminated in consolidation, whereas before 2010 they were a source of investing cash flows; |
· | the investment of a total of $290 million in Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm reserve escrow accounts as a result of their Act 55 storm cost financings, which are discussed in Note 2 to the financial statements; |
· | an increase in construction expenditures, primarily in the Entergy Wholesale Commodities business, as decreases for the Utility resulting from Hurricane Gustav, Hurricane Ike, and Arkansas ice storm restoration spending in 2009 were offset by spending on various projects; and |
· | proceeds of $219 million in 2010 from the sale of Entergy’s ownership interest in the Harrison County Power Project 550 MW combined-cycle power plant to two Texas electric cooperatives that owned a minority share of the plant. |
2009 Compared to 2008
Net cash used in investing activities decreased by $496 million in 2009 compared to 2008. The following significant investing cash flow activity occurred in 2009 and 2008:
· | Construction expenditures were $281 million lower in 2009 than in 2008 primarily due to Hurricane Gustav and Hurricane Ike restoration spending in 2008. |
· | In March 2008, Entergy Gulf States Louisiana purchased the Calcasieu Generating Facility, a 322 MW simple-cycle, gas-fired power plant located near the city of Sulphur in southwestern Louisiana, for approximately $56 million. |
· | In September 2008, Entergy Arkansas purchased the Ouachita Plant, a 789 MW gas-fired plant located 20 miles south of the Arkansas state line near Sterlington, Louisiana, for approximately $210 million (In November 2009, Entergy Arkansas sold one-third of the plant to Entergy Gulf States Louisiana). |
· | Receipt in 2009 of insurance proceeds from Entergy Texas'Texas’s Hurricane Ike claim and in 2008 of insurance proceeds from Entergy New Orleans'Orleans’s Hurricane Katrina claim. |
· | The investment of a net total of $45 million in escrow accounts for construction projects in 2008 and the withdrawal of $36 million of those funds from escrow accounts in 2009. |
2008Financing Activities
2010 Compared to 20072009
Net cash used in investingfinancing activities increased by $472$719 million in 20082010 compared to 2007.2009 primarily because long-term debt activity used approximately $307 million of cash in 2010 and provided approximately $160 million of cash in 2009. The followingmost significant net use for long-term debt activity is notablewas by Entergy Corporation, which reduced its 5-year credit facility balance by $934 million and repaid a total of $275 million of notes and bank term loans, while issuing $1 billion of notes in comparing 20082010. For the details of Entergy’s long-term debt outstanding see Note 5 to 2007:the financial statements herein. In addition, Entergy Corporation repurchased $879 million of its common stock in 2010 and repurchased $613 million of its common stock in 2009. Entergy 217;s stock repurchases are discussed further in the “Capital Expenditure Plans and Other Uses of Capital
· | Construction expenditures were $634 million higher in 2008 than in 2007, primarily due to storm restoration spending caused by Hurricane Gustav and Hurricane Ike and increased spending on various projects by the Utility that are discussed further in "Capital Expenditure Plans and Other Uses of Capital" above. |
· | In April 2007, Non-Utility Nuclear purchased the 798 MW Palisades nuclear power plant located near South Haven, Michigan for a net cash payment of $336 million. |
· | In March 2008, Entergy Gulf States Louisiana purchased the Calcasieu Generating Facility, a 322 MW simple-cycle, gas-fired power plant located near the city of Sulphur in southwestern Louisiana, for approximately $56 million. |
· | In September 2008, Entergy Arkansas purchased the Ouachita Plant, a 789 MW gas-fired plant located 20 miles south of the Arkansas state line near Sterlington, Louisiana, for approximately $210 million. |
· | Non-Utility Nuclear made a $72 million payment to NYPA in 2008 under the value sharing agreements associated with the acquisition of the FitzPatrick and Indian Point 3 power plants. See Note 15 to the financial statements for additional discussion of the value sharing agreements. |
· | The investment of a net total of $45 million in escrow accounts for construction projects in 2008. |
· | Entergy Mississippi realized proceeds in 2007 from $100 million of investments held in trust that were received from a bond issuance in 2006 and used to redeem bonds in 2007. |
- Dividends and Stock Repurchases” section above.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
2009 Compared to 2008
Net cash used in financing activities increased $978 million in 2009 compared to 2008. The following significant financing2008 primarily because long-term debt activity provided approximately $160 million of cash flow activity occurred in 2009 and 2008:provided approximately $970 million of cash in 2008. Also, Entergy Corporation repurchased $613 million of its common stock in 2009 and repurchased $512 million of its common stock in 2008.
· | Entergy Corporation decreased the net borrowings under its credit facility by $671 million in 2009 compared to increasing the net borrowings under its credit facility by $986 million in 2008. See Note 4 to the financial statements for a description of the Entergy Corporation credit facility. |
· | Entergy Texas issued $500 million of 7.125% Series mortgage bonds in January 2009 and used a portion of the proceeds to repay $70.8 million in long-term debt prior to maturity. |
· | Entergy Texas issued $150 million of 7.875% Series mortgage bonds in May 2009. |
· | Entergy Mississippi issued $150 million of 6.64% Series first mortgage bonds in June 2009. |
· | Entergy Gulf States Louisiana issued $300 million of 5.59% Series first mortgage bonds in October 2009. |
· | Entergy Louisiana issued $400 million of 5.40% Series first mortgage bonds in November 2009. |
· | A subsidiary of Entergy Texas issued $545.9 million of securitization bonds in November 2009. See Note 5 to the financial statements for additional information regarding the securitization bonds. |
· | Entergy Gulf States Louisiana paid, at or prior to maturity, $721.2 million in 2009 and $675.8 million in 2008 of long term debt, including $602.2 million in 2009 and $309.1 million in 2008 paid by Entergy Texas under the debt assumption agreement; |
· | Entergy Arkansas issued $300 million of 5.4% Series first mortgage bonds in July 2008. |
· | Entergy Louisiana issued $300 million of 6.5% Series first mortgage bonds in August 2008. |
· | Entergy Louisiana repurchased, prior to maturity, $60 million of Auction Rate governmental bonds in April 2008. |
· | Entergy New Orleans paid, at maturity, its $30 million 3.875% Series first mortgage bonds in August 2008. |
· | The Utility operating companies decreased the borrowings outstanding on their long-term credit facilities by $100 million in 2009 and increased the borrowings outstanding on their long-term credit facilities by $100 million in 2008. |
· | Entergy Corporation paid $267 million of notes payable in 2009 and $237 million of notes payable in 2008 at their maturities. |
· | Entergy Corporation repurchased $613 million of its common stock in 2009 and repurchased $512 million of its common stock in 2008. |
2008 Compared to 2007
Net cash used in financing activities decreased $151 million in 2008 compared to 2007. The following activity is notable in comparing 2008 to 2007:
· | Entergy Corporation increased the net borrowings under its revolving credit facility by $986 million in 2008 and by $1,431 million in 2007. See Note 4 to the financial statements for a description of the Entergy Corporation credit facility. |
· | Entergy Arkansas issued $300 million of 5.40% Series first mortgage bonds in July 2008. |
· | Entergy Louisiana issued $300 million of 6.50% Series first mortgage bonds in August 2008. |
· | Entergy Louisiana repurchased, prior to maturity, $60 million of Auction Rate governmental bonds in April 2008. |
· | Entergy New Orleans paid, at maturity, its $30 million 3.875% Series first mortgage bonds in August 2008. |
· | Under the terms of the debt assumption agreement between Entergy Texas and Entergy Gulf States Louisiana that is discussed in Note 5 to the financial statements, Entergy Texas paid at maturity $309.1 million of Entergy Gulf States Louisiana first mortgage bonds in 2008. |
· | The Utility operating companies increased the borrowings outstanding on their long-term credit facilities by $100 million in 2008. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | A subsidiary of Entergy Texas issued $329.5 million of securitization bonds in June 2007. See Note 5 to the financial statements for additional information regarding the securitization bonds. |
· | Entergy Corporation paid $237 million of notes payable at their maturities in 2008. |
· | Entergy Mississippi redeemed $100 million of First Mortgage Bonds in 2007. |
· | Entergy Corporation repurchased $512 million of its common stock in 2008 and $1,216 million of its common stock in 2007. |
· | Entergy Corporation increased the dividend on its common stock in the third quarter 2007. The quarterly dividend was $0.54 per share for the first two quarters of 2007 and $0.75 per share for each quarter since then. |
State and Local Rate Regulation and Fuel-Cost Recovery
The rates that the Utility operating companies and System Energy charge for their services significantly influence Entergy'sEntergy’s financial position, results of operations, and liquidity. These companies are regulated and the rates charged to their customers are determined in regulatory proceedings. Governmental agencies, including the APSC, the City Council, the LPSC, the MPSC, the PUCT, and the FERC, are primarily responsible for approval of the rates charged to customers. Following is a summary of the Utility operating companies'companies’ authorized returns on common equity.equity and current retail base rates. The Utility operating companies'companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery proceedings are discussed in Note 2 to the financial statements.
Company | | | Authorized Return on Common Equity (ROE) | | |
| | | | |
Entergy Arkansas | | 10.2% | 9.9% | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | 9.9%-11.4% (electric)-Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate
10.0%-11.0% (gas) plan filing approved by the LPSC.
Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
| | | | |
Entergy Louisiana | | 9.45%- 11.05% | 9.45%-11.05% | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| | | | |
Entergy Mississippi | | 10.79%- 13.05% | 11.91%-14.42% | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | 10.7%-11.5% (electric)-Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a
10.25%-11.25% (gas) settlement approved by the City Council.
|
| | | | |
Entergy Texas | | 10.125% | 10.0% (stipulated as | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a reasonable ROE insettlement of Entergy Texas's base rate case settlement) |
| | | |
System Energyapproved by the
| | | 10.94% PUCT. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Federal Regulation
System Agreement
The FERC regulates wholesale rates (including Entergy Utility intrasystem energy exchanges pursuant to the System Agreement) and interstate transmission of electricity, as well as rates for System Energy'sEnergy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proce edings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement. See Note 2 to the financial statements for discussions of this litigation.
Entergy Arkansas and Entergy Mississippi Notices of Termination of System Agreement ProceedingsParticipation and Related APSC Investigation
Production Cost Equalization Proceeding CommencedCiting its concerns that the benefits of its continued participation in the current form of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC.
In October 2007 the MPSC issued a letter confirming its belief that Entergy Mississippi should exit the System Agreement in light of the recent developments involving the System Agreement. The MPSC letter also requested that Entergy Mississippi advise the MPSC regarding the status of the Utility operating companies’ effort to develop successor arrangements to the System Agreement and advise the MPSC regarding Entergy Mississippi’s position with respect to withdrawal from the System Agreement. In November 2007, pursuant to the provisions of the System Agreement, Entergy Mississippi provided its written notice to terminate its participation in the System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authoriz ed by the FERC.
On February 2, 2009, Entergy Arkansas and Entergy Mississippi filed with the FERC their notices of cancellation to effectuate the termination of their participation in the Entergy System Agreement, effective December 18, 2013 and November 7, 2015, respectively. While the FERC had indicated previously that the notices should be filed 18 months prior to Entergy Arkansas’s termination (approximately mid-2012), the filing explains that resolving this issue now, rather than later, is important to ensure that informed long-term resource planning decisions can be made during the years leading up to Entergy Arkansas’s withdrawal and that all of the Utility operating companies are properly positioned to continue to operate reliably following Entergy Arkansas’s an d, eventually, Entergy Mississippi’s, departure from the System Agreement. Entergy Arkansas and Entergy Mississippi requested that the FERC accept the proposed notices of cancellation without further proceedings. Various parties intervened or filed protests in the proceeding, including the APSC, the LPSC, the MPSC, and the City Council.
In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month notice period without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a result of withdrawal. The FERC stated that it expected Entergy and all interested parties to move forward and develop details of all needed successor arrangements and encouraged Entergy to file its Section 205 filing for post 2013 arrangements as soon as possible. In February 2011 the FERC denied the LPSC’s and the City Council’s rehearing requests. The LPSC has appealed the FERC’s decision to the U.S. Court of Appe als for the District of Columbia.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The APSC had previously commenced an investigation, in 2004, into whether Entergy Arkansas’s continued participation in the System Agreement is in the best interests of its customers. The Entergy Arkansas president, Hugh McDonald, filed testimony with the APSC in response to requests by the APSC. In addition, Mr. McDonald has appeared before the APSC at public hearings for questioning. In December 2007, the APSC ordered Mr. McDonald to file testimony each month with the APSC detailing progress toward development of successor arrangements, beginning in March 2008, and Mr. McDonald has done so. In his September 2009 testimony Mr. McDonald reported to the APSC the results of a related study. According to the study the total estima ted cost to establish the systems and staff the organizations to perform the necessary planning and operating functions for a stand-alone Entergy Arkansas operation are estimated at approximately $23 million, including $18 million to establish generation-related functions and $5 million to modify transmission-related information systems. Incremental costs for ongoing staffing and systems costs are estimated at approximately $8 million. Cost and implementation schedule estimates will continue to be re-evaluated and refined as additional, more detailed analysis is completed. The study did not assess the effect of stand-alone operation on Entergy Arkansas’s generation resource requirements. Entergy Arkansas expects it would take approximately two years to implement stand-alone operations for Entergy Arkansas.
In February 2010 the APSC issued an order announcing a refocus of its ongoing investigation of Entergy Arkansas's post-System Agreement operation. The order describes the APSC's "stated purpose in opening this inquiry to conduct an investigation regarding the prudence of [Entergy Arkansas] entering into a successor ESA [Entergy System Agreement] as opposed to becoming a stand-alone utility upon its exit from the ESA, and whether [Entergy Arkansas], as a standalone utility, should join the SPP RTO. It is the [APSC's] intention to render a decision regarding the prudence of [Entergy Arkansas] entering into a successor ESA as opposed to becoming a stand-alone utility upon its exit from the ESA, as well as [Entergy Arkansas'] RTO participation by the end of calendar yea r 2010. In parallel with this Docket, the [APSC] will be actively involved and will be closely watching to see if any meaningful enhancement will be made to a new Enhanced Independent Coordinator of Transmission (“E-ICT") Agreement through the efforts of the [Entergy Transmission System] stakeholders, Entergy, and the newly formed and federally-recognized [Entergy Regional State Committee] in 2010." Later, in April 2010, the APSC issued an order that directs Entergy Arkansas also to consider joining the Midwest ISO RTO as a stand-alone utility.
Entergy Arkansas filed testimony and participated in a March 2010 evidentiary hearing in the proceeding. Entergy Arkansas noted in its testimony that it was not reasonable to complete a comprehensive evaluation of strategic options by the end of 2010 and that forcing a decision would place parties in the untenable position of making critical decisions based on insufficient information. Entergy Arkansas outlined three options for post-System Agreement operation of its electrical system: 1) Entergy Arkansas self providing its generation planning and operating functions as a stand-alone company; 2) Entergy Arkansas plus coordination agreements with third parties in which Entergy Arkansas self provides some planning and operations functions, but also enters i nto one or more coordinating or pooling agreements with third parties; and 3) Successor Arrangements under which Entergy Arkansas plans for its own generation resources but enters into a new generation commitment and dispatch agreement with other Utility operating companies under a successor agreement intended to avoid the litigation previously experienced. Entergy Arkansas’s plan is expected to lead to a decision in late 2011 regarding which option to implement; however, Entergy Arkansas anticipates pursuing during this time several elements that are common to all options. In an attempt to reach understanding of complex issues, Entergy Arkansas proposed to hold a series of technical conferences targeting specific subjects. Technical conferences have been held and another evidentiary hearing in the proceeding was held in August 2010.
An additional technical conference is scheduled in March 2011. As stated by an APSC order: “The scope of the technical conference includes the Charles River Associates (“CRA”) Federal Energy Regulatory Commission (“FERC”) - directed cost/benefit study of all Entergy Operating Companies (‘‘Entergy OpCos”) becoming full members in the Southwest Power Pool Regional Transmission Organization (“SPP RTO”); the CRA APSC-directed addendum study considering Entergy Arkansas, Inc. (“EAI”) as a stand-alone member of the SPP RTO; and the CRA APSC-directed addendum study considering EAI as a stand-alone member of the Midwest Independent Transmission System Operator (“MISO”); as well as the CRA EAI/Entergy S ervices, Inc. (“ESI”)-directed additional addendum studies (including a cost/benefit study of all Entergy Op Cos becoming members of MISO).”
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
A procedural schedule has been established in the proceeding that, among other things: (1) requires Entergy Arkansas to file its assessment and recommendations regarding each of the strategic reorganization options by May 12, 2011 and (2) sets an evidentiary hearing to begin September 7, 2011.
The Utility operating companies continue to meet with various interested parties to discuss a proposed framework for successor arrangements to the current System Agreement. An initial draft of the successor arrangements, referred to as the Commitment, Operations, and Dispatch Agreement or “CODA,” was provided to state regulators on September 16, 2010. The draft CODA was based on three overarching principles: voluntary coordinated resource planning; centralized commitment, operations, and dispatch (so that the resources of all Utility operating companies are operated to serve the combined loads of those companies); and coordinated transmission operations. In contrast to the current System Agreement, which requires joint generation resource plan ning, the draft CODA is intended to establish a resource planning regime that reflects the resource needs of each Utility operating company’s jurisdictional customers so that each Utility operating company would realize the benefits and costs of its own generation planning decisions.
Prior to that time, in early April 2010, Entergy Corporation and the Utility operating companies determined in connection with their decision-making process that it is appropriate to agree and commit that no Utility operating company will enter voluntarily into successor arrangements with the other Utility operating companies if its retail regulator finds successor arrangements are not in the public interest. Hugh McDonald, Entergy Arkansas president, notified the APSC of this decision, and explained the decision and commitment, in a letter filed with the APSC on April 26, 2010.
LPSC and City Council Action Related to the Entergy Arkansas and Entergy Mississippi Notices of Termination
In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the potential for a new agreement. Likewise, the New Orleans City Council opened a docket to gather information on progress towards a successor agreement. The LPSC subsequently passed a resolution stating that it cannot evaluate successor arrangements without having certainty about System Agreement exit obligations.
Independent Coordinator of Transmission
In 2000, the FERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of independent RTOs (regional transmission organizations). Delays in implementing the FERC RTO order occurred due to a variety of reasons, including the fact that utility companies, other stakeholders, and federal and state regulators have had to work to resolve various issues related to the establishment of such RTOs.
In November 2006, after nearly a decade of effort, including filings, orders, technical conferences, and proceedings at the FERC, the Utility operating companies installed the Southwest Power Pool (SPP) as their Independent Coordinator of Transmission (ICT). The installation does not transfer control of Entergy’s transmission system to the ICT, but rather vests with the ICT responsibility for:
· | granting or denying transmission service on the Utility operating companies’ transmission system. |
· | administering the Utility operating companies’ OASIS node for purposes of processing and evaluating transmission service requests and ensuring compliance with the Utility operating companies’ obligation to post transmission-related information. |
· | developing a base plan for the Utility operating companies’ transmission system that will result in the ICT making the determination on whether costs of transmission upgrades should be rolled into the Utility operating companies’ transmission rates or directly assigned to the customer requesting or causing an upgrade to be constructed. This should result in a transmission pricing structure that ensures that the Utility operating companies’ retail native load customers are required to pay for only those upgrades necessary to reliably serve their needs. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | serving as the reliability coordinator for the Entergy transmission system. |
· | overseeing the operation of the weekly procurement process (WPP). |
· | evaluating interconnection-related investments already made on the Entergy System for purposes of determining the future allocation of the uncredited portion of these investments, pursuant to a detailed methodology. The ICT agreement also clarifies the rights that customers receive when they fund a supplemental upgrade. |
In October 2008 the FERC issued an order accepting a tariff amendment establishing that the WPP shall take effect at a date to be determined, after completion of successful simulation trials and the ICT’s endorsement of the WPP’s implementation. On January 16, 2009, the Utility operating companies filed a compliance filing with the FERC that included the ICT’s endorsement of the WPP implementation, subject to the FERC’s acceptance of certain additional tariff amendments and the completion of simulation testing and certain other items. The Utility operating companies filed the tariff amendments supported by the ICT on the same day. The amendments proposed to further amend the WPP to (a) limit supplier offers in the WPP to on-peak pe riods and (b) eliminate the granting of certain transmission service through the WPP.
On March 17, 2009, the FERC issued an order conditionally approving the proposed modification to the WPP to allow the process to be implemented the week of March 23, 2009. In its order approving the requested modifications, the FERC imposed additional conditions related to the ICT arrangement and indicated it was going to evaluate the success of the ICT arrangement, including the cost and benefits of implementing the WPP and whether the WPP goes far enough to address the transmission access issues that the ICT and WPP were intended to address. The FERC, in conjunction with the APSC, the LPSC, the MPSC, the PUCT, and the City Council, hosted a conference on June 24, 2009, to discuss the ICT arrangement and transmission access on the Entergy transmission system. In compliance with the FERC’s March 2009 order, in November 2009 the Utility operating companies filed with the FERC a process for evaluating the modification or replacement of the current ICT and WPP arrangements.
During the conference, several issues were raised by regulators and market participants, including the adequacy of the Utility operating companies’ capital investment in the transmission system, the Utility operating companies’ compliance with the existing North American Electric Reliability Corporation (NERC) reliability planning standards, the availability of transmission service across the system, and whether the Utility operating companies could have purchased lower cost power from merchant generators located on the transmission system rather than running their older generating facilities. On July 20, 2009, the Utility operating companies filed comments with the FERC responding to the issues raised during the conference. The comments explain that: 1) the Utility operating companies believe that the ICT arrangement has fulfilled its objectives; 2) the Utility operating companies’ transmission planning practices comply with laws and regulations regarding the planning and operation of the transmission system; and 3) these planning practices have resulted in a system that meets applicable reliability standards and is sufficiently robust to allow the Utility operating companies both to substantially increase the amount of transmission service available to third parties and to make significant amounts of economic purchases from the wholesale market for the benefit of the Utility operating companies’ retail customers. The Utility operating companies also explain that, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies’ transmission system that limits the ability of the Utility operating companies as well as other parties to fully utilize the generating resources that have been granted transmission service. Additionally, the Utility operating companies commit in their response to exploring and working on potential reforms or alternatives for the ICT arrangement that could take effect following the initial term. The Utility operating companies’ comments also recognize that NERC is in the process of amending certain of its transmission reliability planning standards and that the amended standards, if approved by the FERC, will result in more stringent transmission planning criteria being applicable in the future. The FERC may also make other changes to transmission reliability standards. These changes to the reliability standards would result in increased capital expenditures by the Utility operating companies.
The Entergy Regional State Committee (E-RSC), which is comprised of representatives from all of the Utility operating companies' retail regulators, has been formed to consider several of these issues related to Entergy's transmission system. Among other things, the E-RSC in concert with the FERC plan to conduct a cost/benefit analysis comparing the ICT arrangement and a proposal under which Entergy would join the Southwest Power Pool RTO. The scope of the study was expanded in July 2010 to consider Entergy joining the Midwest ISO RTO as another alternative.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In September 2010, as modified in October 2010, the Utility operating companies filed a request for a two-year interim extension, with certain modifications, of the ICT arrangement, which was scheduled to expire on November 17, 2010. The filing stated that, if approved by the E-RSC during its October 20-21, 2010 meeting, the Utility operating companies will make a subsequent filing with the FERC to provide the E-RSC with the authority to, upon unanimous approval of all E-RSC members, (1) propose modifications to cost allocation methodology for transmission projects and (2) add transmission projects to the construction plan. On October 13, 2010, the LPSC issued an order approving proposals filed by Entergy Louisiana and Entergy Gulf States Louisiana to modify the cur rent ICT arrangement and to give the E-RSC authority in the two areas as described above. On October 20, 2010, the E-RSC unanimously voted in favor of the proposal granting the E-RSC authority in the two areas described above. The Utility operating companies have filed the necessary revisions to the Entergy OATT to implement the E-RSC's new authority. In November 2010 the FERC approved extension of the ICT arrangement for two years. In December 2010 the FERC approved the proposal to provide the E-RSC with authority in the two areas described above.
On September 30, 2010, the consultant presented its cost/benefit analysis of the Entergy and Cleco regions joining the SPP RTO. The cost/benefit analysis indicates that the Entergy region, including entities beyond the Utility operating companies, would realize a net cost of $438 million to a net benefit of $387 million, primarily depending upon transmission cost allocation issues. Addendum studies, including studies related to Entergy Arkansas and the Utility operating companies joining the Midwest ISO, are due to be completed by the end of the first quarter 2011. Pursuant to a schedule established by an LPSC ALJ, Entergy Gulf States Louisiana and Entergy Louisiana expect to make a filing in May 2011 that sets forth the results of the analysis of the ava ilable options and preliminary recommendations regarding which option is in the public interest. The other Utility operating companies expect to make similar filings at that time.
Notice to SERC Reliability Corporation Regarding Reliability Standards
Entergy has notified the SERC Reliability Corporation (SERC) of potential violations of certain North American Electric Reliability Corporation (NERC) reliability standards, including certain Critical Infrastructure Protection, Facility Connection, and System Protection Coordination standards. Entergy is working with the SERC to provide information concerning these potential violations. The Energy Policy Act of 2005 provides authority to impose civil penalties for violations of the Federal Power Act and FERC regulations.
U.S. Department of Justice Investigation
In September 2010, Entergy was notified that the U.S. Department of Justice had commenced a civil investigation of competitive issues concerning certain generation procurement, dispatch, and transmission system practices and policies of the Utility operating companies. The investigation is ongoing.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Market risk is the risk of changes in the value of commodity and financial instruments, or in future net income or cash flows, in response to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the following significant market risks:
· | The commodity price risk associated with the sale of electricity by the Entergy Wholesale Commodities business. |
· | The interest rate and equity price risk associated with Entergy’s investments in pension and other postretirement benefit trust funds. See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trust funds. |
· | The interest rate and equity price risk associated with Entergy’s investments in nuclear plant decommissioning trust funds, particularly in the Entergy Wholesale Commodities business. See Note 17 to the financial statements for details regarding Entergy’s decommissioning trust funds. |
· | The interest rate risk associated with changes in interest rates as a result of Entergy’s issuances of debt. Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization. See Notes 4 and 5 to the financial statements for the details of Entergy’s debt outstanding. |
The Utility business has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail rate regulators, the Utility operating companies hedge exposure to natural gas price volatility.
Entergy’s commodity and financial instruments are exposed to credit risk. Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy is also exposed to a potential demand on liquidity due to credit support requirements within its supply or sales agreements.
Commodity Price Risk
Power Generation
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Entergy Wholesale Commodities also sells unforced capacity from its nuclear plants to load-serving entities, which allows those companies to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward fixed price power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity a nd energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy to its counterparties, make capacity available to them, or both. The following is a summary as of December 31, 2010 of the amount of Entergy Wholesale Commodities’ nuclear power plants’ planned energy output that is sold forward under physical or financial contracts:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | �� | | | | | | | | | |
Percent of planned generation sold forward: | | | | | | | | | | |
| Unit-contingent | | 79% | | 59% | | 34% | | 14% | | 12% |
| Unit-contingent with guarantee of availability (1) | | 17% | | 14% | | 6% | | 3% | | 3% |
| Firm LD | | 3% | | 24% | | 0% | | 8% | | 0% |
| Offsetting positions | | (3)% | | (10)% | | 0% | | 0% | | 0% |
| Total energy sold forward | | 96% | | 87% | | 40% | | 25% | | 15% |
Planned generation (TWh) (4) | | 41 | | 41 | | 40 | | 41 | | 41 |
Average revenue under contract per MWh (2) (3) | | $53 | | $49 | | $47 | | $51 | | $51 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
(1) | A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees. |
(2) | The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant, which is through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far. |
(3) | Average revenue under contract may fluctuate due to positive or negative basis differences, option premiums, costs to convert firm LD to unit-contingent, and other risk management costs. Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA. |
(4) | Assumes license renewal for plants whose current licenses expire within five years. License renewal applications are in process for four units, as follows (with current license expirations in parentheses): Vermont Yankee (March 2012), Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015). |
Entergy estimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on December 31, 2010 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $17 million in 2011. Entergy estimates that, based on December 31, 2009 market conditions, planned generation volume, and hedged position, a $10 per MWh change in the annual average energy price would have had a corresponding effect on pre-tax net income of $53 million in 2010.
Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, NYPA and the subsidiaries that own the FitzPatrick and Indian Point 3 plants amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, the Entergy subsidiaries agreed to make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Entergy subsidiaries will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million.& #160; The annual payment for each year’s output is due by January 15 of the following year. Entergy will record the liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. In 2010, 2009, and 2008, Entergy Wholesale Commodities recorded a $72 million liability for generation during each of those years. An amount equal to the liability was recorded each year to the plant asset account as contingent purchase price consideration for the plants. This amount will be depreciated over the expected remaining useful life of the plants.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At December 31, 2010, based on power prices at that time, Entergy had credit exposure of $14 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commo dities segment) transactions, $20 million of guarantees that support letters of credit, and $5 million of posted cash collateral to the ISOs. As of December 31, 2010, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $123 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2010, Entergy would have been required to provide approximately $78 million of additional cash or letters of credit under some of the agreements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As of December 31, 2010, the counterparties or their guarantors for 99.7% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2015 have public investment grade credit ratings and 0.3% is with load-serving entities without public credit ratings.
In addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary as of December 31, 2010 of the amount of the Entergy Wholesale Commodities nuclear plants’ installed capacity that is sold forward, and the blended amount of the Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is sold forward:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | | | | | | | | | | |
Percent of capacity sold forward: | | | | | | | | | | |
| Bundled capacity and energy contracts | | 25% | | 18% | | 16% | | 16% | | 16% |
| Capacity contracts | | 37% | | 29% | | 26% | | 10% | | 0% |
| Total capacity sold forward | | 62% | | 47% | | 42% | | 26% | | 16% |
Planned net MW in operation | | 4,998 | | 4,998 | | 4,998 | | 4,998 | | 4,998 |
Average revenue under contract per kW per month | | $2.6 | | $3.0 | | $3.1 | | $3.5 | | $- |
(applies to capacity contracts only) | | | | | | | | | | |
| | | | | | | | | | |
Blended Capacity and Energy Recap (based on revenues) | | | | | | | | | | |
% of planned generation and capacity sold forward | | 96% | | 87% | | 40% | | 26% | | 15% |
Average revenue under contract per MWh | | $54 | | $51 | | $50 | | $53 | | $52 |
The preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy’s financial position or results of operations.
Nuclear Decommissioning Costs
Entergy subsidiaries own nuclear generation facilities in both its Utility and Entergy Wholesale Commodities business units. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service, and money is collected and deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates:
· | Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by annual factors ranging from approximately 3% to 3.5%. A 50 basis point change in this assumption could change the ultimate cost of decommissioning a facility by as much as an approximate average of 20% to 25%. To the extent that a high probability of license renewal is assumed, a change in the estimated inflation or cost escalation rate has a larger effect on the undiscounted cash flows because the rate of inflation is factored into the calculation for a longer period of time. |
· | Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant’s retirement must be estimated. A high probability that the plant’s license will be renewed and operate for some time beyond the original license term has currently been assumed for purposes of calculating the decommissioning liability for a number of Entergy’s nuclear units. Second, an assumption must be made whether decommissioning will begin immediately upon plant retirement, or whether the plant will be held in “safestore” status for later decommissioning, as permitted by applicable regulations. While the effect of these assumptions cannot be determined with pr ecision, a change of assumption of either renewal or use of a “safestore” status can possibly change the present value of these obligations. Future revisions to appropriately reflect changes needed to the estimate of decommissioning costs will affect net income, only to the extent that the estimate of any reduction in the liability exceeds the amount of the undepreciated asset retirement cost at the date of the revision, for unregulated portions of Entergy’s business. Any increases in the liability recorded due to such changes are capitalized and depreciated over the asset’s remaining economic life. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. However the DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy is continuing to pursue damages claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and mainta ining these facilities can have a significant effect (as much as an average of 20% to 30% of estimated decommissioning costs). Entergy’s decommissioning studies may include cost estimates for spent fuel storage. However, these estimates could change in the future based on the timing of the opening of an appropriate facility designated by the federal government to receive spent nuclear fuel. |
· | Technology and Regulation – Over the past several years, more practical experience with the actual decommissioning of facilities has been gained and that experience has been incorporated in to Entergy’s current decommissioning cost estimates. However, given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur and affect current cost estimates. If regulations regarding nuclear decommissioning were to change, this could have a potentially significant effect on cost estimates. The effect of these potential changes is not presently determinable. |
· | Interest Rates - The estimated decommissioning costs that form the basis for the decommissioning liability recorded on the balance sheet are discounted to present values using a credit-adjusted risk-free rate. When the decommissioning cost estimate is significantly changed requiring a revision to the decommissioning liability and the change results in an increase in cash flows, that increase is discounted using a current credit-adjusted risk-free rate. Under accounting rules, if the revision in estimate results in a decrease in estimated cash flows, that decrease is discounted using the previous credit-adjusted risk-free rate. Therefore, to the extent that one of the factors noted above changes resulting in a significant increase in estimated cash flows, current int erest rates will affect the calculation of the present value of the additional decommissioning liability. |
In the first quarter 2009, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in an $8.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the second quarter 2009, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $4.2 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the fourth quarter 2009, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $78.7 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement obligation asset that will be depreciated over the remaining life of the unit.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Impairment of Long-lived Assets and Trust Fund Investments
Entergy has significant investments in long-lived assets in all of its segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment whenever there are indications that impairments may exist. This evaluation involves a significant degree of estimation and uncertainty. In the Utility business, portions of River Bend are not included in rate base, which could reduce the revenue that would otherwise be recovered for the applicable portions of its generation. In the Entergy Wholesale Commodities business, Entergy’s investments in merchant nuclear generation assets are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses are not renewed. Entergy’s investments in merchant non-nuclear generation assets are subject to impairment if adverse market conditions arise.
In order to determine if Entergy should recognize an impairment of a long-lived asset that is to be held and used, accounting standards require that the sum of the expected undiscounted future cash flows from the asset be compared to the asset’s carrying value. The carrying value of the asset includes any capitalized asset retirement cost associated with the recording of an additional decommissioning liability, therefore changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded; if such cash flows are less than the carrying value, Entergy is required to record an impairment charge to write the asset down to its fair value.& #160; If an asset is held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value.
These estimates are based on a number of key assumptions, including:
· | Future power and fuel prices - Electricity and gas prices have been very volatile in recent years, and this volatility is expected to continue. This volatility necessarily increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows. |
· | Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, the market for such assets is volatile and the value of individual assets is impacted by factors unique to those assets. |
· | Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant impact on operations could cause a significant change in these assumptions. |
· | Timing - Entergy currently assumes, for a number of its nuclear units, that the plant’s license will be renewed. A change in that assumption could have a significant effect on the expected future cash flows and result in a significant effect on operations. |
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
If Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 includes a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued operations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plan t, including nuclear fuel, is $424 million as of December 31, 2010.
Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary-impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). For debt securities held as of January 1, 2009 for which an othe r-than-temporary impairment had previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other than temporary impairments relating to credit losses on debt securities in 2010 or 2009. The assessment of whether an investment in an equity security has suffered an other than temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of inve stments. As discussed in Note 1 to the financial statements, unrealized losses that are not considered temporarily impaired are recorded in earnings for Entergy Wholesale Commodities. Entergy Wholesale Commodities recorded charges to other income of $1 million in 2010, $86 million in 2009, and $50 million in 2008 resulting from the recognition of impairments of certain securities held in its decommissioning trust funds that are not considered temporary. Additional impairments could be recorded in 2011 to the extent that then current market conditions change the evaluation of recoverability of unrealized losses.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility and E ntergy Wholesale Commodities segments.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Assumptions
Key actuarial assumptions utilized in determining these costs include:
· | Discount rates used in determining future benefit obligations; |
· | Projected health care cost trend rates; |
· | Expected long-term rate of return on plan assets; and |
· | Rate of increase in future compensation levels. |
Entergy reviews these assumptions on an annual basis and adjusts them as necessary. The falling interest rate environment and worse-than-expected performance of the financial equity markets in 2008, partially offset by recoveries in 2009 and 2010, have impacted Entergy’s funding and reported costs for these benefits. In addition, these trends have caused Entergy to make a number of adjustments to its assumptions.
In selecting an assumed discount rate to calculate benefit obligations, Entergy reviews market yields on high-quality corporate debt and matches these rates with Entergy’s projected stream of benefit payments. Based on recent market trends, the discount rates used to calculate its qualified pension benefit obligation decreased from a range of 6.10% to 6.30% for its specific pension plans in 2009 to a range of 5.6% to 5.7% in 2010. The discount rate used to calculate its other postretirement benefit obligation also decreased from 6.10% in 2009 to 5.5% in 2010. Entergy’s assumed discount rates used to calculate the 2008 pension and other postretirement obligations were 6.75% and 6.7%, respectively.
Entergy reviews actual recent cost trends and projected future trends in establishing health care cost trend rates. Based on this review, Entergy’s health care cost trend rate assumption used in calculating the December 31, 2010 accumulated postretirement benefit obligation was an 8.5% increase in health care costs in 2011 gradually decreasing each successive year, until it reaches a 4.75% annual increase in health care costs in 2019 and beyond for pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees.
The assumed rate of increase in future compensation levels used to calculate benefit obligations was 4.23% in 2010 and 2009.
In determining its expected long-term rate of return on plan assets used in calculation of benefit plan costs, Entergy reviews past long-term performance, asset allocations, and long-term inflation assumptions. Entergy targets an asset allocation for its qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities. The target allocations for Entergy’s non-taxable postretirement benefit assets are 55% equity securities and 45% fixed-income securities and, for its taxable other postretirement benefit assets, 35% equity securities and 65% fixed-income securities. Entergy’s expected long-term rate of return on qualified pension assets and non-taxable other postretirement assets used to calculate qualified pension and other postretirement benefits costs was 8.5% and 7.75% , respectively for 2010 and 8.5% for both qualified and other postretirement benefit costs for 2009 and 2008. Entergy’s expected long-term rates of return on qualified pension assets and non-taxable other postretirement assets used to calculate 2011 qualified pension and other postretirement benefits costs were 8.5% and 7.75%, respectively. Entergy’s expected long-term rates of return on taxable other postretirement assets used to calculate other postretirement benefits costs were 5.5% in 2011 and 2010, 6% in 2009 and 5.5% in 2008.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Discount rate | | (0.25%) | | $13,682 | | $131,414 |
Rate of return on plan assets | | (0.25%) | | $7,634 | | - |
Rate of increase in compensation | | 0.25% | | $6,367 | | $30,374 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Health care cost trend | | 0.25% | | $6,500 | | $34,291 |
Discount rate | | (0.25%) | | $4,375 | | $40,557 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Accounting Mechanisms
Effective December 31, 2006, accounting standards required an employer to recognize in its balance sheet the funded status of its benefit plans. Refer to Note 11 to the financial statements for a further discussion of Entergy’s funded status.
In accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees.
Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Costs and Funding
In 2010, Entergy’s total qualified pension cost was $147.1 million. Entergy anticipates 2011 qualified pension cost to be $154 million. Pension funding was $454 million for 2010. Entergy’s contributions to the pension trust are currently estimated to be approximately $368.8 million in 2011, although the required pension contributions will not be known with more certainty until the January 1, 2011 valuations are completed by April 1, 2011.
Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall which, under the Pension Protection Act, must be funded over a seven-year rolling period. The
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on a calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets and the funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury; therefore, periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.
Total postretirement health care and life insurance benefit costs for Entergy in 2010 were $111.1 million, including $26.6 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy expects 2011 postretirement health care and life insurance benefit costs to be $114.7 million. This includes a projected $33 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy contributed $75 million to its postretirement plans in 2010. Entergy’s current estimate of contributions to its other postretirement plans is approximately $78 million in 2011.
Federal Healthcare Legislation
The Patient Protection and Affordable Care Act (PPACA) became federal law on March 23, 2010, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 became federal law and amended certain provisions of the PPACA. These new federal laws change the law governing employer-sponsored group health plans, like Entergy's plans, and include, among other things, the following significant provisions:
· | A 40% excise tax on per capita medical benefit costs that exceed certain thresholds; |
· | Change in coverage limits for dependants; and |
· | Elimination of lifetime caps. |
The total impact of PPACA is not yet determinable because technical guidance regarding application must still be issued. Additionally, ongoing litigation and political discussions are in progress regarding the constitutionality of and the potential repeal of health care reform, although whether that occurs and what parts of health care reform would be invalidated or repealed is not yet known. Entergy will continue to monitor these developments to determine the possible impact on Entergy as a result of PPACA. Entergy is participating in the programs currently provided for under PPACA, such as the early retiree reinsurance program, which may provide for some limited reimbursements of certain claims for early retirees aged 55 to 64 who are not yet eligible for Medicare.
One provision of the new law that is effective in 2013 eliminates the federal income tax deduction for prescription drug expenses of Medicare beneficiaries for which the plan sponsor also receives the retiree drug subsidy under Part D. Entergy receives subsidy payments under the Medicare Part D plan and therefore in the first quarter 2010 recorded a reduction to the deferred tax asset related to the unfunded other postretirement benefit obligation. The offset was recorded as a $16 million charge to income tax expense or, for the Utility, including each Registrant Subsidiary, as a regulatory asset.
Other Contingencies
As a company with multi-state domestic utility operations and a history of international investments, Entergy is subject to a number of federal, state, and international laws and regulations and other factors and conditions in the areas in which it operates, which potentially subject it to environmental, litigation, and other risks. Entergy periodically evaluates its exposure for such risks and records a reserve for those matters which are considered probable and estimable in accordance with generally accepted accounting principles.
Environmental
Entergy must comply with environmental laws and regulations applicable to the handling and disposal of hazardous waste. Under these various laws and regulations, Entergy could incur substantial costs to restore properties consistent with the various standards. Entergy conducts studies to determine the extent of any required remediation and has recorded reserves based upon its evaluation of the likelihood of loss and expected dollar amount for each issue. Additional sites could be identified which require environmental remediation for which Entergy could be liable. The amounts of environmental reserves recorded can be significantly affected by the following external events or conditions:
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Changes to existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. |
· | The identification of additional sites or the filing of other complaints in which Entergy may be asserted to be a potentially responsible party. |
· | The resolution or progression of existing matters through the court system or resolution by the EPA. |
Litigation
Entergy has been named as defendant in a number of lawsuits involving employment, ratepayer, and injuries and damages issues, among other matters. Entergy periodically reviews the cases in which it has been named as defendant and assesses the likelihood of loss in each case as probable, reasonably estimable, or remote and records reserves for cases which have a probable likelihood of loss and can be estimated. Notes 2 and 8 to the financial statements include more detail on ratepayer and other lawsuits and management’s assessment of the adequacy of reserves recorded for these matters. Given the environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is named as a defendant, however, the ultimate outcome of the litigation Entergy is exposed to has the potential to materially affect the results of operations of Entergy, or its operating company subsidiaries.
Uncertain Tax Positions
Entergy’s operations, including acquisitions and divestitures, require Entergy to evaluate risks such as the potential tax effects of a transaction, or warranties made in connection with such a transaction. Entergy believes that it has adequately assessed and provided for these types of risks, where applicable. Any reserves recorded for these types of issues, however, could be significantly affected by events such as claims made by third parties under warranties, additional transactions contemplated by Entergy, or completion of reviews of the tax treatment of certain transactions or issues by taxing authorities. Entergy does not expect a material adverse effect on earnings from these matters.
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
REPORT OF MANAGEMENT
Management of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial statements and related financial information included in this document. To meet this responsibility, management establishes and maintains a system of internal controls designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements in accordance with generally accepted accounting principles. This system includes communication through written policies and procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility and training of personnel. This system is also tested by a comprehensive internal audit program.
Entergy management assesses the effectiveness of Entergy’s internal control over financial reporting on an annual basis. In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and presentation.
Entergy Corporation and the Registrant Subsidiaries’ independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the effectiveness of Entergy’s internal control over financial reporting as of December 31, 2010, which is included herein on pages 390 through 397.
In addition, the Audit Committee of the Board of Directors, composed solely of independent Directors, meets with the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal controls, and auditing and financial reporting matters. The Audit Committee appoints the independent auditors annually, seeks shareholder ratification of the appointment, and reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present, providing free access to the Audit Committee.
Based on management’s assessment of internal controls using the COSO criteria, management believes that Entergy and each of the Registrant Subsidiaries maintained effective internal control over financial reporting as of December 31, 2010. Management further believes that this assessment, combined with the policies and procedures noted above, provides reasonable assurance that Entergy’s and each of the Registrant Subsidiaries’ financial statements are fairly and accurately presented in accordance with generally accepted accounting principles.
J. WAYNE LEONARD Chairman of the Board and Chief Executive Officer of Entergy Corporation | LEO P. DENAULT Executive Vice President and Chief Financial Officer of Entergy Corporation |
HUGH T. MCDONALD Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc. | WILLIAM M. MOHL Chairman of the Board, President, and Chief Executive Officer of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC |
HALEY R. FISACKERLY Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc. | CHARLES L. RICE, JR. President and Chief Executive Officer of Entergy New Orleans, Inc. |
JOSEPH F. DOMINO Chairman of the Board, President, and Chief Executive Officer of Entergy Texas, Inc. | JOHN T. HERRON Chairman, President, and Chief Executive Officer of System Energy Resources, Inc. |
THEODORE H. BUNTING, JR. Senior Vice President and Chief Accounting Officer (and acting principal financial officer) of Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and Entergy Texas, Inc. | WANDA C. CURRY Vice President and Chief Financial Officer of System Energy Resources, Inc. |
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SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands, Except Percentages and Per Share Amounts) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 11,487,577 | | | $ | 10,745,650 | | | $ | 13,093,756 | | | $ | 11,484,398 | | | $ | 10,932,158 | |
Income from continuing operations | | $ | 1,270,305 | | | $ | 1,251,050 | | | $ | 1,240,535 | | | $ | 1,159,954 | | | $ | 1,133,098 | |
Earnings per share from continuing operations: | | | | | | | | | | | | | | | | | |
Basic | | $ | 6.72 | | | $ | 6.39 | | | $ | 6.39 | | | $ | 5.77 | | | $ | 5.46 | |
Diluted | | $ | 6.66 | | | $ | 6.30 | | | $ | 6.20 | | | $ | 5.60 | | | $ | 5.36 | |
Dividends declared per share | | $ | 3.24 | | | $ | 3.00 | | | $ | 3.00 | | | $ | 2.58 | | | $ | 2.16 | |
Return on common equity | | | 14.61 | % | | | 14.85 | % | | | 15.42 | % | | | 14.13 | % | | | 14.21 | % |
Book value per share, year-end | | $ | 47.53 | | | $ | 45.54 | | | $ | 42.07 | | | $ | 40.71 | | | $ | 40.45 | |
Total assets | | $ | 38,685,276 | | | $ | 37,561,953 | | | $ | 36,616,818 | | | $ | 33,643,002 | | | $ | 31,082,731 | |
Long-term obligations (1) | | $ | 11,575,973 | | | $ | 11,277,314 | | | $ | 11,734,411 | | | $ | 10,165,735 | | | $ | 9,194,206 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet, and in 2006 preferred stock with sinking fund. | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Utility Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 3,375 | | | $ | 2,999 | | | $ | 3,610 | | | $ | 3,228 | | | $ | 3,193 | |
Commercial | | | 2,317 | | | | 2,184 | | | | 2,735 | | | | 2,413 | | | | 2,318 | |
Industrial | | | 2,207 | | | | 1,997 | | | | 2,933 | | | | 2,545 | | | | 2,630 | |
Governmental | | | 212 | | | | 204 | | | | 248 | | | | 221 | | | | 155 | |
Total retail | | | 8,111 | | | | 7,384 | | | | 9,526 | | | | 8,407 | | | | 8,296 | |
Sales for resale (1) | | | 389 | | | | 206 | | | | 325 | | | | 393 | | | | 612 | |
Other | | | 241 | | | | 290 | | | | 222 | | | | 246 | | | | 155 | |
Total | | $ | 8,741 | | | $ | 7,880 | | | $ | 10,073 | | | $ | 9,046 | | | $ | 9,063 | |
Utility Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | |
Residential | | | 37,465 | | | | 33,626 | | | | 33,047 | | | | 33,281 | | | | 31,665 | |
Commercial | | | 28,831 | | | | 27,476 | | | | 27,340 | | | | 27,408 | | | | 25,079 | |
Industrial | | | 38,751 | | | | 35,638 | | | | 37,843 | | | | 38,985 | | | | 38,339 | |
Governmental | | | 2,463 | | | | 2,408 | | | | 2,379 | | | | 2,339 | | | | 1,580 | |
Total retail | | | 107,510 | | | | 99,148 | | | | 100,609 | | | | 102,013 | | | | 96,663 | |
Sales for resale (1) | | | 4,372 | | | | 4,862 | | | | 5,401 | | | | 6,145 | | | | 10,803 | |
Total | | | 111,882 | | | | 104,010 | | | | 106,010 | | | | 108,158 | | | | 107,466 | |
| | | | | | | | | | | | | | | | | | | | |
Competitive Businesses: | | | | | | | | | | | | | | | | | | | | |
Operating Revenues | | $ | 2,549 | | | $ | 2,693 | | | $ | 2,779 | | | $ | 2,232 | | | $ | 1,785 | |
Billed Electric Energy Sales (GWh) | | | 42,682 | | | | 43,969 | | | | 44,747 | | | | 40,916 | | | | 38,289 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes sales to Entergy New Orleans in 2006 , which was deconsolidated while its bankruptcy reorganization proceeding was pending. | |
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To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
New Orleans, Louisiana
We have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2010 and 2009, and the related consolidated income statements, consolidated statements of changes in equity and comprehensive income, and consolidated statements of cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Corporation and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2011 expressed an unqualified opinion on the Corporation’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2011
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| |
CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands, Except Share Data) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 8,740,637 | | | $ | 7,880,016 | | | $ | 10,073,160 | |
Natural gas | | | 197,658 | | | | 172,213 | | | | 241,856 | |
Competitive businesses | | | 2,549,282 | | | | 2,693,421 | | | | 2,778,740 | |
TOTAL | | | 11,487,577 | | | | 10,745,650 | | | | 13,093,756 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operating and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 2,518,582 | | | | 2,309,831 | | | | 3,577,764 | |
Purchased power | | | 1,659,416 | | | | 1,395,203 | | | | 2,491,200 | |
Nuclear refueling outage expenses | | | 256,123 | | | | 241,310 | | | | 221,759 | |
Other operation and maintenance | | | 2,969,402 | | | | 2,750,810 | | | | 2,742,762 | |
Decommissioning | | | 211,736 | | | | 199,063 | | | | 189,409 | |
Taxes other than income taxes | | | 534,299 | | | | 503,859 | | | | 496,952 | |
Depreciation and amortization | | �� | 1,069,894 | | | | 1,082,775 | | | | 1,030,860 | |
Other regulatory charges (credits) - net | | | 44,921 | | | | (21,727 | ) | | | 59,883 | |
TOTAL | | | 9,264,373 | | | | 8,461,124 | | | | 10,810,589 | |
| | | | | | | | | | | | |
Gain on sale of business | | | 44,173 | | | | - | | | | - | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 2,267,377 | | | | 2,284,526 | | | | 2,283,167 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 59,381 | | | | 59,545 | | | | 44,523 | |
Interest and investment income | | | 185,455 | | | | 236,628 | | | | 197,872 | |
Other than temporary impairment losses | | | (1,378 | ) | | | (86,069 | ) | | | (49,656 | ) |
Miscellaneous - net | | | (48,124 | ) | | | (40,396 | ) | | | (23,452 | ) |
TOTAL | | | 195,334 | | | | 169,708 | | | | 169,287 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 610,146 | | | | 603,679 | | | | 634,188 | |
Allowance for borrowed funds used during construction | | | (34,979 | ) | | | (33,235 | ) | | | (25,267 | ) |
TOTAL | | | 575,167 | | | | 570,444 | | | | 608,921 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 1,887,544 | | | | 1,883,790 | | | | 1,843,533 | |
| | | | | | | | | | | | |
Income taxes | | | 617,239 | | | | 632,740 | | | | 602,998 | |
| | | | | | | | | | | | |
CONSOLIDATED NET INCOME | | | 1,270,305 | | | | 1,251,050 | | | | 1,240,535 | |
| | | | | | | | | | | | |
Preferred dividend requirements of subsidiaries | | | 20,063 | | | | 19,958 | | | | 19,969 | |
| | | | | | | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | | $ | 1,250,242 | | | $ | 1,231,092 | | | $ | 1,220,566 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Earnings per average common share: | | | | | | | | | | | | |
Basic | | $ | 6.72 | | | $ | 6.39 | | | $ | 6.39 | |
Diluted | | $ | 6.66 | | | $ | 6.30 | | | $ | 6.20 | |
Dividends declared per common share | | $ | 3.24 | | | $ | 3.00 | | | $ | 3.00 | |
| | | | | | | | | | | | |
Basic average number of common shares outstanding | | | 186,010,452 | | | | 192,772,032 | | | | 190,925,613 | |
Diluted average number of common shares outstanding | | | 187,814,235 | | | | 195,838,068 | | | | 201,011,588 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Consolidated net income | | $ | 1,270,305 | | | $ | 1,251,050 | | | $ | 1,240,535 | |
Adjustments to reconcile consolidated net income to net cash flow | | | | | | | | | | | | |
provided by operating activities: | | | | | | | | | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 1,705,331 | | | | 1,458,861 | | | | 1,391,689 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 718,987 | | | | 864,684 | | | | 333,948 | |
Gain on sale of business | | | (44,173 | ) | | | - | | | | - | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (99,640 | ) | | | 116,444 | | | | 78,653 | |
Fuel inventory | | | (10,665 | ) | | | 19,291 | | | | (7,561 | ) |
Accounts payable | | | 216,635 | | | | (14,251 | ) | | | (23,225 | ) |
Prepaid taxes and taxes accrued | | | (116,988 | ) | | | (260,029 | ) | | | 122,134 | |
Interest accrued | | | 17,651 | | | | 4,974 | | | | (652 | ) |
Deferred fuel | | | 8,909 | | | | 72,314 | | | | (38,500 | ) |
Other working capital accounts | | | (160,326 | ) | | | (43,391 | ) | | | (119,296 | ) |
Changes in provisions for estimated losses | | | 265,284 | | | | (12,030 | ) | | | 12,462 | |
Changes in other regulatory assets | | | 339,408 | | | | (415,157 | ) | | | (324,211 | ) |
Changes in pensions and other postretirement liabilities | | | (80,844 | ) | | | 71,789 | | | | 828,160 | |
Other | | | (103,793 | ) | | | (181,391 | ) | | | (169,808 | ) |
Net cash flow provided by operating activities | | | 3,926,081 | | | | 2,933,158 | | | | 3,324,328 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction/capital expenditures | | | (1,974,286 | ) | | | (1,931,245 | ) | | | (2,212,255 | ) |
Allowance for equity funds used during construction | | | 59,381 | | | | 59,545 | | | | 44,523 | |
Nuclear fuel purchases | | | (407,711 | ) | | | (525,474 | ) | | | (423,951 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | - | | | | 284,997 | | | | 297,097 | |
Proceeds from sale of assets and businesses | | | 228,171 | | | | 39,554 | | | | 30,725 | |
Payment for purchase of plant | | | - | | | | - | | | | (266,823 | ) |
Insurance proceeds received for property damages | | | 7,894 | | | | 53,760 | | | | 130,114 | |
Changes in transition charge account | | | (29,945 | ) | | | (1,036 | ) | | | 7,211 | |
NYPA value sharing payment | | | (72,000 | ) | | | (72,000 | ) | | | (72,000 | ) |
Payments to storm reserve escrow account | | | (296,614 | ) | | | (6,802 | ) | | | (248,863 | ) |
Receipts from storm reserve escrow account | | | 9,925 | | | | - | | | | 249,461 | |
Decrease (increase) in other investments | | | 24,956 | | | | 100,956 | | | | (73,431 | ) |
Proceeds from nuclear decommissioning trust fund sales | | | 2,606,383 | | | | 2,570,523 | | | | 1,652,277 | |
Investment in nuclear decommissioning trust funds | | | (2,730,377 | ) | | | (2,667,172 | ) | | | (1,704,181 | ) |
Net cash flow used in investing activities | | | (2,574,223 | ) | | | (2,094,394 | ) | | | (2,590,096 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | |
Proceeds from the issuance of: | | | | | | | | | |
Long-term debt | | | 3,870,694 | | | | 2,003,469 | | | | 3,456,695 | |
Common stock and treasury stock | | | 51,163 | | | | 28,198 | | | | 34,775 | |
Retirement of long-term debt | | | (4,178,127 | ) | | | (1,843,169 | ) | | | (2,486,806 | ) |
Repurchase of common stock | | | (878,576 | ) | | | (613,125 | ) | | | (512,351 | ) |
Redemption of preferred stock | | | - | | | | (1,847 | ) | | | - | |
Changes in credit borrowings - net | | | (8,512 | ) | | | (25,000 | ) | | | 30,000 | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (603,854 | ) | | | (576,956 | ) | | | (573,045 | ) |
Preferred stock | | | (20,063 | ) | | | (19,958 | ) | | | (20,025 | ) |
Net cash flow used in financing activities | | | (1,767,275 | ) | | | (1,048,388 | ) | | | (70,757 | ) |
| | | | | | | | | | | | |
Effect of exchange rates on cash and cash equivalents | | | 338 | | | | (1,316 | ) | | | 3,288 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (415,079 | ) | | | (210,940 | ) | | | 666,763 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 1,709,551 | | | | 1,920,491 | | | | 1,253,728 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 1,294,472 | | | $ | 1,709,551 | | | $ | 1,920,491 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 540,352 | | | $ | 568,417 | | | $ | 612,288 | |
Income taxes | | $ | 32,144 | | | $ | 43,057 | | | $ | 137,234 | |
| | | | | | | | | | | | |
Noncash financing activities: | | | | | | | | | | | | |
Long-term debt retired (equity unit notes) | | | - | | | $ | (500,000 | ) | | | - | |
Common stock issued in settlement of equity unit purchase contracts | | | - | | | $ | 500,000 | | | | - | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
CONSOLIDATED BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 76,290 | | | $ | 85,861 | |
Temporary cash investments | | | 1,218,182 | | | | 1,623,690 | |
Total cash and cash equivalents | | | 1,294,472 | | | | 1,709,551 | |
Securitization recovery trust account | | | 43,044 | | | | 13,098 | |
Accounts receivable: | | | | | | | | |
Customer | | | 602,796 | | | | 553,692 | |
Allowance for doubtful accounts | | | (31,777 | ) | | | (27,631 | ) |
Other | | | 161,662 | | | | 152,303 | |
Accrued unbilled revenues | | | 302,901 | | | | 302,463 | |
Total accounts receivable | | | 1,035,582 | | | | 980,827 | |
Deferred fuel costs | | | 64,659 | | | | 126,798 | |
Accumulated deferred income taxes | | | 8,472 | | | | - | |
Fuel inventory - at average cost | | | 207,520 | | | | 196,855 | |
Materials and supplies - at average cost | | | 866,908 | | | | 825,702 | |
Deferred nuclear refueling outage costs | | | 218,423 | | | | 225,290 | |
System agreement cost equalization | | | 52,160 | | | | 70,000 | |
Prepaid taxes | | | 301,807 | | | | 184,819 | |
Prepayments and other | | | 246,036 | | | | 201,221 | |
TOTAL | | | 4,339,083 | | | | 4,534,161 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 40,697 | | | | 39,580 | |
Decommissioning trust funds | | | 3,595,716 | | | | 3,211,183 | |
Non-utility property - at cost (less accumulated depreciation) | | | 257,847 | | | | 247,664 | |
Other | | | 405,946 | | | | 120,273 | |
TOTAL | | | 4,300,206 | | | | 3,618,700 | |
| | | | | | | | |
PROPERTY, PLANT AND EQUIPMENT | | | | | | | | |
Electric | | | 37,153,061 | | | | 36,343,772 | |
Property under capital lease | | | 800,078 | | | | 783,096 | |
Natural gas | | | 330,608 | | | | 314,256 | |
Construction work in progress | | | 1,661,560 | | | | 1,547,319 | |
Nuclear fuel under capital lease | | | - | | | | 527,521 | |
Nuclear fuel | | | 1,377,962 | | | | 739,827 | |
TOTAL PROPERTY, PLANT AND EQUIPMENT | | | 41,323,269 | | | | 40,255,791 | |
Less - accumulated depreciation and amortization | | | 17,474,914 | | | | 16,866,389 | |
PROPERTY, PLANT AND EQUIPMENT - NET | | | 23,848,355 | | | | 23,389,402 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 845,725 | | | | 816,856 | |
Other regulatory assets (includes securitization property of $882,346 as of December 31, 2010) | | | 3,838,237 | | | | 3,647,154 | |
Deferred fuel costs | | | 172,202 | | | | 172,202 | |
Goodwill | | | 377,172 | | | | 377,172 | |
Accumulated deferred income taxes | | | 54,523 | | | | - | |
Other | | | 909,773 | | | | 1,006,306 | |
TOTAL | | | 6,197,632 | | | | 6,019,690 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 38,685,276 | | | $ | 37,561,953 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES | |
CONSOLIDATED BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | 299,548 | | | $ | 711,957 | |
Notes payable and commercial paper | | | 154,135 | | | | 30,031 | |
Accounts payable | | | 1,181,099 | | | | 998,228 | |
Customer deposits | | | 335,058 | | | | 323,342 | |
Accumulated deferred income taxes | | | 49,307 | | | | 48,584 | |
Interest accrued | | | 217,685 | | | | 192,283 | |
Deferred fuel costs | | | 166,409 | | | | 219,639 | |
Obligations under capital leases | | | 3,388 | | | | 212,496 | |
Pension and other postretirement liabilities | | | 39,862 | | | | 55,031 | |
System agreement cost equalization | | | 52,160 | | | | 187,204 | |
Other | | | 277,598 | | | | 215,202 | |
TOTAL | | | 2,776,249 | | | | 3,193,997 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 8,573,646 | | | | 7,662,798 | |
Accumulated deferred investment tax credits | | | 292,330 | | | | 308,395 | |
Obligations under capital leases | | | 42,078 | | | | 354,233 | |
Other regulatory liabilities | | | 539,026 | | | | 378,862 | |
Decommissioning and asset retirement cost liabilities | | | 3,148,479 | | | | 2,939,539 | |
Accumulated provisions | | | 395,250 | | | | 141,315 | |
Pension and other postretirement liabilities | | | 2,175,364 | | | | 2,241,039 | |
Long-term debt (includes securitization bonds of $931,131 as of December 31, 2010) | | | 11,317,157 | | | | 10,705,738 | |
Other | | | 618,559 | | | | 711,334 | |
TOTAL | | | 27,101,889 | | | | 25,443,253 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Subsidiaries' preferred stock without sinking fund | | | 216,738 | | | | 217,343 | |
| | | | | | | | |
EQUITY | | | | | | | | |
Common Shareholders' Equity: | | | | | | | | |
Common stock, $.01 par value, authorized 500,000,000 shares; | | | | | | | | |
issued 254,752,788 shares in 2010 and in 2009 | | | 2,548 | | | | 2,548 | |
Paid-in capital | | | 5,367,474 | | | | 5,370,042 | |
Retained earnings | | | 8,689,401 | | | | 8,043,122 | |
Accumulated other comprehensive loss | | | (38,212 | ) | | | (75,185 | ) |
Less - treasury stock, at cost (76,006,920 shares in 2010 and | | | | | | | | |
65,634,580 shares in 2009) | | | 5,524,811 | | | | 4,727,167 | |
Total common shareholders' equity | | | 8,496,400 | | | | 8,613,360 | |
Subsidiaries' preferred stock without sinking fund | | | 94,000 | | | | 94,000 | |
TOTAL | | | 8,590,400 | | | | 8,707,360 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 38,685,276 | | | $ | 37,561,953 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | Common Shareholders’ Equity | | | |
| | Subsidiaries’ Preferred Stock | | | Common Stock | | | Treasury Stock | | | Paid-in Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income (Loss) | | | Total | |
| | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 94,000 | | | $ | 2,482 | | | $ | (3,734,865 | ) | | $ | 4,850,769 | | | $ | 6,735,965 | | | $ | 8,320 | | | $ | 7,956,671 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 19,969 | | | | - | | | | - | | | | - | | | | 1,220,566 | | | | - | | | | 1,240,535 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized gain (net of tax expense of $78,837) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 133,370 | | | | 133,370 | |
Pension and other postretirement liabilities (net of tax benefit of $68,076) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (125,087 | ) | | | (125,087 | ) |
Net unrealized investment losses (net of tax benefit of $108,049) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (126,013 | ) | | | (126,013 | ) |
Foreign currency translation (net of tax benefit of $1,770) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,288 | ) | | | (3,288 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,119,517 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (512,351 | ) | | | - | | | | - | | | | - | | | | (512,351 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 72,002 | | | | 18,534 | | | | - | | | | - | | | | 90,536 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (573,924 | ) | | | - | | | | (573,924 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (19,969 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (19,969 | ) |
Capital stock and other expenses | | | - | | | | - | | | | - | | | | - | | | | 112 | | | | - | | | | 112 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2008 | | $ | 94,000 | | | $ | 2,482 | | | $ | (4,175,214 | ) | | $ | 4,869,303 | | | $ | 7,382,719 | | | $ | (112,698 | ) | | $ | 8,060,592 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 19,958 | | | | - | | | | - | | | | - | | | | 1,231,092 | | | | - | | | | 1,251,050 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized loss (net of tax expense of $333) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,887 | ) | | | (2,887 | ) |
Pension and other postretirement liabilities (net of tax benefit of $34,415) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (35,707 | ) | | | (35,707 | ) |
Net unrealized investment gains (net of tax expense of $102,845) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 82,929 | | | | 82,929 | |
Foreign currency translation (net of tax benefit of $246) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (457 | ) | | | (457 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,294,928 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (613,125 | ) | | | - | | | | - | | | | - | | | | (613,125 | ) |
Common stock issuances in settlement of equity unit purchase contracts | | | - | | | | 66 | | | | - | | | | 499,934 | | | | - | | | | - | | | | 500,000 | |
Common stock issuances related to stock plans | | | - | | | | - | | | | 61,172 | | | | 805 | | | | - | | | | - | | | | 61,977 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (576,913 | ) | | | - | | | | (576,913 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (19,958 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (19,958 | ) |
Capital stock and other expenses | | | - | | | | - | | | | - | | | | - | | | | (141 | ) | | | - | | | | (141 | ) |
Adjustment for implementation of new accounting pronouncement | | | - | | | | - | | | | - | | | | - | | | | 6,365 | | | | (6,365 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2009 | | $ | 94,000 | | | $ | 2,548 | | | $ | (4,727,167 | ) | | $ | 5,370,042 | | | $ | 8,043,122 | | | $ | (75,185 | ) | | | 8,707,360 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 20,063 | | | | - | | | | - | | | | - | | | | 1,250,242 | | | | - | | | | 1,270,305 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized loss (net of tax benefit of $7,088) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (11,685 | ) | | | (11,685 | ) |
Pension and other postretirement liabilities (net of tax benefit of $14,387) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (8,527 | ) | | | (8,527 | ) |
Net unrealized investment gains (net of tax expense of $51,130) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 57,523 | | | | 57,523 | |
Foreign currency translation (net of tax benefit of $182) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (338 | ) | | | (338 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,307,278 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (878,576 | ) | | | - | | | | - | | | | - | | | | (878,576 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 80,932 | | | | (2,568 | ) | | | - | | | | - | | | | 78,364 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (603,963 | ) | | | - | | | | (603,963 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (20,063 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (20,063 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2010 | | $ | 94,000 | | | $ | 2,548 | | | $ | (5,524,811 | ) | | $ | 5,367,474 | | | $ | 8,689,401 | | | $ | (38,212 | ) | | $ | 8,590,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2010, 2009, and 2008 include $13.3 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries. As required by generally accepted accounting principles, all intercompany transactions have been eliminated in the consolidated financial statements. Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K. The Registrant Subsidiaries and many other Entergy subsidiaries maintain accounts in accordance with FERC and other regulatory guidelines. Certain previously reported amounts have been reclassified to conform to current classification s, with no effect on net income or common shareholders’ (or members’) equity.
Use of Estimates in the Preparation of Financial Statements
In conformity with generally accepted accounting principles, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Louisiana, Mississippi, and Texas, respectively. Entergy Gulf States Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana. Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans, except for Algiers, where Entergy Louisiana is the electric power supplier. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.
Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers. To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions. Changes are made to the inputs in the estimate as needed to reflect changes in billing practices. Each month the estimated unbilled r evenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy records revenue from sales under rates implemented subject to refund less estimated amounts accrued for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate case as of the date the financial statements are prepared.
Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing.System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are computed by allowing a return on System Energy 8217;s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property. For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation. Normal maintenance, repairs, and minor replacement costs are charged to operating expenses. Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.
Electric plant includes the portions of Grand Gulf and Waterford 3 that have been sold and leased back. For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions.
Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,393 | | $5,378 | | $3,015 | | $- |
Other | | 1,842 | | 1,797 | | 45 | | - |
Transmission | | 2,986 | | 2,956 | | 30 | | - |
Distribution | | 5,926 | | 5,926 | | - | | - |
Other | | 1,661 | | 1,411 | | 248 | | 2 |
Construction work in progress | | 1,662 | | 1,300 | | 361 | | 1 |
Nuclear fuel | | 1,378 | | 760 | | 618 | | - |
Property, plant, and equipment - net | | $23,848 | | $19,528 | | $4,317 | | $3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,105 | | $5,414 | | $2,691 | | $- |
Other | | 1,936 | | 1,724 | | 212 | | - |
Transmission | | 2,922 | | 2,889 | | 33 | | - |
Distribution | | 5,948 | | 5,948 | | - | | - |
Other | | 1,664 | | 1,398 | | 263 | | 3 |
Construction work in progress | | 1,547 | | 1,134 | | 414 | | (1) |
Nuclear fuel (leased and owned) | | 1,267 | | 747 | | 520 | | - |
Property, plant, and equipment - net | | $23,389 | | $19,254 | | $4,133 | | $2 |
Depreciation rates on average depreciable property for Entergy approximated 2.6% in 2010, 2.7% in 2009, and 2.7% in 2008. Included in these rates are the depreciation rates on average depreciable utility property of 2.5% in 2010, 2.7% in 2009, and 2.7% 2008, and the depreciation rates on average depreciable non-utility property of 3.7% in 2010, 3.8% in 2009, and 3.7% in 2008.
Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in fuel expense in the income statements.
“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $207.6 million and $197.8 million as of December 31, 2010 and 2009, respectively.
Construction expenditures included in accounts payable at December 31, 2010 is $171 million.
Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,029 | | $1,452 | | $1,489 | | $- | | $- | | $- | | $1,408 |
Other | | 406 | | 302 | | 393 | | 368 | | (2) | | 331 | | - |
Transmission | | 837 | | 456 | | 597 | | 469 | | 22 | | 569 | | 6 |
Distribution | | 1,637 | | 817 | | 1,255 | | 977 | | 296 | | 944 | | - |
Other | | 197 | | 192 | | 289 | | 207 | | 180 | | 116 | | 20 |
Construction work in progress | | 114 | | 119 | | 521 | | 147 | | 12 | | 80 | | 211 |
Nuclear fuel | | 189 | | 203 | | 135 | | - | | - | | - | | 155 |
Property, plant, and equipment - net | | $4,409 | | $3,541 | | $4,679 | | $2,168 | | $508 | | $2,040 | | $1,800 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,017 | | $1,484 | | $1,450 | | $- | | $- | | $- | | $1,463 |
Other | | 414 | | 300 | | 384 | | 331 | | (6) | | 301 | | - |
Transmission | | 819 | | 416 | | 611 | | 467 | | 27 | | 543 | | 6 |
Distribution | | 1,618 | | 870 | | 1,330 | | 943 | | 280 | | 907 | | - |
Other | | 202 | | 185 | | 307 | | 220 | | 174 | | 113 | | 21 |
Construction work in progress | | 115 | | 84 | | 510 | | 63 | | 21 | | 82 | | 199 |
Nuclear fuel (leased and owned) | | 185 | | 163 | | 122 | | - | | - | | - | | 85 |
Property, plant, and equipment - net | | $4,370 | | $3,502 | | $4,714 | | $2,024 | | $496 | | $1,946 | | $1,774 |
Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | |
2010 | | 2.9% | | 1.8% | | 2.4% | | 2.6% | | 3.1% | | 2.3% | | 2.9% |
2009 | | 3.3% | | 1.9% | | 2.5% | | 2.6% | | 3.0% | | 2.3% | | 2.9% |
2008 | | 3.2% | | 2.2% | | 2.5% | | 2.6% | | 3.1% | | 2.4% | | 2.9% |
Non-utility property - at cost (less accumulated depreciation) for Entergy Gulf States Louisiana is reported net of accumulated depreciation of $134 million and $131 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $2.5 million and $2.3 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $9.5 million and $9.2 million as of December 31, 2010 and 2009, respectively.
As of December 31, 2010, construction expenditures included in accounts payable are $16 million for Entergy Arkansas, $14.3 million for Entergy Gulf States Louisiana, $31.6 million for Entergy Louisiana, $6.8 million for Entergy Mississippi, $157.5 thousand for Entergy New Orleans, $3.3 million for Entergy Texas, and $23.8 million for System Energy.
System Energy invested, through its subsidiary Entergy New Nuclear Development, LLC, in initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities. As of December 31, 2009, $100.3 million in construction work in progress was recorded on System Energy’s balance sheet related to this project. In the first quarter 2010, $24.9 million, $24.9 million, and $49.5 million of this construction work in progress was transferred to Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi, respectively.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. The investments and expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests. As of December 31, 2010, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Generating Stations | | Fuel-Type | | Total Megawatt Capability (1) | | Ownership | | Investment | | Accumulated Depreciation |
| | | | | | | | | (In Millions) |
Utility business: | | | | | | | | | | | |
Entergy Arkansas - | | | | | | | | | | | |
Independence | Unit 1 | | Coal | | 836 | | 31.50% | | $127 | | $94 |
| Common Facilities | | Coal | | | | 15.75% | | $33 | | $24 |
White Bluff | Units 1 and 2 | | Coal | | 1,659 | | 57.00% | | $489 | | $332 |
Ouachita (2) | Common Facilities | | Gas | | | | 66.67% | | $171 | | $140 |
Entergy Gulf States Louisiana - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 40.25% | | $243 | | $167 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 24.15% | | $142 | | $94 |
Ouachita (2) | Common Facilities | | Gas | | | | 33.33% | | $87 | | $72 |
Entergy Mississippi - | | | | | | | | | | | |
Independence | Units 1 and 2 and Common Facilities | | Coal | | 1,678 | | 25.00% | | $247 | | $132 |
Entergy Texas - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 29.75% | | $178 | | $116 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 17.85% | | $106 | | $67 |
System Energy - | | | | | | | | | | | |
Grand Gulf | Unit 1 | | Nuclear | | 1,251 | | 90.00%(3) | | $3,852 | | $2,418 |
| | | | | | | | | | | |
Entergy Wholesale Commodities: | | | | | | | | | | | |
Independence | Unit 2 | | Coal | | 842 | | 14.37% | | $68 | | $40 |
| Common Facilities | | Coal | | | | 7.18% | | $16 | | $10 |
(1) | “Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
(2) | Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Gulf States Louisiana. The investment and accumulated depreciation numbers above are only for the common facilities. |
(3) | Includes an 11.5% leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements. |
Nuclear Refueling Outage Costs
Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income Taxes
Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return. Each tax paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreement. Deferred income taxes are recorded for all temporary differences between the book and tax basis of assets and liabilities, and for certain credits available for carryforward.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted.
Investment tax credits are deferred and amortized based upon the average useful life of the related property, in accordance with ratemaking treatment.
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of income:
| For the Years Ended December 31, |
| 2010 | 2009 | 2008 |
| | (In Millions, Except Per Share Data) |
Basic earnings per average common share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share |
Net income attributable to Entergy Corporation | $1,250.2 | 186.0 | | $6.72 | $1,231.1 | 192.8 | | $6.39 | $1,220.6 | 190.9 | | $6.39 |
Average dilutive effect of: | | | | | | | | | | | | |
Stock options | - | 1.8 | | (0.06) | - | 2.2 | | (0.07) | - | 4.1 | | (0.13) |
Equity units | - | - | | - | 3.2 | 0.8 | | (0.02) | 24.7 | 6.0 | | (0.06) |
Diluted earnings per average common share | $1,250.2 | 187.8 | | $6.66 | $1,234.3 | 195.8 | | $6.30 | $1,245.3 | 201.0 | | $6.20 |
| | | | | | | | | | | | |
The calculation of diluted earnings per share excluded 5,380,262 options outstanding at December 31, 2010, 4,368,614 options outstanding at December 31, 2009, and 3,326,835 options outstanding at December 31, 2008 that could potentially dilute basic earnings per share in the future. Those options were not included in the calculation of diluted earnings per share because the exercise price of those options exceeded the average market price for the year.
See Note 7 to the financial statements for a discussion of the equity units.
Stock-based Compensation Plans
Entergy grants stock options to key employees of the Entergy subsidiaries, which is described more fully in Note 12 to the financial statements. Effective January 1, 2003, Entergy prospectively adopted the fair value based method of accounting for stock options. Awards under Entergy’s plans generally vest over three years. Stock-based compensation expense included in consolidated net income, net of related tax effects, is $9.2 million for 2010, is $10.4 million for 2009, and is $10.7 million for 2008 for Entergy’s stock options granted.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accounting for the Effects of Regulation
Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards. The Utility operating companies and System Energy have rates that (i) are approved by a body empowered to set rates that bind customers (its regulator); (ii) are cost-based; and (iii) can be charged to and collected from customers. These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers. Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs that would otherwise be charged to expense if the rate actions of its regulator make it probable that those costs will be recovered in future revenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial statements. When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.
An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements. In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations. Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.
Entergy Gulf States Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business. The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order. The plan allows Entergy Gulf States Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between ratepayers and shareholders.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at date of purchase to be cash equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances. The allowance is based on accounts receivable agings, historical experience, and other currently available evidence. Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.
Investments
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealiz ed gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whe ther Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 17 to the financial statements for details on the decommissioning trust funds and the other than temporary impairments recorded in 2010, 2009, and 2008.
Equity Method Investments
Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations. Entergy records its share of earnings or losses of the investee based on the change during the period in the estimated liquidation value of the investment, assuming that the investee’s assets were to be liquidated at book value. In accordance with this method, earnings are allocated to owners or members based on what each partner would receive from its capital account if, hypothetically, liquidation were to occur at the balance sheet date and amounts distributed were based on recorded book values. Entergy discontinues the recognition of l osses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support. See Note 14 to the financial statements for additional information regarding Entergy’s equity method investments.
Derivative Financial Instruments and Commodity Derivatives
The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet the normal purchase, normal sales criteria. The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction.
Contracts for commodities that will be delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.
For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income. To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in other comprehensive income are reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portions of all hedges are recognized in current-period earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using bid prices and market quotes. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not accrue to the benefit or detriment of stockholders. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments. See Note 16 to the financial statements for further discu ssion of fair value.
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy over the remaining life of the assets.
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March 21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
Entergy Wholesale Commodities’ investments are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses will not be renewed. Specifically regarding Vermont Yankee, if Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 include a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued oper ations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plant, including nuclear fuel, is $424 million as of December 31, 2010.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Gulf States Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Gulf States Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, in accordance with ratemaking treatment.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.
Presentation of Non-Controlling Interests
In 2007, a new accounting pronouncement was issued regarding non-controlling interests that requires generally that ownership interests in subsidiaries held by parties other than the reporting company (non-controlling interests) be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the controlling shareholders’ equity, and that the amount of consolidated net income attributable to the reporting company and to the non-controlling interests be clearly identified and presented on the face of the consolidated income statement. This new accounting pronouncement became effective for Entergy in the first quarter 2009 and applies to preferred securities issued by Entergy subsidiaries to third parties.
Presentation of Preferred Stock without Sinking Fund
In connection with the adoption of the new accounting pronouncement regarding non-controlling interests Entergy evaluated the accounting standards regarding the classification and measurement of redeemable securities. These standards require the classification of securities between liabilities and shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans articles of incorp oration provide, generally, that the holders of each company’s preferred securities may elect a majority of the respective company’s board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders’ equity on the balance sheet. Entergy Gulf States Louisiana and Entergy Louisiana, both organized as limited liability companies, have outstanding preferred securities with similar protective rights with respect to unpaid dividends, but provide for the election of board members that would not constitute a majority of the board; and their preferred securities are therefore classified for all periods presented as a component of members’ equity.
The outstanding preferred securities of Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Asset Management, whose preferred holders also have protective rights as described in Note 6 to the financial statements, are similarly presented between liabilities and equity on Entergy’s consolidated balance sheets and the outstanding preferred securities of Entergy Gulf States Louisiana and Entergy Louisiana are presented within total equity in Entergy’s consolidated balance sheets. The preferred dividends or distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
New Accounting Pronouncements
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets
Other Regulatory Assets
Regulatory assets represent probable future revenues associated with costs that are expected to be recovered from customers through the regulatory ratemaking process affecting the Utility business. In addition to the regulatory assets that are specifically disclosed on the face of the balance sheets, the table below provides detail of “Other regulatory assets” that are included on Entergy’s and the Registrant Subsidiaries’ balance sheets as of December 31, 2010 and 2009:
Entergy
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $406.4 | | $403.9 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 15.8 | | 23.2 |
Grand Gulf fuel - non-current and power management rider - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 17.4 | | 58.2 |
Gas hedging costs - recovered through fuel rates | | 1.9 | | 0.4 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 1,734.7 | | 1,481.7 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 4.8 | | 7.2 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 1,026.0 | | 1,183.2 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 81.5 | | 44.4 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 26.2 | | 28.1 |
Sale-leaseback deferral - Grand Gulf Lease Obligation recovered through June 2014 and Waterford 3 Lease Obligation (in 2009) (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations and Waterford 3 Lease Obligations) | | 22.3 | | 115.3 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 32.6 | | 34.2 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 95.8 | | 101.9 |
Little Gypsy cost proceeding – recovery timing will be determined by the LPSC in the project costs proceeding (Note 2 – Little Gypsy Repowering Project) | | 200.9 | | - |
Unamortized loss on reacquired debt - recovered over term of debt | | 122.5 | | 115.0 |
Other | | 49.4 | | 50.5 |
Total | | $3,838.2 | | $3,647.2 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $167.3 | | $179.4 |
Incremental ice storm costs - recovered through 2032 | | 11.1 | | 11.6 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 547.5 | | 447.6 |
Grand Gulf fuel - non-current - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | - | | 8.2 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 4.8 | | 7.2 |
Provision for storm damages - recovered either through securitization or retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 118.5 | | 61.7 |
Unamortized loss on reacquired debt - recovered over term of debt | | 38.0 | | 29.7 |
Other | | 5.2 | | 1.6 |
Entergy Arkansas Total | | $892.4 | | $747.0 |
Entergy Gulf States Louisiana
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $17.8 | | $17.6 |
Gas hedging costs - recovered through fuel rates | | 1.0 | | 0.3 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 157.4 | | 142.7 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 6.0 | | 44.1 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 14.0 | | 15.7 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 26.2 | | 28.1 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 32.6 | | 34.2 |
Unamortized loss on reacquired debt - recovered over term of debt | | 13.5 | | 14.1 |
Other | | 2.4 | | 3.0 |
Entergy Gulf States Louisiana Total | | $270.9 | | $299.8 |
Entergy Louisiana
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $113.4 | | $99.9 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 309.1 | | 200.4 |
Little Gypsy cost proceeding – recovery timing will be determined by the LPSC in the project costs proceeding (Note 2 – Little Gypsy Repowering Project) | | 200.9 | | - |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 1.0 | | 91.9 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 1.8 | | 7.5 |
Sale-leaseback deferral - (Note 10 – Sale and Leaseback Transactions – Waterford 3 Lease Obligations ) | | - | | 40.7 |
Unamortized loss on reacquired debt - recovered over term of debt | | 22.5 | | 19.7 |
Other | | 14.0 | | 16.9 |
Entergy Louisiana Total | | $662.7 | | $477.0 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Mississippi
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $5.0 | | $4.7 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 46.1 | | 44.5 |
Grand Gulf fuel - non-current and power management rider- recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 17.4 | | 50.0 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 160.0 | | 131.5 |
Provision for storm damages - recovered through retail rates | | 8.7 | | 10.0 |
Unamortized loss on reacquired debt - recovered over term of debt | | 11.5 | | 10.1 |
Other | | 4.5 | | 0.6 |
Entergy Mississippi Total | | $253.2 | | $251.4 |
Entergy New Orleans
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $3.2 | | $3.0 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 15.4 | | 15.2 |
Gas hedging costs - recovered through fuel rates | | 0.5 | | 0.2 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 95.3 | | 74.8 |
Provision for storm damages, including hurricane costs - recovered through insurance proceeds and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 10.8 | | 23.8 |
Unamortized loss on reacquired debt - recovered over term of debt | | 3.0 | | 2.9 |
Other | | 7.1 | | 5.8 |
Entergy New Orleans Total | | $135.3 | | $125.7 |
Entergy Texas | | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $1.4 | | $1.5 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 7.3 | | 7.2 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 165.4 | | 145.9 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 881.7 | | 952.2 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 95.8 | | 101.9 |
Unamortized loss on reacquired debt - recovered over term of debt | | 12.7 | | 13.5 |
Other | | 4.7 | | 9.9 |
Entergy Texas Total | | $1,169.0 | | $1,232.1 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $98.3 | | $97.8 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 12.2 | | 13.9 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other Postretirement Benefits) (b) | | 142.0 | | 78.4 |
Sale-leaseback deferral - recovered through June 2014 (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations) | | 22.3 | | 74.6 |
Unamortized loss on reacquired debt - recovered over term of debt | | 21.5 | | 25.0 |
Other | | 0.4 | | 0.3 |
System Energy Total | | $296.7 | | $290.0 |
(a) | The jurisdictional split order assigned the regulatory asset to Entergy Texas. The regulatory asset, however, is being recovered and amortized at Entergy Gulf States Louisiana. As a result, a billing will occur monthly over the same term as the recovery and receipts will be submitted to Entergy Texas. Entergy Texas has recorded a receivable from Entergy Gulf States Louisiana and Entergy Gulf States Louisiana has recorded a corresponding payable. |
(b) | Does not earn a return on investment, but is offset by related liabilities. |
Fuel and purchased power cost recovery
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are allowed to recover fuel and purchased power costs through fuel mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and the current fuel and purchased power costs is recorded as “Deferred fuel costs” on the Utility operating companies’ financial statements. The table below shows the amount of deferred fuel costs as of December 31, 2010 and 2009, that Entergy expects to recover (or return to customers) through fuel mechanisms, subject to subsequent regulatory review.
| 2010 | | 2009 |
| (In Millions) |
| | | |
Entergy Arkansas | $61.5 | | $122.8 |
Entergy Gulf States Louisiana (a) | $77.8 | | $57.8 |
Entergy Louisiana (a) | $8.8 | | $66.4 |
Entergy Mississippi | $3.2 | | ($72.9) |
Entergy New Orleans (a) | ($2.8) | | $8.1 |
Entergy Texas | ($77.4) | | ($102.7) |
(a) | 2010 and 2009 include $100.1 million for Entergy Gulf States Louisiana, $68 million for Entergy Louisiana , and $4.1 million for Entergy New Orleans of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be over a period greater than twelve months. |
Entergy Gulf States Louisiana made a $36.8 million adjustment to its deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Production Cost Allocation Rider
The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “System Agreement Cost Equalization Proceedings” section below. These costs cause an increase in Entergy Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months.
Energy Cost Recovery Rider
Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthly bills. The rider utilizes prior calendar year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.
In early October 2005, the APSC initiated an investigation into Entergy Arkansas's interim energy cost recovery rate. The investigation focused on Entergy Arkansas's 1) gas contracting, portfolio, and hedging practices; 2) wholesale purchases during the period; 3) management of the coal inventory at its coal generation plants; and 4) response to the contractual failure of the railroads to provide coal deliveries. In March 2006, the APSC extended its investigation to cover the costs included in Entergy Arkansas's March 2006 annual energy cost rate filing, and a hearing was held in the APSC energy cost recovery investigation in October 2006.
In January 2007 the APSC issued an order in its review of the energy cost rate. The APSC found that Entergy Arkansas failed to maintain an adequate coal inventory level going into the summer of 2005 and that Entergy Arkansas should be responsible for any incremental energy costs resulting from two outages caused by employee and contractor error. The coal plant generation curtailments were caused by railroad delivery problems and Entergy Arkansas has since resolved litigation with the railroad regarding the delivery problems. The APSC staff was directed to perform an analysis with Entergy Arkansas’s assistance to determine the additional fuel and purchased energy costs associated with these findings and file the analysis within 60 days of the order.& #160; After a final determination of the costs is made by the APSC, Entergy Arkansas would be directed to refund that amount with interest to its customers as a credit on the energy cost recovery rider. Entergy Arkansas requested rehearing of the order. In March 2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas’s petition for rehearing and for stay of the APSC order.
In October 2008 Entergy Arkansas filed a motion to lift the stay and to rescind the APSC's January 2007 order in light of the arguments advanced in Entergy Arkansas’s rehearing petition and because the value for Entergy Arkansas’s customers obtained through the resolved railroad litigation is significantly greater than the incremental cost of actions identified by the APSC as imprudent. In December 2008, the APSC denied the motion to lift the stay pending resolution of Entergy Arkansas’s rehearing request and of the unresolved issues in the proceeding. The APSC ordered the parties to submit their unresolved issues list in the pending proceeding, which the parties did. In February 2010 the APSC denied Entergy Arkansas’s request for rehearing, and held a hearing in September 2010 to determine the amount of damages, if any, that should be assessed against Entergy Arkansas. A decision is pending. Entergy Arkansas expects the amount of damages, if any, to have an immaterial effect on its results of operations, financial position, or cash flows.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The APSC also established a separate docket to consider the resolved railroad litigation, and in February 2010 it established a procedural schedule that concluded with testimony through September 2010. Testimony has been filed and the APSC will now decide the case based on the record in the proceeding, including the prefiled testimony.
Entergy Gulf States Louisiana and Entergy Louisiana
Entergy Gulf States Louisiana and Entergy Louisiana recover electric fuel and purchased power costs for the upcoming month based upon the level of such costs from the prior month. Entergy Gulf States Louisiana’s purchased gas adjustments include estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
In January 2003 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 1995 through 2004. The LPSC Staff issued its audit report in December 2010. The report recommends the disallowance of $23 million of costs which, with interest, will total $43 million. $2.3 million of this total relates to a realignment to and recovery through base rates of certain SO2 costs. Entergy Gulf States Louisiana filed comments disputing the finding s in the report and requested a hearing. Entergy Gulf States Louisiana has recorded provisions for the estimated effect of this proceeding.
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana's purchased gas adjustment clause filings for its gas distribution operations. The audit includes a review of the reasonableness of charges flowed through by Entergy Gulf States Louisiana for the period from 2003 through 2008. Discovery is in progress, but a procedural schedule has not been established.
In August 2000 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Louisiana. The time period that is the subject of the audit was January 1, 2000 through December 31, 2001. The scope of this docket was expanded to include a review of annual reports on fuel and purchased power transactions with affiliates and a prudence review of transmission planning issues and to include the years 2002 through 2004. Hearings were held and in May 2008 the ALJ issued a final recommendation that found in Entergy Louisiana’s favor on the issues, except for the disallowance of hypothetical SO2 allowance costs included in affiliate purchase s. The ALJ recommended a refund of the SO2 allowance costs collected to date and a realignment of these costs into base rates prospectively with an amortization of the refunded amount through base rates over a five-year period. The LPSC issued an order in December 2008 affirming the ALJ’s recommendation. Entergy Louisiana recorded a provision for the disallowance, including interest, and refunded approximately $7 million to customers in 2009.
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana's fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. Discovery is in progress, but a procedural schedule has not been established.
Entergy Mississippi
Entergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted quarterly to reflect accumulated over- or under-recoveries from the second prior quarter. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
In October 2008 the MPSC issued an order directing Entergy Mississippi and Entergy Services, Inc. to provide documents associated with fuel adjustment clause litigation in Louisiana involving Entergy Louisiana and Entergy New Orleans, and in January 2009 issued an order requiring Entergy Mississippi to provide additional information related to the long-term Evangeline gas contract that had been an issue in the fuel adjustment clause litigation in Louisiana. Entergy Mississippi and Entergy Services filed a response to the MPSC order stating that gas from the Evangeline gas contract had been sold into the Entergy System exchange and had an effect on the costs paid by Entergy Mississippi’s customers. Further proceedings have not been scheduled.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Mississippi Attorney General Complaint
The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, Inc., and Entergy Power, Inc. alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The litigation is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. On December 29, 2008, the defendant Entergy companies filed to remove the attorney general’s suit to U.S. District Court (the forum that Entergy believes is appropriate to resolve the types of fede ral issues raised in the suit), where it is currently pending, and additionally answered the complaint and filed a counter-claim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009, the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general’s complaint.
Entergy New Orleans
Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges. In June 2006 the City Council authorized the recovery of all Grand Gulf costs through Entergy New Orleans’s fuel adjustment clause (a significant portion of Grand Gulf costs was previously recovered through base rates), and continued that authorization in approving the October 2006 formula rate plan filing settlement. Effective June 2009, the majority of Grand Gulf costs were realigned to base rates and are no longer flowed through the fuel adjustment clause.
Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.
Entergy Texas
Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges, not recovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
In October 2007, Entergy Texas filed a request with the PUCT to refund $45.6 million, including interest, of fuel cost recovery over-collections through September 2007. In January 2008, Entergy Texas filed with the PUCT a stipulation and settlement agreement among the parties that updated the over-collection balance through November 2007 and established a refund amount, including interest, of $71 million. The PUCT approved the agreement in February 2008. The refund was made over a two-month period beginning February 2008, but was reduced by $10.3 million of under-recovered incremental purchased capacity costs.
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 rough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. In December 2008 the PUCT adopted an ALJ proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. Because the PUCT allocation to Texas retail
Entergy Corporation and Subsidiaries
Notes to Financial Statements
customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision results in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. Entergy Texas filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. In May 2009 the FERC issued an order rejecting the proposed amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). The PUCT and FERC decisions are now final.In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Entergy Texas requested that the proposed refund be made over a four-month period beginning June 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009.
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Entergy Texas requested that the proposed refund be made over a six-month period beginning January 2010. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund was made for most customers over a three-month period beginning January 2010.
In June 2010, Entergy Texas filed with the PUCT a request to refund approximately $66 million, including interest, of fuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
In December 2010, Entergy Texas filed with the PUCT a request to refund approximately $52 million, including interest, of fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved on an interim basis and is pending final action by the PUCT, Entergy Texas will refund over-collections of approximately $72.7 million through November 2010. The refund will be made for most customers over a three-month period beginning with the February 2011 billing cycle.
Entergy Texas’s December 2009 rate case filing, which is discussed below, also included a request to reconcile $1.8 billion of fuel and purchased power costs covering the period April 2007 through June 2009.
Storm Cost Recovery Filings with Retail Regulators
Entergy Arkansas
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas's transmission and distribution lines, equipment, poles, and other facilities. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. In June 2010 the APSC issued a financing order authorizing the issuance of approximately $126.3 million in storm cost recovery bonds, which includes carrying costs of $11.5 million and $4.6 million of up-front financing costs. See Note 5 to the financial statements for a discussion of the August 2010 issuance of the securitization bonds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Gulf States Louisiana and Entergy Louisiana
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy's service territory. Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 fi nancings).Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm costs were financed primarily by Act 55 financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Act 55 financing savings to customers via a Storm Cost Offset rider.
In December 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financings are accomplished. In March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includes these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In July 2010 the LCDA issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3 million to acquire 1,502,643.04 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy Gulf States Louisiana and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses.
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate.& #160; Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In August 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agent for the state.
Entergy New Orleans
In December 2005 the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included Community Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007 the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
Entergy Texas
Hurricane Ike and Hurricane Gustav
Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas’s request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6 .8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
Little Gypsy Repowering Project (Entergy and Entergy Louisiana)
In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisiana complied with the LPSC’s directive and recommended that the project be suspended for an extended pe riod of time of three years or more. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC Staff and Intervenors filed testimony. The LPSC Staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, b ut at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it is probable that the Little Gypsy repowering project will be abandoned and accordingly reclassified the project costs from construction work in progress to a regulatory asset. This accounting reclassification does not modify Entergy Louisiana’s requested relief pending before the LPSC. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties conducted a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement is expected to be presented to the LPSC for approval in the first quarter 2011.
Retail Rate Proceedings
The following chart summarizes the Utility operating companies' current retail base rates:
Company | | Authorized Return on Common Equity | | |
| | | | |
Entergy Arkansas | | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
Entergy Louisiana | | 9.45%- 11.05% | | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| | | | |
Entergy Mississippi | | 10.79%- 13.05% | | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a settlement approved by the City Council. |
| | | | |
Entergy Texas | | 10.125% | | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a settlement of Entergy Texas's base rate case approved by the PUCT. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC (Entergy Arkansas)
Retail Rates
2009 Base Rate Filing
In September 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. In June 2010 the APSC approved a settlement and subsequent compliance tariffs that provide for a $63.7 million rate increase, effective for bills rendered for the first billing cycle of July 2010. The settlement provides for a 10.2% return on common equity.
2006 Base Rate Filing
In August 2006, Entergy Arkansas filed with the APSC a request for a change in base rates. In June 2007, after hearings on the filing, the APSC ordered Entergy Arkansas to reduce its annual rates by $5 million, and set a return on common equity of 9.9% with a hypothetical common equity level lower than Entergy Arkansas’s actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy’s stock-based compensation plans, and left Entergy Arkansas with no mechanism to recover $52 million of costs previously accumulated in Entergy Arkansas’s storm reserve and $18 million of removal costs associated with the term ination of a lease. The base rate change was implemented effective for bills rendered after June 15, 2007.
Entergy Arkansas sought to overturn the APSC’s decision, but in December 2008 the Arkansas Court of Appeals upheld almost all aspects of the APSC decision. After considering the progress of the proceeding in light of the decision of the Court of Appeals, Entergy Arkansas recorded in the fourth quarter 2008 an approximately $70 million charge to earnings, on both a pre- and after-tax basis because these are primarily flow-through items, to recognize that the regulatory assets associated with the storm reserve costs, lease termination removal costs, and stock-based compensation were no longer probable of recovery. In April 2009 the Arkansas Supreme Court denied Entergy Arkansas’s petition for review of the Court of Appeals decision.
Filings with the LPSC
Formula Rate Plans (Entergy Gulf States Louisiana and Entergy Louisiana)
In March 2005 the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, establishes a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate pl an filing in June 2005. The formula rate plan was subsequently extended one year.
Entergy Louisiana made a rate filing with the LPSC requesting a base rate increase in January 2004. In May 2005 the LPSC approved a settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed below the formula rate plans for Entergy Gulf States Louisiana and Entergy Louisiana have been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, and 2010 test years.
Retail Rates - Electric
(Entergy Gulf States Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Gulf States Louisiana’s 2007 test year filing and provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.65% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 tes t year filing that was made in October 2009. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. In May 2010, Entergy Gulf States Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.25% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate increase for incremental capacity costs. In July 2010 the LPSC approved a $7.8 million increase in the revenue requirement for decommiss ioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana made a revised 2009 test year filing. The revised filing reflected a 10.12% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $25.2 million for capacity costs. The rates reflected in the revised filing became effective, beginning with the first billing cycle of September 2010. Entergy Gulf States Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in January 2011.
(Entergy Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Louisiana’s 2006 and 2007 test year filings provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%).
Entergy Louisiana was permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the May 2010 billing cycle and a $0.1 million refund. In addition, Entergy Louisiana moved the recovery of approximately $12.5 million of capacity costs from fuel adjustment clause recovery to base rate recovery. At its April 21, 2010 meeting, the LPSC accepted the joint report.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2010, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.82% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental capacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue requirement for decommissioning, effective September 2010. ; In August 2010, Entergy Louisiana made a revised 2009 test year formula rate plan filing. The revised filing reflected a 10.82% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million for capacity costs. The rates reflected in the revised filing became effective beginning with the first billing cycle of September 2010. Entergy Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in December 2010.
Retail Rates - Gas (Entergy Gulf States Louisiana)
In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010. The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million. The sixty-day review and comment period for this filing remains open.
In January 2010, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2009. The filing showed an earned return on common equity of 10.87%, which is within the earnings bandwidth of 10.5% plus or minus fifty basis points, resulting in no rate change. In April 2010, Entergy Gulf States Louisiana filed a revised evaluation report reflecting changes agreed upon with the LPSC Staff. The revised evaluation report also resulted in no rate change.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. In March 2010 the MPSC issued an order: (1) providing the opportunity for a reset of Entergy Mississippi's return on common equity to a point within the formula rate plan bandwidth and eliminating the 50/50 sharing that had been in the plan, (2) modifying the performance measurement process, and (3) replacing the revenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a limit of four percent of revenues, although any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi's request to use a projected test year for its annual scheduled formula rate plan filing and, theref ore, Entergy Mississippi will continue to use a historical test year for its annual evaluation reports under the plan.
In March 2010, Entergy Mississippi submitted its 2009 test year filing, its first annual filing under the new formula rate plan rider. In June 2010 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provides for no change in rates, but does provide for the deferral as a regulatory asset of $3.9 million of legal expenses associated with certain litigation involving the Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the City Council (Entergy New Orleans)
Formula Rate Plans and Storm-related Riders
On July 31, 2008, Entergy New Orleans filed an electric and gas base rate case with the City Council. On April 2, 2009, the City Council approved a comprehensive settlement. The settlement provided for a net $35.3 million reduction in combined fuel and non-fuel electric revenue requirement, including conversion of a $10.6 million voluntary recovery credit, implemented in January 2008, to a permanent reduction and substantial realignment of Grand Gulf cost recovery from fuel to electric base rates, and a $4.95 million gas base rate increase, both effective June 1, 2009, with adjustment of the customer charges for all rate classes. A new three-year formula rate plan was also adopted, with terms including an 11.1% benchmark electric return on common equity (ROE) with a +/- 40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans is over- or under-earning. The formula rate plan also includes a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
The 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs.
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings presented various alternatives to reflect the effect of Entergy New Orleans’s lost customers and decreased revenue following Hurricane Katrina. The alternative that Entergy New Orleans recommended adjusts for lost customers and assumes that the City Council’s June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place during the rate-effective period (a significant portion of Grand Gulf costs was previously recovered through base rates).
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establish a storm reserve to provide for the risk of another storm.
In October 2006, the City Council approved a settlement agreement that resolved Entergy New Orleans’s rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respect to storm restoration costs the anticipated receipt of CDBG funding as recommended by the Louisiana Recovery Authority. The settlement provided for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause was continued. Gas base rates increased by $4.75 million in November 2006 and increased by an additional $1.5 million in March 2007 and an additional $4.75 million in November 2007. The settleme nt called for Entergy New Orleans to file a base rate case by July 31, 2008, which it did as discussed above. The settlement agreement discontinued the formula rate plan and the generation performance-based plan but permitted Entergy New Orleans to file an application to seek authority to implement formula rate plan mechanisms no sooner than six months following the effective date of the implementation of the base rates resulting from the July 31, 2008 base rate case. The settlement also authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Beginning in May 2010, Entergy Texas implemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testi mony, of $58 million.
The parties filed a settlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. Baseline values were established to be used in Entergy Texas's request for a transmission cost recovery factor that will be made in a separate proceeding. The settlement states that Entergy Texas's fuel costs for the period April 2007 through June 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River B end decommissioning costs at $2.0 million annually. Consistent with the settlement, in the third quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the settlement in December 2010.
System Agreement Cost Equalization Proceedings
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies'companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proceedings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement.
In June 2005, the FERC issued a decision in the System Agreement litigation that had been commenced by the LPSC, and essentially affirmed its decision in a December 2005 order on rehearing. The FERC decision concluded, among other things, that:
· | The System Agreement no longer roughly equalizes total production costs among the Utility operating companies. |
· | In order to reach rough production cost equalization, the FERC will imposeimposed a bandwidth remedy by which each company'scompany’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs. |
· | In calculating the production costs for this purpose under the FERC'sFERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year'syear’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies'companies’ total production costs. |
· | The remedy ordered by FERC in 2005 required no refunds and became effective based on calendar year 2006 production costs and the first reallocation payments were made in 2007. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The FERC'sFERC’s decision reallocates total production costs of the Utility operating companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. Under the current circumstances, this will be accomplished by payments from Utility operating companies whose production costs are more than 11% below Entergy System average production costs to Utility operating companies whose production costs are more than the Entergy System average production cost, with payments going first to those Utility operating companies whose total production costs are farthest above the Entergy System average.
Assessing the potential effects of the FERC'sFERC’s decision requires assumptions regarding the future total production cost of each Utility operating company, which assumptions include the mix of solid fuel and gas-fired generation available to each company and the costs of natural gas and purchased power. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy Texas, and Entergy Mississippi are more dependent upon gas-fired generation sources than Entergy Arkansas or Entergy New Orleans. Of these, Entergy Arkansas is the least dependent upon gas-fired generation sources. Therefore, increases in natural gas prices likely will increase the amount by which Entergy Arkansas'Arkansas’s total production costs are below the Entergy System average production costs.
The LPSC, APSC, MPSC, and the AEEC appealed the FERC'sFERC’s decision to the United States Court of Appeals for the D.C. Circuit. Entergy and the City of New Orleans intervened in the various appeals. The D.C. Circuit issued its decision in April 2008. The D.C. Circuit affirmed the FERC'sFERC’s decision in most respects, but remanded the case to the FERC for further proceedings and reconsideration of its conclusion that it was prohibited from ordering refunds and its determination to implement the bandwidth remedy commencing with calendar year 2006 production costs (with the first payments/receipts commencing in June 2007), rather than commencing the remedy on June 1, 2005. The D.C. Circuit concluded the FERC had failed so far in the proceeding to offer a reasoned explanation regarding these issues. InAs discussed below, in December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treatment of interruptible load in the allocation of capacity costs by the Utility operating companies. The FERC also deferred further action on the question of whether it provided sufficient rationale for not ordering refunds, and whether it impermissibly delayed implementation of the bandwidth remedy, until resolution of this paper hearing.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy's Utility Operating Companies' Compliance Filing
In April 2006, the Utility operating companies filed with the FERC their compliance filing to implement the provisions of the FERC'sFERC’s decision. The filing amended the System Agreement to provide for the calculation of production costs, average production costs, and payments/receipts among the Utility operating companies to the extent required to maintain rough production cost equalization pursuant to the FERC'sFERC’s decision. The FERC accepted the compliance filing in November 2006, with limited modifications. Provisions of the compliance filing as approved by the FERC include: the first payments commenced in June 2007, rather than earlier; interest is not required on the unpaid balance; and any payments will be made over seven months, rather than 12.1 2. In April 2007, the FERC denied various requests for rehearing, with one exception regarding the issue of retrospective refunds. That issue will be addressed subsequent to the remanded proceeding involving the interruptible load decision discussed further below in this section under "Interruptible“Interruptible Load Proceeding."”
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Calendar Year 2010 Production Costs
The liabilities and assets for the preliminary estimate of the payments and receipts required to implement the FERC’s remedy based on calendar year 2010 production costs were recorded in December 2010, based on certain year-to-date information. The preliminary estimate was recorded based on the following estimate of the payments/receipts among the Utility operating companies for 2011.
| Payments or (Receipts) |
| (In Millions) |
| |
Entergy Arkansas | $52 |
Entergy Gulf States Louisiana | $- |
Entergy Louisiana | $- |
Entergy Mississippi | ($37) |
Entergy New Orleans | ($15) |
Entergy Texas | $- |
The actual payments/receipts for 2011, based on calendar year 2010 production costs, will not be calculated until the Utility operating companies’ FERC Form 1s have been filed. Once the calculation is completed, it will be filed at the FERC. The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the Entergy System generating fleet, and multiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.
Rough Production Cost Equalization Rates
Each yearMay since 2007 Entergy has filed with the FERC the rates to implement the FERC'sFERC’s orders in the System Agreement proceeding. These filings show the following payments/receipts among the Utility operating companies are necessary to achieve rough production cost equalization as defined by the FERC'sFERC’s orders:
| | | 2007 Payments or (Receipts) Based on 2006 Costs | | 2008 Payments or (Receipts) Based on 2007 Costs | | 2009 Payments or (Receipts) Based on 2008 Costs | | 2010 Payments or (Receipts) Based on 2009 Costs |
| 2007 Payments or (Receipts) Based on 2006 Costs | 2008 Payments or (Receipts) Based on 2007 Costs | 2009 Payments or (Receipts) Based on 2008 Costs | | | (In Millions) |
| ( In Millions) | | | | | | | | | |
Entergy Arkansas | $252 | $252 | $390 | | | $252 | | $252 | | $390 | | $41 |
Entergy Gulf States Louisiana | ($120) | ($124) | ($107) | | | ($120) | | ($124) | | ($107) | | $- |
Entergy Louisiana | ($91) | ($36) | ($140) | | | ($91) | | ($36) | | ($140) | | ($22) |
Entergy Mississippi | ($41) | ($20) | ($24) | | | ($41) | | ($20) | | ($24) | | ($19) |
Entergy New Orleans | $- | ($7) | $- | | | $- | | ($7) | | $- | | $- |
Entergy Texas | ($30) | ($65) | ($119) | | | ($30) | | ($65) | | ($119) | | $- |
Management believes that any changes in the allocation of production costs resulting from the FERC's decision and related retail proceedings should result in similar rate changes for retail customers. The APSC has approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas. Management believes that any changes in the allocation of production costs resulting from the FERC’s decision and related retail proceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs. See "“Fuel and purchased power cost recovery, Entergy Texas," in Note 2 to the financial statements” above for discussion of a PUCT decision that Entergy Texas is currently challenging regarding the rough production cost equalization payments that could resultresulted in $18.6 million of trapped costs between Entergy'sEntergy’s Texas and Louisiana jurisdictions. See “2007 Rate Filing Based on Calendar Year 2006 Production Costs” below for a discussion of a FERC decision that could result in $14.5 million of trapped costs at Entergy Arkansas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Based on the FERC'sFERC’s April 27, 2007 order on rehearing that is discussed above, in the second quarter 2007 Entergy Arkansas recorded accounts payable and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC'sFERC’s remedy based on calendar year 2006 production costs. Entergy Arkansas recorded a corresponding regulatory asset for its right to collect the payments from its customers, and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded corresponding regulatory liabilities for their obligations to pass the receipts on to their customers. The companies have followed this same accounting practice eacheac h year since then. The regulatory asset and liabilities are shown as "System“System Agreement cost equalization"equalization” on the respective balance sheets.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
2007 Rate Filing Based on Calendar Year 2006 Production Costs
Several parties intervened in the 2007 rate proceeding at the FERC, including the APSC, the MPSC, the Council, and the LPSC, which have also filed protests. The PUCT also intervened. Intervenor testimony was filed in which the intervenors and also the FERC Staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for nuclear facilities. The effect of the various positions would be to reallocate costs among the Utility operating companies. The Utility operating companies filed rebuttal testimony explaining why the bandwidth payments are properly recoverablerecoverab le under the AmerenUE contract, and explaining why the positions of FERC Staff and intervenors on the other issues should be rejected. A hearing in this proceeding concluded in July 2008, and the ALJ issued an initial decision in September 2008. The ALJ'sALJ’s initial decision concludes, among other things, that: (1) the decisions to not exercise Entergy Arkansas'Arkansas’s option to purchase the Independence plant in 1996 and 1997 were prudent; (2) Entergy Arkansas properly flowed a portion of the bandwidth payments through to AmerenUE in accordance with the wholesale power contract; and (3) the level of nuclear depreciation and decommissioning expense reflected in the bandwidth calculation should be calculated based on NRC-authorized license life, rather than the nuclear depreciation and decommissioning expense authorized by the retail regulators for purposes of retail ratemaking. Following briefing by the parties, the matter was submitted to the FERC for decision. On January 11, 2010, the FERC issued its decision both affirming and overturning certain of the ALJ'sALJ’s rulings, including overturning the decision on nuclear depreciation and decommissioning expense. The FERC’s conclusion related to the AmerenUE contract does not permit Entergy Arkansas to recover a portion of its bandwidth payment from AmerenUE. The Utility operating companies requested rehearing of that portion of the decision and requested clarification on certain other portions of the decision.
AmerenUE argued that its current wholesale power contract with Entergy Arkansas, pursuant to which Entergy Arkansas sells power to AmerenUE, does not permit Entergy Arkansas to flow through to AmerenUE any portion of Entergy Arkansas'Arkansas’s bandwidth payment. According to AmerenUE, Entergy Arkansas has sought to collect from AmerenUE approximately $14.5 million of the 2007 Entergy Arkansas bandwidth payment. The AmerenUE contract expired in August 2009. In April 2008, AmerenUE filed a complaint with the FERC seeking refunds of this amount, plus interest, in the event the FERC ultimately determines that bandwidth payments are not properly recovered under the AmerenUE contract. In response to the FERC'sFERC’s decision discussed in the previous paragraph, Entergy Arkansas recorded a regulatory provision in the fourth quarter 2009 for a potential refund to AmerenUE.
The Utility operating companies also filed with the FERC during 2007 certain proposed modifications to the rough production cost equalization calculation. The FERC rejected certain of the proposed modifications, accepted certain of the proposed modifications without further proceedings, and set two of the proposed modifications for hearing and settlement procedures. With respect to the proceeding involving changes to the functionalization of costs to the production function, a hearing was held in March 2008 and the ALJ issued an Initial Decision in June 2008 finding the modifications proposed by the Utility operating companies to be just and reasonable. In January 2010 the FERC affirmed the ALJ's decision.
2008 Rate Filing Based on Calendar Year 2007 Production Costs
Several parties intervened in the 2008 rate proceeding at the FERC, including the APSC, the LPSC, and AmerenUE, which have also filed protests. Several other parties, including the MPSC and the City Council, have intervened in the proceeding without filing a protest. In direct testimony filed on January 9, 2009, certain intervenors and also the FERC staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for the nuclear and fossil-fueled generating facilities. The effect of these various positions would be to reallocate costs among the Utility operating companies.companies . In addition, three issues were raised alleging imprudence by the Utility operating companies, including whether the Utility operating companies had properly reflected generating units'units’ minimum operating levels for purposes of making unit commitment and dispatch decisions, whether Entergy Arkansas'Arkansas’s sales to third parties from its retained share of the Grand Gulf nuclear facility were reasonable, prudent, and non-discriminatory, and whether Entergy Louisiana'sLouisiana’s long-term Evangeline gas purchase contract was prudent and reasonable.
Entergy Corporation and Subsidiaries
Management'sNotes to Financial Discussion and AnalysisStatements
The parties reached a partial settlement agreement of certain of the issues initially raised in this proceeding. The partial settlement agreement was conditioned on the FERC accepting the agreement without modification or condition, which the FERC did on August 24, 2009. A hearing on the remaining issues in the proceeding was completed in June 2009, and in September 2009 the ALJ issued an initial decision. The initial decision affirms Entergy'sEntergy’s position in the filing, except for two issues that may result in a reallocation of costs among the Utility operating companies. Entergy, the APSC, the LPSC, and the MPSC have submitted briefs on exceptions in the proceeding, and the matter has been submitted to the FERC for decision.
2009 Rate Filing Based on Calendar Year 2008 Production Costs
Several parties intervened in the 2009 rate proceeding at the FERC, including the LPSC and Ameren, which have also filed protests. OnIn July 27, 2009 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2009, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures were terminated and a hearing before the ALJ was held in April 2010. In August 2010 the ALJ issued an initial decision. The initial decision substantially affirms Entergy's position in the filing, except for one issue that may result in some reallocation of costs among the Utility operating companies. The LPSC, the FERC trial staff, and Entergy have submitted briefs on exceptions in the proceed ing.
2010 Rate Filing Based on Calendar Year 2009 Production Costs
In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC's orders in the System Agreement proceeding, and supplemented the filing in September 2010. Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which have also filed protests. In July 2010 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2010, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures have been terminated, and the ALJ scheduled hearings to begin in April 2010,March 2011, with an initial decision scheduled for August 2010.July 2011. Subsequently, in January 2011 the ALJ issued an order directing the parties and FERC staff to s how cause why this proceeding should not be stayed pending the issuance of FERC decisions in the prior production cost proceedings currently before the FERC on review. Briefing on the issue concluded on February 14, 2011. A hearing on the show cause order is scheduled for March 3, 2011.
Calendar Year 2009 Production Costs
The liabilities and assets for the preliminary estimate of the payments and receipts required to implement the FERC's remedy based on calendar year 2009 production costs were recorded in December 2009, based on certain year-to-date information. The preliminary estimate was recorded based on the following estimate of the payments/receipts among the Utility operating companies for 2010:
| Payments or
(Receipts)
|
| (In Millions) |
| |
Entergy Arkansas | $70 |
Entergy Gulf States Louisiana | ($10) |
Entergy Louisiana | ($54) |
Entergy Mississippi | $- |
Entergy New Orleans | ($6) |
Entergy Texas | $- |
The actual payments/receipts for 2010, based on calendar year 2009 production costs, will not be calculated until the Utility operating companies' FERC Form 1s have been filed. Once the calculation is completed, it will be filed at the FERC. The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the Entergy System generating fleet, and multiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.
Interruptible Load ProceedingIndependent Coordinator of Transmission
In April 20072000, the U.S. CourtFERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of Appeals forindependent RTOs (regional transmission organizations). Delays in implementing the D.C. Circuit issued its opinion inFERC RTO order occurred due to a variety of reasons, including the LPSC's appeal of the FERC's March 2004fact that utility companies, other stakeholders, and April 2005 ordersfederal and state regulators have had to work to resolve various issues related to the treatment underestablishment of such RTOs.
In November 2006, after nearly a decade of effort, including filings, orders, technical conferences, and proceedings at the System Agreement of the Utility operating companies' interruptible loads. In its opinion, the D.C. Circuit concluded that the FERC, (1) acted arbitrarily and capriciously by allowing the Utility operating companies to phase-ininstalled the effectsSouthwest Power Pool (SPP) as their Independent Coordinator of the eliminationTransmission (ICT). The installation does not transfer control of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time. The D.C. Circuit remanded the matterEntergy’s transmission system to the FERC for a more considered determination onICT, but rather vests with the issue of refunds. The FERC issued its order on remand in September 2007, in whichICT responsibility for:
· | granting or denying transmission service on the Utility operating companies’ transmission system. |
· | administering the Utility operating companies’ OASIS node for purposes of processing and evaluating transmission service requests and ensuring compliance with the Utility operating companies’ obligation to post transmission-related information. |
· | developing a base plan for the Utility operating companies’ transmission system that will result in the ICT making the determination on whether costs of transmission upgrades should be rolled into the Utility operating companies’ transmission rates or directly assigned to the customer requesting or causing an upgrade to be constructed. This should result in a transmission pricing structure that ensures that the Utility operating companies’ retail native load customers are required to pay for only those upgrades necessary to reliably serve their needs. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | serving as the reliability coordinator for the Entergy transmission system. |
· | overseeing the operation of the weekly procurement process (WPP). |
· | evaluating interconnection-related investments already made on the Entergy System for purposes of determining the future allocation of the uncredited portion of these investments, pursuant to a detailed methodology. The ICT agreement also clarifies the rights that customers receive when they fund a supplemental upgrade. |
In October 2008 the FERC issued an order accepting a tariff amendment establishing that the WPP shall take effect at a date to be determined, after completion of successful simulation trials and the ICT’s endorsement of the WPP’s implementation. On January 16, 2009, the Utility operating companies filed a compliance filing with the FERC that included the ICT’s endorsement of the WPP implementation, subject to the FERC’s acceptance of certain additional tariff amendments and the completion of simulation testing and certain other items. The Utility operating companies filed the tariff amendments supported by the ICT on the same day. The amendments proposed to further amend the WPP to (a) limit supplier offers in the WPP to on-peak pe riods and (b) eliminate the granting of certain transmission service through the WPP.
On March 17, 2009, the FERC issued an order conditionally approving the proposed modification to the WPP to allow the process to be implemented the week of March 23, 2009. In its order approving the requested modifications, the FERC imposed additional conditions related to the ICT arrangement and indicated it was going to evaluate the success of the ICT arrangement, including the cost and benefits of implementing the WPP and whether the WPP goes far enough to address the transmission access issues that the ICT and WPP were intended to address. The FERC, in conjunction with the APSC, the LPSC, the MPSC, the PUCT, and the City Council, hosted a conference on June 24, 2009, to discuss the ICT arrangement and transmission access on the Entergy transmission system. In compliance with the FERC’s March 2009 order, in November 2009 the Utility operating companies filed with the FERC a process for evaluating the modification or replacement of the current ICT and WPP arrangements.
During the conference, several issues were raised by regulators and market participants, including the adequacy of the Utility operating companies’ capital investment in the transmission system, the Utility operating companies’ compliance with the existing North American Electric Reliability Corporation (NERC) reliability planning standards, the availability of transmission service across the system, and whether the Utility operating companies could have purchased lower cost power from merchant generators located on the transmission system rather than running their older generating facilities. On July 20, 2009, the Utility operating companies filed comments with the FERC responding to the issues raised during the conference. The comments explain that: 1) the Utility operating companies believe that the ICT arrangement has fulfilled its objectives; 2) the Utility operating companies’ transmission planning practices comply with laws and regulations regarding the planning and operation of the transmission system; and 3) these planning practices have resulted in a system that meets applicable reliability standards and is sufficiently robust to allow the Utility operating companies both to substantially increase the amount of transmission service available to third parties and to make significant amounts of economic purchases from the wholesale market for the benefit of the Utility operating companies’ retail customers. The Utility operating companies also explain that, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies’ transmission system that limits the ability of the Utility operating companies as well as other parties to fully utilize the generating resources that have been granted transmission service. Additionally, the Utility operating companies commit in their response to exploring and working on potential reforms or alternatives for the ICT arrangement that could take effect following the initial term. The Utility operating companies’ comments also recognize that NERC is in the process of amending certain of its transmission reliability planning standards and that the amended standards, if approved by the FERC, will result in more stringent transmission planning criteria being applicable in the future. The FERC may also make other changes to transmission reliability standards. These changes to the reliability standards would result in increased capital expenditures by the Utility operating companies.
The Entergy Regional State Committee (E-RSC), which is comprised of representatives from all of the Utility operating companies' retail regulators, has been formed to consider several of these issues related to Entergy's transmission system. Among other things, the E-RSC in concert with the FERC plan to conduct a cost/benefit analysis comparing the ICT arrangement and a proposal under which Entergy would join the Southwest Power Pool RTO. The scope of the study was expanded in July 2010 to consider Entergy joining the Midwest ISO RTO as another alternative.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In September 2010, as modified in October 2010, the Utility operating companies filed a request for a two-year interim extension, with certain modifications, of the ICT arrangement, which was scheduled to expire on November 17, 2010. The filing stated that, if approved by the E-RSC during its October 20-21, 2010 meeting, the Utility operating companies will make a subsequent filing with the FERC to provide the E-RSC with the authority to, upon unanimous approval of all E-RSC members, (1) propose modifications to cost allocation methodology for transmission projects and (2) add transmission projects to the construction plan. On October 13, 2010, the LPSC issued an order approving proposals filed by Entergy Louisiana and Entergy Gulf States Louisiana to modify the cur rent ICT arrangement and to give the E-RSC authority in the two areas as described above. On October 20, 2010, the E-RSC unanimously voted in favor of the proposal granting the E-RSC authority in the two areas described above. The Utility operating companies have filed the necessary revisions to the Entergy OATT to implement the E-RSC's new authority. In November 2010 the FERC approved extension of the ICT arrangement for two years. In December 2010 the FERC approved the proposal to provide the E-RSC with authority in the two areas described above.
On September 30, 2010, the consultant presented its cost/benefit analysis of the Entergy and Cleco regions joining the SPP RTO. The cost/benefit analysis indicates that the Entergy region, including entities beyond the Utility operating companies, would realize a net cost of $438 million to a net benefit of $387 million, primarily depending upon transmission cost allocation issues. Addendum studies, including studies related to Entergy Arkansas and the Utility operating companies joining the Midwest ISO, are due to be completed by the end of the first quarter 2011. Pursuant to a schedule established by an LPSC ALJ, Entergy Gulf States Louisiana and Entergy Louisiana expect to make a filing in May 2011 that sets forth the results of the analysis of the ava ilable options and preliminary recommendations regarding which option is in the public interest. The other Utility operating companies expect to make similar filings at that time.
Notice to SERC Reliability Corporation Regarding Reliability Standards
Entergy has notified the SERC Reliability Corporation (SERC) of potential violations of certain North American Electric Reliability Corporation (NERC) reliability standards, including certain Critical Infrastructure Protection, Facility Connection, and System Protection Coordination standards. Entergy is working with the SERC to provide information concerning these potential violations. The Energy Policy Act of 2005 provides authority to impose civil penalties for violations of the Federal Power Act and FERC regulations.
U.S. Department of Justice Investigation
In September 2010, Entergy was notified that the U.S. Department of Justice had commenced a civil investigation of competitive issues concerning certain generation procurement, dispatch, and transmission system practices and policies of the Utility operating companies. The investigation is ongoing.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Market risk is the risk of changes in the value of commodity and financial instruments, or in future net income or cash flows, in response to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the following significant market risks:
· | The commodity price risk associated with the sale of electricity by the Entergy Wholesale Commodities business. |
· | The interest rate and equity price risk associated with Entergy’s investments in pension and other postretirement benefit trust funds. See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trust funds. |
· | The interest rate and equity price risk associated with Entergy’s investments in nuclear plant decommissioning trust funds, particularly in the Entergy Wholesale Commodities business. See Note 17 to the financial statements for details regarding Entergy’s decommissioning trust funds. |
· | The interest rate risk associated with changes in interest rates as a result of Entergy’s issuances of debt. Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization. See Notes 4 and 5 to the financial statements for the details of Entergy’s debt outstanding. |
The Utility business has limited exposure to the effects of market risk because it directsoperates primarily under cost-based rate regulation. To the extent approved by their retail rate regulators, the Utility operating companies hedge exposure to natural gas price volatility.
Entergy’s commodity and financial instruments are exposed to credit risk. Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Entergy is also exposed to a potential demand on liquidity due to credit support requirements within its supply or sales agreements.
Commodity Price Risk
Power Generation
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Entergy Wholesale Commodities also sells unforced capacity from its nuclear plants to load-serving entities, which allows those companies to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward fixed price power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity a nd energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy to its counterparties, make capacity available to them, or both. The following is a summary as of December 31, 2010 of the amount of Entergy Wholesale Commodities’ nuclear power plants’ planned energy output that is sold forward under physical or financial contracts:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | �� | | | | | | | | | |
Percent of planned generation sold forward: | | | | | | | | | | |
| Unit-contingent | | 79% | | 59% | | 34% | | 14% | | 12% |
| Unit-contingent with guarantee of availability (1) | | 17% | | 14% | | 6% | | 3% | | 3% |
| Firm LD | | 3% | | 24% | | 0% | | 8% | | 0% |
| Offsetting positions | | (3)% | | (10)% | | 0% | | 0% | | 0% |
| Total energy sold forward | | 96% | | 87% | | 40% | | 25% | | 15% |
Planned generation (TWh) (4) | | 41 | | 41 | | 40 | | 41 | | 41 |
Average revenue under contract per MWh (2) (3) | | $53 | | $49 | | $47 | | $51 | | $51 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
(1) | A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees. |
(2) | The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant, which is through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far. |
(3) | Average revenue under contract may fluctuate due to positive or negative basis differences, option premiums, costs to convert firm LD to unit-contingent, and other risk management costs. Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA. |
(4) | Assumes license renewal for plants whose current licenses expire within five years. License renewal applications are in process for four units, as follows (with current license expirations in parentheses): Vermont Yankee (March 2012), Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015). |
Entergy estimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on December 31, 2010 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $17 million in 2011. Entergy estimates that, based on December 31, 2009 market conditions, planned generation volume, and hedged position, a $10 per MWh change in the annual average energy price would have had a corresponding effect on pre-tax net income of $53 million in 2010.
Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, NYPA and the subsidiaries that own the FitzPatrick and Indian Point 3 plants amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, the Entergy subsidiaries agreed to make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Entergy subsidiaries will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million.& #160; The annual payment for each year’s output is due by January 15 of the following year. Entergy will record the liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. In 2010, 2009, and 2008, Entergy Wholesale Commodities recorded a $72 million liability for generation during each of those years. An amount equal to the liability was recorded each year to the plant asset account as contingent purchase price consideration for the plants. This amount will be depreciated over the expected remaining useful life of the plants.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At December 31, 2010, based on power prices at that time, Entergy had credit exposure of $14 million under the guarantees in place supporting Entergy Nuclear Power Marketing (a subsidiary in the Entergy Wholesale Commo dities segment) transactions, $20 million of guarantees that support letters of credit, and $5 million of posted cash collateral to the ISOs. As of December 31, 2010, the credit exposure associated with Entergy Wholesale Commodities assurance requirements would increase by $123 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2010, Entergy would have been required to provide approximately $78 million of additional cash or letters of credit under some of the agreements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As of December 31, 2010, the counterparties or their guarantors for 99.7% of the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2015 have public investment grade credit ratings and 0.3% is with load-serving entities without public credit ratings.
In addition to selling the power produced by its plants, Entergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary as of December 31, 2010 of the amount of the Entergy Wholesale Commodities nuclear plants’ installed capacity that is sold forward, and the blended amount of the Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is sold forward:
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | | | | | | | | | | |
Percent of capacity sold forward: | | | | | | | | | | |
| Bundled capacity and energy contracts | | 25% | | 18% | | 16% | | 16% | | 16% |
| Capacity contracts | | 37% | | 29% | | 26% | | 10% | | 0% |
| Total capacity sold forward | | 62% | | 47% | | 42% | | 26% | | 16% |
Planned net MW in operation | | 4,998 | | 4,998 | | 4,998 | | 4,998 | | 4,998 |
Average revenue under contract per kW per month | | $2.6 | | $3.0 | | $3.1 | | $3.5 | | $- |
(applies to capacity contracts only) | | | | | | | | | | |
| | | | | | | | | | |
Blended Capacity and Energy Recap (based on revenues) | | | | | | | | | | |
% of planned generation and capacity sold forward | | 96% | | 87% | | 40% | | 26% | | 15% |
Average revenue under contract per MWh | | $54 | | $51 | | $50 | | $53 | | $52 |
The preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy’s financial position or results of operations.
Nuclear Decommissioning Costs
Entergy subsidiaries own nuclear generation facilities in both its Utility and Entergy Wholesale Commodities business units. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service, and money is collected and deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates:
· | Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by annual factors ranging from approximately 3% to 3.5%. A 50 basis point change in this assumption could change the ultimate cost of decommissioning a facility by as much as an approximate average of 20% to 25%. To the extent that a high probability of license renewal is assumed, a change in the estimated inflation or cost escalation rate has a larger effect on the undiscounted cash flows because the rate of inflation is factored into the calculation for a longer period of time. |
· | Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant’s retirement must be estimated. A high probability that the plant’s license will be renewed and operate for some time beyond the original license term has currently been assumed for purposes of calculating the decommissioning liability for a number of Entergy’s nuclear units. Second, an assumption must be made whether decommissioning will begin immediately upon plant retirement, or whether the plant will be held in “safestore” status for later decommissioning, as permitted by applicable regulations. While the effect of these assumptions cannot be determined with pr ecision, a change of assumption of either renewal or use of a “safestore” status can possibly change the present value of these obligations. Future revisions to appropriately reflect changes needed to the estimate of decommissioning costs will affect net income, only to the extent that the estimate of any reduction in the liability exceeds the amount of the undepreciated asset retirement cost at the date of the revision, for unregulated portions of Entergy’s business. Any increases in the liability recorded due to such changes are capitalized and depreciated over the asset’s remaining economic life. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. However the DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy is continuing to pursue damages claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and mainta ining these facilities can have a significant effect (as much as an average of 20% to 30% of estimated decommissioning costs). Entergy’s decommissioning studies may include cost estimates for spent fuel storage. However, these estimates could change in the future based on the timing of the opening of an appropriate facility designated by the federal government to receive spent nuclear fuel. |
· | Technology and Regulation – Over the past several years, more practical experience with the actual decommissioning of facilities has been gained and that experience has been incorporated in to Entergy’s current decommissioning cost estimates. However, given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur and affect current cost estimates. If regulations regarding nuclear decommissioning were to change, this could have a potentially significant effect on cost estimates. The effect of these potential changes is not presently determinable. |
· | Interest Rates - The estimated decommissioning costs that form the basis for the decommissioning liability recorded on the balance sheet are discounted to present values using a credit-adjusted risk-free rate. When the decommissioning cost estimate is significantly changed requiring a revision to the decommissioning liability and the change results in an increase in cash flows, that increase is discounted using a current credit-adjusted risk-free rate. Under accounting rules, if the revision in estimate results in a decrease in estimated cash flows, that decrease is discounted using the previous credit-adjusted risk-free rate. Therefore, to the extent that one of the factors noted above changes resulting in a significant increase in estimated cash flows, current int erest rates will affect the calculation of the present value of the additional decommissioning liability. |
In the first quarter 2009, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in an $8.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the second quarter 2009, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $4.2 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the fourth quarter 2009, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $78.7 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement obligation asset that will be depreciated over the remaining life of the unit.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Impairment of Long-lived Assets and Trust Fund Investments
Entergy has significant investments in long-lived assets in all of its segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment whenever there are indications that impairments may exist. This evaluation involves a significant degree of estimation and uncertainty. In the Utility business, portions of River Bend are not included in rate base, which could reduce the revenue that would otherwise be recovered for the applicable portions of its generation. In the Entergy Wholesale Commodities business, Entergy’s investments in merchant nuclear generation assets are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses are not renewed. Entergy’s investments in merchant non-nuclear generation assets are subject to impairment if adverse market conditions arise.
In order to determine if Entergy should recognize an impairment of a long-lived asset that is to be held and used, accounting standards require that the sum of the expected undiscounted future cash flows from the asset be compared to the asset’s carrying value. The carrying value of the asset includes any capitalized asset retirement cost associated with the recording of an additional decommissioning liability, therefore changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded; if such cash flows are less than the carrying value, Entergy is required to record an impairment charge to write the asset down to its fair value.& #160; If an asset is held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value.
These estimates are based on a number of key assumptions, including:
· | Future power and fuel prices - Electricity and gas prices have been very volatile in recent years, and this volatility is expected to continue. This volatility necessarily increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows. |
· | Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, the market for such assets is volatile and the value of individual assets is impacted by factors unique to those assets. |
· | Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant impact on operations could cause a significant change in these assumptions. |
· | Timing - Entergy currently assumes, for a number of its nuclear units, that the plant’s license will be renewed. A change in that assumption could have a significant effect on the expected future cash flows and result in a significant effect on operations. |
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
If Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 includes a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued operations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plan t, including nuclear fuel, is $424 million as of December 31, 2010.
Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary-impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). For debt securities held as of January 1, 2009 for which an othe r-than-temporary impairment had previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other than temporary impairments relating to credit losses on debt securities in 2010 or 2009. The assessment of whether an investment in an equity security has suffered an other than temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of inve stments. As discussed in Note 1 to the financial statements, unrealized losses that are not considered temporarily impaired are recorded in earnings for Entergy Wholesale Commodities. Entergy Wholesale Commodities recorded charges to other income of $1 million in 2010, $86 million in 2009, and $50 million in 2008 resulting from the recognition of impairments of certain securities held in its decommissioning trust funds that are not considered temporary. Additional impairments could be recorded in 2011 to the extent that then current market conditions change the evaluation of recoverability of unrealized losses.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility and E ntergy Wholesale Commodities segments.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Assumptions
Key actuarial assumptions utilized in determining these costs include:
· | Discount rates used in determining future benefit obligations; |
· | Projected health care cost trend rates; |
· | Expected long-term rate of return on plan assets; and |
· | Rate of increase in future compensation levels. |
Entergy reviews these assumptions on an annual basis and adjusts them as necessary. The falling interest rate environment and worse-than-expected performance of the financial equity markets in 2008, partially offset by recoveries in 2009 and 2010, have impacted Entergy’s funding and reported costs for these benefits. In addition, these trends have caused Entergy to make a compliance filing removing all interruptible loadnumber of adjustments to its assumptions.
In selecting an assumed discount rate to calculate benefit obligations, Entergy reviews market yields on high-quality corporate debt and matches these rates with Entergy’s projected stream of benefit payments. Based on recent market trends, the discount rates used to calculate its qualified pension benefit obligation decreased from a range of 6.10% to 6.30% for its specific pension plans in 2009 to a range of 5.6% to 5.7% in 2010. The discount rate used to calculate its other postretirement benefit obligation also decreased from 6.10% in 2009 to 5.5% in 2010. Entergy’s assumed discount rates used to calculate the computation2008 pension and other postretirement obligations were 6.75% and 6.7%, respectively.
Entergy reviews actual recent cost trends and projected future trends in establishing health care cost trend rates. Based on this review, Entergy’s health care cost trend rate assumption used in calculating the December 31, 2010 accumulated postretirement benefit obligation was an 8.5% increase in health care costs in 2011 gradually decreasing each successive year, until it reaches a 4.75% annual increase in health care costs in 2019 and beyond for pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees.
The assumed rate of peak load responsibility commencingincrease in future compensation levels used to calculate benefit obligations was 4.23% in 2010 and 2009.
In determining its expected long-term rate of return on plan assets used in calculation of benefit plan costs, Entergy reviews past long-term performance, asset allocations, and long-term inflation assumptions. Entergy targets an asset allocation for its qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities. The target allocations for Entergy’s non-taxable postretirement benefit assets are 55% equity securities and 45% fixed-income securities and, for its taxable other postretirement benefit assets, 35% equity securities and 65% fixed-income securities. Entergy’s expected long-term rate of return on qualified pension assets and non-taxable other postretirement assets used to calculate qualified pension and other postretirement benefits costs was 8.5% and 7.75% , respectively for 2010 and 8.5% for both qualified and other postretirement benefit costs for 2009 and 2008. Entergy’s expected long-term rates of return on qualified pension assets and non-taxable other postretirement assets used to calculate 2011 qualified pension and other postretirement benefits costs were 8.5% and 7.75%, respectively. Entergy’s expected long-term rates of return on taxable other postretirement assets used to calculate other postretirement benefits costs were 5.5% in 2011 and 2010, 6% in 2009 and 5.5% in 2008.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Discount rate | | (0.25%) | | $13,682 | | $131,414 |
Rate of return on plan assets | | (0.25%) | | $7,634 | | - |
Rate of increase in compensation | | 0.25% | | $6,367 | | $30,374 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) |
| | | | | | |
Health care cost trend | | 0.25% | | $6,500 | | $34,291 |
Discount rate | | (0.25%) | | $4,375 | | $40,557 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Accounting Mechanisms
Effective December 31, 2006, accounting standards required an employer to recognize in its balance sheet the funded status of its benefit plans. Refer to Note 11 to the financial statements for a further discussion of Entergy’s funded status.
In accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees.
Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Costs and Funding
In 2010, Entergy’s total qualified pension cost was $147.1 million. Entergy anticipates 2011 qualified pension cost to be $154 million. Pension funding was $454 million for 2010. Entergy’s contributions to the pension trust are currently estimated to be approximately $368.8 million in 2011, although the required pension contributions will not be known with more certainty until the January 1, 2011 valuations are completed by April 1, 20042011.
Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall which, under the Pension Protection Act, must be funded over a seven-year rolling period. The
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on a calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed in to issuethe calculated fair market value of assets and the funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury; therefore, periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.
Total postretirement health care and life insurance benefit costs for Entergy in 2010 were $111.1 million, including $26.6 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy expects 2011 postretirement health care and life insurance benefit costs to be $114.7 million. This includes a projected $33 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy contributed $75 million to its postretirement plans in 2010. Entergy’s current estimate of contributions to its other postretirement plans is approximately $78 million in 2011.
Federal Healthcare Legislation
The Patient Protection and Affordable Care Act (PPACA) became federal law on March 23, 2010, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 became federal law and amended certain provisions of the PPACA. These new federal laws change the law governing employer-sponsored group health plans, like Entergy's plans, and include, among other things, the following significant provisions:
· | A 40% excise tax on per capita medical benefit costs that exceed certain thresholds; |
· | Change in coverage limits for dependants; and |
· | Elimination of lifetime caps. |
The total impact of PPACA is not yet determinable because technical guidance regarding application must still be issued. Additionally, ongoing litigation and political discussions are in progress regarding the constitutionality of and the potential repeal of health care reform, although whether that occurs and what parts of health care reform would be invalidated or repealed is not yet known. Entergy will continue to monitor these developments to determine the possible impact on Entergy as a result of PPACA. Entergy is participating in the programs currently provided for under PPACA, such as the early retiree reinsurance program, which may provide for some limited reimbursements of certain claims for early retirees aged 55 to 64 who are not yet eligible for Medicare.
One provision of the new law that is effective in 2013 eliminates the federal income tax deduction for prescription drug expenses of Medicare beneficiaries for which the plan sponsor also receives the retiree drug subsidy under Part D. Entergy receives subsidy payments under the Medicare Part D plan and therefore in the first quarter 2010 recorded a reduction to the deferred tax asset related to the unfunded other postretirement benefit obligation. The offset was recorded as a $16 million charge to income tax expense or, for the Utility, including each Registrant Subsidiary, as a regulatory asset.
Other Contingencies
As a company with multi-state domestic utility operations and a history of international investments, Entergy is subject to a number of federal, state, and international laws and regulations and other factors and conditions in the areas in which it operates, which potentially subject it to environmental, litigation, and other risks. Entergy periodically evaluates its exposure for such risks and records a reserve for those matters which are considered probable and estimable in accordance with generally accepted accounting principles.
Environmental
Entergy must comply with environmental laws and regulations applicable to the handling and disposal of hazardous waste. Under these various laws and regulations, Entergy could incur substantial costs to restore properties consistent with the various standards. Entergy conducts studies to determine the extent of any necessary refundsrequired remediation and has recorded reserves based upon its evaluation of the likelihood of loss and expected dollar amount for each issue. Additional sites could be identified which require environmental remediation for which Entergy could be liable. The amounts of environmental reserves recorded can be significantly affected by the following external events or conditions:
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Changes to existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. |
· | The identification of additional sites or the filing of other complaints in which Entergy may be asserted to be a potentially responsible party. |
· | The resolution or progression of existing matters through the court system or resolution by the EPA. |
Litigation
Entergy has been named as defendant in a number of lawsuits involving employment, ratepayer, and injuries and damages issues, among other matters. Entergy periodically reviews the cases in which it has been named as defendant and assesses the likelihood of loss in each case as probable, reasonably estimable, or remote and records reserves for cases which have a probable likelihood of loss and can be estimated. Notes 2 and 8 to reflectthe financial statements include more detail on ratepayer and other lawsuits and management’s assessment of the adequacy of reserves recorded for these matters. Given the environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is named as a defendant, however, the ultimate outcome of the litigation Entergy is exposed to has the potential to materially affect the results of operations of Entergy, or its operating company subsidiaries.
Uncertain Tax Positions
Entergy’s operations, including acquisitions and divestitures, require Entergy to evaluate risks such as the potential tax effects of a transaction, or warranties made in connection with such a transaction. Entergy believes that it has adequately assessed and provided for these types of risks, where applicable. Any reserves recorded for these types of issues, however, could be significantly affected by events such as claims made by third parties under warranties, additional transactions contemplated by Entergy, or completion of reviews of the tax treatment of certain transactions or issues by taxing authorities. Entergy does not expect a material adverse effect on earnings from these matters.
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
REPORT OF MANAGEMENT
Management of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial statements and related financial information included in this change. document. To meet this responsibility, management establishes and maintains a system of internal controls designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements in accordance with generally accepted accounting principles. This system includes communication through written policies and procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility and training of personnel. This system is also tested by a comprehensive internal audit program.
Entergy management assesses the effectiveness of Entergy’s internal control over financial reporting on an annual basis. In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and presentation.
Entergy Corporation and the Registrant Subsidiaries’ independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the effectiveness of Entergy’s internal control over financial reporting as of December 31, 2010, which is included herein on pages 390 through 397.
In addition, the order directsAudit Committee of the Board of Directors, composed solely of independent Directors, meets with the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal controls, and auditing and financial reporting matters. The Audit Committee appoints the independent auditors annually, seeks shareholder ratification of the appointment, and reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present, providing free access to the Audit Committee.
Based on management’s assessment of internal controls using the COSO criteria, management believes that Entergy and each of the Registrant Subsidiaries maintained effective internal control over financial reporting as of December 31, 2010. Management further believes that this assessment, combined with the policies and procedures noted above, provides reasonable assurance that Entergy’s and each of the Registrant Subsidiaries’ financial statements are fairly and accurately presented in accordance with generally accepted accounting principles.
J. WAYNE LEONARD Chairman of the Board and Chief Executive Officer of Entergy Corporation | LEO P. DENAULT Executive Vice President and Chief Financial Officer of Entergy Corporation |
HUGH T. MCDONALD Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc. | WILLIAM M. MOHL Chairman of the Board, President, and Chief Executive Officer of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC |
HALEY R. FISACKERLY Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc. | CHARLES L. RICE, JR. President and Chief Executive Officer of Entergy New Orleans, Inc. |
JOSEPH F. DOMINO Chairman of the Board, President, and Chief Executive Officer of Entergy Texas, Inc. | JOHN T. HERRON Chairman, President, and Chief Executive Officer of System Energy Resources, Inc. |
THEODORE H. BUNTING, JR. Senior Vice President and Chief Accounting Officer (and acting principal financial officer) of Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and Entergy Texas, Inc. | WANDA C. CURRY Vice President and Chief Financial Officer of System Energy Resources, Inc. |
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SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands, Except Percentages and Per Share Amounts) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 11,487,577 | | | $ | 10,745,650 | | | $ | 13,093,756 | | | $ | 11,484,398 | | | $ | 10,932,158 | |
Income from continuing operations | | $ | 1,270,305 | | | $ | 1,251,050 | | | $ | 1,240,535 | | | $ | 1,159,954 | | | $ | 1,133,098 | |
Earnings per share from continuing operations: | | | | | | | | | | | | | | | | | |
Basic | | $ | 6.72 | | | $ | 6.39 | | | $ | 6.39 | | | $ | 5.77 | | | $ | 5.46 | |
Diluted | | $ | 6.66 | | | $ | 6.30 | | | $ | 6.20 | | | $ | 5.60 | | | $ | 5.36 | |
Dividends declared per share | | $ | 3.24 | | | $ | 3.00 | | | $ | 3.00 | | | $ | 2.58 | | | $ | 2.16 | |
Return on common equity | | | 14.61 | % | | | 14.85 | % | | | 15.42 | % | | | 14.13 | % | | | 14.21 | % |
Book value per share, year-end | | $ | 47.53 | | | $ | 45.54 | | | $ | 42.07 | | | $ | 40.71 | | | $ | 40.45 | |
Total assets | | $ | 38,685,276 | | | $ | 37,561,953 | | | $ | 36,616,818 | | | $ | 33,643,002 | | | $ | 31,082,731 | |
Long-term obligations (1) | | $ | 11,575,973 | | | $ | 11,277,314 | | | $ | 11,734,411 | | | $ | 10,165,735 | | | $ | 9,194,206 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet, and in 2006 preferred stock with sinking fund. | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Utility Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 3,375 | | | $ | 2,999 | | | $ | 3,610 | | | $ | 3,228 | | | $ | 3,193 | |
Commercial | | | 2,317 | | | | 2,184 | | | | 2,735 | | | | 2,413 | | | | 2,318 | |
Industrial | | | 2,207 | | | | 1,997 | | | | 2,933 | | | | 2,545 | | | | 2,630 | |
Governmental | | | 212 | | | | 204 | | | | 248 | | | | 221 | | | | 155 | |
Total retail | | | 8,111 | | | | 7,384 | | | | 9,526 | | | | 8,407 | | | | 8,296 | |
Sales for resale (1) | | | 389 | | | | 206 | | | | 325 | | | | 393 | | | | 612 | |
Other | | | 241 | | | | 290 | | | | 222 | | | | 246 | | | | 155 | |
Total | | $ | 8,741 | | | $ | 7,880 | | | $ | 10,073 | | | $ | 9,046 | | | $ | 9,063 | |
Utility Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | |
Residential | | | 37,465 | | | | 33,626 | | | | 33,047 | | | | 33,281 | | | | 31,665 | |
Commercial | | | 28,831 | | | | 27,476 | | | | 27,340 | | | | 27,408 | | | | 25,079 | |
Industrial | | | 38,751 | | | | 35,638 | | | | 37,843 | | | | 38,985 | | | | 38,339 | |
Governmental | | | 2,463 | | | | 2,408 | | | | 2,379 | | | | 2,339 | | | | 1,580 | |
Total retail | | | 107,510 | | | | 99,148 | | | | 100,609 | | | | 102,013 | | | | 96,663 | |
Sales for resale (1) | | | 4,372 | | | | 4,862 | | | | 5,401 | | | | 6,145 | | | | 10,803 | |
Total | | | 111,882 | | | | 104,010 | | | | 106,010 | | | | 108,158 | | | | 107,466 | |
| | | | | | | | | | | | | | | | | | | | |
Competitive Businesses: | | | | | | | | | | | | | | | | | | | | |
Operating Revenues | | $ | 2,549 | | | $ | 2,693 | | | $ | 2,779 | | | $ | 2,232 | | | $ | 1,785 | |
Billed Electric Energy Sales (GWh) | | | 42,682 | | | | 43,969 | | | | 44,747 | | | | 40,916 | | | | 38,289 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes sales to Entergy New Orleans in 2006 , which was deconsolidated while its bankruptcy reorganization proceeding was pending. | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
New Orleans, Louisiana
We have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2010 and 2009, and the related consolidated income statements, consolidated statements of changes in equity and comprehensive income, and consolidated statements of cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Corporation and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2011 expressed an unqualified opinion on the Corporation’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2011
(Page left blank intentionally)
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CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands, Except Share Data) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 8,740,637 | | | $ | 7,880,016 | | | $ | 10,073,160 | |
Natural gas | | | 197,658 | | | | 172,213 | | | | 241,856 | |
Competitive businesses | | | 2,549,282 | | | | 2,693,421 | | | | 2,778,740 | |
TOTAL | | | 11,487,577 | | | | 10,745,650 | | | | 13,093,756 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operating and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 2,518,582 | | | | 2,309,831 | | | | 3,577,764 | |
Purchased power | | | 1,659,416 | | | | 1,395,203 | | | | 2,491,200 | |
Nuclear refueling outage expenses | | | 256,123 | | | | 241,310 | | | | 221,759 | |
Other operation and maintenance | | | 2,969,402 | | | | 2,750,810 | | | | 2,742,762 | |
Decommissioning | | | 211,736 | | | | 199,063 | | | | 189,409 | |
Taxes other than income taxes | | | 534,299 | | | | 503,859 | | | | 496,952 | |
Depreciation and amortization | | �� | 1,069,894 | | | | 1,082,775 | | | | 1,030,860 | |
Other regulatory charges (credits) - net | | | 44,921 | | | | (21,727 | ) | | | 59,883 | |
TOTAL | | | 9,264,373 | | | | 8,461,124 | | | | 10,810,589 | |
| | | | | | | | | | | | |
Gain on sale of business | | | 44,173 | | | | - | | | | - | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 2,267,377 | | | | 2,284,526 | | | | 2,283,167 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 59,381 | | | | 59,545 | | | | 44,523 | |
Interest and investment income | | | 185,455 | | | | 236,628 | | | | 197,872 | |
Other than temporary impairment losses | | | (1,378 | ) | | | (86,069 | ) | | | (49,656 | ) |
Miscellaneous - net | | | (48,124 | ) | | | (40,396 | ) | | | (23,452 | ) |
TOTAL | | | 195,334 | | | | 169,708 | | | | 169,287 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 610,146 | | | | 603,679 | | | | 634,188 | |
Allowance for borrowed funds used during construction | | | (34,979 | ) | | | (33,235 | ) | | | (25,267 | ) |
TOTAL | | | 575,167 | | | | 570,444 | | | | 608,921 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 1,887,544 | | | | 1,883,790 | | | | 1,843,533 | |
| | | | | | | | | | | | |
Income taxes | | | 617,239 | | | | 632,740 | | | | 602,998 | |
| | | | | | | | | | | | |
CONSOLIDATED NET INCOME | | | 1,270,305 | | | | 1,251,050 | | | | 1,240,535 | |
| | | | | | | | | | | | |
Preferred dividend requirements of subsidiaries | | | 20,063 | | | | 19,958 | | | | 19,969 | |
| | | | | | | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | | $ | 1,250,242 | | | $ | 1,231,092 | | | $ | 1,220,566 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Earnings per average common share: | | | | | | | | | | | | |
Basic | | $ | 6.72 | | | $ | 6.39 | | | $ | 6.39 | |
Diluted | | $ | 6.66 | | | $ | 6.30 | | | $ | 6.20 | |
Dividends declared per common share | | $ | 3.24 | | | $ | 3.00 | | | $ | 3.00 | |
| | | | | | | | | | | | |
Basic average number of common shares outstanding | | | 186,010,452 | | | | 192,772,032 | | | | 190,925,613 | |
Diluted average number of common shares outstanding | | | 187,814,235 | | | | 195,838,068 | | | | 201,011,588 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Consolidated net income | | $ | 1,270,305 | | | $ | 1,251,050 | | | $ | 1,240,535 | |
Adjustments to reconcile consolidated net income to net cash flow | | | | | | | | | | | | |
provided by operating activities: | | | | | | | | | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 1,705,331 | | | | 1,458,861 | | | | 1,391,689 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 718,987 | | | | 864,684 | | | | 333,948 | |
Gain on sale of business | | | (44,173 | ) | | | - | | | | - | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (99,640 | ) | | | 116,444 | | | | 78,653 | |
Fuel inventory | | | (10,665 | ) | | | 19,291 | | | | (7,561 | ) |
Accounts payable | | | 216,635 | | | | (14,251 | ) | | | (23,225 | ) |
Prepaid taxes and taxes accrued | | | (116,988 | ) | | | (260,029 | ) | | | 122,134 | |
Interest accrued | | | 17,651 | | | | 4,974 | | | | (652 | ) |
Deferred fuel | | | 8,909 | | | | 72,314 | | | | (38,500 | ) |
Other working capital accounts | | | (160,326 | ) | | | (43,391 | ) | | | (119,296 | ) |
Changes in provisions for estimated losses | | | 265,284 | | | | (12,030 | ) | | | 12,462 | |
Changes in other regulatory assets | | | 339,408 | | | | (415,157 | ) | | | (324,211 | ) |
Changes in pensions and other postretirement liabilities | | | (80,844 | ) | | | 71,789 | | | | 828,160 | |
Other | | | (103,793 | ) | | | (181,391 | ) | | | (169,808 | ) |
Net cash flow provided by operating activities | | | 3,926,081 | | | | 2,933,158 | | | | 3,324,328 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction/capital expenditures | | | (1,974,286 | ) | | | (1,931,245 | ) | | | (2,212,255 | ) |
Allowance for equity funds used during construction | | | 59,381 | | | | 59,545 | | | | 44,523 | |
Nuclear fuel purchases | | | (407,711 | ) | | | (525,474 | ) | | | (423,951 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | - | | | | 284,997 | | | | 297,097 | |
Proceeds from sale of assets and businesses | | | 228,171 | | | | 39,554 | | | | 30,725 | |
Payment for purchase of plant | | | - | | | | - | | | | (266,823 | ) |
Insurance proceeds received for property damages | | | 7,894 | | | | 53,760 | | | | 130,114 | |
Changes in transition charge account | | | (29,945 | ) | | | (1,036 | ) | | | 7,211 | |
NYPA value sharing payment | | | (72,000 | ) | | | (72,000 | ) | | | (72,000 | ) |
Payments to storm reserve escrow account | | | (296,614 | ) | | | (6,802 | ) | | | (248,863 | ) |
Receipts from storm reserve escrow account | | | 9,925 | | | | - | | | | 249,461 | |
Decrease (increase) in other investments | | | 24,956 | | | | 100,956 | | | | (73,431 | ) |
Proceeds from nuclear decommissioning trust fund sales | | | 2,606,383 | | | | 2,570,523 | | | | 1,652,277 | |
Investment in nuclear decommissioning trust funds | | | (2,730,377 | ) | | | (2,667,172 | ) | | | (1,704,181 | ) |
Net cash flow used in investing activities | | | (2,574,223 | ) | | | (2,094,394 | ) | | | (2,590,096 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | |
Proceeds from the issuance of: | | | | | | | | | |
Long-term debt | | | 3,870,694 | | | | 2,003,469 | | | | 3,456,695 | |
Common stock and treasury stock | | | 51,163 | | | | 28,198 | | | | 34,775 | |
Retirement of long-term debt | | | (4,178,127 | ) | | | (1,843,169 | ) | | | (2,486,806 | ) |
Repurchase of common stock | | | (878,576 | ) | | | (613,125 | ) | | | (512,351 | ) |
Redemption of preferred stock | | | - | | | | (1,847 | ) | | | - | |
Changes in credit borrowings - net | | | (8,512 | ) | | | (25,000 | ) | | | 30,000 | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (603,854 | ) | | | (576,956 | ) | | | (573,045 | ) |
Preferred stock | | | (20,063 | ) | | | (19,958 | ) | | | (20,025 | ) |
Net cash flow used in financing activities | | | (1,767,275 | ) | | | (1,048,388 | ) | | | (70,757 | ) |
| | | | | | | | | | | | |
Effect of exchange rates on cash and cash equivalents | | | 338 | | | | (1,316 | ) | | | 3,288 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (415,079 | ) | | | (210,940 | ) | | | 666,763 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 1,709,551 | | | | 1,920,491 | | | | 1,253,728 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 1,294,472 | | | $ | 1,709,551 | | | $ | 1,920,491 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 540,352 | | | $ | 568,417 | | | $ | 612,288 | |
Income taxes | | $ | 32,144 | | | $ | 43,057 | | | $ | 137,234 | |
| | | | | | | | | | | | |
Noncash financing activities: | | | | | | | | | | | | |
Long-term debt retired (equity unit notes) | | | - | | | $ | (500,000 | ) | | | - | |
Common stock issued in settlement of equity unit purchase contracts | | | - | | | $ | 500,000 | | | | - | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
CONSOLIDATED BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 76,290 | | | $ | 85,861 | |
Temporary cash investments | | | 1,218,182 | | | | 1,623,690 | |
Total cash and cash equivalents | | | 1,294,472 | | | | 1,709,551 | |
Securitization recovery trust account | | | 43,044 | | | | 13,098 | |
Accounts receivable: | | | | | | | | |
Customer | | | 602,796 | | | | 553,692 | |
Allowance for doubtful accounts | | | (31,777 | ) | | | (27,631 | ) |
Other | | | 161,662 | | | | 152,303 | |
Accrued unbilled revenues | | | 302,901 | | | | 302,463 | |
Total accounts receivable | | | 1,035,582 | | | | 980,827 | |
Deferred fuel costs | | | 64,659 | | | | 126,798 | |
Accumulated deferred income taxes | | | 8,472 | | | | - | |
Fuel inventory - at average cost | | | 207,520 | | | | 196,855 | |
Materials and supplies - at average cost | | | 866,908 | | | | 825,702 | |
Deferred nuclear refueling outage costs | | | 218,423 | | | | 225,290 | |
System agreement cost equalization | | | 52,160 | | | | 70,000 | |
Prepaid taxes | | | 301,807 | | | | 184,819 | |
Prepayments and other | | | 246,036 | | | | 201,221 | |
TOTAL | | | 4,339,083 | | | | 4,534,161 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 40,697 | | | | 39,580 | |
Decommissioning trust funds | | | 3,595,716 | | | | 3,211,183 | |
Non-utility property - at cost (less accumulated depreciation) | | | 257,847 | | | | 247,664 | |
Other | | | 405,946 | | | | 120,273 | |
TOTAL | | | 4,300,206 | | | | 3,618,700 | |
| | | | | | | | |
PROPERTY, PLANT AND EQUIPMENT | | | | | | | | |
Electric | | | 37,153,061 | | | | 36,343,772 | |
Property under capital lease | | | 800,078 | | | | 783,096 | |
Natural gas | | | 330,608 | | | | 314,256 | |
Construction work in progress | | | 1,661,560 | | | | 1,547,319 | |
Nuclear fuel under capital lease | | | - | | | | 527,521 | |
Nuclear fuel | | | 1,377,962 | | | | 739,827 | |
TOTAL PROPERTY, PLANT AND EQUIPMENT | | | 41,323,269 | | | | 40,255,791 | |
Less - accumulated depreciation and amortization | | | 17,474,914 | | | | 16,866,389 | |
PROPERTY, PLANT AND EQUIPMENT - NET | | | 23,848,355 | | | | 23,389,402 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 845,725 | | | | 816,856 | |
Other regulatory assets (includes securitization property of $882,346 as of December 31, 2010) | | | 3,838,237 | | | | 3,647,154 | |
Deferred fuel costs | | | 172,202 | | | | 172,202 | |
Goodwill | | | 377,172 | | | | 377,172 | |
Accumulated deferred income taxes | | | 54,523 | | | | - | |
Other | | | 909,773 | | | | 1,006,306 | |
TOTAL | | | 6,197,632 | | | | 6,019,690 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 38,685,276 | | | $ | 37,561,953 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES | |
CONSOLIDATED BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | 299,548 | | | $ | 711,957 | |
Notes payable and commercial paper | | | 154,135 | | | | 30,031 | |
Accounts payable | | | 1,181,099 | | | | 998,228 | |
Customer deposits | | | 335,058 | | | | 323,342 | |
Accumulated deferred income taxes | | | 49,307 | | | | 48,584 | |
Interest accrued | | | 217,685 | | | | 192,283 | |
Deferred fuel costs | | | 166,409 | | | | 219,639 | |
Obligations under capital leases | | | 3,388 | | | | 212,496 | |
Pension and other postretirement liabilities | | | 39,862 | | | | 55,031 | |
System agreement cost equalization | | | 52,160 | | | | 187,204 | |
Other | | | 277,598 | | | | 215,202 | |
TOTAL | | | 2,776,249 | | | | 3,193,997 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 8,573,646 | | | | 7,662,798 | |
Accumulated deferred investment tax credits | | | 292,330 | | | | 308,395 | |
Obligations under capital leases | | | 42,078 | | | | 354,233 | |
Other regulatory liabilities | | | 539,026 | | | | 378,862 | |
Decommissioning and asset retirement cost liabilities | | | 3,148,479 | | | | 2,939,539 | |
Accumulated provisions | | | 395,250 | | | | 141,315 | |
Pension and other postretirement liabilities | | | 2,175,364 | | | | 2,241,039 | |
Long-term debt (includes securitization bonds of $931,131 as of December 31, 2010) | | | 11,317,157 | | | | 10,705,738 | |
Other | | | 618,559 | | | | 711,334 | |
TOTAL | | | 27,101,889 | | | | 25,443,253 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Subsidiaries' preferred stock without sinking fund | | | 216,738 | | | | 217,343 | |
| | | | | | | | |
EQUITY | | | | | | | | |
Common Shareholders' Equity: | | | | | | | | |
Common stock, $.01 par value, authorized 500,000,000 shares; | | | | | | | | |
issued 254,752,788 shares in 2010 and in 2009 | | | 2,548 | | | | 2,548 | |
Paid-in capital | | | 5,367,474 | | | | 5,370,042 | |
Retained earnings | | | 8,689,401 | | | | 8,043,122 | |
Accumulated other comprehensive loss | | | (38,212 | ) | | | (75,185 | ) |
Less - treasury stock, at cost (76,006,920 shares in 2010 and | | | | | | | | |
65,634,580 shares in 2009) | | | 5,524,811 | | | | 4,727,167 | |
Total common shareholders' equity | | | 8,496,400 | | | | 8,613,360 | |
Subsidiaries' preferred stock without sinking fund | | | 94,000 | | | | 94,000 | |
TOTAL | | | 8,590,400 | | | | 8,707,360 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 38,685,276 | | | $ | 37,561,953 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | Common Shareholders’ Equity | | | |
| | Subsidiaries’ Preferred Stock | | | Common Stock | | | Treasury Stock | | | Paid-in Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income (Loss) | | | Total | |
| | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 94,000 | | | $ | 2,482 | | | $ | (3,734,865 | ) | | $ | 4,850,769 | | | $ | 6,735,965 | | | $ | 8,320 | | | $ | 7,956,671 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 19,969 | | | | - | | | | - | | | | - | | | | 1,220,566 | | | | - | | | | 1,240,535 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized gain (net of tax expense of $78,837) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 133,370 | | | | 133,370 | |
Pension and other postretirement liabilities (net of tax benefit of $68,076) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (125,087 | ) | | | (125,087 | ) |
Net unrealized investment losses (net of tax benefit of $108,049) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (126,013 | ) | | | (126,013 | ) |
Foreign currency translation (net of tax benefit of $1,770) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,288 | ) | | | (3,288 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,119,517 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (512,351 | ) | | | - | | | | - | | | | - | | | | (512,351 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 72,002 | | | | 18,534 | | | | - | | | | - | | | | 90,536 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (573,924 | ) | | | - | | | | (573,924 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (19,969 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (19,969 | ) |
Capital stock and other expenses | | | - | | | | - | | | | - | | | | - | | | | 112 | | | | - | | | | 112 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2008 | | $ | 94,000 | | | $ | 2,482 | | | $ | (4,175,214 | ) | | $ | 4,869,303 | | | $ | 7,382,719 | | | $ | (112,698 | ) | | $ | 8,060,592 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 19,958 | | | | - | | | | - | | | | - | | | | 1,231,092 | | | | - | | | | 1,251,050 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized loss (net of tax expense of $333) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,887 | ) | | | (2,887 | ) |
Pension and other postretirement liabilities (net of tax benefit of $34,415) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (35,707 | ) | | | (35,707 | ) |
Net unrealized investment gains (net of tax expense of $102,845) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 82,929 | | | | 82,929 | |
Foreign currency translation (net of tax benefit of $246) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (457 | ) | | | (457 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,294,928 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (613,125 | ) | | | - | | | | - | | | | - | | | | (613,125 | ) |
Common stock issuances in settlement of equity unit purchase contracts | | | - | | | | 66 | | | | - | | | | 499,934 | | | | - | | | | - | | | | 500,000 | |
Common stock issuances related to stock plans | | | - | | | | - | | | | 61,172 | | | | 805 | | | | - | | | | - | | | | 61,977 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (576,913 | ) | | | - | | | | (576,913 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (19,958 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (19,958 | ) |
Capital stock and other expenses | | | - | | | | - | | | | - | | | | - | | | | (141 | ) | | | - | | | | (141 | ) |
Adjustment for implementation of new accounting pronouncement | | | - | | | | - | | | | - | | | | - | | | | 6,365 | | | | (6,365 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2009 | | $ | 94,000 | | | $ | 2,548 | | | $ | (4,727,167 | ) | | $ | 5,370,042 | | | $ | 8,043,122 | | | $ | (75,185 | ) | | | 8,707,360 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 20,063 | | | | - | | | | - | | | | - | | | | 1,250,242 | | | | - | | | | 1,270,305 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized loss (net of tax benefit of $7,088) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (11,685 | ) | | | (11,685 | ) |
Pension and other postretirement liabilities (net of tax benefit of $14,387) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (8,527 | ) | | | (8,527 | ) |
Net unrealized investment gains (net of tax expense of $51,130) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 57,523 | | | | 57,523 | |
Foreign currency translation (net of tax benefit of $182) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (338 | ) | | | (338 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,307,278 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (878,576 | ) | | | - | | | | - | | | | - | | | | (878,576 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 80,932 | | | | (2,568 | ) | | | - | | | | - | | | | 78,364 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (603,963 | ) | | | - | | | | (603,963 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (20,063 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (20,063 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2010 | | $ | 94,000 | | | $ | 2,548 | | | $ | (5,524,811 | ) | | $ | 5,367,474 | | | $ | 8,689,401 | | | $ | (38,212 | ) | | $ | 8,590,400 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2010, 2009, and 2008 include $13.3 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries. As required by generally accepted accounting principles, all intercompany transactions have been eliminated in the consolidated financial statements. Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K. The Registrant Subsidiaries and many other Entergy subsidiaries maintain accounts in accordance with FERC and other regulatory guidelines. Certain previously reported amounts have been reclassified to conform to current classification s, with no effect on net income or common shareholders’ (or members’) equity.
Use of Estimates in the Preparation of Financial Statements
In conformity with generally accepted accounting principles, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Louisiana, Mississippi, and Texas, respectively. Entergy Gulf States Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana. Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans, except for Algiers, where Entergy Louisiana is the electric power supplier. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.
Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers. To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions. Changes are made to the inputs in the estimate as needed to reflect changes in billing practices. Each month the estimated unbilled r evenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy records revenue from sales under rates implemented subject to refund less estimated amounts accrued for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate case as of the date the financial statements are prepared.
Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing.System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are computed by allowing a return on System Energy 8217;s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property. For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation. Normal maintenance, repairs, and minor replacement costs are charged to operating expenses. Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.
Electric plant includes the portions of Grand Gulf and Waterford 3 that have been sold and leased back. For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions.
Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,393 | | $5,378 | | $3,015 | | $- |
Other | | 1,842 | | 1,797 | | 45 | | - |
Transmission | | 2,986 | | 2,956 | | 30 | | - |
Distribution | | 5,926 | | 5,926 | | - | | - |
Other | | 1,661 | | 1,411 | | 248 | | 2 |
Construction work in progress | | 1,662 | | 1,300 | | 361 | | 1 |
Nuclear fuel | | 1,378 | | 760 | | 618 | | - |
Property, plant, and equipment - net | | $23,848 | | $19,528 | | $4,317 | | $3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,105 | | $5,414 | | $2,691 | | $- |
Other | | 1,936 | | 1,724 | | 212 | | - |
Transmission | | 2,922 | | 2,889 | | 33 | | - |
Distribution | | 5,948 | | 5,948 | | - | | - |
Other | | 1,664 | | 1,398 | | 263 | | 3 |
Construction work in progress | | 1,547 | | 1,134 | | 414 | | (1) |
Nuclear fuel (leased and owned) | | 1,267 | | 747 | | 520 | | - |
Property, plant, and equipment - net | | $23,389 | | $19,254 | | $4,133 | | $2 |
Depreciation rates on average depreciable property for Entergy approximated 2.6% in 2010, 2.7% in 2009, and 2.7% in 2008. Included in these rates are the depreciation rates on average depreciable utility property of 2.5% in 2010, 2.7% in 2009, and 2.7% 2008, and the depreciation rates on average depreciable non-utility property of 3.7% in 2010, 3.8% in 2009, and 3.7% in 2008.
Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in fuel expense in the income statements.
“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $207.6 million and $197.8 million as of December 31, 2010 and 2009, respectively.
Construction expenditures included in accounts payable at December 31, 2010 is $171 million.
Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,029 | | $1,452 | | $1,489 | | $- | | $- | | $- | | $1,408 |
Other | | 406 | | 302 | | 393 | | 368 | | (2) | | 331 | | - |
Transmission | | 837 | | 456 | | 597 | | 469 | | 22 | | 569 | | 6 |
Distribution | | 1,637 | | 817 | | 1,255 | | 977 | | 296 | | 944 | | - |
Other | | 197 | | 192 | | 289 | | 207 | | 180 | | 116 | | 20 |
Construction work in progress | | 114 | | 119 | | 521 | | 147 | | 12 | | 80 | | 211 |
Nuclear fuel | | 189 | | 203 | | 135 | | - | | - | | - | | 155 |
Property, plant, and equipment - net | | $4,409 | | $3,541 | | $4,679 | | $2,168 | | $508 | | $2,040 | | $1,800 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,017 | | $1,484 | | $1,450 | | $- | | $- | | $- | | $1,463 |
Other | | 414 | | 300 | | 384 | | 331 | | (6) | | 301 | | - |
Transmission | | 819 | | 416 | | 611 | | 467 | | 27 | | 543 | | 6 |
Distribution | | 1,618 | | 870 | | 1,330 | | 943 | | 280 | | 907 | | - |
Other | | 202 | | 185 | | 307 | | 220 | | 174 | | 113 | | 21 |
Construction work in progress | | 115 | | 84 | | 510 | | 63 | | 21 | | 82 | | 199 |
Nuclear fuel (leased and owned) | | 185 | | 163 | | 122 | | - | | - | | - | | 85 |
Property, plant, and equipment - net | | $4,370 | | $3,502 | | $4,714 | | $2,024 | | $496 | | $1,946 | | $1,774 |
Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | |
2010 | | 2.9% | | 1.8% | | 2.4% | | 2.6% | | 3.1% | | 2.3% | | 2.9% |
2009 | | 3.3% | | 1.9% | | 2.5% | | 2.6% | | 3.0% | | 2.3% | | 2.9% |
2008 | | 3.2% | | 2.2% | | 2.5% | | 2.6% | | 3.1% | | 2.4% | | 2.9% |
Non-utility property - at cost (less accumulated depreciation) for Entergy Gulf States Louisiana is reported net of accumulated depreciation of $134 million and $131 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $2.5 million and $2.3 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $9.5 million and $9.2 million as of December 31, 2010 and 2009, respectively.
As of December 31, 2010, construction expenditures included in accounts payable are $16 million for Entergy Arkansas, $14.3 million for Entergy Gulf States Louisiana, $31.6 million for Entergy Louisiana, $6.8 million for Entergy Mississippi, $157.5 thousand for Entergy New Orleans, $3.3 million for Entergy Texas, and $23.8 million for System Energy.
System Energy invested, through its subsidiary Entergy New Nuclear Development, LLC, in initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities. As of December 31, 2009, $100.3 million in construction work in progress was recorded on System Energy’s balance sheet related to this project. In the first quarter 2010, $24.9 million, $24.9 million, and $49.5 million of this construction work in progress was transferred to Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi, respectively.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. The investments and expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests. As of December 31, 2010, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Generating Stations | | Fuel-Type | | Total Megawatt Capability (1) | | Ownership | | Investment | | Accumulated Depreciation |
| | | | | | | | | (In Millions) |
Utility business: | | | | | | | | | | | |
Entergy Arkansas - | | | | | | | | | | | |
Independence | Unit 1 | | Coal | | 836 | | 31.50% | | $127 | | $94 |
| Common Facilities | | Coal | | | | 15.75% | | $33 | | $24 |
White Bluff | Units 1 and 2 | | Coal | | 1,659 | | 57.00% | | $489 | | $332 |
Ouachita (2) | Common Facilities | | Gas | | | | 66.67% | | $171 | | $140 |
Entergy Gulf States Louisiana - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 40.25% | | $243 | | $167 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 24.15% | | $142 | | $94 |
Ouachita (2) | Common Facilities | | Gas | | | | 33.33% | | $87 | | $72 |
Entergy Mississippi - | | | | | | | | | | | |
Independence | Units 1 and 2 and Common Facilities | | Coal | | 1,678 | | 25.00% | | $247 | | $132 |
Entergy Texas - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 29.75% | | $178 | | $116 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 17.85% | | $106 | | $67 |
System Energy - | | | | | | | | | | | |
Grand Gulf | Unit 1 | | Nuclear | | 1,251 | | 90.00%(3) | | $3,852 | | $2,418 |
| | | | | | | | | | | |
Entergy Wholesale Commodities: | | | | | | | | | | | |
Independence | Unit 2 | | Coal | | 842 | | 14.37% | | $68 | | $40 |
| Common Facilities | | Coal | | | | 7.18% | | $16 | | $10 |
(1) | “Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
(2) | Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Gulf States Louisiana. The investment and accumulated depreciation numbers above are only for the common facilities. |
(3) | Includes an 11.5% leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements. |
Nuclear Refueling Outage Costs
Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income Taxes
Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return. Each tax paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreement. Deferred income taxes are recorded for all temporary differences between the book and tax basis of assets and liabilities, and for certain credits available for carryforward.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted.
Investment tax credits are deferred and amortized based upon the average useful life of the related property, in accordance with ratemaking treatment.
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of income:
| For the Years Ended December 31, |
| 2010 | 2009 | 2008 |
| | (In Millions, Except Per Share Data) |
Basic earnings per average common share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share |
Net income attributable to Entergy Corporation | $1,250.2 | 186.0 | | $6.72 | $1,231.1 | 192.8 | | $6.39 | $1,220.6 | 190.9 | | $6.39 |
Average dilutive effect of: | | | | | | | | | | | | |
Stock options | - | 1.8 | | (0.06) | - | 2.2 | | (0.07) | - | 4.1 | | (0.13) |
Equity units | - | - | | - | 3.2 | 0.8 | | (0.02) | 24.7 | 6.0 | | (0.06) |
Diluted earnings per average common share | $1,250.2 | 187.8 | | $6.66 | $1,234.3 | 195.8 | | $6.30 | $1,245.3 | 201.0 | | $6.20 |
| | | | | | | | | | | | |
The calculation of diluted earnings per share excluded 5,380,262 options outstanding at December 31, 2010, 4,368,614 options outstanding at December 31, 2009, and 3,326,835 options outstanding at December 31, 2008 that could potentially dilute basic earnings per share in the future. Those options were not included in the calculation of diluted earnings per share because the exercise price of those options exceeded the average market price for the year.
See Note 7 to the financial statements for a discussion of the equity units.
Stock-based Compensation Plans
Entergy grants stock options to key employees of the Entergy subsidiaries, which is described more fully in Note 12 to the financial statements. Effective January 1, 2003, Entergy prospectively adopted the fair value based method of accounting for stock options. Awards under Entergy’s plans generally vest over three years. Stock-based compensation expense included in consolidated net income, net of related tax effects, is $9.2 million for 2010, is $10.4 million for 2009, and is $10.7 million for 2008 for Entergy’s stock options granted.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accounting for the Effects of Regulation
Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards. The Utility operating companies and System Energy have rates that (i) are approved by a body empowered to set rates that bind customers (its regulator); (ii) are cost-based; and (iii) can be charged to and collected from customers. These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers. Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs that would otherwise be charged to expense if the rate actions of its regulator make refundsit probable that those costs will be recovered in future revenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial statements. When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.
An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements. In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations. Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.
Entergy Gulf States Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business. The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order. The plan allows Entergy Gulf States Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between ratepayers and shareholders.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at date of purchase to be cash equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances. The allowance is based on accounts receivable agings, historical experience, and other currently available evidence. Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.
Investments
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealiz ed gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whe ther Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 17 to the financial statements for details on the decommissioning trust funds and the other than temporary impairments recorded in 2010, 2009, and 2008.
Equity Method Investments
Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations. Entergy records its share of earnings or losses of the investee based on the change during the period in the estimated liquidation value of the investment, assuming that the investee’s assets were to be liquidated at book value. In accordance with this method, earnings are allocated to owners or members based on what each partner would receive from its capital account if, hypothetically, liquidation were to occur at the balance sheet date and amounts distributed were based on recorded book values. Entergy discontinues the recognition of l osses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support. See Note 14 to the financial statements for additional information regarding Entergy’s equity method investments.
Derivative Financial Instruments and Commodity Derivatives
The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet the normal purchase, normal sales criteria. The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction.
Contracts for commodities that will be delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.
For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income. To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in other comprehensive income are reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portions of all hedges are recognized in current-period earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using bid prices and market quotes. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not accrue to the benefit or detriment of stockholders. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments. See Note 16 to the financial statements for further discu ssion of fair value.
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy over the remaining life of the assets.
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March 21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
Entergy Wholesale Commodities’ investments are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses will not be renewed. Specifically regarding Vermont Yankee, if Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 include a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued oper ations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plant, including nuclear fuel, is $424 million as of December 31, 2010.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Gulf States Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Gulf States Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, in accordance with ratemaking treatment.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.
Presentation of Non-Controlling Interests
In 2007, a new accounting pronouncement was issued regarding non-controlling interests that requires generally that ownership interests in subsidiaries held by parties other than the reporting company (non-controlling interests) be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the controlling shareholders’ equity, and that the amount of consolidated net income attributable to the reporting company and to the non-controlling interests be clearly identified and presented on the face of the consolidated income statement. This new accounting pronouncement became effective for Entergy in the first quarter 2009 and applies to preferred securities issued by Entergy subsidiaries to third parties.
Presentation of Preferred Stock without Sinking Fund
In connection with the adoption of the new accounting pronouncement regarding non-controlling interests Entergy evaluated the accounting standards regarding the classification and measurement of redeemable securities. These standards require the classification of securities between liabilities and shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans articles of incorp oration provide, generally, that the holders of each company’s preferred securities may elect a majority of the respective company’s board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders’ equity on the balance sheet. Entergy Gulf States Louisiana and Entergy Louisiana, both organized as limited liability companies, have outstanding preferred securities with similar protective rights with respect to unpaid dividends, but provide for the election of board members that would not constitute a majority of the board; and their preferred securities are therefore classified for all periods presented as a component of members’ equity.
The outstanding preferred securities of Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Asset Management, whose preferred holders also have protective rights as described in Note 6 to the financial statements, are similarly presented between liabilities and equity on Entergy’s consolidated balance sheets and the outstanding preferred securities of Entergy Gulf States Louisiana and Entergy Louisiana are presented within total equity in Entergy’s consolidated balance sheets. The preferred dividends or distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
New Accounting Pronouncements
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets
Other Regulatory Assets
Regulatory assets represent probable future revenues associated with costs that are expected to be recovered from customers through the regulatory ratemaking process affecting the Utility business. In addition to the regulatory assets that are specifically disclosed on the face of the balance sheets, the table below provides detail of “Other regulatory assets” that are included on Entergy’s and the Registrant Subsidiaries’ balance sheets as of December 31, 2010 and 2009:
Entergy
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $406.4 | | $403.9 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 15.8 | | 23.2 |
Grand Gulf fuel - non-current and power management rider - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 17.4 | | 58.2 |
Gas hedging costs - recovered through fuel rates | | 1.9 | | 0.4 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 1,734.7 | | 1,481.7 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 4.8 | | 7.2 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 1,026.0 | | 1,183.2 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 81.5 | | 44.4 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 26.2 | | 28.1 |
Sale-leaseback deferral - Grand Gulf Lease Obligation recovered through June 2014 and Waterford 3 Lease Obligation (in 2009) (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations and Waterford 3 Lease Obligations) | | 22.3 | | 115.3 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 32.6 | | 34.2 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 95.8 | | 101.9 |
Little Gypsy cost proceeding – recovery timing will be determined by the LPSC in the project costs proceeding (Note 2 – Little Gypsy Repowering Project) | | 200.9 | | - |
Unamortized loss on reacquired debt - recovered over term of debt | | 122.5 | | 115.0 |
Other | | 49.4 | | 50.5 |
Total | | $3,838.2 | | $3,647.2 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $167.3 | | $179.4 |
Incremental ice storm costs - recovered through 2032 | | 11.1 | | 11.6 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 547.5 | | 447.6 |
Grand Gulf fuel - non-current - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | - | | 8.2 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 4.8 | | 7.2 |
Provision for storm damages - recovered either through securitization or retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 118.5 | | 61.7 |
Unamortized loss on reacquired debt - recovered over term of debt | | 38.0 | | 29.7 |
Other | | 5.2 | | 1.6 |
Entergy Arkansas Total | | $892.4 | | $747.0 |
Entergy Gulf States Louisiana
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $17.8 | | $17.6 |
Gas hedging costs - recovered through fuel rates | | 1.0 | | 0.3 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 157.4 | | 142.7 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 6.0 | | 44.1 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 14.0 | | 15.7 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 26.2 | | 28.1 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 32.6 | | 34.2 |
Unamortized loss on reacquired debt - recovered over term of debt | | 13.5 | | 14.1 |
Other | | 2.4 | | 3.0 |
Entergy Gulf States Louisiana Total | | $270.9 | | $299.8 |
Entergy Louisiana
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $113.4 | | $99.9 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 309.1 | | 200.4 |
Little Gypsy cost proceeding – recovery timing will be determined by the LPSC in the project costs proceeding (Note 2 – Little Gypsy Repowering Project) | | 200.9 | | - |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 1.0 | | 91.9 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 1.8 | | 7.5 |
Sale-leaseback deferral - (Note 10 – Sale and Leaseback Transactions – Waterford 3 Lease Obligations ) | | - | | 40.7 |
Unamortized loss on reacquired debt - recovered over term of debt | | 22.5 | | 19.7 |
Other | | 14.0 | | 16.9 |
Entergy Louisiana Total | | $662.7 | | $477.0 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Mississippi
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $5.0 | | $4.7 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 46.1 | | 44.5 |
Grand Gulf fuel - non-current and power management rider- recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 17.4 | | 50.0 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 160.0 | | 131.5 |
Provision for storm damages - recovered through retail rates | | 8.7 | | 10.0 |
Unamortized loss on reacquired debt - recovered over term of debt | | 11.5 | | 10.1 |
Other | | 4.5 | | 0.6 |
Entergy Mississippi Total | | $253.2 | | $251.4 |
Entergy New Orleans
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $3.2 | | $3.0 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 15.4 | | 15.2 |
Gas hedging costs - recovered through fuel rates | | 0.5 | | 0.2 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 95.3 | | 74.8 |
Provision for storm damages, including hurricane costs - recovered through insurance proceeds and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 10.8 | | 23.8 |
Unamortized loss on reacquired debt - recovered over term of debt | | 3.0 | | 2.9 |
Other | | 7.1 | | 5.8 |
Entergy New Orleans Total | | $135.3 | | $125.7 |
Entergy Texas | | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $1.4 | | $1.5 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 7.3 | | 7.2 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 165.4 | | 145.9 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 881.7 | | 952.2 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 95.8 | | 101.9 |
Unamortized loss on reacquired debt - recovered over term of debt | | 12.7 | | 13.5 |
Other | | 4.7 | | 9.9 |
Entergy Texas Total | | $1,169.0 | | $1,232.1 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $98.3 | | $97.8 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 12.2 | | 13.9 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other Postretirement Benefits) (b) | | 142.0 | | 78.4 |
Sale-leaseback deferral - recovered through June 2014 (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations) | | 22.3 | | 74.6 |
Unamortized loss on reacquired debt - recovered over term of debt | | 21.5 | | 25.0 |
Other | | 0.4 | | 0.3 |
System Energy Total | | $296.7 | | $290.0 |
(a) | The jurisdictional split order assigned the regulatory asset to Entergy Texas. The regulatory asset, however, is being recovered and amortized at Entergy Gulf States Louisiana. As a result, a billing will occur monthly over the same term as the recovery and receipts will be submitted to Entergy Texas. Entergy Texas has recorded a receivable from Entergy Gulf States Louisiana and Entergy Gulf States Louisiana has recorded a corresponding payable. |
(b) | Does not earn a return on investment, but is offset by related liabilities. |
Fuel and purchased power cost recovery
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are allowed to recover fuel and purchased power costs through fuel mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and the current fuel and purchased power costs is recorded as “Deferred fuel costs” on the Utility operating companies’ financial statements. The table below shows the amount of deferred fuel costs as of December 31, 2010 and 2009, that Entergy expects to recover (or return to customers) through fuel mechanisms, subject to subsequent regulatory review.
| 2010 | | 2009 |
| (In Millions) |
| | | |
Entergy Arkansas | $61.5 | | $122.8 |
Entergy Gulf States Louisiana (a) | $77.8 | | $57.8 |
Entergy Louisiana (a) | $8.8 | | $66.4 |
Entergy Mississippi | $3.2 | | ($72.9) |
Entergy New Orleans (a) | ($2.8) | | $8.1 |
Entergy Texas | ($77.4) | | ($102.7) |
(a) | 2010 and 2009 include $100.1 million for Entergy Gulf States Louisiana, $68 million for Entergy Louisiana , and $4.1 million for Entergy New Orleans of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be over a period greater than twelve months. |
Entergy Gulf States Louisiana made a $36.8 million adjustment to its deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Production Cost Allocation Rider
The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “System Agreement Cost Equalization Proceedings” section below. These costs cause an increase in Entergy Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months.
Energy Cost Recovery Rider
Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthly bills. The rider utilizes prior calendar year energy costs and projected energy sales for the twelve-month period May 1995 through July 1996. Entergy,commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.
In early October 2005, the APSC initiated an investigation into Entergy Arkansas's interim energy cost recovery rate. The investigation focused on Entergy Arkansas's 1) gas contracting, portfolio, and hedging practices; 2) wholesale purchases during the MPSC,period; 3) management of the coal inventory at its coal generation plants; and 4) response to the City Councilcontractual failure of the railroads to provide coal deliveries. In March 2006, the APSC extended its investigation to cover the costs included in Entergy Arkansas's March 2006 annual energy cost rate filing, and a hearing was held in the APSC energy cost recovery investigation in October 2006.
In January 2007 the APSC issued an order in its review of the energy cost rate. The APSC found that Entergy Arkansas failed to maintain an adequate coal inventory level going into the summer of 2005 and that Entergy Arkansas should be responsible for any incremental energy costs resulting from two outages caused by employee and contractor error. The coal plant generation curtailments were caused by railroad delivery problems and Entergy Arkansas has since resolved litigation with the railroad regarding the delivery problems. The APSC staff was directed to perform an analysis with Entergy Arkansas’s assistance to determine the additional fuel and purchased energy costs associated with these findings and file the analysis within 60 days of the order.& #160; After a final determination of the costs is made by the APSC, Entergy Arkansas would be directed to refund that amount with interest to its customers as a credit on the energy cost recovery rider. Entergy Arkansas requested rehearing of the order. In March 2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas’s petition for rehearing and for stay of the APSC order.
In October 2008 Entergy Arkansas filed a motion to lift the stay and to rescind the APSC's January 2007 order in light of the arguments advanced in Entergy Arkansas’s rehearing petition and because the value for Entergy Arkansas’s customers obtained through the resolved railroad litigation is significantly greater than the incremental cost of actions identified by the APSC as imprudent. In December 2008, the APSC denied the motion to lift the stay pending resolution of Entergy Arkansas’s rehearing request and of the unresolved issues in the proceeding. The APSC ordered the parties to submit their unresolved issues list in the pending proceeding, which the parties did. In February 2010 the APSC denied Entergy Arkansas’s request for rehearing, and held a hearing in September 2010 to determine the amount of damages, if any, that should be assessed against Entergy Arkansas. A decision is pending. Entergy Arkansas expects the amount of damages, if any, to have an immaterial effect on its results of operations, financial position, or cash flows.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The APSC also established a separate docket to consider the resolved railroad litigation, and in February 2010 it established a procedural schedule that concluded with testimony through September 2010. Testimony has been filed and the APSC will now decide the case based on the record in the proceeding, including the prefiled testimony.
Entergy Gulf States Louisiana and Entergy Louisiana
Entergy Gulf States Louisiana and Entergy Louisiana recover electric fuel and purchased power costs for the upcoming month based upon the level of such costs from the prior month. Entergy Gulf States Louisiana’s purchased gas adjustments include estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
In January 2003 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 1995 through 2004. The LPSC Staff issued its audit report in December 2010. The report recommends the disallowance of $23 million of costs which, with interest, will total $43 million. $2.3 million of this total relates to a realignment to and recovery through base rates of certain SO2 costs. Entergy Gulf States Louisiana filed comments disputing the finding s in the report and requested a hearing. Entergy Gulf States Louisiana has recorded provisions for the estimated effect of this proceeding.
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana's purchased gas adjustment clause filings for its gas distribution operations. The audit includes a review of the reasonableness of charges flowed through by Entergy Gulf States Louisiana for the period from 2003 through 2008. Discovery is in progress, but a procedural schedule has not been established.
In August 2000 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Louisiana. The time period that is the subject of the audit was January 1, 2000 through December 31, 2001. The scope of this docket was expanded to include a review of annual reports on fuel and purchased power transactions with affiliates and a prudence review of transmission planning issues and to include the years 2002 through 2004. Hearings were held and in May 2008 the ALJ issued a final recommendation that found in Entergy Louisiana’s favor on the issues, except for the disallowance of hypothetical SO2 allowance costs included in affiliate purchase s. The ALJ recommended a refund of the SO2 allowance costs collected to date and a realignment of these costs into base rates prospectively with an amortization of the refunded amount through base rates over a five-year period. The LPSC issued an order in December 2008 affirming the ALJ’s recommendation. Entergy Louisiana recorded a provision for the disallowance, including interest, and refunded approximately $7 million to customers in 2009.
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana's fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. Discovery is in progress, but a procedural schedule has not been established.
Entergy Mississippi
Entergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted quarterly to reflect accumulated over- or under-recoveries from the second prior quarter. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
In October 2008 the MPSC issued an order directing Entergy Mississippi and Entergy Services, Inc. to provide documents associated with fuel adjustment clause litigation in Louisiana involving Entergy Louisiana and Entergy New Orleans, and in January 2009 issued an order requiring Entergy Mississippi to provide additional information related to the long-term Evangeline gas contract that had been an issue in the fuel adjustment clause litigation in Louisiana. Entergy Mississippi and Entergy Services filed a response to the MPSC order stating that gas from the Evangeline gas contract had been sold into the Entergy System exchange and had an effect on the costs paid by Entergy Mississippi’s customers. Further proceedings have not been scheduled.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Mississippi Attorney General Complaint
The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, Inc., and Entergy Power, Inc. alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The litigation is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. On December 29, 2008, the defendant Entergy companies filed to remove the attorney general’s suit to U.S. District Court (the forum that Entergy believes is appropriate to resolve the types of fede ral issues raised in the suit), where it is currently pending, and additionally answered the complaint and filed a counter-claim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009, the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general’s complaint.
Entergy New Orleans
Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges. In June 2006 the City Council authorized the recovery of all Grand Gulf costs through Entergy New Orleans’s fuel adjustment clause (a significant portion of Grand Gulf costs was previously recovered through base rates), and continued that authorization in approving the October 2006 formula rate plan filing settlement. Effective June 2009, the majority of Grand Gulf costs were realigned to base rates and are no longer flowed through the fuel adjustment clause.
Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.
Entergy Texas
Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges, not recovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
In October 2007, Entergy Texas filed a request with the PUCT to refund $45.6 million, including interest, of fuel cost recovery over-collections through September 2007. In January 2008, Entergy Texas filed with the PUCT a stipulation and settlement agreement among the parties that updated the over-collection balance through November 2007 and established a refund amount, including interest, of $71 million. The PUCT approved the agreement in February 2008. The refund was made over a two-month period beginning February 2008, but was reduced by $10.3 million of under-recovered incremental purchased capacity costs.
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 rough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. In December 2008 the PUCT adopted an ALJ proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. Because the PUCT allocation to Texas retail
Entergy Corporation and Subsidiaries
Notes to Financial Statements
customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision results in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. Entergy Texas filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. In May 2009 the FERC issued an order rejecting the proposed amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). The PUCT and FERC decisions are now final.In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Entergy Texas requested that the proposed refund be made over a four-month period beginning June 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009.
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Entergy Texas requested that the proposed refund be made over a six-month period beginning January 2010. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund was made for most customers over a three-month period beginning January 2010.
In June 2010, Entergy Texas filed with the PUCT a request to refund approximately $66 million, including interest, of fuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
In December 2010, Entergy Texas filed with the PUCT a request to refund approximately $52 million, including interest, of fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved on remand.an interim basis and is pending final action by the PUCT, Entergy Texas will refund over-collections of approximately $72.7 million through November 2010. The FERCrefund will be made for most customers over a three-month period beginning with the February 2011 billing cycle.
Entergy Texas’s December 2009 rate case filing, which is discussed below, also included a request to reconcile $1.8 billion of fuel and purchased power costs covering the period April 2007 through June 2009.
Storm Cost Recovery Filings with Retail Regulators
Entergy Arkansas
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas's transmission and distribution lines, equipment, poles, and other facilities. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. In June 2010 the APSC issued a financing order authorizing the issuance of approximately $126.3 million in storm cost recovery bonds, which includes carrying costs of $11.5 million and $4.6 million of up-front financing costs. See Note 5 to the financial statements for a discussion of the August 2010 issuance of the securitization bonds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Gulf States Louisiana and Entergy Louisiana
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy's service territory. Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 fi nancings).Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm costs were financed primarily by Act 55 financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Act 55 financing savings to customers via a Storm Cost Offset rider.
In December 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financings are accomplished. In March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includes these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In July 2010 the LCDA issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3 million to acquire 1,502,643.04 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy Gulf States Louisiana and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses.
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate.& #160; Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In August 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agent for the state.
Entergy New Orleans
In December 2005 the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included Community Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007 the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
Entergy Texas
Hurricane Ike and Hurricane Gustav
Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas’s request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6 .8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
Little Gypsy Repowering Project (Entergy and Entergy Louisiana)
In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisiana complied with the LPSC’s directive and recommended that the project be suspended for an extended pe riod of time of three years or more. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC Staff and Intervenors filed testimony. The LPSC Staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, b ut at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it is probable that the Little Gypsy repowering project will be abandoned and accordingly reclassified the project costs from construction work in progress to a regulatory asset. This accounting reclassification does not modify Entergy Louisiana’s requested relief pending before the LPSC. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties conducted a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement is expected to be presented to the LPSC for approval in the first quarter 2011.
Retail Rate Proceedings
The following chart summarizes the Utility operating companies' current retail base rates:
Company | | Authorized Return on Common Equity | | |
| | | | |
Entergy Arkansas | | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
Entergy Louisiana | | 9.45%- 11.05% | | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| | | | |
Entergy Mississippi | | 10.79%- 13.05% | | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a settlement approved by the City Council. |
| | | | |
Entergy Texas | | 10.125% | | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a settlement of Entergy Texas's base rate case approved by the PUCT. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC (Entergy Arkansas)
Retail Rates
2009 Base Rate Filing
In September 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. In June 2010 the APSC approved a settlement and subsequent compliance tariffs that provide for a $63.7 million rate increase, effective for bills rendered for the first billing cycle of July 2010. The settlement provides for a 10.2% return on common equity.
2006 Base Rate Filing
In August 2006, Entergy Arkansas filed with the APSC a request for a change in base rates. In June 2007, after hearings on the filing, the APSC ordered Entergy Arkansas to reduce its annual rates by $5 million, and set a return on common equity of 9.9% with a hypothetical common equity level lower than Entergy Arkansas’s actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy’s stock-based compensation plans, and left Entergy Arkansas with no mechanism to recover $52 million of costs previously accumulated in Entergy Arkansas’s storm reserve and $18 million of removal costs associated with the term ination of a lease. The base rate change was implemented effective for bills rendered after June 15, 2007.
Entergy Arkansas sought to overturn the APSC’s decision, but in December 2008 the Arkansas Court of Appeals upheld almost all aspects of the APSC decision. After considering the progress of the proceeding in light of the decision of the Court of Appeals, Entergy Arkansas recorded in the fourth quarter 2008 an approximately $70 million charge to earnings, on both a pre- and after-tax basis because these are primarily flow-through items, to recognize that the regulatory assets associated with the storm reserve costs, lease termination removal costs, and stock-based compensation were no longer probable of recovery. In April 2009 the Arkansas Supreme Court denied Entergy Arkansas’s petition for review of the Court of Appeals decision.
Filings with the LPSC
Formula Rate Plans (Entergy Gulf States Louisiana and Entergy Louisiana)
In March 2005 the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, establishes a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate pl an filing in June 2005. The formula rate plan was subsequently extended one year.
Entergy Louisiana made a rate filing with the LPSC requesting a base rate increase in January 2004. In May 2005 the LPSC approved a settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed below the formula rate plans for Entergy Gulf States Louisiana and Entergy Louisiana have been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, and 2010 test years.
Retail Rates - Electric
(Entergy Gulf States Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Gulf States Louisiana’s 2007 test year filing and provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.65% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 tes t year filing that was made in October 2009. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. In May 2010, Entergy Gulf States Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.25% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate increase for incremental capacity costs. In July 2010 the LPSC approved a $7.8 million increase in the revenue requirement for decommiss ioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana made a revised 2009 test year filing. The revised filing reflected a 10.12% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $25.2 million for capacity costs. The rates reflected in the revised filing became effective, beginning with the first billing cycle of September 2010. Entergy Gulf States Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in January 2011.
(Entergy Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Louisiana’s 2006 and 2007 test year filings provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%).
Entergy Louisiana was permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the May 2010 billing cycle and a $0.1 million refund. In addition, Entergy Louisiana moved the recovery of approximately $12.5 million of capacity costs from fuel adjustment clause recovery to base rate recovery. At its April 21, 2010 meeting, the LPSC accepted the joint report.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2010, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.82% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental capacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue requirement for decommissioning, effective September 2010. ; In August 2010, Entergy Louisiana made a revised 2009 test year formula rate plan filing. The revised filing reflected a 10.82% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million for capacity costs. The rates reflected in the revised filing became effective beginning with the first billing cycle of September 2010. Entergy Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in December 2010.
Retail Rates - Gas (Entergy Gulf States Louisiana)
In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010. The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million. The sixty-day review and comment period for this filing remains open.
In January 2010, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2009. The filing showed an earned return on common equity of 10.87%, which is within the earnings bandwidth of 10.5% plus or minus fifty basis points, resulting in no rate change. In April 2010, Entergy Gulf States Louisiana filed a revised evaluation report reflecting changes agreed upon with the LPSC Staff. The revised evaluation report also resulted in no rate change.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. In March 2010 the MPSC issued an order: (1) providing the opportunity for a reset of Entergy Mississippi's return on common equity to a point within the formula rate plan bandwidth and eliminating the 50/50 sharing that had been in the plan, (2) modifying the performance measurement process, and (3) replacing the revenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a limit of four percent of revenues, although any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi's request to delayuse a projected test year for its annual scheduled formula rate plan filing and, theref ore, Entergy Mississippi will continue to use a historical test year for its annual evaluation reports under the paymentplan.
In March 2010, Entergy Mississippi submitted its 2009 test year filing, its first annual filing under the new formula rate plan rider. In June 2010 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provides for no change in rates, but does provide for the deferral as a regulatory asset of refunds$3.9 million of legal expenses associated with certain litigation involving the Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the City Council (Entergy New Orleans)
Formula Rate Plans and Storm-related Riders
On July 31, 2008, Entergy New Orleans filed an electric and gas base rate case with the City Council. On April 2, 2009, the City Council approved a comprehensive settlement. The settlement provided for a net $35.3 million reduction in combined fuel and non-fuel electric revenue requirement, including conversion of a $10.6 million voluntary recovery credit, implemented in January 2008, to a permanent reduction and substantial realignment of Grand Gulf cost recovery from fuel to electric base rates, and a $4.95 million gas base rate increase, both effective June 1, 2009, with adjustment of the customer charges for all rate classes. A new three-year formula rate plan was also adopted, with terms including an 11.1% benchmark electric return on common equity (ROE) with a +/- 40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans is over- or under-earning. The formula rate plan also includes a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
The 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs.
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings presented various alternatives to reflect the effect of Entergy New Orleans’s lost customers and decreased revenue following Hurricane Katrina. The alternative that Entergy New Orleans recommended adjusts for lost customers and assumes that the City Council’s June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place during the rate-effective period (a significant portion of Grand Gulf costs was previously recovered through base rates).
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establish a storm reserve to provide for the risk of another storm.
In October 2006, the City Council approved a settlement agreement that resolved Entergy New Orleans’s rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respect to storm restoration costs the anticipated receipt of CDBG funding as recommended by the Louisiana Recovery Authority. The settlement provided for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause was continued. Gas base rates increased by $4.75 million in November 2006 and increased by an additional $1.5 million in March 2007 and an additional $4.75 million in November 2007. The settleme nt called for Entergy New Orleans to file a base rate case by July 31, 2008, which it did as discussed above. The settlement agreement discontinued the formula rate plan and the generation performance-based plan but permitted Entergy New Orleans to file an application to seek authority to implement formula rate plan mechanisms no sooner than six months following the effective date of the implementation of the base rates resulting from the July 31, 2008 base rate case. The settlement also authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Beginning in May 2010, Entergy Texas implemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testi mony, of $58 million.
The parties filed a settlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. Baseline values were established to be used in Entergy Texas's request for a transmission cost recovery factor that will be made in a separate proceeding. The settlement states that Entergy Texas's fuel costs for the period May 1995April 2007 through July 1996 until 30 days followingJune 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River B end decommissioning costs at $2.0 million annually. Consistent with the settlement, in the third quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the settlement in December 2010.
System Agreement Cost Equalization Proceedings
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proceedings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement.
In June 2005, the FERC issued a decision in the System Agreement litigation that had been commenced by the LPSC, and essentially affirmed its decision in a December 2005 order on rehearing. The FERC issued in September 2008 an order denying rehearing. decision concluded, among other things, that:
· | The System Agreement no longer roughly equalizes total production costs among the Utility operating companies. |
· | In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs. |
· | In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies’ total production costs. |
· | The remedy ordered by FERC in 2005 required no refunds and became effective based on calendar year 2006 production costs and the first reallocation payments were made in 2007. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The refunds were made byFERC’s decision reallocates total production costs of the Utility operating companies that owed refunds towhose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. Under the current circumstances, this will be accomplished by payments from Utility operating companies that were due a refund on October 15, 2008. The APSC and thewhose production costs are more than 11% below Entergy System average production costs to Utility operating companies whose production costs are more than the Entergy System average production cost, with payments going first to those Utility operating companies whose total production costs are farthest above the Entergy System average.
Assessing the potential effects of the FERC’s decision requires assumptions regarding the future total production cost of each Utility operating company, which assumptions include the mix of solid fuel and gas-fired generation available to each company and the costs of natural gas and purchased power. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy Texas, and Entergy Mississippi are more dependent upon gas-fired generation sources than Entergy Arkansas or Entergy New Orleans. Of these, Entergy Arkansas is the least dependent upon gas-fired generation sources. Therefore, increases in natural gas prices likely will increase the amount by which Entergy Arkansas’s total production costs are below the Entergy System average production costs.
The LPSC, APSC, MPSC, and the AEEC appealed the FERC decisionsFERC’s decision to the United States Court of Appeals for the D.C. Circuit. BecauseEntergy and the City of its refund obligation to customers as a result of this proceeding and a related LPSC proceeding, Entergy Louisiana recorded provisions during 2008 of approximately $16 million, including interest, for rate refunds. The refunds were madeNew Orleans intervened in the fourth quarter of 2009.
Following the filing of petitioners' initial briefs, the FERC filed a motion requesting the D.C. Circuit hold the appeal of the FERC's decisions ordering refunds in the interruptible load proceeding in abeyance and remand the record to the FERC.various appeals. The D.C. Circuit granted the FERC's unopposed motion on June 24, 2009, and directed the FERC to file status reports at 60-day intervals beginning August 24, 2009.issued its decision in April 2008. The D.C. Circuit also directedaffirmed the partiesFERC’s decision in most respects, but remanded the case to file motionsthe FERC for further proceedings and reconsideration of its conclusion that it was prohibited from ordering refunds and its determination to govern future proceedingsimplement the bandwidth remedy commencing with calendar year 2006 production costs (with the first payments/receipts commencing in June 2007), rather than commencing the remedy on June 1, 2005. The D.C. Circuit concluded the FERC had failed so far in the case within 30 days of the completion of the FERC proceedings. Inproceeding to offer a reasoned explanation regarding these issues. As discussed below, in December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treatment of interruptible load in the allocation of capacity costs by the Utility operating companies. Pursuant toThe FERC also deferred further action on the paper hearing schedule, initial briefs were filed on January 19, 2010question of whether it provided sufficient rationale for not ordering refunds, and reply briefs were filed on February 9, 2010.
Entergy Arkansas and Entergy Mississippi Notices of Termination of System Agreement Participation and Related APSC Investigation
Citing its concerns that the benefits of its continued participation in the current formwhether it impermissibly delayed implementation of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective ninety-six (96) months from the datebandwidth remedy, until resolution of the notice or such earlier date as authorized by the FERC. Entergy Arkansas indicated, however, that a properly structured replacement agreement could be a viable alternative.this paper hearing.
In October 2007 the MPSC issued a letter confirming its belief that Entergy Mississippi should exit the System Agreement in light of the recent developments involving the System Agreement. The MPSC letter also requested that Entergy Mississippi advise the MPSC regarding the status ofApril 2006, the Utility operating companies' effort to develop successor arrangements to the System Agreement and advise the MPSC regarding Entergy Mississippi's position with respect to withdrawal from the System Agreement. In November 2007, pursuant to the provisions of the System Agreement, Entergy Mississippi provided its written notice to terminate its participation in the System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC.
On February 2, 2009, Entergy Arkansas and Entergy Mississippicompanies filed with the FERC their noticescompliance filing to implement the provisions of cancellationthe FERC’s decision. The filing amended the System Agreement to effectuateprovide for the terminationcalculation of their participationproduction costs, average production costs, and payments/receipts among the Utility operating companies to the extent required to maintain rough production cost equalization pursuant to the FERC’s decision. The FERC accepted the compliance filing in November 2006, with limited modifications. Provisions of the compliance filing as approved by the FERC include: the first payments commenced in June 2007, rather than earlier; interest is not required on the unpaid balance; and any payments will be made over seven months, rather than 1 2. In April 2007, the FERC denied various requests for rehearing, with one exception regarding the issue of retrospective refunds. That issue will be addressed subsequent to the remanded proceeding involving the interruptible load decision discussed further below in this section under “Interruptible Load Proceeding.”
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Calendar Year 2010 Production Costs
The liabilities and assets for the preliminary estimate of the payments and receipts required to implement the FERC’s remedy based on calendar year 2010 production costs were recorded in December 2010, based on certain year-to-date information. The preliminary estimate was recorded based on the following estimate of the payments/receipts among the Utility operating companies for 2011.
| Payments or (Receipts) |
| (In Millions) |
| |
Entergy Arkansas | $52 |
Entergy Gulf States Louisiana | $- |
Entergy Louisiana | $- |
Entergy Mississippi | ($37) |
Entergy New Orleans | ($15) |
Entergy Texas | $- |
The actual payments/receipts for 2011, based on calendar year 2010 production costs, will not be calculated until the Utility operating companies’ FERC Form 1s have been filed. Once the calculation is completed, it will be filed at the FERC. The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the Entergy System Agreement, effective December 18, 2013generating fleet, and November 7, 2015, respectively. Whilemultiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.
Rough Production Cost Equalization Rates
Each May since 2007 Entergy has filed with the FERC had indicated previously that the notices should be filed 18 months priorrates to Entergy Arkansas' termination (approximately mid-2012),implement the filing explains that resolving this issue now, rather than later, is important to ensure that informed long-term resource planning decisions can be made duringFERC’s orders in the years leading up to Entergy Arkansas' withdrawal and that all ofSystem Agreement proceeding. These filings show the following payments/receipts among the Utility operating companies are properly positionednecessary to continueachieve rough production cost equalization as defined by the FERC’s orders:
| | 2007 Payments or (Receipts) Based on 2006 Costs | | 2008 Payments or (Receipts) Based on 2007 Costs | | 2009 Payments or (Receipts) Based on 2008 Costs | | 2010 Payments or (Receipts) Based on 2009 Costs |
| | (In Millions) |
| | | | | | | | |
Entergy Arkansas | | $252 | | $252 | | $390 | | $41 |
Entergy Gulf States Louisiana | | ($120) | | ($124) | | ($107) | | $- |
Entergy Louisiana | | ($91) | | ($36) | | ($140) | | ($22) |
Entergy Mississippi | | ($41) | | ($20) | | ($24) | | ($19) |
Entergy New Orleans | | $- | | ($7) | | $- | | $- |
Entergy Texas | | ($30) | | ($65) | | ($119) | | $- |
The APSC has approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to operate reliably following Entergy Arkansas' and, eventually, Entergy Mississippi's, departureArkansas. Management believes that any changes in the allocation of production costs resulting from the System Agreement.FERC’s decision and related retail proceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs. See “Fuel and purchased power cost recovery, Entergy Texas,” above for discussion of a PUCT decision that resulted in $18.6 million of trapped costs between Entergy’s Texas and Louisiana jurisdictions. See “2007 Rate Filing Based on Calendar Year 2006 Production Costs” below for a discussion of a FERC decision that could result in $14.5 million of trapped costs at Entergy Arkansas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Based on the FERC’s April 27, 2007 order on rehearing that is discussed above, in the second quarter 2007 Entergy Arkansas recorded accounts payable and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, requested thatand Entergy Texas recorded accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC’s remedy based on calendar year 2006 production costs. Entergy Arkansas recorded a corresponding regulatory asset for its right to collect the payments from its customers, and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded corresponding regulatory liabilities for their obligations to pass the receipts on to their customers. The companies have followed this same accounting practice eac h year since then. The regulatory asset and liabilities are shown as “System Agreement cost equalization” on the respective balance sheets.
2007 Rate Filing Based on Calendar Year 2006 Production Costs
Several parties intervened in the 2007 rate proceeding at the FERC, acceptincluding the proposed noticesAPSC, the MPSC, the Council, and the LPSC, which have also filed protests. The PUCT also intervened. Intervenor testimony was filed in which the intervenors and also the FERC Staff advocated a number of cancellation without further proceedings. Variouspositions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for nuclear facilities. The effect of the various positions would be to reallocate costs among the Utility operating companies. The Utility operating companies filed rebuttal testimony explaining why the bandwidth payments are properly recoverab le under the AmerenUE contract, and explaining why the positions of FERC Staff and intervenors on the other issues should be rejected. A hearing in this proceeding concluded in July 2008, and the ALJ issued an initial decision in September 2008. The ALJ’s initial decision concludes, among other things, that: (1) the decisions to not exercise Entergy Arkansas’s option to purchase the Independence plant in 1996 and 1997 were prudent; (2) Entergy Arkansas properly flowed a portion of the bandwidth payments through to AmerenUE in accordance with the wholesale power contract; and (3) the level of nuclear depreciation and decommissioning expense reflected in the bandwidth calculation should be calculated based on NRC-authorized license life, rather than the nuclear depreciation and decommissioning expense authorized by the retail regulators for purposes of retail ratemaking. Following briefing by the parties, the matter was submitted to the FERC for decision. On January 11, 2010, the FERC issued its decision both affirming and overturning certain of the ALJ’s rulings, including overturning the decision on nuclear depreciation and decommissioning expense. The FERC’s conclusion related to the AmerenUE contract does not permit Entergy Arkansas to recover a portion of its bandwidth payment from AmerenUE. The Utility operating companies requested rehearing of that portion of the decision and requested clarification on certain other portions of the decision.
AmerenUE argued that its current wholesale power contract with Entergy Arkansas, pursuant to which Entergy Arkansas sells power to AmerenUE, does not permit Entergy Arkansas to flow through to AmerenUE any portion of Entergy Arkansas’s bandwidth payment. According to AmerenUE, Entergy Arkansas has sought to collect from AmerenUE approximately $14.5 million of the 2007 Entergy Arkansas bandwidth payment. The AmerenUE contract expired in August 2009. In April 2008, AmerenUE filed a complaint with the FERC seeking refunds of this amount, plus interest, in the event the FERC ultimately determines that bandwidth payments are not properly recovered under the AmerenUE contract. In response to the FERC’s decision discussed in the previous paragraph, Entergy Arkansas recorded a regulatory provision in the fourth quarter 2009 for a potential refund to AmerenUE.
2008 Rate Filing Based on Calendar Year 2007 Production Costs
Several parties intervened or filed protests in the 2008 rate proceeding at the FERC, including the APSC, the LPSC, and AmerenUE, which have also filed protests. Several other parties, including the MPSC and the City Council.Council, have intervened in the proceeding without filing a protest. In direct testimony filed on January 9, 2009, certain intervenors and also the FERC staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for the nuclear and fossil-fueled generating facilities. The effect of these various positions would be to reallocate costs among the Utility operating companies . In addition, three issues were raised alleging imprudence by the Utility operating companies, including whether the Utility operating companies had properly reflected generating units’ minimum operating levels for purposes of making unit commitment and dispatch decisions, whether Entergy Arkansas’s sales to third parties from its retained share of the Grand Gulf nuclear facility were reasonable, prudent, and non-discriminatory, and whether Entergy Louisiana’s long-term Evangeline gas purchase contract was prudent and reasonable.
Entergy Corporation and Subsidiaries
Management'sNotes to Financial Discussion and AnalysisStatements
The parties reached a partial settlement agreement of certain of the issues initially raised in this proceeding. The partial settlement agreement was conditioned on the FERC accepting the agreement without modification or condition, which the FERC did on August 24, 2009. A hearing on the remaining issues in the proceeding was completed in June 2009, and in September 2009 the ALJ issued an initial decision. The initial decision affirms Entergy’s position in the filing, except for two issues that may result in a reallocation of costs among the Utility operating companies. Entergy, the APSC, the LPSC, and the MPSC have submitted briefs on exceptions in the proceeding, and the matter has been submitted to the FERC for decision.
2009 Rate Filing Based on Calendar Year 2008 Production Costs
Several parties intervened in the 2009 rate proceeding at the FERC, including the LPSC and Ameren, which have also filed protests. In NovemberJuly 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month notice period without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a result of withdrawal. The FERC stated that it expected Entergy and all interested parties to move forward and develop details of all needed successor arrangements and encouraged Entergy to file its Section 205Entergy's proposed rates for filing, for post 2013 arrangements as soon as possible. The LPSC and the City Council have requested rehearing of the FERC's decision.
The APSC had previously commenced an investigation, in 2004, into whether Entergy Arkansas' continued participation in the System Agreement is in the best interests of its customers. More than once in the investigation proceeding Entergy Arkansas and its president, Hugh McDonald, filed testimony with the APSC in response to requests by the APSC. In addition, Mr. McDonald has appeared before the APSC on more than one occasion at public hearings for questioning. In December 2007, the APSC ordered Mr. McDonald to file testimony each month with the APSC detailing progress toward development of successor arrangements, beginning in March 2008, and Mr. McDonald has done so. In his Septembereffective June 1, 2009, testimony Mr. McDonald reported to the APSC the results of a related study. According to the study total estimated cost to establish the systems and staff the organizations to perform the necessary planning and operating functions for a stand-alone Entergy Arkansas operation are estimated at approximately $23 million, including $18 million to establish generation-related functions and $5 million to modify transmission-related information systems. Incremental costs for ongoing staffing and systems costs are estimated at approximately $8 million. Cost and implementation schedule estimates will continue to be re-evaluated and refined as additional, more detailed analysis is completed. The study did not assess the effect of stand-alone operation on Entergy Arkansas’ generation resource requirements. Entergy Arkansas expects it would take approximately two years to implement stand-alone operations for Entergy Arkansas.
In February 2010 the APSC issued an order announcing a refocus of its ongoing investigation of Entergy Arkansas' post-System Agreement operation. The order describes the APSC's "stated purpose in opening this inquiry to conduct an investigation regarding the prudence of [Entergy Arkansas] entering into a successor ESA [Entergy System Agreement] as opposed to becoming a stand-alone utility upon its exit from the ESA, and whether [Entergy Arkansas], as a standalone utility, should join the SPP RTO. It is the [APSC's] intention to render a decision regarding the prudence of [Entergy Arkansas] entering into a successor ESA as opposed to becoming a stand-alone utility upon its exit from the ESA, as well as [Entergy Arkansas'] RTO participation by the end of calendar year 2010. In parallel with this Docket, the [APSC] will be actively involved and will be closely watching to see if any meaningful enhancement will be made to a new Enhanced Independent Coordinator of Transmission (“E-ICT") Agreement through the efforts of the ETS [Entergy Transmission System] stakeholders, Entergy, and the newly formed and federally-recognized E-RSC in 2010." The schedule set by the order includes evidentiary hearings in March and May 2010. The order directed that the existing docket investigating Entergy Arkansas' participation in the System Agreement be closed. For a discussion of Entergy's Independent Coordinator of Transmission and the E-RSC see "Independent Coordinator of Transmission" below.
LPSC and City Council Action Related to the Entergy Arkansas and Entergy Mississippi Notices of Termination
In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the potential for a new agreement. Likewise, the New Orleans City Council opened a docket to gather information on progress towards a successor agreement.
June 2009 LPSC Complaint Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas' sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. The LPSC's complaint challenges sales made beginning in 2002 and requests refunds. On July 20, 2009, the Utility operating companies filed a response to the complaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System. In their response, the Utility operating companies
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to refund, and set the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company. The response further explains that the FERC already has determined that Entergy Arkansas' short-term wholesale sales did not trigger the "right-of-first-refusal" provision of the System Agreement. While the D.C. Circuit recently determined that the "right-of-first-refusal" issue was not properly before the FERC at the time of its earlier decision on the issue, the LPSC has raised no additional claims or facts that would warrant the FERC reaching a different conclusion. On December 7, 2009, the FERC issued an order setting the matterproceeding for hearing and settlement procedures. Settlement procedures were unsuccessfulterminated and a hearing before the ALJ was held in April 2010. In August 2010 the ALJ issued an initial decision. The initial decision substantially affirms Entergy's position in the matter isfiling, except for one issue that may result in some reallocation of costs among the Utility operating companies. The LPSC, the FERC trial staff, and Entergy have submitted briefs on exceptions in the proceed ing.
2010 Rate Filing Based on Calendar Year 2009 Production Costs
In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC's orders in the System Agreement proceeding, and supplemented the filing in September 2010. Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which have also filed protests. In July 2010 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2010, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures have been terminated, and the ALJ scheduled hearings to begin in August 2010.March 2011, with an initial decision scheduled for July 2011. Subsequently, in January 2011 the ALJ issued an order directing the parties and FERC staff to s how cause why this proceeding should not be stayed pending the issuance of FERC decisions in the prior production cost proceedings currently before the FERC on review. Briefing on the issue concluded on February 14, 2011. A hearing on the show cause order is scheduled for March 3, 2011.
Independent Coordinator of Transmission
In 2000, the FERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of independent RTOs (regional transmission organizations). Delays in implementing the FERC RTO order occurred due to a variety of reasons, including the fact that utility companies, other stakeholders, and federal and state regulators have had to work to resolve various issues related to the establishment of such RTOs.
In November 2006, after nearly a decade of effort, including filings, orders, technical conferences, and proceedings at the FERC, the Utility operating companies installed the Southwest Power Pool (SPP) as their Independent Coordinator of Transmission (ICT). The installation does not transfer control of Entergy'sEntergy’s transmission system to the ICT, but rather vests with the ICT responsibility for:
· | granting or denying transmission service on the Utility operating companies'companies’ transmission system. |
· | administering the Utility operating companies'companies’ OASIS node for purposes of processing and evaluating transmission service requests and ensuring compliance with the Utility operating companies'companies’ obligation to post transmission-related information. |
· | developing a base plan for the Utility operating companies'companies’ transmission system that will result in the ICT making the determination on whether costs of transmission upgrades should be rolled into the Utility operating companies'companies’ transmission rates or directly assigned to the customer requesting or causing an upgrade to be constructed. This should result in a transmission pricing structure that ensures that the Utility operating companies'companies’ retail native load customers are required to pay for only those upgrades necessary to reliably serve their needs. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | serving as the reliability coordinator for the Entergy transmission system. |
· | overseeing the operation of the weekly procurement process (WPP). |
· | evaluating interconnection-related investments already made on the Entergy System for purposes of determining the future allocation of the uncredited portion of these investments, pursuant to a detailed methodology. The ICT agreement also clarifies the rights that customers receive when they fund a supplemental upgrade. |
The initial term of the ICT is four years, and Entergy is precluded from terminating the ICT prior to the end of the four-year period.
After the FERC issued its April 2006 order approving the ICT proposal, the Utility operating companies made a series of compliance filings with the FERC that were protested by various parties. The FERC accepted the compliance filings and denied various requests for rehearing. As stated above, SPP was installed as the ICT in November 2006.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In October 2006 the Utility operating companies filed revisions to their Open Access Transmission Tariff (OATT) with the FERC to establish a mechanism to recover from their wholesale transmission customers the (1) costs incurred to develop or join an RTO and to develop the ICT; and (2) on-going costs that will be incurred under the ICT agreement. Several parties intervened opposing the proposed tariff revisions. In December 2006 the FERC accepted for filing Entergy's proposed tariff revisions, and set them for hearing and settlement procedures. In its Order, the FERC concluded that each of the Utility operating companies "should be allowed the opportunity to recover its start up costs associated with its formation of the ICT and its participation in prior failed attempts to form an RTO," and also that the proposed tariffs raised issues of fact that are more properly addressed through hearing and settlement procedures. In June 2007 the Utility operating companies reached a settlement-in-principle with the parties to the proceeding and the FERC approved the settlement in November 2007.
In the FERC's April 2006 order that approved Entergy's ICT proposal, the FERC stated that the WPP must be operational within approximately 14 months of the FERC order, or June 24, 2007, or the FERC may reevaluate all approvals to proceed with the ICT. The Utility operating companies filed status reports with the FERC notifying the FERC that, due to unexpected issues with the development of the WPP software and testing, the WPP was still not operational. The Utility operating companies also filed various tariff revisions with the FERC in 2007 and 2008 to address issues identified during the testing of the WPP and changes to the effective date of the WPP. On October 10, 2008 the FERC issued an order accepting a tariff amendment establishing that the WPP shall take effect at a date to be determined, after completion of successful simulation trials and the ICT'sICT’s endorsement of the WPP'sWPP’s implementation. On January 16, 2009, the Utility operating companies filed a compliance filing with the FERC that included the ICT'sICT’s endorsement of the WPP implementation, subject to the FERC'sFERC’s acceptance of certain additional tariff amendments and the completion of simulation testing and certain other items. The Utility operating companies filed the tariff amendments supported by the ICT on the same day. The amendments proposed to further amend the WPP to (a) limit supplier offers in the WPP to on-peak periodspe riods and (b) eliminate the granting of certain transmission service through the WPP.
On March 17, 2009, the FERC issued an order conditionally approving the proposed modification to the WPP to allow the process to be implemented the week of March 23, 2009. In its order approving the requested modifications, the FERC imposed additional conditions related to the ICT arrangement and indicated it was going to evaluate the success of the ICT arrangement, including the cost and benefits of implementing the WPP and whether the WPP goes far enough to address the transmission access issues that the ICT and WPP were intended to address. The FERC, in conjunction with the APSC, the LPSC, the MPSC, the PUCT, and the City Council, hosted a conference on June 24, 2009, to discuss the ICT arrangement and transmission access on the Entergy transmission system. In compliance with the FERC'sFERC’s March 2009 order, in November 2009 the Utility operating companies filed with the FERC a process for evaluating the modification or replacement of the current ICT and WPP arrangements.
During the conference, several issues were raised by regulators and market participants, including the adequacy of the Utility operating companies'companies’ capital investment in the transmission system, the Utility operating companies'companies’ compliance with the existing North American Electric Reliability Corporation (NERC) reliability planning standards, the availability of transmission service across the system, and whether the Utility operating companies could have purchased lower cost power from merchant generators located on the transmission system rather than running their older generating facilities. On July 20, 2009, the Utility operating companies filed comments with the FERC responding to the issues raised during the conference. The comments explain that: 1) the Utility operating companies believe that the ICT arrangement has fulfilled its objectives; 2) the Utility operating companies'companies’ transmission planning practices comply with laws and regulations regarding the planning and operation of the transmission system; and 3) these planning practices have resulted in a system that meets applicable reliability standards and is sufficiently robust to allow the Utility operating companies both to substantially increase the amount of transmission service available to third parties and to make significant amounts of economic purchases from the wholesale market for the benefit of the Utility operating companies'companies’ retail customers. The Utility operating companies also explain that, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies’ transmission system that
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
limits the ability of the Utility operating companies as well as other parties to fully utilize the generating resources that have been granted transmission service. Additionally, the Utility operating companies commit in their response to exploring and working on potential reforms or alternatives for the ICT arrangement that could take effect following the initial term. The Utility operating companies'companies’ comments also recognize that NERC is in the process of amending certain of its transmission reliability planning standards and that the amended standards, if approved by the FERC, will result in more stringent transmission planning criteria being applicable in the future. The FERC may also make other changes to transmission reliability standards. These changes to the reliability standards would result in increased capital expenditures by the Utility operating companies.
The Entergy Regional State Committee (E-RSC), which is comprised of representatives from all of the Utility operating companies' retail regulators, has been formed to consider several of these issues related to Entergy's transmission system. Among other things, the E-RSC in concert with the FERC plan to conduct a cost/benefitsbenefit analysis comparing the ICT arrangement and a proposal under which Entergy would join the SPPSouthwest Power Pool RTO. The scope of the study was expanded in July 2010 to consider Entergy joining the Midwest ISO RTO as another alternative.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In September 2010, as modified in October 2010, the Utility operating companies filed a request for a two-year interim extension, with certain modifications, of the ICT arrangement, which was scheduled to expire on November 17, 2010. The filing stated that, if approved by the E-RSC during its October 20-21, 2010 meeting, the Utility operating companies will make a subsequent filing with the FERC to provide the E-RSC with the authority to, upon unanimous approval of all E-RSC members, (1) propose modifications to cost allocation methodology for transmission projects and (2) add transmission projects to the construction plan. On October 13, 2010, the LPSC issued an order approving proposals filed by Entergy Louisiana and Entergy Gulf States Louisiana to modify the cur rent ICT arrangement and to give the E-RSC authority in the two areas as described above. On October 20, 2010, the E-RSC unanimously voted in favor of the proposal granting the E-RSC authority in the two areas described above. The Utility operating companies have filed the necessary revisions to the Entergy OATT to implement the E-RSC's new authority. In November 2010 the FERC approved extension of the ICT arrangement for two years. In December 2010 the FERC approved the proposal to provide the E-RSC with authority in the two areas described above.
FERC AuditsOn September 30, 2010, the consultant presented its cost/benefit analysis of the Entergy and Cleco regions joining the SPP RTO. The cost/benefit analysis indicates that the Entergy region, including entities beyond the Utility operating companies, would realize a net cost of $438 million to a net benefit of $387 million, primarily depending upon transmission cost allocation issues. Addendum studies, including studies related to Entergy Arkansas and the Utility operating companies joining the Midwest ISO, are due to be completed by the end of the first quarter 2011. Pursuant to a schedule established by an LPSC ALJ, Entergy Gulf States Louisiana and Entergy Louisiana expect to make a filing in May 2011 that sets forth the results of the analysis of the ava ilable options and preliminary recommendations regarding which option is in the public interest. The other Utility operating companies expect to make similar filings at that time.
Notice to SERC Reliability Corporation Regarding Reliability Standards
The Division of Audits in the Office of Enforcement and the Division of Compliance in the Office of Reliability of the FERC jointly commenced an audit of Entergy Services, Inc. on October 1, 2009. The audit will evaluate Entergy Services': (1) practices related to Bulk Electric System planning and operations; (2) compliance with the requirements contained within its Open Access Transmission Tariff; and (3) other obligations and responsibilities as approved by the FERC. The audit will cover the period from April 1, 2006 to the present. The Energy Policy Act of 2005 provides the FERC with authority to impose civil penalties for violations of the Federal Power Act and FERC regulations.
SERC Reliability Corporation Reliability Standards
Entergy has notified the SERC Reliability Corporation (SERC) of potential violations of certain FERCNorth American Electric Reliability Corporation (NERC) reliability standards, including certain Critical Infrastructure Protection, Facility Connection, and System Protection Coordination standards. Entergy is working with the SERC to provide information concerning these potential violations. The Energy Policy Act of 2005 provides authority to impose civil penalties for violations of the Federal Power Act and FERC regulations.
U.S. Department of Justice Investigation
In September 2010, Entergy was notified that the U.S. Department of Justice had commenced a civil investigation of competitive issues concerning certain generation procurement, dispatch, and transmission system practices and policies of the Utility operating companies. The investigation is ongoing.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Market risk is the risk of changes in the value of commodity and financial instruments, or in future operating resultsnet income or cash flows, in response to changing market conditions. Entergy holds commodity and financial instruments that are exposed to the following significant market risks:
· | The commodity price risk associated with the sale of electricity by Entergy's Non-Utility Nuclear business and with the purchase of gas by the Utility.Entergy Wholesale Commodities business. |
· | The interest rate and equity price risk associated with Entergy'sEntergy’s investments in pension and other postretirement benefit trust funds. See Note 11 to the financial statements for details regarding Entergy'sEntergy’s pension and other postretirement benefit trust funds. |
· | The interest rate and equity price risk associated with Entergy'sEntergy’s investments in nuclear plant decommissioning trust funds, particularly in the Non-Utility NuclearEntergy Wholesale Commodities business. See Note 17 to the financial statements for details regarding Entergy'sEntergy’s decommissioning trust funds. |
· | The interest rate risk associated with changes in interest rates as a result of Entergy'sEntergy’s issuances of debt. Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization. See Notes 4 and 5 to the financial statements for the details of Entergy'sEntergy’s debt outstanding. |
Entergy'sThe Utility business has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail rate regulators, the Utility operating companies hedge exposure to natural gas price volatility.
Entergy’s commodity and financial instruments are also exposed to credit risk. Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement. Credit riskEntergy is also includesexposed to a potential demand on liquidity due to credit support requirements within its supply or sales agreements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Commodity Price Risk
Power Generation
As a wholesale generator, Entergy's Non-Utility Nuclear business'sEntergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Non-Utility NuclearEntergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Non-Utility NuclearEntergy Wholesale Commodities also sells unforced capacity from its nuclear plants to load-serving entities, which allows those companies to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Non-Utility Nuclear'sEntergy Wholesale Commodities’ forward fixed price power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity anda nd energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Non-Utility NuclearEntergy Wholesale Commodities to deliver MWh of energy to its counterparties, make capacity available to them, or both. The following is a summary as of December 31, 20092010 of the amount of Non-Utility Nuclear'sEntergy Wholesale Commodities’ nuclear power plants'plants’ planned energy output that is sold forward under physical or financial contracts:
| | 2010 | | 2011 | | 2012 | | 2013 | | 2014 |
Non-Utility Nuclear: | | | | | | | | | | |
Percent of planned generation sold forward: | | | | | | | | | | |
| Unit-contingent | | 53% | | 54% | | 18% | | 12% | | 14% |
| Unit-contingent with guarantee of availability (1) | | 35% | | 17% | | 13% | | 6% | | 3% |
| Firm liquidated damages | | 0% | | 3% | | 0% | | 0% | | 0% |
| Total | | 88% | | 74% | | 31% | | 18% | | 17% |
Planned generation (TWh) | | 40 | | 41 | | 41 | | 40 | | 41 |
Average contracted price per MWh (2) | | $57 | | $56 | | $56 | | $50 | | $50 |
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | �� | | | | | | | | | |
Percent of planned generation sold forward: | | | | | | | | | | |
| Unit-contingent | | 79% | | 59% | | 34% | | 14% | | 12% |
| Unit-contingent with guarantee of availability (1) | | 17% | | 14% | | 6% | | 3% | | 3% |
| Firm LD | | 3% | | 24% | | 0% | | 8% | | 0% |
| Offsetting positions | | (3)% | | (10)% | | 0% | | 0% | | 0% |
| Total energy sold forward | | 96% | | 87% | | 40% | | 25% | | 15% |
Planned generation (TWh) (4) | | 41 | | 41 | | 40 | | 41 | | 41 |
Average revenue under contract per MWh (2) (3) | | $53 | | $49 | | $47 | | $51 | | $51 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The following is a summary as of December 31, 2008 of the amount of Non-Utility Nuclear's nuclear power plants' planned energy output that is sold forward under physical or financial contracts:
| | 2009 | | 2010 | | 2011 | | 2012 | | 2013 |
Non-Utility Nuclear: | | | | | | | | | | |
Percent of planned generation sold forward: | | | | | | | | | | |
| Unit-contingent | | 48% | | 31% | | 29% | | 18% | | 12% |
| Unit-contingent with guarantee of availability (1) | | 38% | | 35% | | 17% | | 7% | | 6% |
| Total | | 86% | | 66% | | 46% | | 25% | | 18% |
Planned generation (TWh) | | 41 | | 40 | | 41 | | 41 | | 40 |
Average contracted price per MWh (2) | | $61 | | $60 | | $56 | | $54 | | $50 |
(1) | A sale of power on a unit-contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy'sEntergy’s outstanding guarantees of availability provide for dollar limits on Entergy'sEntergy’s maximum liability under such guarantees. |
(2) | The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy most of the power produced by the plant, which is through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly, beginning in November 2005, if power market prices drop below PPA prices, which has not happened thus far. |
(3) | Average revenue under contract may fluctuate due to positive or negative basis differences, option premiums, costs to convert firm LD to unit-contingent, and other risk management costs. Also, average revenue under contract excludes payments owed under the value sharing agreement with NYPA. |
(4) | Assumes license renewal for plants whose current licenses expire within five years. License renewal applications are in process for four units, as follows (with current license expirations in parentheses): Vermont Yankee (March 2012), Pilgrim (June 2012), Indian Point 2 (September 2013), and Indian Point 3 (December 2015). |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy estimates that a $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on December 31, 2010 market conditions, planned generation volume, and hedged position, would have a corresponding effect on pre-tax net income of $17 million in 2011. Entergy estimates that, based on December 31, 2009 market conditions, planned generation volume, and hedged position, a $10 per MWh change in the annual average energy price would have had a corresponding effect on pre-tax net income of $53 million in 2010.
Entergy's Non-Utility Nuclear business'Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, NYPA and the subsidiaries that own the FitzPatrick and Indian Point 3 plants amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, Entergy's Non-Utility Nuclear businessthe Entergy subsidiaries agreed to make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Entergy's Non-Utility Nuclear businessEntergy subsidiaries will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million.& #160; The annual payment for each year'syear’s output is due by January 15 of the following year. In August 2008, Non-Utility Nuclear entered into a resolution of a dispute with NYPA over the applicability of the value sharing agreements to its FitzPatrick and Indian Point 3 nuclear power plants after the planned spin-off of the Non-Utility Nuclear business. Under the resolution, Non-Utility Nuclear agreed not to treat the separation as a "Cessation Event" that would terminate its obligation to make the payments under the value sharing agreements. As a result, after the spin-off transaction, Non-Utility Nuclear will continue to be obligated to make payments to NYPA under the amended and restated value sharing agreements.
Non-Utility NuclearEntergy will record itsthe liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. In 2010, 2009, and 2008, and 2007, Non-Utility NuclearEntergy Wholesale Commodities recorded a $72 million liability for generation during each of those years. An amount equal to the liability was recorded each year to the plant asset account as contingent purchase price consideration for the plants. This amount will be depreciated over the expected remaining useful life of the plants.
Some of the agreements to sell the power produced by Entergy's Non-Utility NuclearEntergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary is required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Non-Utility NuclearEntergy Wholesale Commodities sells power. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of collateral. At December 31, 2009,2010, based on power prices at that time, Entergy had $369credit exposure of $14 million of collateralunder the guarantees in place to supportsupporting Entergy Nuclear Power Marketing transactional activity, consisting primarily of(a subsidiary in the Entergy Corporation guarantees, but also includingWholesale Commo dities segment) transactions, $20 million of guarantees that support letters of credit, and $2$5 million of posted cash collateral.collateral to the ISOs. As of December 31, 2009,2010, the credit exposure associated with Non-Utility NuclearEntergy Wholesale Commodities assurance requirements couldwould increase by an estimated amount of up to $308$123 million for eacha $1 per MMBtu increase in gas prices in both the short- andshort-and long-term markets, but because market prices have fallen below most contract prices, the credit exposure would increase by only $8 million.markets. In the event of a decrease in Entergy Corporation'sCorporation’s credit rating to below investment grade, based on power prices as of December 31, 2009,2010, Entergy would have been required to provide approximately $73$78 million of additional cash or letters of credit under some of the agreements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As of December 31, 2009,2010, the counterparties or their guarantors for 99.7% of the planned energy output under contract for Non-Utility NuclearEntergy Wholesale Commodities nuclear plants through 2014, 99.7% of the planned energy output is under contract with counterparties with2015 have public investment grade credit ratings and 0.3% is with load-serving entities without public credit ratings.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In addition to selling the power produced by its plants, the Non-Utility Nuclear businessEntergy Wholesale Commodities sells unforced capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary as of December 31, 2010 of the amount of the Non-Utility Nuclear business'Entergy Wholesale Commodities nuclear plants’ installed capacity that is currently sold forward, and the blended amount of the Non-Utility Nuclear business'Entergy Wholesale Commodities nuclear plants’ planned generation output and installed capacity that is currently sold forward:
| | 2010 | | 2011 | | 2012 | | 2013 | | 2014 |
Non-Utility Nuclear: | | | | | | | | | | |
Percent of capacity sold forward: | | | | | | | | | | |
| Bundled capacity and energy contracts | | 26% | | 25% | | 18% | | 16% | | 16% |
| Capacity contracts | | 42% | | 26% | | 30% | | 13% | | 0% |
| Total | | 68% | | 51% | | 48% | | 29% | | 16% |
Planned net MW in operation | | 4,998 | | 4,998 | | 4,998 | | 4,998 | | 4,998 |
Average capacity contract price per kW per month | | $3.0 | | $3.6 | | $3.0 | | $2.6 | | $- |
Blended Capacity and Energy (based on revenues) | | | | | | | | | | |
% of planned generation and capacity sold forward | | 87% | | 73% | | 33% | | 16% | | 13% |
Average contract revenue per MWh | | $59 | | $58 | | $60 | | $53 | | $50 |
| | 2011 | | 2012 | | 2013 | | 2014 | | 2015 |
Entergy Wholesale Commodities: | | | | | | | | | | |
Percent of capacity sold forward: | | | | | | | | | | |
| Bundled capacity and energy contracts | | 25% | | 18% | | 16% | | 16% | | 16% |
| Capacity contracts | | 37% | | 29% | | 26% | | 10% | | 0% |
| Total capacity sold forward | | 62% | | 47% | | 42% | | 26% | | 16% |
Planned net MW in operation | | 4,998 | | 4,998 | | 4,998 | | 4,998 | | 4,998 |
Average revenue under contract per kW per month | | $2.6 | | $3.0 | | $3.1 | | $3.5 | | $- |
(applies to capacity contracts only) | | | | | | | | | | |
| | | | | | | | | | |
Blended Capacity and Energy Recap (based on revenues) | | | | | | | | | | |
% of planned generation and capacity sold forward | | 96% | | 87% | | 40% | | 26% | | 15% |
Average revenue under contract per MWh | | $54 | | $51 | | $50 | | $53 | | $52 |
The preparation of Entergy'sEntergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy'sEntergy’s financial position or results of operations.
Nuclear Decommissioning Costs
Entergy ownssubsidiaries own nuclear generation facilities in both its Utility and Non-Utility NuclearEntergy Wholesale Commodities business units. Regulations require Entergy subsidiaries to decommission itsthe nuclear power plants after each facility is taken out of service, and money is collected and deposited in trust funds during the facilities'facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates:
· | Cost Escalation Factors - Entergy'sEntergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by annual factors ranging from approximately 3% to 3.5%. A 50 basis point change in this assumption could change the ultimate cost of decommissioning a facility by as much as an approximate average of 20% to 25%. To the extent that a high probability of license renewal is assumed, a change in the estimated inflation or cost escalation rate has a larger effect on the undiscounted cash flows because the rate of inflation is factored into the calculation for a longer period of time. |
· | Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant'splant’s retirement must be estimated. A high probability that the plant'splant’s license will be renewed and operate for some time beyond the original license term has currently been assumed for purposes of calculating the decommissioning liability for a number of Entergy'sEntergy’s nuclear units. Second, an assumption must be made whether decommissioning will begin immediately upon plant retirement, or whether the plant will be held in "safestore"“safestore” status for later decommissioning, as permitted by applicable regulations. While the effect of these assumptions cannot be determined with precision,pr ecision, a change of assumption of either renewal or use of a "safestore"“safestore” status can possibly change the present value of these obligations. Future revisions to appropriately reflect changes needed to the estimate of decommissioning costs will affect net income, only to the extent that the estimate of any reduction in the liability exceeds the amount of the undepreciated asset retirement cost at the date of the revision, for unregulated portions of Entergy'sEntergy’s business. Any increases in the liability recorded due to such changes are capitalized and depreciated over the asset'sasset’s remaining economic life. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop thisa repository at Yucca Mountain, Nevada. However the DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy is continuing to pursue damages claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and maintainingmainta ining these facilities can have a significant effect (as much as an average of 20% to 30% of estimated decommissioning costs). Entergy'sEntergy’s decommissioning studies may include cost estimates for spent fuel storage. However, these estimates could change in the future based on the timing of the opening of an appropriate facility designated by the federal government to receive spent nuclear fuel. |
· | Technology and Regulation – Over the past several years, more practical experience with the actual decommissioning of facilities has been gained and that experience has been incorporated in to Entergy'sEntergy’s current decommissioning cost estimates. However, given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur and affect current cost estimates. If regulations regarding nuclear decommissioning were to change, this could have a potentially significant effect on cost estimates. The effect of these potential changes is not presently determinable. |
· | Interest Rates - The estimated decommissioning costs that form the basis for the decommissioning liability recorded on the balance sheet are discounted to present values using a credit-adjusted risk-free rate. When the decommissioning cost estimate is significantly changed requiring a revision to the decommissioning liability and the change results in an increase in cash flows, that increase is discounted using a current credit-adjusted risk-free rate. Under accounting rules, if the revision in estimate results in a decrease in estimated cash flows, that decrease is discounted using the previous credit-adjusted risk-free rate. Therefore, to the extent that one of the factors noted above changes resulting in a significant increase in estimated cash flows, current interestint erest rates will affect the calculation of the present value of the additional decommissioning liability. |
In the first quarter 2009, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in an $8.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the second quarter 2009, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $4.2 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the fourth quarter 2009, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $78.7 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement obligation asset that will be depreciated over the remaining life of the unit.
In the third quarter 2008, Entergy's Non-Utility Nuclear business recorded an increase of $13.7 million in decommissioning liabilities for certain of its plants as a result of revised decommissioning cost studies. The revised estimates resulted in the recognition of a $13.7 million asset retirement obligation asset that will be depreciated over the remaining life of the units.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month'smonth’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Impairment of Long-lived Assets and Trust Fund Investments
Entergy has significant investments in long-lived assets in all of its segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment whenever there are indications that impairments may exist. This evaluation involves a significant degree of estimation and uncertainty. In the Utility business, portions of River Bend are not included in rate base, which could reduce the revenue that would otherwise be recovered for the applicable portions of its generation. In the Non-Utility NuclearEntergy Wholesale Commodities business, Entergy'sEntergy’s investments in merchant nuclear generation assets are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses are not renewed. In the non-nuclear wholesale assets business, Entergy'sEntergy’s investments in merchant non-nuclear generation assets are subject to impairment if adverse market conditions arise.
In order to determine if Entergy should recognize an impairment of a long-lived asset that is to be held and used, accounting standards require that the sum of the expected undiscounted future cash flows from the asset be compared to the asset'sasset’s carrying value. The carrying value of the asset includes any capitalized asset retirement cost associated with the recording of an additional decommissioning liability, therefore changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment. If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded; if such cash flows are less than the carrying value, Entergy is required to record an impairment charge to write the asset down to its fair value.& #160; If an asset is held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value.
These estimates are based on a number of key assumptions, including:
· | Future power and fuel prices - Electricity and gas prices have been very volatile in recent years, and this volatility is expected to continue. This volatility necessarily increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows. |
· | Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets. While market transactions provide evidence for this valuation, the market for such assets is volatile and the value of individual assets is impacted by factors unique to those assets. |
· | Future operating costs - Entergy assumes relatively minor annual increases in operating costs. Technological or regulatory changes that have a significant impact on operations could cause a significant change in these assumptions. |
· | Timing - Entergy currently assumes, for a number of its nuclear units, that the plant'splant’s license will be renewed. A change in that assumption could have a significant effect on the expected future cash flows and result in a significant effect on operations. |
Entergy's Non-Utility NuclearFour nuclear power plants in the Entergy Wholesale Commodities business currently hassegment have applications pending applications for NRC license renewals forrenewals. This includes the Vermont Yankee Pilgrim, Indian Point 2, and Indian Point 3 power plants.plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee the state certificates of public good to operate the plant and store spent nuclear fuel also expire in 2012. Non-Utility Nuclear filed an application with the Vermont Public Service Board onbeyond March 3, 2008 for approval of continued operations and storage of spent nuclear fuel generated after March 21, 2012. Under Vermont law the Vermont General Assembly approval of Non-Utility Nuclear's request is required for the request to be granted. On February 24, 2010, a bill to approve the continued operation of
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote byin the Vermont Senate leadership and defeated by a margin of 26 to 4. This vote does not precludeNeither house of the Vermont Senate from voting againGeneral Assembly has voted on a similar bill in the future. At the current time,since that time.
If Entergy management believesconcludes that it will ultimately receive all necessary approvalsVermont Yankee is unlikely to operate Vermont Yankeesignificantly beyond its current license expiration. If those approvals are ultimately not received,expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant, including any capitalized asset retirement costplant. Entergy's evaluation of the probability associated with the recordingoperations of the decommissioning liabilityplant past 2012 includes a number of factors such as furtherthe status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described in Note 9 toabove, the potential sale of the plant, and the application of federal laws regarding the continued operations of nuclear facilities. In preparing its 2010 financial statements.statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plan t, including nuclear fuel, is $424 million as of December 31, 2010.
Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary-impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). For debt securities held as of January 1, 2009 for which an other-than-temporaryothe r-than-temporary impairment had previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other than temporary impairments relating to credit losses on debt securities in 2010 or 2009. The assessment of whether an investment in an equity security has suffered an other than temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy'sEntergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.inve stments. As discloseddiscussed in Note 1 to the financial statements, unrealized losses that are not considered temporarily impaired are recorded in earnings for Non-Utility Nuclear. Non-Utility NuclearEntergy Wholesale Commodities. Entergy Wholesale Commodities recorded charges to other income of $1 million in 2010, $86 million in 2009, and $50 million in 2008 and $5 million in 2007 resulting from the recognition of impairments of certain securities held in its decommissioning trust funds that are not considered temporary. Additional impairments could be recorded in 20102011 to the extent that then current market conditions change the evaluation of recoverability of unrealized losses.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate for the Utility and Non-Utility NuclearE ntergy Wholesale Commodities segments.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Assumptions
Key actuarial assumptions utilized in determining these costs include:
· | Discount rates used in determining the future benefit obligations; |
· | Projected health care cost trend rates; |
· | Expected long-term rate of return on plan assets; and |
· | Rate of increase in future compensation levels. |
Entergy reviews these assumptions on an annual basis and adjusts them as necessary. The falling interest rate environment and worse-than-expected performance of the financial equity markets in recent years2008, partially offset by recoveries in 2009 and 2010, have impacted Entergy'sEntergy’s funding and reported costs for these benefits. In addition, these trends have caused Entergy to make a number of adjustments to its assumptions.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In selecting an assumed discount rate to calculate benefit obligations, Entergy reviews market yields on high-quality corporate debt and matches these rates with Entergy'sEntergy’s projected stream of benefit payments. Based on recent market trends, Entergy decreased the discount raterates used to calculate its qualified pension benefit obligation decreased from an average ratea range of 6.75% in 2008 to specific rates by plan ranging from 6.10% to 6.30% for its specific pension plans in 2009.2009 to a range of 5.6% to 5.7% in 2010. The discount rate used to calculate its other postretirement benefit obligation was also decreased from 6.7% in 2008 to 6.10% in 2009. Entergy's2009 to 5.5% in 2010. Entergy’s assumed discount raterates used to calculate the 20072008 pension and other postretirement benefit obligations was 6.50%.were 6.75% and 6.7%, respectively.
Entergy reviews actual recent cost trends and projected future trends in establishing health care cost trend rates. Based on this review, Entergy'sEntergy’s health care cost trend rate assumption used in calculating the December 31, 20092010 accumulated postretirement benefit obligation was a 7.5%an 8.5% increase in health care costs in 20102011 gradually decreasing each successive year, until it reaches a 4.75% annual increase in health care costs in 20162019 and beyond.beyond for pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees.
The assumed rate of increase in future compensation levels used to calculate benefit obligations was 4.23% in 2010 and 2009.
In determining its expected long-term rate of return on plan assets used in calculation of benefit plan costs, Entergy reviews past long-term performance, asset allocations, and long-term inflation assumptions. Entergy targets an asset allocation for its qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities. The target allocations for Entergy'sEntergy’s non-taxable postretirement benefit assets are 55% equity securities and 45% fixed-income securities and, for its taxable other postretirement benefit assets, 35% equity securities and 65% fixed-income securities. Entergy'sEntergy’s expected long-term rate of return on qualified pension assets and non-taxable other postretirement assets used to calculate 2009, 2008, and 2007 qualified pension and other postretirement benefits costs was 8.5%. Entergy's and 7.75% , respectively for 2010 and 8.5% for both qualified and other postretirement benefit costs for 2009 and 2008. Entergy’s expected long-term raterates of return on qualified pension assets and non-taxable other postretirement assets used to calculate 2011 qualified pension and other postretirement benefits costs were 8.5% and 7.75%, respectively. Entergy’s expected long-term rates of return on taxable other postretirement assets wasused to calculate other postretirement benefits costs were 5.5% in 2011 and 2010, 6% in 2009 and 5.5% in 20082008.
Entergy Corporation and 2007.Subsidiaries
Management's Financial Discussion and Analysis
The assumed rate of increase in future compensation levels used to calculate benefit obligations was 4.23% in 2009, 2008, and 2007.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $12,192 | | $117,856 | | (0.25%) | | $13,682 | | $131,414 |
Rate of return on plan assets | | (0.25%) | | $7,331 | | - | | (0.25%) | | $7,634 | | - |
Rate of increase in compensation | | 0.25% | | $6,311 | | $30,817 | | 0.25% | | $6,367 | | $30,374 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $6,073 | | $31,981 | | 0.25% | | $6,500 | | $34,291 |
Discount rate | | (0.25%) | | $4,109 | | $37,324 | | (0.25%) | | $4,375 | | $40,557 |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Each fluctuation above assumes that the other components of the calculation are held constant.
Accounting Mechanisms
Effective December 31, 2006, accounting standards required an employer to recognize in its balance sheet the funded status of its benefit plans. Refer to Note 11 to the financial statements for a further discussion of Entergy'sEntergy’s funded status.
In accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs. Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets. If necessary, the excess is amortized over the average remaining service period of active employees.
Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Costs and Funding
In 2009, Entergy's2010, Entergy’s total qualified pension cost was $86$147.1 million. Entergy anticipates 20102011 qualified pension cost to be $147.1$154 million. Pension funding was $132$454 million for 2009. Entergy's2010. Entergy’s contributions to the pension trust are currently estimated to be approximately $270$368.8 million in 2010,2011, although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010.2011.
Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date. Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall which, under the Pension Protection Act, must be funded over a seven-year rolling period. The
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on a calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets and the funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury; therefore, periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.
Entergy's minimum required contributions for the 2010 plan year are generally payable in installments throughout 2010 and 2011 and will be based on the funding calculations as of January 1, 2010. The final date at which 2010 plan year contributions may be made is September 15, 2011. Given the decline in the capital markets in 2008, the minimum required contributions for the 2010 plan year, payable in 2010 and 2011, will increase although recoveries in the capital market in 2009 will help to mitigate the expected increase. The actual increase or timing of that increase cannot be determined with certainty until the January 1, 2010 valuation is completed by April 1, 2010; however Entergy’s preliminary estimates of 2010 funding requirements indicate that the contributions will not increase materially over and above historical levels of pension contributions. In addition to the minimum required contribution required under the Pension Protection Act to fund a shortfall based on the seven year rolling amortization, additional contributions could be needed in 2010 to avoid the plan limitations noted above.
Total postretirement health care and life insurance benefit costs for Entergy in 20092010 were $105.2$111.1 million, including $24$26.6 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy expects 20102011 postretirement health care and life insurance benefit costs to be $111$114.7 million. This includes a projected $26.6$33 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy contributed $79$75 million to its postretirement plans in 2009.2010. Entergy’s current estimate of contributions to its other postretirement plans is approximately $76.4$78 million in 2010.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis2011.
Federal Healthcare Legislation
The Patient Protection and Affordable Care Act (PPACA) became federal law on March 23, 2010, and, on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 became federal law and amended certain provisions of the PPACA. These new federal laws change the law governing employer-sponsored group health plans, like Entergy's plans, and include, among other things, the following significant provisions:
· | A 40% excise tax on per capita medical benefit costs that exceed certain thresholds; |
· | Change in coverage limits for dependants; and |
· | Elimination of lifetime caps. |
The total impact of PPACA is not yet determinable because technical guidance regarding application must still be issued. Additionally, ongoing litigation and political discussions are in progress regarding the constitutionality of and the potential repeal of health care reform, although whether that occurs and what parts of health care reform would be invalidated or repealed is not yet known. Entergy will continue to monitor these developments to determine the possible impact on Entergy as a result of PPACA. Entergy is participating in the programs currently provided for under PPACA, such as the early retiree reinsurance program, which may provide for some limited reimbursements of certain claims for early retirees aged 55 to 64 who are not yet eligible for Medicare.
One provision of the new law that is effective in 2013 eliminates the federal income tax deduction for prescription drug expenses of Medicare beneficiaries for which the plan sponsor also receives the retiree drug subsidy under Part D. Entergy receives subsidy payments under the Medicare Part D plan and therefore in the first quarter 2010 recorded a reduction to the deferred tax asset related to the unfunded other postretirement benefit obligation. The offset was recorded as a $16 million charge to income tax expense or, for the Utility, including each Registrant Subsidiary, as a regulatory asset.
Other Contingencies
As a company with multi-state domestic utility operations and a history of international investments, Entergy is subject to a number of federal, state, and international laws and regulations and other factors and conditions in the areas in which it operates, which potentially subject it to environmental, litigation, and other risks. Entergy periodically evaluates its exposure for such risks and records a reserve for those matters which are considered probable and estimable in accordance with generally accepted accounting principles.
Environmental
Entergy must comply with environmental laws and regulations applicable to the handling and disposal of hazardous waste. Under these various laws and regulations, Entergy could incur substantial costs to restore properties consistent with the various standards. Entergy conducts studies to determine the extent of any required remediation and has recorded reserves based upon its evaluation of the likelihood of loss and expected dollar amount for each issue. Additional sites could be identified which require environmental remediation for which Entergy could be liable. The amounts of environmental reserves recorded can be significantly affected by the following external events or conditions:
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
· | Changes to existing state or federal regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. |
· | The identification of additional sites or the filing of other complaints in which Entergy may be asserted to be a potentially responsible party. |
· | The resolution or progression of existing matters through the court system or resolution by the EPA. |
Litigation
Entergy has been named as defendant in a number of lawsuits involving employment, ratepayer, and injuries and damages issues, among other matters. Entergy periodically reviews the cases in which it has been named as defendant and assesses the likelihood of loss in each case as probable, reasonably estimable, or remote and records reserves for cases which have a probable likelihood of loss and can be estimated. Notes 2 and 8 to the financial statements include more detail on ratepayer and other lawsuits and management'smanagement’s assessment of the adequacy of reserves recorded for these matters. Given the environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is named as a defendant, however, the ultimate outcome of the litigation Entergy is exposed to has the potential to materially affect the results of operations of Entergy, or its operating company subsidiaries.
Uncertain Tax Positions
Entergy'sEntergy’s operations, including acquisitions and divestitures, require Entergy to evaluate risks such as the potential tax effects of a transaction, or warranties made in connection with such a transaction. Entergy believes that it has adequately assessed and provided for these types of risks, where applicable. Any reserves recorded for these types of issues, however, could be significantly affected by events such as claims made by third parties under warranties, additional transactions contemplated by Entergy, or completion of reviews of the tax treatment of certain transactions or issues by taxing authorities. Entergy does not expect a material adverse effect on earnings from these matters.
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
REPORT OF MANAGEMENT
Management of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial statements and related financial information included in this document. To meet this responsibility, management establishes and maintains a system of internal controls designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements in accordance with generally accepted accounting principles. This system includes communication through written policies and procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility and training of personnel. This system is also tested by a comprehensive internal audit program.
Entergy management assesses the effectiveness of Entergy’s internal control over financial reporting on an annual basis. In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and presentation.
Entergy Corporation and the Registrant Subsidiaries’ independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the effectiveness of Entergy’s internal control over financial reporting as of December 31, 2010, which is included herein on pages 390 through 397.
In addition, the Audit Committee of the Board of Directors, composed solely of independent Directors, meets with the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal controls, and auditing and financial reporting matters. The Audit Committee appoints the independent auditors annually, seeks shareholder ratification of the appointment, and reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present, providing free access to the Audit Committee.
Based on management’s assessment of internal controls using the COSO criteria, management believes that Entergy and each of the Registrant Subsidiaries maintained effective internal control over financial reporting as of December 31, 2010. Management further believes that this assessment, combined with the policies and procedures noted above, provides reasonable assurance that Entergy’s and each of the Registrant Subsidiaries’ financial statements are fairly and accurately presented in accordance with generally accepted accounting principles.
J. WAYNE LEONARD Chairman of the Board and Chief Executive Officer of Entergy Corporation | LEO P. DENAULT Executive Vice President and Chief Financial Officer of Entergy Corporation |
HUGH T. MCDONALD Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc. | WILLIAM M. MOHL Chairman of the Board, President, and Chief Executive Officer of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC |
HALEY R. FISACKERLY Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc. | CHARLES L. RICE, JR. President and Chief Executive Officer of Entergy New Orleans, Inc. |
JOSEPH F. DOMINO Chairman of the Board, President, and Chief Executive Officer of Entergy Texas, Inc. | JOHN T. HERRON Chairman, President, and Chief Executive Officer of System Energy Resources, Inc. |
THEODORE H. BUNTING, JR. Senior Vice President and Chief Accounting Officer (and acting principal financial officer) of Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and Entergy Texas, Inc. | WANDA C. CURRY Vice President and Chief Financial Officer of System Energy Resources, Inc. |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands, Except Percentages and Per Share Amounts) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 11,487,577 | | | $ | 10,745,650 | | | $ | 13,093,756 | | | $ | 11,484,398 | | | $ | 10,932,158 | |
Income from continuing operations | | $ | 1,270,305 | | | $ | 1,251,050 | | | $ | 1,240,535 | | | $ | 1,159,954 | | | $ | 1,133,098 | |
Earnings per share from continuing operations: | | | | | | | | | | | | | | | | | |
Basic | | $ | 6.72 | | | $ | 6.39 | | | $ | 6.39 | | | $ | 5.77 | | | $ | 5.46 | |
Diluted | | $ | 6.66 | | | $ | 6.30 | | | $ | 6.20 | | | $ | 5.60 | | | $ | 5.36 | |
Dividends declared per share | | $ | 3.24 | | | $ | 3.00 | | | $ | 3.00 | | | $ | 2.58 | | | $ | 2.16 | |
Return on common equity | | | 14.61 | % | | | 14.85 | % | | | 15.42 | % | | | 14.13 | % | | | 14.21 | % |
Book value per share, year-end | | $ | 47.53 | | | $ | 45.54 | | | $ | 42.07 | | | $ | 40.71 | | | $ | 40.45 | |
Total assets | | $ | 38,685,276 | | | $ | 37,561,953 | | | $ | 36,616,818 | | | $ | 33,643,002 | | | $ | 31,082,731 | |
Long-term obligations (1) | | $ | 11,575,973 | | | $ | 11,277,314 | | | $ | 11,734,411 | | | $ | 10,165,735 | | | $ | 9,194,206 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet, and in 2006 preferred stock with sinking fund. | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Utility Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 3,375 | | | $ | 2,999 | | | $ | 3,610 | | | $ | 3,228 | | | $ | 3,193 | |
Commercial | | | 2,317 | | | | 2,184 | | | | 2,735 | | | | 2,413 | | | | 2,318 | |
Industrial | | | 2,207 | | | | 1,997 | | | | 2,933 | | | | 2,545 | | | | 2,630 | |
Governmental | | | 212 | | | | 204 | | | | 248 | | | | 221 | | | | 155 | |
Total retail | | | 8,111 | | | | 7,384 | | | | 9,526 | | | | 8,407 | | | | 8,296 | |
Sales for resale (1) | | | 389 | | | | 206 | | | | 325 | | | | 393 | | | | 612 | |
Other | | | 241 | | | | 290 | | | | 222 | | | | 246 | | | | 155 | |
Total | | $ | 8,741 | | | $ | 7,880 | | | $ | 10,073 | | | $ | 9,046 | | | $ | 9,063 | |
Utility Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | |
Residential | | | 37,465 | | | | 33,626 | | | | 33,047 | | | | 33,281 | | | | 31,665 | |
Commercial | | | 28,831 | | | | 27,476 | | | | 27,340 | | | | 27,408 | | | | 25,079 | |
Industrial | | | 38,751 | | | | 35,638 | | | | 37,843 | | | | 38,985 | | | | 38,339 | |
Governmental | | | 2,463 | | | | 2,408 | | | | 2,379 | | | | 2,339 | | | | 1,580 | |
Total retail | | | 107,510 | | | | 99,148 | | | | 100,609 | | | | 102,013 | | | | 96,663 | |
Sales for resale (1) | | | 4,372 | | | | 4,862 | | | | 5,401 | | | | 6,145 | | | | 10,803 | |
Total | | | 111,882 | | | | 104,010 | | | | 106,010 | | | | 108,158 | | | | 107,466 | |
| | | | | | | | | | | | | | | | | | | | |
Competitive Businesses: | | | | | | | | | | | | | | | | | | | | |
Operating Revenues | | $ | 2,549 | | | $ | 2,693 | | | $ | 2,779 | | | $ | 2,232 | | | $ | 1,785 | |
Billed Electric Energy Sales (GWh) | | | 42,682 | | | | 43,969 | | | | 44,747 | | | | 40,916 | | | | 38,289 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes sales to Entergy New Orleans in 2006 , which was deconsolidated while its bankruptcy reorganization proceeding was pending. | |
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| | | | | | | | | | | | | | | | | | | | |
To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
New Orleans, Louisiana
We have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2010 and 2009, and the related consolidated income statements, consolidated statements of changes in equity and comprehensive income, and consolidated statements of cash flows for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Corporation and Subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2011 expressed an unqualified opinion on the Corporation’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2011
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CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands, Except Share Data) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 8,740,637 | | | $ | 7,880,016 | | | $ | 10,073,160 | |
Natural gas | | | 197,658 | | | | 172,213 | | | | 241,856 | |
Competitive businesses | | | 2,549,282 | | | | 2,693,421 | | | | 2,778,740 | |
TOTAL | | | 11,487,577 | | | | 10,745,650 | | | | 13,093,756 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operating and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 2,518,582 | | | | 2,309,831 | | | | 3,577,764 | |
Purchased power | | | 1,659,416 | | | | 1,395,203 | | | | 2,491,200 | |
Nuclear refueling outage expenses | | | 256,123 | | | | 241,310 | | | | 221,759 | |
Other operation and maintenance | | | 2,969,402 | | | | 2,750,810 | | | | 2,742,762 | |
Decommissioning | | | 211,736 | | | | 199,063 | | | | 189,409 | |
Taxes other than income taxes | | | 534,299 | | | | 503,859 | | | | 496,952 | |
Depreciation and amortization | | �� | 1,069,894 | | | | 1,082,775 | | | | 1,030,860 | |
Other regulatory charges (credits) - net | | | 44,921 | | | | (21,727 | ) | | | 59,883 | |
TOTAL | | | 9,264,373 | | | | 8,461,124 | | | | 10,810,589 | |
| | | | | | | | | | | | |
Gain on sale of business | | | 44,173 | | | | - | | | | - | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 2,267,377 | | | | 2,284,526 | | | | 2,283,167 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 59,381 | | | | 59,545 | | | | 44,523 | |
Interest and investment income | | | 185,455 | | | | 236,628 | | | | 197,872 | |
Other than temporary impairment losses | | | (1,378 | ) | | | (86,069 | ) | | | (49,656 | ) |
Miscellaneous - net | | | (48,124 | ) | | | (40,396 | ) | | | (23,452 | ) |
TOTAL | | | 195,334 | | | | 169,708 | | | | 169,287 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 610,146 | | | | 603,679 | | | | 634,188 | |
Allowance for borrowed funds used during construction | | | (34,979 | ) | | | (33,235 | ) | | | (25,267 | ) |
TOTAL | | | 575,167 | | | | 570,444 | | | | 608,921 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 1,887,544 | | | | 1,883,790 | | | | 1,843,533 | |
| | | | | | | | | | | | |
Income taxes | | | 617,239 | | | | 632,740 | | | | 602,998 | |
| | | | | | | | | | | | |
CONSOLIDATED NET INCOME | | | 1,270,305 | | | | 1,251,050 | | | | 1,240,535 | |
| | | | | | | | | | | | |
Preferred dividend requirements of subsidiaries | | | 20,063 | | | | 19,958 | | | | 19,969 | |
| | | | | | | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | | $ | 1,250,242 | | | $ | 1,231,092 | | | $ | 1,220,566 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Earnings per average common share: | | | | | | | | | | | | |
Basic | | $ | 6.72 | | | $ | 6.39 | | | $ | 6.39 | |
Diluted | | $ | 6.66 | | | $ | 6.30 | | | $ | 6.20 | |
Dividends declared per common share | | $ | 3.24 | | | $ | 3.00 | | | $ | 3.00 | |
| | | | | | | | | | | | |
Basic average number of common shares outstanding | | | 186,010,452 | | | | 192,772,032 | | | | 190,925,613 | |
Diluted average number of common shares outstanding | | | 187,814,235 | | | | 195,838,068 | | | | 201,011,588 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Consolidated net income | | $ | 1,270,305 | | | $ | 1,251,050 | | | $ | 1,240,535 | |
Adjustments to reconcile consolidated net income to net cash flow | | | | | | | | | | | | |
provided by operating activities: | | | | | | | | | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 1,705,331 | | | | 1,458,861 | | | | 1,391,689 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 718,987 | | | | 864,684 | | | | 333,948 | |
Gain on sale of business | | | (44,173 | ) | | | - | | | | - | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (99,640 | ) | | | 116,444 | | | | 78,653 | |
Fuel inventory | | | (10,665 | ) | | | 19,291 | | | | (7,561 | ) |
Accounts payable | | | 216,635 | | | | (14,251 | ) | | | (23,225 | ) |
Prepaid taxes and taxes accrued | | | (116,988 | ) | | | (260,029 | ) | | | 122,134 | |
Interest accrued | | | 17,651 | | | | 4,974 | | | | (652 | ) |
Deferred fuel | | | 8,909 | | | | 72,314 | | | | (38,500 | ) |
Other working capital accounts | | | (160,326 | ) | | | (43,391 | ) | | | (119,296 | ) |
Changes in provisions for estimated losses | | | 265,284 | | | | (12,030 | ) | | | 12,462 | |
Changes in other regulatory assets | | | 339,408 | | | | (415,157 | ) | | | (324,211 | ) |
Changes in pensions and other postretirement liabilities | | | (80,844 | ) | | | 71,789 | | | | 828,160 | |
Other | | | (103,793 | ) | | | (181,391 | ) | | | (169,808 | ) |
Net cash flow provided by operating activities | | | 3,926,081 | | | | 2,933,158 | | | | 3,324,328 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction/capital expenditures | | | (1,974,286 | ) | | | (1,931,245 | ) | | | (2,212,255 | ) |
Allowance for equity funds used during construction | | | 59,381 | | | | 59,545 | | | | 44,523 | |
Nuclear fuel purchases | | | (407,711 | ) | | | (525,474 | ) | | | (423,951 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | - | | | | 284,997 | | | | 297,097 | |
Proceeds from sale of assets and businesses | | | 228,171 | | | | 39,554 | | | | 30,725 | |
Payment for purchase of plant | | | - | | | | - | | | | (266,823 | ) |
Insurance proceeds received for property damages | | | 7,894 | | | | 53,760 | | | | 130,114 | |
Changes in transition charge account | | | (29,945 | ) | | | (1,036 | ) | | | 7,211 | |
NYPA value sharing payment | | | (72,000 | ) | | | (72,000 | ) | | | (72,000 | ) |
Payments to storm reserve escrow account | | | (296,614 | ) | | | (6,802 | ) | | | (248,863 | ) |
Receipts from storm reserve escrow account | | | 9,925 | | | | - | | | | 249,461 | |
Decrease (increase) in other investments | | | 24,956 | | | | 100,956 | | | | (73,431 | ) |
Proceeds from nuclear decommissioning trust fund sales | | | 2,606,383 | | | | 2,570,523 | | | | 1,652,277 | |
Investment in nuclear decommissioning trust funds | | | (2,730,377 | ) | | | (2,667,172 | ) | | | (1,704,181 | ) |
Net cash flow used in investing activities | | | (2,574,223 | ) | | | (2,094,394 | ) | | | (2,590,096 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | |
Proceeds from the issuance of: | | | | | | | | | |
Long-term debt | | | 3,870,694 | | | | 2,003,469 | | | | 3,456,695 | |
Common stock and treasury stock | | | 51,163 | | | | 28,198 | | | | 34,775 | |
Retirement of long-term debt | | | (4,178,127 | ) | | | (1,843,169 | ) | | | (2,486,806 | ) |
Repurchase of common stock | | | (878,576 | ) | | | (613,125 | ) | | | (512,351 | ) |
Redemption of preferred stock | | | - | | | | (1,847 | ) | | | - | |
Changes in credit borrowings - net | | | (8,512 | ) | | | (25,000 | ) | | | 30,000 | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (603,854 | ) | | | (576,956 | ) | | | (573,045 | ) |
Preferred stock | | | (20,063 | ) | | | (19,958 | ) | | | (20,025 | ) |
Net cash flow used in financing activities | | | (1,767,275 | ) | | | (1,048,388 | ) | | | (70,757 | ) |
| | | | | | | | | | | | |
Effect of exchange rates on cash and cash equivalents | | | 338 | | | | (1,316 | ) | | | 3,288 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (415,079 | ) | | | (210,940 | ) | | | 666,763 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 1,709,551 | | | | 1,920,491 | | | | 1,253,728 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 1,294,472 | | | $ | 1,709,551 | | | $ | 1,920,491 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 540,352 | | | $ | 568,417 | | | $ | 612,288 | |
Income taxes | | $ | 32,144 | | | $ | 43,057 | | | $ | 137,234 | |
| | | | | | | | | | | | |
Noncash financing activities: | | | | | | | | | | | | |
Long-term debt retired (equity unit notes) | | | - | | | $ | (500,000 | ) | | | - | |
Common stock issued in settlement of equity unit purchase contracts | | | - | | | $ | 500,000 | | | | - | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
CONSOLIDATED BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 76,290 | | | $ | 85,861 | |
Temporary cash investments | | | 1,218,182 | | | | 1,623,690 | |
Total cash and cash equivalents | | | 1,294,472 | | | | 1,709,551 | |
Securitization recovery trust account | | | 43,044 | | | | 13,098 | |
Accounts receivable: | | | | | | | | |
Customer | | | 602,796 | | | | 553,692 | |
Allowance for doubtful accounts | | | (31,777 | ) | | | (27,631 | ) |
Other | | | 161,662 | | | | 152,303 | |
Accrued unbilled revenues | | | 302,901 | | | | 302,463 | |
Total accounts receivable | | | 1,035,582 | | | | 980,827 | |
Deferred fuel costs | | | 64,659 | | | | 126,798 | |
Accumulated deferred income taxes | | | 8,472 | | | | - | |
Fuel inventory - at average cost | | | 207,520 | | | | 196,855 | |
Materials and supplies - at average cost | | | 866,908 | | | | 825,702 | |
Deferred nuclear refueling outage costs | | | 218,423 | | | | 225,290 | |
System agreement cost equalization | | | 52,160 | | | | 70,000 | |
Prepaid taxes | | | 301,807 | | | | 184,819 | |
Prepayments and other | | | 246,036 | | | | 201,221 | |
TOTAL | | | 4,339,083 | | | | 4,534,161 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 40,697 | | | | 39,580 | |
Decommissioning trust funds | | | 3,595,716 | | | | 3,211,183 | |
Non-utility property - at cost (less accumulated depreciation) | | | 257,847 | | | | 247,664 | |
Other | | | 405,946 | | | | 120,273 | |
TOTAL | | | 4,300,206 | | | | 3,618,700 | |
| | | | | | | | |
PROPERTY, PLANT AND EQUIPMENT | | | | | | | | |
Electric | | | 37,153,061 | | | | 36,343,772 | |
Property under capital lease | | | 800,078 | | | | 783,096 | |
Natural gas | | | 330,608 | | | | 314,256 | |
Construction work in progress | | | 1,661,560 | | | | 1,547,319 | |
Nuclear fuel under capital lease | | | - | | | | 527,521 | |
Nuclear fuel | | | 1,377,962 | | | | 739,827 | |
TOTAL PROPERTY, PLANT AND EQUIPMENT | | | 41,323,269 | | | | 40,255,791 | |
Less - accumulated depreciation and amortization | | | 17,474,914 | | | | 16,866,389 | |
PROPERTY, PLANT AND EQUIPMENT - NET | | | 23,848,355 | | | | 23,389,402 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 845,725 | | | | 816,856 | |
Other regulatory assets (includes securitization property of $882,346 as of December 31, 2010) | | | 3,838,237 | | | | 3,647,154 | |
Deferred fuel costs | | | 172,202 | | | | 172,202 | |
Goodwill | | | 377,172 | | | | 377,172 | |
Accumulated deferred income taxes | | | 54,523 | | | | - | |
Other | | | 909,773 | | | | 1,006,306 | |
TOTAL | | | 6,197,632 | | | | 6,019,690 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 38,685,276 | | | $ | 37,561,953 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES | |
CONSOLIDATED BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | 299,548 | | | $ | 711,957 | |
Notes payable and commercial paper | | | 154,135 | | | | 30,031 | |
Accounts payable | | | 1,181,099 | | | | 998,228 | |
Customer deposits | | | 335,058 | | | | 323,342 | |
Accumulated deferred income taxes | | | 49,307 | | | | 48,584 | |
Interest accrued | | | 217,685 | | | | 192,283 | |
Deferred fuel costs | | | 166,409 | | | | 219,639 | |
Obligations under capital leases | | | 3,388 | | | | 212,496 | |
Pension and other postretirement liabilities | | | 39,862 | | | | 55,031 | |
System agreement cost equalization | | | 52,160 | | | | 187,204 | |
Other | | | 277,598 | | | | 215,202 | |
TOTAL | | | 2,776,249 | | | | 3,193,997 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 8,573,646 | | | | 7,662,798 | |
Accumulated deferred investment tax credits | | | 292,330 | | | | 308,395 | |
Obligations under capital leases | | | 42,078 | | | | 354,233 | |
Other regulatory liabilities | | | 539,026 | | | | 378,862 | |
Decommissioning and asset retirement cost liabilities | | | 3,148,479 | | | | 2,939,539 | |
Accumulated provisions | | | 395,250 | | | | 141,315 | |
Pension and other postretirement liabilities | | | 2,175,364 | | | | 2,241,039 | |
Long-term debt (includes securitization bonds of $931,131 as of December 31, 2010) | | | 11,317,157 | | | | 10,705,738 | |
Other | | | 618,559 | | | | 711,334 | |
TOTAL | | | 27,101,889 | | | | 25,443,253 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Subsidiaries' preferred stock without sinking fund | | | 216,738 | | | | 217,343 | |
| | | | | | | | |
EQUITY | | | | | | | | |
Common Shareholders' Equity: | | | | | | | | |
Common stock, $.01 par value, authorized 500,000,000 shares; | | | | | | | | |
issued 254,752,788 shares in 2010 and in 2009 | | | 2,548 | | | | 2,548 | |
Paid-in capital | | | 5,367,474 | | | | 5,370,042 | |
Retained earnings | | | 8,689,401 | | | | 8,043,122 | |
Accumulated other comprehensive loss | | | (38,212 | ) | | | (75,185 | ) |
Less - treasury stock, at cost (76,006,920 shares in 2010 and | | | | | | | | |
65,634,580 shares in 2009) | | | 5,524,811 | | | | 4,727,167 | |
Total common shareholders' equity | | | 8,496,400 | | | | 8,613,360 | |
Subsidiaries' preferred stock without sinking fund | | | 94,000 | | | | 94,000 | |
TOTAL | | | 8,590,400 | | | | 8,707,360 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 38,685,276 | | | $ | 37,561,953 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | Common Shareholders’ Equity | | | |
| | Subsidiaries’ Preferred Stock | | | Common Stock | | | Treasury Stock | | | Paid-in Capital | | | Retained Earnings | | | Accumulated Other Comprehensive Income (Loss) | | | Total | |
| | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 94,000 | | | $ | 2,482 | | | $ | (3,734,865 | ) | | $ | 4,850,769 | | | $ | 6,735,965 | | | $ | 8,320 | | | $ | 7,956,671 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 19,969 | | | | - | | | | - | | | | - | | | | 1,220,566 | | | | - | | | | 1,240,535 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized gain (net of tax expense of $78,837) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 133,370 | | | | 133,370 | |
Pension and other postretirement liabilities (net of tax benefit of $68,076) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (125,087 | ) | | | (125,087 | ) |
Net unrealized investment losses (net of tax benefit of $108,049) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (126,013 | ) | | | (126,013 | ) |
Foreign currency translation (net of tax benefit of $1,770) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (3,288 | ) | | | (3,288 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,119,517 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (512,351 | ) | | | - | | | | - | | | | - | | | | (512,351 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 72,002 | | | | 18,534 | | | | - | | | | - | | | | 90,536 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (573,924 | ) | | | - | | | | (573,924 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (19,969 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (19,969 | ) |
Capital stock and other expenses | | | - | | | | - | | | | - | | | | - | | | | 112 | | | | - | | | | 112 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2008 | | $ | 94,000 | | | $ | 2,482 | | | $ | (4,175,214 | ) | | $ | 4,869,303 | | | $ | 7,382,719 | | | $ | (112,698 | ) | | $ | 8,060,592 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 19,958 | | | | - | | | | - | | | | - | | | | 1,231,092 | | | | - | | | | 1,251,050 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized loss (net of tax expense of $333) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (2,887 | ) | | | (2,887 | ) |
Pension and other postretirement liabilities (net of tax benefit of $34,415) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (35,707 | ) | | | (35,707 | ) |
Net unrealized investment gains (net of tax expense of $102,845) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 82,929 | | | | 82,929 | |
Foreign currency translation (net of tax benefit of $246) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (457 | ) | | | (457 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,294,928 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (613,125 | ) | | | - | | | | - | | | | - | | | | (613,125 | ) |
Common stock issuances in settlement of equity unit purchase contracts | | | - | | | | 66 | | | | - | | | | 499,934 | | | | - | | | | - | | | | 500,000 | |
Common stock issuances related to stock plans | | | - | | | | - | | | | 61,172 | | | | 805 | | | | - | | | | - | | | | 61,977 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (576,913 | ) | | | - | | | | (576,913 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (19,958 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (19,958 | ) |
Capital stock and other expenses | | | - | | | | - | | | | - | | | | - | | | | (141 | ) | | | - | | | | (141 | ) |
Adjustment for implementation of new accounting pronouncement | | | - | | | | - | | | | - | | | | - | | | | 6,365 | | | | (6,365 | ) | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2009 | | $ | 94,000 | | | $ | 2,548 | | | $ | (4,727,167 | ) | | $ | 5,370,042 | | | $ | 8,043,122 | | | $ | (75,185 | ) | | | 8,707,360 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Consolidated net income (a) | | | 20,063 | | | | - | | | | - | | | | - | | | | 1,250,242 | | | | - | | | | 1,270,305 | |
Other comprehensive income: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Cash flow hedges net unrealized loss (net of tax benefit of $7,088) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (11,685 | ) | | | (11,685 | ) |
Pension and other postretirement liabilities (net of tax benefit of $14,387) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (8,527 | ) | | | (8,527 | ) |
Net unrealized investment gains (net of tax expense of $51,130) | | | - | | | | - | | | | - | | | | - | | | | - | | | | 57,523 | | | | 57,523 | |
Foreign currency translation (net of tax benefit of $182) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (338 | ) | | | (338 | ) |
Total comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,307,278 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock repurchases | | | - | | | | - | | | | (878,576 | ) | | | - | | | | - | | | | - | | | | (878,576 | ) |
Common stock issuances related to stock plans | | | - | | | | - | | | | 80,932 | | | | (2,568 | ) | | | - | | | | - | | | | 78,364 | |
Common stock dividends declared | | | - | | | | - | | | | - | | | | - | | | | (603,963 | ) | | | - | | | | (603,963 | ) |
Preferred dividend requirements of subsidiaries (a) | | | (20,063 | ) | | | - | | | | - | | | | - | | | | - | | | | - | | | | (20,063 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at December 31, 2010 | | $ | 94,000 | | | $ | 2,548 | | | $ | (5,524,811 | ) | | $ | 5,367,474 | | | $ | 8,689,401 | | | $ | (38,212 | ) | | $ | 8,590,400 | |
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See Notes to Financial Statements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2010, 2009, and 2008 include $13.3 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | |
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NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries. As required by generally accepted accounting principles, all intercompany transactions have been eliminated in the consolidated financial statements. Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K. The Registrant Subsidiaries and many other Entergy subsidiaries maintain accounts in accordance with FERC and other regulatory guidelines. Certain previously reported amounts have been reclassified to conform to current classification s, with no effect on net income or common shareholders’ (or members’) equity.
Use of Estimates in the Preparation of Financial Statements
In conformity with generally accepted accounting principles, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Louisiana, Mississippi, and Texas, respectively. Entergy Gulf States Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana. Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans, except for Algiers, where Entergy Louisiana is the electric power supplier. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.
Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers. To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions. Changes are made to the inputs in the estimate as needed to reflect changes in billing practices. Each month the estimated unbilled r evenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy records revenue from sales under rates implemented subject to refund less estimated amounts accrued for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate case as of the date the financial statements are prepared.
Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing.System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are computed by allowing a return on System Energy 8217;s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property. For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation. Normal maintenance, repairs, and minor replacement costs are charged to operating expenses. Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.
Electric plant includes the portions of Grand Gulf and Waterford 3 that have been sold and leased back. For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions.
Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,393 | | $5,378 | | $3,015 | | $- |
Other | | 1,842 | | 1,797 | | 45 | | - |
Transmission | | 2,986 | | 2,956 | | 30 | | - |
Distribution | | 5,926 | | 5,926 | | - | | - |
Other | | 1,661 | | 1,411 | | 248 | | 2 |
Construction work in progress | | 1,662 | | 1,300 | | 361 | | 1 |
Nuclear fuel | | 1,378 | | 760 | | 618 | | - |
Property, plant, and equipment - net | | $23,848 | | $19,528 | | $4,317 | | $3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,105 | | $5,414 | | $2,691 | | $- |
Other | | 1,936 | | 1,724 | | 212 | | - |
Transmission | | 2,922 | | 2,889 | | 33 | | - |
Distribution | | 5,948 | | 5,948 | | - | | - |
Other | | 1,664 | | 1,398 | | 263 | | 3 |
Construction work in progress | | 1,547 | | 1,134 | | 414 | | (1) |
Nuclear fuel (leased and owned) | | 1,267 | | 747 | | 520 | | - |
Property, plant, and equipment - net | | $23,389 | | $19,254 | | $4,133 | | $2 |
Depreciation rates on average depreciable property for Entergy approximated 2.6% in 2010, 2.7% in 2009, and 2.7% in 2008. Included in these rates are the depreciation rates on average depreciable utility property of 2.5% in 2010, 2.7% in 2009, and 2.7% 2008, and the depreciation rates on average depreciable non-utility property of 3.7% in 2010, 3.8% in 2009, and 3.7% in 2008.
Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in fuel expense in the income statements.
“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $207.6 million and $197.8 million as of December 31, 2010 and 2009, respectively.
Construction expenditures included in accounts payable at December 31, 2010 is $171 million.
Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,029 | | $1,452 | | $1,489 | | $- | | $- | | $- | | $1,408 |
Other | | 406 | | 302 | | 393 | | 368 | | (2) | | 331 | | - |
Transmission | | 837 | | 456 | | 597 | | 469 | | 22 | | 569 | | 6 |
Distribution | | 1,637 | | 817 | | 1,255 | | 977 | | 296 | | 944 | | - |
Other | | 197 | | 192 | | 289 | | 207 | | 180 | | 116 | | 20 |
Construction work in progress | | 114 | | 119 | | 521 | | 147 | | 12 | | 80 | | 211 |
Nuclear fuel | | 189 | | 203 | | 135 | | - | | - | | - | | 155 |
Property, plant, and equipment - net | | $4,409 | | $3,541 | | $4,679 | | $2,168 | | $508 | | $2,040 | | $1,800 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,017 | | $1,484 | | $1,450 | | $- | | $- | | $- | | $1,463 |
Other | | 414 | | 300 | | 384 | | 331 | | (6) | | 301 | | - |
Transmission | | 819 | | 416 | | 611 | | 467 | | 27 | | 543 | | 6 |
Distribution | | 1,618 | | 870 | | 1,330 | | 943 | | 280 | | 907 | | - |
Other | | 202 | | 185 | | 307 | | 220 | | 174 | | 113 | | 21 |
Construction work in progress | | 115 | | 84 | | 510 | | 63 | | 21 | | 82 | | 199 |
Nuclear fuel (leased and owned) | | 185 | | 163 | | 122 | | - | | - | | - | | 85 |
Property, plant, and equipment - net | | $4,370 | | $3,502 | | $4,714 | | $2,024 | | $496 | | $1,946 | | $1,774 |
Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | |
2010 | | 2.9% | | 1.8% | | 2.4% | | 2.6% | | 3.1% | | 2.3% | | 2.9% |
2009 | | 3.3% | | 1.9% | | 2.5% | | 2.6% | | 3.0% | | 2.3% | | 2.9% |
2008 | | 3.2% | | 2.2% | | 2.5% | | 2.6% | | 3.1% | | 2.4% | | 2.9% |
Non-utility property - at cost (less accumulated depreciation) for Entergy Gulf States Louisiana is reported net of accumulated depreciation of $134 million and $131 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $2.5 million and $2.3 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $9.5 million and $9.2 million as of December 31, 2010 and 2009, respectively.
As of December 31, 2010, construction expenditures included in accounts payable are $16 million for Entergy Arkansas, $14.3 million for Entergy Gulf States Louisiana, $31.6 million for Entergy Louisiana, $6.8 million for Entergy Mississippi, $157.5 thousand for Entergy New Orleans, $3.3 million for Entergy Texas, and $23.8 million for System Energy.
System Energy invested, through its subsidiary Entergy New Nuclear Development, LLC, in initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities. As of December 31, 2009, $100.3 million in construction work in progress was recorded on System Energy’s balance sheet related to this project. In the first quarter 2010, $24.9 million, $24.9 million, and $49.5 million of this construction work in progress was transferred to Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi, respectively.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. The investments and expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests. As of December 31, 2010, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Generating Stations | | Fuel-Type | | Total Megawatt Capability (1) | | Ownership | | Investment | | Accumulated Depreciation |
| | | | | | | | | (In Millions) |
Utility business: | | | | | | | | | | | |
Entergy Arkansas - | | | | | | | | | | | |
Independence | Unit 1 | | Coal | | 836 | | 31.50% | | $127 | | $94 |
| Common Facilities | | Coal | | | | 15.75% | | $33 | | $24 |
White Bluff | Units 1 and 2 | | Coal | | 1,659 | | 57.00% | | $489 | | $332 |
Ouachita (2) | Common Facilities | | Gas | | | | 66.67% | | $171 | | $140 |
Entergy Gulf States Louisiana - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 40.25% | | $243 | | $167 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 24.15% | | $142 | | $94 |
Ouachita (2) | Common Facilities | | Gas | | | | 33.33% | | $87 | | $72 |
Entergy Mississippi - | | | | | | | | | | | |
Independence | Units 1 and 2 and Common Facilities | | Coal | | 1,678 | | 25.00% | | $247 | | $132 |
Entergy Texas - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 29.75% | | $178 | | $116 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 17.85% | | $106 | | $67 |
System Energy - | | | | | | | | | | | |
Grand Gulf | Unit 1 | | Nuclear | | 1,251 | | 90.00%(3) | | $3,852 | | $2,418 |
| | | | | | | | | | | |
Entergy Wholesale Commodities: | | | | | | | | | | | |
Independence | Unit 2 | | Coal | | 842 | | 14.37% | | $68 | | $40 |
| Common Facilities | | Coal | | | | 7.18% | | $16 | | $10 |
(1) | “Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
(2) | Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Gulf States Louisiana. The investment and accumulated depreciation numbers above are only for the common facilities. |
(3) | Includes an 11.5% leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements. |
Nuclear Refueling Outage Costs
Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.
Entergy Corporation and Subsidiaries
Management'sNotes to Financial Discussion and AnalysisStatements
Income Taxes
Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return. Each tax paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreement. Deferred income taxes are recorded for all temporary differences between the book and tax basis of assets and liabilities, and for certain credits available for carryforward.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted.
Investment tax credits are deferred and amortized based upon the average useful life of the related property, in accordance with ratemaking treatment.
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of income:
| For the Years Ended December 31, |
| 2010 | 2009 | 2008 |
| | (In Millions, Except Per Share Data) |
Basic earnings per average common share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share |
Net income attributable to Entergy Corporation | $1,250.2 | 186.0 | | $6.72 | $1,231.1 | 192.8 | | $6.39 | $1,220.6 | 190.9 | | $6.39 |
Average dilutive effect of: | | | | | | | | | | | | |
Stock options | - | 1.8 | | (0.06) | - | 2.2 | | (0.07) | - | 4.1 | | (0.13) |
Equity units | - | - | | - | 3.2 | 0.8 | | (0.02) | 24.7 | 6.0 | | (0.06) |
Diluted earnings per average common share | $1,250.2 | 187.8 | | $6.66 | $1,234.3 | 195.8 | | $6.30 | $1,245.3 | 201.0 | | $6.20 |
| | | | | | | | | | | | |
The calculation of diluted earnings per share excluded 5,380,262 options outstanding at December 31, 2010, 4,368,614 options outstanding at December 31, 2009, and 3,326,835 options outstanding at December 31, 2008 that could potentially dilute basic earnings per share in the future. Those options were not included in the calculation of diluted earnings per share because the exercise price of those options exceeded the average market price for the year.
See Note 7 to the financial statements for a discussion of the equity units.
Stock-based Compensation Plans
Entergy grants stock options to key employees of the Entergy subsidiaries, which is described more fully in Note 12 to the financial statements. Effective January 1, 2003, Entergy prospectively adopted the fair value based method of accounting for stock options. Awards under Entergy’s plans generally vest over three years. Stock-based compensation expense included in consolidated net income, net of related tax effects, is $9.2 million for 2010, is $10.4 million for 2009, and is $10.7 million for 2008 for Entergy’s stock options granted.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accounting for the Effects of Regulation
Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards. The Utility operating companies and System Energy have rates that (i) are approved by a body empowered to set rates that bind customers (its regulator); (ii) are cost-based; and (iii) can be charged to and collected from customers. These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers. Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs that would otherwise be charged to expense if the rate actions of its regulator make it probable that those costs will be recovered in future revenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial statements. When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.
An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements. In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations. Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.
Entergy Gulf States Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business. The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order. The plan allows Entergy Gulf States Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between ratepayers and shareholders.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at date of purchase to be cash equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances. The allowance is based on accounts receivable agings, historical experience, and other currently available evidence. Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.
Investments
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealiz ed gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whe ther Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 17 to the financial statements for details on the decommissioning trust funds and the other than temporary impairments recorded in 2010, 2009, and 2008.
Equity Method Investments
Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations. Entergy records its share of earnings or losses of the investee based on the change during the period in the estimated liquidation value of the investment, assuming that the investee’s assets were to be liquidated at book value. In accordance with this method, earnings are allocated to owners or members based on what each partner would receive from its capital account if, hypothetically, liquidation were to occur at the balance sheet date and amounts distributed were based on recorded book values. Entergy discontinues the recognition of l osses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support. See Note 14 to the financial statements for additional information regarding Entergy’s equity method investments.
Derivative Financial Instruments and Commodity Derivatives
The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet the normal purchase, normal sales criteria. The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction.
Contracts for commodities that will be delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.
For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income. To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in other comprehensive income are reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portions of all hedges are recognized in current-period earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using bid prices and market quotes. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not accrue to the benefit or detriment of stockholders. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments. See Note 16 to the financial statements for further discu ssion of fair value.
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy over the remaining life of the assets.
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March 21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
Entergy Wholesale Commodities’ investments are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses will not be renewed. Specifically regarding Vermont Yankee, if Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 include a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued oper ations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plant, including nuclear fuel, is $424 million as of December 31, 2010.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Gulf States Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Gulf States Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, in accordance with ratemaking treatment.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.
Presentation of Non-Controlling Interests
In 2007, a new accounting pronouncement was issued regarding non-controlling interests that requires generally that ownership interests in subsidiaries held by parties other than the reporting company (non-controlling interests) be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the controlling shareholders’ equity, and that the amount of consolidated net income attributable to the reporting company and to the non-controlling interests be clearly identified and presented on the face of the consolidated income statement. This new accounting pronouncement became effective for Entergy in the first quarter 2009 and applies to preferred securities issued by Entergy subsidiaries to third parties.
Presentation of Preferred Stock without Sinking Fund
In connection with the adoption of the new accounting pronouncement regarding non-controlling interests Entergy evaluated the accounting standards regarding the classification and measurement of redeemable securities. These standards require the classification of securities between liabilities and shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans articles of incorp oration provide, generally, that the holders of each company’s preferred securities may elect a majority of the respective company’s board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders’ equity on the balance sheet. Entergy Gulf States Louisiana and Entergy Louisiana, both organized as limited liability companies, have outstanding preferred securities with similar protective rights with respect to unpaid dividends, but provide for the election of board members that would not constitute a majority of the board; and their preferred securities are therefore classified for all periods presented as a component of members’ equity.
The outstanding preferred securities of Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Asset Management, whose preferred holders also have protective rights as described in Note 6 to the financial statements, are similarly presented between liabilities and equity on Entergy’s consolidated balance sheets and the outstanding preferred securities of Entergy Gulf States Louisiana and Entergy Louisiana are presented within total equity in Entergy’s consolidated balance sheets. The preferred dividends or distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
New Accounting PronouncementsUse of Estimates in the Preparation of Financial Statements
In June 2009conformity with generally accepted accounting principles, the FASB issued SFAS 167, "Amendments to FASB Interpretation No. 46R". SFAS 167 replaces the current quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly affect the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. SFAS 167 also requires additional disclosures on an interim and annual basis about an enterprise's involvement in variable interest entities. The standard will be effective for Entergy in the first quarter 2010. Upon adoption, Entergy expects its subsidiaries that finance their nuclear fuel purchases through nuclear fuel leases to consolidate the special purpose nuclear fuel companies acting as lessors. The adoption of this statement will result in the reclassification of amounts between certain line items in the financial statements.
ENTERGY CORPORATION AND SUBSIDIARIES |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (In Thousands, Except Percentages and Per Share Amounts) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 10,745,650 | | | $ | 13,093,756 | | | $ | 11,484,398 | | | $ | 10,932,158 | | | $ | 10,106,247 | |
Income from continuing operations | | $ | 1,231,092 | | | $ | 1,220,566 | | | $ | 1,134,849 | | | $ | 1,133,098 | | | $ | 943,125 | |
Earnings per share from continuing operations: | | | | | | | | | | | | | | | | | |
Basic | | $ | 6.39 | | | $ | 6.39 | | | $ | 5.77 | | | $ | 5.46 | | | $ | 4.49 | |
Diluted | | $ | 6.30 | | | $ | 6.20 | | | $ | 5.60 | | | $ | 5.36 | | | $ | 4.40 | |
Dividends declared per share | | $ | 3.00 | | | $ | 3.00 | | | $ | 2.58 | | | $ | 2.16 | | | $ | 2.16 | |
Return on common equity | | | 14.85 | % | | | 15.42 | % | | | 14.13 | % | | | 14.21 | % | | | 11.20 | % |
Book value per share, year-end | | $ | 45.54 | | | $ | 42.07 | | | $ | 40.71 | | | $ | 40.45 | | | $ | 37.31 | |
Total assets | | $ | 37,364,597 | | | $ | 36,616,818 | | | $ | 33,643,002 | | | $ | 31,082,731 | | | $ | 30,857,657 | |
Long-term obligations (1) | | $ | 11,059,971 | | | $ | 11,517,382 | | | $ | 9,948,573 | | | $ | 8,996,620 | | | $ | 9,013,448 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt), preferred stock with sinking fund, and noncurrent capital lease obligations. | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | | | 2005 | |
| | (Dollars In Millions) |
Utility Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 2,999 | | | $ | 3,610 | | | $ | 3,228 | | | $ | 3,193 | | | $ | 2,912 | |
Commercial | | | 2,184 | | | | 2,735 | | | | 2,413 | | | | 2,318 | | | | 2,041 | |
Industrial | | | 1,997 | | | | 2,933 | | | | 2,545 | | | | 2,630 | | | | 2,419 | |
Governmental | | | 204 | | | | 248 | | | | 221 | | | | 155 | | | | 141 | |
Total retail | | | 7,384 | | | | 9,526 | | | | 8,407 | | | | 8,296 | | | | 7,513 | |
Sales for resale (1) | | | 206 | | | | 325 | | | | 393 | | | | 612 | | | | 656 | |
Other | | | 290 | | | | 222 | | | | 246 | | | | 155 | | | | 278 | |
Total | | $ | 7,880 | | | $ | 10,073 | | | $ | 9,046 | | | $ | 9,063 | | | $ | 8,447 | |
Utility Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | |
Residential | | | 33,626 | | | | 33,047 | | | | 33,281 | | | | 31,665 | | | | 31,569 | |
Commercial | | | 27,476 | | | | 27,340 | | | | 27,408 | | | | 25,079 | | | | 24,401 | |
Industrial | | | 35,638 | | | | 37,843 | | | | 38,985 | | | | 38,339 | | | | 37,615 | |
Governmental | | | 2,408 | | | | 2,379 | | | | 2,339 | | | | 1,580 | | | | 1,568 | |
Total retail | | | 99,148 | | | | 100,609 | | | | 102,013 | | | | 96,663 | | | | 95,153 | |
Sales for resale (1) | | | 4,862 | | | | 5,401 | | | | 6,145 | | | | 10,803 | | | | 11,459 | |
Total | | | 104,010 | | | | 106,010 | | | | 108,158 | | | | 107,466 | | | | 106,612 | |
| | | | | | | | | | | | | | | | | | | | |
Non-Utility Nuclear: | | | | | | | | | | | | | | | | | | | | |
Operating Revenues | | $ | 2,555 | | | $ | 2,558 | | | $ | 2,030 | | | $ | 1,545 | | | $ | 1,422 | |
Billed Electric Energy Sales (GWh) | | | 40,981 | | | | 41,710 | | | | 37,570 | | | | 34,847 | | | | 33,641 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes sales to Entergy New Orleans, which was deconsolidated in 2006 and 2005. See Note 18 to the financial statements. | |
| | | | | | | | | | | | | | | | | | | | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
New Orleans, Louisiana
We have audited the accompanying consolidated balance sheetspreparation of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2009 and 2008, and the related consolidated statements of income, retained earnings, comprehensive income, and paid-in capital, and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Corporation and Subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for eachseparate financial statements of the three yearsRegistrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in the period ended December 31, 2009, in conformity with accounting principles generally accepted infuture to the United States of America.extent that future estimates or actual results are different from the estimates used.
As discussed in Note 1 to the consolidated financial statements, the Corporation adopted a new accounting standard for non-controlling interests for all periods presented.Revenues and Fuel Costs
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Corporation’s internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2010 expressed an unqualified opinion on the Corporation’s internal control over financial reporting.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 2010
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF INCOME |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands, Except Share Data) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 7,880,016 | | | $ | 10,073,160 | | | $ | 9,046,301 | |
Natural gas | | | 172,213 | | | | 241,856 | | | | 206,073 | |
Competitive businesses | | | 2,693,421 | | | | 2,778,740 | | | | 2,232,024 | |
TOTAL | | | 10,745,650 | | | | 13,093,756 | | | | 11,484,398 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operating and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 2,309,831 | | | | 3,577,764 | | | | 2,934,833 | |
Purchased power | | | 1,395,203 | | | | 2,491,200 | | | | 1,986,950 | |
Nuclear refueling outage expenses | | | 241,310 | | | | 221,759 | | | | 180,971 | |
Other operation and maintenance | | | 2,750,810 | | | | 2,742,762 | | | | 2,649,654 | |
Decommissioning | | | 199,063 | | | | 189,409 | | | | 167,898 | |
Taxes other than income taxes | | | 503,859 | | | | 496,952 | | | | 489,058 | |
Depreciation and amortization | | | 1,082,775 | | | | 1,030,860 | | | | 963,712 | |
Other regulatory charges (credits) - net | | | (21,727 | ) | | | 59,883 | | | | 54,954 | |
TOTAL | | | 8,461,124 | | | | 10,810,589 | | | | 9,428,030 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 2,284,526 | | | | 2,283,167 | | | | 2,056,368 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 59,545 | | | | 44,523 | | | | 42,742 | |
Interest and dividend income | | | 236,628 | | | | 197,872 | | | | 238,911 | |
Other than temporary impairment losses | | | (86,069 | ) | | | (49,656 | ) | | | (4,914 | ) |
Equity in earnings (loss) of unconsolidated equity affiliates | | | (7,793 | ) | | | (11,684 | ) | | | 3,176 | |
Miscellaneous - net | | | (32,603 | ) | | | (11,768 | ) | | | (24,860 | ) |
TOTAL | | | 169,708 | | | | 169,287 | | | | 255,055 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 520,716 | | | | 500,898 | | | | 506,089 | |
Other interest - net | | | 82,963 | | | | 133,290 | | | | 155,995 | |
Allowance for borrowed funds used during construction | | | (33,235 | ) | | | (25,267 | ) | | | (25,032 | ) |
TOTAL | | | 570,444 | | | | 608,921 | | | | 637,052 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 1,883,790 | | | | 1,843,533 | | | | 1,674,371 | |
| | | | | | | | | | | | |
Income taxes | | | 632,740 | | | | 602,998 | | | | 514,417 | |
| | | | | | | | | | | | |
CONSOLIDATED NET INCOME | | | 1,251,050 | | | | 1,240,535 | | | | 1,159,954 | |
| | | | | | | | | | | | |
Preferred dividend requirements of subsidiaries | | | 19,958 | | | | 19,969 | | | | 25,105 | |
| | | | | | | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | | $ | 1,231,092 | | | $ | 1,220,566 | | | $ | 1,134,849 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Earnings per average common share: | | | | | | | | | | | | |
Basic | | $ | 6.39 | | | $ | 6.39 | | | $ | 5.77 | |
Diluted | | $ | 6.30 | | | $ | 6.20 | | | $ | 5.60 | |
Dividends declared per common share | | $ | 3.00 | | | $ | 3.00 | | | $ | 2.58 | |
| | | | | | | | | | | | |
Basic average number of common shares outstanding | | | 192,772,032 | | | | 190,925,613 | | | | 196,572,945 | |
Diluted average number of common shares outstanding | | | 195,838,068 | | | | 201,011,588 | | | | 202,780,283 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Consolidated net income | | $ | 1,251,050 | | | $ | 1,240,535 | | | $ | 1,159,954 | |
Adjustments to reconcile consolidated net income to net cash flow | | | | | | | | | | | | |
provided by operating activities: | | | | | | | | | | | | |
Reserve for regulatory adjustments | | | (508 | ) | | | (8,285 | ) | | | (15,574 | ) |
Other regulatory charges (credits) - net | | | (21,727 | ) | | | 59,883 | | | | 54,954 | |
Depreciation, amortization, and decommissioning | | | 1,281,838 | | | | 1,220,269 | | | | 1,131,610 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 864,684 | | | | 333,948 | | | | 476,241 | |
Equity in losses of unconsolidated equity affiliates - net of dividends | | | 7,793 | | | | 11,684 | | | | (3,176 | ) |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 116,444 | | | | 78,653 | | | | (62,646 | ) |
Fuel inventory | | | 19,291 | | | | (7,561 | ) | | | (10,445 | ) |
Accounts payable | | | (14,251 | ) | | | (23,225 | ) | | | (103,048 | ) |
Taxes accrued | | | (75,210 | ) | | | 75,210 | | | | (187,324 | ) |
Interest accrued | | | 4,974 | | | | (652 | ) | | | 11,785 | |
Deferred fuel | | | 72,314 | | | | (38,500 | ) | | | 912 | |
Other working capital accounts | | | (228,210 | ) | | | (72,372 | ) | | | (73,269 | ) |
Provision for estimated losses and reserves | | | (12,030 | ) | | | 12,462 | | | | (59,292 | ) |
Changes in other regulatory assets | | | (415,157 | ) | | | (324,211 | ) | | | 254,736 | |
Changes in pensions and other postretirement liabilities | | | 71,789 | | | | 828,160 | | | | (56,224 | ) |
Other | | | 10,074 | | | | (61,670 | ) | | | 40,576 | |
Net cash flow provided by operating activities | | | 2,933,158 | | | | 3,324,328 | | | | 2,559,770 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction/capital expenditures | | | (1,931,245 | ) | | | (2,212,255 | ) | | | (1,578,030 | ) |
Allowance for equity funds used during construction | | | 59,545 | | | | 44,523 | | | | 42,742 | |
Nuclear fuel purchases | | | (525,474 | ) | | | (423,951 | ) | | | (408,732 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | 284,997 | | | | 297,097 | | | | 169,066 | |
Proceeds from sale of assets and businesses | | | 39,554 | | | | 30,725 | | | | 13,063 | |
Payment for purchase of plant | | | - | | | | (266,823 | ) | | | (336,211 | ) |
Insurance proceeds received for property damages | | | 53,760 | | | | 130,114 | | | | 83,104 | |
Changes in transition charge account | | | (1,036 | ) | | | 7,211 | | | | (19,273 | ) |
NYPA value sharing payment | | | (72,000 | ) | | | (72,000 | ) | | | - | |
Increase (decrease) in other investments | | | 94,154 | | | | (72,833 | ) | | | 41,720 | |
Proceeds from nuclear decommissioning trust fund sales | | | 2,570,523 | | | | 1,652,277 | | | | 1,583,584 | |
Investment in nuclear decommissioning trust funds | | | (2,667,172 | ) | | | (1,704,181 | ) | | | (1,708,764 | ) |
Net cash flow used in investing activities | | | (2,094,394 | ) | | | (2,590,096 | ) | | | (2,117,731 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
| | | | | | | | | | | | |
| | For the Years Ended December 31, | |
| | | 2009 | | | | 2008 | | | | 2007 | |
| | (In Thousands) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of: | | | | | | | | | | | | |
Long-term debt | | | 2,003,469 | | | | 3,456,695 | | | | 2,866,136 | |
Preferred equity | | | - | | | | - | | | | 10,000 | |
Common stock and treasury stock | | | 28,198 | | | | 34,775 | | | | 78,830 | |
Retirement of long-term debt | | | (1,843,169 | ) | | | (2,486,806 | ) | | | (1,369,945 | ) |
Repurchase of common stock | | | (613,125 | ) | | | (512,351 | ) | | | (1,215,578 | ) |
Redemption of preferred stock | | | (1,847 | ) | | | - | | | | (57,827 | ) |
Changes in short term borrowings - net | | | (25,000 | ) | | | 30,000 | | | | - | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (576,956 | ) | | | (573,045 | ) | | | (507,327 | ) |
Preferred stock | | | (19,958 | ) | | | (20,025 | ) | | | (25,875 | ) |
Net cash flow used in financing activities | | | (1,048,388 | ) | | | (70,757 | ) | | | (221,586 | ) |
| | | | | | | | | | | | |
Effect of exchange rates on cash and cash equivalents | | | (1,316 | ) | | | 3,288 | | | | 30 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (210,940 | ) | | | 666,763 | | | | 220,483 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 1,920,491 | | | | 1,253,728 | | | | 1,016,152 | |
| | | | | | | | | | | | |
Effect of the reconsolidation of Entergy New Orleans on cash and cash equivalents | | | - | | | | - | | | | 17,093 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 1,709,551 | | | $ | 1,920,491 | | | $ | 1,253,728 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 568,417 | | | $ | 612,288 | | | $ | 611,197 | |
Income taxes | | $ | 43,057 | | | $ | 137,234 | | | $ | 376,808 | |
| | | | | | | | | | | | |
Noncash financing activities: | | | | | | | | | | | | |
Long-term debt retired (equity unit notes) | | $ | (500,000 | ) | | | - | | | | - | |
Common stock issued in settlement of equity unit purchase contracts | | $ | 500,000 | | | | - | | | | - | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
| | | | | | |
| | December 31, |
| | 2009 | | | 2008 | |
| | (In Thousands) |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 85,861 | | | $ | 115,876 | |
Temporary cash investments | | | 1,623,690 | | | | 1,804,615 | |
Total cash and cash equivalents | | | 1,709,551 | | | | 1,920,491 | |
Securitization recovery trust account | | | 13,098 | | | | 12,062 | |
Accounts receivable: | | | | | | | | |
Customer | | | 553,692 | | | | 734,204 | |
Allowance for doubtful accounts | | | (27,631 | ) | | | (25,610 | ) |
Other | | | 152,303 | | | | 206,627 | |
Accrued unbilled revenues | | | 302,463 | | | | 282,914 | |
Total accounts receivable | | | 980,827 | | | | 1,198,135 | |
Deferred fuel costs | | | 126,798 | | | | 167,092 | |
Accumulated deferred income taxes | | | - | | | | 7,307 | |
Fuel inventory - at average cost | | | 196,855 | | | | 216,145 | |
Materials and supplies - at average cost | | | 825,702 | | | | 776,170 | |
Deferred nuclear refueling outage costs | | | 225,290 | | | | 221,803 | |
System agreement cost equalization | | | 70,000 | | | | 394,000 | |
Prepayments and other | | | 386,040 | | | | 247,184 | |
TOTAL | | | 4,534,161 | | | | 5,160,389 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 39,580 | | | | 66,247 | |
Decommissioning trust funds | | | 3,211,183 | | | | 2,832,243 | |
Non-utility property - at cost (less accumulated depreciation) | | | 247,664 | | | | 231,115 | |
Other | | | 120,273 | | | | 107,939 | |
TOTAL | | | 3,618,700 | | | | 3,237,544 | |
| | | | | | | | |
PROPERTY, PLANT AND EQUIPMENT | | | | | | | | |
Electric | | | 36,343,772 | | | | 34,495,406 | |
Property under capital lease | | | 783,096 | | | | 745,504 | |
Natural gas | | | 314,256 | | | | 303,769 | |
Construction work in progress | | | 1,547,319 | | | | 1,712,761 | |
Nuclear fuel under capital lease | | | 527,521 | | | | 465,374 | |
Nuclear fuel | | | 739,827 | | | | 636,813 | |
TOTAL PROPERTY, PLANT AND EQUIPMENT | | | 40,255,791 | | | | 38,359,627 | |
Less - accumulated depreciation and amortization | | | 16,866,389 | | | | 15,930,513 | |
PROPERTY, PLANT AND EQUIPMENT - NET | | | 23,389,402 | | | | 22,429,114 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 619,500 | | | | 581,719 | |
Other regulatory assets | | | 3,647,154 | | | | 3,615,104 | |
Deferred fuel costs | | | 172,202 | | | | 168,122 | |
Goodwill | | | 377,172 | | | | 377,172 | |
Other | | | 1,006,306 | | | | 1,047,654 | |
TOTAL | | | 5,822,334 | | | | 5,789,771 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 37,364,597 | | | $ | 36,616,818 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
| | | | | | | | |
| | December 31, |
| | | 2009 | | | | 2008 | |
| | (In Thousands) |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Currently maturing long-term debt | | $ | 711,957 | | | $ | 544,460 | |
Notes payable | | | 30,031 | | | | 55,034 | |
Accounts payable | | | 998,228 | | | | 1,475,745 | |
Customer deposits | | | 323,342 | | | | 302,303 | |
Taxes accrued | | | - | | | | 75,210 | |
Accumulated deferred income taxes | | | 48,584 | | | | - | |
Interest accrued | | | 192,283 | | | | 187,310 | |
Deferred fuel costs | | | 219,639 | | | | 183,539 | |
Obligations under capital leases | | | 212,496 | | | | 162,393 | |
Pension and other postretirement liabilities | | | 55,031 | | | | 46,288 | |
System agreement cost equalization | | | 187,204 | | | | 460,315 | |
Other | | | 215,202 | | | | 273,297 | |
TOTAL | | | 3,193,997 | | | | 3,765,894 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 7,422,319 | | | | 6,565,770 | |
Accumulated deferred investment tax credits | | | 308,395 | | | | 325,570 | |
Obligations under capital leases | | | 354,233 | | | | 343,093 | |
Other regulatory liabilities | | | 421,985 | | | | 280,643 | |
Decommissioning and asset retirement cost liabilities | | | 2,939,539 | | | | 2,677,495 | |
Accumulated provisions | | | 141,315 | | | | 147,452 | |
Pension and other postretirement liabilities | | | 2,241,039 | | | | 2,177,993 | |
Long-term debt | | | 10,705,738 | | | | 11,174,289 | |
Other | | | 711,334 | | | | 880,998 | |
TOTAL | | | 25,245,897 | | | | 24,573,303 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Subsidiaries' preferred stock without sinking fund | | | 217,343 | | | | 217,029 | |
| | | | | | | | |
EQUITY | | | | | | | | |
Common Shareholders' Equity: | | | | | | | | |
Common stock, $.01 par value, authorized 500,000,000 shares; | | | | | | | | |
issued 254,752,788 shares in 2009 and 248,174,087 shares in 2008 | | | 2,548 | | | | 2,482 | |
Paid-in capital | | | 5,370,042 | | | | 4,869,303 | |
Retained earnings | | | 8,043,122 | | | | 7,382,719 | |
Accumulated other comprehensive loss | | | (75,185 | ) | | | (112,698 | ) |
Less - treasury stock, at cost (65,634,580 shares in 2009 and | | | | | | | | |
58,815,518 shares in 2008) | | | 4,727,167 | | | | 4,175,214 | |
Total common shareholders' equity | | | 8,613,360 | | | | 7,966,592 | |
Subsidiaries' preferred stock without sinking fund | | | 94,000 | | | | 94,000 | |
TOTAL | | | 8,707,360 | | | | 8,060,592 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 37,364,597 | | | $ | 36,616,818 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | | | | |
RETAINED EARNINGS | | | | | | | | | | | | | | | | | | |
Retained Earnings - Beginning of period | | $ | 7,382,719 | | | | | | $ | 6,735,965 | | | | | | $ | 6,113,042 | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | |
Net income attributable to Entergy Corporation | | | 1,231,092 | | | $ | 1,231,092 | | | | 1,220,566 | | | $ | 1,220,566 | | | | 1,134,849 | | | $ | 1,134,849 | |
Adjustments related to implementation of new accounting pronouncements | | | 6,365 | | | | | | | | - | | | | | | | | (4,600 | ) | | | | |
Total | | | 1,237,457 | | | | | | | | 1,220,566 | | | | | | | | 1,130,249 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends declared on common stock | | | 576,913 | | | | | | | | 573,924 | | | | | | | | 507,326 | | | | | |
Capital stock and other expenses | | | 141 | | | | | | | | (112 | ) | | | | | | | - | | | | | |
Total | | | 577,054 | | | | | | | | 573,812 | | | | | | | | 507,326 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Retained Earnings - End of period | | $ | 8,043,122 | | | | | | | $ | 7,382,719 | | | | | | | $ | 6,735,965 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period: | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated derivative instrument fair value changes | | $ | 120,830 | | | | | | | $ | (12,540 | ) | | | | | | $ | (105,578 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities | | | (232,232 | ) | | | | | | | (107,145 | ) | | | | | | | (105,909 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized investment gains | | | (4,402 | ) | | | | | | | 121,611 | | | | | | | | 104,551 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | | 3,106 | | | | | | | | 6,394 | | | | | | | | 6,424 | | | | | |
Total | | | (112,698 | ) | | | | | | | 8,320 | | | | | | | | (100,512 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net derivative instrument fair value changes | | | | | | | | | | | | | | | | | | | | | | | | |
arising during the period (net of tax expense of $333, $78,837 and $57,185) | | | (2,887 | ) | | | (2,887 | ) | | | 133,370 | | | | 133,370 | | | | 93,038 | | | | 93,038 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax expense (benefit) of ($34,415), ($68,076) and $29,994) | | | (35,707 | ) | | | (35,707 | ) | | | (125,087 | ) | | | (125,087 | ) | | | (1,236 | ) | | | (1,236 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized investment gains (net of tax expense (benefit) of $102,845, ($108,049) and $23,562) | | | 82,929 | | | | 82,929 | | | | (126,013 | ) | | | (126,013 | ) | | | 17,060 | | | | 17,060 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Adjustment related to implementation of new accounting pronouncement (net of tax benefit of ($4,921)) | | | (6,365 | ) | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation (net of tax benefit of ($246), ($1,770) and ($16)) | | | (457 | ) | | | (457 | ) | | | (3,288 | ) | | | (3,288 | ) | | | (30 | ) | | | (30 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at end of period: | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated derivative instrument fair value changes | | | 117,943 | | | | | | | | 120,830 | | | | | | | | (12,540 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities | | | (267,939 | ) | | | | | | | (232,232 | ) | | | | | | | (107,145 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Net unrealized investment gains | | | 72,162 | | | | | | | | (4,402 | ) | | | | | | | 121,611 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | | 2,649 | | | | | | | | 3,106 | | | | | | | | 6,394 | | | | | |
Total | | $ | (75,185 | ) | | | | | | $ | (112,698 | ) | | | | | | $ | 8,320 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Add: preferred dividend requirements of subsidiaries | | | | | | | 19,958 | | | | | | | | 19,969 | | | | | | | | 25,105 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Comprehensive Income | | | | | | $ | 1,294,928 | | | | | | | $ | 1,119,517 | | | | | | | $ | 1,268,786 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
PAID-IN CAPITAL | | | | | | | | | | | | | | | | | | | | | | | | |
Paid-in Capital - Beginning of period | | $ | 4,869,303 | | | | | | | $ | 4,850,769 | | | | | | | $ | 4,827,265 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | | | | |
Common stock issuances in settlement of equity unit purchase contracts | | | 499,934 | | | | | | | | - | | | | | | | | - | | | | | |
Common stock issuances related to stock plans | | | 805 | | | | | | | | 18,534 | | | | | | | | 23,504 | | | | | |
Total | | | 500,739 | | | | | | | | 18,534 | | | | | | | | 23,504 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Paid-in Capital - End of period | | $ | 5,370,042 | | | | | | | $ | 4,869,303 | | | | | | | $ | 4,850,769 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Louisiana, Mississippi, and Texas, respectively. Entergy Gulf States Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana. Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans, except for Algiers, where Entergy Louisiana is the electric power supplier. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.
Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers. To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions. Changes are made to the inputs in the estimate as needed to reflect changes in billing practices. Each month the estimated unbilled r evenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy records revenue from sales under rates implemented subject to refund less estimated amounts accrued for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate case as of the date the financial statements are prepared.
Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing.System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are computed by allowing a return on System Energy 8217;s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property. For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation. Normal maintenance, repairs, and minor replacement costs are charged to operating expenses. Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.
Electric plant includes the portions of Grand Gulf and Waterford 3 that have been sold and leased back. For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions.
Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,393 | | $5,378 | | $3,015 | | $- |
Other | | 1,842 | | 1,797 | | 45 | | - |
Transmission | | 2,986 | | 2,956 | | 30 | | - |
Distribution | | 5,926 | | 5,926 | | - | | - |
Other | | 1,661 | | 1,411 | | 248 | | 2 |
Construction work in progress | | 1,662 | | 1,300 | | 361 | | 1 |
Nuclear fuel | | 1,378 | | 760 | | 618 | | - |
Property, plant, and equipment - net | | $23,848 | | $19,528 | | $4,317 | | $3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,105 | | $5,414 | | $2,691 | | $- |
Other | | 1,936 | | 1,724 | | 212 | | - |
Transmission | | 2,922 | | 2,889 | | 33 | | - |
Distribution | | 5,948 | | 5,948 | | - | | - |
Other | | 1,664 | | 1,398 | | 263 | | 3 |
Construction work in progress | | 1,547 | | 1,134 | | 414 | | (1) |
Nuclear fuel (leased and owned) | | 1,267 | | 747 | | 520 | | - |
Property, plant, and equipment - net | | $23,389 | | $19,254 | | $4,133 | | $2 |
Depreciation rates on average depreciable property for Entergy approximated 2.6% in 2010, 2.7% in 2009, and 2.7% in 2008. Included in these rates are the depreciation rates on average depreciable utility property of 2.5% in 2010, 2.7% in 2009, and 2.7% 2008, and the depreciation rates on average depreciable non-utility property of 3.7% in 2010, 3.8% in 2009, and 3.7% in 2008.
Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in fuel expense in the income statements.
“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $207.6 million and $197.8 million as of December 31, 2010 and 2009, respectively.
Construction expenditures included in accounts payable at December 31, 2010 is $171 million.
Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2010 and 2009, is shown below:
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,029 | | $1,452 | | $1,489 | | $- | | $- | | $- | | $1,408 |
Other | | 406 | | 302 | | 393 | | 368 | | (2) | | 331 | | - |
Transmission | | 837 | | 456 | | 597 | | 469 | | 22 | | 569 | | 6 |
Distribution | | 1,637 | | 817 | | 1,255 | | 977 | | 296 | | 944 | | - |
Other | | 197 | | 192 | | 289 | | 207 | | 180 | | 116 | | 20 |
Construction work in progress | | 114 | | 119 | | 521 | | 147 | | 12 | | 80 | | 211 |
Nuclear fuel | | 189 | | 203 | | 135 | | - | | - | | - | | 155 |
Property, plant, and equipment - net | | $4,409 | | $3,541 | | $4,679 | | $2,168 | | $508 | | $2,040 | | $1,800 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,017 | | $1,484 | | $1,450 | | $- | | $- | | $- | | $1,463 |
Other | | 414 | | 300 | | 384 | | 331 | | (6) | | 301 | | - |
Transmission | | 819 | | 416 | | 611 | | 467 | | 27 | | 543 | | 6 |
Distribution | | 1,618 | | 870 | | 1,330 | | 943 | | 280 | | 907 | | - |
Other | | 202 | | 185 | | 307 | | 220 | | 174 | | 113 | | 21 |
Construction work in progress | | 115 | | 84 | | 510 | | 63 | | 21 | | 82 | | 199 |
Nuclear fuel (leased and owned) | | 185 | | 163 | | 122 | | - | | - | | - | | 85 |
Property, plant, and equipment - net | | $4,370 | | $3,502 | | $4,714 | | $2,024 | | $496 | | $1,946 | | $1,774 |
Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | |
2010 | | 2.9% | | 1.8% | | 2.4% | | 2.6% | | 3.1% | | 2.3% | | 2.9% |
2009 | | 3.3% | | 1.9% | | 2.5% | | 2.6% | | 3.0% | | 2.3% | | 2.9% |
2008 | | 3.2% | | 2.2% | | 2.5% | | 2.6% | | 3.1% | | 2.4% | | 2.9% |
Non-utility property - at cost (less accumulated depreciation) for Entergy Gulf States Louisiana is reported net of accumulated depreciation of $134 million and $131 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $2.5 million and $2.3 million as of December 31, 2010 and 2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $9.5 million and $9.2 million as of December 31, 2010 and 2009, respectively.
As of December 31, 2010, construction expenditures included in accounts payable are $16 million for Entergy Arkansas, $14.3 million for Entergy Gulf States Louisiana, $31.6 million for Entergy Louisiana, $6.8 million for Entergy Mississippi, $157.5 thousand for Entergy New Orleans, $3.3 million for Entergy Texas, and $23.8 million for System Energy)Energy.
The accompanying consolidated financial statements includeSystem Energy invested, through its subsidiary Entergy New Nuclear Development, LLC, in initial development costs for potential new nuclear development at the accountsGrand Gulf and River Bend sites, including licensing and design activities. As of Entergy CorporationDecember 31, 2009, $100.3 million in construction work in progress was recorded on System Energy’s balance sheet related to this project. In the first quarter 2010, $24.9 million, $24.9 million, and its subsidiaries. As required by generally accepted accounting principles, all significant intercompany transactions have been eliminated$49.5 million of this construction work in the consolidated financial statements. Entergy's Registrant Subsidiaries (Entergy Arkansas,progress was transferred to Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi, respectively.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. The investments and expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests. As of December 31, 2010, the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Generating Stations | | Fuel-Type | | Total Megawatt Capability (1) | | Ownership | | Investment | | Accumulated Depreciation |
| | | | | | | | | (In Millions) |
Utility business: | | | | | | | | | | | |
Entergy Arkansas - | | | | | | | | | | | |
Independence | Unit 1 | | Coal | | 836 | | 31.50% | | $127 | | $94 |
| Common Facilities | | Coal | | | | 15.75% | | $33 | | $24 |
White Bluff | Units 1 and 2 | | Coal | | 1,659 | | 57.00% | | $489 | | $332 |
Ouachita (2) | Common Facilities | | Gas | | | | 66.67% | | $171 | | $140 |
Entergy Gulf States Louisiana - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 40.25% | | $243 | | $167 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 24.15% | | $142 | | $94 |
Ouachita (2) | Common Facilities | | Gas | | | | 33.33% | | $87 | | $72 |
Entergy Mississippi - | | | | | | | | | | | |
Independence | Units 1 and 2 and Common Facilities | | Coal | | 1,678 | | 25.00% | | $247 | | $132 |
Entergy Texas - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 29.75% | | $178 | | $116 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 17.85% | | $106 | | $67 |
System Energy - | | | | | | | | | | | |
Grand Gulf | Unit 1 | | Nuclear | | 1,251 | | 90.00%(3) | | $3,852 | | $2,418 |
| | | | | | | | | | | |
Entergy Wholesale Commodities: | | | | | | | | | | | |
Independence | Unit 2 | | Coal | | 842 | | 14.37% | | $68 | | $40 |
| Common Facilities | | Coal | | | | 7.18% | | $16 | | $10 |
(1) | “Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
(2) | Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Gulf States Louisiana. The investment and accumulated depreciation numbers above are only for the common facilities. |
(3) | Includes an 11.5% leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements. |
Nuclear Refueling Outage Costs
Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income Taxes
Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return. Each tax paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreement. Deferred income taxes are recorded for all temporary differences between the book and tax basis of assets and liabilities, and for certain credits available for carryforward.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted.
Investment tax credits are deferred and amortized based upon the average useful life of the related property, in accordance with ratemaking treatment.
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of income:
| For the Years Ended December 31, |
| 2010 | 2009 | 2008 |
| | (In Millions, Except Per Share Data) |
Basic earnings per average common share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share |
Net income attributable to Entergy Corporation | $1,250.2 | 186.0 | | $6.72 | $1,231.1 | 192.8 | | $6.39 | $1,220.6 | 190.9 | | $6.39 |
Average dilutive effect of: | | | | | | | | | | | | |
Stock options | - | 1.8 | | (0.06) | - | 2.2 | | (0.07) | - | 4.1 | | (0.13) |
Equity units | - | - | | - | 3.2 | 0.8 | | (0.02) | 24.7 | 6.0 | | (0.06) |
Diluted earnings per average common share | $1,250.2 | 187.8 | | $6.66 | $1,234.3 | 195.8 | | $6.30 | $1,245.3 | 201.0 | | $6.20 |
| | | | | | | | | | | | |
The calculation of diluted earnings per share excluded 5,380,262 options outstanding at December 31, 2010, 4,368,614 options outstanding at December 31, 2009, and 3,326,835 options outstanding at December 31, 2008 that could potentially dilute basic earnings per share in the future. Those options were not included in the calculation of diluted earnings per share because the exercise price of those options exceeded the average market price for the year.
See Note 7 to the financial statements for a discussion of the equity units.
Stock-based Compensation Plans
Entergy grants stock options to key employees of the Entergy subsidiaries, which is described more fully in Note 12 to the financial statements. Effective January 1, 2003, Entergy prospectively adopted the fair value based method of accounting for stock options. Awards under Entergy’s plans generally vest over three years. Stock-based compensation expense included in consolidated net income, net of related tax effects, is $9.2 million for 2010, is $10.4 million for 2009, and is $10.7 million for 2008 for Entergy’s stock options granted.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accounting for the Effects of Regulation
Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards. The Utility operating companies and System Energy have rates that (i) are approved by a body empowered to set rates that bind customers (its regulator); (ii) are cost-based; and (iii) can be charged to and collected from customers. These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers. Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs that would otherwise be charged to expense if the rate actions of its regulator make it probable that those costs will be recovered in future revenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial statements. When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.
An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements. In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations. Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.
Entergy Gulf States Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business. The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order. The plan allows Entergy Gulf States Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between ratepayers and shareholders.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at date of purchase to be cash equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances. The allowance is based on accounts receivable agings, historical experience, and other currently available evidence. Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.
Investments
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealiz ed gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whe ther Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 17 to the financial statements for details on the decommissioning trust funds and the other than temporary impairments recorded in 2010, 2009, and 2008.
Equity Method Investments
Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations. Entergy records its share of earnings or losses of the investee based on the change during the period in the estimated liquidation value of the investment, assuming that the investee’s assets were to be liquidated at book value. In accordance with this method, earnings are allocated to owners or members based on what each partner would receive from its capital account if, hypothetically, liquidation were to occur at the balance sheet date and amounts distributed were based on recorded book values. Entergy discontinues the recognition of l osses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support. See Note 14 to the financial statements for additional information regarding Entergy’s equity method investments.
Derivative Financial Instruments and Commodity Derivatives
The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet the normal purchase, normal sales criteria. The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction.
Contracts for commodities that will be delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.
For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income. To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in other comprehensive income are reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portions of all hedges are recognized in current-period earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using bid prices and market quotes. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not accrue to the benefit or detriment of stockholders. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments. See Note 16 to the financial statements for further discu ssion of fair value.
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy over the remaining life of the assets.
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March 21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
Entergy Wholesale Commodities’ investments are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses will not be renewed. Specifically regarding Vermont Yankee, if Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 include a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued oper ations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plant, including nuclear fuel, is $424 million as of December 31, 2010.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Gulf States Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Gulf States Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, in accordance with ratemaking treatment.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.
Presentation of Non-Controlling Interests
In 2007, a new accounting pronouncement was issued regarding non-controlling interests that requires generally that ownership interests in subsidiaries held by parties other than the reporting company (non-controlling interests) be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the controlling shareholders’ equity, and that the amount of consolidated net income attributable to the reporting company and to the non-controlling interests be clearly identified and presented on the face of the consolidated income statement. This new accounting pronouncement became effective for Entergy in the first quarter 2009 and applies to preferred securities issued by Entergy subsidiaries to third parties.
Presentation of Preferred Stock without Sinking Fund
In connection with the adoption of the new accounting pronouncement regarding non-controlling interests Entergy evaluated the accounting standards regarding the classification and measurement of redeemable securities. These standards require the classification of securities between liabilities and shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans articles of incorp oration provide, generally, that the holders of each company’s preferred securities may elect a majority of the respective company’s board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders’ equity on the balance sheet. Entergy Gulf States Louisiana and Entergy Louisiana, both organized as limited liability companies, have outstanding preferred securities with similar protective rights with respect to unpaid dividends, but provide for the election of board members that would not constitute a majority of the board; and their preferred securities are therefore classified for all periods presented as a component of members’ equity.
The outstanding preferred securities of Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Texas, and System Energy)Asset Management, whose preferred holders also include their separatehave protective rights as described in Note 6 to the financial statements, are similarly presented between liabilities and equity on Entergy’s consolidated balance sheets and the outstanding preferred securities of Entergy Gulf States Louisiana and Entergy Louisiana are presented within total equity in this Form 10-K.Entergy’s consolidated balance sheets. The Registrant Subsidiaries and many other Entergypreferred dividends or distributions paid by all subsidiaries maintain accounts in accordance with FERC and other regulatory guidelines. Certain previously reported amounts have been reclassified to conform to current classifications, with no effect onare reflected for all periods presented outside of consolidated net income or shareholders' (or members') equity.income.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Use of Estimates in the Preparation of Financial Statements
In conformity with generally accepted accounting principles, the preparation of Entergy Corporation'sCorporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities. Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Louisiana, Mississippi, and Texas, respectively. Entergy Gulf States Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana. Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans, except for Algiers, where Entergy Louisiana is the electric power supplier. Entergy's Non-Utility NuclearThe Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by the Non-Utility Nuclearsubsidiaries in that segment.
Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers. To the extent that deliveries have occurred but a bill has not been issued, Entergy'sEntergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy'sEntergy’s Utility operating companies'companies’ various jurisdictions. Changes are made to the inputs in the estimate as needed to reflect changes in billing practices. Each month the estimated unbilled revenuer evenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month'smonth’s estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy records revenue from sales under rates implemented subject to refund less estimated amounts accrued for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate case as of the date the financial statements are prepared.
Entergy’s Utility operating companies'companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy'sfiling.System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are computed by allowing a return on System Energy'sEnergy 8217;s common equity funds allocable to its net investment in Grand Gulf, plus System Energy'sEnergy’s effective interest cost for its debt allocable to its investment in Grand Gulf.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost. Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property. For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation. Normal maintenance, repairs, and minor replacement costs are charged to operating expenses. Substantially all of the Registrant Subsidiaries'Subsidiaries’ plant is subject to mortgage liens.
Electric plant includes the portions of Grand Gulf and Waterford 3 that have been sold and leased back. For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions.
Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 20092010 and 2008,2009, is shown below:
2009 | | Entergy | | Utility | | Non-Utility Nuclear | | All Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,105 | | $5,414 | | $2,691 | | $- |
Other | | 1,724 | | 1,724 | | - | | - |
Transmission | | 2,922 | | 2,889 | | 33 | | - |
Distribution | | 5,948 | | 5,948 | | - | | - |
Other | | 1,876 | | 1,398 | | 255 | | 223 |
Construction work in progress | | 1,547 | | 1,134 | | 412 | | 1 |
Nuclear fuel (leased and owned) | | 1,267 | | 747 | | 520 | | - |
Property, plant, and equipment - net | | $23,389 | | $19,254 | | $3,911 | | $224 |
2008 | | Entergy | | Utility | | Non-Utility Nuclear | | All Other | |
2010 | | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) | | (In Millions) |
Production | | | | | | | | | | | | | | | | |
Nuclear | | $7,998 | | $5,468 | | $2,530 | | $- | | $8,393 | | $5,378 | | $3,015 | | $- |
Other | | 1,944 | | 1,723 | | - | | 221 | | 1,842 | | 1,797 | | 45 | | - |
Transmission | | 2,757 | | 2,724 | | 33 | | - | | 2,986 | | 2,956 | | 30 | | - |
Distribution | | 5,361 | | 5,361 | | - | | - | | 5,926 | | 5,926 | | - | | - |
Other | | 1,554 | | 1,283 | | 271 | | - | | 1,661 | | 1,411 | | 248 | | 2 |
Construction work in progress | | 1,713 | | 1,441 | | 252 | | 20 | | 1,662 | | 1,300 | | 361 | | 1 |
Nuclear fuel (leased and owned) | | 1,102 | | 596 | | 506 | | - | |
Nuclear fuel | | | 1,378 | | 760 | | 618 | | - |
Property, plant, and equipment - net | | $22,429 | | $18,596 | | $3,592 | | $241 | | $23,848 | | $19,528 | | $4,317 | | $3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy | | Utility | | Entergy Wholesale Commodities | | Parent & Other |
| | (In Millions) |
Production | | | | | | | | |
Nuclear | | $8,105 | | $5,414 | | $2,691 | | $- |
Other | | 1,936 | | 1,724 | | 212 | | - |
Transmission | | 2,922 | | 2,889 | | 33 | | - |
Distribution | | 5,948 | | 5,948 | | - | | - |
Other | | 1,664 | | 1,398 | | 263 | | 3 |
Construction work in progress | | 1,547 | | 1,134 | | 414 | | (1) |
Nuclear fuel (leased and owned) | | 1,267 | | 747 | | 520 | | - |
Property, plant, and equipment - net | | $23,389 | | $19,254 | | $4,133 | | $2 |
Depreciation rates on average depreciable property for Entergy approximated 2.6% in 2010, 2.7% in 2009, 2008, and 2007.2.7% in 2008. Included in these rates are the depreciation rates on average depreciable utility property of 2.5% in 2010, 2.7% in 2009, and 2.7% in 2008, and 2.6% in 2007 and the depreciation rates on average depreciable non-utility property of 3.7% in 2010, 3.8% in 2009, and 3.7% in 2008, and 3.6% in 2007.
Entergy Corporation and Subsidiaries
Notes to Financial Statements2008.
Entergy amortizes nuclear fuel using a units-of-production method. Nuclear fuel amortization is included in fuel expense in the income statements.
"“Non-utility property - at cost (less accumulated depreciation)"” for Entergy is reported net of accumulated depreciation of $197.8$207.6 million and $185.8$197.8 million as of December 31, 20092010 and 2008,2009, respectively.
Construction expenditures included in accounts payable at December 31, 20092010 is $159.8$171 million.
Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 20092010 and 2008,2009, is shown below:
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
2010 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) | | (In Millions) |
Production | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nuclear | | $1,017 | | $1,484 | | $1,450 | | $- | | $- | | $- | | $1,463 | | $1,029 | | $1,452 | | $1,489 | | $- | | $- | | $- | | $1,408 |
Other | | 414 | | 300 | | 384 | | 331 | | (6) | | 301 | | - | | 406 | | 302 | | 393 | | 368 | | (2) | | 331 | | - |
Transmission | | 819 | | 416 | | 611 | | 467 | | 27 | | 543 | | 6 | | 837 | | 456 | | 597 | | 469 | | 22 | | 569 | | 6 |
Distribution | | 1,618 | | 870 | | 1,330 | | 943 | | 280 | | 907 | | - | | 1,637 | | 817 | | 1,255 | | 977 | | 296 | | 944 | | - |
Other | | 202 | | 185 | | 307 | | 220 | | 174 | | 113 | | 21 | | 197 | | 192 | | 289 | | 207 | | 180 | | 116 | | 20 |
Construction work in progress | | 115 | | 84 | | 510 | | 63 | | 21 | | 82 | | 199 | | 114 | | 119 | | 521 | | 147 | | 12 | | 80 | | 211 |
Nuclear fuel (leased and owned) | | 185 | | 163 | | 122 | | - | | - | | - | | 85 | |
Nuclear fuel | | | 189 | | 203 | | 135 | | - | | - | | - | | 155 |
Property, plant, and equipment - net | | $4,370 | | $3,502 | | $4,714 | | $2,024 | | $496 | | $1,946 | | $1,774 | | $4,409 | | $3,541 | | $4,679 | | $2,168 | | $508 | | $2,040 | | $1,800 |
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,063 | | $1,410 | | $1,434 | | $- | | $- | | $- | | $1,561 |
Other | | 470 | | 239 | | 354 | | 346 | | - | | 314 | | - |
Transmission | | 782 | | 386 | | 508 | | 476 | | 21 | | 545 | | 6 |
Distribution | | 1,519 | | 733 | | 1,148 | | 885 | | 236 | | 840 | | - |
Other | | 201 | | 180 | | 302 | | 194 | | 165 | | 110 | | 20 |
Construction work in progress | | 142 | | 202 | | 602 | | 82 | | 22 | | 221 | | 123 |
Nuclear fuel (leased and owned) | | 137 | | 152 | | 74 | | - | | - | | - | | 133 |
Property, plant, and equipment - net | | $4,314 | | $3,302 | | $4,422 | | $1,983 | | $444 | | $2,030 | | $1,843 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
Production | | | | | | | | | | | | | | |
Nuclear | | $1,017 | | $1,484 | | $1,450 | | $- | | $- | | $- | | $1,463 |
Other | | 414 | | 300 | | 384 | | 331 | | (6) | | 301 | | - |
Transmission | | 819 | | 416 | | 611 | | 467 | | 27 | | 543 | | 6 |
Distribution | | 1,618 | | 870 | | 1,330 | | 943 | | 280 | | 907 | | - |
Other | | 202 | | 185 | | 307 | | 220 | | 174 | | 113 | | 21 |
Construction work in progress | | 115 | | 84 | | 510 | | 63 | | 21 | | 82 | | 199 |
Nuclear fuel (leased and owned) | | 185 | | 163 | | 122 | | - | | - | | - | | 85 |
Property, plant, and equipment - net | | $4,370 | | $3,502 | | $4,714 | | $2,024 | | $496 | | $1,946 | | $1,774 |
Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | | 2.9% | | 1.8% | | 2.4% | | 2.6% | | 3.1% | | 2.3% | | 2.9% |
2009 | | 3.3% | | 1.9% | | 2.5% | | 2.6% | | 3.0% | | 2.3% | | 2.9% | | 3.3% | | 1.9% | | 2.5% | | 2.6% | | 3.0% | | 2.3% | | 2.9% |
2008 | | 3.2% | | 2.2% | | 2.5% | | 2.6% | | 3.1% | | 2.4% | | 2.9% | | 3.2% | | 2.2% | | 2.5% | | 2.6% | | 3.1% | | 2.4% | | 2.9% |
2007 | | 3.2% | | 2.2% | | 2.5% | | 2.5% | | 3.0% | | 2.4% | | 2.8% | |
| | | | | | | | | | | | | | | |
Non-utility property - at cost (less accumulated depreciation) for Entergy Gulf States Louisiana is reported net of accumulated depreciation of $131$134 million and $126.2$131 million as of December 31, 20092010 and 2008,2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $2.3$2.5 million and $2.1$2.3 million as of December 31, 20092010 and 2008,2009, respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $9.2$9.5 million and $9$9.2 million as of December 31, 20092010 and 2008,2009, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As of December 31, 2009,2010, construction expenditures included in accounts payable are $13.2$16 million for Entergy Arkansas, $7.6$14.3 million for Entergy Gulf States Louisiana, $26.0$31.6 million for Entergy Louisiana, $3.0$6.8 million for Entergy Mississippi, $22$157.5 thousand for Entergy New Orleans, $4.4$3.3 million for Entergy Texas, and $15.7$23.8 million for System Energy.
System Energy has invested, through its subsidiary Entergy New Nuclear Development, LLC, in initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities. As of December 31, 2009, $100.3 million in construction work in progress was recorded on System Energy'sEnergy’s balance sheet related to this project. In the first quarter 2010, $24.9 million, $24.9 million, and $49.5 million of this construction work in progress was transferred to Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi, respectively.
Jointly-Owned Generating Stations
Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. The investments and expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests. As of December 31, 2009,2010, the subsidiaries'subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:
Generating Stations | | Fuel-Type | | Total Megawatt Capability (1) | | Ownership | | Investment | | Accumulated Depreciation |
| | | | | | | | | (In Millions) |
Utility business: | | | | | | | | | | | |
Entergy Arkansas - | | | | | | | | | | | |
Independence | Unit 1 | | Coal | | 836 | | 31.50% | | $128 | | $91 |
| Common Facilities | | Coal | | | | | | | | |
White Bluff | Units 1 and 2 | | Coal | | 1,640 | | 57.00% | | $486 | | $323 |
Ouachita (3) | Common Facilities | | Gas | | | | | | | | |
Entergy Gulf States Louisiana - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 40.25% | | $236 | | $162 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 24.15% | | $141 | | $89 |
Ouachita (3) | Common Facilities | | Gas | | | | | | | | |
Entergy Mississippi - | | | | | | | | | | | |
Independence | Units 1 and 2 and Common Facilities | | Coal | | | | | | | | |
Entergy Texas - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 29.75% | | $173 | | $115 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 17.85% | | $105 | | $66 |
System Energy - | | | | | | | | | | | |
Grand Gulf | Unit 1 | | Nuclear | | 1,210 | | 90.00%(2) | | $3,806 | | $2,315 |
| | | | | | | | | | | |
Non-nuclear wholesale assets: | | | | | | | | | | | |
Independence | Unit 2 | | Coal | | 842 | | 14.37% | | $74 | | $39 |
| Common Facilities | | Coal | | | | 7.18% | | | | |
Harrison County | | | Gas | | 550 | | 60.90% | | $207 | | $29 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Generating Stations | | Fuel-Type | | Total Megawatt Capability (1) | | Ownership | | Investment | | Accumulated Depreciation |
| | | | | | | | | (In Millions) |
Utility business: | | | | | | | | | | | |
Entergy Arkansas - | | | | | | | | | | | |
Independence | Unit 1 | | Coal | | 836 | | 31.50% | | $127 | | $94 |
| Common Facilities | | Coal | | | | 15.75% | | $33 | | $24 |
White Bluff | Units 1 and 2 | | Coal | | 1,659 | | 57.00% | | $489 | | $332 |
Ouachita (2) | Common Facilities | | Gas | | | | 66.67% | | $171 | | $140 |
Entergy Gulf States Louisiana - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 40.25% | | $243 | | $167 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 24.15% | | $142 | | $94 |
Ouachita (2) | Common Facilities | | Gas | | | | 33.33% | | $87 | | $72 |
Entergy Mississippi - | | | | | | | | | | | |
Independence | Units 1 and 2 and Common Facilities | | Coal | | 1,678 | | 25.00% | | $247 | | $132 |
Entergy Texas - | | | | | | | | | | | |
Roy S. Nelson | Unit 6 | | Coal | | 550 | | 29.75% | | $178 | | $116 |
Big Cajun 2 | Unit 3 | | Coal | | 588 | | 17.85% | | $106 | | $67 |
System Energy - | | | | | | | | | | | |
Grand Gulf | Unit 1 | | Nuclear | | 1,251 | | 90.00%(3) | | $3,852 | | $2,418 |
| | | | | | | | | | | |
Entergy Wholesale Commodities: | | | | | | | | | | | |
Independence | Unit 2 | | Coal | | 842 | | 14.37% | | $68 | | $40 |
| Common Facilities | | Coal | | | | 7.18% | | $16 | | $10 |
(1) | "“Total Megawatt Capability"Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
(2) | Includes an 11.5% leasehold interest held by System Energy. System Energy's Grand Gulf lease obligations are discussed in Note 10 to the financial statements. |
(3) | Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Gulf States Louisiana. The investment and accumulated depreciation numbers above are only for the common facilities. |
(3) | Includes an 11.5% leasehold interest held by System Energy. System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements. |
Nuclear Refueling Outage Costs
Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line.
Allowance for Funds Used During Construction (AFUDC)
AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries. AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in rates.the rates charged to customers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income Taxes
Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return. Each tax paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy'sEntergy’s intercompany income tax allocation agreement. Deferred income taxes are recorded for all temporary differences between the book and tax basis of assets and liabilities, and for certain credits available for carryforward. Entergy Louisiana, formed December 31, 2005, was not a member of the consolidated group in 2006 and 2007 and filed a separate federal income tax return. Beginning January 1, 2008, Entergy Louisiana joined the Entergy consolidated federal income tax return.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted.
Investment tax credits are deferred and amortized based upon the average useful life of the related property, in accordance with ratemaking treatment.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Earnings per Share
The following table presents Entergy'sEntergy’s basic and diluted earnings per share calculation included on the consolidated statements of income:
| For the Years Ended December 31, | For the Years Ended December 31, |
| 2009 | 2008 | 2007 | 2010 | 2009 | 2008 |
| | (In Millions, Except Per Share Data) | | (In Millions, Except Per Share Data) |
Basic earnings per average common share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share | Income | Shares | | $/share |
Net income attributable to Entergy Corporation | $1,231.1 | 192.8 | | $6.39 | $1,220.6 | 190.9 | | $6.39 | $1,134.8 | 196.6 | | $5.77 | $1,250.2 | 186.0 | | $6.72 | $1,231.1 | 192.8 | | $6.39 | $1,220.6 | 190.9 | | $6.39 |
Average dilutive effect of: | | | | | | | | | | | | | | | | | | | | | | | | |
Stock options | - | 2.2 | | (0.07) | - | 4.1 | | (0.13) | - | 5.0 | | (0.14) | - | 1.8 | | (0.06) | - | 2.2 | | (0.07) | - | 4.1 | | (0.13) |
Equity units | 3.2 | 0.8 | | (0.02) | 24.7 | 6.0 | | (0.06) | - | 1.1 | | (0.03) | - | - | | - | 3.2 | 0.8 | | (0.02) | 24.7 | 6.0 | | (0.06) |
Deferred units | - | - | | - | - | - | | - | - | 0.1 | | - | |
Diluted earnings per average common share | $1,234.3 | 195.8 | | $6.30 | $1,245.3 | 201.0 | | $6.20 | $1,134.8 | 202.8 | | $5.60 | $1,250.2 | 187.8 | | $6.66 | $1,234.3 | 195.8 | | $6.30 | $1,245.3 | 201.0 | | $6.20 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The calculation of diluted earnings per share excluded 5,380,262 options outstanding at December 31, 2010, 4,368,614 options outstanding at December 31, 2009, and 3,326,835 options outstanding at December 31, 2008 that could potentially dilute basic earnings per share in the future. Those options were not included in the calculation of diluted earnings per share because the exercise price of those options exceeded the average market price for the year. As of December 31, 2008, the calculation of diluted earnings per share excluded 3,326,835 options because the exercise price of those options exceeded the average market price for the year. All options to purchase common stock shares in 2007 were included in the computation of diluted earnings per share because the common share average market price at the end of 2007 was greater than the exercise prices of all of the options outstanding.
Entergy had 10,000,000 equity units outstanding as of December 31, 2008, that obligatedSee Note 7 to the holders to purchase a certain number of shares of Entergy common stockfinancial statements for a stated price no later than February 17, 2009. In February 2009, Entergy Corporation was unable to remarket successfully $500 milliondiscussion of notes associated with itsthe equity units. The note holders therefore put the notes to Entergy, Entergy retired the notes, and Entergy issued 6,598,000 shares of common stock to the note holders.
Stock-based Compensation Plans
Entergy grants stock options to key employees of the Entergy subsidiaries, which is described more fully in Note 12 to the financial statements. Effective January 1, 2003, Entergy prospectively adopted the fair value based method of accounting for stock options. Awards under Entergy'sEntergy’s plans generally vest over three years. Stock-based compensation expense included in consolidated net income, net of related tax effects, is $9.2 million for 20092010, is $10.4 million for 20082009, and is $10.7 million and for 2007 is $8.9 million2008 for Entergy'sEntergy’s stock options granted.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accounting for the Effects of Regulation
Entergy'sEntergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards. The Utility operating companies and System Energy have rates that (i) are approved by a body empowered to set rates that bind customers (its regulator); (ii) are cost-based; and (iii) can be charged to and collected from customers. These criteria may also be applied to separable portions of a utility'sutility’s business, such as the generation or transmission functions, or to specific classes of customers. Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs that would otherwise be charged to expense if the rate actions
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of its regulator make it probable that those costs will be recovered in future revenue. Such capitalized costs are reflected as regulatory assets in the accompanying financial statements. When an enterprise concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity'sentity’s balance sheet.
An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements. In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations. Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.
Entergy Gulf States Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business. The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15%) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order. The plan allows Entergy Gulf States Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between ratepayers and shareholders.
Cash and Cash Equivalents
Entergy considers all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at date of purchase to be cash equivalents.
Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances. The allowance is based on accounts receivable agings, historical experience, and other currently available evidence. Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.
Investments
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealizedunrealiz ed gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders'shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders'shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whetherwhe ther Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy'sEntergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. See Note 17 to the financial statements for details on the decommissioning trust funds and the other than temporary impairments recorded in 2010, 2009, and 2008.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Equity Method InvesteesInvestments
Entergy owns investments that are accounted for under the equity method of accounting because Entergy'sEntergy’s ownership level results in significant influence, but not control, over the investee and its operations. Entergy records its share of earnings or losses of the investee based on the change during the period in the estimated liquidation value of the investment, assuming that the investee'sinvestee’s assets were to be liquidated at book value. In accordance with this method, earnings are allocated to owners or members based on what each partner would receive from its capital account if, hypothetically, liquidation were to occur at the balance sheet date and amounts distributed were based on recorded book values. Entergy discontinues the recognition of lossesl osses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support. See Note 14 to the financial statements for additional information regarding Entergy'sEntergy’s equity method investments.
Derivative Financial Instruments and Commodity Derivatives
The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet the normal purchase, normal sales criteria. The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction.
Contracts for commodities that will be delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.
For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income. To qualify for hedge accounting, the relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged. Gains or losses accumulated in other comprehensive income are reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The ineffective portions of all hedges are recognized in current-period earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy'sEntergy’s other derivative instruments.
Fair Values
The estimated fair values of Entergy'sEntergy’s financial instruments and derivatives are determined using bid prices and market quotes. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not accrue to the benefit or detriment of stockholders. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments. See Note 16 to the financial statements for further discussiondiscu ssion of fair value.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy over the remaining life of the assets.
Four nuclear power plants in the Entergy Wholesale Commodities business segment have applications pending for NRC license renewals. This includes the Vermont Yankee plant, which currently has an operating license that expires March 21, 2012. In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee and store spent nuclear fuel beyond March 21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. On March 3, 2008, Entergy filed an application with the VPSB to renew its CPG. On February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote in the Vermont Senate and defeated by a margin of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
Entergy Wholesale Commodities’ investments are subject to impairment if adverse market conditions arise, if a unit ceases operation, or for certain units if their operating licenses will not be renewed. Specifically regarding Vermont Yankee, if Entergy concludes that Vermont Yankee is unlikely to operate significantly beyond its current license expiration date in 2012, it could result in an impairment of part or all of the carrying value of the plant. Entergy's evaluation of the probability associated with operations of the plant past 2012 include a number of factors such as the status of the NRC's evaluation of Entergy's application for license renewal, the status of state regulatory issues as described above, the potential sale of the plant, and the application of federal laws regarding the continued oper ations of nuclear facilities. In preparing its 2010 financial statements Entergy evaluated these factors and concluded that the carrying value of Vermont Yankee is not impaired as of December 31, 2010. The net carrying value of the plant, including nuclear fuel, is $424 million as of December 31, 2010.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Gulf States Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy'sEntergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Gulf States Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, in accordance with ratemaking treatment.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes. Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.
Presentation of Non-Controlling Interests
In 2007, a new accounting pronouncement was issued regarding non-controlling interests that requires generally that ownership interests in subsidiaries held by parties other than the reporting company (non-controlling interests) be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the controlling shareholders'shareholders’ equity, and that the amount of consolidated net income attributable to the reporting company and to the non-controlling interests be clearly identified and presented on the face of the consolidated income statement. This new accounting pronouncement became effective for Entergy in the first quarter 2009 and applies to preferred securities issued by Entergy subsidiaries to third parties.
Presentation of Preferred Stock without Sinking Fund
In connection with the adoption of the new accounting pronouncement regarding non-controlling interests Entergy evaluated the accounting standards regarding the classification and measurement of redeemable securities. These standards require the classification of securities between liabilities and shareholders'shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans articles of incorporationincorp oration provide, generally, that the holders of each company'scompany’s preferred securities may elect a majority of the respective company'scompany’s board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders'shareholders’ equity on the balance sheet. Entergy Gulf States Louisiana and Entergy Louisiana, both organized as limited liability companies, have outstanding preferred securities with similar protective rights with respect to unpaid dividends, but provide for the election of board members that would not constitute a majority of the board; and their preferred securities are therefore classified for all periods presented as a component of members'members’ equity.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The outstanding preferred securities of Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Asset Management, whose preferred holders also have protective rights as described in Note 6 to the financial statements, are similarly presented between liabilities and shareholders' equity on Entergy'sEntergy’s consolidated balance sheets and the outstanding preferred securities of Entergy Gulf States Louisiana and Entergy Louisiana are presented within total equity in Entergy'sEntergy’s consolidated balance sheets. The preferred dividends or distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.
Subsequent Events
Entergy evaluated events of which its management was aware subsequent to December 31, 2009, through the date that this annual report was issued.
New Accounting Pronouncements
In June 2009 the FASB issued SFAS 167, "Amendments to FASB Interpretation No. 46R". SFAS 167 replaces the current quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly affect the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. SFAS 167 also requires additional disclosures on an interim and annual basis about an enterprise's involvement in variable interest entities. The standard will be effective for Entergy in the first quarter 2010. Upon adoption, Entergy expects its subsidiaries that finance their nuclear fuel purchases through nuclear fuel leases to consolidate the special purpose nuclear fuel companies acting as lessors. The adoption of this statement will result in the reclassification of amounts between certain line items in the financial statements.
Entergy Gulf States Louisiana and Entergy Texas Basis of Presentation
Effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utility companies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole retail jurisdiction of the LPSC, Entergy Gulf States Louisiana. Entergy Texas now owns all Entergy Gulf States, Inc. distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, undivided 42.5% ownership shares of Entergy Gulf States, Inc.'s 70% ownership interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana, and other assets and contract rights to the extent related to utility operations in Texas. Entergy Gulf States Louisiana now owns all of the remaining assets that were owned by Entergy Gulf States, Inc. On a book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana and approximately 41.9% were allocated to Entergy Texas.
Because the jurisdictional separation was a transaction involving entities under common control, Entergy Texas recognized the assets and liabilities allocated to it at their carrying amounts in the accounts of Entergy Gulf States, Inc. at the time of the jurisdictional separation. Entergy Texas' financial statements report results of operations for 2007 as though the jurisdictional separation had occurred at the beginning of 2007, and presented its 2007 balance sheet as though the assets and liabilities had been allocated at December 31, 2007. Financial information presented for prior periods has also been presented on that basis to furnish comparative information.
As the successor to Entergy Gulf States, Inc. for financial reporting purposes, Entergy Gulf States Louisiana's income statement and cash flow statement for the year ended December 31, 2007 include the operations of Entergy Texas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
New Accounting Pronouncements
The accounting standard-setting process, including projects between the FASB and the International Accounting Standards Board (IASB) to converge U.S. GAAP and International Financial Reporting Standards, is ongoing and the FASB and the IASB are each currently working on several projects that have not yet resulted in final pronouncements. Final pronouncements that result from these projects could have a material effect on Entergy’s future net income or financial position.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets
Other Regulatory Assets
Regulatory assets represent probable future revenues associated with costs that are expected to be recovered from customers through the regulatory ratemaking process affecting the Utility business. In addition to the regulatory assets that are specifically disclosed on the face of the balance sheets, the table below provides detail of "Other“Other regulatory assets"assets” that are included on Entergy'sEntergy’s and the Registrant Subsidiaries'Subsidiaries’ balance sheets as of December 31, 20092010 and 2008:2009:
Entergy
| | 2009 | | 2008 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $403.9 | | $371.2 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 23.2 | | 48.4 |
Grand Gulf fuel - non-current - recovered through rate riders when rates are redetermined periodically (Note 2 Fuel and purchased power cost recovery) | | 58.2 | | 28.6 |
Gas hedging costs - recovered through fuel rates | | 0.4 | | 66.8 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non Qualified Pension Plans) (b) | | 1,481.7 | | 1,468.6 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 7.2 | | 9.6 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | | | |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 44.4 | | 63.9 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 28.1 | | 29.9 |
Sale-leaseback deferral - Grand Gulf and Waterford 3 Lease Obligations recovered through June 2014 and December 2044, respectively (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations and Waterford 3 Lease Obligations) | | 115.3 | | 122.8 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 34.2 | | 35.8 |
Transition to competition - recovered through February 2021 (Note 2 – Retail Rate Proceedings – Filings with the PUCT and Texas Cities) | | 101.9 | | 107.6 |
Unamortized loss on reacquired debt - recovered over term of debt | | 115.0 | | 124.0 |
Unrealized loss on decommissioning trust funds | | - | | 42.3 |
Other | | 50.5 | | 54.2 |
Total | | $3,647.2 | | $3,615.1 |
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $406.4 | | $403.9 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 15.8 | | 23.2 |
Grand Gulf fuel - non-current and power management rider - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 17.4 | | 58.2 |
Gas hedging costs - recovered through fuel rates | | 1.9 | | 0.4 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 1,734.7 | | 1,481.7 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 4.8 | | 7.2 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 1,026.0 | | 1,183.2 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 81.5 | | 44.4 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 26.2 | | 28.1 |
Sale-leaseback deferral - Grand Gulf Lease Obligation recovered through June 2014 and Waterford 3 Lease Obligation (in 2009) (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations and Waterford 3 Lease Obligations) | | 22.3 | | 115.3 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 32.6 | | 34.2 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 95.8 | | 101.9 |
Little Gypsy cost proceeding – recovery timing will be determined by the LPSC in the project costs proceeding (Note 2 – Little Gypsy Repowering Project) | | 200.9 | | - |
Unamortized loss on reacquired debt - recovered over term of debt | | 122.5 | | 115.0 |
Other | | 49.4 | | 50.5 |
Total | | $3,838.2 | | $3,647.2 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
| | 2009 | | 2008 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $179.4 | | $164.9 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | - | | 5.9 |
Incremental ice storm costs - recovered through 2032 | | 11.6 | | 12.1 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 447.6 | | 441.6 |
Grand Gulf fuel - non-current - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 8.2 | | 19.4 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 7.2 | | 9.6 |
Provision for storm damages - recovered either through securitization or retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 61.7 | | - |
Unamortized loss on reacquired debt - recovered over term of debt | | 29.7 | | 32.3 |
Other | | 1.6 | | 3.2 |
Entergy Arkansas Total | | $747.0 | | $689.0 |
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $167.3 | | $179.4 |
Incremental ice storm costs - recovered through 2032 | | 11.1 | | 11.6 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 547.5 | | 447.6 |
Grand Gulf fuel - non-current - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | - | | 8.2 |
Postretirement benefits - recovered through 2012 (Note 11 – Other Postretirement Benefits) (b) | | 4.8 | | 7.2 |
Provision for storm damages - recovered either through securitization or retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 118.5 | | 61.7 |
Unamortized loss on reacquired debt - recovered over term of debt | | 38.0 | | 29.7 |
Other | | 5.2 | | 1.6 |
Entergy Arkansas Total | | $892.4 | | $747.0 |
Entergy Gulf States Louisiana
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $17.6 | | $15.0 | | $17.8 | | $17.6 |
Gas hedging costs - recovered through fuel rates | | 0.3 | | 20.2 | | 1.0 | | 0.3 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 142.7 | | 121.2 | | 157.4 | | 142.7 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | | | | | 6.0 | | 44.1 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 15.7 | | 13.6 | | 14.0 | | 15.7 |
River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC) | | 28.1 | | 29.9 | | 26.2 | | 28.1 |
Spindletop gas storage facility - recovered through December 2032 (a) | | 34.2 | | 35.8 | | 32.6 | | 34.2 |
Unamortized loss on reacquired debt - recovered over term of debt | | 14.1 | | 15.2 | | 13.5 | | 14.1 |
Other | | 3.3 | | 4.7 | | 2.4 | | 3.0 |
Entergy Gulf States Louisiana Total | | $299.8 | | $287.9 | | $270.9 | | $299.8 |
Entergy Louisiana
| | 2009 | | 2008 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $99.9 | | $86.2 |
FRP deferral - recovery to be determined in formula rate plan proceeding | | - | | 17.5 |
Gas hedging costs - recovered through fuel rates | | - | | 26.7 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 200.4 | | 196.8 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | | | |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 7.5 | | 32.3 |
Sale-leaseback deferral - recovered through December 2044 (Note 10 – Sale and Leaseback Transactions – Waterford 3 Lease Obligations ) | | 40.7 | | 31.8 |
Unamortized loss on reacquired debt - recovered over term of debt | | 19.7 | | 21.7 |
Other | | 17.2 | | 21.7 |
Entergy Louisiana Total | | $477.0 | | $515.1 |
| | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $113.4 | | $99.9 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Non-Qualified Pension Plans) (b) | | 309.1 | | 200.4 |
Little Gypsy cost proceeding – recovery timing will be determined by the LPSC in the project costs proceeding (Note 2 – Little Gypsy Repowering Project) | | 200.9 | | - |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 1.0 | | 91.9 |
Deferred capacity - recovery timing will be determined by the LPSC in the formula rate plan filings (Note 2 – Retail Rate Proceedings – Filings with the LPSC) | | 1.8 | | 7.5 |
Sale-leaseback deferral - (Note 10 – Sale and Leaseback Transactions – Waterford 3 Lease Obligations ) | | - | | 40.7 |
Unamortized loss on reacquired debt - recovered over term of debt | | 22.5 | | 19.7 |
Other | | 14.0 | | 16.9 |
Entergy Louisiana Total | | $662.7 | | $477.0 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Mississippi
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $4.7 | | $4.5 | | $5.0 | | $4.7 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 44.5 | | 40.0 | | 46.1 | | 44.5 |
Grand Gulf fuel - non-current - recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | 50.0 | | 9.3 | |
Gas hedging costs - recovered through fuel rates | | - | | 15.6 | |
Grand Gulf fuel - non-current and power management rider- recovered through rate riders when rates are redetermined periodically (Note 2 – Fuel and purchased power cost recovery) | | | 17.4 | | 50.0 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 131.5 | | 136.3 | | 160.0 | | 131.5 |
Provision for storm damages - recovered through retail rates | | 10.0 | | 9.3 | | 8.7 | | 10.0 |
Unamortized loss on reacquired debt - recovered over term of debt | | 10.1 | | 11.3 | | 11.5 | | 10.1 |
Other | | 0.6 | | 0.6 | | 4.5 | | 0.6 |
Entergy Mississippi Total | | $251.4 | | $226.9 | | $253.2 | | $251.4 |
Entergy New Orleans
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $3.0 | | $2.8 | | $3.2 | | $3.0 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 15.2 | | 15.4 | | 15.4 | | 15.2 |
Gas hedging costs - recovered through fuel rates | | 0.2 | | 4.3 | | 0.5 | | 0.2 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 74.8 | | 82.5 | | 95.3 | | 74.8 |
Provision for storm damages, including hurricane costs - recovered through insurance proceeds and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 23.8 | | 99.7 | | 10.8 | | 23.8 |
Unamortized loss on reacquired debt - recovered over term of debt | | 2.9 | | 3.2 | | 3.0 | | 2.9 |
Other | | 5.8 | | 0.6 | | 7.1 | | 5.8 |
Entergy New Orleans Total | | $125.7 | | $208.5 | | $135.3 | | $125.7 |
Entergy Texas | | 2010 | | 2009 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $1.4 | | $1.5 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 7.3 | | 7.2 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 165.4 | | 145.9 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | 881.7 | | 952.2 |
Transition to competition costs - recovered over a 15-year period through February 2021 | | 95.8 | | 101.9 |
Unamortized loss on reacquired debt - recovered over term of debt | | 12.7 | | 13.5 |
Other | | 4.7 | | 9.9 |
Entergy Texas Total | | $1,169.0 | | $1,232.1 |
Entergy Texas
| | 2009 | | 2008 |
| | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $1.5 | | $1.7 |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 7.2 | | 34.7 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans, Other Postretirement Benefits, and Non-Qualified Pension Plans) (b) | | 145.9 | | 149.2 |
Provision for storm damages, including hurricane costs - recovered through securitization, insurance proceeds, and retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators) | | | | |
Transition to competition - recovered through February 2021 (Note 2 – Retail Rate Proceedings – Filings with the PUCT and Texas Cities) | | 101.9 | | 107.6 |
Unamortized loss on reacquired debt - recovered over term of debt | | 13.5 | | 12.3 |
Other | | 9.9 | | 0.7 |
Entergy Texas Total | | $1,232.1 | | $1,117.3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
Asset Retirement Obligation - recovery dependent upon timing of decommissioning (Note 9) (b) | | $97.8 | | $96.1 | | $98.3 | | $97.8 |
Unrealized loss on decommissioning trust funds | | - | | 31.3 | |
Removal costs - recovered through depreciation rates (Note 9) (b) | | 13.9 | | 14.5 | | 12.2 | | 13.9 |
Pension & postretirement costs (Note 11 – Qualified Pension Plans and Other Postretirement Benefits) (b) | | | | | | 142.0 | | 78.4 |
Sale-leaseback deferral - recovered through June 2014 (Note 10 – Sale and Leaseback Transactions – Grand Gulf Lease Obligations) | | 74.6 | | 91.0 | | 22.3 | | 74.6 |
Unamortized loss on reacquired debt - recovered over term of debt | | 25.0 | | 28.0 | | 21.5 | | 25.0 |
Other | | 0.3 | | 0.4 | | 0.4 | | 0.3 |
System Energy Total | | $290.0 | | $333.4 | | $296.7 | | $290.0 |
(a) | The jurisdictional split order assigned the regulatory asset to Entergy Texas. The regulatory asset, however, is being recovered and amortized at Entergy Gulf States Louisiana. As a result, a billing will occur monthly over the same term as the recovery and receipts will be submitted to Entergy Texas. Entergy Texas has recorded a receivable from Entergy Gulf States Louisiana and Entergy Gulf States Louisiana has recorded a corresponding payable. |
(b) | Does not earn a return on investment, but is offset by related liabilities. |
Fuel and purchased power cost recovery
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are allowed to recover certain fuel and purchased power costs through fuel mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues. The difference between revenues collected and the current fuel and purchased power costs is recorded as "Deferred“Deferred fuel costs"costs” on the Utility operating companies'companies’ financial statements. The table below shows the amount of deferred fuel costs as of December 31, 20092010 and 2008,2009, that Entergy expects to recover (or return to customers) through fuel mechanisms, subject to subsequent regulatory review.
| 2009 | | 2008 | 2010 | | 2009 |
| (In Millions) | (In Millions) |
| | | | | | |
Entergy Arkansas | $122.8 | | $119.1 | $61.5 | | $122.8 |
Entergy Gulf States Louisiana (a) | $57.8 | | $8.1 | $77.8 | | $57.8 |
Entergy Louisiana (a) | $66.4 | | ($23.6) | $8.8 | | $66.4 |
Entergy Mississippi | ($72.9) | | $5.0 | $3.2 | | ($72.9) |
Entergy New Orleans (a) | $8.1 | | $21.8 | ($2.8) | | $8.1 |
Entergy Texas | ($102.7) | | $21.2 | ($77.4) | | ($102.7) |
(a) | 20092010 and 20082009 include $100.1 million for Entergy Gulf States Louisiana, and $68 million for Entergy Louisiana of fuel, purchased power,, and capacity costs that are expected to be recovered over a period greater than twelve months. 2009 includes $4.1 million for Entergy New Orleans of fuel, purchased power, and capacity costs, thatwhich do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months. |
Entergy Gulf States Louisiana made a $36.8 million adjustment to its deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Production Cost Allocation Rider
In its June 2007 decision on Entergy Arkansas' August 2006 rate filing, theThe APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings.proceedings, which are discussed in the “System Agreement Cost Equalization Proceedings” section below. These costs cause an increase in Entergy Arkansas'Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months. In December 2007, the APSC issued a subsequent order stating that termination of the rider would be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing.
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - System Agreement Proceedings" for a discussion of the System Agreement proceedings.
Energy Cost Recovery Rider
Entergy Arkansas'Arkansas’s retail rates include an energy cost recovery rider. In December 2007,rider to recover fuel and purchased energy costs in monthly bills. The rider utilizes prior calendar year energy costs and projected energy sales for the APSC issuedtwelve-month period commencing on April 1 of each year to develop an order stating that terminationenergy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost recovery rider would be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing.
In March 2009, Entergy Arkansas filed with the APSC its annual energy cost rate for the period April 2009 through March 2010.prior calendar year. The filed energy cost rate decreased from $0.02456/kWh to $0.01552/kWh. The decrease was caused by the following: 1) all three of the nuclear power plants from which Entergy Arkansas obtains power, ANO 1 and 2 and Grand Gulf, had refueling outages in 2008, and the previous energy cost rate had been adjusted to account for the replacement power costs that would be incurred while these units were down; 2) Entergy Arkansas had a deferred fuel cost liability from over-recovered fuel costs at December 31, 2008, as compared to a deferred fuel cost asset from under-recovered fuel costs at December 31, 2007; offset by 3) an increase in the fuel and purchased power prices included in the calculation.
In August 2009, as provided for by its energy cost recovery rider Entergy Arkansas filed with the APSCtariff also allows an interim revision to its energy cost rate. The revised energy cost rate is a decrease from $0.01552/kWh to $0.01206/kWh. The decrease was caused by a decrease in natural gasrequest depending upon the level of over- or under-recovery of fuel and purchased power prices from the levels used in setting the rate in March 2009. The interim revised energy cost rate went into effect for the first billing cycle of September 2009. In its order approving the new rate, the APSC ordered Entergy Arkansas to show cause why the rate should not be further reduced. In its September 14, 2009 response, Entergy Arkansas explained that it used the same methodology it had used in previous interim revisions, which is based on estimating what the rate would be in the next annual update based on the information known at the time. There has been no further activity in this proceeding.costs.
APSC Investigations
In September 2005, Entergy Arkansas filed with the APSC an interim energy cost rate per the energy cost recovery rider, which provides for an interim adjustment should the cumulative over- or under-recovery for the energy period exceed 10 percent of the energy costs for that period. In early October 2005, the APSC initiated an investigation into Entergy Arkansas'Arkansas's interim energy cost recovery rate. The investigation is focused on Entergy Arkansas'Arkansas's 1) gas contracting, portfolio, and hedging practices; 2) wholesale purchases during the period; 3) management of the coal inventory at its coal generation plants; and 4) response to the contractual failure of the railroads to provide coal deliveries. In March 2006, the APSC extended its investigation to cover the costs included in Entergy Arkansas'Arkansas's March 2006 annual energy cost rate filing, and a hearing was held in the APSC energy cost recovery investigation in October 2006.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In January 2007 the APSC issued an order in its review of the energy cost rate. The APSC found that Entergy Arkansas failed to maintain an adequate coal inventory level going into the summer of 2005 and that Entergy Arkansas should be responsible for any incremental energy costs resulting from two outages caused by employee and contractor error. The coal plant generation curtailments were caused by railroad delivery problems and Entergy Arkansas has since resolved litigation with the railroad regarding the delivery problems. The APSC staff was directed to perform an analysis with Entergy Arkansas'Arkansas’s assistance to determine the additional fuel and purchased energy costs associated with these findings and file the analysis within 60 days of the order.& #160; After a final determination of the costs is made by the APSC, Entergy Arkansas would be directed to refund that amount with interest to its customers as a credit on the energy cost recovery rider. Entergy Arkansas requested rehearing of the order. In March 2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas'Arkansas’s petition for rehearing and for stay of the APSC order.
In October 2008 Entergy Arkansas filed a motion to lift the stay and to rescind the APSC's January 2007 order in light of the arguments advanced in Entergy Arkansas'Arkansas’s rehearing petition and because the value for Entergy Arkansas'Arkansas’s customers obtained through the resolved railroad litigation is significantly greater than the incremental cost of actions identified by the APSC as imprudent. The APSC staff, the AEEC, and the Arkansas attorney general support the lifting of the stay but request additional proceedings. In December 2008, the APSC denied the motion to lift the stay pending resolution of Entergy Arkansas'Arkansas’s rehearing request and of the unresolved issues in the proceeding. The APSC ordered the parties to submit their unresolved issues list in the pending proceeding, which the parties have done.did. In February 2010 the APSC denied Entergy Arkansas'Arkansas’s request for rehearing, and scheduledheld a hearing forin September 2010 to determine the amount of damages, if any, that should be assessed against Entergy Arkansas. A decision is pending. Entergy Arkansas expects the amount of damages, if any, to have an immaterial effect on its results of operations, financial position, or cash flows.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The APSC also established a separate docket to consider the resolved railroad litigation, and in February 2010 it established a procedural schedule that concludesconcluded with testimony through September 2010. TheTestimony has been filed and the APSC may set a hearingwill now decide the case based on the record in a future order, if necessary.the proceeding, including the prefiled testimony.
Entergy Gulf States Louisiana and Entergy Louisiana
In Louisiana, Entergy Gulf States Louisiana and Entergy Louisiana recover electric fuel and purchased power costs for the upcoming month based upon the level of such costs from the prior month. Entergy Gulf States Louisiana'sLouisiana’s purchased gas adjustments include estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
In January 2003 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 1995 through 2004. The LPSC Staff issued its audit report in December 2010. The report recommends the disallowance of $23 million of costs which, with interest, will total $43 million. $2.3 million of this total relates to a realignment to and recovery through base rates of certain SO2 costs. Entergy Gulf States Louisiana filed comments disputing the finding s in the report and requested a hearing. Entergy Gulf States Louisiana has recorded provisions for the estimated effect of this proceeding.
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana's purchased gas adjustment clause filings for its gas distribution operations. The audit includes a review of the reasonableness of charges flowed through by Entergy Gulf States Louisiana for the period from 2003 through 2008. Discovery is in progress, but a procedural schedule has not been established.
In August 2000 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Louisiana pursuant to a November 1997 LPSC general order.Louisiana. The time period that is the subject of the audit iswas January 1, 2000 through December 31, 2001. In September 2003, the LPSC staff issued its audit report and recommended a disallowance with regard to an alleged failure to uprate Waterford 3 in a timely manner. This issue was resolved with a March 2005 global settlement. Subsequent to the issuance of the audit report, theThe scope of this docket was expanded to include a review of annual reports on fuel and purchased power transactions with affiliates and a prudence review of transmission planning issues and to include the years 2002 through 2004. Hearings were held and in November 2006. In May 2008 the ALJ issued a final recommendation that found in Entergy Louisiana'sLouisiana’s favor on the issues, except for the disallowance of hypothetical SO2 allowance costs included in affiliate purchases.purchase s. The ALJ recommended a refund of the SO2 allowance costs collected to date and a realignment of these costs into base rates prospectively with an amortization of the refunded amount through base rates over a five-year period. The LPSC issued an order in December 2008 affirming the ALJ'sALJ’s recommendation. Entergy Louisiana recorded a provision for the disallowance, including interest, and refunded approximately $7 million to customers in 2009.
In January 2003,April 2010 the LPSC authorized its staff to initiate a proceeding toan audit theof Entergy Louisiana's fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates pursuant to a November 1997 LPSC general order.filings. The audit will includeincludes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through itsthe fuel adjustment clause in
by Entergy Corporation and Subsidiaries
Notes to Financial Statements
Louisiana for the period January 1, 1995from 2005 through December 31, 2002.2009. Discovery is underway,in progress, but a detailed procedural schedule extending beyond the discovery stage has not yet been established, and the LPSC staff has not yet issued its audit report. In June 2005, the LPSC expanded the audit period to include the years through 2004.established.
Entergy Mississippi
Entergy Mississippi'sMississippi’s rate schedules include an energy cost recovery rider that is adjusted quarterly to reflect accumulated over- or under-recoveries from the second prior quarter. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
In July 2008 the MPSC began a proceeding to investigate the fuel procurement practices and fuel adjustment schedules of the Mississippi utility companies, including Entergy Mississippi. A two-day public hearing was held in July 2008, and after a recess during which the MPSC reviewed information, the hearing resumed on August 5, 2008, for additional testimony by an expert witness retained by the MPSC. The MPSC's witness presented testimony regarding a review of the utilities' fuel adjustment clauses. The MPSC stated that the goal of the proceeding is fact-finding so that the MPSC may decide whether to amend the current fuel cost recovery process. In February 2009 the MPSC published a final report of its expert witness, which discussed Entergy Mississippi's fuel procurement activities and made recommendations regarding fuel recovery practices in Mississippi.
In addition, in October 2008 the MPSC issued an order directing Entergy Mississippi and Entergy Services, Inc. to provide documents associated with fuel adjustment clause litigation in Louisiana involving Entergy Louisiana and Entergy New Orleans, and in January 2009 issued an order requiring Entergy Mississippi to provide additional information related to the long-term Evangeline gas contract that had been an issue in the fuel adjustment clause litigation in Louisiana. Entergy Mississippi and Entergy Services filed a response to the MPSC order stating that gas from the Evangeline gas contract had been sold into the Entergy System exchange and had an effect on the costs paid by Entergy Mississippi'sMississippi’s customers. The MPSC's investigation is ongoing.Further proceedings have not been scheduled.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In August 2009 the MPSC retained an independent audit firm to audit Entergy Mississippi's fuel adjustment clause submittals for the period October 2007 through September 2009. The independent audit firm submitted its report to the MPSC in December 2009. The report does not recommend that any costs be disallowed for recovery. The report did suggest that some costs, less than one percent of the fuel and purchased power costs recovered during the period, may have been more reasonably charged to customers through base rates rather than through fuel charges, but the report did not suggest that customers should not have paid for those costs. In November 2009 the MPSC also retained another firm to review processes and practices related to fuel and purchased energy. The results of that review are due to the MPSC in March 2010.
In January 2010 the MPSC issued an order certifying to the Mississippi Legislature the independent audit report and the Public Utilities Staff's annual fuel audit report for the years ended September 30, 2008 and 2009, which did not find any imprudent costs. The order stated that the MPSC will open a rulemaking docket to address certain policy issues regarding allowable fuel adjustment costs, fuel adjustment mechanisms, and related matters.
Mississippi Attorney General Complaint
The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, Inc., and Entergy Power, Inc. alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The litigation is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. On December 29, 2008, the defendant Entergy companies filed to remove the attorney general'sgeneral’s suit to U.S. District Court (the forum that Entergy believes is appropriate to resolve the types of federalfede ral issues raised in the suit), where it is currently pending, and additionally answered the complaint and filed a counter-claim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009, the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general'sgeneral’s complaint.
Entergy New Orleans
Entergy New Orleans'Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges. In June 2006 the City Council authorized the recovery of all Grand Gulf costs through Entergy New Orleans'Orleans’s fuel adjustment clause (a significant portion of Grand Gulf costs was previously recovered through base rates), and continued that authorization in approving the October 2006 formula rate plan filing settlement. Effective June 2009, the majority of Grand Gulf costs were realigned to base rates and are no longer flowed through the fuel adjustment clause.
Entergy New Orleans'Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges. In October 2005, the City Council approved modification of the gas cost collection mechanism effective November 2005 in order to address concerns regarding its fluctuations, particularly during the winter heating season. The modifications are intended to minimize fluctuations in gas rates during the winter months.
Entergy Texas
Entergy Texas'Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges, not recovered in base rates. The fixed fuel factor formula was revised and approved by a PUCT order in August 2006. The new formula was implemented in September 2006. Under the new methodology, semi-annualSemi-annual revisions of the fixed fuel factor will continue to beare made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas'Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
In July 2005, Entergy Texas filed with the PUCT a request for implementation of an incremental purchased capacity recovery rider. Through this rider Entergy Texas sought to recover incremental revenues that represent the incremental purchased capacity costs, including Entergy Texas' obligation to purchase power from Entergy Louisiana's Perryville plant, over what is already in Entergy Texas' base rates. The PUCT approved an initial rider to collect $18 million annually, which was increased to $21 million in subsequent years. Under the settlement of the 2007 rate case discussed below, this rider ceased on January 28, 2009, with the implementation of stipulated base rates. The amounts collected through the rider are subject to reconciliation.
In May 2006, Entergy Texas filed with the PUCT a fuel and purchased power reconciliation case covering the period September 2003 through December 2005 for costs recoverable through the fixed fuel factor rate and the incremental purchased capacity recovery rider. Entergy Texas sought reconciliation of $1.6 billion of fuel and purchased power costs on a Texas retail basis. A hearing was conducted before the ALJs in April 2007. In July 2007, the ALJs issued a proposal for decision recommending that Entergy Texas be authorized to reconcile all of its requested fixed fuel factor expenses and recommending a minor exception to the incremental purchased capacity recovery calculation. The ALJs also recommended granting an exception to the PUCT rules to allow for recovery of an additional $11.4 million in purchased power capacity costs. In September 2007, the PUCT issued an order, which affirmed the ultimate result of the ALJs' proposal for decision. Upon motions for rehearing, the PUCT added additional language in its order on rehearing to further clarify its position that 30% of River Bend should not be regulated by the PUCT. Two parties filed a second motion for rehearing, but the PUCT declined to address them. The PUCT's decision has been appealed to the Travis County District Court.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In March 2007, Entergy Texas filed a request with the PUCT to refund $78.5 million, including interest, of fuel cost recovery over-collections through January 2007. In June 2007 the PUCT approved a unanimous stipulation and settlement agreement that updated the over-collection balance through April 2007 and established a refund amount, including interest, of $109.4 million. The refund was made over a two-month period beginning with the first billing cycle in July 2007.
In October 2007, Entergy Texas filed a request with the PUCT to refund $45.6 million, including interest, of fuel cost recovery over-collections through September 2007. In January 2008, Entergy Texas filed with the PUCT a stipulation and settlement agreement among the parties that updated the over-collection balance through November 2007 and established a refund amount, including interest, of $71 million. The PUCT approved the agreement in February 2008. The refund was made over a two-month period beginning February 2008, but was reduced by $10.3 million of under-recovered incremental purchased capacity costs.
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 Rough Production Cost Equalizationrough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. A hearing was held at the end of July 2008, and in OctoberIn December 2008 the PUCT adopted an ALJ issued a proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. The PUCT adopted the ALJ's proposal for decision in December 2008. Because the PUCT allocation to Texas retail
Entergy Corporation and Subsidiaries
Notes to Financial Statements
customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision would resultresults in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. The PUCT denied Entergy Texas' motion for rehearing and Entergy Texas commenced proceedings in both state and federal district courts seeking to reverse the PUCT's decision. The federal proceeding has been abated pending further action by the FERC in the proceeding discussed below. No procedural schedule has been set for the state proceeding.
Entergy Texas also filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. OnIn May 8, 2009 the FERC issued an order rejecting the proposed amendment, stating, among other things, that the FERC does not have jurisdiction over the allocation of an individual utility's receipts/payments among or between its retail jurisdictions and that this was a matter for the courts to review in the pending proceedings noted above.amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). Entergy requested rehearing of the FERC's order,The PUCT and on July 8, 2009, the FERC granted the request for rehearing for the limited purpose of affording more time for consideration of Entergy's request.decisions are now final.
In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Entergy Texas requested that the proposed refund be made over a four-month period beginning June 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009, with the exception of certain industrial and seasonal/agricultural customers who received a one-month refund.2009.
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Entergy Texas requested that the proposed refund be made over a six-month period beginning January 2010. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund will bewas made for most customers over a three-month period beginning January 2010.
In June 2010, Entergy Texas filed with the exceptionPUCT a request to refund approximately $66 million, including interest, of certain industrialfuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
In December 2010, Entergy Texas filed with the PUCT a request to refund approximately $52 million, including interest, of fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved on an interim basis and seasonal/agriculturalis pending final action by the PUCT, Entergy Texas will refund over-collections of approximately $72.7 million through November 2010. The refund will be made for most customers who receivedover a one-month refund.three-month period beginning with the February 2011 billing cycle.
Entergy Texas'Texas’s December 2009 rate case filing, which is discussed below, also includesincluded a request to reconcile $1.8 billion of fuel and purchased power costs covering the period April 2007 through June 2009.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Storm Cost Recovery Filings with Retail Regulators
Entergy Arkansas
Entergy Arkansas Storm Reserve Accounting
The APSC's June 2007 order in Entergy Arkansas' base rate proceeding eliminated storm reserve accounting for Entergy Arkansas. In March 2009 a law was enacted in Arkansas that requires the APSC to permit storm reserve accounting for utilities that request it. Entergy Arkansas filed its request with the APSC, and has reinstated storm reserve accounting effective January 1, 2009. A hearing on Entergy Arkansas' request is scheduled for March 2010.
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas'Arkansas's transmission and distribution lines, equipment, poles, and other facilities. On January 30, 2009, the APSC issued an order inviting and encouraging electric public utilities to file specific proposals for the recovery of extraordinary storm restoration expenses associated with the ice storm. On February 16, 2009, Entergy Arkansas filed a request with the APSC for an accounting order authorizing deferral of the operating and maintenance cost portion of Entergy Arkansas' ice storm restoration costs pending their recovery. The APSC issued such an order in March 2009 subject to certain conditions, including that if Entergy Arkansas seeks to recover the deferred costs, those costs will be subject to investigation for whether they are incremental, prudent, and reasonable. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. On February 1,In June 2010 Entergy Arkansas requestedthe APSC issued a financing order to issueauthorizing the issuance of approximately $127.5$126.3 million in storm cost recovery bonds, which includedincludes carrying costs of $11.7$11.5 million and $4.6 million of up-front financing costs to pay for ice storm restoration because Entergy Arkansas' analysis demonstrates retail customers will benefit from lower costs using securitization. The APSC has established a procedural schedule that includes a hearing in April 2010 and states that the APSC will issue its final order by June 15, 2010. Entergy Arkansas' September 2009 general rate filing also requested recovery of the January 2009 ice storm costs over 10 years if it was expected that securitization would not produce lower costs for customers, and Entergy Arkansas will remove this request if the APSC approves securitization.
Entergy Texas
Hurricane Rita
In July 2006, Entergy Texas filed an application with the PUCT with respect to its Hurricane Rita reconstruction costs incurred through March 2006. The filing asked the PUCT to determine the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Texas allocates those costs among its retail customer classes. In December 2006, the PUCT approved $381 million of reasonable and necessary hurricane reconstruction costs incurred through March 31, 2006, plus carrying costs, as eligible for recovery. After netting expected insurance proceeds, the amount is $353 million.
In April 2007, the PUCT issued its financing order authorizing the issuance of securitization bonds to recover the $353 million of hurricane reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits.costs. See Note 5 to the financial statements for a discussion of the June 2007August 2010 issuance of the securitization bonds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Hurricane Ike and Hurricane Gustav
Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas' request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6.8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
Entergy Gulf States Louisiana and Entergy Louisiana
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy's service territory. Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana made a supplemental filing to, among other things, recommend recoveryand the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and replenishmentissuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 fi nancings).Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm reservescosts were financed primarily by Louisiana Act 55 (passed in 2007) financing.financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana recovered their costs from Hurricane Katrinaalso filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Hurricane Rita primarily by Act 55 financing as discussed below. Onsavings to customers via a Storm Cost Offset rider.
In December 30, 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that if approved, provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana.Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financing isfinancings are accomplished. The parties to the proceeding have agreed to a procedural schedule that includes March/In March and April 2010, hearing dates for both the recoverability and the method of recovery proceedings.
Hurricane Katrina and Hurricane Rita
In February 2007, Entergy Louisiana and Entergy Gulf States Louisiana filed a supplemental and amending application by which they sought authority from the LPSC to securitize their Hurricane Katrina and Hurricane Rita storm cost recovery and storm reserve amounts, together with certain debt retirement costs and upfront and ongoing costs of the securitized debt issued. Securitization is authorized by a law signed by the Governor of Louisiana in May 2006. Hearings on the quantification of the amounts eligible for securitization began in late-April 2007. At the start of the hearing, a stipulation among Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC staff,an uncontested stipulated settlement that includes these terms and most other partiesalso includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the proceeding was read into$462.4 million of bond proceeds loaned by the record. The stipulation quantifiedLCDA to the balance ofLURC, the LURC deposited $200 million in a restricted escrow account as a storm restoration costs for recovery as $545 milliondamage reserve for Entergy Louisiana and $187transferred $262.4 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In July 2010 the LCDA issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and set the storm reserve amounts at $152transferred $150.3 million for Entergy Louisiana and $87 million fordirectly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3 million to acquire 1,502,643.04 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The stipulation also called for securitizationpreferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the storm restoration costs and storm reserves in those same amounts. In August 2007, the LPSC issued orders approving recoveryLLC agreement. The terms of the stipulated storm cost recovery and storm reserve amounts plusmembership interests include certain debt retirement and upfront and ongoing costs through securitization financing.financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy Gulf States Louisiana and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses.
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to Act 64 traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 3, 2008, the Louisiana State Bond Commission granted preliminary approval for the Act 55 financings. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana'sLouisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
OnIn July 29, 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate.& #160; Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
OnIn August 26, 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LPFA,LURC, and remit the collections to the LPFA. By analogy to and in accordance with Entergy's accounting policy for collection of sales taxes,bond indenture trustee. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agent for the state.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Mississippi
In March 2006, the Governor of Mississippi signed a law that established a mechanism by which the MPSC could authorize and certify an electric utility financing order and the state could issue bonds to finance the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities. In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later, Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of Community Development Block Grant (CDBG) funding for reimbursement of its Hurricane Katrina infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount included the $89 million of Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. Entergy Mississippi's filing stated that the amount actually financed through the state bonds would be net of any CDBG funds that Entergy Mississippi received.
In October 2006, the Mississippi Development Authority approved for payment and Entergy Mississippi received $81 million in CDBG funding for Hurricane Katrina costs. The MPSC then issued a financing order authorizing the issuance of state bonds to finance $8 million of Entergy Mississippi's certified Hurricane Katrina restoration costs and $40 million for an increase in Entergy Mississippi's storm damage reserve. $30 million of the storm damage reserve was set aside in a restricted account. A Mississippi state entity issued the bonds in May 2007, and Entergy Mississippi received proceeds of $48 million. Entergy Mississippi does not report the bonds on its balance sheet because the bonds are the obligation of the state entity, and there is no recourse against Entergy Mississippi in the event of a bond default. To service the bonds, Entergy Mississippi collects a system restoration charge on behalf of the issuer, and remits the collections to the issuer. By analogy to and in accordance with Entergy's accounting policy for collection of sales taxes, Entergy Mississippi does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
Entergy New Orleans
In December 2005 the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included CDBGCommunity Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007 the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans' estimated costs of $465 million for its gas system rebuild (which is discussed below).plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007.2007 and $19.2 million in 2010.
Entergy Texas
Hurricane Ike and Hurricane Gustav
Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas’s request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6 .8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
Little Gypsy Repowering Project (Entergy and Entergy Louisiana)
In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisiana complied with the LPSC’s directive and recommended that the project be suspended for an extended pe riod of time of three years or more. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC Staff and Intervenors filed testimony. The LPSC Staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, b ut at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it is probable that the Little Gypsy repowering project will be abandoned and accordingly reclassified the project costs from construction work in progress to a regulatory asset. This accounting reclassification does not modify Entergy Louisiana’s requested relief pending before the LPSC. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties conducted a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement is expected to be presented to the LPSC for approval in the first quarter 2011.
Retail Rate Proceedings
The following chart summarizes the Utility operating companies' current retail base rates:
Company | | Authorized Return on Common Equity | | |
| | | | |
Entergy Arkansas | | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
Entergy Louisiana | | 9.45%- 11.05% | | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| | | | |
Entergy Mississippi | | 10.79%- 13.05% | | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a settlement approved by the City Council. |
| | | | |
Entergy Texas | | 10.125% | | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a settlement of Entergy Texas's base rate case approved by the PUCT. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC (Entergy Arkansas)
Retail Rates
2009 Base Rate Filing
In September 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. In June 2010 the APSC approved a settlement and subsequent compliance tariffs that provide for a $63.7 million rate increase, effective for bills rendered for the first billing cycle of July 2010. The settlement provides for a 10.2% return on common equity.
2006 Base Rate Filing
In August 2006, Entergy Arkansas filed with the APSC a request for a change in base rates. Entergy Arkansas requested a general base rate increase (using an ROE of 11.25%), which it subsequently adjusted to a request for a $106.5 million annual increase. In June 2007, after hearings on the filing, the APSC ordered Entergy Arkansas to reduce its annual rates by $5 million, and set a return on common equity of 9.9% with a hypothetical common equity level lower than Entergy Arkansas'Arkansas’s actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy'sEntergy’s stock-based compensation plans. In addition, under the terms of the APSC's decision, the order eliminated storm reserve accountingplans, and set an amount of $14.4 million in base rates to address
Entergy Corporation and Subsidiaries
Notes to Financial Statements
storm restoration costs, regardless of the actual annual amount of future restoration costs. The APSC's June 2007 decision left Entergy Arkansas with no mechanism to recover $52 million of costs previously accumulated in Entergy Arkansas'Arkansas’s storm reserve and $18 million of removal costs associated with the terminationterm ination of a lease.
The APSC denied Entergy Arkansas' request for rehearing of its June 2007 decision, and the base rate change was implemented August 29, 2007, effective for bills rendered after June 15, 2007. In
Entergy Arkansas sought to overturn the APSC’s decision, but in December 2008 the Arkansas Court of Appeals upheld almost all aspects of the APSC decision. After considering the progress of the proceeding in light of the decision of the Court of Appeals, Entergy Arkansas recorded in the fourth quarter 2008 an approximately $70 million charge to earnings, on both a pre- and after-tax basis because these are primarily flow-through items, to recognize that the regulatory assets associated with the storm reserve costs, lease termination removal costs, and stock-based compensation arewere no longer probable of recovery. In April 2009 the Arkansas Supreme Court denied Entergy Arkansas'Arkansas’s petition for review of the Court of Appeals decision.
2009 Base Rate Filing
On September 4, 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. Entergy Arkansas requested a $223.2 million base rate increase that would become effective in July 2010. The filing reflects an 11.5% return on common equity using a projected capital structure, and proposes a formula rate plan mechanism. Proposed formula rate plan provisions include a +/- 25 basis point bandwidth, with earnings outside the bandwidth reset to the 11.5% return on common equity midpoint and rates changing on a prospective basis depending on whether Entergy Arkansas is over or under-earning. The proposed formula rate plan also includes a recovery mechanism for APSC-approved costs for additional capacity purchases or construction/acquisition of new transmission or generating facilities. Entergy Arkansas is also seeking an increase in its annual storm damage accrual from $14.4 million to $22.3 million. The APSC scheduled hearings in the proceeding beginning in May 2010.
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
2009 Rate Case
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The filing includes a proposed cost of service adjustment rider with a three-year term beginning with the 2010 calendar year as the initial evaluation period. Key provisions include a plus or minus 15 basis point bandwidth, with earnings outside the bandwidth reset to the bottom or top of the band and rates changing prospectively depending upon whether Entergy Texas is under or over-earning. The annual change in revenue requirement is limited to a percentage change in the Consumer Price Index for urban areas, and the filing includes a provision for extraordinary events greater than $10 million per year that would be considered separately. The filing also proposes a purchased power recovery rider and a competitive generation service tariff and will establish test year baseline values to be used in the transmission cost recovery factor rider authorized for use by Entergy Texas in the 2009 legislative session. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Hearings in the proceeding are scheduled for July 2010, and the PUCT is required to issue a final order by November 1, 2010. Beginning in May 2010, Entergy Texas will be allowed to implement a $17.5 million interim rate increase, subject to refund. The rates set by a final order will be effective back to September 13, 2010.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2007 Rate Case
Entergy Texas made a rate filing in September 2007 with the PUCT requesting an annual rate increase totaling $107.5 million, including a base rate increase of $64.3 million and riders totaling $43.2 million. On December 16, 2008, Entergy Texas filed a term sheet that reflected a settlement agreement that included the PUCT Staff and the other active participants in the rate case. On December 19, 2008, the ALJs approved Entergy Texas' request to implement interim rates reflecting the agreement. The agreement includes a $46.7 million base rate increase, among other provisions. Under the ALJs' interim order, Entergy Texas implemented interim rates, subject to refund and surcharge, reflecting the rates established through the settlement. These rates became effective with bills rendered on and after January 28, 2009, for usage on and after December 19, 2008. In addition, the existing recovery mechanism for incremental purchased power capacity costs ceased as of January 28, 2009, with purchased power capacity costs then subsumed within the base rates set in this proceeding. The agreement adopted by the PUCT also reconciles fuel and purchased power costs for the period January 1, 2006 through March 31, 2007. Certain Texas municipalities exercised their original jurisdiction and took final action to approve rates consistent with the interim rates approved by the ALJs. In March 2009, the PUCT approved the settlement, which made the interim rates final.
Transition to Competition Costs
In August 2005, Entergy Texas filed with the PUCT an application for recovery of its transition to competition costs. Entergy Texas requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider. The $189 million represents transition to competition costs Entergy Texas incurred from June 1, 1999 through June 17, 2005 in preparing for the potential of competition in its Texas service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Texas reached a unanimous settlement agreement, which the PUCT approved in June 2006, on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Texas to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Texas implemented rates based on this revenue level on March 1, 2006.
Filings with the LPSC
Formula Rate Plans (Entergy Gulf States Louisiana and Entergy Louisiana)
In March 2005 the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, establishes a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate planpl an filing in June 2005. The formula rate plan was subsequently extended one year.
Entergy Louisiana made a rate filing with the LPSC requesting a base rate increase in January 2004. In May 2005 the LPSC approved a settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed below the formula rate plans for Entergy Gulf States Louisiana and Entergy Louisiana have been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, and 2010 test years.
Retail Rates - Electric
(Entergy Louisiana)
In October 2009 the LPSC approved a settlement that resolves Entergy Louisiana's 2006 and 2007 test year filings. The settlement provides for a new formula rate plan for the 2008, 2009, and 2010 test years. Entergy Louisiana is permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%). The rate reset, a $2.5 million increase that includes a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset will be subject to refund pending review of the 2008 test year filing that was made on October 21, 2009. The settlement does not allow recovery through the formula rate plan of most of Entergy Louisiana's costs associated with Entergy's stock option plan. Pursuant to the settlement Entergy Louisiana refunded to its customers $12.9 million, which includes interest, in the November 2009 billing cycle. The LPSC Staff and one intervenor filed comments on the 2008 test year filing in January 2010. Entergy Louisiana has until March 2010 to provide an initial response to the proposed adjustments and discovery is ongoing. Entergy Louisiana will implement any agreed changes by March 15, 2010. A procedural schedule to address any contested issues would be set after March 15, 2010.
In December 2009, Entergy Louisiana filed an application seeking LPSC approval for a $10.3 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Currently, Entergy Louisiana has $2.2 million in annual retail rates for decommissioning funding.
In May 2008, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2007 test year, seeking an $18.4 million rate increase, comprised of $12.6 million of recovery of incremental and deferred capacity costs and $5.8 million based on a cost of service revenue deficiency related to continued lost contribution to fixed costs associated with the loss of customers due to Hurricane Katrina. In August 2008, Entergy Louisiana implemented a $43.9 million formula rate plan decrease to remove interim storm cost recovery and to reduce the storm damage accrual. Entergy Louisiana then implemented a $16.9 million formula rate plan increase, subject to refund, effective the first billing cycle in September 2008, comprised of $12.6 million of recovery of incremental and deferred capacity costs and $4.3 million based on a cost of service deficiency.
In May 2007, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2006 test year, indicating a 7.6% earned return on common equity. In September 2007, Entergy Louisiana modified its formula rate plan filing to reflect its implementation of certain adjustments proposed by the LPSC Staff in its review of Entergy Louisiana's original filing with which Entergy Louisiana agreed, and to reflect its implementation of an $18.4 million annual formula rate plan increase comprised of (1) a $23.8 million increase representing 60% of Entergy Louisiana's revenue deficiency, and (2) a $5.4 million decrease for reduced incremental and deferred capacity costs. In October 2007, Entergy Louisiana implemented a $7.1 million formula rate plan decrease that was due primarily to the reclassification of certain franchise fees from base rates to collection via a line item on customer bills pursuant to an LPSC Order.
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Louisiana modified the filing in August 2006 to reflect a 9.45% return on equity which is within the allowed bandwidth. The modified filing includes an increase of $24.2 million for interim recovery of storm costs from Hurricanes Katrina and Rita and a $119.2 million rate increase to recover LPSC-approved incremental deferred and ongoing capacity costs. The filing requested recovery of approximately $50 million for the amortization of capacity deferrals over a three-year period, including carrying charges, and approximately $70 million for ongoing capacity costs. The increase was implemented, subject to refund, with the first billing cycle of September 2006. Entergy Louisiana subsequently updated its formula rate plan rider to reflect adjustments proposed by the LPSC Staff with which it agrees. The adjusted return on equity of 9.56% remains within the allowed bandwidth. Ongoing and deferred incremental capacity costs were reduced to $118.7 million. The
Entergy Corporation and Subsidiaries
Notes to Financial Statements
updated formula rate plan rider was implemented, subject to refund, with the first billing cycle of October 2006. An uncontested stipulated settlement was filed in February 2008 that left the current base rates in place, and the LPSC approved the settlement in March 2008. In the settlement Entergy Louisiana agreed to credit customers $7.2 million, plus $0.7 million of interest, for customer contributions to the Central States Compact in Nebraska that was never completed and agreed to a one-time $2.6 million deduction from the deferred capacity cost balance. The credit, for which Entergy Louisiana had previously recorded a provision, was made in May 2008.
(Entergy Gulf States Louisiana)
In October 2009 the LPSC approved a settlement that resolvesresolved Entergy Gulf States Louisiana'sLouisiana’s 2007 test year filing. The settlement providesfiling and provided for a new formula rate plan for the 2008, 2009, and 2010 test years. Entergy Gulf States Louisiana is permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.65% return on equity for the 2008 test year. 10.65% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset will bewas subject to refund pending review of the 2008 testtes t year filing that was made onin October 21, 2009. The settlement does not allow recovery through the formula rate plan of most of Entergy Gulf States Louisiana's costs associated with Entergy's stock option plan. Pursuant to the settlement Entergy Gulf States Louisiana refunded to its customers $3.7 million, which includes interest, in the November 2009 billing cycle. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. The discoveryIn May 2010, Entergy Gulf States Louisiana and comment period forthe LPSC staff submitted a joint report on the 2008 test year filing is currently open, and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Gulf States Louisiana will implement any agreed changes by March 15, 2010. A procedural schedule to address any contested issues would be set after March 15, 2010.
In Decembermade its formula rate plan filing with the LPSC for the 2009 Entergy Gulf States Louisiana filed an application seeking LPSC approval fortest year. The filing reflected a $9.7 million10.25% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to ana NRC notification of a projected shortfall of decommissioning funding assurance. Currently, Entergy Gulf States Louisiana's annual retail rates contain no amountThe filing also reflected a rate increase for decommissioning funding.
incremental capacity costs. In May 2008,July 2010 the LPSC approved a $7.8 million increase in the revenue requirement for decommiss ioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2007a revised 2009 test year.year filing. The revised filing reflected a 9.26%10.12% earned return on common equity, which was belowis within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and indicated a $5.4(2) $25.2 million revenue deficiency, offset by a $4.1 million decrease in required additionalfor capacity costs. The rates reflected in the revised filing became effective, beginning with the first billing cycle of September 2010. Entergy Gulf States Louisiana implementedand the LPSC staff subsequently submitted a $20.7 millionjoint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in January 2011.
(Entergy Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Louisiana’s 2006 and 2007 test year filings provided for a new formula rate plan decrease,for the 2008, 2009, and 2010 test years. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%).
Entergy Louisiana was permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the firstMay 2010 billing cycle in September 2008. The decrease included removal of interim storm cost recovery and a reduction in$0.1 million refund. In addition, Entergy Louisiana moved the storm damage accrual. Entergy Gulf States Louisiana then implemented a $16.0recovery of approximately $12.5 million formulaof capacity costs from fuel adjustment clause recovery to base rate plan increase, subject to refund, effectiverecovery. At its April 21, 2010 meeting, the first billing cycle in October 2008 to collect previously deferred and ongoing costs associated with LPSC approved additional capacity, includingaccepted the Ouachita power plant. In November 2008 Entergy Gulf States Louisiana filed to implement an additional increase of $9.3 million to recover the costs of a new purchased power agreement.joint report.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2007,2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 20062009 test year. The filing reflected a 10.0% return on common equity, which was within the allowed earnings bandwidth, and an anticipated formula rate plan decrease of $23 million annually attributable to adjustments outside of the formula rate plan sharing mechanism related to capacity costs and the anticipated securitization of storm costs related to Hurricane Katrina and Hurricane Rita and the securitization of a storm reserve. In September 2007, Entergy Gulf States Louisiana modified the formula rate plan filing to reflect a 10.07% return on common equity, which was still within the allowed bandwidth. The modified filing also reflected implementation of a $4.1 million rate increase, subject to refund, attributable to recovery of additional LPSC-approved incremental deferred and ongoing capacity costs. The rate decrease anticipated in the original filing did not occur because of the additional capacity costs approved by the LPSC, and because securitization of storm costs associated with Hurricane Katrina and Hurricane Rita and the establishment of a storm reserve had not yet occurred. In October 2007, Entergy Gulf States Louisiana implemented a $16.4 million formula rate plan decrease that was due to the reclassification of certain franchise fees from base rates to collection via a line item on customer bills pursuant to an LPSC order. In March 2008 the LPSC approved an uncontested stipulated settlement that left the current base rates in place and extended the formula rate plan for one year.
In May 2006, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Gulf States Louisiana modified the filing in August 2006 to reflect an 11.1%10.82% return on common equity, which is within the allowed bandwidth.earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The modified filing includesdoes reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental capacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue requirement for decommissioning, effective September 2010. ; In August 2010, Entergy Louisiana made a revised 2009 test year formula rate plan increasefiling. The revised filing reflected a 10.82% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of $17.2service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million annually that provides for 1) interim recovery of $10.5 million of storm costs from Hurricane Katrina and Hurricane Rita and 2) recovery of $6.7 million of LPSC-approved incremental deferred and ongoing capacity costs. The increase was implementedrates reflected in the revised filing became effective beginning with the first billing cycle of September 2006. In May 2007 the LPSC approved a settlement between2010. Entergy Gulf States Louisiana and the LPSC staff affirmingsubsequently submitted a joint report on the rates that were implemented2009 test year filing consistent with these terms and the LPSC approved the joint report in September 2006.December 2010.
Retail Rates - Gas (Entergy Gulf States Louisiana)
In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010. The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million. The sixty-day review and comment period for this filing remains open.
In January 2010, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2009. The filing showed an earned return on common equity of 10.87%, which is within the earnings bandwidth of 10.5% plus or minus fifty basis points. The sixty day review and comment period for this filing remains open.
In January 2009, Entergy Gulf States Louisiana filed with the LPSC its gaspoints, resulting in no rate stabilization plan for the test year ended September 30, 2008. The filing showed a revenue deficiency of $529 thousand based on a return on common equity mid-point of 10.5%.change. In April 2009, Entergy Gulf States Louisiana implemented a $255 thousand rate increase pursuant to an uncontested settlement with the LPSC staff.
In January 2008, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ending September 30, 2007. The filing showed a revenue deficiency of $3.7 million based on a return on common equity mid-point of 10.5%. Entergy Gulf States Louisiana implemented a $3.4 million rate increase in April 2008 pursuant to an uncontested agreement with the LPSC staff.
In January 2007, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ending September 30, 2006. The filing showed a revenue deficiency of $3.5 million based on a return on common equity mid-point of 10.5%. In March 2007,2010, Entergy Gulf States Louisiana filed a set of rate and rider schedules that reflected all proposed LPSC staff adjustments and implemented a $2.4 million base rate increase effectiverevised evaluation report reflecting changes agreed upon with the first billing cycle of April 2007 pursuant to theLPSC Staff. The revised evaluation report also resulted in no rate stabilization plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statementschange.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. The proposed modifications include:In March 2010 the MPSC issued an order: (1) resettingproviding the opportunity for a reset of Entergy Mississippi's return on common equity to the middle ofa point within the formula rate plan bandwidth each year and eliminating the 50/50 sharing that had been in the current plan, (2) modifying the performance measurement process, and (3) replacing the current raterevenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a proposed limit of four percent of revenues, (3) implementingalthough any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi's request to use a projected test year for the annual filing and subsequent look-back for the prior year, and (4) modifying the performance measurement process.
In March 2009, Entergy Mississippi made with the MPSC its annual scheduled formula rate plan filing for the 2008 test year. The filing reported a $27.0 million revenue deficiency and, an earned return on common equity of 7.41%.theref ore, Entergy Mississippi requestedwill continue to use a $14.5 million increase inhistorical test year for its annual electric revenues, which is the maximum increase allowedevaluation reports under the terms of the formula rate plan. The MPSC issued an order on June 30, 2009, finding that Entergy Mississippi's earned return was sufficiently below the lower bandwidth limit set by the formula rate plan to require a $14.5 million increase in annual revenues, effective for bills rendered on or after June 30, 2009.
In March 2008,2010, Entergy Mississippi madesubmitted its 2009 test year filing, its first annual scheduledfiling under the new formula rate plan filing for the 2007 test year with the MPSC. The filing showed that a $10.1 million increase in annual electric revenues is warranted.rider. In June 2008, Entergy Mississippi reached a settlement with the Mississippi Public Utilities Staff that would result in a $3.8 million rate increase. In January 2009 the MPSC rejected the settlement and left the current rates in effect. Entergy Mississippi appealed the MPSC's decision to the Mississippi Supreme Court. After the decision of the MPSC regarding the formula rate plan filing for the 2008 test year, Entergy Mississippi filed a motion to dismiss its appeal to the Mississippi Supreme Court.
In March 2007, Entergy Mississippi made its annual scheduled formula rate plan filing for the 2006 test year with the MPSC. The filing showed that an increase of $12.9 million in annual electric revenues is warranted. In June 20072010 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities staffStaff that provides for no change in rates, but does provide for the deferral as a $10.5regulatory asset of $3.9 million rate increase, which was effective beginningof legal expenses associated with July 2007 billings.certain litigation involving the Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the City Council (Entergy New Orleans)
Formula Rate Plans and Storm-related Riders
On July 31, 2008, Entergy New Orleans filed an electric and gas base rate case with the City Council. On April 2, 2009, the City Council approved a comprehensive settlement. The settlement provided for a net $35.3 million reduction in combined fuel and non-fuel electric revenue requirement, including conversion of thea $10.6 million voluntary recovery credit, implemented in January 2008, to a permanent reduction and substantial realignment of Grand Gulf cost recovery from fuel to electric base rates, and a $4.95 million gas base rate increase, both effective June 1, 2009, with adjustment of the customer charges for all rate classes. A new three-year formula rate plan was also adopted, with terms including an 11.1% benchmark electric return on common equity (ROE) with a +/- 40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans is over- or under-earning. The formula rate plan also includes a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
The 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs. The programs are expected to begin in 2010.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings presented various alternatives to reflect the effect of Entergy New Orleans'Orleans’s lost customers and decreased revenue following Hurricane Katrina. The alternative that Entergy New Orleans recommended adjusts for lost customers and assumes that the City Council'sCouncil’s June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place during the rate-effective period (a significant portion of Grand Gulf costs was previously recovered through base rates).
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establish a storm reserve to provide for the risk of another storm.
In October 2006, the City Council approved a settlement agreement that resolved Entergy New Orleans'Orleans’s rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respect to storm restoration costs the anticipated receipt of CDBG funding as recommended by the Louisiana Recovery Authority. The settlement provided for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause was continued. Gas base rates increased by $4.75 million in November 2006 and increased by an additional $1.5 million in March 2007 and an additional $4.75 million in November 2007. The settlementsettleme nt called for Entergy New Orleans to file a base rate case by July 31, 2008, which it did as discussed above. The settlement agreement discontinued the formula rate plan and the generation performance-based plan but permitted Entergy New Orleans to file an application to seek authority to implement formula rate plan mechanisms no sooner than six months following the effective date of the implementation of the base rates resulting from the July 31, 2008 base rate case. The settlement also authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.
In January 2008, Entergy New Orleans voluntarily implemented a 6.15% base rate credit (the recovery credit) for electric customers, which returned approximately $11.3 million to electric customers in 2008. Entergy New Orleans was able to implement this credit because during 2007 the recovery of New Orleans after Hurricane Katrina was occurring faster than expected in 2006 projections. In addition, Entergy New Orleans committed to set aside $2.5 million for an energy efficiency program focused on community education and outreach and weatherization of homes.
Fuel Adjustment Clause Litigation
In April 1999, a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seek treble damages for alleged injuries arising from the defendants' alleged violations of Louisiana's antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans' fuel adjustment filings with the City Council. In particular, plaintiffs allege that Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel or energy from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorneys' fees. Entergy filed exceptions to the plaintiffs' allegations, asserting, among other things, that jurisdiction over these issues rests with the City Council and the FERC. In March 2004, the plaintiffs supplemented and amended their petition. If necessary, at the appropriate time, Entergy will also raise its defenses to the antitrust claims. The suit in state court was stayed by stipulation of the parties and order of the court pending review of the decision by the City Council in the proceeding discussed in the next paragraph.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Plaintiffs alsoFilings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
In December 2009, Entergy Texas filed a corresponding complaintrate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Beginning in May 2010, Entergy Texas implemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testi mony, of $58 million.
The parties filed a settlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. Baseline values were established to be used in Entergy Texas's request for a transmission cost recovery factor that will be made in a separate proceeding. The settlement states that Entergy Texas's fuel costs for the period April 2007 through June 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River B end decommissioning costs at $2.0 million annually. Consistent with the City Council in order to initiate a review by the City Council of the plaintiffs' allegations and to force restitution to ratepayers of all costs they allege were improperly and imprudently includedsettlement, in the fuel adjustment filings. Testimony was filed on behalfthird quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the plaintiffssettlement in this proceeding asserting, among other things, that Entergy New Orleans and other defendantsDecember 2010.
System Agreement Cost Equalization Proceedings
The Utility operating companies historically have engaged in fuel procurementthe coordinated planning, construction, and power purchasing practicesoperation of generating and included costs in Entergy New Orleans' fuel adjustmentbulk transmission facilities under the terms of the System Agreement, which is a rate schedule that could have resulted in Entergy New Orleans customers being overchargedhas been approved by more than $100 million over a periodthe FERC. Certain of years. Hearings were held in Februarythe Utility operating companies’ retail regulators and March 2002. In February 2004,other parties are pursuing litigation involving the City Council approved a resolution that resulted in a refund to customers of $11.3 million, including interest, duringSystem Agreement at the months of June through September 2004. In May 2005 the Civil District Court for the Parish of Orleans affirmed the City Council resolution, finding no support for the plaintiffs' claim that the refund amount should be higher. In June 2005, the plaintiffs appealed the Civil District Court decisionFERC. The proceedings include challenges to the Louisiana Fourth Circuit Courtallocation of Appeal. On February 25, 2008, the Fourth Circuit Court of Appeal issued a decision affirming in part, and reversing in part, the Civil District Court's decision. Although the Fourth Circuit Court of Appeal did not reverse any of the substantive findings and conclusions of the City Council or the Civil District Court, the Fourth Circuit found that the amount of the refund was arbitrary and capricious and increased the amount of the refund to $34.3 million. Entergy New Orleans and the City Council filed with the Louisiana Supreme Court seeking, among other things, review and reversal of the Fourth Circuit decision. In April 2009 the Louisiana Supreme Court reversed the decision of the Louisiana Fourth Circuit Court of Appeal and reinstated the decision of the Civil District Court. In May 2009 the Louisiana Supreme Court denied the plaintiffs' request for rehearing. In January 2010 the plaintiffs filed a motion to lift the stay and to supplement and amend their state court petition.
In the Entergy New Orleans bankruptcy proceeding, the named plaintiffs in the Entergy New Orleans fuel clause lawsuit, together with the named plaintiffs in the Entergy New Orleans rate of return lawsuit, filed a Complaint for Declaratory Judgment asking the court to declare that Entergy New Orleans, Entergy Corporation, and Entergy Services are a single business enterprise, and,costs as such, are liable in solido with Entergy New Orleans for any claims asserted in the Entergy New Orleans fuel adjustment clause lawsuit and the Entergy New Orleans rate of return lawsuit, and, alternatively, that the automatic stay be lifted to permit the movants to pursue the same relief in state court. The bankruptcy court dismissed the action on April 26, 2006. The matter was appealed to the U.S. District Court for the Eastern District of Louisiana, and the district court affirmed the dismissal in October 2006, but on different grounds, concluding that the lawsuit was premature. In Entergy New Orleans' plan of reorganization that was confirmeddefined by the bankruptcy court in May 2007, the plaintiffs' claims are treated as unimpaired "Litigation Claims," which will "ride through" the bankruptcy proceeding, with any legal, equitableSystem Agreement and contractual rights to which the plaintiffs' Litigation Claim entitles the plaintiffs unalteredallegations of imprudence by the planUtility operating companies in their execution of reorganization.
Electric Industry Restructuring (Entergy Texas)their obligations under the System Agreement.
In June 2009,2005, the FERC issued a law was enacteddecision in Texasthe System Agreement litigation that requires Entergy Texas to cease all activities relating to Entergy Texas' transition to competition. The law allows Entergy Texas to remain a part of the SERC Region, although it does not prevent Entergy Texas from joining the Southwest Power Pool. The law provides that proceedings to certify a power region that Entergy Texas belongs to as a qualified power region can be initiatedhad been commenced by the PUCT, orLPSC, and essentially affirmed its decision in a December 2005 order on motion by another party, when the conditions supporting such a proceeding exist. Under the new law, the PUCT may not approve a transition to competition plan for Entergy Texas until the expiration of four years from the PUCT's certification of Entergy Texas' power region. In response to the new law, Entergy Texas in June 2009 gave notice to the PUCT of the withdrawal of its previously filed transition to competition plan, and requested that its transition to competition proceeding be dismissed. In July 2009 the ALJ dismissed the proceeding.rehearing. The FERC decision concluded, among other things, that:
The new law also contains provisions that allow Entergy Texas to be included in a cost recovery mechanism that permits annual filings for the recovery of reasonable and necessary expenditures for transmission infrastructure improvement and changes in wholesale transmission charges. This mechanism was previously available to other non-ERCOT Texas utility companies, but not to Entergy Texas.· | The System Agreement no longer roughly equalizes total production costs among the Utility operating companies. |
· | In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs. |
· | In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies’ total production costs. |
· | The remedy ordered by FERC in 2005 required no refunds and became effective based on calendar year 2006 production costs and the first reallocation payments were made in 2007. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The new law further amends already existing law that had requiredFERC’s decision reallocates total production costs of the Utility operating companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. Under the current circumstances, this will be accomplished by payments from Utility operating companies whose production costs are more than 11% below Entergy System average production costs to Utility operating companies whose production costs are more than the Entergy System average production cost, with payments going first to those Utility operating companies whose total production costs are farthest above the Entergy System average.
Assessing the potential effects of the FERC’s decision requires assumptions regarding the future total production cost of each Utility operating company, which assumptions include the mix of solid fuel and gas-fired generation available to each company and the costs of natural gas and purchased power. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy Texas, and Entergy Mississippi are more dependent upon gas-fired generation sources than Entergy Arkansas or Entergy New Orleans. Of these, Entergy Arkansas is the least dependent upon gas-fired generation sources. Therefore, increases in natural gas prices likely will increase the amount by which Entergy Arkansas’s total production costs are below the Entergy System average production costs.
The LPSC, APSC, MPSC, and the AEEC appealed the FERC’s decision to proposethe United States Court of Appeals for PUCT approval a tariff to allow eligible customers the ability to contract for competitive generation. The amending languageD.C. Circuit. Entergy and the City of New Orleans intervened in the new law provides,various appeals. The D.C. Circuit issued its decision in April 2008. The D.C. Circuit affirmed the FERC’s decision in most respects, but remanded the case to the FERC for further proceedings and reconsideration of its conclusion that it was prohibited from ordering refunds and its determination to implement the bandwidth remedy commencing with calendar year 2006 production costs (with the first payments/receipts commencing in June 2007), rather than commencing the remedy on June 1, 2005. The D.C. Circuit concluded the FERC had failed so far in the proceeding to offer a reasoned explanation regarding these issues. As discussed below, in December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treatment of interruptible load in the allocation of capacity costs by the Utility operating companies. The FERC also deferred further action on the question of whether it provided sufficient rationale for not ordering refunds, and whether it impermissibly delayed implementation of the bandwidth remedy, until resolution of this paper hearing.
In April 2006, the Utility operating companies filed with the FERC their compliance filing to implement the provisions of the FERC’s decision. The filing amended the System Agreement to provide for the calculation of production costs, average production costs, and payments/receipts among the Utility operating companies to the extent required to maintain rough production cost equalization pursuant to the FERC’s decision. The FERC accepted the compliance filing in November 2006, with limited modifications. Provisions of the compliance filing as approved by the FERC include: the first payments commenced in June 2007, rather than earlier; interest is not required on the unpaid balance; and any payments will be made over seven months, rather than 1 2. In April 2007, the FERC denied various requests for rehearing, with one exception regarding the issue of retrospective refunds. That issue will be addressed subsequent to the remanded proceeding involving the interruptible load decision discussed further below in this section under “Interruptible Load Proceeding.”
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Calendar Year 2010 Production Costs
The liabilities and assets for the preliminary estimate of the payments and receipts required to implement the FERC’s remedy based on calendar year 2010 production costs were recorded in December 2010, based on certain year-to-date information. The preliminary estimate was recorded based on the following estimate of the payments/receipts among the Utility operating companies for 2011.
| Payments or (Receipts) |
| (In Millions) |
| |
Entergy Arkansas | $52 |
Entergy Gulf States Louisiana | $- |
Entergy Louisiana | $- |
Entergy Mississippi | ($37) |
Entergy New Orleans | ($15) |
Entergy Texas | $- |
The actual payments/receipts for 2011, based on calendar year 2010 production costs, will not be calculated until the Utility operating companies’ FERC Form 1s have been filed. Once the calculation is completed, it will be filed at the FERC. The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the Entergy System generating fleet, and multiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.
Rough Production Cost Equalization Rates
Each May since 2007 Entergy has filed with the FERC the rates to implement the FERC’s orders in the System Agreement proceeding. These filings show the following payments/receipts among the Utility operating companies are necessary to achieve rough production cost equalization as defined by the FERC’s orders:
| | 2007 Payments or (Receipts) Based on 2006 Costs | | 2008 Payments or (Receipts) Based on 2007 Costs | | 2009 Payments or (Receipts) Based on 2008 Costs | | 2010 Payments or (Receipts) Based on 2009 Costs |
| | (In Millions) |
| | | | | | | | |
Entergy Arkansas | | $252 | | $252 | | $390 | | $41 |
Entergy Gulf States Louisiana | | ($120) | | ($124) | | ($107) | | $- |
Entergy Louisiana | | ($91) | | ($36) | | ($140) | | ($22) |
Entergy Mississippi | | ($41) | | ($20) | | ($24) | | ($19) |
Entergy New Orleans | | $- | | ($7) | | $- | | $- |
Entergy Texas | | ($30) | | ($65) | | ($119) | | $- |
The APSC has approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas. Management believes that any changes in the allocation of production costs resulting from the FERC’s decision and related retail proceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs. See “Fuel and purchased power cost recovery, Entergy Texas,” above for discussion of a PUCT decision that resulted in $18.6 million of trapped costs between Entergy’s Texas and Louisiana jurisdictions. See “2007 Rate Filing Based on Calendar Year 2006 Production Costs” below for a discussion of a FERC decision that could result in $14.5 million of trapped costs at Entergy Arkansas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Based on the FERC’s April 27, 2007 order on rehearing that is discussed above, in the second quarter 2007 Entergy Arkansas recorded accounts payable and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC’s remedy based on calendar year 2006 production costs. Entergy Arkansas recorded a corresponding regulatory asset for its right to collect the payments from its customers, and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded corresponding regulatory liabilities for their obligations to pass the receipts on to their customers. The companies have followed this same accounting practice eac h year since then. The regulatory asset and liabilities are shown as “System Agreement cost equalization” on the respective balance sheets.
2007 Rate Filing Based on Calendar Year 2006 Production Costs
Several parties intervened in the 2007 rate proceeding at the FERC, including the APSC, the MPSC, the Council, and the LPSC, which have also filed protests. The PUCT also intervened. Intervenor testimony was filed in which the intervenors and also the FERC Staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for nuclear facilities. The effect of the various positions would be to reallocate costs among the Utility operating companies. The Utility operating companies filed rebuttal testimony explaining why the bandwidth payments are properly recoverab le under the AmerenUE contract, and explaining why the positions of FERC Staff and intervenors on the other issues should be rejected. A hearing in this proceeding concluded in July 2008, and the ALJ issued an initial decision in September 2008. The ALJ’s initial decision concludes, among other things, that: 1)(1) the tariff shalldecisions to not be implementedexercise Entergy Arkansas’s option to purchase the Independence plant in 1996 and 1997 were prudent; (2) Entergy Arkansas properly flowed a manner that harmsportion of the sustainability or competitivenessbandwidth payments through to AmerenUE in accordance with the wholesale power contract; and (3) the level of manufacturers who choose not to participatenuclear depreciation and decommissioning expense reflected in the tariff; 2) Entergy Texas shall "purchase competitive generation service, selectedbandwidth calculation should be calculated based on NRC-authorized license life, rather than the nuclear depreciation and decommissioning expense authorized by the customer, and provideretail regulators for purposes of retail ratemaking. Following briefing by the generation at retailparties, the matter was submitted to the customer";FERC for decision. On January 11, 2010, the FERC issued its decision both affirming and 3)overturning certain of the ALJ’s rulings, including overturning the decision on nuclear depreciation and decommissioning expense. The FERC’s conclusion related to the AmerenUE contract does not permit Entergy Texas shall provideArkansas to recover a portion of its bandwidth payment from AmerenUE. The Utility operating companies requested rehearing of that portion of the decision and price transmission service and ancillary services under that tariff at a rate that is unbundled from its costrequested clarification on certain other portions of service. The new law directs that the PUCT may not issue an order on the tariff that is contrary to an applicable decision, rule, or policy statement of a federal regulatory agency having jurisdiction. The new law provides that the PUCT shall approve, reject, or modify the proposed tariff not later than September 1, 2010.decision.
AmerenUE argued that its current wholesale power contract with Entergy Arkansas, pursuant to which Entergy Arkansas sells power to AmerenUE, does not permit Entergy Arkansas to flow through to AmerenUE any portion of Entergy Arkansas’s bandwidth payment. According to AmerenUE, Entergy Arkansas has sought to collect from AmerenUE approximately $14.5 million of the 2007 Entergy Arkansas bandwidth payment. The AmerenUE contract expired in August 2009. In April 2008, AmerenUE filed a complaint with the FERC seeking refunds of this amount, plus interest, in the event the FERC ultimately determines that bandwidth payments are not properly recovered under the AmerenUE contract. In response to the FERC’s decision discussed in the previous paragraph, Entergy Arkansas recorded a regulatory provision in the fourth quarter 2009 for a potential refund to AmerenUE.
2008 Rate Filing Based on Calendar Year 2007 Production Costs
Several parties intervened in the 2008 rate proceeding at the FERC, including the APSC, the LPSC, and AmerenUE, which have also filed protests. Several other parties, including the MPSC and the City Council, have intervened in the proceeding without filing a protest. In direct testimony filed on January 9, 2009, certain intervenors and also the FERC staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for the nuclear and fossil-fueled generating facilities. The effect of these various positions would be to reallocate costs among the Utility operating companies . In addition, three issues were raised alleging imprudence by the Utility operating companies, including whether the Utility operating companies had properly reflected generating units’ minimum operating levels for purposes of making unit commitment and dispatch decisions, whether Entergy Arkansas’s sales to third parties from its retained share of the Grand Gulf nuclear facility were reasonable, prudent, and non-discriminatory, and whether Entergy Louisiana’s long-term Evangeline gas purchase contract was prudent and reasonable.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The parties reached a partial settlement agreement of certain of the issues initially raised in this proceeding. The partial settlement agreement was conditioned on the FERC accepting the agreement without modification or condition, which the FERC did on August 24, 2009. A hearing on the remaining issues in the proceeding was completed in June 2009, and in September 2009 the ALJ issued an initial decision. The initial decision affirms Entergy’s position in the filing, except for two issues that may result in a reallocation of costs among the Utility operating companies. Entergy, the APSC, the LPSC, and the MPSC have submitted briefs on exceptions in the proceeding, and the matter has been submitted to the FERC for decision.
2009 Rate Filing Based on Calendar Year 2008 Production Costs
Several parties intervened in the 2009 rate proceeding at the FERC, including the LPSC and Ameren, which have also filed protests. In July 2009 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2009, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures were terminated and a hearing before the ALJ was held in April 2010. In August 2010 the ALJ issued an initial decision. The initial decision substantially affirms Entergy's position in the filing, except for one issue that may result in some reallocation of costs among the Utility operating companies. The LPSC, the FERC trial staff, and Entergy have submitted briefs on exceptions in the proceed ing.
2010 Rate Filing Based on Calendar Year 2009 Production Costs
In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC's orders in the System Agreement proceeding, and supplemented the filing in September 2010. Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which have also filed protests. In July 2010 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2010, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures have been terminated, and the ALJ scheduled hearings to begin in March 2011, with an initial decision scheduled for July 2011. Subsequently, in January 2011 the ALJ issued an order directing the parties and FERC staff to s how cause why this proceeding should not be stayed pending the issuance of FERC decisions in the prior production cost proceedings currently before the FERC on review. Briefing on the issue concluded on February 14, 2011. A hearing on the show cause order is scheduled for March 3, 2011.
Interruptible Load Proceeding
(In April 2007 the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC’s appeal of the FERC’s March 2004 and April 2005 orders related to the treatment under the System Agreement of the Utility operating companies’ interruptible loads. In its opinion, the D.C. Circuit concluded that the FERC (1) acted arbitrarily and capriciously by allowing the Utility operating companies to phase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time. The D.C. Circuit remanded the ma tter to the FERC for a more considered determination on the issue of refunds. The FERC issued its order on remand in September 2007, in which it directed Entergy Louisiana)to make a compliance filing removing all interruptible load from the computation of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change. In addition, the order directed the Utility operating companies to make refunds for the period May 1995 through July 1996. In November 2007 the Utility operating companies filed a refund report describing the refunds to be issued pursuant to the FERC's orders. The LPSC filed a protest to the refund report in December 2007, and the Utility operating companies filed an answer to the protest in January 2008. The refunds were made in October 2008 by the Utility operating companies that owed refunds to the Utility operating companies that were due a refund under the decision. The APSC and the Utility operating companies appealed the FERC decisions to the D.C. Circuit. Because of its refund obligation to its customers as a result of this proceeding and a related LPSC proceeding, Entergy Louisiana recorded provisions during 2008 of approximately $16 million, including interest, for rate refunds. The refunds were made in the fourth quarter 2009.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Following the filing of petitioners' initial briefs, the FERC filed a motion requesting the D.C. Circuit hold the appeal of the FERC's decisions ordering refunds in the interruptible load proceeding in abeyance and remand the record to the FERC. The D.C. Circuit granted the FERC's unopposed motion on June 24, 2009, and directed the FERC to file status reports at 60-day intervals beginning August 24, 2009. The D.C. Circuit also directed the parties to file motions to govern future proceedings in the case within 30 days of the completion of the FERC proceedings. In December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treat ment of interruptible load in the allocation of capacity costs by the Utility operating companies. In August 2010 the FERC issued an order stating that it has the authority and refunds are appropriate. The APSC, MPSC, and Entergy have requested rehearing of the FERC's decision. In September 2010, the FERC set for hearing and settlement judge procedures the Utility operating companies' calculation of the refunds for the 15-month refund period of May 14, 1995 through August 13, 1996, as contained in the November 2007 refund report. The purpose of the hearing is to determine whether the refund amounts for such period were calculated in a just and reasonable manner. The settlement proceedings are ongoing.
Entergy Arkansas filed a request with the APSC for recovery of the refund paid to its customers and the APSC staff has filed a motion to dismiss the request. A procedural schedule has not been set in the proceeding.
Entergy Arkansas Opportunity Sales Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds. On July 20, 2009, the Utility operating companies filed a response to the co mplaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System. In their response, the Utility operating companies explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company. The response further explains that the FERC already has determined that Entergy Arkansas’s short-term wholesale sales did not trigger the “right-of-first-refusal” provision of the System Agreement. While the D.C. Circuit recently determined that the “right-of-first-refusal” issue was not properly before the FERC at the time of its earlier decision on the issue, the LPS C has raised no additional claims or facts that would warrant the FERC reaching a different conclusion. On December 7, 2009, the FERC issued an order setting the matter for hearing and settlement procedures.
The LPSC filed direct testimony in the proceeding alleging, among other things, (1) that Entergy violated the System Agreement by permitting Entergy Arkansas to make non-requirements sales to non-affiliated third parties rather than making such energy available to the other Utility operating companies’ customers; and (2) that over the period 2000 - 2009, these non-requirements sales caused harm to the Utility operating companies’ customers of $144 million and these customers should be compensated for this harm by Entergy. In subsequent testimony, the LPSC modified its original damages claim in favor of quantifying damages by re-running intra-system bills, which has not occurred. The Utility operating companies believe the LPSC's allegations are without m erit. A hearing in the matter was held in August 2010.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In December 2010 the ALJ issued an initial decision. The ALJ found that the System Agreement allowed for Entergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as joint account sales. The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, along with interest. Entergy Corporation, or an Entergy Corporation subsidiary, is the shareholder of each of the Utility operating companies. Entergy disagrees with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision. ;FERC consideration of the initial decision is pending. Entergy is unable to estimate the potential damages in this matter because certain aspects of how the refunds would be calculated require clarification by the FERC.
LPSC Interruptible Load Proceeding (Entergy Louisiana)
As discussed above, the FERC issued orders in September 2005 and 2007 in which it directed Entergy to remove all interruptible load from certain computations of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change. In addition, in September 2008 the FERC directed the Utility operating companies to make refunds for the period May 1995 through July 1996. In October 2009 the LPSC issued an order approving the flow through to retail rates of the LPSC-jurisdictional portion of the payments and credits resulting from the FERC'sFERC’s orders that had not yet been flowed through to retail rates, which required a net refund to Entergy Louisiana retail customers of $17.6 million, including interest. The refunds were made in the fourth quarter 2009. Of this amount, $5.4 million was refunded subject to adjustment in the event that future action by the FERC or the D.C. Circuit Court of Appeals results in a reversal or change in the amount of the refunds ordered by the FERC in September 2008.
Co-Owner-Initiated Proceeding at the FERC (Entergy Arkansas)
In October 2004, Arkansas Electric Cooperative Corporation (AECC) filed a complaint at the FERC against Entergy Arkansas relating to a contract dispute over the pricing of substitute energy at the co-owned Independence and White Bluff coal plants. The main issue in the case related to the consequences under the governing contracts when the dispatch of the coal units is constrained due to system operating conditions. A hearing was held on the AECC complaint and an ALJ Initial Decision was issued in January 2006 in which the ALJ found AECC's claims to be without merit. On October 25, 2006, the FERC issued its order in the proceeding. In the order, the FERC reversed the ALJ's findings. Specifically, the FERC found that the governing contracts do not recognize the effects of dispatch constraints on the co-owned units. The FERC explained that for over twenty-three years the course of conduct of the parties was such that AECC received its full entitlement to the two coal units, regardless of any reduced output caused by system operating constraints. Based on the order, Entergy Arkansas is required to refund to AECC all excess amounts billed to AECC as a result of the system operating constraints. The FERC denied Entergy Arkansas' request for rehearing and Entergy Arkansas refunded $22.1 million (including interest) to AECC in September 2007. Entergy Arkansas had previously recorded a provision for the estimated effect of this refund. In January 2010 the FERC issued an order conditionally accepting the refund report and ordering further refunds, noting that the refund period should have included the period July 1, 2004 through December 23, 2004. Entergy Arkansas had previously recorded a provision for the estimated effect of this refund.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 3. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Income tax expenses from continuing operations for 2010, 2009, 2008, and 20072008 for Entergy Corporation and subsidiariesSubsidiaries consist of the following:
| | | 2010 | | 2009 | | 2008 |
| | 2009 | | | 2008 | | | 2007 | | | (In Thousands) |
Current: | | | | | | | | | | | | | | | |
Federal | | $ | (433,105 | ) | | $ | 451,517 | | | $ | (1,379,288 | ) | | $145,161 | | ($433,105) | | $451,517 |
Foreign | | | 154 | | | | 256 | | | | 316 | | | 131 | | 154 | | 256 |
State | | | (108,552 | ) | | | 146,171 | | | | 27,174 | | | 19,313 | | (108,552) | | 146,171 |
Total | | | (541,503 | ) | | | 597,944 | | | | (1,351,798 | ) | | 164,605 | | (541,503) | | 597,944 |
Deferred and non-current -- net | | | 1,191,418 | | | | 23,022 | | | | 1,884,383 | | Deferred and non-current -- net | 468,698 | | 1,191,418 | | 23,022 |
Investment tax credit | | | | | | | | | | | | | | | | | | |
adjustments -- net | | | (17,175 | ) | | | (17,968 | ) | | | (18,168 | ) | | (16,064) | | (17,175) | | (17,968) |
Income tax expense from | | | | | | | | | | | | | | | | | | |
continuing operations | | $ | 632,740 | | | $ | 602,998 | | | $ | 514,417 | | | $617,239 | | $632,740 | | $602,998 |
| | | | | | | | | | | | | | | | | | |
Income tax expenses for 2010, 2009, and 2008 and 2007 for Entergy'sEntergy’s Registrant Subsidiaries consist of the following:
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
| | | | | Entergy | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2010 | | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) | | (In Thousands) |
Current: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal | | ($37,544) | | ($203,651) | | $12,387 | | $19,347 | | $160,846 | | ($72,207) | | $73,183 | | $114,821 | | $196,230 | | $73,174 | | $12,812 | | ($114,441) | | ($10,607) | | ($4,102) |
State | | 22,710 | | (12,416) | | (49,843) | | (2,321) | | 1,171 | | 2,478 | | (12,667) | | (9,200) | | 481 | | (4,324) | | 5,822 | | 1,412 | | 1,060 | | 3,328 |
Total | | (14,834) | | (216,067) | | (37,456) | | 17,026 | | 162,017 | | (69,729) | | 60,516 | | 105,621 | | 196,711 | | 68,850 | | 18,634 | | (113,029) | | (9,547) | | (774) |
Deferred and non-current -- net | | 100,584 | | 308,659 | | 85,728 | | 26,400 | | (145,981) | | 108,253 | | 39,866 | | 10,328 | | (117,426) | | 918 | | 31,415 | | 129,880 | | 53,539 | | 60,305 |
Investment tax credit | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
adjustments - net | | (3,994) | | (3,407) | | (3,222) | | (1,103) | | (323) | | (1,609) | | (3,481) | |
Recorded income tax expense | | | | | | | | | | | | | | | |
adjustments -- net | | | (3,005) | | (3,407) | | (3,222) | | (985) | | (324) | | (1,609) | | (3,482) |
Income taxes | | | $112,944 | | $75,878 | | $66,546 | | $49,064 | | $16,527 | | $42,383 | | $56,049 |
| | | | | | | | | | | | | | | |
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
| | | | | Entergy | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) | | (In Thousands) |
Current: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Federal | | ($200,032) | | $96,585 | | $335,164 | | $43,214 | | $22,419 | | $73,974 | | 25,356 | | ($37,544) | | ($203,651) | | $12,387 | | $19,347 | | $160,846 | | ($72,207) | | $73,183 |
State | | 12,533 | | 39,423 | | 59,304 | | 5,099 | | (3,493) | | 3,954 | | 8,518 | | 22,710 | | (12,416) | | (49,843) | | (2,321) | | 1,171 | | 2,478 | | (12,667) |
Total | | (187,499) | | 136,008 | | 394,468 | | 48,313 | | 18,926 | | 77,928 | | 33,874 | | (14,834) | | (216,067) | | (37,456) | | 17,026 | | 162,017 | | (69,729) | | 60,516 |
Deferred and non-current -- net | | 288,118 | | (74,681) | | (320,596) | | (13,918) | | 4,471 | | (48,200) | | 29,100 | | 100,584 | | 308,659 | | 85,728 | | 26,400 | | (145,981) | | 108,253 | | 39,866 |
Investment tax credit | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
adjustments - net | | (3,996) | | (4,130) | | (3,224) | | (1,155) | | (345) | | (1,610) | | (3,480) | |
Recorded income tax expense | | $96,623 | | $57,197 | | $70,648 | | $33,240 | | $23,052 | | $28,118 | | $59,494 | |
adjustments -- net | | | (3,994) | | (3,407) | | (3,222) | | (1,103) | | (323) | | (1,609) | | (3,481) |
Income taxes | | | $81,756 | | $89,185 | | $45,050 | | $42,323 | | $15,713 | | $36,915 | | $96,901 |
| | | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2007 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | ($464,280) | | ($306,133) | | $153,083 | | ($49,810) | | ($20,779) | | ($280,094) | | ($273,310) |
State | | 13,173 | | 14,454 | | 35,884 | | 8,576 | | 1,663 | | 6,061 | | 2,463 |
Total | | (451,107) | | (291,679) | | 188,967 | | (41,234) | | (19,116) | | (274,033) | | (270,847) |
Deferred and non-current -- net | | 540,750 | | 421,149 | | (102,246) | | 78,397 | | 32,978 | | 311,863 | | 319,773 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments - net | | (4,005) | | (5,769) | | (3,227) | | (1,313) | | (356) | | (1,581) | | (3,479) |
Recorded income tax expense | | $85,638 | | $123,701 | | $83,494 | | $35,850 | | $13,506 | | $36,249 | | $45,447 |
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | ($200,032) | | $96,585 | | $335,164 | | $43,214 | | $22,419 | | $73,974 | | $25,356 |
State | | 12,533 | | 39,423 | | 59,304 | | 5,099 | | (3,493) | | 3,954 | | 8,518 |
Total | | (187,499) | | 136,008 | | 394,468 | | 48,313 | | 18,926 | | 77,928 | | 33,874 |
Deferred and non-current -- net | | 288,118 | | (74,681) | | (320,596) | | (13,918) | | 4,471 | | (48,200) | | 29,100 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments - net | | (3,996) | | (4,130) | | (3,224) | | (1,155) | | (345) | | (1,610) | | (3,480) |
Income taxes | | $96,623 | | $57,197 | | $70,648 | | $33,240 | | $23,052 | | $28,118 | | $59,494 |
| | | | | | | | | | | | | | |
Total income taxes for Entergy Corporation and subsidiariesSubsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2010, 2009, and 2008 and 2007 are:
| | 2009 | | | 2008 | | | 2007 | | | 2010 | | 2009 | | 2008 |
| | (In Thousands) | | | | | | (In Thousands) |
| | | | | | | | | | | | | | | |
Net income attributable to Entergy Corporation | | $ | 1,231,092 | | | $ | 1,220,566 | | | $ | 1,134,849 | | | $1,250,242 | | $1,231,092 | | $1,220,566 |
Preferred dividend requirements of subsidiaries | | | 19,958 | | | | 19,969 | | | | 25,105 | | | 20,063 | | 19,958 | | 19,969 |
Consolidated net income | | | 1,251,050 | | | | 1,240,535 | | | | 1,159,954 | | | 1,270,305 | | 1,251,050 | | 1,240,535 |
Income taxes | | | 632,740 | | | | 602,998 | | | | 514,417 | | | 617,239 | | 632,740 | | 602,998 |
Income before income taxes | | $ | 1,883,790 | | | $ | 1,843,533 | | | $ | 1,674,371 | | | $1,887,544 | | $1,883,790 | | $1,843,533 |
| | | | | | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $ | 659,327 | | | $ | 645,237 | | | $ | 586,030 | | | $660,640 | | $659,327 | | $645,237 |
Increases (reductions) in tax resulting from: | | | | | | | | | | | | | | | | | | |
State income taxes net of federal income tax effect | | | 65,241 | | | | 9,926 | | | | 31,066 | | | 40,530 | | 65,241 | | 9,926 |
Regulatory differences - utility plant items | | | 57,383 | | | | 45,543 | | | | 50,070 | | | 14,931 | | 57,383 | | 45,543 |
Amortization of investment tax credits | | | (16,745 | ) | | | (17,458 | ) | | | (17,612 | ) | | (15,980) | | (16,745) | | (17,458) |
Writeoff of reorganization costs | | | (19,974) | | - | | - |
Tax law change-Medicare Part D | | | 13,616 | | - | | - |
Decommissioning trust fund basis | | | (7,917 | ) | | | (417 | ) | | | (35,684 | ) | | - | | (7,917) | | (417) |
Capital gains (losses) | | | (28,051 | ) | | | (74,278 | ) | | | 7,126 | | |
Flow-through/permanent differences | | | (49,486 | ) | | | 14,656 | | | | (49,609 | ) | |
Tax reserves | | | (17,435 | ) | | | (27,970 | ) | | | (25,821 | ) | |
Capital gains / (losses) | | | - | | (28,051) | | (74,278) |
Flow-through / permanent differences | | | (26,370) | | (49,486) | | 14,656 |
Provision for uncertain tax positions | | | (43,115) | | (17,435) | | (27,970) |
Valuation allowance | | | (40,795 | ) | | | 11,770 | | | | (8,676 | ) | | - | | (40,795) | | 11,770 |
Other - net | | | 11,218 | | | | (4,011 | ) | | | (22,473 | ) | | (7,039) | | 11,218 | | (4,011) |
Total income taxes as reported | | $ | 632,740 | | | $ | 602,998 | | | $ | 514,417 | | | $617,239 | | $632,740 | | $602,998 |
| | | | | | | | | | | | | | | | | | |
Effective Income Tax Rate | | | 33.6 | % | | | 32.7 | % | | | 30.7 | % | | 32.7% | | 33.6% | | 32.7% |
| | | | | | | | | | | | | |
In December 2009 an Entergy subsidiary sold Class B preferred shares to a third party for $2.1 million. The sale resulted in a capital loss for tax purposes of $73.1 million, providing a federal and state net tax benefit of approximately $28 million that Entergy recorded in the fourth quarter 2009. This amount is included in capital losses in the table above.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2010, 2009, 2008, and 20072008 are:
| | | | | Entergy | | | | | | | | | | | | | | | | | | | | Entergy | | | | | | | | | | |
| | Entergy | | | Gulf States | | | Entergy | | | Entergy | | | Entergy | | | Entergy | | | System | | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | | Louisiana | | | Louisiana | | | Mississippi | | | New Orleans | | | Texas | | | Energy | | |
2010 | | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 66,875 | | | $ | 153,047 | | | $ | 232,845 | | | $ | 77,636 | | | $ | 31,025 | | | $ | 63,841 | | | $ | 48,908 | | | $172,618 | | $190,738 | | $231,435 | | $83,687 | | $31,005 | | $66,200 | | $82,624 |
Income taxes | | | 81,756 | | | | 89,185 | | | | 45,050 | | | | 42,323 | | | | 15,713 | | | | 36,915 | | | | 96,901 | | | 112,944 | | 75,878 | | 66,546 | | 49,064 | | 16,527 | | 42,383 | | 56,049 |
Pretax income | | $ | 148,631 | | | $ | 242,232 | | | $ | 277,895 | | | $ | 119,959 | | | $ | 46,738 | | | $ | 100,756 | | | $ | 145,809 | | | $285,562 | | $266,616 | | $297,981 | | $132,751 | | $47,532 | | $108,583 | | $138,673 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $ | 52,021 | | | $ | 84,781 | | | $ | 97,263 | | | $ | 41,986 | | | $ | 16,358 | | | $ | 35,264 | | | $ | 51,033 | | | $99,947 | | $93,316 | | $104,293 | | $46,463 | | $16,636 | | $38,004 | | $48,536 |
Increases (reductions) in tax | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
federal income tax effect | | | 9,617 | | | | 6,487 | | | | 5,095 | | | | 2,417 | | | | 1,387 | | | | 1,509 | | | | 4,033 | | | 13,156 | | 1,142 | | (10,618) | | 1,156 | | 1,377 | | 424 | | 2,206 |
Regulatory differences - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
utility plant items | | | 19,275 | | | | 10,303 | | | | 14,463 | | | | 1,365 | | | | (55 | ) | | | 2,008 | | | | 10,024 | | | 5,982 | | (5,551) | | (987) | | 1,812 | | 3,815 | | 2,564 | | 7,297 |
Amortization of investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
tax credits | | | (3,972 | ) | | | (3,088 | ) | | | (3,192 | ) | | | (1,092 | ) | | | (324 | ) | | | (1,596 | ) | | | (3,480 | ) | | (2,983) | | (3,309) | | (3,192) | | (972) | | (313) | | (1,596) | | (3,480) |
Flow-through/permanent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow-through / permanent | | | | | | | | | | | | | | | |
differences | | | 2,331 | | | | (7,317 | ) | | | (26,614 | ) | | | (319 | ) | | | (2,300 | ) | | | (1,538 | ) | | | (4,462 | ) | | (1,235) | | (7,996) | | (754) | | 153 | | (4,883) | | 236 | | (497) |
Benefit of Entergy Corporation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
expenses | | | 978 | | | | (170 | ) | | | (24,231 | ) | | | (2,841 | ) | | | 31 | | | | - | | | | 35,027 | | |
Taxes reserves | | | - | | | | (5,400 | ) | | | (17,700 | ) | | | 800 | | | | (400 | ) | | | 600 | | | | 4,900 | | |
Non-taxable | | | | | | | | | | | | | | | |
dividend income | | | - | | (9,189) | | (23,603) | | - | | - | | - | | - |
Provision for uncertain | | | | | | | | | | | | | | | |
tax positions | | | (2,100) | | 7,200 | | 2,200 | | 700 | | (300) | | 2,800 | | 2,090 |
Other -- net | | | 1,506 | | | | 3,589 | | | | (34 | ) | | | 7 | | | | 1,016 | | | | 668 | | | | (174 | ) | | 177 | | 265 | | (793) | | (248) | | 195 | | (49) | | (103) |
Total income taxes | | $ | 81,756 | | | $ | 89,185 | | | $ | 45,050 | | | $ | 42,323 | | | $ | 15,713 | | | $ | 36,915 | | | $ | 96,901 | | | $112,944 | | $75,878 | | $66,546 | | $49,064 | | $16,527 | | $42,383 | | $56,049 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Effective Income Tax Rate | | | 55.0 | % | | | 36.8 | % | | | 16.2 | % | | | 35.3 | % | | | 33.6 | % | | | 36.6 | % | | | 66.5 | % | | 39.6% | | 28.5% | | 22.3% | | 37.0% | | 34.8% | | 39.0% | | 40.4% |
The flow-through/permanent difference for Entergy Louisiana relates to the exclusion of dividend income from its preferred membership interest in Entergy Holdings Company, LLC as well as the flow-through of the equity component of AFUDC.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | | |
| | | | | Entergy | | | | | | | | | | |
| | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 47,152 | | | $ | 144,767 | | | $ | 157,543 | | | $ | 59,710 | | | $ | 34,947 | | | $ | 57,895 | | | $ | 91,067 | | | $66,875 | | $153,047 | | $232,845 | | $77,636 | | $31,025 | | $63,841 | | $48,908 |
Income taxes | | | 96,623 | | | | 57,197 | | | | 70,648 | | | | 33,240 | | | | 23,052 | | | | 28,118 | | | | 59,494 | | | 81,756 | | 89,185 | | 45,050 | | 42,323 | | 15,713 | | 36,915 | | 96,901 |
Pretax income | | $ | 143,775 | | | $ | 201,964 | | | $ | 228,191 | | | $ | 92,950 | | | $ | 57,999 | | | $ | 86,013 | | | $ | 150,561 | | | $148,631 | | $242,232 | | $277,895 | | $119,959 | | $46,738 | | $100,756 | | $145,809 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $ | 50,321 | | | $ | 70,687 | | | $ | 79,867 | | | $ | 32,533 | | | $ | 20,299 | | | $ | 30,105 | | | $ | 52,696 | | | $52,021 | | $84,781 | | $97,263 | | $41,986 | | $16,358 | | $35,264 | | $51,033 |
Increases (reductions) in tax | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
federal income tax effect | | | 10,754 | | | | (891 | ) | | | (18,486 | ) | | | 4,126 | | | | 2,057 | | | | 3,138 | | | | 5,604 | | | 9,617 | | 6,487 | | 5,095 | | 2,417 | | 1,387 | | 1,509 | | 4,033 |
Regulatory differences - | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
utility plant items | | | 17,542 | | | | 3,308 | | | | 9,960 | | | | 3,305 | | | | 1,202 | | | | 1,076 | | | | 9,150 | | | 19,275 | | 10,303 | | 14,463 | | 1,365 | | (55) | | 2,008 | | 10,024 |
Amortization of investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
tax credits | | | (3,972 | ) | | | (3,730 | ) | | | (3,192 | ) | | | (1,140 | ) | | | (348 | ) | | | (1,596 | ) | | | (3,480 | ) | | (3,972) | | (3,088) | | (3,192) | | (1,092) | | (324) | | (1,596) | | (3,480) |
Flow-through/permanent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Flow-through / permanent | | | | | | | | | | | | | | | |
differences | | | 17,868 | | | | (12,130 | ) | | | 1,553 | | | | (4,068 | ) | | | (694 | ) | | | (4,133 | ) | | | (1,956 | ) | �� | 2,331 | | (690) | | (7,539) | | (319) | | (2,300) | | (1,538) | | (4,462) |
Benefit of Entergy Corporation expenses | | | - | | | | - | | | | - | | | | (1,556 | ) | | | - | | | | | | | | (3,420 | ) | |
Tax reserves | | | 2,800 | | | | 1,000 | | | | 1,150 | | | | 700 | | | | 200 | | | | (1,200 | ) | | | 900 | | |
Other – net | | | 1,310 | | | | (1,047 | ) | | | (204 | ) | | | (660 | ) | | | 336 | | | | 728 | | | | - | | |
Non-taxable | | | | | | | | | | | | | | | |
dividend income | | | - | | (6,627) | | (19,075) | | - | | - | | - | | - |
Benefit of Entergy Corporation | | | | | | | | | | | | | | | |
expenses | | | 978 | | (170) | | (24,231) | | (2,841) | | 31 | | - | | 35,027 |
Provision for uncertain | | | | | | | | | | | | | | | |
tax positions | | | - | | (5,400) | | (17,700) | | 800 | | (400) | | 600 | | 4,900 |
Other -- net | | | 1,506 | | 3,589 | | (34) | | 7 | | 1,016 | | 668 | | (174) |
Total income taxes | | $ | 96,623 | | | $ | 57,197 | | | $ | 70,648 | | | $ | 33,240 | | | $ | 23,052 | | | $ | 28,118 | | | $ | 59,494 | | | $81,756 | | $89,185 | | $45,050 | | $42,323 | | $15,713 | | $36,915 | | $96,901 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Effective Income Tax Rate | | | 67.2 | % | | | 28.3 | % | | | 31.0 | % | | | 35.8 | % | | | 39.7 | % | | | 32.7 | % | | | 39.5 | % | | 55.0% | | 36.8% | | 16.2% | | 35.3% | | 33.6% | | 36.6% | | 66.5% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Net income | | $47,152 | | $144,767 | | $157,543 | | $59,710 | | $34,947 | | $57,895 | | $91,067 |
Income taxes | | 96,623 | | 57,197 | | 70,648 | | 33,240 | | 23,052 | | 28,118 | | 59,494 |
Pretax income | | $143,775 | | $201,964 | | $228,191 | | $92,950 | | $57,999 | | $86,013 | | $150,561 |
| | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $50,321 | | $70,687 | | $79,867 | | $32,533 | | $20,299 | | $30,105 | | $52,696 |
Increases (reductions) in tax | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | |
federal income tax effect | | 10,754 | | (891) | | (18,486) | | 4,126 | | 2,057 | | 3,138 | | 5,604 |
Regulatory differences - | | | | | | | | | | | | | | |
utility plant items | | 17,542 | | 3,308 | | 9,960 | | 3,305 | | 1,202 | | 1,076 | | 9,150 |
Amortization of investment | | | | | | | | | | | | | | |
tax credits | | (3,972) | | (3,730) | | (3,192) | | (1,140) | | (348) | | (1,596) | | (3,480) |
Flow-through / permanent | | | | | | | | | | | | | | |
differences | | 17,868 | | (12,130) | | 11,885 | | (477) | | (694) | | (4,133) | | (1,956) |
Non-taxable | | | | | | | | | | | | | | |
dividend income | | - | | - | | (10,332) | | (3,591) | | - | | - | | - |
Benefit of Entergy Corporation expenses | | - | | - | | - | | (1,556) | | - | | - | | (3,420) |
Provision for uncertain | | | | | | | | | | | | | | |
tax positions | | 2,800 | | 1,000 | | 1,150 | | 700 | | 200 | | (1,200) | | 900 |
Other – net | | 1,310 | | (1,047) | | (204) | | (660) | | 336 | | 728 | | - |
Total income taxes | | $96,623 | | $57,197 | | $70,648 | | $33,240 | | $23,052 | | $28,118 | | $59,494 |
| | | | | | | | | | | | | | |
Effective Income Tax Rate | | 67.2% | | 28.3% | | 31.0% | | 35.8% | | 39.7% | | 32.7% | | 39.5% |
The flow-through/permanent differences for Entergy Arkansas in 2008 result from the write-off of regulatory assets associated with storm reserve costs, lease termination removal costs, and stock-based compensation which are no longer probable of recovery. The flow-through/permanent differences for Entergy Gulf States Louisiana in 2008 result mainly from regulatory and tax accounting applied to its pension payments.
2007 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | | | | | | | |
Net income | | $ | 139,111 | | | $ | 192,779 | | | $ | 143,337 | | | $ | 72,106 | | | $ | 24,582 | | | $ | 58,921 | | | $ | 136,081 | |
Income taxes | | | 85,638 | | | | 123,701 | | | | 83,494 | | | | 35,850 | | | | 13,506 | | | | 36,249 | | | | 45,447 | |
Pretax income | | $ | 224,749 | | | $ | 316,480 | | | $ | 226,831 | | | $ | 107,956 | | | $ | 38,088 | | | $ | 95,170 | | | $ | 181,528 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $ | 78,662 | | | $ | 110,768 | | | $ | 79,391 | | | $ | 37,785 | | | $ | 13,331 | | | $ | 33,310 | | | $ | 63,534 | |
Increases (reductions) in tax | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
federal income tax effect | | | 10,651 | | | | 8,294 | | | | 9,718 | | | | 3,513 | | | | 1,486 | | | | 3,739 | | | | 6,497 | |
Regulatory differences - | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
utility plant items | | | 18,109 | | | | 15,688 | | | | 9,828 | | | | 125 | | | | 1,058 | | | | 1,122 | | | | 9,675 | |
Amortization of investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
tax credits | | | (3,984 | ) | | | (5,314 | ) | | | (3,192 | ) | | | (1,296 | ) | | | (346 | ) | | | (1,621 | ) | | | (3,480 | ) |
Flow-through/permanent | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
differences | | | (14,502 | ) | | | (5,993 | ) | | | (7,495 | ) | | | (2,400 | ) | | | (906 | ) | | | (1,012 | ) | | | (3,165 | ) |
Benefit of Entergy Corporation expenses | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | (28,943 | ) |
Other – net | | | (3,298 | ) | | | 258 | | | | (4,756 | ) | | | (1,877 | ) | | | (1,117 | ) | | | 711 | | | | 1,329 | |
Total income taxes | | $ | 85,638 | | | $ | 123,701 | | | $ | 83,494 | | | $ | 35,850 | | | $ | 13,506 | | | $ | 36,249 | | | $ | 45,447 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Effective Income Tax Rate | | | 38.1 | % | | | 39.1 | % | | | 36.8 | % | | | 33.2 | % | | | 35.5 | % | | | 38.1 | % | | | 25.0 | % |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and subsidiariesSubsidiaries as of December 31, 20092010 and 20082009 are as follows:
| | | 2010 | | 2009 |
| | 2009 | | | 2008 | | | (In Thousands) |
Deferred tax liabilities: | | | | | | | | | | |
Plant-related basis differences | | $ | (5,476,972 | ) | | $ | (5,269,579 | ) | | ($5,947,760) | | ($5,520,095) |
Net regulatory assets/(liabilities) | | | (950,354 | ) | | | (1,026,203 | ) | | (1,074,133) | | (1,147,710) |
Power purchase agreements | | | (862,322 | ) | | | (773,606 | ) | | (265,429) | | (862,322) |
Nuclear decommissioning trusts | | | (855,608 | ) | | | (658,379 | ) | | (439,481) | | (855,608) |
Other | | | (456,053 | ) | | | (350,250 | ) | | (679,302) | | (456,053) |
Total | | | (8,601,309 | ) | | | (8,078,017 | ) | | (8,406,105) | | (8,841,788) |
| | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | |
tax credit | | | 118,587 | | | | 123,810 | | | 111,170 | | 118,587 |
Pension-related items | | | 356,284 | | | | 391,702 | | |
Pension and other post-employment benefits | | | 161,730 | | 356,284 |
Nuclear decommissioning liabilities | | | 313,648 | | | | 239,814 | | | 285,889 | | 313,648 |
Sale and leaseback | | | 260,934 | | | | 252,479 | | | 256,157 | | 260,934 |
Reserve for regulatory adjustments | | | 103,403 | | | | 106,302 | | |
General contingencies reserve | | | 98,514 | | | | 27,268 | | |
Provision for regulatory adjustments | | | 100,504 | | 103,403 |
Provision for contingencies | | | 28,554 | | 98,514 |
Unbilled/deferred revenues | | | 31,995 | | | | 27,841 | | | 18,642 | | 31,995 |
Customer deposits | | | 13,073 | | | | 76,559 | | | 15,724 | | 13,073 |
Net operating loss carryforwards | | | 148,979 | | | | 387,405 | | | 123,710 | | 148,979 |
Capital losses | | | 45,787 | | | | 131,690 | | | 56,602 | | 45,787 |
Other | | | 160,264 | | | | 126,470 | | | 19,009 | | 160,264 |
Valuation allowance | | | (47,998 | ) | | | (75,502 | ) | | (70,089) | | (47,998) |
Total | | | 1,603,470 | | | | 1,815,838 | | | 1,107,602 | | 1,603,470 |
| | | | | | | | | | | | |
Noncurrent accrued taxes (including unrecognized | | | | | | | | | | | | |
tax benefits) | | | (473,064 | ) | | | (296,284 | ) | | (1,261,455) | | (473,064) |
| | | | | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | $ | (7,470,903 | ) | | $ | (6,558,463 | ) | | ($8,559,958) | | ($7,711,382) |
Entergy’s estimated tax attributeattributes carryovers and their expiration dates as of December 31, 2009,2010 are as follows:
Carryover Description | | Carryover Amount | | Year(s) of expiration |
| | | | |
Federal net operating losses | | $8.910 billion | | 2023-2029 |
State net operating losses | | $7.67.5 billion | | 2010-20292011-2030 |
Federal capital losses | | $16560.7 million | | 2013-20142014 |
State capital losses | | $855 million | | 2011-2015 |
Federal minimum tax credits | | $29 million | | never |
Other federal and state credits | | $4570 million | | 2023-20292011-2030 |
The $3 billion cash benefit of the federal net operating loss, less appropriate deposits for uncertain tax positions, is expected to be realized over the next six years.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. The deferred tax assets recorded on the operating and capital loss carryovers are approximately $149.6 million and $45.8 million, respectively.
Because it is more likely than not that the benefit from certain state net operating and capital loss carryovers will not be utilized, a valuation allowance of $47$28 million and $34 million has been provided on the deferred tax assets relating to these state net operating and capital loss carryovers, has been provided.respectively.
Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 20092010 and 20082009 are as follows:
| | | | Entergy | | | | | | | | | | | | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System | | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy | |
2010 | | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Plant-related basis differences - net | | ($987,968) | | ($1,057,746) | | ($981,938) | | ($492,769) | | ($122,429) | | ($756,898) | | ($278,973) | | ($1,156,099) | | ($992,939) | | ($983,926) | | ($526,062) | | ($178,434) | | ($799,937) | | ($328,060) |
Net regulatory assets/(liabilities) | | (119,783) | | (316,969) | | (187,719) | | (38,995) | | 55,457 | | (104,312) | | (238,033) | | (145,649) | | (253,389) | | (289,297) | | (63,515) | | 37,946 | | (135,006) | | (225,222) |
Power purchase agreements | | (46,244) | | 37,995 | | (477,965) | | 1,059 | | 60,705 | | (36,898) | | 25,192 | | 582 | | 102,581 | | (417,388) | | (766) | | (61) | | (6,851) | | - |
Nuclear decommissioning trusts | | (198,301) | | (58,100) | | (12,369) | | - | | - | | - | | (88,646) | | (9,968) | | (978) | | (3,806) | | - | | - | | - | | (4,102) |
Deferred fuel | | 2,948 | | (3,416) | | (2,876) | | - | | - | | 2,627 | | (21) | | (24,210) | | (935) | | (7,584) | | (4,521) | | (626) | | 10,025 | | (60) |
Other | | (139,501) | | (3,647) | | (38,442) | | (21,763) | | (32,331) | | (19,923) | | (14,621) | | (123,524) | | (2,505) | | (21,971) | | (10,991) | | (13,839) | | (19,712) | | (15,234) |
Total | | ($1,488,849) | | ($1,401,883) | | ($1,701,309) | | ($552,468) | | ($38,598) | | ($915,404) | | ($595,102) | | ($1,458,868) | | ($1,148,165) | | ($1,723,972) | | ($605,855) | | ($155,014) | | ($951,481) | | ($572,678) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
tax credits | | 18,795 | | 33,957 | | 30,648 | | 2,874 | | 2,153 | | 7,886 | | 22,274 | | 17,623 | | 32,651 | | 29,417 | | 2,502 | | 706 | | 7,327 | | 20,944 |
Pension-related items | | 6,857 | | 80,127 | | 44,451 | | (2,110) | | (2,930) | | (23,489) | | 2,991 | |
Pension and OPEB | | | (64,774) | | 70,954 | | 7,922 | | (27,111) | | (11,527) | | (38,152) | | (18,255) |
Nuclear decommissioning liabilities | | | (173,666) | | (41,829) | | - | | - | | - | | - | | (69,610) |
Sale and leaseback | | - | | - | | 84,517 | | - | | - | | - | | 176,417 | | - | | - | | 80,117 | | - | | - | | - | | 176,040 |
Reserve for regulatory adjustments | | - | | 103,403 | | - | | - | | - | | - | | - | |
Provision for regulatory adjustments | | | - | | 100,504 | | - | | - | | - | | - | | - |
Unbilled/deferred revenues | | 13,619 | | (17,236) | | (1,464) | | 14,335 | | - | | 22,741 | | - | | 8,056 | | (23,853) | | 6,892 | | 8,914 | | 1,538 | | 15,775 | | - |
Customer deposits | | 8,540 | | 616 | | 5,698 | | (1,890) | | 109 | | - | | - | | 7,907 | | 618 | | 5,699 | | 1,391 | | 109 | | - | | - |
Rate refund | | 11,786 | | (6,041) | | 121 | | - | | - | | (4,018) | | - | | 10,873 | | (5,386) | | 131 | | - | | - | | (4,008) | | - |
NOL carryforward | | - | | 9,398 | | 3,521 | | - | | 6,017 | | 156,153 | | 7,546 | | - | | 40 | | 41 | | - | | 8 | | 139,859 | | - |
Other | | 11,957 | | 6,780 | | 13,220 | | (5,701) | | 19,479 | | 40,032 | | 18,845 | | 13,589 | | 26,468 | | 25,897 | | 14,585 | | 21,310 | | 28,508 | | 16,486 |
Total | | 71,554 | | 211,004 | | 180,712 | | 7,508 | | 24,828 | | 199,305 | | 228,073 | | (180,392) | | 160,167 | | 156,116 | | 281 | | 12,144 | | 149,309 | | 125,605 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Noncurrent accrued taxes (including | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
unrecognized tax benefits) | | (151,079) | | (167,324) | | (196,024) | | (33,505) | | (131,142) | | 35,424 | | (224,733) | | (104,925) | | (419,125) | | (321,757) | | (55,585) | | (22,328) | | 17,256 | | (178,447) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated deferred income | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
taxes and taxes accrued | | ($1,568,374) | | ($1,358,203) | | ($1,716,621) | | ($578,465) | | ($144,912) | | ($680,675) | | ($591,762) | | ($1,744,185) | | ($1,407,123) | | ($1,889,613) | | ($661,159) | | ($165,198) | | ($784,916) | | ($625,520) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2008 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | |
Plant-related basis differences - net | | ($977,088) | | ($1,073,496) | | ($1,002,664) | | ($484,152) | | ($167,757) | | ($649,471) | | ($347,532) |
Net regulatory assets/(liabilities) | | (300,928) | | (356,750) | | (111,896) | | (15,597) | | 68,163 | | (93,918) | | (211,786) |
Power purchase agreements | | (68,778) | | 149,626 | | (557,859) | | (2,320) | | - | | 9,679 | | 26,872 |
Nuclear decommissioning trusts | | (117,260) | | (10,991) | | (3,031) | | - | | - | | - | | (37,128) |
Deferred fuel | | (46,880) | | (595) | | (2,416) | | (1,116) | | (8,255) | | (6,571) | | (10,232) |
Other | | (42,558) | | (3,720) | | (32,776) | | (22,337) | | (7,571) | | (21,104) | | 14,090 |
Total | | ($1,553,492) | | ($1,295,926) | | ($1,710,642) | | ($525,522) | | ($115,420) | | ($761,385) | | ($565,716) |
| | | | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | | | |
tax credits | | 20,353 | | 35,261 | | 31,878 | | 3,292 | | 951 | | 8,445 | | 23,603 |
Pension-related items | | 17,937 | | 60,338 | | 38,037 | | (1,988) | | (6,857) | | (19,530) | | 6,410 |
Sale and leaseback | | - | | - | | 89,543 | | - | | - | | - | | 162,936 |
Reserve for regulatory adjustments | | - | | 106,302 | | - | | - | | - | | - | | - |
Unbilled/deferred revenues | | 11,508 | | (8,916) | | (2,322) | | (3,986) | | - | | 18,951 | | - |
Customer deposits | | 9,408 | | 35,224 | | 16,804 | | 15,014 | | 109 | | - | | - |
Rate refund | | 814 | | (5,231) | | 9,971 | | - | | 2 | | (5,135) | | - |
NOL carryforward | | 32,286 | | - | | - | | - | | - | | 100,687 | | 1,393 |
Other | �� | 38,641 | | 29,861 | | 19,375 | | 7,003 | | (8,776) | | 9,021 | | (3,229) |
Total | | 130,947 | | 252,839 | | 203,286 | | 19,335 | | (14,571) | | 112,439 | | 191,113 |
| | | | | | | | | | | | | | |
Noncurrent accrued taxes (including | | | | | | | | | | | | | | |
unrecognized tax benefits) | | (83,953) | | (215,323) | | (366,480) | | (45,671) | | 9,777 | | (19,439) | | (176) |
| | | | | | | | | | | | | | |
Accumulated deferred income | | | | | | | | | | | | | | |
taxes and taxes accrued | | ($1,506,498) | | ($1,258,410) | | ($1,873,836) | | ($551,858) | | ($120,214) | | ($668,385) | | ($374,779) |
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | |
Plant-related basis differences - net | | ($987,968) | | ($1,057,746) | | ($981,938) | | ($492,769) | | ($165,552) | | ($756,898) | | ($278,973) |
Net regulatory assets/(liabilities) | | (176,945) | | (249,870) | | (294,431) | | (63,887) | | 40,831 | | (128,807) | | (274,602) |
Power purchase agreements | | (46,244) | | 37,995 | | (477,965) | | 1,059 | | 60,705 | | (36,898) | | 25,192 |
Nuclear decommissioning trusts | | (198,301) | | (58,100) | | (12,369) | | - | | - | | - | | (88,646) |
Deferred fuel | | 2,948 | | (3,416) | | (2,876) | | - | | - | | 2,627 | | (21) |
Other | | (139,501) | | (3,647) | | (38,442) | | (21,763) | | (32,331) | | (19,923) | | (14,621) |
Total | | ($1,546,011) | | ($1,334,784) | | ($1,808,021) | | ($577,360) | | ($96,347) | | ($939,899) | | ($631,671) |
| | | | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | | | |
tax credits | | 18,795 | | 33,957 | | 30,648 | | 2,874 | | 2,153 | | 7,886 | | 22,274 |
Pension and OPEB | | 6,857 | | 80,127 | | 44,451 | | (2,110) | | (2,930) | | (23,489) | | 2,991 |
Nuclear decommissioning liability | | 12,070 | | - | | - | | - | | - | | - | | 3,160 |
Sale and leaseback | | - | | - | | 84,517 | | - | | - | | - | | 176,417 |
Provision for regulatory adjustments | | - | | 103,403 | | - | | - | | - | | - | | - |
Unbilled/deferred revenues | | 13,619 | | (17,236) | | (1,464) | | 14,335 | | - | | 22,741 | | - |
Customer deposits | | 8,540 | | 616 | | 5,698 | | (1,890) | | 109 | | - | | - |
Rate refund | | 11,786 | | (6,041) | | 121 | | - | | - | | (4,018) | | - |
NOL carryforward | | - | | 9,398 | | 3,521 | | - | | 6,017 | | 156,153 | | 7,546 |
Other | | (113) | | 6,780 | | 13,220 | | (5,701) | | 19,479 | | 40,032 | | 15,685 |
Total | | 71,554 | | 211,004 | | 180,712 | | 7,508 | | 24,828 | | 199,305 | | 228,073 |
| | | | | | | | | | | | | | |
Noncurrent accrued taxes (including | | | | | | | | | | | | | | |
unrecognized tax benefits) | | (151,079) | | (167,324) | | (196,024) | | (33,505) | | (131,142) | | 35,424 | | (224,733) |
| | | | | | | | | | | | | | |
Accumulated deferred income | | | | | | | | | | | | | | |
taxes and taxes accrued | | ($1,625,536) | | ($1,291,104) | | ($1,823,333) | | ($603,357) | | ($202,661) | | ($705,170) | | ($628,331) |
| | | | | | | | | | | | | | |
The Registrant Subsidiaries’ estimated tax attributeattributes carryovers and their expiration dates as of December 31, 2009,2010 are as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | |
| | | | | | | | | | | | | | |
Federal net operating losses | | $97 million | | - | | $189 million | | - | | $9 million | | $534 million | | - |
Year(s) of expiration | | 2028 | | N/A | | 2028 | | N/A | | 2028 | | 2028 | | N/A |
| | | | | | | | | | | | | | |
State net operating losses | | - | | $210 million | | $127 million | | - | | $64 million | | - | | - |
Year(s) of expiration | | N/A | | 2023 | | 2023 | | N/A | | 2021-2023 | | N/A | | N/A |
| | | | | | | | | | | | | | |
Federal minimum tax credits | | $5 million | | $17 million | | - | | $1 million | | $1 million | | - | | - |
Year(s) of expiration | | never | | never | | N/A | | never | | never | | N/A | | N/A |
| | | | | | | | | | | | | | |
Other federal credits | | $1 million | | $1 million | | $1 million | | - | | $1 million | | - | | $1 million |
Year(s) of expiration | | 2024-2028 | | 2024-2028 | | 2024-2028 | | N/A | | 2024-2028 | | N/A | | 2024-2028 |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | |
Federal net operating losses | | $337 million | | $19 million | | $315 million | | - | | - | | $417 million | | - |
Year(s) of expiration | | 2028-2030 | | 2029 | | 2029-2030 | | N/A | | N/A | | 2028-2029 | | N/A |
| | | | | | | | | | | | | | |
State net operating losses | | - | | $78 million | | $380 million | | - | | $34 million | | - | | - |
Year(s) of expiration | | N/A | | 2023-2024 | | 2023-2025 | | N/A | | 2020-2021 | | N/A | | N/A |
| | | | | | | | | | | | | | |
Federal minimum tax credits | | $5 million | | $17 million | | - | | $1 million | | $1 million | | - | | - |
Year(s) of expiration | | never | | never | | N/A | | never | | never | | N/A | | N/A |
| | | | | | | | | | | | | | |
Other federal credits | | $1 million | | $1 million | | $1 million | | - | | $1 million | | - | | $1 million |
Year(s) of expiration | | 2024-2028 | | 2024-2028 | | 2024-2030 | | N/A | | 2024-2028 | | N/A | | 2024-2030 |
| | | | | | | | | | | | | | |
State credits | | - | | - | | - | | $4.8 million | | - | | $11.2 million | | $1.9 million |
Year(s) of expiration | | N/A | | N/A | | N/A | | 2013-2015 | | N/A | | 2011-2027 | | 2015 |
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Unrecognized tax benefits
Accounting standards establish a "more-likely-than-not"“more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. A reconciliation of Entergy'sEntergy’s beginning and ending amount of unrecognized tax benefits is as follows:
| | 2009 | | 2008 | | 2007 | | 2010 | | 2009 | | 2008 |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | |
Gross balance at January 1 | | $1,825,447 | | $2,523,794 | | $2,265,257 | | $4,050,491 | | $1,825,447 | | $2,523,794 |
Additions based on tax positions related to the current year | | | | | | | | 480,843 | | 2,286,759 | | 378,189 |
Additions for tax positions of prior years | | 697,615 | | 259,434 | | 670,385 | | 871,682 | | 697,615 | | 259,434 |
Reductions for tax positions of prior years | | (372,862) | | (166,651) | | (450,252) | | (438,460) | | (372,862) | | (166,651) |
Settlements | | (385,321) | | (1,169,319) | | (102,485) | | (10,462) | | (385,321) | | (1,169,319) |
Lapse of statute of limitations | | (1,147) | | - | | (1,938) | | (4,306) | | (1,147) | | - |
Gross balance at December 31 | | 4,050,491 | | 1,825,447 | | 2,523,794 | | 4,949,788 | | 4,050,491 | | 1,825,447 |
Offsets to gross unrecognized tax benefits: | | | | | | | | | | | | |
Credit and loss carryovers | | (3,349,589) | | (1,265,734) | | (654,888) | | (3,771,301) | | (3,349,589) | | (1,265,734) |
Cash paid to taxing authorities | | (373,000) | | (548,000) | | (402,000) | | (373,000) | | (373,000) | | (548,000) |
Unrecognized tax benefits net of unused tax attributes and payments (1) | | | | | | | | $805,487 | | $327,902 | | $11,713 |
(1) Potential tax liability above what is payable on tax returns(1) | Potential tax liability above what is payable on tax returns |
The balances of unrecognized tax benefits include $605 million, $522 million, $543 million, and $242$543 million as of December 31, 2010, 2009, 2008, and 2007,2008, respectively, which, if recognized, would lower the effective income tax rates. Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $4.34 billion, $3.53 billion, $1.28 billion, and $1.88$1.28 billion as of December 31, 2010, 2009, 2008 and 20072008, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
Entergy accrues interesthas made deposits, with the IRS against its potential liabilities arising from audit adjustments and penalties expensessettlements related to unrecognizedits uncertain tax positions. Deposits are expected to be made to the IRS as the cash tax benefits in incomeof uncertain tax expense. Entergy'spositions are realized. As of December 31, 2009, 2008, and 2007 balance of unrecognized tax benefits includes approximately $48 million, $55 million, and $50 million, respectively, accrued for the possible payment of interest and penalties.
2010, Entergy has deposits of $373 million on account with the IRS to cover its uncertain tax positions.
Entergy accrues interest and penalties expenses, if any, related to unrecognized tax benefits in income tax expense. Entergy’s December 31, 2010, 2009, and 2008 accrued balance for the possible payment of interest and penalties is approximately $45 million, $48 million, and $55 million, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2010, 2009, and 2008 is as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2010 | | $293,920 | | $311,311 | | $352,577 | | $17,137 | | ($53,295) | | $32,299 | | $211,247 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 38,205 | | 87,755 | | 183,188 | | 4,679 | | 173 | | 5,169 | | 16,829 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 1,838 | | 25,960 | | 34,236 | | 6,857 | | 72,169 | | 5,868 | | 10,402 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (92,699) | | (71,033) | | (64,868) | | (4,469) | | (863) | | (29,100) | | (13,116) |
Settlements | | (1,025) | | (107) | | 55 | | (41) | | (8) | | (7) | | (844) |
Gross balance at December 31, 2010 | | 240,239 | | 353,886 | | 505,188 | | 24,163 | | 18,176 | | 14,229 | | 224,518 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (123,968) | | (29,257) | | (131,805) | | (6,477) | | (3,751) | | (6,269) | | (10,487) |
Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $40,294 | | $279,136 | | $373,383 | | $10,130 | | $13,251 | | $6,584 | | $172,153 |
| | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2009 | | $240,203 | | $275,378 | | $298,650 | | $31,724 | | $26,050 | | $39,202 | | $172,168 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 9,826 | | 5,436 | | 10,197 | | 283 | | 17 | | 97 | | 6,812 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 80,968 | | 102,466 | | 108,399 | | 1,256 | | 109 | | 28,821 | | 30,586 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (22,830) | | (33,000) | | (45,613) | | (4,235) | | (70,391) | | (17,853) | | (244) |
Settlements | | (14,247) | | (38,969) | | (19,056) | | (11,891) | | (9,080) | | (17,968) | | 1,925 |
Gross balance at December 31, 2009 | | 293,920 | | 311,311 | | 352,577 | | 17,137 | | (53,295) | | 32,299 | | 211,247 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (39,847) | | (20,031) | | (70,428) | | (1,618) | | (633) | | (30,921) | | (1,297) |
Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $178,096 | | $245,787 | | $282,149 | | $7,963 | | ($55,102) | | $2 | | $168,072 |
| | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
A reconciliation of the Registrant Subsidiaries' beginning and ending amount of unrecognized tax benefits for 2009, 2008, and 2007 is as follows: | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2008 | | $309,019 | | $224,379 | | $66,291 | | $69,734 | | $46,904 | | $86,732 | | $197,307 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 685 | | 89,966 | | 236,499 | | 773 | | 404 | | 338 | | 502 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 12,465 | | 10,784 | | 5,300 | | 7,494 | | 1,025 | | 189 | | 1,405 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (330) | | (372) | | (1,567) | | (8,051) | | (13,645) | | (5,082) | | (192) |
Settlements | | (81,636) | | (49,379) | | (7,873) | | (38,226) | | (8,638) | | (42,975) | | (26,854) |
Gross balance at December 31, 2008 | | 240,203 | | 275,378 | | 298,650 | | 31,724 | | 26,050 | | 39,202 | | 172,168 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (147,737) | | - | | (127,572) | | - | | (6,392) | | (39,202) | | - |
Cash paid to taxing authorities | | (69,273) | | (36,812) | | - | | (806) | | (554) | | (1,376) | | (66,398) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $23,193 | | $238,566 | | $171,078 | | $30,918 | | $19,104 | | ($1,376) | | $105,770 |
| | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2009 | | $240,203 | | $275,378 | | $298,650 | | $31,724 | | $26,050 | | $39,202 | | $172,168 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 9,826 | | 5,436 | | 10,197 | | 283 | | 17 | | 97 | | 6,812 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 80,968 | | 102,466 | | 108,399 | | 1,256 | | 109 | | 28,821 | | 30,586 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (22,830) | | (33,000) | | (45,613) | | (4,235) | | (70,391) | | (17,853) | | (244) |
Settlements | | (14,247) | | (38,969) | | (19,056) | | (11,891) | | (9,080) | | (17,968) | | 1,925 |
Gross balance at December 31, 2009 | | 293,920 | | 311,311 | | 352,577 | | 17,137 | | (53,295) | | 32,299 | | 211,247 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (39,847) | | (20,031) | | (70,428) | | (1,618) | | (633) | | (30,921) | | (1,297) |
Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | $178,096 | | $245,787 | | $282,149 | | $7,963 | | ($55,102) | | $2 | | $168,072 |
| | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2008 | | $309,019 | | $224,379 | | $66,291 | | $69,734 | | $46,904 | | $86,732 | | $197,307 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 685 | | 89,966 | | 236,499 | | 773 | | 404 | | 338 | | 502 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 12,465 | | 10,784 | | 5,300 | | 7,494 | | 1,025 | | 189 | | 1,405 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (330) | | (372) | | (1,567) | | (8,051) | | (13,645) | | (5,082) | | (192) |
Settlements | | (81,636) | | (49,379) | | (7,873) | | (38,226) | | (8,638) | | (42,975) | | (26,854) |
Gross balance at December 31, 2008 | | 240,203 | | 275,378 | | 298,650 | | 31,724 | | 26,050 | | 39,202 | | 172,168 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (147,737) | | - | | (127,572) | | - | | (6,392) | | (39,202) | | - |
Cash paid to taxing authorities | | (69,273) | | (36,812) | | - | | (806) | | (554) | | (1,376) | | (66,398) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $23,193 | | $238,566 | | $171,078 | | $30,918 | | $19,104 | | ($1,376) | | $105,770 |
| | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2007 | | $199,090 | | $176,649 | | $72,620 | | $50,374 | | $22,027 | | $49,344 | | $194,881 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 152 | | 217 | | 673 | | 19,106 | | 25,874 | | 596 | | 1,184 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 115,440 | | 78,724 | | 20,798 | | 4,133 | | 1,180 | | 48,249 | | 48,290 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (10,537) | | (15,755) | | (28,031) | | (13,509) | | (2,361) | | (1,362) | | (1,230) |
Settlements | | 4,874 | | (15,456) | | 231 | | 9,630 | | 184 | | (10,095) | | (45,818) |
Gross balance at December 31, 2007 | | 309,019 | | 224,379 | | 66,291 | | 69,734 | | 46,904 | | 86,732 | | 197,307 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (100,545) | | (65,945) | | (66,291) | | - | | (46,904) | | - | | (31) |
Cash paid to taxing authorities | | (45,000) | | (25,000) | | - | | - | | - | | - | | (50,000) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $163,474 | | $133,434 | | $- | | $69,734 | | $- | | $86,732 | | $147,276 |
| | | | | | | | | | | | | | |
The Registrant Subsidiaries'Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would affect the effective income tax rate as follows:
| December 31, 2009 | | December 31, 2008 | | December 31, 2007 | | December 31, 2010 | | December 31, 2009 | | December 31, 2008 |
| (In Millions) | | | | | |
| | | | | | | | | | | |
Entergy Arkansas | $1.2 | | $1.2 | | ($1.6) | | $0.2 | | $1.2 | | $1.2 |
Entergy Gulf States Louisiana | $69.8 | | $75.2 | | $1.3 | | $129.6 | | $69.8 | | $75.2 |
Entergy Louisiana | $192.7 | | $210.4 | | $0.7 | | $286.7 | | $192.7 | | $210.4 |
Entergy Mississippi | $3.3 | | $2.5 | | $1.8 | | $5.3 | | $3.3 | | $2.5 |
Entergy New Orleans | $0.3 | | $0.7 | | $0.5 | | - | | $0.3 | | $0.7 |
Entergy Texas | $1.2 | | $0.6 | | $1.8 | | $6.0 | | $1.2 | | $0.6 |
System Energy | $8.7 | | $3.9 | | $3.0 | | $12.1 | | $8.7 | | $3.9 |
The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Included in theAccrued balances of unrecognized tax benefits were accruals for the possible payment of interest and penaltypenalties are as follows:
| December 31, 2009 | | December 31, 2008 | | December 31, 2007 | December 31, 2010 | | December 31, 2009 | | December 31, 2008 |
| (In Millions) | (In Millions) |
| | | | | | | | | | |
Entergy Arkansas | $0.7 | | $1.6 | | $1.4 | - | | $0.7 | | $1.6 |
Entergy Gulf States Louisiana | $2.3 | | $1.4 | | $0.9 | $9.7 | | $2.3 | | $1.4 |
Entergy Louisiana | $1.2 | | $- | | $- | $3.3 | | $1.2 | | - |
Entergy Mississippi | $2.1 | | $2.1 | | $1.7 | $1.6 | | $2.1 | | $2.1 |
Entergy New Orleans | $0.3 | | $0.7 | | $0.5 | - | | $0.3 | | $0.7 |
Entergy Texas | $0.2 | | $0.2 | | $1.4 | $0.1 | | $0.2 | | $0.2 |
System Energy | $7.2 | | $3.3 | | $2.7 | $8.2 | | $7.2 | | $3.3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy and the Registrant Subsidiaries do not expect that total unrecognized tax benefits will significantly change within the next twelve months; however, the results of pending litigations and audit issues, discussed below, could result in significant changes.
Income Tax LitigationEntergy Texas
For tax years 1997Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and 1998, a U.S. Tax Court trial was heldpurchased power costs, including carrying charges, not recovered in April 2008.base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix. The issuesamounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the Court are as follows:
· | The ability to credit the U.K. Windfall Tax against U.S. tax as a foreign tax credit. The U.K. Windfall Tax relates to Entergy's former investment in London Electricity. |
· | The validity of Entergy's change in method of tax accounting for street lighting assets and the related increase in depreciation deductions. |
PUCT.
OnIn October 2007, Entergy Texas filed a request with the PUCT to refund $45.6 million, including interest, of fuel cost recovery over-collections through September 2007. In January 2008, Entergy Texas filed with the PUCT a stipulation and settlement agreement among the parties that updated the over-collection balance through November 20, 2009, Entergy was directed by the Tax Court to submit2007 and established a supplement to previously filed supplemental briefs addressing the issues in dispute. A decision is anticipated by the first or second quarter 2010.
On February 21, 2008, the IRS issued a Statutory Noticerefund amount, including interest, of Deficiency for the year 2000. A Tax Court Petition was filed on May 5, 2008. Trial is set for April 17, 2010. The Petition challenges the IRS assessment on the same two issues described above as well as the following issue:
· | The allowance of depreciation deductions that resulted from Entergy's purchase price allocations on its acquisitions of its Non-Utility Nuclear plants. |
With respect to the U.K. Windfall Tax issue, the total tax included in IRS Notices of Deficiency is $82$71 million. The total tax and interest associated with this issue for all years is $209PUCT approved the agreement in February 2008. The refund was made over a two-month period beginning February 2008, but was reduced by $10.3 million before consideration of cash deposits made with the IRS to offset the potential exposure.
With respect to the street lighting issue, the total tax included in IRS Notices of Deficiency is $22 million. The federal and state tax and interest associated with this issue total $61 million for all open tax years.
With respect to the depreciation deducted on Non-Utility Nuclear plant acquisitions, the total tax included in IRS Notices of Deficiency is $7 million. The federal and state tax and interest associated with this issue total $270 million for all open tax years.
Income Tax Audits
Entergy or one of its subsidiaries files U.S. federal and various state and foreign income tax returns. Other than the matters discussed in the Income Tax Litigation section above, the IRS's and substantially all state taxing authorities' examinations are completed for years before 2004.under-recovered incremental purchased capacity costs.
2002-2003 IRS Audit
In September 2009,January 2008, Entergy entered intoTexas made a partial agreementcompliance filing with the IRSPUCT describing how its 2007 rough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. In December 2008 the PUCT adopted an ALJ proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. Because the years 2002 and 2003. It is a partial agreement because Entergy did not agreePUCT allocation to the IRS's adjustments for the U.K. Windfall Tax foreign tax credit and the street lighting issues. Entergy expects to receive a Notice of Deficiency from the IRS on these two issues in the first quarter 2010. These issues will be governed by the outcome of a previous U.S. Tax Court trial for the tax years 1997 and 1998 for which Entergy is awaiting a decision.Texas retail
Entergy Corporation and Subsidiaries
Notes to Financial Statements
customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision results in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. Entergy Texas filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. In May 2009 the FERC issued an order rejecting the proposed amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). The PUCT and FERC decisions are now final.In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Entergy Texas requested that the proposed refund be made over a four-month period beginning June 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009.
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Entergy Texas requested that the proposed refund be made over a six-month period beginning January 2010. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund was made for most customers over a three-month period beginning January 2010.
In June 2010, Entergy Texas filed with the PUCT a request to refund approximately $66 million, including interest, of fuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
In December 2010, Entergy Texas filed with the PUCT a request to refund approximately $52 million, including interest, of fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved on an interim basis and is pending final action by the PUCT, Entergy Texas will refund over-collections of approximately $72.7 million through November 2010. The refund will be made for most customers over a three-month period beginning with the February 2011 billing cycle.
Entergy Texas’s December 2009 rate case filing, which is discussed below, also included a request to reconcile $1.8 billion of fuel and purchased power costs covering the period April 2007 through June 2009.
Storm Cost Recovery Filings with Retail Regulators
Entergy Arkansas
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas's transmission and distribution lines, equipment, poles, and other facilities. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. In June 2010 the APSC issued a financing order authorizing the issuance of approximately $126.3 million in storm cost recovery bonds, which includes carrying costs of $11.5 million and $4.6 million of up-front financing costs. See Note 5 to the financial statements for a discussion of the August 2010 issuance of the securitization bonds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Gulf States Louisiana and Entergy Louisiana
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy's service territory. Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 fi nancings).Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm costs were financed primarily by Act 55 financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Act 55 financing savings to customers via a Storm Cost Offset rider.
In December 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financings are accomplished. In March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includes these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In July 2010 the LCDA issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3 million to acquire 1,502,643.04 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2004-2005 IRS AuditEntergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy Gulf States Louisiana and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The IRS issued its 2004-2005 Revenue Agent's Report on May 26, 2009.storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses.
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On June 25, 2009April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed a formal Protest with the IRS Appeals Office indicating disagreement with certain issues contained inLPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana’s proposals under the Revenue Agent’s Report. The major issues in dispute are:Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
· | Depreciation of street lighting assets (issue before the Tax Court) |
· | Depreciable basis of assets acquired in Non-Utility Nuclear plant purchases (issue before the Tax Court) |
· | Qualified research expendituresIn July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for purposes of the research credit |
· | Inclusion of nuclear decommissioning liabilities in cost of goods sold |
It is anticipated that IRS Appeals proceedings on these disputed issues will commence in the second quarter of 2010.
2006-2007 IRS Audit
The IRS commenced an examination of Entergy's 2006 and 2007 U.S. federal income tax returns in the third quarter 2009. To date, the IRS has not proposed any adjustments in the audit of these returns.
Other Tax Matters
When Entergy Louisiana Inc. restructured effective December 31, 2005,and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana agreed,from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate.& #160; Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the merger plan,LLC agreement. The terms of the membership interests include certain financial covenants to indemnify its parent,which Entergy Louisiana Holdings Inc. (formerly, Entergy Louisiana, Inc.) for certain tax obligations that arose fromCompany LLC is subject, including the 2002-2003 IRS partial agreement. Because the agreement with the IRS was settled in the fourth quarter 2009, Entergy Louisiana paid Entergy Louisiana Holdings approximately $289 million pursuantrequirement to these intercompany obligations in the fourth quarter 2009.maintain a net worth of at least $1 billion.
On November 20, 2009, Entergy Corporation and subsidiaries amendedIn August 2008 the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement such that Entergy Corporation shall be treated,LPFA issued $278.4 million in bonds under all provisionsthe aforementioned Act 55. From the $274.7 million of such Agreement,bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a manner that is identical to the treatment afforded all subsidiaries, direct or indirect, of Entergy Corporation.
In the fourth quarter 2009, Entergy filed Applications for Change in Method of Accounting for certain costs under Section 263A of the Internal Revenue Code. In the Application, Entergy is requesting permission to treat the nuclear decommissioning liability associated with the operation of its nuclear power plantsrestricted escrow account as a production cost properly includable in cost of goods sold. The effect of this changestorm damage reserve for Entergy is a $5.7 billion reduction in 2009 taxable income within Non-Utility Nuclear.Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agent for the state.
Entergy New Orleans
In December 2005 the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included Community Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007 the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
Entergy Texas
Hurricane Ike and Hurricane Gustav
Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas’s request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6 .8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
Little Gypsy Repowering Project (Entergy and Entergy Louisiana)
In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisiana complied with the LPSC’s directive and recommended that the project be suspended for an extended pe riod of time of three years or more. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC Staff and Intervenors filed testimony. The LPSC Staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, b ut at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it is probable that the Little Gypsy repowering project will be abandoned and accordingly reclassified the project costs from construction work in progress to a regulatory asset. This accounting reclassification does not modify Entergy Louisiana’s requested relief pending before the LPSC. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties conducted a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement is expected to be presented to the LPSC for approval in the first quarter 2011.
Retail Rate Proceedings
The following chart summarizes the Utility operating companies' current retail base rates:
Company | | Authorized Return on Common Equity | | |
| | | | |
Entergy Arkansas | | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
Entergy Louisiana | | 9.45%- 11.05% | | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| | | | |
Entergy Mississippi | | 10.79%- 13.05% | | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a settlement approved by the City Council. |
| | | | |
Entergy Texas | | 10.125% | | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a settlement of Entergy Texas's base rate case approved by the PUCT. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC (Entergy Arkansas)
Retail Rates
2009 Base Rate Filing
In September 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. In June 2010 the APSC approved a settlement and subsequent compliance tariffs that provide for a $63.7 million rate increase, effective for bills rendered for the first billing cycle of July 2010. The settlement provides for a 10.2% return on common equity.
2006 Base Rate Filing
In August 2006, Entergy Arkansas filed with the APSC a request for a change in base rates. In June 2007, after hearings on the filing, the APSC ordered Entergy Arkansas to reduce its annual rates by $5 million, and set a return on common equity of 9.9% with a hypothetical common equity level lower than Entergy Arkansas’s actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy’s stock-based compensation plans, and left Entergy Arkansas with no mechanism to recover $52 million of costs previously accumulated in Entergy Arkansas’s storm reserve and $18 million of removal costs associated with the term ination of a lease. The base rate change was implemented effective for bills rendered after June 15, 2007.
Entergy Arkansas sought to overturn the APSC’s decision, but in December 2008 the Arkansas Court of Appeals upheld almost all aspects of the APSC decision. After considering the progress of the proceeding in light of the decision of the Court of Appeals, Entergy Arkansas recorded in the fourth quarter 2008 an approximately $70 million charge to earnings, on both a pre- and after-tax basis because these are primarily flow-through items, to recognize that the regulatory assets associated with the storm reserve costs, lease termination removal costs, and stock-based compensation were no longer probable of recovery. In April 2009 the Arkansas Supreme Court denied Entergy Arkansas’s petition for review of the Court of Appeals decision.
Filings with the LPSC
Formula Rate Plans (Entergy Gulf States Louisiana and Entergy Louisiana)
In March 2005 the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, establishes a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate pl an filing in June 2005. The formula rate plan was subsequently extended one year.
Entergy Louisiana made a rate filing with the LPSC requesting a base rate increase in January 2004. In May 2005 the LPSC approved a settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed below the formula rate plans for Entergy Gulf States Louisiana and Entergy Louisiana have been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, and 2010 test years.
Retail Rates - Electric
(Entergy Gulf States Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Gulf States Louisiana’s 2007 test year filing and provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.65% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 tes t year filing that was made in October 2009. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. In May 2010, Entergy Gulf States Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.25% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate increase for incremental capacity costs. In July 2010 the LPSC approved a $7.8 million increase in the revenue requirement for decommiss ioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana made a revised 2009 test year filing. The revised filing reflected a 10.12% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $25.2 million for capacity costs. The rates reflected in the revised filing became effective, beginning with the first billing cycle of September 2010. Entergy Gulf States Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in January 2011.
(Entergy Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Louisiana’s 2006 and 2007 test year filings provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%).
Entergy Louisiana was permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the May 2010 billing cycle and a $0.1 million refund. In addition, Entergy Louisiana moved the recovery of approximately $12.5 million of capacity costs from fuel adjustment clause recovery to base rate recovery. At its April 21, 2010 meeting, the LPSC accepted the joint report.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2010, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.82% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental capacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue requirement for decommissioning, effective September 2010. ; In August 2010, Entergy Louisiana made a revised 2009 test year formula rate plan filing. The revised filing reflected a 10.82% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million for capacity costs. The rates reflected in the revised filing became effective beginning with the first billing cycle of September 2010. Entergy Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in December 2010.
Retail Rates - Gas (Entergy Gulf States Louisiana)
In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010. The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million. The sixty-day review and comment period for this filing remains open.
In January 2010, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2009. The filing showed an earned return on common equity of 10.87%, which is within the earnings bandwidth of 10.5% plus or minus fifty basis points, resulting in no rate change. In April 2010, Entergy Gulf States Louisiana filed a revised evaluation report reflecting changes agreed upon with the LPSC Staff. The revised evaluation report also resulted in no rate change.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. In March 2010 the MPSC issued an order: (1) providing the opportunity for a reset of Entergy Mississippi's return on common equity to a point within the formula rate plan bandwidth and eliminating the 50/50 sharing that had been in the plan, (2) modifying the performance measurement process, and (3) replacing the revenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a limit of four percent of revenues, although any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi's request to use a projected test year for its annual scheduled formula rate plan filing and, theref ore, Entergy Mississippi will continue to use a historical test year for its annual evaluation reports under the plan.
In March 2010, Entergy Mississippi submitted its 2009 test year filing, its first annual filing under the new formula rate plan rider. In June 2010 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provides for no change in rates, but does provide for the deferral as a regulatory asset of $3.9 million of legal expenses associated with certain litigation involving the Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the City Council (Entergy New Orleans)
Formula Rate Plans and Storm-related Riders
On July 31, 2008, Entergy New Orleans filed an electric and gas base rate case with the City Council. On April 2, 2009, the City Council approved a comprehensive settlement. The settlement provided for a net $35.3 million reduction in combined fuel and non-fuel electric revenue requirement, including conversion of a $10.6 million voluntary recovery credit, implemented in January 2008, to a permanent reduction and substantial realignment of Grand Gulf cost recovery from fuel to electric base rates, and a $4.95 million gas base rate increase, both effective June 1, 2009, with adjustment of the customer charges for all rate classes. A new three-year formula rate plan was also adopted, with terms including an 11.1% benchmark electric return on common equity (ROE) with a +/- 40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans is over- or under-earning. The formula rate plan also includes a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
The 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs.
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings presented various alternatives to reflect the effect of Entergy New Orleans’s lost customers and decreased revenue following Hurricane Katrina. The alternative that Entergy New Orleans recommended adjusts for lost customers and assumes that the City Council’s June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place during the rate-effective period (a significant portion of Grand Gulf costs was previously recovered through base rates).
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establish a storm reserve to provide for the risk of another storm.
In October 2006, the City Council approved a settlement agreement that resolved Entergy New Orleans’s rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respect to storm restoration costs the anticipated receipt of CDBG funding as recommended by the Louisiana Recovery Authority. The settlement provided for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause was continued. Gas base rates increased by $4.75 million in November 2006 and increased by an additional $1.5 million in March 2007 and an additional $4.75 million in November 2007. The settleme nt called for Entergy New Orleans to file a base rate case by July 31, 2008, which it did as discussed above. The settlement agreement discontinued the formula rate plan and the generation performance-based plan but permitted Entergy New Orleans to file an application to seek authority to implement formula rate plan mechanisms no sooner than six months following the effective date of the implementation of the base rates resulting from the July 31, 2008 base rate case. The settlement also authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Beginning in May 2010, Entergy Texas implemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testi mony, of $58 million.
The parties filed a settlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. Baseline values were established to be used in Entergy Texas's request for a transmission cost recovery factor that will be made in a separate proceeding. The settlement states that Entergy Texas's fuel costs for the period April 2007 through June 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River B end decommissioning costs at $2.0 million annually. Consistent with the settlement, in the third quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the settlement in December 2010.
System Agreement Cost Equalization Proceedings
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proceedings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement.
In June 2005, the FERC issued a decision in the System Agreement litigation that had been commenced by the LPSC, and essentially affirmed its decision in a December 2005 order on rehearing. The FERC decision concluded, among other things, that:
· | The System Agreement no longer roughly equalizes total production costs among the Utility operating companies. |
· | In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs. |
· | In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies’ total production costs. |
· | The remedy ordered by FERC in 2005 required no refunds and became effective based on calendar year 2006 production costs and the first reallocation payments were made in 2007. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The FERC’s decision reallocates total production costs of the Utility operating companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. Under the current circumstances, this will be accomplished by payments from Utility operating companies whose production costs are more than 11% below Entergy System average production costs to Utility operating companies whose production costs are more than the Entergy System average production cost, with payments going first to those Utility operating companies whose total production costs are farthest above the Entergy System average.
Assessing the potential effects of the FERC’s decision requires assumptions regarding the future total production cost of each Utility operating company, which assumptions include the mix of solid fuel and gas-fired generation available to each company and the costs of natural gas and purchased power. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy Texas, and Entergy Mississippi are more dependent upon gas-fired generation sources than Entergy Arkansas or Entergy New Orleans. Of these, Entergy Arkansas is the least dependent upon gas-fired generation sources. Therefore, increases in natural gas prices likely will increase the amount by which Entergy Arkansas’s total production costs are below the Entergy System average production costs.
The LPSC, APSC, MPSC, and the AEEC appealed the FERC’s decision to the United States Court of Appeals for the D.C. Circuit. Entergy and the City of New Orleans intervened in the various appeals. The D.C. Circuit issued its decision in April 2008. The D.C. Circuit affirmed the FERC’s decision in most respects, but remanded the case to the FERC for further proceedings and reconsideration of its conclusion that it was prohibited from ordering refunds and its determination to implement the bandwidth remedy commencing with calendar year 2006 production costs (with the first payments/receipts commencing in June 2007), rather than commencing the remedy on June 1, 2005. The D.C. Circuit concluded the FERC had failed so far in the proceeding to offer a reasoned explanation regarding these issues. As discussed below, in December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treatment of interruptible load in the allocation of capacity costs by the Utility operating companies. The FERC also deferred further action on the question of whether it provided sufficient rationale for not ordering refunds, and whether it impermissibly delayed implementation of the bandwidth remedy, until resolution of this paper hearing.
In April 2006, the Utility operating companies filed with the FERC their compliance filing to implement the provisions of the FERC’s decision. The filing amended the System Agreement to provide for the calculation of production costs, average production costs, and payments/receipts among the Utility operating companies to the extent required to maintain rough production cost equalization pursuant to the FERC’s decision. The FERC accepted the compliance filing in November 2006, with limited modifications. Provisions of the compliance filing as approved by the FERC include: the first payments commenced in June 2007, rather than earlier; interest is not required on the unpaid balance; and any payments will be made over seven months, rather than 1 2. In April 2007, the FERC denied various requests for rehearing, with one exception regarding the issue of retrospective refunds. That issue will be addressed subsequent to the remanded proceeding involving the interruptible load decision discussed further below in this section under “Interruptible Load Proceeding.”
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Calendar Year 2010 Production Costs
The liabilities and assets for the preliminary estimate of the payments and receipts required to implement the FERC’s remedy based on calendar year 2010 production costs were recorded in December 2010, based on certain year-to-date information. The preliminary estimate was recorded based on the following estimate of the payments/receipts among the Utility operating companies for 2011.
| Payments or (Receipts) |
| (In Millions) |
| |
Entergy Arkansas | $52 |
Entergy Gulf States Louisiana | $- |
Entergy Louisiana | $- |
Entergy Mississippi | ($37) |
Entergy New Orleans | ($15) |
Entergy Texas | $- |
The actual payments/receipts for 2011, based on calendar year 2010 production costs, will not be calculated until the Utility operating companies’ FERC Form 1s have been filed. Once the calculation is completed, it will be filed at the FERC. The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the Entergy System generating fleet, and multiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.
Rough Production Cost Equalization Rates
Each May since 2007 Entergy has filed with the FERC the rates to implement the FERC’s orders in the System Agreement proceeding. These filings show the following payments/receipts among the Utility operating companies are necessary to achieve rough production cost equalization as defined by the FERC’s orders:
| | 2007 Payments or (Receipts) Based on 2006 Costs | | 2008 Payments or (Receipts) Based on 2007 Costs | | 2009 Payments or (Receipts) Based on 2008 Costs | | 2010 Payments or (Receipts) Based on 2009 Costs |
| | (In Millions) |
| | | | | | | | |
Entergy Arkansas | | $252 | | $252 | | $390 | | $41 |
Entergy Gulf States Louisiana | | ($120) | | ($124) | | ($107) | | $- |
Entergy Louisiana | | ($91) | | ($36) | | ($140) | | ($22) |
Entergy Mississippi | | ($41) | | ($20) | | ($24) | | ($19) |
Entergy New Orleans | | $- | | ($7) | | $- | | $- |
Entergy Texas | | ($30) | | ($65) | | ($119) | | $- |
The APSC has approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas. Management believes that any changes in the allocation of production costs resulting from the FERC’s decision and related retail proceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs. See “Fuel and purchased power cost recovery, Entergy Texas,” above for discussion of a PUCT decision that resulted in $18.6 million of trapped costs between Entergy’s Texas and Louisiana jurisdictions. See “2007 Rate Filing Based on Calendar Year 2006 Production Costs” below for a discussion of a FERC decision that could result in $14.5 million of trapped costs at Entergy Arkansas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Based on the FERC’s April 27, 2007 order on rehearing that is discussed above, in the second quarter 2007 Entergy Arkansas recorded accounts payable and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC’s remedy based on calendar year 2006 production costs. Entergy Arkansas recorded a corresponding regulatory asset for its right to collect the payments from its customers, and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded corresponding regulatory liabilities for their obligations to pass the receipts on to their customers. The companies have followed this same accounting practice eac h year since then. The regulatory asset and liabilities are shown as “System Agreement cost equalization” on the respective balance sheets.
2007 Rate Filing Based on Calendar Year 2006 Production Costs
Several parties intervened in the 2007 rate proceeding at the FERC, including the APSC, the MPSC, the Council, and the LPSC, which have also filed protests. The PUCT also intervened. Intervenor testimony was filed in which the intervenors and also the FERC Staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for nuclear facilities. The effect of the various positions would be to reallocate costs among the Utility operating companies. The Utility operating companies filed rebuttal testimony explaining why the bandwidth payments are properly recoverab le under the AmerenUE contract, and explaining why the positions of FERC Staff and intervenors on the other issues should be rejected. A hearing in this proceeding concluded in July 2008, and the ALJ issued an initial decision in September 2008. The ALJ’s initial decision concludes, among other things, that: (1) the decisions to not exercise Entergy Arkansas’s option to purchase the Independence plant in 1996 and 1997 were prudent; (2) Entergy Arkansas properly flowed a portion of the bandwidth payments through to AmerenUE in accordance with the wholesale power contract; and (3) the level of nuclear depreciation and decommissioning expense reflected in the bandwidth calculation should be calculated based on NRC-authorized license life, rather than the nuclear depreciation and decommissioning expense authorized by the retail regulators for purposes of retail ratemaking. Following briefing by the parties, the matter was submitted to the FERC for decision. On January 11, 2010, the FERC issued its decision both affirming and overturning certain of the ALJ’s rulings, including overturning the decision on nuclear depreciation and decommissioning expense. The FERC’s conclusion related to the AmerenUE contract does not permit Entergy Arkansas to recover a portion of its bandwidth payment from AmerenUE. The Utility operating companies requested rehearing of that portion of the decision and requested clarification on certain other portions of the decision.
AmerenUE argued that its current wholesale power contract with Entergy Arkansas, pursuant to which Entergy Arkansas sells power to AmerenUE, does not permit Entergy Arkansas to flow through to AmerenUE any portion of Entergy Arkansas’s bandwidth payment. According to AmerenUE, Entergy Arkansas has sought to collect from AmerenUE approximately $14.5 million of the 2007 Entergy Arkansas bandwidth payment. The AmerenUE contract expired in August 2009. In April 2008, AmerenUE filed a complaint with the FERC seeking refunds of this amount, plus interest, in the event the FERC ultimately determines that bandwidth payments are not properly recovered under the AmerenUE contract. In response to the FERC’s decision discussed in the previous paragraph, Entergy Arkansas recorded a regulatory provision in the fourth quarter 2009 for a potential refund to AmerenUE.
2008 Rate Filing Based on Calendar Year 2007 Production Costs
Several parties intervened in the 2008 rate proceeding at the FERC, including the APSC, the LPSC, and AmerenUE, which have also filed protests. Several other parties, including the MPSC and the City Council, have intervened in the proceeding without filing a protest. In direct testimony filed on January 9, 2009, certain intervenors and also the FERC staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for the nuclear and fossil-fueled generating facilities. The effect of these various positions would be to reallocate costs among the Utility operating companies . In addition, three issues were raised alleging imprudence by the Utility operating companies, including whether the Utility operating companies had properly reflected generating units’ minimum operating levels for purposes of making unit commitment and dispatch decisions, whether Entergy Arkansas’s sales to third parties from its retained share of the Grand Gulf nuclear facility were reasonable, prudent, and non-discriminatory, and whether Entergy Louisiana’s long-term Evangeline gas purchase contract was prudent and reasonable.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The parties reached a partial settlement agreement of certain of the issues initially raised in this proceeding. The partial settlement agreement was conditioned on the FERC accepting the agreement without modification or condition, which the FERC did on August 24, 2009. A hearing on the remaining issues in the proceeding was completed in June 2009, and in September 2009 the ALJ issued an initial decision. The initial decision affirms Entergy’s position in the filing, except for two issues that may result in a reallocation of costs among the Utility operating companies. Entergy, the APSC, the LPSC, and the MPSC have submitted briefs on exceptions in the proceeding, and the matter has been submitted to the FERC for decision.
2009 Rate Filing Based on Calendar Year 2008 Production Costs
Several parties intervened in the 2009 rate proceeding at the FERC, including the LPSC and Ameren, which have also filed protests. In July 2009 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2009, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures were terminated and a hearing before the ALJ was held in April 2010. In August 2010 the ALJ issued an initial decision. The initial decision substantially affirms Entergy's position in the filing, except for one issue that may result in some reallocation of costs among the Utility operating companies. The LPSC, the FERC trial staff, and Entergy have submitted briefs on exceptions in the proceed ing.
2010 Rate Filing Based on Calendar Year 2009 Production Costs
In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC's orders in the System Agreement proceeding, and supplemented the filing in September 2010. Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which have also filed protests. In July 2010 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2010, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures have been terminated, and the ALJ scheduled hearings to begin in March 2011, with an initial decision scheduled for July 2011. Subsequently, in January 2011 the ALJ issued an order directing the parties and FERC staff to s how cause why this proceeding should not be stayed pending the issuance of FERC decisions in the prior production cost proceedings currently before the FERC on review. Briefing on the issue concluded on February 14, 2011. A hearing on the show cause order is scheduled for March 3, 2011.
Interruptible Load Proceeding
In April 2007 the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC’s appeal of the FERC’s March 2004 and April 2005 orders related to the treatment under the System Agreement of the Utility operating companies’ interruptible loads. In its opinion, the D.C. Circuit concluded that the FERC (1) acted arbitrarily and capriciously by allowing the Utility operating companies to phase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time. The D.C. Circuit remanded the ma tter to the FERC for a more considered determination on the issue of refunds. The FERC issued its order on remand in September 2007, in which it directed Entergy to make a compliance filing removing all interruptible load from the computation of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change. In addition, the order directed the Utility operating companies to make refunds for the period May 1995 through July 1996. In November 2007 the Utility operating companies filed a refund report describing the refunds to be issued pursuant to the FERC's orders. The LPSC filed a protest to the refund report in December 2007, and the Utility operating companies filed an answer to the protest in January 2008. The refunds were made in October 2008 by the Utility operating companies that owed refunds to the Utility operating companies that were due a refund under the decision. The APSC and the Utility operating companies appealed the FERC decisions to the D.C. Circuit. Because of its refund obligation to its customers as a result of this proceeding and a related LPSC proceeding, Entergy Louisiana recorded provisions during 2008 of approximately $16 million, including interest, for rate refunds. The refunds were made in the fourth quarter 2009.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Following the filing of petitioners' initial briefs, the FERC filed a motion requesting the D.C. Circuit hold the appeal of the FERC's decisions ordering refunds in the interruptible load proceeding in abeyance and remand the record to the FERC. The D.C. Circuit granted the FERC's unopposed motion on June 24, 2009, and directed the FERC to file status reports at 60-day intervals beginning August 24, 2009. The D.C. Circuit also directed the parties to file motions to govern future proceedings in the case within 30 days of the completion of the FERC proceedings. In December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treat ment of interruptible load in the allocation of capacity costs by the Utility operating companies. In August 2010 the FERC issued an order stating that it has the authority and refunds are appropriate. The APSC, MPSC, and Entergy have requested rehearing of the FERC's decision. In September 2010, the FERC set for hearing and settlement judge procedures the Utility operating companies' calculation of the refunds for the 15-month refund period of May 14, 1995 through August 13, 1996, as contained in the November 2007 refund report. The purpose of the hearing is to determine whether the refund amounts for such period were calculated in a just and reasonable manner. The settlement proceedings are ongoing.
Entergy Arkansas filed a request with the APSC for recovery of the refund paid to its customers and the APSC staff has filed a motion to dismiss the request. A procedural schedule has not been set in the proceeding.
Entergy Arkansas Opportunity Sales Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds. On July 20, 2009, the Utility operating companies filed a response to the co mplaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System. In their response, the Utility operating companies explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company. The response further explains that the FERC already has determined that Entergy Arkansas’s short-term wholesale sales did not trigger the “right-of-first-refusal” provision of the System Agreement. While the D.C. Circuit recently determined that the “right-of-first-refusal” issue was not properly before the FERC at the time of its earlier decision on the issue, the LPS C has raised no additional claims or facts that would warrant the FERC reaching a different conclusion. On December 7, 2009, the FERC issued an order setting the matter for hearing and settlement procedures.
The LPSC filed direct testimony in the proceeding alleging, among other things, (1) that Entergy violated the System Agreement by permitting Entergy Arkansas to make non-requirements sales to non-affiliated third parties rather than making such energy available to the other Utility operating companies’ customers; and (2) that over the period 2000 - 2009, these non-requirements sales caused harm to the Utility operating companies’ customers of $144 million and these customers should be compensated for this harm by Entergy. In subsequent testimony, the LPSC modified its original damages claim in favor of quantifying damages by re-running intra-system bills, which has not occurred. The Utility operating companies believe the LPSC's allegations are without m erit. A hearing in the matter was held in August 2010.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In December 2010 the ALJ issued an initial decision. The ALJ found that the System Agreement allowed for Entergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as joint account sales. The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, along with interest. Entergy Corporation, or an Entergy Corporation subsidiary, is the shareholder of each of the Utility operating companies. Entergy disagrees with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision. ;FERC consideration of the initial decision is pending. Entergy is unable to estimate the potential damages in this matter because certain aspects of how the refunds would be calculated require clarification by the FERC.
LPSC Interruptible Load Proceeding (Entergy Louisiana)
As discussed above, the FERC issued orders in September 2005 and 2007 in which it directed Entergy to remove all interruptible load from certain computations of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change. In addition, in September 2008 the FERC directed the Utility operating companies to make refunds for the period May 1995 through July 1996. In October 2009 the LPSC issued an order approving the flow through to retail rates of the LPSC-jurisdictional portion of the payments and credits resulting from the FERC’s orders that had not yet been flowed through to retail rates, which required a net refund to Entergy Louisiana retail customers of $17.6 million, including interest. The refunds were made in the fourth quarter 2009. Of this amount, $5.4 million was refunded subject to adjustment in the event that future action by the FERC or the D.C. Circuit Court of Appeals results in a reversal or change in the amount of the refunds ordered by the FERC in September 2008.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT AND SHORT-TERM BORROWINGS3. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Income tax expenses from continuing operations for 2010, 2009, and 2008 for Entergy Corporation has a revolving credit facility that expires in August 2012 and has a borrowing capacitySubsidiaries consist of $3.5 billion. the following:
| | 2010 | | 2009 | | 2008 |
| | (In Thousands) |
Current: | | | | | | |
Federal | | $145,161 | | ($433,105) | | $451,517 |
Foreign | | 131 | | 154 | | 256 |
State | | 19,313 | | (108,552) | | 146,171 |
Total | | 164,605 | | (541,503) | | 597,944 |
Deferred and non-current -- net | 468,698 | | 1,191,418 | | 23,022 |
Investment tax credit | | | | | | |
adjustments -- net | | (16,064) | | (17,175) | | (17,968) |
Income tax expense from | | | | | | |
continuing operations | | $617,239 | | $632,740 | | $602,998 |
| | | | | | |
Income tax expenses for 2010, 2009, and 2008 for Entergy’s Registrant Subsidiaries consist of the following:
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | $114,821 | | $196,230 | | $73,174 | | $12,812 | | ($114,441) | | ($10,607) | | ($4,102) |
State | | (9,200) | | 481 | | (4,324) | | 5,822 | | 1,412 | | 1,060 | | 3,328 |
Total | | 105,621 | | 196,711 | | 68,850 | | 18,634 | | (113,029) | | (9,547) | | (774) |
Deferred and non-current -- net | | 10,328 | | (117,426) | | 918 | | 31,415 | | 129,880 | | 53,539 | | 60,305 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments -- net | | (3,005) | | (3,407) | | (3,222) | | (985) | | (324) | | (1,609) | | (3,482) |
Income taxes | | $112,944 | | $75,878 | | $66,546 | | $49,064 | | $16,527 | | $42,383 | | $56,049 |
| | | | | | | | | | | | | | |
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | ($37,544) | | ($203,651) | | $12,387 | | $19,347 | | $160,846 | | ($72,207) | | $73,183 |
State | | 22,710 | | (12,416) | | (49,843) | | (2,321) | | 1,171 | | 2,478 | | (12,667) |
Total | | (14,834) | | (216,067) | | (37,456) | | 17,026 | | 162,017 | | (69,729) | | 60,516 |
Deferred and non-current -- net | | 100,584 | | 308,659 | | 85,728 | | 26,400 | | (145,981) | | 108,253 | | 39,866 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments -- net | | (3,994) | | (3,407) | | (3,222) | | (1,103) | | (323) | | (1,609) | | (3,481) |
Income taxes | | $81,756 | | $89,185 | | $45,050 | | $42,323 | | $15,713 | | $36,915 | | $96,901 |
| | | | | | | | | | | | | | |
Entergy Corporation also hasand Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | ($200,032) | | $96,585 | | $335,164 | | $43,214 | | $22,419 | | $73,974 | | $25,356 |
State | | 12,533 | | 39,423 | | 59,304 | | 5,099 | | (3,493) | | 3,954 | | 8,518 |
Total | | (187,499) | | 136,008 | | 394,468 | | 48,313 | | 18,926 | | 77,928 | | 33,874 |
Deferred and non-current -- net | | 288,118 | | (74,681) | | (320,596) | | (13,918) | | 4,471 | | (48,200) | | 29,100 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments - net | | (3,996) | | (4,130) | | (3,224) | | (1,155) | | (345) | | (1,610) | | (3,480) |
Income taxes | | $96,623 | | $57,197 | | $70,648 | | $33,240 | | $23,052 | | $28,118 | | $59,494 |
| | | | | | | | | | | | | | |
Total income taxes for Entergy Corporation and Subsidiaries differ from the abilityamounts computed by applying the statutory income tax rate to issue letters of credit against the total borrowing capacity of the credit facility.income before taxes. The facility fee is currently 0.09% of the commitment amount. Facility fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest ratereasons for the year ended December 31,differences for the years 2010, 2009, was 1.377% onand 2008 are:
| | 2010 | | 2009 | | 2008 |
| | (In Thousands) |
| | | | | | |
Net income attributable to Entergy Corporation | | $1,250,242 | | $1,231,092 | | $1,220,566 |
Preferred dividend requirements of subsidiaries | | 20,063 | | 19,958 | | 19,969 |
Consolidated net income | | 1,270,305 | | 1,251,050 | | 1,240,535 |
Income taxes | | 617,239 | | 632,740 | | 602,998 |
Income before income taxes | | $1,887,544 | | $1,883,790 | | $1,843,533 |
| | | | | | |
Computed at statutory rate (35%) | | $660,640 | | $659,327 | | $645,237 |
Increases (reductions) in tax resulting from: | | | | | | |
State income taxes net of federal income tax effect | | 40,530 | | 65,241 | | 9,926 |
Regulatory differences - utility plant items | | 14,931 | | 57,383 | | 45,543 |
Amortization of investment tax credits | | (15,980) | | (16,745) | | (17,458) |
Writeoff of reorganization costs | | (19,974) | | - | | - |
Tax law change-Medicare Part D | | 13,616 | | - | | - |
Decommissioning trust fund basis | | - | | (7,917) | | (417) |
Capital gains / (losses) | | - | | (28,051) | | (74,278) |
Flow-through / permanent differences | | (26,370) | | (49,486) | | 14,656 |
Provision for uncertain tax positions | | (43,115) | | (17,435) | | (27,970) |
Valuation allowance | | - | | (40,795) | | 11,770 |
Other - net | | (7,039) | | 11,218 | | (4,011) |
Total income taxes as reported | | $617,239 | | $632,740 | | $602,998 |
| | | | | | |
Effective Income Tax Rate | | 32.7% | | 33.6% | | 32.7% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total income taxes for the drawn portionRegistrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2010, 2009, and 2008 are:
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Net income | | $172,618 | | $190,738 | | $231,435 | | $83,687 | | $31,005 | | $66,200 | | $82,624 |
Income taxes | | 112,944 | | 75,878 | | 66,546 | | 49,064 | | 16,527 | | 42,383 | | 56,049 |
Pretax income | | $285,562 | | $266,616 | | $297,981 | | $132,751 | | $47,532 | | $108,583 | | $138,673 |
| | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $99,947 | | $93,316 | | $104,293 | | $46,463 | | $16,636 | | $38,004 | | $48,536 |
Increases (reductions) in tax | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | |
federal income tax effect | | 13,156 | | 1,142 | | (10,618) | | 1,156 | | 1,377 | | 424 | | 2,206 |
Regulatory differences - | | | | | | | | | | | | | | |
utility plant items | | 5,982 | | (5,551) | | (987) | | 1,812 | | 3,815 | | 2,564 | | 7,297 |
Amortization of investment | | | | | | | | | | | | | | |
tax credits | | (2,983) | | (3,309) | | (3,192) | | (972) | | (313) | | (1,596) | | (3,480) |
Flow-through / permanent | | | | | | | | | | | | | | |
differences | | (1,235) | | (7,996) | | (754) | | 153 | | (4,883) | | 236 | | (497) |
Non-taxable | | | | | | | | | | | | | | |
dividend income | | - | | (9,189) | | (23,603) | | - | | - | | - | | - |
Provision for uncertain | | | | | | | | | | | | | | |
tax positions | | (2,100) | | 7,200 | | 2,200 | | 700 | | (300) | | 2,800 | | 2,090 |
Other -- net | | 177 | | 265 | | (793) | | (248) | | 195 | | (49) | | (103) |
Total income taxes | | $112,944 | | $75,878 | | $66,546 | | $49,064 | | $16,527 | | $42,383 | | $56,049 |
| | | | | | | | | | | | | | |
Effective Income Tax Rate | | 39.6% | | 28.5% | | 22.3% | | 37.0% | | 34.8% | | 39.0% | | 40.4% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Net income | | $66,875 | | $153,047 | | $232,845 | | $77,636 | | $31,025 | | $63,841 | | $48,908 |
Income taxes | | 81,756 | | 89,185 | | 45,050 | | 42,323 | | 15,713 | | 36,915 | | 96,901 |
Pretax income | | $148,631 | | $242,232 | | $277,895 | | $119,959 | | $46,738 | | $100,756 | | $145,809 |
| | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $52,021 | | $84,781 | | $97,263 | | $41,986 | | $16,358 | | $35,264 | | $51,033 |
Increases (reductions) in tax | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | |
federal income tax effect | | 9,617 | | 6,487 | | 5,095 | | 2,417 | | 1,387 | | 1,509 | | 4,033 |
Regulatory differences - | | | | | | | | | | | | | | |
utility plant items | | 19,275 | | 10,303 | | 14,463 | | 1,365 | | (55) | | 2,008 | | 10,024 |
Amortization of investment | | | | | | | | | | | | | | |
tax credits | | (3,972) | | (3,088) | | (3,192) | | (1,092) | | (324) | | (1,596) | | (3,480) |
Flow-through / permanent | | | | | | | | | | | | | | |
differences | �� | 2,331 | | (690) | | (7,539) | | (319) | | (2,300) | | (1,538) | | (4,462) |
Non-taxable | | | | | | | | | | | | | | |
dividend income | | - | | (6,627) | | (19,075) | | - | | - | | - | | - |
Benefit of Entergy Corporation | | | | | | | | | | | | | | |
expenses | | 978 | | (170) | | (24,231) | | (2,841) | | 31 | | - | | 35,027 |
Provision for uncertain | | | | | | | | | | | | | | |
tax positions | | - | | (5,400) | | (17,700) | | 800 | | (400) | | 600 | | 4,900 |
Other -- net | | 1,506 | | 3,589 | | (34) | | 7 | | 1,016 | | 668 | | (174) |
Total income taxes | | $81,756 | | $89,185 | | $45,050 | | $42,323 | | $15,713 | | $36,915 | | $96,901 |
| | | | | | | | | | | | | | |
Effective Income Tax Rate | | 55.0% | | 36.8% | | 16.2% | | 35.3% | | 33.6% | | 36.6% | | 66.5% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Net income | | $47,152 | | $144,767 | | $157,543 | | $59,710 | | $34,947 | | $57,895 | | $91,067 |
Income taxes | | 96,623 | | 57,197 | | 70,648 | | 33,240 | | 23,052 | | 28,118 | | 59,494 |
Pretax income | | $143,775 | | $201,964 | | $228,191 | | $92,950 | | $57,999 | | $86,013 | | $150,561 |
| | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $50,321 | | $70,687 | | $79,867 | | $32,533 | | $20,299 | | $30,105 | | $52,696 |
Increases (reductions) in tax | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | |
federal income tax effect | | 10,754 | | (891) | | (18,486) | | 4,126 | | 2,057 | | 3,138 | | 5,604 |
Regulatory differences - | | | | | | | | | | | | | | |
utility plant items | | 17,542 | | 3,308 | | 9,960 | | 3,305 | | 1,202 | | 1,076 | | 9,150 |
Amortization of investment | | | | | | | | | | | | | | |
tax credits | | (3,972) | | (3,730) | | (3,192) | | (1,140) | | (348) | | (1,596) | | (3,480) |
Flow-through / permanent | | | | | | | | | | | | | | |
differences | | 17,868 | | (12,130) | | 11,885 | | (477) | | (694) | | (4,133) | | (1,956) |
Non-taxable | | | | | | | | | | | | | | |
dividend income | | - | | - | | (10,332) | | (3,591) | | - | | - | | - |
Benefit of Entergy Corporation expenses | | - | | - | | - | | (1,556) | | - | | - | | (3,420) |
Provision for uncertain | | | | | | | | | | | | | | |
tax positions | | 2,800 | | 1,000 | | 1,150 | | 700 | | 200 | | (1,200) | | 900 |
Other – net | | 1,310 | | (1,047) | | (204) | | (660) | | 336 | | 728 | | - |
Total income taxes | | $96,623 | | $57,197 | | $70,648 | | $33,240 | | $23,052 | | $28,118 | | $59,494 |
| | | | | | | | | | | | | | |
Effective Income Tax Rate | | 67.2% | | 28.3% | | 31.0% | | 35.8% | | 39.7% | | 32.7% | | 39.5% |
The flow-through/permanent differences for Entergy Arkansas in 2008 result from the facility. Following is a summarywrite-off of the borrowings outstandingregulatory assets associated with storm reserve costs, lease termination removal costs, and capacity available under the facilitystock-based compensation which are no longer probable of recovery. The flow-through/permanent differences for Entergy Gulf States Louisiana in 2008 result mainly from regulatory and tax accounting applied to its pension payments.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2009.2010 and 2009 are as follows:
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) |
| | | | | | |
$3,500 | | $2,566 | | $28 | | $906 |
Entergy Corporation's facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur. | | 2010 | | 2009 |
| | (In Thousands) |
Deferred tax liabilities: | | | | |
Plant-related basis differences | | ($5,947,760) | | ($5,520,095) |
Net regulatory assets/(liabilities) | | (1,074,133) | | (1,147,710) |
Power purchase agreements | | (265,429) | | (862,322) |
Nuclear decommissioning trusts | | (439,481) | | (855,608) |
Other | | (679,302) | | (456,053) |
Total | | (8,406,105) | | (8,841,788) |
| | | | |
Deferred tax assets: | | | | |
Accumulated deferred investment | | | | |
tax credit | | 111,170 | | 118,587 |
Pension and other post-employment benefits | | 161,730 | | 356,284 |
Nuclear decommissioning liabilities | | 285,889 | | 313,648 |
Sale and leaseback | | 256,157 | | 260,934 |
Provision for regulatory adjustments | | 100,504 | | 103,403 |
Provision for contingencies | | 28,554 | | 98,514 |
Unbilled/deferred revenues | | 18,642 | | 31,995 |
Customer deposits | | 15,724 | | 13,073 |
Net operating loss carryforwards | | 123,710 | | 148,979 |
Capital losses | | 56,602 | | 45,787 |
Other | | 19,009 | | 160,264 |
Valuation allowance | | (70,089) | | (47,998) |
Total | | 1,107,602 | | 1,603,470 |
| | | | |
Noncurrent accrued taxes (including unrecognized | | | | |
tax benefits) | | (1,261,455) | | (473,064) |
| | | | |
Accumulated deferred income taxes and taxes accrued | | ($8,559,958) | | ($7,711,382) |
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi,Entergy’s estimated tax attributes carryovers and Entergy Texas each had credit facilities availabletheir expiration dates as of December 31, 20092010 are as follows:
Carryover Description | | Carryover Amount | | Year(s) of expiration |
| | | | |
Federal net operating losses | | $10 billion | | 2023-2029 |
State net operating losses | | $7.5 billion | | 2011-2030 |
Federal capital losses | | $60.7 million | | 2014 |
State capital losses | | $855 million | | 2011-2015 |
Federal minimum tax credits | | $29 million | | never |
Other federal and state credits | | $70 million | | 2011-2030 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns.
Because it is more likely than not that the benefit from certain state net operating and capital loss carryovers will not be utilized, a valuation allowance of $28 million and $34 million has been provided on the deferred tax assets relating to these state net operating and capital loss carryovers, respectively.
Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2010 and 2009 are as follows:
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | |
Plant-related basis differences - net | | ($1,156,099) | | ($992,939) | | ($983,926) | | ($526,062) | | ($178,434) | | ($799,937) | | ($328,060) |
Net regulatory assets/(liabilities) | | (145,649) | | (253,389) | | (289,297) | | (63,515) | | 37,946 | | (135,006) | | (225,222) |
Power purchase agreements | | 582 | | 102,581 | | (417,388) | | (766) | | (61) | | (6,851) | | - |
Nuclear decommissioning trusts | | (9,968) | | (978) | | (3,806) | | - | | - | | - | | (4,102) |
Deferred fuel | | (24,210) | | (935) | | (7,584) | | (4,521) | | (626) | | 10,025 | | (60) |
Other | | (123,524) | | (2,505) | | (21,971) | | (10,991) | | (13,839) | | (19,712) | | (15,234) |
Total | | ($1,458,868) | | ($1,148,165) | | ($1,723,972) | | ($605,855) | | ($155,014) | | ($951,481) | | ($572,678) |
| | | | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | | | |
tax credits | | 17,623 | | 32,651 | | 29,417 | | 2,502 | | 706 | | 7,327 | | 20,944 |
Pension and OPEB | | (64,774) | | 70,954 | | 7,922 | | (27,111) | | (11,527) | | (38,152) | | (18,255) |
Nuclear decommissioning liabilities | | (173,666) | | (41,829) | | - | | - | | - | | - | | (69,610) |
Sale and leaseback | | - | | - | | 80,117 | | - | | - | | - | | 176,040 |
Provision for regulatory adjustments | | - | | 100,504 | | - | | - | | - | | - | | - |
Unbilled/deferred revenues | | 8,056 | | (23,853) | | 6,892 | | 8,914 | | 1,538 | | 15,775 | | - |
Customer deposits | | 7,907 | | 618 | | 5,699 | | 1,391 | | 109 | | - | | - |
Rate refund | | 10,873 | | (5,386) | | 131 | | - | | - | | (4,008) | | - |
NOL carryforward | | - | | 40 | | 41 | | - | | 8 | | 139,859 | | - |
Other | | 13,589 | | 26,468 | | 25,897 | | 14,585 | | 21,310 | | 28,508 | | 16,486 |
Total | | (180,392) | | 160,167 | | 156,116 | | 281 | | 12,144 | | 149,309 | | 125,605 |
| | | | | | | | | | | | | | |
Noncurrent accrued taxes (including | | | | | | | | | | | | | | |
unrecognized tax benefits) | | (104,925) | | (419,125) | | (321,757) | | (55,585) | | (22,328) | | 17,256 | | (178,447) |
| | | | | | | | | | | | | | |
Accumulated deferred income | | | | | | | | | | | | | | |
taxes and taxes accrued | | ($1,744,185) | | ($1,407,123) | | ($1,889,613) | | ($661,159) | | ($165,198) | | ($784,916) | | ($625,520) |
| | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | |
Plant-related basis differences - net | | ($987,968) | | ($1,057,746) | | ($981,938) | | ($492,769) | | ($165,552) | | ($756,898) | | ($278,973) |
Net regulatory assets/(liabilities) | | (176,945) | | (249,870) | | (294,431) | | (63,887) | | 40,831 | | (128,807) | | (274,602) |
Power purchase agreements | | (46,244) | | 37,995 | | (477,965) | | 1,059 | | 60,705 | | (36,898) | | 25,192 |
Nuclear decommissioning trusts | | (198,301) | | (58,100) | | (12,369) | | - | | - | | - | | (88,646) |
Deferred fuel | | 2,948 | | (3,416) | | (2,876) | | - | | - | | 2,627 | | (21) |
Other | | (139,501) | | (3,647) | | (38,442) | | (21,763) | | (32,331) | | (19,923) | | (14,621) |
Total | | ($1,546,011) | | ($1,334,784) | | ($1,808,021) | | ($577,360) | | ($96,347) | | ($939,899) | | ($631,671) |
| | | | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | | | |
tax credits | | 18,795 | | 33,957 | | 30,648 | | 2,874 | | 2,153 | | 7,886 | | 22,274 |
Pension and OPEB | | 6,857 | | 80,127 | | 44,451 | | (2,110) | | (2,930) | | (23,489) | | 2,991 |
Nuclear decommissioning liability | | 12,070 | | - | | - | | - | | - | | - | | 3,160 |
Sale and leaseback | | - | | - | | 84,517 | | - | | - | | - | | 176,417 |
Provision for regulatory adjustments | | - | | 103,403 | | - | | - | | - | | - | | - |
Unbilled/deferred revenues | | 13,619 | | (17,236) | | (1,464) | | 14,335 | | - | | 22,741 | | - |
Customer deposits | | 8,540 | | 616 | | 5,698 | | (1,890) | | 109 | | - | | - |
Rate refund | | 11,786 | | (6,041) | | 121 | | - | | - | | (4,018) | | - |
NOL carryforward | | - | | 9,398 | | 3,521 | | - | | 6,017 | | 156,153 | | 7,546 |
Other | | (113) | | 6,780 | | 13,220 | | (5,701) | | 19,479 | | 40,032 | | 15,685 |
Total | | 71,554 | | 211,004 | | 180,712 | | 7,508 | | 24,828 | | 199,305 | | 228,073 |
| | | | | | | | | | | | | | |
Noncurrent accrued taxes (including | | | | | | | | | | | | | | |
unrecognized tax benefits) | | (151,079) | | (167,324) | | (196,024) | | (33,505) | | (131,142) | | 35,424 | | (224,733) |
| | | | | | | | | | | | | | |
Accumulated deferred income | | | | | | | | | | | | | | |
taxes and taxes accrued | | ($1,625,536) | | ($1,291,104) | | ($1,823,333) | | ($603,357) | | ($202,661) | | ($705,170) | | ($628,331) |
| | | | | | | | | | | | | | |
The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2010 are as follows:
| | Entergy CompanyArkansas
| | Entergy Gulf States Louisiana | | Entergy Expiration DateLouisiana
| | Amount ofEntergy
FacilityMississippi
| | Entergy Interest Rate (a)New Orleans
| | Amount Drawn
as ofEntergy
December 31, 2009Texas
| | System Energy |
| | | | | | | | |
Entergy Arkansas | | April 2010 | | | |
Federal net operating losses | | $337 million | | $19 million | | $315 million | | - | | - | | $417 million | | - |
Year(s) of expiration | | 2028-2030 | | 2029 | | 2029-2030 | | N/A | | N/A | | 2028-2029 | | N/A |
| | | | | | | | | | | | | | |
State net operating losses | | - | | $8878 million (b) | | 5.00%$380 million | | - |
Entergy Gulf States Louisiana | | August 2012 | | $10034 million (c) | | 0.71% | | - |
Entergy Louisiana | | August 2012- |
Year(s) of expiration | | N/A | | 2023-2024 | | 2023-2025 | | N/A | | 2020-2021 | | N/A | | N/A |
| | | | | | | | | | | | | | |
Federal minimum tax credits | | $5 million | | $17 million | | - | | $1 million | | $1 million | | - | | - |
Year(s) of expiration | | never | | never | | N/A | | never | | never | | N/A | | N/A |
| | | | | | | | | | | | | | |
Other federal credits | | $2001 million (d) | | 0.64%$1 million | | $1 million | | - |
Entergy Mississippi | | May 2010 | | $351 million (e) | | 1.98% | | - |
Entergy Mississippi | | May 2010 | | $251 million (e) |
Year(s) of expiration | | 1.98%2024-2028 | | 2024-2028 | | 2024-2030 | | N/A | | 2024-2028 | | N/A | | 2024-2030 |
| | | | | | | | | | | | | | |
State credits | | - |
Entergy Mississippi | | May 2010- | | - | | $104.8 million (e) | | 1.91% | | - |
Entergy Texas | | August 2012 | | $10011.2 million (f) | | 0.71%$1.9 million |
Year(s) of expiration | | -N/A | | N/A | | N/A | | 2013-2015 | | N/A | | 2011-2027 | | 2015 |
(a) | The interest rate is the weighted average interest rate as of December 31, 2009 applied or that would be applied to the outstanding borrowings under the facility. |
(b) | The credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization and contains an interest rate floor of 5%. Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable. |
(c) | The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2009, no letters of credit were outstanding. The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to the terms of the credit agreement, the amount of debt assumed by Entergy Texas ($168 million as of December 31, 2009 and $770 million as of December 31, 2008) is excluded from debt and capitalization in calculating the debt ratio. |
(d) | The credit facility allows Entergy Louisiana to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2009, no letters of credit were outstanding. The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(e) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable. Entergy Mississippi is required to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(f) | The credit facility allows Entergy Texas to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2009, no letters of credit were outstanding. The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to the terms of the credit agreement securitization bonds are excluded from debt and capitalization in calculating the debt ratio. |
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through October 31, 2011 under a FERC order dated October 14, 2009. In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the FERC-authorized limits. The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of December 31, 2009 (aggregating both money pool and external short-term borrowings) for the Registrant Subsidiaries:Contents
| Authorized | | Borrowings |
| (In Millions) |
Entergy Arkansas | $250 | | - |
Entergy Gulf States Louisiana | $200 | | - |
Entergy Louisiana | $250 | | - |
Entergy Mississippi | $175 | | - |
Entergy New Orleans | $100 | | - |
Entergy Texas | $200 | | - |
System Energy | $200 | | - |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5. LONG - - TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Long-term debt for Entergy Corporation and subsidiaries as of December 31, 2009 and 2008 consisted of:
| 2009 | | 2008 |
| (In Thousands) |
Mortgage Bonds: | | | |
Libor + 0.40% Series due December 2009-Entergy Gulf States Louisiana (f) | $- | | $219,470 |
4.5% Series due June 2010 - Entergy Arkansas | 100,000 | | 100,000 |
4.67% Series due June 2010 - Entergy Louisiana | 55,000 | | 55,000 |
4.98% Series due July 2010 - Entergy New Orleans | 30,000 | | 30,000 |
5.12% Series due August 2010 - Entergy Gulf States Louisiana (f) | - | | 100,000 |
5.83% Series due November 2010 - Entergy Louisiana | 150,000 | | 150,000 |
4.65% Series due May 2011 - Entergy Mississippi | 80,000 | | 80,000 |
4.875% Series due November 2011 - Entergy Gulf States Louisiana (f) | 200,000 | | 200,000 |
6.2% Series due October 2012 - System Energy | 70,000 | | 70,000 |
6.0% Series due December 2012 - Entergy Gulf States Louisiana (f) | - | | 140,000 |
5.15% Series due February 2013 - Entergy Mississippi | 100,000 | | 100,000 |
5.40% Series due August 2013 - Entergy Arkansas | 300,000 | | 300,000 |
5.25% Series due August 2013 - Entergy New Orleans | 70,000 | | 70,000 |
5.09% Series due November 2014 - Entergy Louisiana | 115,000 | | 115,000 |
5.6% Series due December 2014 - Entergy Gulf States Louisiana (f) | - | | 50,000 |
5.70% Series due June 2015 - Entergy Gulf States Louisiana (f) | 200,000 | | 200,000 |
5.25% Series due August 2015 - Entergy Gulf States Louisiana (f) | 92,120 | | 200,000 |
5.56% Series due September 2015 - Entergy Louisiana | 100,000 | | 100,000 |
5.92% Series due February 2016 - Entergy Mississippi | 100,000 | | 100,000 |
6.75% Series due October 2017 - Entergy New Orleans | 25,000 | | 25,000 |
5.4% Series due May 2018 - Entergy Arkansas | 150,000 | | 150,000 |
6.0% Series due May 2018 - Entergy Gulf States Louisiana | 375,000 | | 375,000 |
4.95% Series due June 2018 - Entergy Mississippi | 95,000 | | 95,000 |
5.0% Series due July 2018 - Entergy Arkansas | 115,000 | | 115,000 |
6.50% Series due September 2018 - Entergy Louisiana | 300,000 | | 300,000 |
7.125% Series due February 2019 - Entergy Texas | 500,000 | | - |
5.5% Series due April 2019 - Entergy Louisiana | 100,000 | | 100,000 |
6.64% Series due July 2019 - Entergy Mississippi | 150,000 | | - |
5.6% Series due September 2024 - Entergy New Orleans | 34,097 | | 34,430 |
5.59% Series due October 2024 - Entergy Gulf States Louisiana | 300,000 | | - |
5.40% Series due November 2024 - Entergy Louisiana | 400,000 | | - |
5.66% Series due February 2025 - Entergy Arkansas | 175,000 | | 175,000 |
5.65% Series due September 2029 - Entergy New Orleans | 38,950 | | 39,345 |
6.7% Series due April 2032 - Entergy Arkansas | 100,000 | | 100,000 |
7.6% Series due April 2032 - Entergy Louisiana | 150,000 | | 150,000 |
6.0% Series due November 2032 - Entergy Arkansas | 100,000 | | 100,000 |
6.0% Series due November 2032 - Entergy Mississippi | 75,000 | | 75,000 |
7.25% Series due December 2032 - Entergy Mississippi | 100,000 | | 100,000 |
5.9% Series due June 2033 - Entergy Arkansas | 100,000 | | 100,000 |
6.20% Series due July 2033 - Entergy Gulf States Louisiana (f) | 240,000 | | 240,000 |
6.25% Series due April 2034 - Entergy Mississippi | 100,000 | | 100,000 |
6.4% Series due October 2034 - Entergy Louisiana | 70,000 | | 70,000 |
6.38% Series due November 2034 - Entergy Arkansas | 60,000 | | 60,000 |
6.18% Series due March 2035 - Entergy Gulf States Louisiana (f) | 85,000 | | 85,000 |
6.30% Series due September 2035 - Entergy Louisiana | 100,000 | | 100,000 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2009 | | 2008 |
| (In Thousands) |
| | | |
7.875% Series due June 2039 - Entergy Texas | 150,000 | | - |
Total mortgage bonds | 5,950,167 | | 5,068,245 |
Governmental Bonds (a): | | | |
5.45% Series due 2010, Calcasieu Parish - Louisiana (f) | $11,975 | | $22,095 |
6.75% Series due 2012, Calcasieu Parish - Louisiana (f) | 26,170 | | 48,285 |
6.7% Series due 2013, Pointe Coupee Parish - Louisiana (f) | 9,460 | | 17,450 |
5.7% Series due 2014, Iberville Parish - Louisiana (f) | 11,710 | | 21,600 |
5.8% Series due 2015, West Feliciana Parish - Louisiana (f) | 15,395 | | 28,400 |
7.0% Series due 2015, West Feliciana Parish - Louisiana (f) | 16,600 | | 39,000 |
5.8% Series due 2016, West Feliciana Parish - Louisiana (f) | 20,000 | | 20,000 |
6.3% Series due 2016, Pope County - Arkansas (b) | 19,500 | | 19,500 |
4.6% Series due 2017, Jefferson County - Arkansas (b) | 54,700 | | 54,700 |
6.3% Series due 2020, Pope County - Arkansas | 120,000 | | 120,000 |
5.0% Series due 2021, Independence County – Arkansas (b) | 45,000 | | 45,000 |
5.875% Series due 2022, Mississippi Business Finance Corp. | 216,000 | | 216,000 |
5.9% Series due 2022, Mississippi Business Finance Corp. | 102,975 | | 102,975 |
4.9% Series due 2022, Independence County - Mississippi (b) | 30,000 | | 30,000 |
4.6% Series due 2022, Mississippi Business Finance Corp. (b) | 16,030 | | 16,030 |
6.2% Series due 2026, Claiborne County - Mississippi | 90,000 | | 90,000 |
6.6% Series due 2028, West Feliciana Parish - Louisiana (f) | 21,680 | | 40,000 |
Total governmental bonds | 827,195 | | 931,035 |
Other Long-Term Debt: | | | |
Note Payable to NYPA, non-interest bearing, 4.8% implicit rate | $177,543 | | $198,127 |
5 year Bank Credit Facility, weighted avg rate 1.377% (Note 4) | 2,566,150 | | 3,237,434 |
Bank term loan, Entergy Corporation, avg rate 1.41%, due 2010 | 60,000 | | 60,000 |
7.75% Notes due December 2009, Entergy Corporation | - | | 267,000 |
6.58% Notes due May 2010, Entergy Corporation | 75,000 | | 75,000 |
6.9% Notes due November 2010, Entergy Corporation | 140,000 | | 140,000 |
7.625% Notes initially due February 2011, Entergy Corporation (c) | - | | 500,000 |
7.06% Notes due March 2011, Entergy Corporation | 86,000 | | 86,000 |
Long-term DOE Obligation (d) | 180,683 | | 180,428 |
Waterford 3 Lease Obligation 7.45% (Note 10) | 241,128 | | 247,725 |
Grand Gulf Lease Obligation 5.13% (Note 10) | 266,864 | | 295,304 |
5.51% Series Senior Secured, Series A due October 2013, Entergy GulfStates Reconstruction Funding | 56,728 | | 74,444 |
5.79% Series Senior Secured, Series A due October 2018, Entergy GulfStates Reconstruction Funding | 121,600 | | 121,600 |
5.93% Series Senior Secured, Series A due June 2022, Entergy GulfStates Reconstruction Funding | 114,400 | | 114,400 |
2.12% Series Senior Secured due February 2016, Entergy Texas RestorationFunding, LLC | 182,500 | | - |
3.65% Series Senior Secured due August 2019, Entergy Texas RestorationFunding, LLC | 144,800 | | - |
4.38% Series Senior Secured due November 2023, Entergy Texas RestorationFunding, LLC | 218,600 | | - |
Bank Credit Facility, weighted avg rate 2.285% (Note 4) - Entergy Texas | - | | 100,000 |
Unamortized Premium and Discount - Net | (10,635) | | (6,906) |
Other | 18,972 | | 28,913 |
Total Long-Term Debt | 11,417,695 | | 11,718,749 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2009 | | 2008 |
| (In Thousands) |
| | | |
Less Amount Due Within One Year | 711,957 | | 544,460 |
| | | |
Long-Term Debt Excluding Amount Due Within One Year | $10,705,738 | | $11,174,289 |
| | | |
Fair Value of Long-Term Debt (e) | $10,727,908 | | $10,117,865 |
(a) | Consists of pollution control revenue bonds and environmental revenue bonds. |
(b) | The bonds are secured by a series of collateral first mortgage bonds. |
(c) | In December 2005, Entergy Corporation sold 10 million equity units with a stated amount of $50 each. An equity unit consisted of (1) a note, initially due February 2011 and initially bearing interest at an annual rate of 5.75%, and (2) a purchase contract that obligated the holder of the equity unit to purchase for $50 between 0.5705 and 0.7074 shares of Entergy Corporation common stock on or before February 17, 2009. Entergy paid the holders quarterly contract adjustment payments of 1.875% per year on the stated amount of $50 per equity unit. Under the terms of the purchase contracts, Entergy attempted to remarket the notes in February 2009 but was unsuccessful, the note holders put the notes to Entergy, Entergy retired the notes, and Entergy issued 6,598,000 shares of common stock in the settlement of the purchase contracts. |
(d) | Pursuant to the Nuclear Waste Policy Act of 1982, Entergy's nuclear owner/licensee subsidiaries have contracts with the DOE for spent nuclear fuel disposal service. The contracts include a one-time fee for generation prior to April 7, 1983. Entergy Arkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt. |
(e) | The fair value excludes lease obligations of $241 million at Entergy Louisiana and $267 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $178 million at Entergy, and includes debt due within one year. It is determined using bid prices reported by dealer markets and by nationally recognized investment banking firms. |
(f) | Entergy Gulf States Louisiana remains primarily liable for all of the long-term debt issued by Entergy Gulf States, Inc. that was outstanding on December 31, 2007 and has not been subsequently repaid. Under a debt assumption agreement with Entergy Gulf States Louisiana, Entergy Texas assumed approximately 46% of this long-term debt. |
The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as of December 31, 2009, for the next five years are as follows:
| Amount |
| (In Thousands) |
| |
2010 | $652,916 |
2011 | $394,778 |
2012 | $2,689,454 |
2013 | $554,154 |
2014 | $144,920 |
In November 2000, Entergy's Non-Utility Nuclear business purchased the FitzPatrick and Indian Point 3 power plants in a seller-financed transaction. Entergy issued notes to NYPA with seven annual installments of approximately $108 million commencing one year from the date of the closing, and eight annual installments of $20 million commencing eight years from the date of the closing. These notes do not have a stated interest rate, but have an implicit interest rate of 4.8%. In accordance with the purchase agreement with NYPA, the purchase of Indian Point 2 in 2001 resulted in Entergy's Non-Utility Nuclear business becoming liable to NYPA for an additional $10 million per year for 10 years, beginning in September
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2003. This liability was recorded upon the purchase of Indian Point 2 in September 2001, and is included in the note payable to NYPA balance above. In July 2003, a payment of $102 million was made prior to maturity on the note payable to NYPA. Under a provision in a letter of credit supporting these notes, if certain of the Utility operating companies or System Energy were to default on other indebtedness, Entergy could be required to post collateral to support the letter of credit.
Covenants in the Entergy Corporation notes require it to maintain a consolidated debt ratio of 65% or less of its total capitalization. If Entergy's debt ratio exceeds this limit, or if Entergy Corporation or certain of the Utility operating companies default on other indebtedness or are in bankruptcy or insolvency proceedings, an acceleration of the notes' maturity dates may occur.
Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have received FERC long-term financing orders authorizing long-term securities issuances. Entergy Arkansas has received an APSC long-term financing order authorizing long-term securities issuances. The long-term securities issuances of Entergy New Orleans are limited to amounts authorized by the City Council, and the current authorization extends through August 2010.
Capital Funds Agreement
Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:
· | maintain System Energy's equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); |
· | permit the continued commercial operation of Grand Gulf; |
· | pay in full all System Energy indebtedness for borrowed money when due; and |
· | enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy's rights in the agreement as security for the specific debt. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Unrecognized tax benefits
Long-term debt forAccounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the Registrant Subsidiariesfinancial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:
| | 2010 | | 2009 | | 2008 |
| | (In Thousands) |
| | | | | | |
Gross balance at January 1 | | $4,050,491 | | $1,825,447 | | $2,523,794 |
Additions based on tax positions related to the current year | | 480,843 | | 2,286,759 | | 378,189 |
Additions for tax positions of prior years | | 871,682 | | 697,615 | | 259,434 |
Reductions for tax positions of prior years | | (438,460) | | (372,862) | | (166,651) |
Settlements | | (10,462) | | (385,321) | | (1,169,319) |
Lapse of statute of limitations | | (4,306) | | (1,147) | | - |
Gross balance at December 31 | | 4,949,788 | | 4,050,491 | | 1,825,447 |
Offsets to gross unrecognized tax benefits: | | | | | | |
Credit and loss carryovers | | (3,771,301) | | (3,349,589) | | (1,265,734) |
Cash paid to taxing authorities | | (373,000) | | (373,000) | | (548,000) |
Unrecognized tax benefits net of unused tax attributes and payments (1) | | $805,487 | | $327,902 | | $11,713 |
(1) | Potential tax liability above what is payable on tax returns |
The balances of unrecognized tax benefits include $605 million, $522 million, and $543 million as of December 31, 2010, 2009, and 2008, consisted of:respectively, which, if recognized, would lower the effective income tax rates. Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $4.34 billion, $3.53 billion, and $1.28 billion as of December 31, 2010, 2009, and 2008, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
| 2009 | | 2008 |
| (In Thousands) |
Entergy Arkansas | | | |
Mortgage Bonds: | | | |
4.50% Series due June 2010 | $100,000 | | $100,000 |
5.40% Series due August 2013 | 300,000 | | 300,000 |
5.4% Series due May 2018 | 150,000 | | 150,000 |
5.0% Series due July 2018 | 115,000 | | 115,000 |
5.66% Series due February 2025 | 175,000 | | 175,000 |
6.7% Series due April 2032 | 100,000 | | 100,000 |
6.0% Series due November 2032 | 100,000 | | 100,000 |
5.9% Series due June 2033 | 100,000 | | 100,000 |
6.38% Series due November 2034 | 60,000 | | 60,000 |
Total mortgage bonds | 1,200,000 | | 1,200,000 |
| | | |
Governmental Bonds (a): | | | |
6.3% Series due 2016, Pope County (d) | 19,500 | | 19,500 |
4.6% Series due 2017, Jefferson County (d) | 54,700 | | 54,700 |
6.3% Series due 2020, Pope County | 120,000 | | 120,000 |
5.0% Series due 2021, Independence County (d) | 45,000 | | 45,000 |
Total governmental bonds | 239,200 | | 239,200 |
| | | |
Other Long-Term Debt | | | |
Long-term DOE Obligation (b) | 180,683 | | 180,428 |
Unamortized Premium and Discount – Net | (1,314) | | (1,457) |
| | | |
Total Long-Term Debt | 1,618,569 | | 1,618,171 |
Less Amount Due Within One Year | 100,000 | | - |
Long-Term Debt Excluding Amount Due Within One Year | $1,518,569 | | $1,618,171 |
| | | |
Fair Value of Long-Term Debt (c) | $1,463,378 | | $1,306,382 |
| | | |
Entergy has made deposits, with the IRS against its potential liabilities arising from audit adjustments and settlements related to its uncertain tax positions. Deposits are expected to be made to the IRS as the cash tax benefits of uncertain tax positions are realized. As of December 31, 2010, Entergy has deposits of $373 million on account with the IRS to cover its uncertain tax positions.
Entergy accrues interest and penalties expenses, if any, related to unrecognized tax benefits in income tax expense. Entergy’s December 31, 2010, 2009, and 2008 accrued balance for the possible payment of interest and penalties is approximately $45 million, $48 million, and $55 million, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2010, 2009, and 2008 is as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2010 | | $293,920 | | $311,311 | | $352,577 | | $17,137 | | ($53,295) | | $32,299 | | $211,247 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 38,205 | | 87,755 | | 183,188 | | 4,679 | | 173 | | 5,169 | | 16,829 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 1,838 | | 25,960 | | 34,236 | | 6,857 | | 72,169 | | 5,868 | | 10,402 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (92,699) | | (71,033) | | (64,868) | | (4,469) | | (863) | | (29,100) | | (13,116) |
Settlements | | (1,025) | | (107) | | 55 | | (41) | | (8) | | (7) | | (844) |
Gross balance at December 31, 2010 | | 240,239 | | 353,886 | | 505,188 | | 24,163 | | 18,176 | | 14,229 | | 224,518 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (123,968) | | (29,257) | | (131,805) | | (6,477) | | (3,751) | | (6,269) | | (10,487) |
Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $40,294 | | $279,136 | | $373,383 | | $10,130 | | $13,251 | | $6,584 | | $172,153 |
| | | | | | | | | | | | | | |
| 2009 | | 2008 |
| (In Thousands) |
Entergy Gulf States Louisiana | | | |
Mortgage Bonds: | | | |
Libor + 0.4% Series due December 2009 (e) | $- | | $219,470 |
5.12% Series due August 2010 (e) | - | | 100,000 |
4.875% Series due November 2011 (e) | 200,000 | | 200,000 |
6.0% Series due December 2012 (e) | - | | 140,000 |
5.6% Series due December 2014 (e) | - | | 50,000 |
5.70% Series due June 2015 (e) | 200,000 | | 200,000 |
5.25% Series due August 2015 (e) | 92,120 | | 200,000 |
6.00% Series due May 2018 | 375,000 | | 375,000 |
5.59% Series due October 2024 | 300,000 | | - |
6.2% Series due July 2033 (e) | 240,000 | | 240,000 |
6.18% Series due March 2035 (e) | 85,000 | | 85,000 |
Total mortgage bonds | 1,492,120 | | 1,809,470 |
| | | |
Governmental Bonds (a) (e): | | | |
5.45% Series due 2010, Calcasieu Parish | 11,975 | | 22,095 |
6.75% Series due 2012, Calcasieu Parish | 26,170 | | 48,285 |
6.7% Series due 2013, Pointe Coupee Parish | 9,460 | | 17,450 |
5.7% Series due 2014, Iberville Parish | 11,710 | | 21,600 |
5.8% Series due 2015, West Feliciana Parish | 15,395 | | 28,400 |
7.0% Series due 2015, West Feliciana Parish | 16,600 | | 39,000 |
5.8% Series due 2016, West Feliciana Parish | 20,000 | | 20,000 |
6.6% Series due 2028, West Feliciana Parish | 21,680 | | 40,000 |
Total governmental bonds | 132,990 | | 236,830 |
| | | |
Other Long-Term Debt | | | |
Unamortized Premium and Discount - Net | (2,372) | | (2,574) |
Other | 3,603 | | 3,603 |
| | | |
Total Long-Term Debt | 1,626,341 | | 2,047,329 |
Less Amount Due Within One Year | 11,975 | | 219,470 |
Long-Term Debt Excluding Amount Due Within One Year | $1,614,366 | | $1,827,859 |
| | | |
Fair Value of Long-Term Debt (c) | $1,637,862 | | $1,871,421 |
| | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2009 | | $240,203 | | $275,378 | | $298,650 | | $31,724 | | $26,050 | | $39,202 | | $172,168 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 9,826 | | 5,436 | | 10,197 | | 283 | | 17 | | 97 | | 6,812 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 80,968 | | 102,466 | | 108,399 | | 1,256 | | 109 | | 28,821 | | 30,586 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (22,830) | | (33,000) | | (45,613) | | (4,235) | | (70,391) | | (17,853) | | (244) |
Settlements | | (14,247) | | (38,969) | | (19,056) | | (11,891) | | (9,080) | | (17,968) | | 1,925 |
Gross balance at December 31, 2009 | | 293,920 | | 311,311 | | 352,577 | | 17,137 | | (53,295) | | 32,299 | | 211,247 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (39,847) | | (20,031) | | (70,428) | | (1,618) | | (633) | | (30,921) | | (1,297) |
Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $178,096 | | $245,787 | | $282,149 | | $7,963 | | ($55,102) | | $2 | | $168,072 |
| | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2009 | | 2008 |
| (In Thousands) |
Entergy Louisiana | | | |
Mortgage Bonds: | | | |
4.67% Series due June 2010 | $55,000 | | $55,000 |
5.83% Series due November 2010 | 150,000 | | 150,000 |
5.09% Series due November 2014 | 115,000 | | 115,000 |
5.56% Series due September 2015 | 100,000 | | 100,000 |
6.50% Series due September 2018 | 300,000 | | 300,000 |
5.5% Series due April 2019 | 100,000 | | 100,000 |
5.40% Series due November 2024 | 400,000 | | - |
7.6% Series due April 2032 | 150,000 | | 150,000 |
6.4% Series due October 2034 | 70,000 | | 70,000 |
6.3% Series due September 2035 | 100,000 | | 100,000 |
Total mortgage bonds | 1,540,000 | | 1,140,000 |
| | | |
Other Long-Term Debt: | | | |
Waterford 3 Lease Obligation 7.45% (Note 10) | 241,128 | | 247,725 |
Unamortized Premium and Discount - Net | (1,576) | | (252) |
| | | |
Total Long-Term Debt | 1,779,552 | | 1,387,473 |
Less Amount Due Within One Year | 222,326 | | - |
Long-Term Debt Excluding Amount Due Within One Year | $1,557,226 | | $1,387,473 |
| | | |
Fair Value of Long-Term Debt (c) | $1,565,969 | | $1,085,155 |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2008 | | $309,019 | | $224,379 | | $66,291 | | $69,734 | | $46,904 | | $86,732 | | $197,307 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 685 | | 89,966 | | 236,499 | | 773 | | 404 | | 338 | | 502 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 12,465 | | 10,784 | | 5,300 | | 7,494 | | 1,025 | | 189 | | 1,405 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (330) | | (372) | | (1,567) | | (8,051) | | (13,645) | | (5,082) | | (192) |
Settlements | | (81,636) | | (49,379) | | (7,873) | | (38,226) | | (8,638) | | (42,975) | | (26,854) |
Gross balance at December 31, 2008 | | 240,203 | | 275,378 | | 298,650 | | 31,724 | | 26,050 | | 39,202 | | 172,168 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (147,737) | | - | | (127,572) | | - | | (6,392) | | (39,202) | | - |
Cash paid to taxing authorities | | (69,273) | | (36,812) | | - | | (806) | | (554) | | (1,376) | | (66,398) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $23,193 | | $238,566 | | $171,078 | | $30,918 | | $19,104 | | ($1,376) | | $105,770 |
| | | | | | | | | | | | | | |
The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would affect the effective income tax rate as follows:
| December 31, 2010 | | December 31, 2009 | | December 31, 2008 |
| | | | | |
| | | | | |
Entergy Arkansas | $0.2 | | $1.2 | | $1.2 |
Entergy Gulf States Louisiana | $129.6 | | $69.8 | | $75.2 |
Entergy Louisiana | $286.7 | | $192.7 | | $210.4 |
Entergy Mississippi | $5.3 | | $3.3 | | $2.5 |
Entergy New Orleans | - | | $0.3 | | $0.7 |
Entergy Texas | $6.0 | | $1.2 | | $0.6 |
System Energy | $12.1 | | $8.7 | | $3.9 |
The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Accrued balances for the possible payment of interest and penalties are as follows:
| December 31, 2010 | | December 31, 2009 | | December 31, 2008 |
| (In Millions) |
| | | | | |
Entergy Arkansas | - | | $0.7 | | $1.6 |
Entergy Gulf States Louisiana | $9.7 | | $2.3 | | $1.4 |
Entergy Louisiana | $3.3 | | $1.2 | | - |
Entergy Mississippi | $1.6 | | $2.1 | | $2.1 |
Entergy New Orleans | - | | $0.3 | | $0.7 |
Entergy Texas | $0.1 | | $0.2 | | $0.2 |
System Energy | $8.2 | | $7.2 | | $3.3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2009 | | 2008 |
| (In Thousands) |
Entergy Mississippi | | | |
Mortgage Bonds: | | | |
4.65% Series due May 2011 | $80,000 | | $80,000 |
5.15% Series due February 2013 | 100,000 | | 100,000 |
5.92% Series due February 2016 | 100,000 | | 100,000 |
4.95% Series due June 2018 | 95,000 | | 95,000 |
6.64% Series due July 2019 | 150,000 | | - |
6.0% Series due November 2032 | 75,000 | | 75,000 |
7.25% Series due December 2032 | 100,000 | | 100,000 |
6.25% Series due April 2034 | 100,000 | | 100,000 |
Total mortgage bonds | 800,000 | | 650,000 |
| | | |
Governmental Bonds (a): | | | |
4.60% Series due 2022, Mississippi Business Finance Corp.(d) | 16,030 | | 16,030 |
4.90% Series due 2022, Independence County (d) (f) | 30,000 | | 30,000 |
Total governmental bonds | 46,030 | | 46,030 |
| | | |
Other Long-Term Debt: | | | |
Unamortized Premium and Discount - Net | (726) | | (700) |
| | | |
Total Long-Term Debt | 845,304 | | 695,330 |
Less Amount Due Within One Year | - | | - |
Long-Term Debt Excluding Amount Due Within One Year | $845,304 | | $695,330 |
| | | |
Fair Value of Long-Term Debt (c) | $874,131 | | $629,227 |
| 2009 | | 2008 |
| (In Thousands) |
Entergy New Orleans | | | |
Mortgage Bonds: | | | |
4.98% Series due July 2010 | $30,000 | | $30,000 |
5.25% Series due August 2013 | 70,000 | | 70,000 |
6.75% Series due October 2017 | 25,000 | | 25,000 |
5.6% Series due September 2024 | 34,097 | | 34,430 |
5.65% Series due September 2029 | 38,950 | | 39,345 |
Total mortgage bonds | 198,047 | | 198,775 |
| | | |
Other Long-Term Debt: | | | |
Affiliate Notes Payable (g) | 74,230 | | 74,230 |
Unamortized Premium and Discount - Net | (24) | | (32) |
| | | |
Total Long-Term Debt | 272,253 | | 272,973 |
Less Amount Due Within One Year | 104,230 | | - |
Long-Term Debt Excluding Amount Due Within One Year | $168,023 | | $272,973 |
| | | |
Fair Value of Long-Term Debt (c) | $198,062 | | $179,009 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas
Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges, not recovered in base rates. Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
In October 2007, Entergy Texas filed a request with the PUCT to refund $45.6 million, including interest, of fuel cost recovery over-collections through September 2007. In January 2008, Entergy Texas filed with the PUCT a stipulation and settlement agreement among the parties that updated the over-collection balance through November 2007 and established a refund amount, including interest, of $71 million. The PUCT approved the agreement in February 2008. The refund was made over a two-month period beginning February 2008, but was reduced by $10.3 million of under-recovered incremental purchased capacity costs.
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 rough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. In December 2008 the PUCT adopted an ALJ proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. Because the PUCT allocation to Texas retail
Entergy Corporation and Subsidiaries
Notes to Financial Statements
customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision results in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. Entergy Texas filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. In May 2009 the FERC issued an order rejecting the proposed amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). The PUCT and FERC decisions are now final.In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Entergy Texas requested that the proposed refund be made over a four-month period beginning June 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009.
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Entergy Texas requested that the proposed refund be made over a six-month period beginning January 2010. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund was made for most customers over a three-month period beginning January 2010.
In June 2010, Entergy Texas filed with the PUCT a request to refund approximately $66 million, including interest, of fuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
In December 2010, Entergy Texas filed with the PUCT a request to refund approximately $52 million, including interest, of fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved on an interim basis and is pending final action by the PUCT, Entergy Texas will refund over-collections of approximately $72.7 million through November 2010. The refund will be made for most customers over a three-month period beginning with the February 2011 billing cycle.
Entergy Texas’s December 2009 rate case filing, which is discussed below, also included a request to reconcile $1.8 billion of fuel and purchased power costs covering the period April 2007 through June 2009.
Storm Cost Recovery Filings with Retail Regulators
Entergy Arkansas
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to Entergy Arkansas's transmission and distribution lines, equipment, poles, and other facilities. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. In June 2010 the APSC issued a financing order authorizing the issuance of approximately $126.3 million in storm cost recovery bonds, which includes carrying costs of $11.5 million and $4.6 million of up-front financing costs. See Note 5 to the financial statements for a discussion of the August 2010 issuance of the securitization bonds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Gulf States Louisiana and Entergy Louisiana
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy's service territory. Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 fi nancings).Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm costs were financed primarily by Act 55 financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Act 55 financing savings to customers via a Storm Cost Offset rider.
In December 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financings are accomplished. In March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that includes these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, the LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In July 2010 the LCDA issued another $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3 million to acquire 1,502,643.04 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy Gulf States Louisiana and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agents for the state.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions of the Utility’s service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in widespread power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses.
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate.& #160; Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
In August 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the bonds on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy, Entergy Gulf States Louisiana or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana and Entergy Louisiana collect a system restoration charge on behalf of the LURC, and remit the collections to the bond indenture trustee. Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not report the collections as revenue because they are merely acting as the billing and collection agent for the state.
Entergy New Orleans
In December 2005 the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included Community Development Block Grant (CDBG) funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007 the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan. Entergy New Orleans received $180.8 million of CDBG funds in 2007 and $19.2 million in 2010.
Entergy Texas
Hurricane Ike and Hurricane Gustav
Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas’s request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6 .8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
Little Gypsy Repowering Project (Entergy and Entergy Louisiana)
In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisiana complied with the LPSC’s directive and recommended that the project be suspended for an extended pe riod of time of three years or more. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC Staff and Intervenors filed testimony. The LPSC Staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, b ut at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it is probable that the Little Gypsy repowering project will be abandoned and accordingly reclassified the project costs from construction work in progress to a regulatory asset. This accounting reclassification does not modify Entergy Louisiana’s requested relief pending before the LPSC. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties conducted a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement is expected to be presented to the LPSC for approval in the first quarter 2011.
Retail Rate Proceedings
The following chart summarizes the Utility operating companies' current retail base rates:
Company | | Authorized Return on Common Equity | | |
| | | | |
Entergy Arkansas | | 10.2% | | -Current retail base rates implemented in the July 2010 billing cycle pursuant to a settlement approved by the APSC. |
| | | | |
Entergy Gulf States Louisiana | | 9.9%-11.4% Electric; 10.0%-11.0% Gas | | -Current retail electric base rates implemented in the September 2010 billing cycle based on Entergy Gulf States Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. Current retail gas base rates reflect the rate stabilization plan filing for the 2009 test year ended September 2009. |
Entergy Louisiana | | 9.45%- 11.05% | | -Current retail base rates implemented in the September 2010 billing cycle based on Entergy Louisiana's revised 2009 test year formula rate plan filing approved by the LPSC. |
| | | | |
Entergy Mississippi | | 10.79%- 13.05% | | -Current retail base rates reflect Entergy Mississippi's latest formula rate plan filing, based on the 2009 test year, and a settlement approved by the MPSC. |
| | | | |
Entergy New Orleans | | 10.7% - 11.5% Electric; 10.25% - 11.25% Gas | | -Current retail base rates implemented in the October 2010 billing cycle pursuant to Entergy New Orleans's 2009 test year formula rate plan filing and a settlement approved by the City Council. |
| | | | |
Entergy Texas | | 10.125% | | -Current retail base rates implemented for usage beginning August 15, 2010, pursuant to a settlement of Entergy Texas's base rate case approved by the PUCT. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC (Entergy Arkansas)
Retail Rates
2009 Base Rate Filing
In September 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. In June 2010 the APSC approved a settlement and subsequent compliance tariffs that provide for a $63.7 million rate increase, effective for bills rendered for the first billing cycle of July 2010. The settlement provides for a 10.2% return on common equity.
2006 Base Rate Filing
In August 2006, Entergy Arkansas filed with the APSC a request for a change in base rates. In June 2007, after hearings on the filing, the APSC ordered Entergy Arkansas to reduce its annual rates by $5 million, and set a return on common equity of 9.9% with a hypothetical common equity level lower than Entergy Arkansas’s actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy’s stock-based compensation plans, and left Entergy Arkansas with no mechanism to recover $52 million of costs previously accumulated in Entergy Arkansas’s storm reserve and $18 million of removal costs associated with the term ination of a lease. The base rate change was implemented effective for bills rendered after June 15, 2007.
Entergy Arkansas sought to overturn the APSC’s decision, but in December 2008 the Arkansas Court of Appeals upheld almost all aspects of the APSC decision. After considering the progress of the proceeding in light of the decision of the Court of Appeals, Entergy Arkansas recorded in the fourth quarter 2008 an approximately $70 million charge to earnings, on both a pre- and after-tax basis because these are primarily flow-through items, to recognize that the regulatory assets associated with the storm reserve costs, lease termination removal costs, and stock-based compensation were no longer probable of recovery. In April 2009 the Arkansas Supreme Court denied Entergy Arkansas’s petition for review of the Court of Appeals decision.
Filings with the LPSC
Formula Rate Plans (Entergy Gulf States Louisiana and Entergy Louisiana)
In March 2005 the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, establishes a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate pl an filing in June 2005. The formula rate plan was subsequently extended one year.
Entergy Louisiana made a rate filing with the LPSC requesting a base rate increase in January 2004. In May 2005 the LPSC approved a settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed below the formula rate plans for Entergy Gulf States Louisiana and Entergy Louisiana have been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, and 2010 test years.
Retail Rates - Electric
(Entergy Gulf States Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Gulf States Louisiana’s 2007 test year filing and provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.65% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 tes t year filing that was made in October 2009. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. In May 2010, Entergy Gulf States Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.25% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate increase for incremental capacity costs. In July 2010 the LPSC approved a $7.8 million increase in the revenue requirement for decommiss ioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana made a revised 2009 test year filing. The revised filing reflected a 10.12% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $25.2 million for capacity costs. The rates reflected in the revised filing became effective, beginning with the first billing cycle of September 2010. Entergy Gulf States Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in January 2011.
(Entergy Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy Louisiana’s 2006 and 2007 test year filings provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%).
Entergy Louisiana was permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the May 2010 billing cycle and a $0.1 million refund. In addition, Entergy Louisiana moved the recovery of approximately $12.5 million of capacity costs from fuel adjustment clause recovery to base rate recovery. At its April 21, 2010 meeting, the LPSC accepted the joint report.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2010, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2009 test year. The filing reflected a 10.82% return on common equity, which is within the allowed earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental capacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue requirement for decommissioning, effective September 2010. ; In August 2010, Entergy Louisiana made a revised 2009 test year formula rate plan filing. The revised filing reflected a 10.82% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million for capacity costs. The rates reflected in the revised filing became effective beginning with the first billing cycle of September 2010. Entergy Louisiana and the LPSC staff subsequently submitted a joint report on the 2009 test year filing consistent with these terms and the LPSC approved the joint report in December 2010.
Retail Rates - Gas (Entergy Gulf States Louisiana)
In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010. The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million. The sixty-day review and comment period for this filing remains open.
In January 2010, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2009. The filing showed an earned return on common equity of 10.87%, which is within the earnings bandwidth of 10.5% plus or minus fifty basis points, resulting in no rate change. In April 2010, Entergy Gulf States Louisiana filed a revised evaluation report reflecting changes agreed upon with the LPSC Staff. The revised evaluation report also resulted in no rate change.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. In March 2010 the MPSC issued an order: (1) providing the opportunity for a reset of Entergy Mississippi's return on common equity to a point within the formula rate plan bandwidth and eliminating the 50/50 sharing that had been in the plan, (2) modifying the performance measurement process, and (3) replacing the revenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a limit of four percent of revenues, although any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi's request to use a projected test year for its annual scheduled formula rate plan filing and, theref ore, Entergy Mississippi will continue to use a historical test year for its annual evaluation reports under the plan.
In March 2010, Entergy Mississippi submitted its 2009 test year filing, its first annual filing under the new formula rate plan rider. In June 2010 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provides for no change in rates, but does provide for the deferral as a regulatory asset of $3.9 million of legal expenses associated with certain litigation involving the Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the City Council (Entergy New Orleans)
Formula Rate Plans and Storm-related Riders
On July 31, 2008, Entergy New Orleans filed an electric and gas base rate case with the City Council. On April 2, 2009, the City Council approved a comprehensive settlement. The settlement provided for a net $35.3 million reduction in combined fuel and non-fuel electric revenue requirement, including conversion of a $10.6 million voluntary recovery credit, implemented in January 2008, to a permanent reduction and substantial realignment of Grand Gulf cost recovery from fuel to electric base rates, and a $4.95 million gas base rate increase, both effective June 1, 2009, with adjustment of the customer charges for all rate classes. A new three-year formula rate plan was also adopted, with terms including an 11.1% benchmark electric return on common equity (ROE) with a +/- 40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans is over- or under-earning. The formula rate plan also includes a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
The 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs.
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings presented various alternatives to reflect the effect of Entergy New Orleans’s lost customers and decreased revenue following Hurricane Katrina. The alternative that Entergy New Orleans recommended adjusts for lost customers and assumes that the City Council’s June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place during the rate-effective period (a significant portion of Grand Gulf costs was previously recovered through base rates).
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establish a storm reserve to provide for the risk of another storm.
In October 2006, the City Council approved a settlement agreement that resolved Entergy New Orleans’s rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respect to storm restoration costs the anticipated receipt of CDBG funding as recommended by the Louisiana Recovery Authority. The settlement provided for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause was continued. Gas base rates increased by $4.75 million in November 2006 and increased by an additional $1.5 million in March 2007 and an additional $4.75 million in November 2007. The settleme nt called for Entergy New Orleans to file a base rate case by July 31, 2008, which it did as discussed above. The settlement agreement discontinued the formula rate plan and the generation performance-based plan but permitted Entergy New Orleans to file an application to seek authority to implement formula rate plan mechanisms no sooner than six months following the effective date of the implementation of the base rates resulting from the July 31, 2008 base rate case. The settlement also authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the PUCT and Texas Cities (Entergy Texas)
Retail Rates
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The rate case also includes a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Beginning in May 2010, Entergy Texas implemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testi mony, of $58 million.
The parties filed a settlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. Baseline values were established to be used in Entergy Texas's request for a transmission cost recovery factor that will be made in a separate proceeding. The settlement states that Entergy Texas's fuel costs for the period April 2007 through June 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River B end decommissioning costs at $2.0 million annually. Consistent with the settlement, in the third quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the settlement in December 2010.
System Agreement Cost Equalization Proceedings
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Certain of the Utility operating companies’ retail regulators and other parties are pursuing litigation involving the System Agreement at the FERC. The proceedings include challenges to the allocation of costs as defined by the System Agreement and allegations of imprudence by the Utility operating companies in their execution of their obligations under the System Agreement.
In June 2005, the FERC issued a decision in the System Agreement litigation that had been commenced by the LPSC, and essentially affirmed its decision in a December 2005 order on rehearing. The FERC decision concluded, among other things, that:
· | The System Agreement no longer roughly equalizes total production costs among the Utility operating companies. |
· | In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs. |
· | In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies’ total production costs. |
· | The remedy ordered by FERC in 2005 required no refunds and became effective based on calendar year 2006 production costs and the first reallocation payments were made in 2007. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The FERC’s decision reallocates total production costs of the Utility operating companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. Under the current circumstances, this will be accomplished by payments from Utility operating companies whose production costs are more than 11% below Entergy System average production costs to Utility operating companies whose production costs are more than the Entergy System average production cost, with payments going first to those Utility operating companies whose total production costs are farthest above the Entergy System average.
Assessing the potential effects of the FERC’s decision requires assumptions regarding the future total production cost of each Utility operating company, which assumptions include the mix of solid fuel and gas-fired generation available to each company and the costs of natural gas and purchased power. Entergy Louisiana, Entergy Gulf States Louisiana, Entergy Texas, and Entergy Mississippi are more dependent upon gas-fired generation sources than Entergy Arkansas or Entergy New Orleans. Of these, Entergy Arkansas is the least dependent upon gas-fired generation sources. Therefore, increases in natural gas prices likely will increase the amount by which Entergy Arkansas’s total production costs are below the Entergy System average production costs.
The LPSC, APSC, MPSC, and the AEEC appealed the FERC’s decision to the United States Court of Appeals for the D.C. Circuit. Entergy and the City of New Orleans intervened in the various appeals. The D.C. Circuit issued its decision in April 2008. The D.C. Circuit affirmed the FERC’s decision in most respects, but remanded the case to the FERC for further proceedings and reconsideration of its conclusion that it was prohibited from ordering refunds and its determination to implement the bandwidth remedy commencing with calendar year 2006 production costs (with the first payments/receipts commencing in June 2007), rather than commencing the remedy on June 1, 2005. The D.C. Circuit concluded the FERC had failed so far in the proceeding to offer a reasoned explanation regarding these issues. As discussed below, in December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treatment of interruptible load in the allocation of capacity costs by the Utility operating companies. The FERC also deferred further action on the question of whether it provided sufficient rationale for not ordering refunds, and whether it impermissibly delayed implementation of the bandwidth remedy, until resolution of this paper hearing.
In April 2006, the Utility operating companies filed with the FERC their compliance filing to implement the provisions of the FERC’s decision. The filing amended the System Agreement to provide for the calculation of production costs, average production costs, and payments/receipts among the Utility operating companies to the extent required to maintain rough production cost equalization pursuant to the FERC’s decision. The FERC accepted the compliance filing in November 2006, with limited modifications. Provisions of the compliance filing as approved by the FERC include: the first payments commenced in June 2007, rather than earlier; interest is not required on the unpaid balance; and any payments will be made over seven months, rather than 1 2. In April 2007, the FERC denied various requests for rehearing, with one exception regarding the issue of retrospective refunds. That issue will be addressed subsequent to the remanded proceeding involving the interruptible load decision discussed further below in this section under “Interruptible Load Proceeding.”
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Calendar Year 2010 Production Costs
The liabilities and assets for the preliminary estimate of the payments and receipts required to implement the FERC’s remedy based on calendar year 2010 production costs were recorded in December 2010, based on certain year-to-date information. The preliminary estimate was recorded based on the following estimate of the payments/receipts among the Utility operating companies for 2011.
| Payments or (Receipts) |
| (In Millions) |
| |
Entergy Arkansas | $52 |
Entergy Gulf States Louisiana | $- |
Entergy Louisiana | $- |
Entergy Mississippi | ($37) |
Entergy New Orleans | ($15) |
Entergy Texas | $- |
The actual payments/receipts for 2011, based on calendar year 2010 production costs, will not be calculated until the Utility operating companies’ FERC Form 1s have been filed. Once the calculation is completed, it will be filed at the FERC. The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the Entergy System generating fleet, and multiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.
Rough Production Cost Equalization Rates
Each May since 2007 Entergy has filed with the FERC the rates to implement the FERC’s orders in the System Agreement proceeding. These filings show the following payments/receipts among the Utility operating companies are necessary to achieve rough production cost equalization as defined by the FERC’s orders:
| | 2007 Payments or (Receipts) Based on 2006 Costs | | 2008 Payments or (Receipts) Based on 2007 Costs | | 2009 Payments or (Receipts) Based on 2008 Costs | | 2010 Payments or (Receipts) Based on 2009 Costs |
| | (In Millions) |
| | | | | | | | |
Entergy Arkansas | | $252 | | $252 | | $390 | | $41 |
Entergy Gulf States Louisiana | | ($120) | | ($124) | | ($107) | | $- |
Entergy Louisiana | | ($91) | | ($36) | | ($140) | | ($22) |
Entergy Mississippi | | ($41) | | ($20) | | ($24) | | ($19) |
Entergy New Orleans | | $- | | ($7) | | $- | | $- |
Entergy Texas | | ($30) | | ($65) | | ($119) | | $- |
The APSC has approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas. Management believes that any changes in the allocation of production costs resulting from the FERC’s decision and related retail proceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs. See “Fuel and purchased power cost recovery, Entergy Texas,” above for discussion of a PUCT decision that resulted in $18.6 million of trapped costs between Entergy’s Texas and Louisiana jurisdictions. See “2007 Rate Filing Based on Calendar Year 2006 Production Costs” below for a discussion of a FERC decision that could result in $14.5 million of trapped costs at Entergy Arkansas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Based on the FERC’s April 27, 2007 order on rehearing that is discussed above, in the second quarter 2007 Entergy Arkansas recorded accounts payable and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC’s remedy based on calendar year 2006 production costs. Entergy Arkansas recorded a corresponding regulatory asset for its right to collect the payments from its customers, and Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas recorded corresponding regulatory liabilities for their obligations to pass the receipts on to their customers. The companies have followed this same accounting practice eac h year since then. The regulatory asset and liabilities are shown as “System Agreement cost equalization” on the respective balance sheets.
2007 Rate Filing Based on Calendar Year 2006 Production Costs
Several parties intervened in the 2007 rate proceeding at the FERC, including the APSC, the MPSC, the Council, and the LPSC, which have also filed protests. The PUCT also intervened. Intervenor testimony was filed in which the intervenors and also the FERC Staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for nuclear facilities. The effect of the various positions would be to reallocate costs among the Utility operating companies. The Utility operating companies filed rebuttal testimony explaining why the bandwidth payments are properly recoverab le under the AmerenUE contract, and explaining why the positions of FERC Staff and intervenors on the other issues should be rejected. A hearing in this proceeding concluded in July 2008, and the ALJ issued an initial decision in September 2008. The ALJ’s initial decision concludes, among other things, that: (1) the decisions to not exercise Entergy Arkansas’s option to purchase the Independence plant in 1996 and 1997 were prudent; (2) Entergy Arkansas properly flowed a portion of the bandwidth payments through to AmerenUE in accordance with the wholesale power contract; and (3) the level of nuclear depreciation and decommissioning expense reflected in the bandwidth calculation should be calculated based on NRC-authorized license life, rather than the nuclear depreciation and decommissioning expense authorized by the retail regulators for purposes of retail ratemaking. Following briefing by the parties, the matter was submitted to the FERC for decision. On January 11, 2010, the FERC issued its decision both affirming and overturning certain of the ALJ’s rulings, including overturning the decision on nuclear depreciation and decommissioning expense. The FERC’s conclusion related to the AmerenUE contract does not permit Entergy Arkansas to recover a portion of its bandwidth payment from AmerenUE. The Utility operating companies requested rehearing of that portion of the decision and requested clarification on certain other portions of the decision.
AmerenUE argued that its current wholesale power contract with Entergy Arkansas, pursuant to which Entergy Arkansas sells power to AmerenUE, does not permit Entergy Arkansas to flow through to AmerenUE any portion of Entergy Arkansas’s bandwidth payment. According to AmerenUE, Entergy Arkansas has sought to collect from AmerenUE approximately $14.5 million of the 2007 Entergy Arkansas bandwidth payment. The AmerenUE contract expired in August 2009. In April 2008, AmerenUE filed a complaint with the FERC seeking refunds of this amount, plus interest, in the event the FERC ultimately determines that bandwidth payments are not properly recovered under the AmerenUE contract. In response to the FERC’s decision discussed in the previous paragraph, Entergy Arkansas recorded a regulatory provision in the fourth quarter 2009 for a potential refund to AmerenUE.
2008 Rate Filing Based on Calendar Year 2007 Production Costs
Several parties intervened in the 2008 rate proceeding at the FERC, including the APSC, the LPSC, and AmerenUE, which have also filed protests. Several other parties, including the MPSC and the City Council, have intervened in the proceeding without filing a protest. In direct testimony filed on January 9, 2009, certain intervenors and also the FERC staff advocated a number of positions on issues that affect the level of production costs the individual Utility operating companies are permitted to reflect in the bandwidth calculation, including the level of depreciation and decommissioning expense for the nuclear and fossil-fueled generating facilities. The effect of these various positions would be to reallocate costs among the Utility operating companies . In addition, three issues were raised alleging imprudence by the Utility operating companies, including whether the Utility operating companies had properly reflected generating units’ minimum operating levels for purposes of making unit commitment and dispatch decisions, whether Entergy Arkansas’s sales to third parties from its retained share of the Grand Gulf nuclear facility were reasonable, prudent, and non-discriminatory, and whether Entergy Louisiana’s long-term Evangeline gas purchase contract was prudent and reasonable.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The parties reached a partial settlement agreement of certain of the issues initially raised in this proceeding. The partial settlement agreement was conditioned on the FERC accepting the agreement without modification or condition, which the FERC did on August 24, 2009. A hearing on the remaining issues in the proceeding was completed in June 2009, and in September 2009 the ALJ issued an initial decision. The initial decision affirms Entergy’s position in the filing, except for two issues that may result in a reallocation of costs among the Utility operating companies. Entergy, the APSC, the LPSC, and the MPSC have submitted briefs on exceptions in the proceeding, and the matter has been submitted to the FERC for decision.
2009 Rate Filing Based on Calendar Year 2008 Production Costs
Several parties intervened in the 2009 rate proceeding at the FERC, including the LPSC and Ameren, which have also filed protests. In July 2009 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2009, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures were terminated and a hearing before the ALJ was held in April 2010. In August 2010 the ALJ issued an initial decision. The initial decision substantially affirms Entergy's position in the filing, except for one issue that may result in some reallocation of costs among the Utility operating companies. The LPSC, the FERC trial staff, and Entergy have submitted briefs on exceptions in the proceed ing.
2010 Rate Filing Based on Calendar Year 2009 Production Costs
In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC's orders in the System Agreement proceeding, and supplemented the filing in September 2010. Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which have also filed protests. In July 2010 the FERC accepted Entergy's proposed rates for filing, effective June 1, 2010, subject to refund, and set the proceeding for hearing and settlement procedures. Settlement procedures have been terminated, and the ALJ scheduled hearings to begin in March 2011, with an initial decision scheduled for July 2011. Subsequently, in January 2011 the ALJ issued an order directing the parties and FERC staff to s how cause why this proceeding should not be stayed pending the issuance of FERC decisions in the prior production cost proceedings currently before the FERC on review. Briefing on the issue concluded on February 14, 2011. A hearing on the show cause order is scheduled for March 3, 2011.
Interruptible Load Proceeding
In April 2007 the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC’s appeal of the FERC’s March 2004 and April 2005 orders related to the treatment under the System Agreement of the Utility operating companies’ interruptible loads. In its opinion, the D.C. Circuit concluded that the FERC (1) acted arbitrarily and capriciously by allowing the Utility operating companies to phase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time. The D.C. Circuit remanded the ma tter to the FERC for a more considered determination on the issue of refunds. The FERC issued its order on remand in September 2007, in which it directed Entergy to make a compliance filing removing all interruptible load from the computation of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change. In addition, the order directed the Utility operating companies to make refunds for the period May 1995 through July 1996. In November 2007 the Utility operating companies filed a refund report describing the refunds to be issued pursuant to the FERC's orders. The LPSC filed a protest to the refund report in December 2007, and the Utility operating companies filed an answer to the protest in January 2008. The refunds were made in October 2008 by the Utility operating companies that owed refunds to the Utility operating companies that were due a refund under the decision. The APSC and the Utility operating companies appealed the FERC decisions to the D.C. Circuit. Because of its refund obligation to its customers as a result of this proceeding and a related LPSC proceeding, Entergy Louisiana recorded provisions during 2008 of approximately $16 million, including interest, for rate refunds. The refunds were made in the fourth quarter 2009.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Following the filing of petitioners' initial briefs, the FERC filed a motion requesting the D.C. Circuit hold the appeal of the FERC's decisions ordering refunds in the interruptible load proceeding in abeyance and remand the record to the FERC. The D.C. Circuit granted the FERC's unopposed motion on June 24, 2009, and directed the FERC to file status reports at 60-day intervals beginning August 24, 2009. The D.C. Circuit also directed the parties to file motions to govern future proceedings in the case within 30 days of the completion of the FERC proceedings. In December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treat ment of interruptible load in the allocation of capacity costs by the Utility operating companies. In August 2010 the FERC issued an order stating that it has the authority and refunds are appropriate. The APSC, MPSC, and Entergy have requested rehearing of the FERC's decision. In September 2010, the FERC set for hearing and settlement judge procedures the Utility operating companies' calculation of the refunds for the 15-month refund period of May 14, 1995 through August 13, 1996, as contained in the November 2007 refund report. The purpose of the hearing is to determine whether the refund amounts for such period were calculated in a just and reasonable manner. The settlement proceedings are ongoing.
Entergy Arkansas filed a request with the APSC for recovery of the refund paid to its customers and the APSC staff has filed a motion to dismiss the request. A procedural schedule has not been set in the proceeding.
Entergy Arkansas Opportunity Sales Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds. On July 20, 2009, the Utility operating companies filed a response to the co mplaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System. In their response, the Utility operating companies explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company. The response further explains that the FERC already has determined that Entergy Arkansas’s short-term wholesale sales did not trigger the “right-of-first-refusal” provision of the System Agreement. While the D.C. Circuit recently determined that the “right-of-first-refusal” issue was not properly before the FERC at the time of its earlier decision on the issue, the LPS C has raised no additional claims or facts that would warrant the FERC reaching a different conclusion. On December 7, 2009, the FERC issued an order setting the matter for hearing and settlement procedures.
The LPSC filed direct testimony in the proceeding alleging, among other things, (1) that Entergy violated the System Agreement by permitting Entergy Arkansas to make non-requirements sales to non-affiliated third parties rather than making such energy available to the other Utility operating companies’ customers; and (2) that over the period 2000 - 2009, these non-requirements sales caused harm to the Utility operating companies’ customers of $144 million and these customers should be compensated for this harm by Entergy. In subsequent testimony, the LPSC modified its original damages claim in favor of quantifying damages by re-running intra-system bills, which has not occurred. The Utility operating companies believe the LPSC's allegations are without m erit. A hearing in the matter was held in August 2010.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In December 2010 the ALJ issued an initial decision. The ALJ found that the System Agreement allowed for Entergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as joint account sales. The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, along with interest. Entergy Corporation, or an Entergy Corporation subsidiary, is the shareholder of each of the Utility operating companies. Entergy disagrees with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision. ;FERC consideration of the initial decision is pending. Entergy is unable to estimate the potential damages in this matter because certain aspects of how the refunds would be calculated require clarification by the FERC.
LPSC Interruptible Load Proceeding (Entergy Louisiana)
As discussed above, the FERC issued orders in September 2005 and 2007 in which it directed Entergy to remove all interruptible load from certain computations of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change. In addition, in September 2008 the FERC directed the Utility operating companies to make refunds for the period May 1995 through July 1996. In October 2009 the LPSC issued an order approving the flow through to retail rates of the LPSC-jurisdictional portion of the payments and credits resulting from the FERC’s orders that had not yet been flowed through to retail rates, which required a net refund to Entergy Louisiana retail customers of $17.6 million, including interest. The refunds were made in the fourth quarter 2009. Of this amount, $5.4 million was refunded subject to adjustment in the event that future action by the FERC or the D.C. Circuit Court of Appeals results in a reversal or change in the amount of the refunds ordered by the FERC in September 2008.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 3. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Income tax expenses from continuing operations for 2010, 2009, and 2008 for Entergy Corporation and Subsidiaries consist of the following:
| | 2010 | | 2009 | | 2008 |
| | (In Thousands) |
Current: | | | | | | |
Federal | | $145,161 | | ($433,105) | | $451,517 |
Foreign | | 131 | | 154 | | 256 |
State | | 19,313 | | (108,552) | | 146,171 |
Total | | 164,605 | | (541,503) | | 597,944 |
Deferred and non-current -- net | 468,698 | | 1,191,418 | | 23,022 |
Investment tax credit | | | | | | |
adjustments -- net | | (16,064) | | (17,175) | | (17,968) |
Income tax expense from | | | | | | |
continuing operations | | $617,239 | | $632,740 | | $602,998 |
| | | | | | |
Income tax expenses for 2010, 2009, and 2008 for Entergy’s Registrant Subsidiaries consist of the following:
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | $114,821 | | $196,230 | | $73,174 | | $12,812 | | ($114,441) | | ($10,607) | | ($4,102) |
State | | (9,200) | | 481 | | (4,324) | | 5,822 | | 1,412 | | 1,060 | | 3,328 |
Total | | 105,621 | | 196,711 | | 68,850 | | 18,634 | | (113,029) | | (9,547) | | (774) |
Deferred and non-current -- net | | 10,328 | | (117,426) | | 918 | | 31,415 | | 129,880 | | 53,539 | | 60,305 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments -- net | | (3,005) | | (3,407) | | (3,222) | | (985) | | (324) | | (1,609) | | (3,482) |
Income taxes | | $112,944 | | $75,878 | | $66,546 | | $49,064 | | $16,527 | | $42,383 | | $56,049 |
| | | | | | | | | | | | | | |
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | ($37,544) | | ($203,651) | | $12,387 | | $19,347 | | $160,846 | | ($72,207) | | $73,183 |
State | | 22,710 | | (12,416) | | (49,843) | | (2,321) | | 1,171 | | 2,478 | | (12,667) |
Total | | (14,834) | | (216,067) | | (37,456) | | 17,026 | | 162,017 | | (69,729) | | 60,516 |
Deferred and non-current -- net | | 100,584 | | 308,659 | | 85,728 | | 26,400 | | (145,981) | | 108,253 | | 39,866 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments -- net | | (3,994) | | (3,407) | | (3,222) | | (1,103) | | (323) | | (1,609) | | (3,481) |
Income taxes | | $81,756 | | $89,185 | | $45,050 | | $42,323 | | $15,713 | | $36,915 | | $96,901 |
| | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Current: | | | | | | | | | | | | | | |
Federal | | ($200,032) | | $96,585 | | $335,164 | | $43,214 | | $22,419 | | $73,974 | | $25,356 |
State | | 12,533 | | 39,423 | | 59,304 | | 5,099 | | (3,493) | | 3,954 | | 8,518 |
Total | | (187,499) | | 136,008 | | 394,468 | | 48,313 | | 18,926 | | 77,928 | | 33,874 |
Deferred and non-current -- net | | 288,118 | | (74,681) | | (320,596) | | (13,918) | | 4,471 | | (48,200) | | 29,100 |
Investment tax credit | | | | | | | | | | | | | | |
adjustments - net | | (3,996) | | (4,130) | | (3,224) | | (1,155) | | (345) | | (1,610) | | (3,480) |
Income taxes | | $96,623 | | $57,197 | | $70,648 | | $33,240 | | $23,052 | | $28,118 | | $59,494 |
| | | | | | | | | | | | | | |
Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2010, 2009, and 2008 are:
| | 2010 | | 2009 | | 2008 |
| | (In Thousands) |
| | | | | | |
Net income attributable to Entergy Corporation | | $1,250,242 | | $1,231,092 | | $1,220,566 |
Preferred dividend requirements of subsidiaries | | 20,063 | | 19,958 | | 19,969 |
Consolidated net income | | 1,270,305 | | 1,251,050 | | 1,240,535 |
Income taxes | | 617,239 | | 632,740 | | 602,998 |
Income before income taxes | | $1,887,544 | | $1,883,790 | | $1,843,533 |
| | | | | | |
Computed at statutory rate (35%) | | $660,640 | | $659,327 | | $645,237 |
Increases (reductions) in tax resulting from: | | | | | | |
State income taxes net of federal income tax effect | | 40,530 | | 65,241 | | 9,926 |
Regulatory differences - utility plant items | | 14,931 | | 57,383 | | 45,543 |
Amortization of investment tax credits | | (15,980) | | (16,745) | | (17,458) |
Writeoff of reorganization costs | | (19,974) | | - | | - |
Tax law change-Medicare Part D | | 13,616 | | - | | - |
Decommissioning trust fund basis | | - | | (7,917) | | (417) |
Capital gains / (losses) | | - | | (28,051) | | (74,278) |
Flow-through / permanent differences | | (26,370) | | (49,486) | | 14,656 |
Provision for uncertain tax positions | | (43,115) | | (17,435) | | (27,970) |
Valuation allowance | | - | | (40,795) | | 11,770 |
Other - net | | (7,039) | | 11,218 | | (4,011) |
Total income taxes as reported | | $617,239 | | $632,740 | | $602,998 |
| | | | | | |
Effective Income Tax Rate | | 32.7% | | 33.6% | | 32.7% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes. The reasons for the differences for the years 2010, 2009, and 2008 are:
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Net income | | $172,618 | | $190,738 | | $231,435 | | $83,687 | | $31,005 | | $66,200 | | $82,624 |
Income taxes | | 112,944 | | 75,878 | | 66,546 | | 49,064 | | 16,527 | | 42,383 | | 56,049 |
Pretax income | | $285,562 | | $266,616 | | $297,981 | | $132,751 | | $47,532 | | $108,583 | | $138,673 |
| | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $99,947 | | $93,316 | | $104,293 | | $46,463 | | $16,636 | | $38,004 | | $48,536 |
Increases (reductions) in tax | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | |
federal income tax effect | | 13,156 | | 1,142 | | (10,618) | | 1,156 | | 1,377 | | 424 | | 2,206 |
Regulatory differences - | | | | | | | | | | | | | | |
utility plant items | | 5,982 | | (5,551) | | (987) | | 1,812 | | 3,815 | | 2,564 | | 7,297 |
Amortization of investment | | | | | | | | | | | | | | |
tax credits | | (2,983) | | (3,309) | | (3,192) | | (972) | | (313) | | (1,596) | | (3,480) |
Flow-through / permanent | | | | | | | | | | | | | | |
differences | | (1,235) | | (7,996) | | (754) | | 153 | | (4,883) | | 236 | | (497) |
Non-taxable | | | | | | | | | | | | | | |
dividend income | | - | | (9,189) | | (23,603) | | - | | - | | - | | - |
Provision for uncertain | | | | | | | | | | | | | | |
tax positions | | (2,100) | | 7,200 | | 2,200 | | 700 | | (300) | | 2,800 | | 2,090 |
Other -- net | | 177 | | 265 | | (793) | | (248) | | 195 | | (49) | | (103) |
Total income taxes | | $112,944 | | $75,878 | | $66,546 | | $49,064 | | $16,527 | | $42,383 | | $56,049 |
| | | | | | | | | | | | | | |
Effective Income Tax Rate | | 39.6% | | 28.5% | | 22.3% | | 37.0% | | 34.8% | | 39.0% | | 40.4% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Net income | | $66,875 | | $153,047 | | $232,845 | | $77,636 | | $31,025 | | $63,841 | | $48,908 |
Income taxes | | 81,756 | | 89,185 | | 45,050 | | 42,323 | | 15,713 | | 36,915 | | 96,901 |
Pretax income | | $148,631 | | $242,232 | | $277,895 | | $119,959 | | $46,738 | | $100,756 | | $145,809 |
| | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $52,021 | | $84,781 | | $97,263 | | $41,986 | | $16,358 | | $35,264 | | $51,033 |
Increases (reductions) in tax | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | |
federal income tax effect | | 9,617 | | 6,487 | | 5,095 | | 2,417 | | 1,387 | | 1,509 | | 4,033 |
Regulatory differences - | | | | | | | | | | | | | | |
utility plant items | | 19,275 | | 10,303 | | 14,463 | | 1,365 | | (55) | | 2,008 | | 10,024 |
Amortization of investment | | | | | | | | | | | | | | |
tax credits | | (3,972) | | (3,088) | | (3,192) | | (1,092) | | (324) | | (1,596) | | (3,480) |
Flow-through / permanent | | | | | | | | | | | | | | |
differences | �� | 2,331 | | (690) | | (7,539) | | (319) | | (2,300) | | (1,538) | | (4,462) |
Non-taxable | | | | | | | | | | | | | | |
dividend income | | - | | (6,627) | | (19,075) | | - | | - | | - | | - |
Benefit of Entergy Corporation | | | | | | | | | | | | | | |
expenses | | 978 | | (170) | | (24,231) | | (2,841) | | 31 | | - | | 35,027 |
Provision for uncertain | | | | | | | | | | | | | | |
tax positions | | - | | (5,400) | | (17,700) | | 800 | | (400) | | 600 | | 4,900 |
Other -- net | | 1,506 | | 3,589 | | (34) | | 7 | | 1,016 | | 668 | | (174) |
Total income taxes | | $81,756 | | $89,185 | | $45,050 | | $42,323 | | $15,713 | | $36,915 | | $96,901 |
| | | | | | | | | | | | | | |
Effective Income Tax Rate | | 55.0% | | 36.8% | | 16.2% | | 35.3% | | 33.6% | | 36.6% | | 66.5% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Net income | | $47,152 | | $144,767 | | $157,543 | | $59,710 | | $34,947 | | $57,895 | | $91,067 |
Income taxes | | 96,623 | | 57,197 | | 70,648 | | 33,240 | | 23,052 | | 28,118 | | 59,494 |
Pretax income | | $143,775 | | $201,964 | | $228,191 | | $92,950 | | $57,999 | | $86,013 | | $150,561 |
| | | | | | | | | | | | | | |
Computed at statutory rate (35%) | | $50,321 | | $70,687 | | $79,867 | | $32,533 | | $20,299 | | $30,105 | | $52,696 |
Increases (reductions) in tax | | | | | | | | | | | | | | |
resulting from: | | | | | | | | | | | | | | |
State income taxes net of | | | | | | | | | | | | | | |
federal income tax effect | | 10,754 | | (891) | | (18,486) | | 4,126 | | 2,057 | | 3,138 | | 5,604 |
Regulatory differences - | | | | | | | | | | | | | | |
utility plant items | | 17,542 | | 3,308 | | 9,960 | | 3,305 | | 1,202 | | 1,076 | | 9,150 |
Amortization of investment | | | | | | | | | | | | | | |
tax credits | | (3,972) | | (3,730) | | (3,192) | | (1,140) | | (348) | | (1,596) | | (3,480) |
Flow-through / permanent | | | | | | | | | | | | | | |
differences | | 17,868 | | (12,130) | | 11,885 | | (477) | | (694) | | (4,133) | | (1,956) |
Non-taxable | | | | | | | | | | | | | | |
dividend income | | - | | - | | (10,332) | | (3,591) | | - | | - | | - |
Benefit of Entergy Corporation expenses | | - | | - | | - | | (1,556) | | - | | - | | (3,420) |
Provision for uncertain | | | | | | | | | | | | | | |
tax positions | | 2,800 | | 1,000 | | 1,150 | | 700 | | 200 | | (1,200) | | 900 |
Other – net | | 1,310 | | (1,047) | | (204) | | (660) | | 336 | | 728 | | - |
Total income taxes | | $96,623 | | $57,197 | | $70,648 | | $33,240 | | $23,052 | | $28,118 | | $59,494 |
| | | | | | | | | | | | | | |
Effective Income Tax Rate | | 67.2% | | 28.3% | | 31.0% | | 35.8% | | 39.7% | | 32.7% | | 39.5% |
The flow-through/permanent differences for Entergy Arkansas in 2008 result from the write-off of regulatory assets associated with storm reserve costs, lease termination removal costs, and stock-based compensation which are no longer probable of recovery. The flow-through/permanent differences for Entergy Gulf States Louisiana in 2008 result mainly from regulatory and tax accounting applied to its pension payments.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2010 and 2009 are as follows:
| | 2010 | | 2009 |
| | (In Thousands) |
Deferred tax liabilities: | | | | |
Plant-related basis differences | | ($5,947,760) | | ($5,520,095) |
Net regulatory assets/(liabilities) | | (1,074,133) | | (1,147,710) |
Power purchase agreements | | (265,429) | | (862,322) |
Nuclear decommissioning trusts | | (439,481) | | (855,608) |
Other | | (679,302) | | (456,053) |
Total | | (8,406,105) | | (8,841,788) |
| | | | |
Deferred tax assets: | | | | |
Accumulated deferred investment | | | | |
tax credit | | 111,170 | | 118,587 |
Pension and other post-employment benefits | | 161,730 | | 356,284 |
Nuclear decommissioning liabilities | | 285,889 | | 313,648 |
Sale and leaseback | | 256,157 | | 260,934 |
Provision for regulatory adjustments | | 100,504 | | 103,403 |
Provision for contingencies | | 28,554 | | 98,514 |
Unbilled/deferred revenues | | 18,642 | | 31,995 |
Customer deposits | | 15,724 | | 13,073 |
Net operating loss carryforwards | | 123,710 | | 148,979 |
Capital losses | | 56,602 | | 45,787 |
Other | | 19,009 | | 160,264 |
Valuation allowance | | (70,089) | | (47,998) |
Total | | 1,107,602 | | 1,603,470 |
| | | | |
Noncurrent accrued taxes (including unrecognized | | | | |
tax benefits) | | (1,261,455) | | (473,064) |
| | | | |
Accumulated deferred income taxes and taxes accrued | | ($8,559,958) | | ($7,711,382) |
Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2010 are as follows:
Carryover Description | | Carryover Amount | | Year(s) of expiration |
| | | | |
Federal net operating losses | | $10 billion | | 2023-2029 |
State net operating losses | | $7.5 billion | | 2011-2030 |
Federal capital losses | | $60.7 million | | 2014 |
State capital losses | | $855 million | | 2011-2015 |
Federal minimum tax credits | | $29 million | | never |
Other federal and state credits | | $70 million | | 2011-2030 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns.
Because it is more likely than not that the benefit from certain state net operating and capital loss carryovers will not be utilized, a valuation allowance of $28 million and $34 million has been provided on the deferred tax assets relating to these state net operating and capital loss carryovers, respectively.
Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2010 and 2009 are as follows:
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2010 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | |
Plant-related basis differences - net | | ($1,156,099) | | ($992,939) | | ($983,926) | | ($526,062) | | ($178,434) | | ($799,937) | | ($328,060) |
Net regulatory assets/(liabilities) | | (145,649) | | (253,389) | | (289,297) | | (63,515) | | 37,946 | | (135,006) | | (225,222) |
Power purchase agreements | | 582 | | 102,581 | | (417,388) | | (766) | | (61) | | (6,851) | | - |
Nuclear decommissioning trusts | | (9,968) | | (978) | | (3,806) | | - | | - | | - | | (4,102) |
Deferred fuel | | (24,210) | | (935) | | (7,584) | | (4,521) | | (626) | | 10,025 | | (60) |
Other | | (123,524) | | (2,505) | | (21,971) | | (10,991) | | (13,839) | | (19,712) | | (15,234) |
Total | | ($1,458,868) | | ($1,148,165) | | ($1,723,972) | | ($605,855) | | ($155,014) | | ($951,481) | | ($572,678) |
| | | | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | | | |
tax credits | | 17,623 | | 32,651 | | 29,417 | | 2,502 | | 706 | | 7,327 | | 20,944 |
Pension and OPEB | | (64,774) | | 70,954 | | 7,922 | | (27,111) | | (11,527) | | (38,152) | | (18,255) |
Nuclear decommissioning liabilities | | (173,666) | | (41,829) | | - | | - | | - | | - | | (69,610) |
Sale and leaseback | | - | | - | | 80,117 | | - | | - | | - | | 176,040 |
Provision for regulatory adjustments | | - | | 100,504 | | - | | - | | - | | - | | - |
Unbilled/deferred revenues | | 8,056 | | (23,853) | | 6,892 | | 8,914 | | 1,538 | | 15,775 | | - |
Customer deposits | | 7,907 | | 618 | | 5,699 | | 1,391 | | 109 | | - | | - |
Rate refund | | 10,873 | | (5,386) | | 131 | | - | | - | | (4,008) | | - |
NOL carryforward | | - | | 40 | | 41 | | - | | 8 | | 139,859 | | - |
Other | | 13,589 | | 26,468 | | 25,897 | | 14,585 | | 21,310 | | 28,508 | | 16,486 |
Total | | (180,392) | | 160,167 | | 156,116 | | 281 | | 12,144 | | 149,309 | | 125,605 |
| | | | | | | | | | | | | | |
Noncurrent accrued taxes (including | | | | | | | | | | | | | | |
unrecognized tax benefits) | | (104,925) | | (419,125) | | (321,757) | | (55,585) | | (22,328) | | 17,256 | | (178,447) |
| | | | | | | | | | | | | | |
Accumulated deferred income | | | | | | | | | | | | | | |
taxes and taxes accrued | | ($1,744,185) | | ($1,407,123) | | ($1,889,613) | | ($661,159) | | ($165,198) | | ($784,916) | | ($625,520) |
| | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | Entergy | | | | | | | | | | |
| | Entergy | | Gulf States | | Entergy | | Entergy | | Entergy | | Entergy | | System |
2009 | | Arkansas | | Louisiana | | Louisiana | | Mississippi | | New Orleans | | Texas | | Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Deferred tax liabilities: | | | | | | | | | | | | | | |
Plant-related basis differences - net | | ($987,968) | | ($1,057,746) | | ($981,938) | | ($492,769) | | ($165,552) | | ($756,898) | | ($278,973) |
Net regulatory assets/(liabilities) | | (176,945) | | (249,870) | | (294,431) | | (63,887) | | 40,831 | | (128,807) | | (274,602) |
Power purchase agreements | | (46,244) | | 37,995 | | (477,965) | | 1,059 | | 60,705 | | (36,898) | | 25,192 |
Nuclear decommissioning trusts | | (198,301) | | (58,100) | | (12,369) | | - | | - | | - | | (88,646) |
Deferred fuel | | 2,948 | | (3,416) | | (2,876) | | - | | - | | 2,627 | | (21) |
Other | | (139,501) | | (3,647) | | (38,442) | | (21,763) | | (32,331) | | (19,923) | | (14,621) |
Total | | ($1,546,011) | | ($1,334,784) | | ($1,808,021) | | ($577,360) | | ($96,347) | | ($939,899) | | ($631,671) |
| | | | | | | | | | | | | | |
Deferred tax assets: | | | | | | | | | | | | | | |
Accumulated deferred investment | | | | | | | | | | | | | | |
tax credits | | 18,795 | | 33,957 | | 30,648 | | 2,874 | | 2,153 | | 7,886 | | 22,274 |
Pension and OPEB | | 6,857 | | 80,127 | | 44,451 | | (2,110) | | (2,930) | | (23,489) | | 2,991 |
Nuclear decommissioning liability | | 12,070 | | - | | - | | - | | - | | - | | 3,160 |
Sale and leaseback | | - | | - | | 84,517 | | - | | - | | - | | 176,417 |
Provision for regulatory adjustments | | - | | 103,403 | | - | | - | | - | | - | | - |
Unbilled/deferred revenues | | 13,619 | | (17,236) | | (1,464) | | 14,335 | | - | | 22,741 | | - |
Customer deposits | | 8,540 | | 616 | | 5,698 | | (1,890) | | 109 | | - | | - |
Rate refund | | 11,786 | | (6,041) | | 121 | | - | | - | | (4,018) | | - |
NOL carryforward | | - | | 9,398 | | 3,521 | | - | | 6,017 | | 156,153 | | 7,546 |
Other | | (113) | | 6,780 | | 13,220 | | (5,701) | | 19,479 | | 40,032 | | 15,685 |
Total | | 71,554 | | 211,004 | | 180,712 | | 7,508 | | 24,828 | | 199,305 | | 228,073 |
| | | | | | | | | | | | | | |
Noncurrent accrued taxes (including | | | | | | | | | | | | | | |
unrecognized tax benefits) | | (151,079) | | (167,324) | | (196,024) | | (33,505) | | (131,142) | | 35,424 | | (224,733) |
| | | | | | | | | | | | | | |
Accumulated deferred income | | | | | | | | | | | | | | |
taxes and taxes accrued | | ($1,625,536) | | ($1,291,104) | | ($1,823,333) | | ($603,357) | | ($202,661) | | ($705,170) | | ($628,331) |
| | | | | | | | | | | | | | |
The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2010 are as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | | | | | | | | | | | | |
Federal net operating losses | | $337 million | | $19 million | | $315 million | | - | | - | | $417 million | | - |
Year(s) of expiration | | 2028-2030 | | 2029 | | 2029-2030 | | N/A | | N/A | | 2028-2029 | | N/A |
| | | | | | | | | | | | | | |
State net operating losses | | - | | $78 million | | $380 million | | - | | $34 million | | - | | - |
Year(s) of expiration | | N/A | | 2023-2024 | | 2023-2025 | | N/A | | 2020-2021 | | N/A | | N/A |
| | | | | | | | | | | | | | |
Federal minimum tax credits | | $5 million | | $17 million | | - | | $1 million | | $1 million | | - | | - |
Year(s) of expiration | | never | | never | | N/A | | never | | never | | N/A | | N/A |
| | | | | | | | | | | | | | |
Other federal credits | | $1 million | | $1 million | | $1 million | | - | | $1 million | | - | | $1 million |
Year(s) of expiration | | 2024-2028 | | 2024-2028 | | 2024-2030 | | N/A | | 2024-2028 | | N/A | | 2024-2030 |
| | | | | | | | | | | | | | |
State credits | | - | | - | | - | | $4.8 million | | - | | $11.2 million | | $1.9 million |
Year(s) of expiration | | N/A | | N/A | | N/A | | 2013-2015 | | N/A | | 2011-2027 | | 2015 |
As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Unrecognized tax benefits
Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:
| | 2010 | | 2009 | | 2008 |
| | (In Thousands) |
| | | | | | |
Gross balance at January 1 | | $4,050,491 | | $1,825,447 | | $2,523,794 |
Additions based on tax positions related to the current year | | 480,843 | | 2,286,759 | | 378,189 |
Additions for tax positions of prior years | | 871,682 | | 697,615 | | 259,434 |
Reductions for tax positions of prior years | | (438,460) | | (372,862) | | (166,651) |
Settlements | | (10,462) | | (385,321) | | (1,169,319) |
Lapse of statute of limitations | | (4,306) | | (1,147) | | - |
Gross balance at December 31 | | 4,949,788 | | 4,050,491 | | 1,825,447 |
Offsets to gross unrecognized tax benefits: | | | | | | |
Credit and loss carryovers | | (3,771,301) | | (3,349,589) | | (1,265,734) |
Cash paid to taxing authorities | | (373,000) | | (373,000) | | (548,000) |
Unrecognized tax benefits net of unused tax attributes and payments (1) | | $805,487 | | $327,902 | | $11,713 |
(1) | Potential tax liability above what is payable on tax returns |
The balances of unrecognized tax benefits include $605 million, $522 million, and $543 million as of December 31, 2010, 2009, and 2008, respectively, which, if recognized, would lower the effective income tax rates. Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $4.34 billion, $3.53 billion, and $1.28 billion as of December 31, 2010, 2009, and 2008, respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.
Entergy has made deposits, with the IRS against its potential liabilities arising from audit adjustments and settlements related to its uncertain tax positions. Deposits are expected to be made to the IRS as the cash tax benefits of uncertain tax positions are realized. As of December 31, 2010, Entergy has deposits of $373 million on account with the IRS to cover its uncertain tax positions.
Entergy accrues interest and penalties expenses, if any, related to unrecognized tax benefits in income tax expense. Entergy’s December 31, 2010, 2009, and 2008 accrued balance for the possible payment of interest and penalties is approximately $45 million, $48 million, and $55 million, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2010, 2009, and 2008 is as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2010 | | $293,920 | | $311,311 | | $352,577 | | $17,137 | | ($53,295) | | $32,299 | | $211,247 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 38,205 | | 87,755 | | 183,188 | | 4,679 | | 173 | | 5,169 | | 16,829 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 1,838 | | 25,960 | | 34,236 | | 6,857 | | 72,169 | | 5,868 | | 10,402 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (92,699) | | (71,033) | | (64,868) | | (4,469) | | (863) | | (29,100) | | (13,116) |
Settlements | | (1,025) | | (107) | | 55 | | (41) | | (8) | | (7) | | (844) |
Gross balance at December 31, 2010 | | 240,239 | | 353,886 | | 505,188 | | 24,163 | | 18,176 | | 14,229 | | 224,518 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (123,968) | | (29,257) | | (131,805) | | (6,477) | | (3,751) | | (6,269) | | (10,487) |
Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $40,294 | | $279,136 | | $373,383 | | $10,130 | | $13,251 | | $6,584 | | $172,153 |
| | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2009 | | $240,203 | | $275,378 | | $298,650 | | $31,724 | | $26,050 | | $39,202 | | $172,168 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 9,826 | | 5,436 | | 10,197 | | 283 | | 17 | | 97 | | 6,812 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 80,968 | | 102,466 | | 108,399 | | 1,256 | | 109 | | 28,821 | | 30,586 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (22,830) | | (33,000) | | (45,613) | | (4,235) | | (70,391) | | (17,853) | | (244) |
Settlements | | (14,247) | | (38,969) | | (19,056) | | (11,891) | | (9,080) | | (17,968) | | 1,925 |
Gross balance at December 31, 2009 | | 293,920 | | 311,311 | | 352,577 | | 17,137 | | (53,295) | | 32,299 | | 211,247 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (39,847) | | (20,031) | | (70,428) | | (1,618) | | (633) | | (30,921) | | (1,297) |
Cash paid to taxing authorities | | (75,977) | | (45,493) | | - | | (7,556) | | (1,174) | | (1,376) | | (41,878) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $178,096 | | $245,787 | | $282,149 | | $7,963 | | ($55,102) | | $2 | | $168,072 |
| | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Gross balance at January 1, 2008 | | $309,019 | | $224,379 | | $66,291 | | $69,734 | | $46,904 | | $86,732 | | $197,307 |
Additions based on tax | | | | | | | | | | | | | | |
positions related to the | | | | | | | | | | | | | | |
current year | | 685 | | 89,966 | | 236,499 | | 773 | | 404 | | 338 | | 502 |
Additions for tax positions | | | | | | | | | | | | | | |
of prior years | | 12,465 | | 10,784 | | 5,300 | | 7,494 | | 1,025 | | 189 | | 1,405 |
Reductions for tax | | | | | | | | | | | | | | |
positions of prior years | | (330) | | (372) | | (1,567) | | (8,051) | | (13,645) | | (5,082) | | (192) |
Settlements | | (81,636) | | (49,379) | | (7,873) | | (38,226) | | (8,638) | | (42,975) | | (26,854) |
Gross balance at December 31, 2008 | | 240,203 | | 275,378 | | 298,650 | | 31,724 | | 26,050 | | 39,202 | | 172,168 |
Offsets to gross unrecognized | | | | | | | | | | | | | | |
tax benefits: | | | | | | | | | | | | | | |
Loss carryovers | | (147,737) | | - | | (127,572) | | - | | (6,392) | | (39,202) | | - |
Cash paid to taxing authorities | | (69,273) | | (36,812) | | - | | (806) | | (554) | | (1,376) | | (66,398) |
Unrecognized tax benefits net of | | | | | | | | | | | | | | |
unused tax attributes and payments | | $23,193 | | $238,566 | | $171,078 | | $30,918 | | $19,104 | | ($1,376) | | $105,770 |
| | | | | | | | | | | | | | |
The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would affect the effective income tax rate as follows:
| December 31, 2010 | | December 31, 2009 | | December 31, 2008 |
| | | | | |
| | | | | |
Entergy Arkansas | $0.2 | | $1.2 | | $1.2 |
Entergy Gulf States Louisiana | $129.6 | | $69.8 | | $75.2 |
Entergy Louisiana | $286.7 | | $192.7 | | $210.4 |
Entergy Mississippi | $5.3 | | $3.3 | | $2.5 |
Entergy New Orleans | - | | $0.3 | | $0.7 |
Entergy Texas | $6.0 | | $1.2 | | $0.6 |
System Energy | $12.1 | | $8.7 | | $3.9 |
The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Accrued balances for the possible payment of interest and penalties are as follows:
| December 31, 2010 | | December 31, 2009 | | December 31, 2008 |
| (In Millions) |
| | | | | |
Entergy Arkansas | - | | $0.7 | | $1.6 |
Entergy Gulf States Louisiana | $9.7 | | $2.3 | | $1.4 |
Entergy Louisiana | $3.3 | | $1.2 | | - |
Entergy Mississippi | $1.6 | | $2.1 | | $2.1 |
Entergy New Orleans | - | | $0.3 | | $0.7 |
Entergy Texas | $0.1 | | $0.2 | | $0.2 |
System Energy | $8.2 | | $7.2 | | $3.3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Income Tax Litigation
On October 4, 2010 the United States Tax Court entered its decision in favor of Entergy for tax years 1997 and 1998. The issues decided by the Court are as follows:
· | The ability to credit the U.K. Windfall Tax against U.S. tax as a foreign tax credit. The U.K. Windfall Tax relates to Entergy’s former investment in London Electricity. |
· | The validity of Entergy’s change in method of tax accounting for street lighting assets and the related increase in depreciation deductions. |
On December 20, 2010, the IRS filed notice that it will appeal the decision of the Tax Court to the United States Court of Appeals for the Fifth Circuit.
On February 21, 2008, the IRS issued a Statutory Notice of Deficiency for the year 2000. The deficiency resulted from a disallowance of the same two issues discussed above as well as the issue discussed below.
· | Depreciation deductions that resulted from Entergy’s purchase price allocations on its acquisitions of its non-utility nuclear plants. |
Entergy filed a Tax Court Petition on May 5, 2008 challenging the three issues in dispute. On June 28, 2010, trial was held in Washington, D.C. On February 7, 2011 a joint stipulation of settled issues was filed addressing the depreciation issue in the above Tax Court case. As a result, the IRS agreed that Entergy was entitled to allocate all of the cash consideration to plant and equipment rather than to nuclear decommissioning trusts thereby entitling Entergy to its claimed depreciation. However, the case has been left open for administrative purposes pending the appeal by the IRS of the U.K. Windfall Tax foreign tax credit and street lighting issues to the United States Court of Appeals for the Fifth Circuit. Additionally, with respect to Entergy’s acquisition of all of i ts non-utility nuclear power plants, Entergy and the IRS entered into a closing agreement on January 31, 2011 that entitles Entergy to allocate all of its cash consideration to plant and equipment.
With respect to the U.K. Windfall Tax issue, the total tax included in IRS Notices of Deficiency is $82 million. The total tax and interest associated with this issue for all years is approximately $275 million.
With respect to the street lighting issue, the total tax included in IRS Notices of Deficiency is $22 million. The total federal and state tax and interest associated with this issue for all open tax years is approximately $75 million.
Income Tax Audits
Entergy or one of its subsidiaries files U.S. federal and various state and foreign income tax returns. Other than the matters discussed in the Income Tax Litigation section above, the IRS’s and substantially all state taxing authorities’ examinations are completed for years before 2004.
2002-2003 IRS Audit
In September 2009, Entergy entered into a partial agreement with the IRS for the years 2002 and 2003. It is a partial agreement because Entergy did not agree to the IRS’s disallowance of foreign tax credits for the U.K. Windfall Tax and the street lighting issues. These issues will be governed by the outcome of the decision by the 5th Circuit for the tax years 1997 and 1998.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2004-2005 IRS Audit
The IRS issued its 2004-2005 Revenue Agent’s Report on May 26, 2009.
On June 25, 2009 Entergy filed a formal Protest with the IRS Appeals Office indicating disagreement with certain issues contained in the Revenue Agent’s Report. The major issues in dispute are:
· | Depreciation of street lighting assets (issue before the 5th Circuit) |
· | Qualified research expenditures for purposes of the research credit |
· | Inclusion of nuclear decommissioning liabilities in cost of goods sold |
The initial IRS Appeals Conference to discuss these disputed issues occurred in September of 2010. Negotiations are ongoing.
2006-2007 IRS Audit
The IRS commenced an examination of Entergy’s 2006 and 2007 U.S. federal income tax returns in the third quarter 2009. The IRS has proposed adjustments for these years. The audit is progressing according to plan. The audit report is expected to be issued in the second quarter 2011.
The IRS has also examined the Entergy Wholesale Commodities subsidiaries’ and Utility operating companies’ mark-to-market deductions claimed on wholesale power contracts. With respect to the mark-to-market issue, the total federal and state tax included in unrecognized tax benefits is approximately $747 million for Entergy and $62 million for Entergy Louisiana. Amounts for the other Registrant Subsidiaries are not significant.
Other Tax Matters
Entergy regularly negotiates with the IRS to achieve settlements. The results of all pending litigations and audit issues could result in significant changes to the amounts of unrecognized tax benefits as discussed above.
When Entergy Louisiana, Inc. restructured effective December 31, 2005, Entergy Louisiana agreed, under the terms of the merger plan, to indemnify its parent, Entergy Louisiana Holdings, Inc. (formerly, Entergy Louisiana, Inc.) for certain tax obligations that arose from the 2002-2003 IRS partial agreement. Because the agreement with the IRS was settled in the fourth quarter 2009, Entergy Louisiana paid Entergy Louisiana Holdings approximately $289 million pursuant to these intercompany obligations in the fourth quarter 2009.
On November 20, 2009, Entergy Corporation and subsidiaries amended the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement such that Entergy Corporation shall be treated, under all provisions of such Agreement, in a manner that is identical to the treatment afforded all subsidiaries, direct or indirect, of Entergy Corporation.
In the fourth quarter 2009, Entergy filed Applications for Change in Method of Accounting for certain costs under Section 263A of the Internal Revenue Code. In the Application, Entergy is requesting permission to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold. The effect of this change for Entergy is a $5.7 billion reduction in 2009 taxable income within Entergy Wholesale Commodities.
In March of 2010, Entergy filed an Application for Change in Accounting Method with the Internal Revenue Service. In the application Entergy proposed to change the definition of Unit of Property to determine the appropriate characterization of costs associated with such Unit as capital or repair under the Internal Revenue Code and related Treasury Regulations. The effect of this change is an approximate $530 million reduction in 2010 taxable income for Entergy. The effect of this change is a reduction in 2010 taxable income of $160 million for Entergy Arkansas, $60 million for Entergy Gulf States Louisiana, $71 million for Entergy Louisiana, $19 million for Entergy Mississippi, $27 million for Entergy Texas, and $48 million for System Energy.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
During the fourth quarter 2010, Entergy determined that its calculation of certain temporary differences associated primarily with plant-related basis differences had been either under or overstated in prior periods and required adjustments to previously reported amounts of accumulated deferred income taxes and taxes accrued and the offsetting regulatory assets or liabilities for income taxes. Entergy and the Registrant Subsidiaries have restated the 2009 balance sheets as shown below. Entergy and Entergy New Orleans also separately restated the 2009 balance sheets to reclassify an amount from other regulatory liabilities, now included as a component of other non-current liabilities for Entergy New Orleans, to accumulated deferred income taxes and taxes accrued. There was no impact on the results of operations o r cash flows as a result of these corrections. The following corrections were made to either increase or (decrease) the previously reported amounts as of December 31, 2009 for Entergy and the Registrant Subsidiaries:
| | Accumulated deferred income taxes and taxes accrued | | Regulatory asset for income taxes - net | | Regulatory liability for income taxes - net | | Other regulatory liabilities |
| | (In Millions) |
| | | | | | | | |
Entergy | | $240 | | $197 | | $- | | ($43) |
Entergy Arkansas | | $57 | | $57 | | $- | | $- |
Entergy Gulf States Louisiana | | ($67) | | ($67) | | $- | | $- |
Entergy Louisiana | | $107 | | $107 | | $- | | $- |
Entergy Mississippi | | $25 | | $25 | | $- | | $- |
Entergy New Orleans | | $58 | | $- | | ($15) | | ($43) |
Entergy Texas | | $24 | | $24 | | $- | | $- |
System Energy | | $37 | | $37 | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT AND SHORT-TERM BORROWINGS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has a revolving credit facility that expires in August 2012 and has a borrowing capacity of $3.5 billion. Entergy Corporation also has the ability to issue letters of credit against the total borrowing capacity of the credit facility. The facility fee is currently 0.125% of the commitment amount. Facility fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the year ended December 31, 2010 was 0.78% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of December 31, 2010.
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) |
| | | | | | |
$3,466 | | $1,632 | | $25 | | $1,809 |
Entergy Corporation’s facility requires it to maintain a consolidated debt ratio of 65% or less of its total capitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy Texas each had credit facilities available as of December 31, 2010 as follows:
Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of December 31, 2010 |
| | | | | | | | |
Entergy Arkansas | | April 2011 | | $75.125 million (b) | | 2.75% | | - |
Entergy Gulf States Louisiana | | August 2012 | | $100 million (c) | | 0.67% | | - |
Entergy Louisiana | | August 2012 | | $200 million (d) | | 0.67% | | - |
Entergy Mississippi | | May 2011 | | $35 million (e) | | 2.01% | | - |
Entergy Mississippi | | May 2011 | | $25 million (e) | | 2.01% | | - |
Entergy Mississippi | | May 2011 | | $10 million (e) | | 2.01% | | - |
Entergy Texas | | August 2012 | | $100 million (f) | | 0.74% | | - |
(a) | The interest rate is the weighted average interest rate as of December 31, 2010 applied, or that would be applied, to outstanding borrowings under the facility. |
(b) | The credit facility requires Entergy Arkansas to maintain a debt ratio of 65% or less of its total capitalization. Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable. |
(c) | The credit facility allows Entergy Gulf States Louisiana to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2010, no letters of credit were outstanding. The credit facility requires Entergy Gulf States Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(d) | The credit facility allows Entergy Louisiana to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2010, no letters of credit were outstanding. The credit facility requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(e) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable. Entergy Mississippi is required to maintain a consolidated debt ratio of 65% or less of its total capitalization. |
(f) | The credit facility allows Entergy Texas to issue letters of credit against the borrowing capacity of the facility. As of December 31, 2010, no letters of credit were outstanding. The credit facility requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization. Pursuant to the terms of the credit agreement securitization bonds are excluded from debt and capitalization in calculating the debt ratio. |
The facility fees on the credit facilities range from 0.09% to 0.15% of the commitment amount.
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through October 31, 2011 under a FERC order dated October 14, 2009. In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed the FERC-authorized limits. The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term bor rowings as of December 31, 2010 (aggregating both money pool and external short-term borrowings) for the Registrant Subsidiaries:
| Authorized | | Borrowings |
| (In Millions) |
Entergy Arkansas | $250 | | - |
Entergy Gulf States Louisiana | $200 | | - |
Entergy Louisiana | $250 | | - |
Entergy Mississippi | $175 | | $33 |
Entergy New Orleans | $100 | | - |
Entergy Texas | $200 | | - |
System Energy | $200 | | - |
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)
See Note 18 to the financial statements for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIE) effective in the first quarter 2010. The variable interest entities have credit facilities and also issue commercial paper to finance the acquisition and ownership of nuclear fuel as follows as of December 31, 2010:
Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of December 31, 2010 | |
| | (Dollars in Millions) | |
| | | | | | | | | |
Entergy Arkansas VIE | | July 2013 | | $85 | | 2.45% | | $62.8 | |
Entergy Gulf States Louisiana VIE | | July 2013 | | $85 | | 2.125% | | $24.2 | |
Entergy Louisiana VIE | | July 2013 | | $90 | | 2.42% | | $23.1 | |
System Energy VIE | | July 2013 | | $100 | | 2.40% | | $38.3 | |
(a) | Includes letter of credit fees and bank fronting fees on commercial paper issuances by the VIEs for Entergy Arkansas, Entergy Louisiana, and System Energy. The VIE for Entergy Gulf States Louisiana does not issue commercial paper, but borrows directly on its bank credit facility. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The amount outstanding on the Entergy Gulf States Louisiana credit facility is included in long-term debt on its balance sheet and the commercial paper outstanding for the other VIEs is classified as a current liability on the respective balance sheets. The commitment fees on the credit facilities are 0.20% of the commitment amount. Each credit facility requires the respective lessee (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, or Entergy Corporation as Guarantor for System Energy) to maintain a consolidated debt ratio of 70% or less of its total capitalization.
The variable interest entities had long-term notes payable that are included in long-term debt on the respective balance sheets as of December 31, 2010 as follows:
Company | | Description | | Amount |
| | | | |
Entergy Arkansas VIE | | 5.60% Series G due September 2011 | | $35 million |
Entergy Arkansas VIE | | 9% Series H due June 2013 | | $30 million |
Entergy Arkansas VIE | | 5.69% Series I due July 2014 | | $70 million |
Entergy Gulf States Louisiana VIE | | 5.56% Series N due May 2013 | | $75 million |
Entergy Gulf States Louisiana VIE | | 5.41% Series O due July 2012 | | $60 million |
Entergy Louisiana VIE | | 5.69% Series E due July 2014 | | $50 million |
System Energy VIE | | 6.29% Series F due September 2013 | | $70 million |
System Energy VIE | | 5.33% Series G due April 2015 | | $60 million |
In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is included as fuel expense.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5. LONG - TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Long-term debt for Entergy Corporation and subsidiaries as of December 31, 2010 and 2009 consisted of:
Type of Debt and Maturity | | Weighted Average Interest Rate December 31, 2010 | | Interest Rate Ranges at December 31, | | Outstanding at December 31, |
2010 | | 2009 | 2010 | | 2009 |
| | | | | | | | (In Thousands) |
| | | | | | | | | | |
Mortgage Bonds | | | | | | | | | | |
2010-2015 | | 4.68% | | 3.6%-6.2% | | 4.5%-6.2% | | $820,000 | | $1,662,120 |
2016-2020 | | 5.98% | | 3.95%-7.125% | | 4.95%-7.125% | | 1,910,000 | | 1,910,000 |
2021-2025 | | 5.13% | | 3.75%-5.66% | | 5.40%-5.66% | | 1,258,738 | | 909,097 |
2026-2035 | | 5.90% | | 4.44%-6.4% | | 5.65%-7.6% | | 1,118,546 | | 1,318,950 |
2039-2041 | | 6.28% | | 5.75%-7.875% | | 7.875% | | 755,000 | | 150,000 |
| | | | | | | | | | |
Governmental Bonds (a) | | | | | | | | | | |
2010-2015 | | 4.26% | | 2.875%-6.75% | | 5.45%-7.0% | | 79,295 | | 91,310 |
2016-2020 | | 4.76% | | 4.6%-5.8% | | 4.6%-6.3% | | 65,540 | | 214,200 |
2021-2025 | | 5.67% | | 4.6%-5.9% | | 4.6%-5.9% | | 410,005 | | 410,005 |
2026-2030 | | 5.32% | | 5.0%-6.2% | | 6.2%-6.6% | | 288,680 | | 111,680 |
| | | | | | | | | | |
Securitization Bonds | | | | | | | | | | |
2013-2020 | | 3.93% | | 2.12%-5.79% | | 2.12%-5.79% | | 474,318 | | 505,628 |
2021-2023 | | 4.25% | | 2.30%-5.93% | | 4.38%-5.93% | | 457,100 | | 333,000 |
| | | | | | | | | | |
Variable Interest Entities Notes Payable (Note 4) | | | | | | | | |
2011-2015 | | 5.69% | | 2.125%-9% | | - | | 474,200 | | - |
| | | | | | | | | | |
Entergy Corporation Notes | | | | | | | | | | |
due May 2010 | | - | | - | | 6.58% | | - | | 75,000 |
due November 2010 | | - | | - | | 6.9% | | - | | 140,000 |
due March 2011 | | n/a | | 7.06% | | 7.06% | | 86,000 | | 86,000 |
due September 2015 | | n/a | | 3.625% | | - | | 550,000 | | - |
due September 2020 | | n/a | | 5.125% | | - | | 450,000 | | - |
| | | | | | | | | | |
Note Payable to NYPA | | (b) | | (b) | | (b) | | 155,971 | | 177,543 |
5 Year Credit Facility (Note 4) | | n/a | | 0.78% | | 1.377% | | 1,632,120 | | 2,566,150 |
Entergy Corporation Bank Term Loan due 2010 | | - | | - | | 1.41% | | - | | 60,000 |
Long-term DOE Obligation (c) | | - | | - | | - | | 180,919 | | 180,683 |
Waterford 3 Lease Obligation (d) | | n/a | | 7.45% | | 7.45% | | 223,802 | | 241,128 |
Grand Gulf Lease Obligation (d) | | n/a | | 5.13% | | 5.13% | | 222,280 | | 266,864 |
Unamortized Premium and Discount - Net | | | | | | (10,181) | | (10,635) |
Other | | | | | | | | 14,372 | | 18,972 |
Total Long-Term Debt | | | | | | | | 11,616,705 | | 11,417,695 |
Less Amount Due Within One Year | | | | | | 299,548 | | 711,957 |
Long-Term Debt Excluding Amount Due Within One Year | | | | $11,317,157 | | $10,705,738 |
| | | | | | | | | | |
Fair Value of Long-Term Debt (e) | | | | | | $10,988,646 | | $10,727,908 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(a) | Consists of pollution control revenue bonds and environmental revenue bonds. |
(b) | These notes do not have a stated interest rate, but have an implicit interest rate of 4.8%. |
(c) | Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have contracts with the DOE for spent nuclear fuel disposal service. The contracts include a one-time fee for generation prior to April 7, 1983. Entergy Arkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt. |
(d) | See Note 10 for further discussion of the Waterford 3 and Grand Gulf Lease Obligations. |
(e) | The fair value excludes lease obligations of $224 million at Entergy Louisiana and $222 million at System Energy, long-term DOE obligations of $181 million at Entergy Arkansas, and the note payable to NYPA of $156 million at Entergy, and includes debt due within one year. Fair values are based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. |
The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as of December 31, 2010, for the next five years are as follows:
| Amount |
| (In Thousands) |
| |
2011 | $230,257 |
2012 | $1,815,972 |
2013 | $734,309 |
2014 | $150,681 |
2015 | $863,539 |
In November 2000, Entergy’s non-utility nuclear business purchased the FitzPatrick and Indian Point 3 power plants in a seller-financed transaction. Entergy issued notes to NYPA with seven annual installments of approximately $108 million commencing one year from the date of the closing, and eight annual installments of $20 million commencing eight years from the date of the closing. These notes do not have a stated interest rate, but have an implicit interest rate of 4.8%. In accordance with the purchase agreement with NYPA, the purchase of Indian Point 2 in 2001 resulted in Entergy becoming liable to NYPA for an additional $10 million per year for 10 years, beginning in September 2003. This liability was recorded upon the purchase of Indian Point 2 in September 2001, and is included in the note payable to NYPA balance above. In July 2003, a payment of $102 million was made prior to maturity on the note payable to NYPA. Under a provision in a letter of credit supporting these notes, if certain of the Utility operating companies or System Energy were to default on other indebtedness, Entergy could be required to post collateral to support the letter of credit.
One of the covenants in certain of the Entergy Corporation notes require it to maintain a consolidated debt ratio of 65% or less of its total capitalization. If Entergy’s debt ratio exceeds this limit, or if Entergy Corporation or certain of the Utility operating companies default on other indebtedness or are in bankruptcy or insolvency proceedings, an acceleration of the notes’ maturity dates may occur.
Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through July 2011. Entergy Arkansas has obtained long-term financing authorization from the APSC that extends through December 2012. Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through July 2012.
Capital Funds Agreement
Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
· | maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt); |
· | permit the continued commercial operation of Grand Gulf; |
· | pay in full all System Energy indebtedness for borrowed money when due; and |
· | enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy’s rights in the agreement as security for the specific debt. |
Long-term debt for the Registrant Subsidiaries as of December 31, 2010 and 2009 consisted of:
| 2010 | | 2009 |
| (In Thousands) |
Entergy Arkansas | | | |
Mortgage Bonds: | | | |
4.50% Series due June 2010 | $- | | $100,000 |
5.40% Series due August 2013 | 300,000 | | 300,000 |
5.4% Series due May 2018 | - | | 150,000 |
5.0% Series due July 2018 | 115,000 | | 115,000 |
3.75% Series due February 2021 | 350,000 | | - |
5.66% Series due February 2025 | 175,000 | | 175,000 |
6.7% Series due April 2032 | - | | 100,000 |
6.0% Series due November 2032 | - | | 100,000 |
5.9% Series due June 2033 | 100,000 | | 100,000 |
6.38% Series due November 2034 | 60,000 | | 60,000 |
5.75% Series due November 2040 | 225,000 | | - |
Total mortgage bonds | 1,325,000 | | 1,200,000 |
| | | |
Governmental Bonds (a): | | | |
6.3% Series due 2016, Pope County (d) | - | | 19,500 |
4.6% Series due 2017, Jefferson County (d) | 54,700 | | 54,700 |
6.3% Series due 2020, Pope County | - | | 120,000 |
5.0% Series due 2021, Independence County (d) | 45,000 | | 45,000 |
Total governmental bonds | 99,700 | | 239,200 |
| | | |
Variable Interest Entity Notes Payable (Note 4) | | | |
5.60% Series G due September 2011 | 35,000 | | - |
9% Series H due June 2013 | 30,000 | | - |
5.69% Series I due July 2014 | 70,000 | | - |
Total variable interest entity notes payable | 135,000 | | - |
| | | |
Securitization Bonds | | | |
2.30% Series Senior Secured due August 2021 | 124,100 | | - |
Total securitization bonds | 124,100 | | - |
| | | |
Other | | | |
Long-term DOE Obligation (b) | 180,919 | | 180,683 |
Unamortized Premium and Discount – Net | (812) | | (1,314) |
Other | 3 | | - |
| | | |
Total Long-Term Debt | 1,863,910 | | 1,618,569 |
Less Amount Due Within One Year | 35,000 | | 100,000 |
Long-Term Debt Excluding Amount Due Within One Year | $1,828,910 | | $1,518,569 |
| | | |
Fair Value of Long-Term Debt (c) | $1,712,663 | | $1,463,378 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2010 | | 2009 |
| (In Thousands) |
Entergy Gulf States Louisiana (e) | | | |
Mortgage Bonds: | | | |
4.875% Series due November 2011 | $- | | $200,000 |
5.70% Series due June 2015 | - | | 200,000 |
5.25% Series due August 2015 | - | | 92,120 |
6.00% Series due May 2018 | 375,000 | | 375,000 |
3.95% Series due October 2020 | 250,000 | | - |
5.59% Series due October 2024 | 300,000 | | 300,000 |
6.2% Series due July 2033 | 240,000 | | 240,000 |
6.18% Series due March 2035 | 85,000 | | 85,000 |
Total mortgage bonds | 1,250,000 | | 1,492,120 |
| | | |
Governmental Bonds (a): | | | |
5.45% Series due 2010, Calcasieu Parish | - | | 11,975 |
6.75% Series due 2012, Calcasieu Parish | 26,170 | | 26,170 |
6.7% Series due 2013, Pointe Coupee Parish | 9,460 | | 9,460 |
5.7% Series due 2014, Iberville Parish | 11,710 | | 11,710 |
5.8% Series due 2015, West Feliciana Parish | - | | 15,395 |
7.0% Series due 2015, West Feliciana Parish | - | | 16,600 |
2.875% Series due 2015, Louisiana Public Facilities Authority (d) | 31,955 | | - |
5.8% Series due 2016, West Feliciana Parish | 10,840 | | 20,000 |
5.0% Series due 2028, Louisiana Public Facilities Authority (d) | 83,680 | | - |
6.6% Series due 2028, West Feliciana Parish | - | | 21,680 |
Total governmental bonds | 173,815 | | 132,990 |
| | | |
Variable Interest Entity Notes Payable | | | |
5.41% Series O due July 2012 | 60,000 | | - |
5.56% Series N due May 2013 | 75,000 | | - |
Credit Facility due July 2013, weighted avg rate 2.125% | 24,200 | | - |
Total variable interest entity notes payable | 159,200 | | - |
| | | |
Other | | | |
Unamortized Premium and Discount - Net | (2,287) | | (2,372) |
Other | 3,604 | | 3,603 |
| | | |
Total Long-Term Debt | 1,584,332 | | 1,626,341 |
Less Amount Due Within One Year | - | | 11,975 |
Long-Term Debt Excluding Amount Due Within One Year | $1,584,332 | | $1,614,366 |
| | | |
Fair Value of Long-Term Debt (c) | $1,643,514 | | $1,637,862 |
| | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2010 | | 2009 |
| (In Thousands) |
Entergy Louisiana | | | |
Mortgage Bonds: | | | |
4.67% Series due June 2010 | $- | | $55,000 |
5.83% Series due November 2010 | - | | 150,000 |
5.09% Series due November 2014 | - | | 115,000 |
5.56% Series due September 2015 | - | | 100,000 |
6.50% Series due September 2018 | 300,000 | | 300,000 |
5.5% Series due April 2019 | - | | 100,000 |
5.40% Series due November 2024 | 400,000 | | 400,000 |
4.44% Series due January 2026 | 250,000 | | - |
7.6% Series due April 2032 | - | | 150,000 |
6.4% Series due October 2034 | 70,000 | | 70,000 |
6.3% Series due September 2035 | 100,000 | | 100,000 |
6.0% Series due March 2040 | 150,000 | | - |
5.875% Series due June 2041 | 150,000 | | - |
Total mortgage bonds | 1,420,000 | | 1,540,000 |
| | | |
Governmental Bonds (a): | | | |
5.0% Series due 2030, Louisiana Public Facilities Authority (d) | 115,000 | | - |
Total governmental bonds | 115,000 | | - |
| | | |
Variable Interest Entity Notes Payable | | | |
5.69% Series E due July 2014 | 50,000 | | - |
Total variable interest entity notes payable | 50,000 | | - |
| | | |
Other Long-Term Debt | | | |
Waterford 3 Lease Obligation 7.45% (Note 10) | 223,802 | | 241,128 |
Unamortized Premium and Discount - Net | (1,689) | | (1,576) |
Other | 3 | | - |
| | | |
Total Long-Term Debt | 1,807,116 | | 1,779,552 |
Less Amount Due Within One Year | 35,550 | | 222,326 |
Long-Term Debt Excluding Amount Due Within One Year | $1,771,566 | | $1,557,226 |
| | | |
Fair Value of Long-Term Debt (c) | $1,515,121 | | $1,565,969 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2010 | | 2009 |
| (In Thousands) |
Entergy Mississippi | | | |
Mortgage Bonds: | | | |
4.65% Series due May 2011 | $80,000 | | $80,000 |
5.15% Series due February 2013 | 100,000 | | 100,000 |
5.92% Series due February 2016 | 100,000 | | 100,000 |
4.95% Series due June 2018 | 95,000 | | 95,000 |
6.64% Series due July 2019 | 150,000 | | 150,000 |
6.0% Series due November 2032 | 75,000 | | 75,000 |
7.25% Series due December 2032 | - | | 100,000 |
6.25% Series due April 2034 | 100,000 | | 100,000 |
6.20% Series due April 2040 | 80,000 | | - |
Total mortgage bonds | 780,000 | | 800,000 |
| | | |
Governmental Bonds (a): | | | |
4.60% Series due 2022, Mississippi Business Finance Corp.(d) | 16,030 | | 16,030 |
4.90% Series due 2022, Independence County (d) | 30,000 | | 30,000 |
Total governmental bonds | 46,030 | | 46,030 |
| | | |
Other | | | |
Unamortized Premium and Discount - Net | (652) | | (726) |
| | | |
Total Long-Term Debt | 825,378 | | 845,304 |
Less Amount Due Within One Year | 80,000 | | - |
Long-Term Debt Excluding Amount Due Within One Year | $745,378 | | $845,304 |
| | | |
Fair Value of Long-Term Debt (c) | $802,045 | | $874,131 |
| 2010 | | 2009 |
| (In Thousands) |
Entergy New Orleans | | | |
Mortgage Bonds: | | | |
4.98% Series due July 2010 | $- | | $30,000 |
5.25% Series due August 2013 | 70,000 | | 70,000 |
6.75% Series due October 2017 | - | | 25,000 |
5.10% Series due December 2020 | 25,000 | | - |
5.6% Series due September 2024 | 33,738 | | 34,097 |
5.65% Series due September 2029 | 38,546 | | 38,950 |
Total mortgage bonds | 167,284 | | 198,047 |
| | | |
Other Long-Term Debt | | | |
Affiliate Notes Payable (f) | - | | 74,230 |
Unamortized Premium and Discount - Net | (69) | | (24) |
| | | |
Total Long-Term Debt | 167,215 | | 272,253 |
Less Amount Due Within One Year | - | | 104,230 |
Long-Term Debt Excluding Amount Due Within One Year | $167,215 | | $168,023 |
| | | |
Fair Value of Long-Term Debt (c) | $171,077 | | $198,062 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas
Entergy Gulf States Louisiana remainswas primarily liable for all of the long-term debt issued by Entergy Gulf States, Inc. that was outstanding on December 31, 2007 and has not been subsequently repaid.2007. Under a debt assumption agreement with Entergy Gulf States Louisiana, Entergy Texas assumed its pro rata share of this long-term debt, which was $1.079 billion, or approximately 46%, of which $168 millionnone remains outstanding at December 31, 2009.2010. The pro rata share of the long-term debt assumed by Entergy Texas was determined by first determining the net assets for each company on a book value basis, and then calculating a debt assumption ratio that resulted in the common equity ratios for each company being approximately the same as the Entergy Gulf States, Inc. common equity ratio immediately prior to the jurisdictional separation. Entergy Texas'By June 2010, Enter gy Texas had repaid the outstanding assumed debt and the debt assumption does not discharge Entergy Gulf States Louisiana's liability for the long-term debt. To secure its debt assumption obligations, Entergy Texas granted to Entergy Gulf States Louisiana a first lien on Entergy Texas' assets that were previously subject to the Entergy Gulf States, Inc. mortgage. Entergy Texas has until December 31, 2010 to repay the assumed debt. Following is the long-term debt issued by Entergy Gulf States, Inc. thatagreement was outstanding on December 31, 2009 and 2008 and Entergy Texas' pro rata share of that debt. Also included are the mortgage bonds issued by Entergy Texas and the securitization bonds issued by Entergy Gulf States Reconstruction Funding and by Entergy Texas Restoration Funding, LLC that are described in further detail below in this Note.terminated.
| 2009 | | 2008 | 2010 | | 2009 |
| (In Thousands) | (In Thousands) |
Mortgage Bonds share assumed under debt assumption agreement: | | | | | | |
Libor + 0.4% Series due December 2009 | $- | | $100,509 | |
5.12 % Series due August 2010 | - | | 45,796 | |
4.875% Series due November 2011 | 28,023 | | 91,592 | $- | | $28,023 |
6.0% Series due December 2012 | - | | 64,114 | |
5.6% Series due December 2014 | - | | 22,898 | |
5.70% Series due June 2015 | 91,592 | | 91,592 | - | | 91,592 |
5.25% Series due August 2015 | - | | 91,592 | |
6.2% Series due July 2033 | - | | 109,911 | |
6.18% Series due March 2035 | 38,927 | | 38,927 | - | | 38,927 |
Total mortgage bonds | 158,542 | | 656,931 | - | | 158,542 |
| | | | | | |
Governmental Bonds share assumed under debt assumption agreement (a): | | | | | | |
5.45% Series due 2010, Calcasieu Parish | - | | 10,120 | |
6.75% Series due 2012, Calcasieu Parish | - | | 22,115 | |
6.7% Series due 2013, Pointe Coupee Parish | - | | 7,990 | |
5.7% Series due 2014, Iberville Parish | - | | 9,890 | |
5.8% Series due 2015, West Feliciana Parish | - | | 13,005 | |
7.0% Series due 2015, West Feliciana Parish | 40 | | 22,440 | - | | 40 |
5.8% Series due 2016, West Feliciana Parish | 9,160 | | 9,160 | - | | 9,160 |
6.6% Series due 2028, West Feliciana Parish | - | | 18,320 | |
Total governmental bonds | 9,200 | | 113,040 | - | | 9,200 |
| | | | | | |
Mortgage Bonds: | | | | | | |
3.60% Series due June 2015 | | 200,000 | | - |
7.125% Series due February 2019 | 500,000 | | - | 500,000 | | 500,000 |
7.875% Series due June 2039 | 150,000 | | - | 150,000 | | 150,000 |
Total mortgage bonds | 650,000 | | - | 850,000 | | 650,000 |
| | | | |
Securitization Bonds | | | | |
5.51% Series Senior Secured, Series A due October 2013 | | 38,152 | | 56,728 |
5.79% Series Senior Secured, Series A due October 2018 | | 121,600 | | 121,600 |
5.93% Series Senior Secured, Series A due June 2022 | | 114,400 | | 114,400 |
2.12% Series Senior Secured due February 2016 | | 169,766 | | 182,500 |
3.65% Series Senior Secured due August 2019 | | 144,800 | | 144,800 |
4.38% Series Senior Secured due November 2023 | | 218,600 | | 218,600 |
Total securitization bonds | | 807,318 | | 838,628 |
| | | | |
Other | | | | |
Unamortized Premium and Discount - Net | | (3,419) | | (3,759) |
Other | | 5,331 | | 5,414 |
| | | | |
Total Long-Term Debt | | 1,659,230 | | 1,658,025 |
Less Amount Due Within One Year | | - | | 167,742 |
Long-Term Debt Excluding Amount Due Within One Year | | $1,659,230 | | $1,490,283 |
| | | | |
Fair Value of Long-Term Debt (c) | | $1,822,219 | | $1,747,348 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2009 | | 2008 |
| (In Thousands) |
| | | |
Other Long-Term Debt: | | | |
5.51% Series Senior Secured, Series A due October 2013 | 56,728 | | 74,444 |
5.79% Series Senior Secured, Series A due October 2018 | 121,600 | | 121,600 |
5.93% Series Senior Secured, Series A due June 2022 | 114,400 | | 114,400 |
2.12% Series Senior Secured due February 2016 | 182,500 | | - |
3.65% Series Senior Secured due August 2019 | 144,800 | | - |
4.38% Series Senior Secured due November 2023 | 218,600 | | - |
Bank Credit Facility, weighted avg rate 2.285% (Note 4) | - | | 100,000 |
Unamortized Premium and Discount - Net | (3,759) | | (952) |
Other | 5,414 | | 5,414 |
| | | |
Total Long-Term Debt | 1,658,025 | | 1,184,877 |
Less Amount Due Within One Year | 167,742 | | 100,509 |
Long-Term Debt Excluding Amount Due Within One Year | $1,490,283 | | $1,084,368 |
| | | |
Fair Value of Long-Term Debt (c) | $1,747,348 | | $1,085,362 |
| | | |
| 2009 | | 2008 | 2010 | | 2009 |
| (In Thousands) | (In Thousands) |
System Energy | | | | | | |
Mortgage Bonds: | | | | | | |
6.2% Series due October 2012 | $70,000 | | $70,000 | $70,000 | | $70,000 |
Total mortgage bonds | 70,000 | | 70,000 | 70,000 | | 70,000 |
| | | | | | |
Governmental Bonds (a): | | | | | | |
5.875% Series due 2022, Mississippi Business Finance Corp. | 216,000 | | 216,000 | 216,000 | | 216,000 |
5.9% Series due 2022, Mississippi Business Finance Corp. | 102,975 | | 102,975 | 102,975 | | 102,975 |
6.2% Series due 2026, Claiborne County | 90,000 | | 90,000 | 90,000 | | 90,000 |
Total governmental bonds | 408,975 | | 408,975 | 408,975 | | 408,975 |
| | | | | | |
Variable Interest Entity Notes Payable | | | | |
6.29% Series F due September 2013 | | 70,000 | | - |
5.33% Series G due April 2015 | | 60,000 | | - |
Total variable interest entity notes payable | | 130,000 | | - |
| | | | |
Other Long-Term Debt: | | | | | | |
Grand Gulf Lease Obligation 5.13% (Note 10) | 266,864 | | 295,304 | 222,280 | | 266,864 |
Unamortized Premium and Discount - Net | (864) | | (939) | (789) | | (864) |
Other | | 2 | | - |
| | | | | | |
Total Long-Term Debt | 744,975 | | 773,340 | 830,468 | | 744,975 |
Less Amount Due Within One Year | 41,715 | | 28,440 | 33,740 | | 41,715 |
Long-Term Debt Excluding Amount Due Within One Year | $703,260 | | $744,900 | $796,728 | | $703,260 |
| | | | | | |
Fair Value of Long-Term Debt (c) | $479,893 | | $363,515 | $611,837 | | $479,893 |
(a) | Consists of pollution control revenue bonds and environmental revenue bonds. |
(b) | Pursuant to the Nuclear Waste Policy Act of 1982, Entergy'sEntergy’s nuclear owner/licensee subsidiaries have contracts with the DOE for spent nuclear fuel disposal service. The contracts include a one-time fee for generation prior to April 7, 1983. Entergy Arkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(c) | The fair value excludes lease obligations of $241$224 million at Entergy Louisiana and $267$222 million at System Energy and long-term DOE obligations of $181 million at Entergy Arkansas, and affiliate notes payable of $74 million at Entergy New Orleans, and includes debt due within one year. It is determined using bidFair values are based on prices derived by independent third parties that use inputs such as benchmark yields, reported by trades, broker/dealer marketsquotes, and by nationally recognized investment banking firms.issuer spreads. |
(d) | The bonds are secured by a series of collateral first mortgage bonds. |
(e) | Entergy Gulf States Louisiana remainswas primarily liable for all of the long-term debt issued by Entergy Gulf States, Inc. that was outstanding on December 31, 2009 and 2008.2007. Under a debt assumption agreement with Entergy Gulf States Louisiana, Entergy Texas assumed approximately 46% of this long-term debt. Entergy Gulf States Louisiana recorded an assumption asset on its balance sheet to reflect the long-term debt assumed by Entergy Texas. By June 2010, Entergy Texas had repaid the outstanding assumed debt and the debt assumption agreement was terminated. |
(f) | In April 2008, Entergy Mississippi repurchased its $30 million of Auction Rate Independence County Pollution Control Revenue Bonds due July 2022. In June 2008, Entergy Mississippi remarketed the series and fixed the interest rate to maturity at 4.90%. |
(g) | The affiliate note payable at Entergy New Orleans that iswas due May 2010 is nowwas classified as current notes payable - associated companies.companies in 2009. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations, and affiliate notes payable)obligations) for debt outstanding as of December 31, 2009,2010, for the next five years are as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
2010 | | $100,000 | | $11,975 | | $205,000 | | - | | $30,000 | | $167,742 | | - | |
2011 | | - | | $200,000 | | - | | $80,000 | | - | | - | | - | | $35,000 | | - | | - | | $80,000 | | - | | - | | - |
2012 | | - | | $26,170 | | - | | - | | - | | - | | $70,000 | | - | | $86,170 | | - | | - | | - | | - | | $70,000 |
2013 | | $300,000 | | $9,460 | | - | | $100,000 | | $70,000 | | $56,728 | | - | | $330,000 | | $108,660 | | - | | $100,000 | | $70,000 | | $38,152 | | $70,000 |
2014 | | - | | $11,710 | | $115,000 | | - | | - | | - | | - | | $70,000 | | $11,710 | | $50,000 | | - | | - | | - | | - |
2015 | | | - | | $31,955 | | - | | - | | - | | $200,000 | | $60,000 |
Entergy Arkansas Securitization Bonds
In June 2010 the APSC issued a financing order authorizing the issuance of bonds to recover Entergy Arkansas’s January 2009 ice storm damage restoration costs, including carrying costs of $11.5 million and $4.6 million of up-front financing costs. In August 2010, Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, issued $124.1 million of storm cost recovery bonds. The bonds have a coupon of 2.30% and an expected maturity date of August 2021. Although the principal amount is not due until the date given above, Entergy Arkansas Restoration Funding expects to make principal payments on the bonds over the next five years in the amount of $10.3 million for 2011, $12.2 million for 2012, $12.6 million fo r 2013, $12.8 million for 2014, and $13.2 million for 2015. With the proceeds, Entergy Arkansas Restoration Funding purchased from Entergy Arkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy Arkansas balance sheet. The creditors of Entergy Arkansas do not have recourse to the assets or revenues of Entergy Arkansas Restoration Funding, including the storm recovery property, and the creditors of Entergy Arkansas Restoration Funding do not have recourse to the assets or revenues of Entergy Arkansas. Entergy Arkansas has no payment obligations to Entergy Arkansas Restoration Funding except to remit storm recovery charge collections.
Entergy Texas Securitization Bonds - Hurricane Rita
In April 2007 the PUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million of Entergy Texas'Texas’s Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company that is now wholly-owned and consolidated by Entergy Texas, issued $329.5 million of senior secured transition bonds (securitization bonds), as follows:
| Amount |
| (In Thousands) |
Senior Secured Transition Bonds, Series A: | |
Tranche A-1 (5.51%) due October 2013 | $93,500 |
Tranche A-2 (5.79%) due October 2018 | 121,600 |
Tranche A-3 (5.93%) due June 2022 | 114,400 |
Total senior secured transition bonds | $329,500 |
Although the principal amount of each tranche is not due until the dates given above, Entergy Gulf States Reconstruction Funding expects to make principal payments on the bonds over the next five years in the amounts of $18.6 million for 2010, $19.7 million for 2011, $20.8 million for 2012, $21.9 million for 2013, and $23.2 million for 2014.2014, and $24.6 million for 2015. All of the scheduled principal payments for 2010-20122011-2012 are for Tranche A-1, except for $2.3 million for Tranche A-2 in 2012, and all of the scheduled principal payments for 2013-20142013-2015 are for Tranche A-2.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas began cost recovery through the transition charge in July 2007.balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Gulf States Reconstruction Funding, including the transition property, and the creditors of Entergy Gulf States Reconstruction Funding do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Gulf States Reconstruction Funding except to remit transition charge collections.
Entergy Texas Securitization Bonds - Hurricane Ike and Hurricane Gustav
In September 2009 the PUCT authorized the issuance of securitization bonds to recover $566.4 million of Entergy Texas'Texas’s Hurricane Ike and Hurricane Gustav restoration costs, plus carrying costs and transitiontransaction costs, offset by insurance proceeds. In November 2009, Entergy Texas Restoration funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds), as follows:
| Amount |
| (In Thousands) |
Senior Secured Transition Bonds | |
Tranche A-1 (2.12%) due February 2016 | $182,500 |
Tranche A-2 (3.65%) due August 2019 | 144,800 |
Tranche A-3 (4.38%) due November 2023 | 218,600 |
Total senior secured transition bonds | $545,900 |
Although the principal amount of each tranche is not due until the dates given above, Entergy Texas Restoration Funding expects to make principal payments on the bonds over the next five years in the amount of $12.7 million for 2010, $37.8 million for 2011, $38.6 million for 2012, $39.4 million for 2013, and $40.2 million for 2014.2014, and $41.2 million for 2015. All of the expected principal payments for 2010-20142011-2014 are for Tranche A-1.A-1 and $13.8 million of the scheduled principal payments for 2015 are for Tranche A-1 and $27.4 million are for Tranche A-2.
With the proceeds, Entergy Texas Restoration Funding purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas expects to use the proceeds to reduce debt.balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding, including the transition property, and the creditors of Entergy Texas Restoration Funding do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Texas Restoration Funding except to remit transition charge collections.
Entergy Texas Note Payable to Entergy Corporation
In December 2008, Entergy Texas borrowed $160 million from its parent company, Entergy Corporation, under a $300 million revolving credit facility pursuant to an Inter-Company Credit Agreement between Entergy Corporation and Entergy Texas. The note had a December 3, 2013 maturity date. Entergy Texas used the proceeds, together with other available corporate funds, to pay at maturity the portion of the $350 million Floating Rate series of First Mortgage Bonds due December 2008 that had been assumed by Entergy Texas, and that bond series is no longer outstanding. In January 2009, Entergy Texas repaid its $160 million note payable to Entergy Corporation with the proceeds from the issuance of $500 million of 7.125% Series mortgage bonds in January 2009.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans Affiliate Notes
Pursuant to its plan of reorganization, in May 2007 Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. In May 2010, Entergy New Orleans included in the principal amount ofrepaid, at maturity, the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
date of issuance of the notes. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%. The Louisiana judicial rate of interest is 9.5% for 2007, 8.5% for 2008, 5.5% for 2009, and 3.5% for 2010.payable.
NOTE 6. PREFERRED EQUITY (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)
The number of shares and units authorized and outstanding and dollar value of preferred stock, preferred membership interests, and minority interest for Entergy Corporation subsidiaries as of December 31, 20092010 and 20082009 are presented below. All series of the Utility preferred stock are redeemable at the option of the related company.
| | Shares/Units Authorized | | Shares/Units Outstanding | | | | | | Shares/Units Authorized | | Shares/Units Outstanding | | | | |
| | 2009 | | 2008 | | 2009 | | 2008 | | 2009 | | 2008 | | 2010 | | 2009 | | 2010 | | 2009 | | 2010 | | 2009 |
Entergy Corporation | | | | | | | | | | (Dollars in Thousands) | | | | | | | | | | (Dollars in Thousands) |
Utility: | | | | | | | | | | | | | | | | | | | | | | | | |
Preferred Stock or Preferred Membership Interests without sinking fund: | | | | | | | | | | | | | | | | | | | | | | | | |
Entergy Arkansas, 4.32%-6.45% Series | | 3,413,500 | | 3,413,500 | | 3,413,500 | | 3,413,500 | | $116,350 | | $116,350 | | 3,413,500 | | 3,413,500 | | 3,413,500 | | 3,413,500 | | $116,350 | | $116,350 |
Entergy Gulf States Louisiana, Series A 8.25 % | | | | | | | | | | 10,000 | | 10,000 | |
Entergy Gulf States Louisiana, Series A 8.25 % | | | 100,000 | | 100,000 | | 100,000 | | 100,000 | | 10,000 | | 10,000 |
Entergy Louisiana, 6.95% Series (a) | | 1,000,000 | | 1,000,000 | | 840,000 | | 840,000 | | 84,000 | | 84,000 | | 1,000,000 | | 1,000,000 | | 840,000 | | 840,000 | | 84,000 | | 84,000 |
Entergy Mississippi, 4.36%-6.25% Series | | 1,403,807 | | 1,403,807 | | 1,403,807 | | 1,403,807 | | 50,381 | | 50,381 | | 1,403,807 | | 1,403,807 | | 1,403,807 | | 1,403,807 | | 50,381 | | 50,381 |
Entergy New Orleans, 4.36%-5.56% Series | | 197,798 | | 197,798 | | 197,798 | �� | 197,798 | | 19,780 | | 19,780 | | 197,798 | | 197,798 | | 197,798 | | 197,798 | | 19,780 | | 19,780 |
Total Utility Preferred Stock or Preferred Membership Interests without sinking fund | | 6,115,105 | | 6,115,105 | | 5,955,105 | | 5,955,105 | | 280,511 | | 280,511 | | 6,115,105 | | 6,115,105 | | 5,955,105 | | 5,955,105 | | 280,511 | | 280,511 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Non-nuclear Wholesale Assets Business: | | | | | | | | | | | | | |
Entergy Wholesale Commodities: | | | | | | | | | | | | | |
Preferred Stock without sinking fund: | | | | | | | | | | | | | | | | | | | | | | | | |
Entergy Asset Management, 8.95% rate (b) | | 1,000,000 | | 1,000,000 | | 305,240 | | 297,376 | | 29,375 | | 29,738 | | 1,000,000 | | 1,000,000 | | 305,240 | | 305,240 | | 29,375 | | 29,375 |
Other | | - | | - | | - | | - | | 1,457 | | 780 | | - | | - | | - | | - | | 852 | | 1,457 |
Total Subsidiaries' Preferred Stock without sinking fund | | 7,115,105 | | 7,115,105 | | 6,260,345 | | 6,252,481 | | $311,343 | | $311,029 | |
Total Subsidiaries’ Preferred Stock without sinking fund | | | 7,115,105 | | 7,115,105 | | 6,260,345 | | 6,260,345 | | $310,738 | | $311,343 |
(a) | In 2007, Entergy Louisiana Holdings, an Entergy subsidiary, purchased 160,000 of these shares from the holders. |
(b) | Upon the sale of Class B preferred shares in December 2009, Entergy Asset Management had issued and outstanding Class A and Class B preferred shares. The preferred stockholders'stockholders’ agreement provides that during the 180 day period prior to each December 31 either Entergy Asset Management or the majority Class A or Class B preferred shareholders, each acting separately as a class, may request that the preferred dividend rate for the respective class be reset. If Entergy Asset Management and the respective preferred shareholders are unable to agree on a dividend reset rate, athe preferred shareholder can request that its shares be sold to a third party.party (“Sale Election”). If Entergy Asset Management is unable to enter into an agreement in principle to sell the preferred shares within 75 days,day s, the Class A preferred shareholders have the right to take control of the Entergy Asset Management board of directors for the purpose of liquidating the assets of Entergy Asset Management in order to repay the Class A preferred shares and any accrued dividends. Upon the sale of Class BA shares resulting from a failed rate resetSale Election or a liquidation transaction by the Class A preferred shareholders, Class B shareholders have the option to exchange their shares for shares of Class A preferred stock. |
All outstanding preferred stock and membership interests are cumulative.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
All outstanding preferred stock and membership interests are cumulative.
At December 31, 20092010 and 2008,2009, Entergy Gulf States Louisiana had outstanding 100,000 units of no par value 8.25% Series Preferred Membership Interests that were initially issued by Entergy Gulf States, Inc. as preference stock. The preference shares were converted into the preferred units as part of the jurisdictional separation. The distributions are cumulative and payable quarterly beginning March 15, 2008. The preferred membership interests are redeemable on or after December 15, 2015, at Entergy Gulf States Louisiana'sLouisiana’s option, at the fixed redemption price of $100 per unit.
The number of shares and units authorized and outstanding and dollar value of preferred stock and membership interests for Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans as of December 31, 20092010 and 20082009 are presented below. All series of the Utility operating companies'companies’ preferred stock and membership interests are redeemable at the respective company'scompany’s option at the call prices presented. Dividends and distributions paid on all of Entergy'sEntergy’s preferred stock and membership interests series are eligible for the dividends received deduction. The dividends received deduction is limited by Internal Revenue Code section 244 for the following preferred stock series: Entergy ArkansasArkans as 4.72%, Entergy Mississippi 4.56%, and Entergy New Orleans 4.75%.
| Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price Per Share as of December 31, |
| 2009 | | 2008 | | 2009 | | 2008 | | 2009 |
Entergy Arkansas Preferred Stock | | | | | | | | | |
Without sinking fund: | | | | | | | | | |
Cumulative, $100 par value: | | | | | | | | | |
4.32% Series | 70,000 | | 70,000 | | $7,000 | | $7,000 | | $103.65 |
4.72% Series | 93,500 | | 93,500 | | 9,350 | | 9,350 | | $107.00 |
4.56% Series | 75,000 | | 75,000 | | 7,500 | | 7,500 | | $102.83 |
4.56% 1965 Series | 75,000 | | 75,000 | | 7,500 | | 7,500 | | $102.50 |
6.08% Series | 100,000 | | 100,000 | | 10,000 | | 10,000 | | $102.83 |
Cumulative, $25 par value: | | | | | | | | | |
6.45% Series (a) | 3,000,000 | | 3,000,000 | | 75,000 | | 75,000 | | $- |
Total without sinking fund | 3,413,500 | | 3,413,500 | | $116,350 | | $116,350 | | |
| Shares/Units
Authorized and Outstanding | |
Dollars
(In Thousands) | | Call Price Per Share/Unit as of December 31, |
| 2009 | | 2008 | | 2009 | | 2008 | | 2009 |
Entergy Gulf States Louisiana Preferred Membership Interests | | | | | | | | | |
Without sinking fund: | | | | | | | | | |
Cumulative, $100 liquidation value: | | | | | | | | | |
8.25% Series (b) | 100,000 | | 100,000 | | $10,000 | | $10,000 | | $- |
Total without sinking fund | 100,000 | | 100,000 | | $10,000 | | $10,000 | | |
| Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Share as of December 31, |
| 2010 | | 2009 | | 2010 | | 2009 | | 2010 |
Entergy Arkansas Preferred Stock | | | | | | | | | |
Without sinking fund: | | | | | | | | | |
Cumulative, $100 par value: | | | | | | | | | |
4.32% Series | 70,000 | | 70,000 | | $7,000 | | $7,000 | | $103.65 |
4.72% Series | 93,500 | | 93,500 | | 9,350 | | 9,350 | | $107.00 |
4.56% Series | 75,000 | | 75,000 | | 7,500 | | 7,500 | | $102.83 |
4.56% 1965 Series | 75,000 | | 75,000 | | 7,500 | | 7,500 | | $102.50 |
6.08% Series | 100,000 | | 100,000 | | 10,000 | | 10,000 | | $102.83 |
Cumulative, $25 par value: | | | | | | | | | |
6.45% Series (a) | 3,000,000 | | 3,000,000 | | 75,000 | | 75,000 | | $- |
Total without sinking fund | 3,413,500 | | 3,413,500 | | $116,350 | | $116,350 | | |
| Units Authorized and Outstanding | | Dollars (In Thousands) | | Call Price Per Unit as of December 31, | Shares/Units Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Share/Unit as of December 31, |
| 2009 | | 2008 | | 2009 | | 2008 | | 2009 | 2010 | | 2009 | | 2010 | | 2009 | | 2010 |
Entergy Louisiana Preferred Membership Interests | | | | | | | | | | |
Entergy Gulf States Louisiana Preferred Membership Interests | | | | | | | | | | |
Without sinking fund: | | | | | | | | | | | | | | | | | | |
Cumulative, $100 liquidation value: | | | | | | | | | | | | | | | | | | |
6.95% Series (c) | 1,000,000 | | 1,000,000 | | $100,000 | | $100,000 | | $- | |
8.25% Series (b) | | 100,000 | | 100,000 | | $10,000 | | $10,000 | | $- |
Total without sinking fund | 1,000,000 | | 1,000,000 | | $100,000 | | $100,000 | | | 100,000 | | 100,000 | | $10,000 | | $10,000 | | |
| Units Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Unit as of December 31, |
| 2010 | | 2009 | | 2010 | | 2009 | | 2010 |
Entergy Louisiana Preferred Membership Interests | | | | | | | | | |
Without sinking fund: | | | | | | | | | |
Cumulative, $100 liquidation value: | | | | | | | | | |
6.95% Series (c) | 1,000,000 | | 1,000,000 | | $100,000 | | $100,000 | | $- |
Total without sinking fund | 1,000,000 | | 1,000,000 | | $100,000 | | $100,000 | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price Per Share as of December 31, | Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Share as of December 31, |
| 2009 | | 2008 | | 2009 | | 2008 | | 2009 | 2010 | | 2009 | | 2010 | | 2009 | | 2010 |
Entergy Mississippi Preferred Stock | | | | | | | | | | | | | | | | | | |
Without sinking fund: | | | | | | | | | | | | | | | | | | |
Cumulative, $100 par value: | | | | | | | | | | | | | | | | | | |
4.36% Series | 59,920 | | 59,920 | | $5,992 | | $5,992 | | $103.88 | 59,920 | | 59,920 | | $5,992 | | $5,992 | | $103.88 |
4.56% Series | 43,887 | | 43,887 | | 4,389 | | 4,389 | | $107.00 | 43,887 | | 43,887 | | 4,389 | | 4,389 | | $107.00 |
4.92% Series | 100,000 | | 100,000 | | 10,000 | | 10,000 | | $102.88 | 100,000 | | 100,000 | | 10,000 | | 10,000 | | $102.88 |
Cumulative, $25 par value | | | | | | | | | | | | | | | | | | |
6.25% Series (d) | 1,200,000 | | 1,200,000 | | 30,000 | | 30,000 | | $- | 1,200,000 | | 1,200,000 | | 30,000 | | 30,000 | | $- |
Total without sinking fund | 1,403,807 | | 1,403,807 | | $50,381 | | $50,381 | | | 1,403,807 | | 1,403,807 | | $50,381 | | $50,381 | | |
| Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price Per Share as of December 31, | Shares Authorized and Outstanding | | Dollars (In Thousands) | | Call Price per Share as of December 31, |
| 2009 | | 2008 | | 2009 | | 2008 | | 2009 | 2010 | | 2009 | | 2010 | | 2009 | | 2010 |
Entergy New Orleans Preferred Stock | | | | | | | | | | | | | | | | | | |
Without sinking fund: | | | | | | | | | | | | | | | | | | |
Cumulative, $100 par value: | | | | | | | | | | | | | | | | | | |
4.36% Series | 60,000 | | 60,000 | | $6,000 | | $6,000 | | $104.58 | 60,000 | | 60,000 | | $6,000 | | $6,000 | | $104.58 |
4.75% Series | 77,798 | | 77,798 | | 7,780 | | 7,780 | | $105.00 | 77,798 | | 77,798 | | 7,780 | | 7,780 | | $105.00 |
5.56% Series | 60,000 | | 60,000 | | 6,000 | | 6,000 | | $102.59 | 60,000 | | 60,000 | | 6,000 | | 6,000 | | $102.59 |
Total without sinking fund | 197,798 | | 197,798 | | $19,780 | | $19,780 | | | 197,798 | | 197,798 | | $19,780 | | $19,780 | | |
(a) | Series is non-callable until April 2011; thereafter callable at par. |
(b) | Series is non-callable until January 2016; thereafter callable at par. |
(c) | Series is non-callable until December 2010; thereafter callable at par. |
(d) | Series is non-callable until August 2010; thereafter callable at par. |
In connection with the adoption of the new accounting pronouncement regarding non-controlling interests Entergy evaluated the accounting standards regarding the classification and measurement of redeemable securities. These standards require the classification of securities between liabilities and shareholders' equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans articles of incorporation provide, generally, that the holders of each company's preferred securities may elect a majority of the respective company's board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders' equity on the balance sheet as of December 31, 2009, and are restating the December 31, 2008 amounts presented in each affected company's financial statements to reflect this same presentation, which reduces the previously reported total shareholders' equity amount by $116 million, $50 million and $20 million for Entergy Arkansas, Entergy Mississippi and Entergy New Orleans, respectively. The 2007 shareholders' equity for each of the affected companies is restated by the same respective amount. This change has no net effect on those companies' reported amount of total liabilities and equity or any other financial statements presented or amounts included therein.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 7. COMMON EQUITY (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Common Stock
Treasury Stock
TreasuryCommon stock and treasury stock shares activity for Entergy for 2010, 2009, 2008, and 20072008 is as follows:
| | 2009 | | 2008 | | 2007 | |
| | Treasury | | | | Treasury | | | | Treasury | | | |
| | Shares | | Cost | | Shares | | Cost | | Shares | | Cost | | 2010 | | 2009 | | 2008 |
| | | | (In Thousands) | | | | (In Thousands) | | | | (In Thousands) | | Common Shares Issued | | Treasury Shares | | Common Shares Issued | | Treasury Shares | | Common Shares Issued | | Treasury Shares |
| | | | | | | | | | | | | | | | | | | | | | | | |
Beginning Balance, January 1 | | 58,815,518 | | $4,175,214 | | 55,053,847 | | $3,734,865 | | 45,506,311 | | $2,644,390 | | 254,752,788 | | 65,634,580 | | 248,174,087 | | 58,815,518 | | 248,174,087 | | 55,053,847 |
Equity Unit Transaction | | | - | | - | | 6,578,701 | | - | | - | | - |
Repurchases | | 7,680,000 | | 613,125 | | 4,792,299 | | 512,351 | | 11,581,842 | | 1,215,578 | | - | | 11,490,551 | | - | | 7,680,000 | | - | | 4,792,299 |
Issuances: | | | | | | | | | | | | | | | | | | | | | | | | |
Employee Stock-Based Compensation Plans | | (856,390) | | (60,846) | | (1,025,408) | | (71,636) | | (2,029,686) | | (124,801) | | - | | (1,113,411) | | - | | (856,390) | | - | | (1,025,408) |
Directors' Plan | | (4,548) | | (326) | | (5,220) | | (366) | | (4,620) | | (302) | |
Directors’ Plan | | | - | | (4,800) | | - | | (4,548) | | - | | (5,220) |
Ending Balance, December 31 | | 65,634,580 | | $4,727,167 | | 58,815,518 | | $4,175,214 | | 55,053,847 | | $3,734,865 | | 254,752,788 | | 76,006,920 | | 254,752,788 | | 65,634,580 | | 248,174,087 | | 58,815,518 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In December 2005, Entergy Corporation sold 10 million equity units with a stated amount of $50 each. An equity unit consisted of (1) a note, initially due February 2011 and initially bearing interest at an annual rate of 5.75%, and (2) a purchase contract that obligated the holder of the equity unit to purchase for $50 between 0.5705 and 0.7074 shares of Entergy Corporation common stock on or before February 17, 2009. Entergy paid the holders quarterly contract adjustment payments of 1.875% per year on the stated amount of $50 per equity unit. Under the terms of the purchase contracts, Entergy attempted to remarket the notes in February 2009 but was unsuccessful, the note holders put the notes to Entergy, Entergy retired the notes, and Entergy issued shares of common stock to settle the purchase contra cts.
Entergy Corporation reissues treasury shares to meet the requirements of the Stock Plan for Outside Directors (Directors'(Directors’ Plan), two Equity Ownership Plans of Entergy Corporation and Subsidiaries, the Equity Awards Plan of Entergy Corporation and Subsidiaries, and certain other stock benefit plans. The Directors'Directors’ Plan awards to non-employee directors a portion of their compensation in the form of a fixed number of shares of Entergy Corporation common stock.
In January 2007, the Board approved a repurchase program under whichthat authorized Entergy is authorized to repurchase up to $1.5 billion of its common stock. In January 2008, the Board authorized an incremental $500 million share repurchase program to enable Entergy to consider opportunistic purchases in response to equity market conditions. Entergy completed both the $1.5 billion and $500 million programs in the third quarter 2009. In October 2009, the Board granted authority for an additional $750 million share repurchase program which was completed in the fourth quarter 2010. In October 2010, the Board granted authority for an additional $500 million share repurchase program.
Retained Earnings and Dividend Restrictions
Provisions within the articles of incorporation or pertinent indentures and various other agreements relating to the long-term debt and preferred stock of certain of Entergy Corporation'sCorporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred stock.equity. As of December 31, 2009,2010, under provisions in their mortgage indentures, Entergy Arkansas and Entergy Mississippi had restricted retained earnings unavailable for distribution to Entergy Corporation of $461.6$458 million and $236$241 million, respectively.respectively, and Entergy Louisiana had member’s equity unavailable for distribution to Entergy Corporation of $465 million. Entergy Corporation received dividend payments from subsidiaries totaling $580 million in 2010, $417 million in 2009, and $313 million in 2008.
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana. Accumulated other comprehensive income (loss) in the balance sheets included the following components:
| | Entergy | | Entergy Gulf States Louisiana | | Entergy Louisiana |
| | December 31, 2010 | | December 31, 2009 | | December 31, 2010 | | December 31, 2009 | | December 31, 2010 | | December 31, 2009 |
| | (In Thousands) |
| | | | | | | | | | | | |
Cash flow hedges net unrealized gain | | $106,258 | | $117,943 | | $- | | $- | | $- | | $- |
Pension and other postretirement liabilities | | (276,466) | | (267,939) | | (40,304) | | (42,171) | | (24,962) | | (25,539) |
Net unrealized investment gains | | 129,685 | | 72,162 | | - | | - | | - | | - |
Foreign currency translation | | 2,311 | | 2,649 | | - | | - | | - | | - |
Total | | ($38,212) | | ($75,185) | | ($40,304) | | ($42,171) | | ($24,962) | | ($25,539) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other comprehensive income and total comprehensive income for years ended December 31, 2010, 2009, and 2008 are presented in Entergy’s, Entergy Gulf States Louisiana’s, and $625 millionEntergy Louisiana’s Statements of Changes in 2007.Equity and Comprehensive Income.
NOTE 8. COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business. While management is unable to predict the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy'sEntergy’s results of operations, cash flows, or financial condition. Entergy discusses regulatory proceedings in Note 2 to the financial statements and discusses tax proceedings in Note 3 to the financial statements.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Vidalia Purchased Power Agreement
Entergy Louisiana has an agreement extending through the year 2031 to purchase energy generated by a hydroelectric facility known as the Vidalia project. Entergy Louisiana made payments under the contract of approximately $215.6$216.5 million in 2010, $204.9 million in 2009, $167.7and $166.5 million in 2008, and $130.8 million in 2007.2008. If the maximum percentage (94%) of the energy is made available to Entergy Louisiana, current production projections would require estimated payments of approximately $169.8$170.2 million in 2010,2011, and a total of $2.81$2.64 billion for the years 20112012 through 2031. Entergy Louisiana currently recovers the costs of the purchased energy through its fuel adjustment clause. In an LPSC-approved settlement related to tax benefits from the tax treatment of the Vidalia contract,con tract, Entergy Louisiana agreed to credit rates by $11 million each year for up to ten years, beginning in October 2002. In addition, in accordance with an LPSC settlement, Entergy Louisiana credited rates in August 2007 by $11.8 million (including interest) as a result of a settlement with the IRS of the 2001 tax treatment of the Vidalia contract. Entergy Louisiana agreed to credit ratepayers additional amounts unless the tax accounting election was not sustained. During the years 2013-2031, Entergy Louisiana and its ratepayers would share the remaining benefits of this tax accounting election. The provisions of the settlement also provide that the LPSC shall not recognize or use Entergy Louisiana'sLouisiana’s use of the cash benefits from the tax treatment in setting any of Entergy Louisiana'sLouisiana’s rates. Therefore, to the extent Entergy Louisiana'sLouisiana’s use of the proceeds would ordinarily have reduced its rate base, no change in rate base shall be reflected for ratemaking purposes.
Nuclear Insurance
Third Party Liability Insurance
The Price-Anderson Act requires that reactor licensees purchase insurance and participate in a secondary insurance pool that provides insurance coverage for the public in the event of a nuclear power plant accident. The costs of this insurance are borne by the nuclear power industry. Congress amended and renewed the Price-Anderson Act in 2005 for a term through 2025. The Price-Anderson Act requires nuclear power plants to show evidence of financial protection in the event of a nuclear accident. This protection must consist of two layers of coverage:
1. | The primary level is private insurance underwritten by American Nuclear Insurers and provides public liability insurance coverage of $375 million. If this amount is not sufficient to cover claims arising from an accident, the second level, Secondary Financial Protection, applies. |
2. | Within the Secondary Financial Protection level, each nuclear reactor has a contingent obligation to pay a retrospective premium, equal to its proportionate share of the loss in excess of the primary level, regardless of proximity to the incident or fault, up to a maximum of $117.5 million per reactor per incident (Entergy's(Entergy’s maximum total contingent obligation per incident is $1.3 billion). This consists of a $111.9 million maximum retrospective premium plus a five percent surcharge, which equates to $117.5 million, that may be payable, if needed, at a rate that is currently set at $17.5 million per year per incident per nuclear power reactor. A $300 million industry-wide aggregate limit exists for domestically-sponsored terrorist acts. ��There is no aggregate limitation for foreign-sponsored terrorist acts.acts as there had been in the past. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Currently, 104 nuclear reactors are participating in the Secondary Financial Protection program. The product of the maximum retrospective premium assessment to the nuclear power industry and the number of nuclear power reactors provides over $12.2 billion in secondary layer insurance coverage to compensate the public in the event of a nuclear power reactor accident. The Price-Anderson Act provides that all potential liability for a nuclear accident is limited to the amounts of insurance coverage available under the primary and secondary layers.
Entergy Arkansas has two licensed reactors and Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy each have one licensed reactor (10% of Grand Gulf is owned by a non-affiliated company (SMEPA) that would share on a pro-rata basis in any retrospective premium assessment to System Energy under the Price-Anderson Act). Entergy's Non-Utility Nuclear business ownsThe Entergy Wholesale Commodities segment includes the ownership and operatesoperation of six nuclear power reactors and ownsthe ownership of the shutdown Indian Point 1 reactor and Big Rock Point facility.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Property Insurance
Entergy'sEntergy’s nuclear owner/licensee subsidiaries are members of Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage, including decontamination and premature decommissioning expense, to the members'members’ nuclear generating plants. Effective April 1, 2009,2010, Entergy was insured against such losses per the following structures:
Utility Plants (ANO 1 and 2, Grand Gulf, River Bend, and Waterford 3)
· | Primary Layer (per plant) - $500 million per occurrence |
· | Excess Layer (per plant) - $750 million per occurrence |
· | Blanket Layer (shared among the Utility plants) - $350 million per occurrence |
· | Total limit - $1.6 billion per occurrence |
· | $2.5 million per occurrence - Turbine/generator damage |
· | $2.5 million per occurrence - Other than turbine/generator damage |
· | $10 million per occurrence plus 10% of amount above $10 million - Damage from a windstorm, flood, earthquake, or volcanic eruption |
Note: ANO 1 and 2 share in the primary and excess layers with common policies because the policies are issued on a per site basis.
Non-Utility NuclearEntergy Wholesale Commodities Plants (Indian Point, 2 and 3, FitzPatrick, Pilgrim, Vermont Yankee, Palisades, and Big Rock Point)
· | Primary Layer (per plant) - $500 million per occurrence |
· | Excess Layer - $615 million per occurrence |
· | Total limit - $1.115 billion per occurrence |
· | $2.5 million per occurrence - Turbine/generator damage |
· | $2.5 million per occurrence - Other than turbine/generator damage |
· | $10 million per occurrence plus 10% of amount above $10 million - Damage from a windstorm, flood, earthquake, or volcanic eruption |
Note: The Indian Point 2 and 3Units share in the primary and excess layers with common policies because the policies are issued on a per site basis. Big Rock Point has its own primary policy with no excess coverage.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In addition, Waterford 3, Grand Gulf, and the Non-Utility NuclearEntergy Wholesale Commodities plants are also covered under NEIL'sNEIL’s Accidental Outage Coverage program. This coverage provides certain fixed indemnities in the event of an unplanned outage that results from a covered NEIL property damage loss, subject to a deductible and a waiting period. The following summarizes this coverage effective April 1, 2009:2010:
Waterford 3
· | $2.95 million weekly indemnity |
· | $413 million maximum indemnity |
· | Deductible: 26 week waiting period |
Grand Gulf
· | $400,000 weekly indemnity (total for four policies) |
· | $56 million maximum indemnity (total for four policies) |
· | Deductible: 26 week waiting period |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Indian Point 2, Indian Point 3, and Palisades
· | $4.5 million weekly indemnity |
· | $490 million maximum indemnity |
· | Deductible: 12 week waiting period |
FitzPatrick and Pilgrim
· | $4.0 million weekly indemnity |
· | $490 million maximum indemnity |
· | Deductible: 12 week waiting period |
Vermont Yankee
· | $3.5 million weekly indemnity |
· | $435 million maximum indemnity |
· | Deductible: 12 week waiting period |
Under the property damage and accidental outage insurance programs, all NEIL insured plants could be subject to assessments should losses exceed the accumulated funds available from NEIL. Effective April 1, 2009,2010, the maximum amounts of such possible assessments per occurrence were as follows:
| | Assessments |
| | (In Millions) |
Utility: | | |
Entergy Arkansas | | $21.3 |
Entergy Gulf States Louisiana | | $17.116.3 |
Entergy Louisiana | | $19.019.3 |
Entergy Mississippi | | $0.07 |
Entergy New Orleans | | $0.07 |
Entergy Texas | | N/A |
System Energy | | $15.115.3 |
| | |
Non-Utility NuclearEntergy Wholesale Commodities | | $- |
Effective April 1, 2009, potentialPotential assessments for the Non-Utility NuclearEntergy Wholesale Commodities plants are covered by insurance obtained through NEIL'sNEIL’s reinsurers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy maintains property insurance for its nuclear units in excess of the NRC'sNRC’s minimum requirement of $1.06 billion per site for nuclear power plant licensees. NRC regulations provide that the proceeds of this insurance must be used, first, to render the reactor safe and stable, and second, to complete decontamination operations. Only after proceeds are dedicated for such use and regulatory approval is secured would any remaining proceeds be made available for the benefit of plant owners or their creditors.
In the event that one or more acts of terrorism causes property damage under one or more or all nuclear insurance policies issued by NEIL (including, but not limited to, those described above) within 12 months from the date the first property damage occurs, the maximum recovery under all such nuclear insurance policies shall be an aggregate of $3.24 billion plus the additional amounts recovered for such losses from reinsurance, indemnity, and any other sources applicable to such losses. The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess of existing coverage for a terrorist event.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Conventional Property Insurance
Entergy'sEntergy’s conventional property insurance program provides coverage of up to $400 million on an Entergy system-wide basis for all operational perils (direct physical loss or damage due to machinery breakdown, electrical failure, fire, lightning, hail, or explosion) on an "each“each and every loss"loss” basis; up to $400 million in coverage for certain natural perils (direct physical loss or damage due to earthquake, tsunami, flood, ice storm, and tornado) on an annual aggregate basis; and up to $125 million for certain other natural perils (direct physical loss or damage due to a named windstorm or storm surge) on an annual aggregate basis. The conventional property insurance program only provides up to $50 million in coverage for the Entergy New Orleans gas distribution system on an annual aggregate basis. TheTh e coverage is subject to a $20 million self-insured retention per occurrence for operational perils and a $35 million self-insured retention per occurrence for natural perils and for the Entergy New Orleans gas distribution system.
Covered property generally includes power plants, substations, facilities, inventories, and gas distribution-related properties. Excluded property generally includes above-ground transmission and distribution lines, poles, and towers. The primary layer consists of a $125$65 million layer in excess of the self-insured retention and the excess layer consists of a $275$335 million layer in excess of the $125$65 million primary layer. Both layers are placed on a quota share basis through several insurers. This coverage is in place for Entergy Corporation, the Registrant Subsidiaries, and certain other Entergy subsidiaries, including the owners of the Non-Utility Nuclearnuclear power plants.plants in the Entergy Wholesale Commodities segment.
In addition to the conventional property insurance program, Entergy has purchased additional coverage ($20 million per occurrence) for some of its non-regulated, non-generation assets. This policy serves to buy-down the $20 million deductible and is placed on a scheduled location basis. The applicable deductibles are $100,000 to $250,000, except for properties that are damaged by flooding and properties whose values are greater than $20 million; these properties have a $500,000 deductible.
Gas System Rebuild Insurance Proceeds (Entergy New Orleans)
Entergy New Orleans received insurance proceeds for future construction expenditures associated with rebuilding its gas system, and the October 2006 City Council resolution approving the settlement of Entergy New Orleans'Orleans’s rate and storm-cost recovery filings requires Entergy New Orleans to record those proceeds in a designated sub-account of other deferred credits until the proceeds are spent on the rebuild project. This other deferred credit is shown as "Gas“Gas system rebuild insurance proceeds"proceeds” on Entergy New Orleans'Orleans’s balance sheet.
Entergy Louisiana)Corporation and Subsidiaries
Notes to Financial Statements
In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The interests represent approximately 9.3% of Waterford 3. Upon the occurrence of certain events, Entergy Louisiana may be obligated to pay amounts sufficient to permit the termination of the lease transactions and may be required to assume the outstanding bonds issued to finance, in part, the lessors' acquisition of the undivided interests in Waterford 3.
Employment and Labor-related Proceedings
The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees and third parties not selected for open positions. These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various Entergy Corporation sponsored plans. Entergy and the Registrant Subsidiaries are responding to these suits and proceedings and deny liability to the claimants. Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of operation, or cash flows of Entergy or the Utility operating companies.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Asbestos Litigation (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Numerous lawsuits have been filed in federal and state courts primarily in Texas and Louisiana, primarily by contractor employees who worked in the 1940-1980s timeframe, against Entergy Gulf States Louisiana and Entergy Texas, and to a lesser extent the other Utility operating companies, as premises owners of power plants, for damages caused by alleged exposure to asbestos. Many other defendants are named in these lawsuits as well. Currently, there are approximately 500 lawsuits involving approximately 5,000 claimants. Management believes that adequate provisions have been established to cover any exposure. Additionally, negotiations continue with insurers to recover reimbursements. Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of operation, or cash flows of the Utility operating companies.
Grand Gulf - Related Agreements
Capital Funds Agreement (System Energy)
System Energy has entered into agreements with Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans whereby they are obligated to purchase their respective entitlements of capacity and energy from System Energy's current 90%Energy’s interest in Grand Gulf, and to make payments that, together with other available funds, are adequate to cover System Energy'sEnergy’s operating expenses. System Energy would have to secure funds from other sources, including Entergy Corporation'sCorporation’s obligations under the Capital Funds Agreement, to cover any shortfalls from payments received from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under these agreements.
Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
System Energy has agreed to sell all of its current 90% share of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans in accordance with specified percentages (Entergy Arkansas-36%, Entergy Louisiana-14%, Entergy Mississippi-33%, and Entergy New Orleans-17%) as ordered by the FERC. Charges under this agreement are paid in consideration for the purchasing companies'companies’ respective entitlement to receive capacity and energy and are payable irrespective of the quantity of energy delivered so long as the unit remains in commercial operation. The agreement will remain in effect until terminated by the parties and the termination is approved by the FERC, most likely upon Grand Gulf'sGulf’s retirement from service.& #160; Monthly obligations are based on actual capacity and energy costs. The average monthly payments for 20092010 under the agreement are approximately $17$17.1 million for Entergy Arkansas, $6.8$6.9 million for Entergy Louisiana, $14$14.2 million for Entergy Mississippi, and $8.3 million for Entergy New Orleans.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are individually obligated to make payments or subordinated advances to System Energy in accordance with stated percentages (Entergy Arkansas-17.1%, Entergy Louisiana-26.9%, Entergy Mississippi-31.3%, and Entergy New Orleans-24.7%) in amounts that, when added to amounts received under the Unit Power Sales Agreement or otherwise, are adequate to cover all of System Energy'sEnergy’s operating expenses as defined, including an amount sufficient to amortize the cost of Grand Gulf 2 over 27 years. (See Reallocation Agreement terms below.) System Energy has assigned its rights to payments and advances to certain creditors as security for certain obligations. Since commercial operation of Grand Gulf began, payments under the Unit Power Sales Agreement have exceeded the amounts payable under the Availability Agreement. Accordingly, no payments under the Availability Agreement have ever been required. If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Sales Agreement payments, and System Energy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleans could become subject to claims or demands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreement payments.
Reallocation Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)
System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans entered into the Reallocation Agreement relating to the sale of capacity and energy from Grand Gulf and the related costs, in which Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans agreed to assume all of Entergy Arkansas'Arkansas’s responsibilities and obligations with respect to Grand Gulf under the Availability Agreement. FERC'sFERC’s decision allocating a portion of Grand Gulf capacity and energy to Entergy Arkansas supersedes the Reallocation Agreement as it relates to Grand Gulf. Responsibility for any Grand Gulf 2 amortization amounts has been individually allocated (Entergy Louisiana-26.23%, Entergy Mississippi-43.97%, and Entergy New Orleans-29.80%) under the terms of the Reallocation Agreement. However, the Reallocation Agreement does not affect Entergy Arkansas'Arkansas’s obligation to System Energy'sEnergy’s lenders under the assignments referred to in the preceding paragraph. Entergy Arkansas would be liable for its share of such amounts if Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans were unable to meet their contractual obligations. No payments of any amortization amounts will be required so long as amounts paid to System Energy under the Unit Power Sales Agreement, including other funds available to System Energy, exceed amounts required under the Availability Agreement, which is expected to be the case for the foreseeable future.
Reimbursement Agreement (System Energy)
In December 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The interests represent approximately 11.5% of Grand Gulf. During the term of the leases, System Energy is required to maintain letters of credit for the equity investors to secure certain amounts payable to the equity investors under the transactions.
Under the provisions of the reimbursement agreement relating to the letters of credit, System Energy has agreed to a number of covenants regarding the maintenance of certain capitalization and fixed charge coverage ratios. System Energy agreed, during the term of the reimbursement agreement, to maintain a ratio of debt to total liabilities and equity less than or equal to 70%. In addition, System Energy must maintain, with respect to each fiscal quarter during the term of the reimbursement agreement, a ratio of adjusted net income to interest expense of at least 1.50 times earnings. As of December 31, 2009,2010, System Energy was in compliance with these covenants.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 9. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Accounting standards require the recording of liabilities for all legal obligations associated with the retirement of long-lived assets that result from the normal operation of those assets. For Entergy, substantially all of its asset retirement obligations consist of its liability for decommissioning its nuclear power plants. In addition, an insignificant amount of removal costs associated with non-nuclear power plants is also included in the decommissioning line item on the balance sheets.
These liabilities are recorded at their fair values (which are the present values of the estimated future cash outflows) in the period in which they are incurred, with an accompanying addition to the recorded cost of the long-lived asset. The asset retirement obligation is accreted each year through a charge to expense, to reflect the time value of money for this present value obligation. The accretion will continue through the completion of the asset retirement activity. The amounts added to the carrying amounts of the long-lived assets will be depreciated over the useful lives of the assets. The application of accounting standards related to asset retirement obligations is earnings neutral to the rate-regulated business of the Registrant Subsidiaries.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In accordance with ratemaking treatment and as required by regulatory accounting standards, the depreciation provisions for the Registrant Subsidiaries include a component for removal costs that are not asset retirement obligations under accounting standards. In accordance with regulatory accounting principles, the Registrant Subsidiaries have recorded regulatory assets (liabilities) in the following amounts to reflect their estimates of the difference between estimated incurred removal costs and estimated removal costs recovered in rates:
| | December 31, | | December 31, |
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
| | | | | | | | |
Entergy Arkansas | | ($7.3) | | $5.9 | | ($24.0) | | ($7.3) |
Entergy Gulf States Louisiana | | ($7.5) | | ($3.6) | | ($24.9) | | ($7.5) |
Entergy Louisiana | | ($21.7) | | ($43.5) | | ($52.9) | | ($21.7) |
Entergy Mississippi | | $44.5 | | $40.0 | | $46.1 | | $44.5 |
Entergy New Orleans | | $15.2 | | $15.4 | | $15.4 | | $15.2 |
Entergy Texas | | $7.2 | | $34.7 | | $7.3 | | $7.2 |
System Energy | | $13.9 | | $14.5 | | $12.2 | | $13.9 |
The cumulative decommissioning and retirement cost liabilities and expenses recorded in 2010 by Entergy were as follows:
| Liabilities as of December 31, 2009 | | Accretion | | Change in Cash Flow Estimate | | Spending | | Liabilities as of December 31, 2010 |
| | | | | (In Millions) | | | | |
Utility: | | | | | | | | | |
Entergy Arkansas | $566.4 | | $35.8 | | $- | | $- | | $602.2 |
Entergy Gulf States Louisiana | $321.2 | | $18.7 | | $- | | $- | | $339.9 |
Entergy Louisiana | $298.2 | | $23.0 | | $- | | $- | | $321.2 |
Entergy Mississippi | $5.1 | | $0.3 | | $- | | $- | | $5.4 |
Entergy New Orleans | $3.2 | | $0.2 | | $- | | $- | | $3.4 |
Entergy Texas | $3.4 | | $0.2 | | $- | | $- | | $3.6 |
System Energy | $421.4 | | $31.4 | | $- | | $- | | $452.8 |
| | | | | | | | | |
Entergy Wholesale Commodities | $1,320.6 | | $107.6 | | $- | | ($8.2) | | $1,420.0 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The cumulative decommissioning and retirement cost liabilities and expenses recorded in 2009 by Entergy were as follows:
| Liabilities as of December 31, 2008 | | Accretion | | Change in Cash Flow Estimate | | | Spending | | Liabilities as of December 31, 2009 |
| | | | | (In Millions) | | | | | |
Utility: | | | | | | | | | | |
Entergy Arkansas | $540.7 | | $34.6 | | ($8.9) | | | $- | | $566.4 |
Entergy Gulf States Louisiana | $222.9 | | $19.6 | | $78.7 | | | $- | | $321.2 |
Entergy Louisiana | $276.8 | | $21.4 | | $- | | | $- | | $298.2 |
Entergy Mississippi | $4.8 | | $0.3 | | $- | | | $- | | $5.1 |
Entergy New Orleans | $3.0 | | $0.2 | | $- | | | $- | | $3.2 |
Entergy Texas | $3.3 | | $0.1 | | $- | | | $- | | $3.4 |
System Energy | $396.2 | | $29.4 | | ($4.2) | | | $- | | $421.4 |
| | | | | | | | | | |
Non-Utility Nuclear | $1,228.7 | | $99.3 | | $- | | | ($8.5) | | $1,319.5 |
| | | | | | | | | | |
Other | $1.2 | | $- | | $- | | | ($0.1) | | $1.1 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The cumulative decommissioning and retirement cost liabilities and expenses recorded in 2008 by Entergy were as follows:
| Liabilities as of December 31, 2007 | | Accretion | | Change in Cash Flow Estimate | | | Spending | | Liabilities as of December 31, 2008 | Liabilities as of December 31, 2008 | | Accretion | | Change in Cash Flow Estimate | | Spending | | Liabilities as of December 31, 2009 |
| | | | | (In Millions) | | | | | | | | | | (In Millions) | | | | |
Utility: | | | | | | | | | | | | | | | | | | | |
Entergy Arkansas | $505.6 | | $35.1 | | $- | | | $- | | $540.7 | $540.7 | | $34.6 | | ($8.9) | | $- | | $566.4 |
Entergy Gulf States Louisiana | $204.8 | | $18.1 | | $- | | | $- | | $222.9 | $222.9 | | $19.6 | | $78.7 | | $- | | $321.2 |
Entergy Louisiana | $257.1 | | $19.9 | | ($0.2) | | | $- | | $276.8 | $276.8 | | $21.4 | | $- | | $- | | $298.2 |
Entergy Mississippi | $4.5 | | $0.3 | | $- | | | $- | | $4.8 | $4.8 | | $0.3 | | $- | | $- | | $5.1 |
Entergy New Orleans | $2.8 | | $0.2 | | $- | | | $- | | $3.0 | $3.0 | | $0.2 | | $- | | $- | | $3.2 |
Entergy Texas | $3.1 | | $0.2 | | $- | | | $- | | $3.3 | $3.3 | | $0.1 | | $- | | $- | | $3.4 |
System Energy | $368.6 | | $27.6 | | $- | | | $- | | $396.2 | $396.2 | | $29.4 | | ($4.2) | | $- | | $421.4 |
| | | | | | | | | | | | | | | | | | | |
Non-Utility Nuclear | $1,141.6 | | $93.5 | | $13.7 | | | ($20.1) | | $1,228.7 | |
| | | | | | | | | | | |
Other | $1.1 | | $0.1 | | $- | | | $- | | $1.2 | |
Entergy Wholesale Commodities | | $1,229.9 | | $99.3 | | $- | | ($8.6) | | $1,320.6 |
Entergy periodically reviews and updates estimated decommissioning costs. The actual decommissioning costs may vary from the estimates because of regulatory requirements, changes in technology, and increased costs of labor, materials, and equipment. As described below, during 2008 and 2009 Entergy updated decommissioning cost estimates for certain nuclear power plants. There were no updates to decommissioning cost estimates for 2010.
In the first quarter 2009, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in an $8.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the second quarter 2009, System Energy recorded a revision to its estimated decommissioning cost liabilities for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $4.2 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
In the fourth quarter 2009, Entergy Gulf States Louisiana recorded a revision to its estimated decommissioning cost liabilities for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $78.7 million increase in its decommissioning liability, along with a corresponding increase in the related asset retirement obligation asset that will be depreciated over the remaining life of the units.
In the third quarter 2008, Entergy's Non-Utility Nuclear business recorded an increase of $13.7 million in decommissioning liabilities for certain of its plants as a result of revised decommissioning cost studies. The revised estimates resulted in the recognition of a $13.7 million asset retirement obligation asset that will be depreciated over the remaining life of the units.
For the Indian Point 3 and FitzPatrick plants purchased in 2000, NYPA retained the decommissioning trusts and the decommissioning liability. NYPA and Entergy subsidiaries executed decommissioning agreements, which specify their decommissioning obligations. NYPA has the right to require the Entergy subsidiaries to assume the decommissioning liability provided that it assigns the corresponding decommissioning trust, up to a specified level, to Entergy.the Entergy subsidiaries. If the decommissioning liability is retained by NYPA, the Entergy subsidiaries will perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trusts. Entergy recorded an asset representing its estimate of the present value of the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
difference between the stipulated contract amount for decommissioning the plants less the decommissioning cost estimated in an independent decommissioning cost study. The asset is increased by monthly accretion based on the applicable discount rate necessary to ultimately provide for the estimated future value of the decommissioning contract. The monthly accretion is recorded as interest income.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy maintains decommissioning trust funds that are committed to meeting the costs of decommissioning the nuclear power plants. The fair values of the decommissioning trust funds and the related asset retirement obligation regulatory assets of Entergy as of December 31, 20092010 are as follows:
| Decommissioning Trust Fair Values | | Regulatory Asset | | Decommissioning Trust Fair Values | | Regulatory Asset |
| (In Millions) | | (In Millions) |
| | | | | | | |
Utility: | | | | | | | |
ANO 1 and ANO 2 | $440.2 | | $173.7 | | $520.8 | | $161.4 |
River Bend | $349.5 | | $11.0 | | $393.6 | | $10.9 |
Waterford 3 | $209.1 | | $91.0 | | $240.5 | | $104.2 |
Grand Gulf | $327.0 | | $97.8 | | $387.9 | | $98.3 |
Non-Utility Nuclear | $1,885.4 | | $- | |
Entergy Wholesale Commodities | | | $2,052.9 | | $- |
The fair values of the decommissioning trust funds and the related asset retirement obligation regulatory assets of Entergy as of December 31, 20082009 are as follows:
| Decommissioning Trust Fair Values | | Regulatory Asset | | Decommissioning Trust Fair Values | | Regulatory Asset |
| (In Millions) | | (In Millions) |
| | | | | | | |
Utility: | | | | | | | |
ANO 1 and ANO 2 | $390.5 | | $159.5 | | $440.2 | | $173.7 |
River Bend | $303.2 | | $8.7 | | $349.5 | | $11.0 |
Waterford 3 | $180.9 | | $77.7 | | $209.1 | | $91.0 |
Grand Gulf | $268.8 | | $96.1 | | $327.0 | | $97.8 |
Non-Utility Nuclear | $1,688.9 | | $- | |
Entergy Wholesale Commodities | | | $1,885.4 | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 10. LEASES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
General
As of December 31, 2009,2010, Entergy Corporation and subsidiaries had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities (excluding nuclear fuel leases and the Grand Gulf and Waterford 3 sale and leaseback transactions) with minimum lease payments as follows:
Year | | Operating Leases | | Capital Leases | | Operating Leases | | Capital Leases |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | |
2010 | | $95,392 | | $4,924 | |
2011 | | 79,043 | | 4,924 | | $88,316 | | $6,494 |
2012 | | 66,042 | | 4,924 | | 77,006 | | 6,494 |
2013 | | 58,279 | | 4,924 | | 69,160 | | 6,494 |
2014 | | 58,557 | | 3,124 | | 70,589 | | 4,694 |
2015 | | | 53,828 | | 4,694 |
Years thereafter | | 172,752 | | 43,480 | | 187,404 | | 43,497 |
Minimum lease payments | | 530,065 | | 66,300 | | 546,303 | | 72,367 |
Less: Amount representing interest | | - | | 26,708 | | - | | 29,405 |
Present value of net minimum lease payments | | $530,065 | | $39,592 | | $546,303 | | $42,962 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total rental expenses for all leases (excluding nuclear fuel leases and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $80.8 million in 2010, $71.6 million in 2009, and $66.4 million in 2008, and $78.8 million in 2007.2008.
As of December 31, 2009,2010, the Registrant Subsidiaries had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities (excluding nuclear fuel leases and the sale and leaseback transactions) with minimum lease payments as follows:
Capital Leases
Year | | Entergy Arkansas | | Entergy Mississippi | | Entergy Arkansas | | Entergy Mississippi |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | |
2010 | | $237 | | $1,800 | |
2011 | | 237 | | 1,800 | | $237 | | $3,370 |
2012 | | 237 | | 1,800 | | 237 | | 3,370 |
2013 | | 237 | | 1,800 | | 237 | | 3,370 |
2014 | | 237 | | - | | 237 | | 1,570 |
2015 | | | 237 | | 1,570 |
Years thereafter | | 1,383 | | - | | 1,146 | | 3,140 |
Minimum lease payments | | 2,568 | | 7,200 | | 2,331 | | 16,390 |
Less: Amount representing interest | | 1,204 | | 782 | | 1,028 | | 3,655 |
Present value of net minimum lease payments | | $1,364 | | $6,418 | | $1,303 | | $12,735 |
Operating Leases
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | | | |
2011 | | $23,214 | | $11,231 | | $9,727 | | $6,168 | | $1,379 | | $5,005 |
2012 | | 22,158 | | 10,904 | | 8,930 | | 5,488 | | 1,271 | | 4,817 |
2013 | | 20,824 | | 10,334 | | 8,025 | | 5,018 | | 1,227 | | 4,612 |
2014 | | 19,243 | | 17,427 | | 6,820 | | 4,382 | | 1,061 | | 3,636 |
2015 | | 20,565 | | 8,094 | | 4,797 | | 3,390 | | 961 | | 1,538 |
Years thereafter | | 12,859 | | 67,499 | | 2,884 | | 8,439 | | 1,324 | | 2,049 |
Minimum lease payments | | $118,863 | | $125,489 | | $41,183 | | $32,885 | | $7,223 | | $21,657 |
Rental Expenses
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
| | | | | | | | | | | | | | |
2010 | | $13.0 | | $12.5 | | $11.7 | | $5.5 | | $1.7 | | $7.4 | | $1.4 |
2009 | | $12.0 | | $11.6 | | $10.7 | | $5.3 | | $1.6 | | $9.9 | | $1.3 |
2008 | | $11.4 | | $11.6 | | $9.9 | | $5.6 | | $1.5 | | $7.8 | | $1.1 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Operating Leases
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | | | |
2010 | | $20,983 | | $12,942 | | $8,961 | | $6,381 | | $729 | | $4,289 |
2011 | | 21,053 | | 11,273 | | 8,115 | | 4,104 | | 521 | | 4,036 |
2012 | | 18,505 | | 10,656 | | 7,010 | | 3,344 | | 382 | | 3,864 |
2013 | | 17,090 | | 10,001 | | 6,018 | | 3,009 | | 366 | | 3,786 |
2014 | | 15,894 | | 16,853 | | 4,610 | | 2,616 | | 312 | | 2,402 |
Years thereafter | | 27,096 | | 61,007 | | 5,639 | | 9,066 | | 743 | | 1,724 |
Minimum lease payments | | $120,621 | | $122,732 | | $40,353 | | $28,520 | | $3,053 | | $20,101 |
Rental Expenses
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) |
| | | | | | | | | | | | | | |
2009 | | $12.0 | | $11.6 | | $10.7 | | $5.3 | | $1.6 | | $9.9 | | $1.3 |
2008 | | $11.4 | | $11.6 | | $9.9 | | $5.6 | | $1.5 | | $7.8 | | $1.1 |
2007 | | $15.9 | | $17.0 | | $10.4 | | $5.4 | | $1.5 | | $11.2 | | $1.3 |
In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment. Railcar operating lease payments were $8.4 million in 2010, $7.2 million in 2009, and $10.2 million in 2008 and $9.0 million in 2007 for Entergy Arkansas and $2.3 million in 2010, $3.1 million in 2009, and $3.4 million in 2008 and $4.8 million in 2007 for Entergy Gulf States Louisiana. Oil tank facilities lease payments for Entergy Mississippi were $3.4 million in 2009,2010, $3.4 million in 2008,2009, and $3.4 million in 2007.
Nuclear Fuel Leases
As of December 31, 2009, arrangements to lease nuclear fuel existed in an aggregate amount up to $215 million for Entergy Arkansas, $210 million for Entergy Gulf States Louisiana, $160 million for Entergy Louisiana, and $155 million for System Energy. As of December 31, 2009, the unrecovered cost base of nuclear fuel leases amounted to approximately $173.1 million for Entergy Arkansas, $157.0 million for Entergy Gulf States Louisiana, $122.0 million for Entergy Louisiana, and $75.4 million for System Energy. The lessors finance the acquisition and ownership of nuclear fuel through loans made under revolving credit agreements, the issuance of commercial paper, and the issuance of intermediate-term notes. The credit agreements for Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy each have a termination date of August 12, 2010. The termination dates may be extended from time to time with the consent of the lenders. The intermediate-term notes issued pursuant to these fuel lease arrangements have varying maturities through July 15, 2014. It is expected that additional financing under the leases will be arranged as needed to acquire additional fuel, to pay interest, and to pay maturing debt. However, if such additional financing cannot be arranged, the lessee in each case must repurchase sufficient nuclear fuel to allow the lessor to meet its obligations in accordance with the fuel lease.2008.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Lease payments are based on nuclear fuel use. The table below represents the total nuclear fuel lease payments (principal and interest), as well as the separate interest component charged to operations, in 2009, 2008, and 2007 for the four Registrant Subsidiaries that own nuclear power plants:
| 2009 | | 2008 | | 2007 |
| Lease Payments | | Interest | | Lease Payments | | Interest | | Lease Payments | | Interest |
| (In Millions) |
| | | | | | | | | | | |
Entergy Arkansas | $79.5 | | $8.1 | | $63.5 | | $4.7 | | $61.7 | | $5.8 |
Entergy Gulf States Louisiana | 33.9 | | 1.9 | | 29.3 | | 2.5 | | 31.5 | | 2.8 |
Entergy Louisiana | 50.0 | | 3.3 | | 44.6 | | 3.0 | | 44.2 | | 4.0 |
System Energy | 50.3 | | 5.4 | | 33.0 | | 2.9 | | 30.4 | | 4.0 |
Total | $213.7 | | $18.7 | | $170.4 | | $13.1 | | $167.8 | | $16.6 |
Sale and Leaseback Transactions
Waterford 3 Lease Obligations
In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million. The interests represent approximately 9.3% of Waterford 3. The leases expire in 2017. Under certain circumstances, Entergy Louisiana may repurchase the leased interests prior to the end of the term of the leases. At the end of the lease terms, Entergy Louisiana has the option to repurchase the leased interests in Waterford 3 at fair market value or to renew the leases for either fair market value or, under certain conditions, a fixed rate.
Entergy Louisiana issued $208.2 million of non-interest bearing first mortgage bonds as collateral for the equity portion of certain amounts payable under the leases.
Upon the occurrence of certain events, Entergy Louisiana may be obligated to assume the outstanding bonds used to finance the purchase of the interests in the unit and to pay an amount sufficient to withdraw from the lease transaction. Such events include lease events of default, events of loss, deemed loss events, or certain adverse "Financial“Financial Events." "Financial Events"” “Financial Events” include, among other things, failure by Entergy Louisiana, following the expiration of any applicable grace or cure period, to maintain (i) total equity capital (including preferred membership interests) at least equal to 30% of adjusted capitalization, or (ii) a fixed charge coverage ratio of at least 1.50 computed on a rolling 12 month basis. As of December 31, 2009,2010, Entergy Louisiana was in compliance with these provisions.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As of December 31, 2009,2010, Entergy Louisiana had future minimum lease payments (reflecting an overall implicit rate of 7.45%) in connection with the Waterford 3 sale and leaseback transactions, which are recorded as long-term debt, as follows:
| | Amount | | Amount |
| | (In Thousands) | | (In Thousands) |
| | | | |
2010 | | $35,138 | |
2011 | | 50,421 | | $50,421 |
2012 | | 39,067 | | 39,067 |
2013 | | 26,301 | | 26,301 |
2014 | | 31,036 | | 31,036 |
2015 | | | 28,827 |
Years thereafter | | 106,821 | | 77,994 |
Total | | 288,784 | | 253,646 |
Less: Amount representing interest | | 47,656 | | 29,844 |
Present value of net minimum lease payments | | $241,128 | | $223,802 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Grand Gulf Lease Obligations
In December 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million. The interests represent approximately 11.5% of Grand Gulf. The leases expire in 2015. Under certain circumstances, System Entergy may repurchase the leased interests prior to the end of the term of the leases. At the end of the lease terms, System Energy has the option to repurchase the leased interests in Grand Gulf at fair market value or to renew the leases for either fair market value or, under certain conditions, a fixed rate.
In May 2004, System Energy caused the Grand Gulf lessors to refinance the outstanding bonds that they had issued to finance the purchase of their undivided interest in Grand Gulf. The refinancing is at a lower interest rate, and System Energy'sEnergy’s lease payments have been reduced to reflect the lower interest costs.
System Energy is required to report the sale-leaseback as a financing transaction in its financial statements. For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation. However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes. Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balanceba lance for the regulatory asset at the end of the lease term. The amount was a net regulatory liabilityasset of $2.5$60.6 million and a net regulatory asset of $19.2$93.1 million as of December 31, 20092010 and 2008,2009, respectively.
As of December 31, 2009,2010, System Energy had future minimum lease payments (reflecting an implicit rate of 5.13%), which are recorded as long-term debt as follows:
| | Amount | | Amount |
| | (In Thousands) | | (In Thousands) |
| | | | |
2010 | | $48,569 | |
2011 | | 49,437 | | $49,437 |
2012 | | 49,959 | | 49,959 |
2013 | | 50,546 | | 50,546 |
2014 | | 51,637 | | 51,637 |
2015 | | | 52,253 |
Years thereafter | | 52,253 | | - |
Total | | 302,401 | | 253,832 |
Less: Amount representing interest | | 35,537 | | 31,552 |
Present value of net minimum lease payments | | $266,864 | | $222,280 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 11. RETIREMENT, OTHER POSTRETIREMENT BENEFITS, AND DEFINED CONTRIBUTION PLANS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Qualified Pension Plans
Entergy has seven qualified pension plans covering substantially all of its employees: "Entergy“Entergy Corporation Retirement Plan for Non-Bargaining Employees," "Entergy” “Entergy Corporation Retirement Plan for Bargaining Employees," "Entergy” “Entergy Corporation Retirement Plan II for Non-Bargaining Employees," "Entergy” “Entergy Corporation Retirement Plan II for Bargaining Employees," "Entergy” “Entergy Corporation Retirement Plan III," "Entergy” “Entergy Corporation Retirement Plan IV for Non-Bargaining Employees,"” and "Entergy“Entergy Corporation Retirement Plan IV for Bargaining Employees."” The Registrant Subsidiaries participate in two of these plans: "Entergy“Entergy Corporation Retirement Plan for Non-Bargaining Employees"Employees” and "Entergy Corporation“Entergy Corpora tion Retirement Plan for Bargaining Employees."” Except for the Entergy Corporation Retirement Plan III, the pension plans are noncontributory and provide pension benefits that are based on employees'employees’ credited service and compensation during the final years before retirement. The Entergy Corporation Retirement Plan III includes a mandatory employee contribution of 3% of earnings during the first 10 years of plan participation, and allows voluntary contributions from 1% to 10% of earnings for a limited group of employees.
The assets of the seven qualified pension plans are held in a master trust established by Entergy. Each pension plan maintains an undivided beneficial interest in each of the investment accounts of the Master Trustmaster trust that is maintained by J. P. Morgan Chase & Co. (the Trustee.)a trustee. Use of the master trust permits the commingling of the trust assets of the pension plans of Entergy Corporation and its Registrant Subsidiaries for investment and administrative purposes. Although assets are commingled in the master trust, the Trusteetrustee maintains supporting records for the purpose of allocating the equity in net earnings (loss) and the administrative expenses of the investment accounts to the various participating pension plans. The Trusteetrustee determines the fair value of the fund and calculatescalc ulates a daily earnings factor, including realized and unrealized gains or losses, collected and accrued income, and administrative expenses, and allocates earnings to each plan in the master trust on a pro rata basis.
Further, within each pension plan, the record of each Registrant Subsidiary’s beneficial interest in the plan assets is maintained by the plan'splan’s actuary and is updated quarterly. Assets for each Registrant Subsidiary are increased for investment income and contributions, and decreased for benefit payments. A plan’s investment incomenet income/(loss) (i.e. interest and dividends, realized gains and losses and expense)expenses) is allocated to the Registrant Subsidiaries participating in that plan based on the value of assets for each Registrant Subsidiary at the beginning of the quarter adjusted for contributions and benefit payments made during the quarter.
Entergy Corporation and its subsidiaries fund pension costs in accordance with contribution guidelines established by the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended. The assets of the plans include common and preferred stocks, fixed-income securities, interest in a money market fund, and insurance contracts. The Registrant Subsidiaries'Subsidiaries’ pension costs are recovered from customers as a component of cost of service in each of their respective jurisdictions. Entergy uses a December 31 measurement date for its pension plans.
Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans. This is measured as the difference between plan assets at fair value and the benefit obligation. Employers are to record previously unrecognized gains and losses, prior service costs, and any remaining transition asset or obligation (that resulted from adopting prior pension and other postretirement benefits accounting standards) as comprehensive income and/or as a regulatory asset reflective of the recovery mechanism for pension and other postretirement benefit costs in the Utility's jurisdictions. For the portion of Entergy Gulf States Louisiana that is not regulated, the unrecognized prior service cost, gains and losses, and transition asset/obligation for its pension and other postretirement benefit obligations are recorded as other comprehensive income. Entergy Gulf States Louisiana and Entergy Louisiana recover other postretirement benefit costs on a pay as you go basis and record the unrecognized prior service cost, gains and losses, and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
transition obligation for its other postretirement benefit obligation as other comprehensive income. Accounting standards also requires that changes in the funded status be recorded as other comprehensive income and/or a regulatory asset in the period in which the changes occur.
Components of Qualified Net Pension Cost and Other Amounts Recognized as a Regulatory Asset and/or Accumulated Other Comprehensive Income (AOCI)
Entergy Corporation'sCorporation and its subsidiaries'subsidiaries’ total 2010, 2009, 2008, and 20072008 qualified pension costs and amounts recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, included the following components:
| | 2009 | | | 2008 | | | 2007 | | | 2010 | | 2009 | | 2008 |
| | (In Thousands) | | | (In Thousands) |
Net periodic pension cost: | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 89,646 | | | $ | 90,392 | | | $ | 96,565 | | | $104,956 | | $89,646 | | $90,392 |
Interest cost on projected benefit obligation | | | 218,172 | | | | 206,586 | | | | 185,170 | | | 231,206 | | 218,172 | | 206,586 |
Expected return on assets | | | (249,220 | ) | | | (230,558 | ) | | | (203,521 | ) | | (259,608) | | (249,220) | | (230,558) |
Amortization of prior service cost | | | 4,997 | | | | 5,063 | | | | 5,531 | | | 4,658 | | 4,997 | | 5,063 |
Recognized net loss | | | 22,401 | | | | 26,834 | | | | 45,775 | | | 65,901 | | 22,401 | | 26,834 |
Curtailment loss | | | - | | | | - | | | | 2,336 | | |
Special termination benefit loss | | | - | | | | - | | | | 4,018 | | |
Net periodic pension costs | | $ | 85,996 | | | $ | 98,317 | | | $ | 135,874 | | | $147,113 | | $85,996 | | $98,317 |
| | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | - | | | $ | - | | | $ | 11,339 | | |
Net (gain)/loss | | | 76,799 | | | | 965,069 | | | | (68,853 | ) | | $232,279 | | $76,799 | | $965,069 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | | | | | |
Amortization of prior service credit | | | (4,997 | ) | | | (5,063 | ) | | | (5,531 | ) | |
Amortization of prior service cost | | | (4,658) | | (4,997) | | (5,063) |
Amortization of net loss | | | (22,401 | ) | | | (26,834 | ) | | | (45,775 | ) | | (65,901) | | (22,401) | | (26,834) |
Total | | | 49,401 | | | | 933,172 | | | | (108,820 | ) | | 161,720 | | 49,401 | | 933,172 |
| | | | | | | | | | | | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $ | 135,397 | | | $ | 1,031,489 | | | $ | 27,054 | | | $308,834 | | $135,397 | | $1,031,489 |
| | | | | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | 4,658 | | | $ | 4,997 | | | $ | 5,064 | | | $3,350 | | $4,658 | | $4,997 |
Net loss | | $ | 65,900 | | | $ | 22,401 | | | $ | 25,641 | | | $92,977 | | $65,900 | | $22,401 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries'Subsidiaries’ total 2010, 2009, 2008, and 20072008 qualified pension costs and amounts recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, included the following components:
2009 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | |
| | (In Thousands) | |
Net periodic pension cost: | | | | | | | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 13,601 | | | $ | 6,993 | | | $ | 7,896 | | | $ | 3,981 | | | $ | 1,701 | | | $ | 3,668 | | | $ | 3,519 | |
Interest cost on projected benefit obligation | | | 47,043 | | | | 21,116 | | | | 27,760 | | | | 14,706 | | | | 5,878 | | | | 15,741 | | | | 8,555 | |
Expected return on assets | | | (48,749 | ) | | | (30,065 | ) | | | (32,789 | ) | | | (16,943 | ) | | | (7,261 | ) | | | (20,740 | ) | | | (11,064 | ) |
Amortization of prior service cost | | | 849 | | | | 438 | | | | 474 | | | | 341 | | | | 206 | | | | 321 | | | | 34 | |
Recognized net loss | | | 7,058 | | | | 319 | | | | 2,817 | | | | 1,289 | | | | 1,225 | | | | 168 | | | | 439 | |
Net pension cost/(income) | | $ | 19,802 | | | $ | (1,199 | ) | | $ | 6,158 | | | $ | 3,374 | | | $ | 1,749 | | | $ | (842 | ) | | $ | 1,483 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss/(gain) | | $ | 32,528 | | | $ | 36,704 | | | $ | 7,113 | | | $ | 5,609 | | | $ | 724 | | | $ | (3,444 | ) | | $ | 5,076 | |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service cost | | | (849 | ) | | | (438 | ) | | | (474 | ) | | | (341 | ) | | | (206 | ) | | | (321 | ) | | | (34 | ) |
Amortization of net loss | | | (7,058 | ) | | | (319 | ) | | | (2,817 | ) | | | (1,289 | ) | | | (1,225 | ) | | | (168 | ) | | | (439 | ) |
Total | | $ | 24,621 | | | $ | 35,947 | | | $ | 3,822 | | | $ | 3,979 | | | $ | (707 | ) | | $ | (3,933 | ) | | $ | 4,603 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total recognized as net periodic pension cost/(income), regulatory asset, and/or AOCI (before tax) | | $ | 44,423 | | | $ | 34,748 | | | $ | 9,980 | | | $ | 7,353 | | | $ | 1,042 | | | $ | (4,775 | ) | | $ | 6,086 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | 782 | | | $ | 302 | | | $ | 474 | | | $ | 318 | | | $ | 177 | | | $ | 237 | | | $ | 34 | |
Net loss | | $ | 16,506 | | | $ | 7,621 | | | $ | 8,603 | | | $ | 4,362 | | | $ | 2,544 | | | $ | 3,207 | | | $ | 523 | |
2010 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Net periodic pension cost: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $15,775 | | $8,462 | | $9,770 | | $4,651 | | $2,063 | | $4,267 | | $4,132 |
Interest cost on projected benefit obligation | | 49,277 | | 24,377 | | 28,541 | | 15,230 | | 6,040 | | 15,869 | | 9,009 |
Expected return on assets | | (50,635) | | (30,752) | | (32,775) | | (17,252) | | (7,236) | | (20,549) | | (11,808) |
Amortization of prior service cost | | 782 | | 302 | | 474 | | 318 | | 177 | | 237 | | 34 |
Recognized net loss | | 16,506 | | 7,622 | | 8,604 | | 4,361 | | 2,544 | | 3,208 | | 523 |
Net pension cost | | $31,705 | | $10,011 | | $14,614 | | $7,308 | | $3,588 | | $3,032 | | $1,890 |
| | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | |
Net loss | | $97,117 | | $4,748 | | $99,129 | | $21,801 | | $22,600 | | $17,316 | | $56,756 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of prior service cost | | (782) | | (302) | | (474) | | (318) | | (177) | | (237) | | (34) |
Amortization of net loss | | (16,506) | | (7,622) | | (8,604) | | (4,361) | | (2,544) | | (3,208) | | (523) |
Total | | $79,829 | | ($3,176) | | $90,051 | | $17,122 | | $19,879 | | $13,871 | | $56,199 |
| | | | | | | | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $111,534 | | $6,835 | | $104,665 | | $24,430 | | $23,467 | | $16,903 | | $58,089 |
| | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
Prior service cost | | $459 | | $79 | | $280 | | $152 | | $35 | | $65 | | $16 |
Net loss | | $25,681 | | $9,118 | | $17,990 | | $6,717 | | $4,666 | | $5,579 | | $5,284 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | | |
2009 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | | (In Thousands) |
Net periodic pension cost: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 14,335 | | | $ | 7,363 | | | $ | 8,230 | | | $ | 4,251 | | | $ | 1,779 | | | $ | 3,874 | | | $ | 3,719 | | | $13,601 | | $6,993 | | $7,896 | | $3,981 | | $1,701 | | $3,668 | | $3,519 |
Interest cost on projected benefit obligation | | | 46,464 | | | | 20,189 | | | | 27,135 | | | | 14,507 | | | | 5,660 | | | | 15,528 | | | | 7,749 | | | 47,043 | | 21,116 | | 27,760 | | 14,706 | | 5,878 | | 15,741 | | 8,555 |
Expected return on assets | | | (47,060 | ) | | | (28,658 | ) | | | (32,535 | ) | | | (16,299 | ) | | | (7,355 | ) | | | (20,188 | ) | | | (9,810 | ) | | (48,749) | | (30,065) | | (32,789) | | (16,943) | | (7,261) | | (20,740) | | (11,064) |
Amortization of prior service cost | | | 892 | | | | 438 | | | | 478 | | | | 361 | | | | 205 | | | | 321 | | | | 34 | | | 849 | | 438 | | 474 | | 341 | | 206 | | 321 | | 34 |
Recognized net loss | | | 9,212 | | | | 461 | | | | 3,679 | | | | 1,941 | | | | 1,280 | | | | 621 | | | | 366 | | | 7,058 | | 319 | | 2,817 | | 1,289 | | 1,225 | | 168 | | 439 |
Net pension cost/(income) | | $ | 23,843 | | | $ | (207 | ) | | $ | 6,987 | | | $ | 4,761 | | | $ | 1,569 | | | $ | 156 | | | $ | 2,058 | | | $19,802 | | ($1,199) | | $6,158 | | $3,374 | | $1,749 | | ($842) | | $1,483 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | $ | 178,674 | | | $ | 118,804 | | | $ | 131,649 | | | $ | 64,245 | | | $ | 30,687 | | | $ | 81,016 | | | $ | 37,700 | | |
Net loss/(gain) | | | $32,528 | | $36,704 | | $7,113 | | $5,609 | | $724 | | ($3,444) | | $5,076 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service cost | | | (892 | ) | | | (438 | ) | | | (478 | ) | | | (361 | ) | | | (205 | ) | | | (321 | ) | | | (34 | ) | | (849) | | (438) | | (474) | | (341) | | (206) | | (321) | | (34) |
Amortization of net loss | | | (9,212 | ) | | | (461 | ) | | | (3,679 | ) | | | (1,941 | ) | | | (1,280 | ) | | | (621 | ) | | | (366 | ) | | (7,058) | | (319) | | (2,817) | | (1,289) | | (1,225) | | (168) | | (439) |
Total | | $ | 168,570 | | | $ | 117,905 | | | $ | 127,492 | | | $ | 61,943 | | | $ | 29,202 | | | $ | 80,074 | | | $ | 37,300 | | | $24,621 | | $35,947 | | $3,822 | | $3,979 | | ($707) | | ($3,933) | | $4,603 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $ | 192,413 | | | $ | 117,698 | | | $ | 134,479 | | | $ | 66,704 | | | $ | 30,771 | | | $ | 80,230 | | | $ | 39,358 | | |
Total recognized as net periodic pension cost/(income), regulatory asset, and/or AOCI (before tax) | | | $44,423 | | $34,748 | | $9,980 | | $7,353 | | $1,042 | | ($4,775) | | $6,086 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | 849 | | | $ | 438 | | | $ | 474 | | | $ | 341 | | | $ | 206 | | | $ | 321 | | | $ | 34 | | | $782 | | $302 | | $474 | | $318 | | $177 | | $237 | | $34 |
Net loss | | $ | 7,063 | | | $ | 323 | | | $ | 2,823 | | | $ | 1,299 | | | $ | 1,216 | | | $ | 200 | | | $ | 433 | | | $16,506 | | $7,621 | | $8,603 | | $4,362 | | $2,544 | | $3,207 | | $523 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Net periodic pension cost: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $14,335 | | $7,363 | | $8,230 | | $4,251 | | $1,779 | | $3,874 | | $3,719 |
Interest cost on projected benefit obligation | | 46,464 | | 20,189 | | 27,135 | | 14,507 | | 5,660 | | 15,528 | | 7,749 |
Expected return on assets | | (47,060) | | (28,658) | | (32,535) | | (16,299) | | (7,355) | | (20,188) | | (9,810) |
Amortization of prior service cost | | 892 | | 438 | | 478 | | 361 | | 205 | | 321 | | 34 |
Recognized net loss | | 9,212 | | 461 | | 3,679 | | 1,941 | | 1,280 | | 621 | | 366 |
Net pension cost/(income) | | $23,843 | | ($207) | | $6,987 | | $4,761 | | $1,569 | | $156 | | $2,058 |
| | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | |
Net loss | | $178,674 | | $118,804 | | $131,649 | | $64,245 | | $30,687 | | $81,016 | | $37,700 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of prior service cost | | (892) | | (438) | | (478) | | (361) | | (205) | | (321) | | (34) |
Amortization of net loss | | (9,212) | | (461) | | (3,679) | | (1,941) | | (1,280) | | (621) | | (366) |
Total | | $168,570 | | $117,905 | | $127,492 | | $61,943 | | $29,202 | | $80,074 | | $37,300 |
| | | | | | | | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $192,413 | | $117,698 | | $134,479 | | $66,704 | | $30,771 | | $80,230 | | $39,358 |
| | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
Prior service cost | | $849 | | $438 | | $474 | | $341 | | $206 | | $321 | | $34 |
Net loss | | $7,063 | | $323 | | $2,823 | | $1,299 | | $1,216 | | $200 | | $433 |
2007 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | |
| | (In Thousands) | |
Net periodic pension cost: | | | | | | | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 14,550 | | | $ | 12,043 | | | $ | 8,924 | | | $ | 4,357 | | | $ | 1,878 | | | $ | 4,048 | | | $ | 4,083 | |
Interest cost on projected benefit obligation | | | 41,992 | | | | 32,556 | | | | 25,003 | | | | 13,484 | | | | 5,040 | | | | 13,757 | | | | 6,841 | |
Expected return on assets | | | (44,037 | ) | | | (43,001 | ) | | | (31,232 | ) | | | (15,349 | ) | | | (5,786 | ) | | | (18,145 | ) | | | (8,543 | ) |
Amortization of prior service cost | | | 1,649 | | | | 1,217 | | | | 640 | | | | 455 | | | | 178 | | | | 530 | | | | 49 | |
Recognized net loss | | | 10,885 | | | | 2,492 | | | | 5,733 | | | | 2,998 | | | | 1,471 | | | | 1,051 | | | | 600 | |
Special termination benefit loss | | | 1,538 | | | | 443 | | | | 607 | | | | - | | | | - | | | | - | | | | 211 | |
Net pension cost | | $ | 26,577 | | | $ | 5,750 | | | $ | 9,675 | | | $ | 5,945 | | | $ | 2,781 | | | $ | 1,241 | | | $ | 3,241 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (gain)/loss | | $ | (1,470 | ) | | $ | (7,115 | ) | | $ | (9,098 | ) | | $ | (5,388 | ) | | $ | 1,221 | | | $ | 6,774 | | | $ | (1,405 | ) |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of prior service cost | | | (1,649 | ) | | | (1,218 | ) | | | (640 | ) | | | (455 | ) | | | (178 | ) | | | (530 | ) | | | (49 | ) |
Amortization of net loss | | | (10,885 | ) | | | (2,492 | ) | | | (5,733 | ) | | | (2,998 | ) | | | (1,471 | ) | | | (1,051 | ) | | | (600 | ) |
Total | | $ | (14,004 | ) | | $ | (10,825 | ) | | $ | (15,471 | ) | | $ | (8,841 | ) | | $ | (428 | ) | | $ | 5,193 | | | $ | (2,054 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax) | | $ | 12,573 | | | $ | (5,075 | ) | | $ | (5,796 | ) | | $ | (2,896 | ) | | $ | 2,353 | | | $ | 6,434 | | | $ | 1,187 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | 892 | | | $ | 438 | | | $ | 478 | | | $ | 361 | | | $ | 207 | | | $ | 321 | | | $ | 34 | |
Net loss | | $ | 8,611 | | | $ | 654 | | | $ | 3,196 | | | $ | 1,704 | | | $ | 1,201 | | | $ | 177 | | | $ | 360 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Qualified Pension Obligations, Plan Assets, Funded Status, Amounts Recognized in the Balance Sheet for Entergy Corporation and its Subsidiaries as of December 31, 20092010 and 20082009
| | December 31, | | | December 31, |
| | 2009 | | | 2008 | | | 2010 | | 2009 |
| | (In Thousands) | | | (In Thousands) |
Change in Projected Benefit Obligation (PBO) | | | | | | | | | | |
Balance at beginning of year | | $ | 3,305,315 | | | $ | 3,247,724 | | | $3,837,744 | | $3,305,315 |
Service cost | | | 89,646 | | | | 90,392 | | | 104,956 | | 89,646 |
Interest cost | | | 218,172 | | | | 206,586 | | | 231,206 | | 218,172 |
Actuarial loss/(gain) | | | 385,221 | | | | (89,124 | ) | |
Actuarial loss | | | 293,189 | | 385,221 |
Employee contributions | | | 852 | | | | 902 | | | 894 | | 852 |
Benefits paid | | | (161,462 | ) | | | (151,165 | ) | | (166,771) | | (161,462) |
Balance at end of year | | $ | 3,837,744 | | | $ | 3,305,315 | | | $4,301,218 | | $3,837,744 |
| | | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $ | 2,078,252 | | | $ | 2,764,383 | | | $2,607,274 | | $2,078,252 |
Actual return on plan assets | | | 557,642 | | | | (823,636 | ) | | 320,517 | | 557,642 |
Employer contributions | | | 131,990 | | | | 287,768 | | | 454,354 | | 131,990 |
Employee contributions | | | 852 | | | | 902 | | | 894 | | 852 |
Acquisition | | | - | | | | - | | |
Benefits paid | | | (161,462 | ) | | | (151,165 | ) | | (166,771) | | (161,462) |
Fair value of assets at end of year | | $ | 2,607,274 | | | $ | 2,078,252 | | | $3,216,268 | | $2,607,274 |
| | | | | | | | | | | | |
Funded status | | $ | (1,230,470 | ) | | $ | (1,227,063 | ) | | ($1,084,950) | | ($1,230,470) |
| | | | | | | | | | | | |
Amount recognized in the balance sheet | | | | | | | | | | | | |
Non-current liabilities | | $ | (1,230,470 | ) | | $ | (1,227,063 | ) | | ($1,084,950) | | ($1,230,470) |
| | | | | | | | | | | | |
Amount recognized as a regulatory asset | | | | | | | | | | | | |
Prior service cost | | $ | 16,376 | | | $ | 20,548 | | | $12,979 | | $16,376 |
Net loss | | �� | 1,183,824 | | | | 1,150,298 | | | 1,350,616 | | 1,183,824 |
| | $ | 1,200,200 | | | $ | 1,170,846 | | | $1,363,595 | | $1,200,200 |
Amount recognized as AOCI (before tax) | | | | | | | | | | | | |
Prior service cost | | $ | 4,116 | | | $ | 4,941 | | | $2,855 | | $4,116 |
Net loss | | | 297,507 | | | | 276,635 | | | 297,093 | | 297,507 |
| | $ | 301,623 | | | $ | 281,576 | | | $299,948 | | $301,623 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Qualified Pension Obligations, Plan Assets, Funded Status, and Amounts Recognized in the Balance Sheet for the Registrant Subsidiaries as of December 31, 20092010 and 20082009
2009 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | | |
2010 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | | (In Thousands) |
Change in Projected Benefit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Obligation (PBO) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of year | | $ | 717,104 | | | $ | 320,220 | | | $ | 423,322 | | | $ | 224,605 | | | $ | 89,315 | | | $ | 240,666 | | | $ | 128,540 | | | $824,261 | | $405,228 | | $480,503 | | $255,057 | | $101,325 | | $266,371 | | $149,387 |
Service cost | | | 13,601 | | | | 6,993 | | | | 7,896 | | | | 3,981 | | | | 1,701 | | | | 3,668 | | | | 3,519 | | | 15,775 | | 8,462 | | 9,770 | | 4,651 | | 2,063 | | 4,267 | | 4,132 |
Interest cost | | | 47,043 | | | | 21,116 | | | | 27,760 | | | | 14,706 | | | | 5,878 | | | | 15,741 | | | | 8,555 | | | 49,277 | | 24,377 | | 28,541 | | 15,230 | | 6,040 | | 15,869 | | 9,009 |
Actuarial loss | | | 90,303 | | | | 73,059 | | | | 46,963 | | | | 25,774 | | | | 9,000 | | | | 21,311 | | | | 13,423 | | | 108,171 | | 11,050 | | 106,227 | | 25,438 | | 24,211 | | 21,055 | | 56,841 |
Employee contribution | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2 | | | - | | - | | - | | - | | - | | - | | 2 |
Benefits paid | | | (43,790 | ) | | | (16,160 | ) | | | (25,438 | ) | | | (14,009 | ) | | | (4,569 | ) | | | (15,015 | ) | | | (4,652 | ) | | (46,889) | | (17,247) | | (28,311) | | (14,197) | | (5,162) | | (15,011) | | (6,273) |
Balance at end of year | | $ | 824,261 | | | $ | 405,228 | | | $ | 480,503 | | | $ | 255,057 | | | $ | 101,325 | | | $ | 266,371 | | | $ | 149,387 | | | $950,595 | | $431,870 | | $596,730 | | $286,179 | | $128,477 | | $292,551 | | $213,098 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $ | 407,158 | | | $ | 253,966 | | | $ | 273,473 | | | $ | 142,916 | | | $ | 60,104 | | | $ | 175,551 | | | $ | 71,648 | | | $494,732 | | $310,445 | | $328,520 | | $171,912 | | $72,046 | | $209,936 | | $91,061 |
Actual return on plan assets | | | 106,556 | | | | 66,610 | | | | 72,862 | | | | 37,186 | | | | 15,404 | | | | 45,823 | | | | 19,316 | | | 61,690 | | 37,054 | | 39,872 | | 20,889 | | 8,847 | | 24,289 | | 11,893 |
Employer contributions | | | 24,808 | | | | 6,029 | | | | 7,623 | | | | 5,819 | | | | 1,107 | | | | 3,577 | | | | 4,747 | | | 136,958 | | 30,955 | | 66,135 | | 33,518 | | 12,957 | | 18,288 | | 31,324 |
Employee contribution | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 2 | | | - | | - | | - | | - | | - | | - | | 2 |
Benefits paid | | | (43,790 | ) | | | (16,160 | ) | | | (25,438 | ) | | | (14,009 | ) | | | (4,569 | ) | | | (15,015 | ) | | | (4,652 | ) | | (46,889) | | (17,247) | | (28,311) | | (14,197) | | (5,162) | | (15,011) | | (6,273) |
Fair value of assets at end of year | | $ | 494,732 | | | $ | 310,445 | | | $ | 328,520 | | | $ | 171,912 | | | $ | 72,046 | | | $ | 209,936 | | | $ | 91,061 | | | $646,491 | | $361,207 | | $406,216 | | $212,122 | | $88,688 | | $237,502 | | $128,007 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Funded status | | $ | (329,529 | ) | | $ | (94,783 | ) | | $ | (151,983 | ) | | $ | (83,145 | ) | | $ | (29,279 | ) | | $ | (56,435 | ) | | $ | (58,326 | ) | | ($304,104) | | ($70,663) | | ($190,514) | | ($74,057) | | ($39,789) | | ($55,049) | | ($85,091) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet (funded status) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-current assets | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | |
Non-current liabilities | | | (329,529 | ) | | | (94,783 | ) | | | (151,983 | ) | | | (83,145 | ) | | | (29,279 | ) | | | (56,435 | ) | | | (58,326 | ) | | ($304,104) | | ($70,663) | | ($190,514) | | ($74,057) | | ($39,789) | | ($55,049) | | ($85,091) |
Total funded status | | $ | (329,529 | ) | | $ | (94,783 | ) | | $ | (151,983 | ) | | $ | (83,145 | ) | | $ | (29,279 | ) | | $ | (56,435 | ) | | $ | (58,326 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized as regulatory asset | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | 1,464 | | | $ | 331 | | | $ | 1,045 | | | $ | 509 | | | $ | 222 | | | $ | 324 | | | $ | 69 | | | $682 | | $88 | | $571 | | $191 | | $45 | | $86 | | $35 |
Net loss | | | 346,511 | | | | 141,661 | | | | 199,201 | | | | 101,893 | | | | 50,980 | | | | 97,832 | | | | 61,186 | | | 427,122 | | 141,052 | | 289,726 | | 119,333 | | 71,035 | | 11,940 | | 117,419 |
| | $ | 347,975 | | | $ | 141,992 | | | $ | 200,246 | | | $ | 102,402 | | | $ | 51,202 | | | $ | 98,156 | | | $ | 61,255 | | | $427,804 | | $141,140 | | $290,297 | | $119,524 | | $71,080 | | $112,026 | | $117,454 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized as AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | - | | | $ | 78 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $- | | $19 | | $- | | $- | | $- | | $- | | $- |
Net loss | | | - | | | | 33,229 | | | | - | | | | - | | | | - | | | | - | | | | - | | | - | | 30,963 | | - | | - | | - | | - | | - |
| | $ | - | | | $ | 33,307 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $- | | $30,982 | | $- | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | | |
2009 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | | (In Thousands) |
Change in Projected Benefit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Obligation (PBO) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of year | | $ | 734,358 | | | $ | 317,997 | | | $ | 429,387 | | | $ | 229,962 | | | $ | 89,132 | | | $ | 245,910 | | | $ | 120,517 | | | $717,104 | | $320,220 | | $423,322 | | $224,605 | | $89,315 | | $240,666 | | $128,540 |
Service cost | | | 14,335 | | | | 7,363 | | | | 8,230 | | | | 4,251 | | | | 1,779 | | | | 3,874 | | | | 3,719 | | | 13,601 | | 6,993 | | 7,896 | | 3,981 | | 1,701 | | 3,668 | | 3,519 |
Interest cost | | | 46,464 | | | | 20,189 | | | | 27,135 | | | | 14,507 | | | | 5,660 | | | | 15,528 | | | | 7,749 | | | 47,043 | | 21,116 | | 27,760 | | 14,706 | | 5,878 | | 15,741 | | 8,555 |
Actuarial gain | | | (34,504 | ) | | | (10,785 | ) | | | (16,436 | ) | | | (10,447 | ) | | | (1,838 | ) | | | (10,280 | ) | | | (10 | ) | |
Actuarial loss | | | 90,303 | | 73,059 | | 46,963 | | 25,774 | | 9,000 | | 21,311 | | 13,423 |
Employee contribution | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4 | | | - | | - | | - | | - | | - | | - | | 2 |
Benefits paid | | | (43,549 | ) | | | (14,544 | ) | | | (24,994 | ) | | | (13,668 | ) | | | (5,418 | ) | | | (14,366 | ) | | | (3,439 | ) | | (43,790) | | (16,160) | | (25,438) | | (14,009) | | (4,569) | | (15,015) | | (4,652) |
Balance at end of year | | $ | 717,104 | | | $ | 320,220 | | | $ | 423,322 | | | $ | 224,605 | | | $ | 89,315 | | | $ | 240,666 | | | $ | 128,540 | | | $824,261 | | $405,228 | | $480,503 | | $255,057 | | $101,325 | | $266,371 | | $149,387 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $ | 577,959 | | | $ | 335,180 | | | $ | 413,964 | | | $ | 203,289 | | | $ | 90,692 | | | $ | 242,144 | | | $ | 97,170 | | | $407,158 | | $253,966 | | $273,473 | | $142,916 | | $60,104 | | $175,551 | | $71,648 |
Actual return on plan assets | | | (166,118 | ) | | | (100,930 | ) | | | (115,550 | ) | | | (58,393 | ) | | | (25,170 | ) | | | (71,109 | ) | | | (27,899 | ) | | 106,556 | | 66,610 | | 72,862 | | 37,186 | | 15,404 | | 45,823 | | 19,316 |
Employer contributions | | | 38,866 | | | | 34,260 | | | | 53 | | | | 11,688 | | | | - | | | | 18,882 | | | | 5,812 | | | 24,808 | | 6,029 | | 7,623 | | 5,819 | | 1,107 | | 3,577 | | 4,747 |
Employee contribution | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 4 | | | - | | - | | - | | - | | - | | - | | 2 |
Benefits paid | | | (43,549 | ) | | | (14,544 | ) | | | (24,994 | ) | | | (13,668 | ) | | | (5,418 | ) | | | (14,366 | ) | | | (3,439 | ) | | (43,790) | | (16,160) | | (25,438) | | (14,009) | | (4,569) | | (15,015) | | (4,652) |
Fair value of assets at end of year | | $ | 407,158 | | | $ | 253,966 | | | $ | 273,473 | | | $ | 142,916 | | | $ | 60,104 | | | $ | 175,551 | | | $ | 71,648 | | | $494,732 | | $310,445 | | $328,520 | | $171,912 | | $72,046 | | $209,936 | | $91,061 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Funded status | | $ | (309,946 | ) | | $ | (66,254 | ) | | $ | (149,849 | ) | | $ | (81,689 | ) | | $ | (29,211 | ) | | $ | (65,115 | ) | | $ | (56,892 | ) | | ($329,529) | | ($94,783) | | ($151,983) | | ($83,145) | | ($29,279) | | ($56,435) | | ($58,326) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet (funded status) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-current assets | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | |
Non-current liabilities | | | (309,946 | ) | | | (66,254 | ) | | | (149,849 | ) | | | (81,689 | ) | | | (29,211 | ) | | | (65,115 | ) | | | (56,892 | ) | | ($329,529) | | ($94,783) | | ($151,983) | | ($83,145) | | ($29,279) | | ($56,435) | | ($58,326) |
Total funded status | | $ | (309,946 | ) | | $ | (66,254 | ) | | $ | (149,849 | ) | | $ | (81,689 | ) | | $ | (29,211 | ) | | $ | (65,115 | ) | | $ | (56,892 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized as regulatory asset | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | 2,313 | | | $ | 720 | | | $ | 1,520 | | | $ | 849 | | | $ | 428 | | | $ | 645 | | | $ | 103 | | | $1,464 | | $331 | | $1,045 | | $509 | | $222 | | $324 | | $69 |
Net loss | | | 321,073 | | | | 117,891 | | | | 195,127 | | | | 97,651 | | | | 51,348 | | | | 101,772 | | | | 56,455 | | | 346,511 | | 141,661 | | 199,201 | | 101,893 | | 50,980 | | 97,832 | | 61,186 |
| | $ | 323,386 | | | $ | 118,611 | | | $ | 196,647 | | | $ | 98,500 | | | $ | 51,776 | | | $ | 102,417 | | | $ | 56,558 | | | $347,975 | | $141,992 | | $200,246 | | $102,402 | | $51,202 | | $98,156 | | $61,255 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized as AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service cost | | $ | - | | | $ | 127 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $- | | $78 | | $- | | $- | | $- | | $- | | $- |
Net loss | | | - | | | | 20,804 | | | | - | | | | - | | | | - | | | | - | | | | - | | | - | | 33,229 | | - | | - | | - | | - | | - |
| | $ | - | | | $ | 20,931 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $- | | $33,307 | | $- | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Benefits
Entergy also currently provides health care and life insurance benefits for retired employees. Substantially all employees may become eligible for these benefits if they reach retirement age while still working for Entergy. Entergy uses a December 31 measurement date for its postretirement benefit plans.
Effective January 1, 1993, Entergy adopted an accounting standard requiring a change from a cash method to an accrual method of accounting for postretirement other than pensions. At January 1, 1993, the actuarially determined accumulated postretirement benefit obligation (APBO) earned by retirees and active employees was estimated to be approximately $241.4 million for Entergy (other than the former Entergy Gulf States) and $128 million for the former Entergy Gulf States (now split into Entergy Gulf States Louisiana and Entergy Texas.)Texas). Such obligations are being amortized over a 20-year period that began in 1993. For the most part, the Registrant Subsidiaries recover other postretirement benefit costs from customers and are required to contributecont ribute other postretirement benefits collected in rates to an external trust.
Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Texas have received regulatory approval to recover other postretirement benefit costs through rates. Entergy Arkansas began recovery in 1998, pursuant to an APSC order. This order also allowed Entergy Arkansas to amortize a regulatory asset (representing the difference between other postretirement benefit costs and cash expenditures for other postretirement benefits incurred for a five-year period that began January 1, 1993) over a 15-year period that began in January 1998.
The LPSC ordered Entergy Gulf States Louisiana and Entergy Louisiana to continue the use of the pay-as-you-go method for ratemaking purposes for postretirement benefits other than pensions. However, the LPSC retains the flexibility to examine individual companies'companies’ accounting for other postretirement benefits to determine if special exceptions to this order are warranted.
Pursuant to regulatory directives, Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy contribute the other postretirement benefit costs collected in rates into trusts. System Energy is funding, on behalf of Entergy Operations, other postretirement benefits associated with Grand Gulf.
Trust assets contributed by participating Registrant Subsidiaries are in three bank-administered trusts, established by Entergy Corporation and maintained by The Bank of New York Mellon (the Trustee.)a trustee. Each participating Registrant Subsidiary holds a beneficial interest in the trusts’ assets. Use of these master trusts permits the commingling of the trust assets for investment and administrative purposes. Although assets are commingled, the Trusteetrustee maintains supporting records for the purpose of allocating the beneficial interest in net earnings (losses) and the administrative expenses of the investment accounts to the various participating plans and participating Registrant Subsidiaries. Beneficial interest in an investment account’s net earnings (losses)income/ (loss) is comprised of interestintere st and dividends and realized and unrealized gains and losses.losses and expense. Beneficial interest from these investments is allocated monthly to the plans and participating Registrant Subsidiary based on its portion of net assets in the pooled accounts.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Net Other Postretirement Benefit Cost and Other Amounts Recognized as a Regulatory Asset and/or AOCI
Entergy Corporation'sCorporation’s and its subsidiaries'subsidiaries’ total 2010, 2009, 2008, and 20072008 other postretirement benefit costs, including amounts capitalized and amounts recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, included the following components:
| | 2009 | | | 2008 | | | 2007 | | | 2010 | | 2009 | | 2008 |
| | (In Thousands) | | | (In Thousands) |
Other post retirement costs: | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 46,765 | | | $ | 47,198 | | | $ | 44,137 | | | $52,313 | | $46,765 | | $47,198 |
Interest cost on APBO | | | 75,265 | | | | 71,295 | | | | 63,231 | | | 76,078 | | 75,265 | | 71,295 |
Expected return on assets | | | (23,484 | ) | | | (28,109 | ) | | | (25,298 | ) | | (26,213) | | (23,484) | | (28,109) |
Amortization of transition obligation | | | 3,732 | | | | 3,827 | | | | 3,831 | | | 3,728 | | 3,732 | | 3,827 |
Amortization of prior service credit | | | (16,096 | ) | | | (16,417 | ) | | | (15,836 | ) | | (12,060) | | (16,096) | | (16,417) |
Recognized net loss | | | 18,970 | | | | 15,565 | | | | 18,972 | | | 17,270 | | 18,970 | | 15,565 |
Special termination benefits | | | - | | | | - | | | | 603 | | |
Net other postretirement benefit cost | | $ | 105,152 | | | $ | 93,359 | | | $ | 89,640 | | | $111,116 | | $105,152 | | $93,359 |
| | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and /or AOCI (before tax) | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | |
Prior service credit for period | | $ | - | | | $ | (5,422 | ) | | $ | (3,520 | ) | | ($50,548) | | $- | | ($5,422) |
Net (gain)/loss | | | 24,983 | | | | 59,291 | | | | (15,013 | ) | |
Net loss | | | 82,189 | | 24,983 | | 59,291 |
Amounts reclassified from regulatory asset and /or AOCI to net periodic benefit cost in the current year: | | | | | | | | | | | | | | | | | | |
Amortization of transition obligation | | | (3,732 | ) | | | (3,827 | ) | | | (3,831 | ) | | (3,728) | | (3,732) | | (3,827) |
Amortization of prior service credit | | | 16,096 | | | | 16,417 | | | | 15,836 | | | 12,060 | | 16,096 | | 16,417 |
Amortization of net loss | | | (18,970 | ) | | | (15,565 | ) | | | (18,972 | ) | | (17,270) | | (18,970) | | (15,565) |
Total | | $ | 18,377 | | | $ | 50,894 | | | $ | (25,500 | ) | | $22,703 | | $18,377 | | $50,894 |
Total recognized as net periodic benefit cost, regulatory asset, and/or AOCI (before tax) | | $ | 123,529 | | | $ | 144,253 | | | $ | 64,140 | | | $133,819 | | $123,529 | | $144,253 |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic benefit cost in the following year | | | | | | | | | | | | | | | | | | |
Transition obligation | | $ | 3,728 | | | $ | 3,729 | | | $ | 3,831 | | | $3,183 | | $3,728 | | $3,729 |
Prior service credit | | $ | (12,060 | ) | | $ | (17,519 | ) | | $ | (16,417 | ) | | ($14,070) | | ($12,060) | | ($17,519) |
Net loss | | $ | 17,270 | | | $ | 19,018 | | | $ | 15,676 | | | $21,192 | | $17,270 | | $19,018 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total 2010, 2009, 2008, and 20072008 other postretirement benefit costs of the Registrant Subsidiaries, including amounts capitalized and deferred, included the following components:
2009 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | | | | System Energy | | |
2010 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | (In Thousands) | | | | | | | | | | | | | | | |
Other post retirement costs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 7,058 | | | $ | 4,783 | | | $ | 4,589 | | | $ | 2,119 | | | $ | 1,242 | | | $ | 2,475 | | | $ | 2,051 | | | $7,372 | | $5,481 | | $5,483 | | $2,200 | | $1,389 | | $2,789 | | $2,251 |
Interest cost on APBO | | | 15,036 | | | | 8,020 | | | | 9,188 | | | | 4,690 | | | | 3,869 | | | | 5,959 | | | | 2,421 | | | 14,515 | | 8,574 | | 9,075 | | 4,370 | | 3,598 | | 6,326 | | 2,562 |
Expected return on assets | | | (8,570 | ) | | | - | | | | - | | | | (3,027 | ) | | | (2,734 | ) | | | (6,222 | ) | | | (1,655 | ) | | (9,780) | | - | | - | | (3,551) | | (2,899) | | (6,872) | | (1,870) |
Amortization of transition obligation | | | 821 | | | | 239 | | | | 382 | | | | 352 | | | | 1,662 | | | | 265 | | | | 9 | | | 821 | | 238 | | 382 | | 351 | | 1,661 | | 265 | | 8 |
Amortization of prior service cost/(credit) | | | (788 | ) | | | (306 | ) | | | 467 | | | | (246 | ) | | | 361 | | | | 76 | | | | (980 | ) | | (786) | | (306) | | 467 | | (246) | | 361 | | 76 | | (763) |
Recognized net loss | | | 8,347 | | | | 1,975 | | | | 2,215 | | | | 2,629 | | | | 1,522 | | | | 3,194 | | | | 1,277 | | | 6,758 | | 2,653 | | 2,440 | | 1,903 | | 1,095 | | 3,008 | | 1,301 |
Net other postretirement benefit cost | | $ | 21,904 | | | $ | 14,711 | | | $ | 16,841 | | | $ | 6,517 | | | $ | 5,922 | | | $ | 5,747 | | | $ | 3,123 | | | $18,900 | | $16,640 | | $17,847 | | $5,027 | | $5,205 | | $5,592 | | $3,489 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit for period | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | ($5,023) | | ($3,109) | | ($3,204) | | ($1,529) | | ($1,587) | | ($2,871) | | ($519) |
Net (gain)/loss | | | (9,364 | ) | | | 14,746 | | | | 6,080 | | | | (5,919 | ) | | | (3,474 | ) | | | 2,349 | | | | 2,166 | | | 4,032 | | 6,583 | | 7,734 | | 5,765 | | (478) | | 922 | | 4,067 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of transition obligation | | | (821 | ) | | | (239 | ) | | | (382 | ) | | | (352 | ) | | | (1,662 | ) | | | (265 | ) | | | (9 | ) | | (821) | | (238) | | (382) | | (351) | | (1,661) | | (265) | | (8) |
Amortization of prior service cost/(credit) | | | 788 | | | | 306 | | | | (467 | ) | | | 246 | | | | (361 | ) | | | (76 | ) | | | 980 | | | 786 | | 306 | | (467) | | 246 | | (361) | | (76) | | 763 |
Amortization of net loss | | | (8,347 | ) | | | (1,975 | ) | | | (2,215 | ) | | | (2,629 | ) | | | (1,522 | ) | | | (3,194 | ) | | | (1,277 | ) | | (6,758) | | (2,653) | | (2,440) | | (1,903) | | (1,095) | | (3,008) | | (1,301) |
Total | | $ | (17,744 | ) | | $ | 12,838 | | | $ | 3,016 | | | $ | (8,654 | ) | | $ | (7,019 | ) | | $ | (1,186 | ) | | $ | 1,860 | | | ($7,784) | | $889 | | $1,241 | | $2,228 | | ($5,182) | | ($5,298) | | $3,002 |
Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | | $ | 4,160 | | | $ | 27,549 | | | $ | 19,857 | | | $ | (2,137 | ) | | $ | (1,097 | ) | | $ | 4,561 | | | $ | 4,983 | | | $11,116 | | $17,529 | | $19,088 | | $7,255 | | $23 | | $294 | | $6,491 |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transition (asset)/obligation | | $ | 821 | | | $ | 238 | | | $ | 382 | | | $ | 351 | | | $ | 1,661 | | | $ | 265 | | | $ | 8 | | |
Transition obligation | | | $821 | | $239 | | $383 | | $352 | | $1,190 | | $187 | | $9 |
Prior service cost/(credit) | | $ | (786 | ) | | $ | (306 | ) | | $ | 467 | | | $ | (246 | ) | | $ | 361 | | | $ | 76 | | | $ | (763 | ) | | ($530) | | ($824) | | ($247) | | ($139) | | $38 | | ($428) | | ($589) |
Net loss | | $ | 6,758 | | | $ | 2,653 | | | $ | 2,440 | | | $ | 1,903 | | | $ | 1,095 | | | $ | 3,008 | | | $ | 1,301 | | | $6,436 | | $2,896 | | $2,793 | | $2,160 | | $968 | | $2,803 | | $1,477 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | | | | System Energy | | |
2009 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| | (In Thousands) | | | | | | | | | | | | | | | |
Other post retirement costs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 6,824 | | | $ | 5,003 | | | $ | 4,394 | | | $ | 2,057 | | | $ | 1,179 | | | $ | 2,423 | | | $ | 2,053 | | | $7,058 | | $4,783 | | $4,589 | | $2,119 | | $1,242 | | $2,475 | | $2,051 |
Interest cost on APBO | | | 13,772 | | | | 7,668 | | | | 8,746 | | | | 4,563 | | | | 3,810 | | | | 5,759 | | | | 2,124 | | | 15,036 | | 8,020 | | 9,188 | | 4,690 | | 3,869 | | 5,959 | | 2,421 |
Expected return on assets | | | (9,966 | ) | | | - | | | | - | | | | (3,620 | ) | | | (3,155 | ) | | | (7,538 | ) | | | (2,043 | ) | | (8,570) | | - | | - | | (3,027) | | (2,734) | | (6,222) | | (1,655) |
Amortization of transition obligation | | | 821 | | | | 337 | | | | 382 | | | | 351 | | | | 1,661 | | | | 265 | | | | 8 | | | 821 | | 239 | | 382 | | 352 | | 1,662 | | 265 | | 9 |
Amortization of prior service cost/(credit) | | | (788 | ) | | | 583 | | | | 467 | | | | (246 | ) | | | 361 | | | | 289 | | | | (1,130 | ) | | (788) | | (306) | | 467 | | (246) | | 361 | | 76 | | (980) |
Recognized net loss | | | 5,757 | | | | 1,977 | | | | 2,715 | | | | 2,133 | | | | 1,164 | | | | 1,425 | | | | 702 | | | 8,347 | | 1,975 | | 2,215 | | 2,629 | | 1,522 | | 3,194 | | 1,277 |
Net other postretirement benefit cost | | $ | 16,420 | | | $ | 15,568 | | | $ | 16,704 | | | $ | 5,238 | | | $ | 5,020 | | | $ | 2,623 | | | $ | 1,714 | | | $21,904 | | $14,711 | | $16,841 | | $6,517 | | $5,922 | | $5,747 | | $3,123 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Prior service credit for period | | $ | - | | | $ | (4,571 | ) | | $ | - | | | $ | - | | | $ | - | | | $ | (851 | ) | | $ | - | | | $- | | $- | | $- | | $- | | $- | | $- | | $- |
Net (gain)/loss | | | 38,149 | | | | (88 | ) | | | (3,024 | ) | | | 8,786 | | | | 7,982 | | | | 23,158 | | | | 8,291 | | | (9,364) | | 14,746 | | 6,080 | | (5,919) | | (3,474) | | 2,349 | | 2,166 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of transition obligation | | | (821 | ) | | | (337 | ) | | | (382 | ) | | | (351 | ) | | | (1,661 | ) | | | (265 | ) | | | (8 | ) | | (821) | | (239) | | (382) | | (352) | | (1,662) | | (265) | | (9) |
Amortization of prior service cost/(credit) | | | 788 | | | | (583 | ) | | | (467 | ) | | | 246 | | | | (361 | ) | | | (289 | ) | | | 1,130 | | | 788 | | 306 | | (467) | | 246 | | (361) | | (76) | | 980 |
Amortization of net loss | | | (5,757 | ) | | | (1,977 | ) | | | (2,715 | ) | | | (2,133 | ) | | | (1,164 | ) | | | (1,425 | ) | | | (702 | ) | | (8,347) | | (1,975) | | (2,215) | | (2,629) | | (1,522) | | (3,194) | | (1,277) |
Total | | $ | 32,359 | | | $ | (7,556 | ) | | $ | (6,588 | ) | | $ | 6,548 | | | $ | 4,796 | | | $ | 20,328 | | | $ | 8,711 | | | ($17,744) | | $12,838 | | $3,016 | | ($8,654) | | ($7,019) | | ($1,186) | | $1,860 |
Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | | $ | 48,779 | | | $ | 8,012 | | | $ | 10,116 | | | $ | 11,786 | | | $ | 9,816 | | | $ | 22,951 | | | $ | 10,425 | | | $4,160 | | $27,549 | | $19,857 | | ($2,137) | | ($1,097) | | $4,561 | | $4,983 |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transition (asset)/obligation | | $ | 821 | | | $ | 239 | | | $ | 382 | | | $ | 351 | | | $ | 1,661 | | | $ | 265 | | | $ | 8 | | | $821 | | $238 | | $382 | | $351 | | $1,661 | | $265 | | $8 |
Prior service cost/(credit) | | $ | (788 | ) | | $ | (306 | ) | | $ | 467 | | | $ | (246 | ) | | $ | 361 | | | $ | 76 | | | $ | (1,130 | ) | | ($786) | | ($306) | | $467 | | ($246) | | $361 | | $76 | | ($763) |
Net loss | | $ | 7,502 | | | $ | 2,322 | | | $ | 2,444 | | | $ | 2,415 | | | $ | 1,297 | | | $ | 2,689 | | | $ | 1,335 | | | $6,758 | | $2,653 | | $2,440 | | $1,903 | | $1,095 | | $3,008 | | $1,301 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2007 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | | | | System Energy | |
| | (In Thousands) | |
Other post retirement costs: | | | | | | | | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $ | 6,099 | | | $ | 6,188 | | | $ | 3,890 | | | $ | 1,904 | | | $ | 1,019 | | | $ | 2,001 | | | $ | 1,804 | |
Interest cost on APBO | | | 12,147 | | | | 11,504 | | | | 7,764 | | | | 4,195 | | | | 3,480 | | | | 5,041 | | | | 1,732 | |
Expected return on assets | | | (8,923 | ) | | | (6,787 | ) | | | - | | | | (3,275 | ) | | | (2,729 | ) | | | (6,787 | ) | | | (1,878 | ) |
Amortization of transition obligation | | | 821 | | | | 604 | | | | 382 | | | | 351 | | | | 1,662 | | | | 266 | | | | 9 | |
Amortization of prior service cost/(credit) | | | (788 | ) | | | 872 | | | | 467 | | | | (246 | ) | | | 361 | | | | 289 | | | | (1,130 | ) |
Recognized net loss | | | 6,001 | | | | 3,169 | | | | 3,059 | | | | 2,449 | | | | 1,129 | | | | 1,393 | | | | 591 | |
Special termination benefits | | | 251 | | | | 79 | | | | 124 | | | | - | | | | - | | | | - | | | | 38 | |
Net other postretirement benefit cost | | $ | 15,608 | | | $ | 15,629 | | | $ | 15,686 | | | $ | 5,378 | | | $ | 4,922 | | | $ | 2,203 | | | $ | 1,166 | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net (gain)/loss | | $ | 4,045 | | | $ | 7,031 | | | $ | (522 | ) | | $ | (2,046 | ) | | $ | 1,226 | | | $ | 2,913 | | | $ | 2,034 | |
Amounts reclassified from regulatory asset and/or AOCI to net periodic benefit cost in the current year: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of transition obligation | | | (821 | ) | | | (604 | ) | | | (382 | ) | | | (351 | ) | | | (1,662 | ) | | | (266 | ) | | | (9 | ) |
Amortization of prior service cost/(credit) | | | 788 | | | | (872 | ) | | | (467 | ) | | | 246 | | | | (361 | ) | | | (289 | ) | | | 1,130 | |
Amortization of net loss | | | (6,001 | ) | | | (3,169 | ) | | | (3,059 | ) | | | (2,449 | ) | | | (1,129 | ) | | | (1,393 | ) | | | (591 | ) |
Total | | $ | (1,989 | ) | | $ | 2,386 | | | $ | (4,430 | ) | | $ | (4,600 | ) | | $ | (1,926 | ) | | $ | 965 | | | $ | 2,564 | |
Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | | $ | 13,619 | | | $ | 18,015 | | | $ | 11,256 | | | $ | 778 | | | $ | 2,996 | | | $ | 3,168 | | | $ | 3,730 | |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic benefit cost in the following year | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transition obligation | | $ | 821 | | | $ | 338 | | | $ | 382 | | | $ | 351 | | | $ | 1,662 | | | $ | 266 | | | $ | 9 | |
Prior service cost/(credit) | | $ | (788 | ) | | $ | 583 | | | $ | 467 | | | $ | (246 | ) | | $ | 361 | | | $ | 289 | | | $ | (1,130 | ) |
Net loss | | $ | 5,759 | | | $ | 1,977 | | | $ | 2,716 | | | $ | 2,133 | | | $ | 1,164 | | | $ | 1,425 | | | $ | 703 | |
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Other post retirement costs: | | | | | | | | | | | | | | |
Service cost - benefits earned during the period | | $6,824 | | $5,003 | | $4,394 | | $2,057 | | $1,179 | | $2,423 | | $2,053 |
Interest cost on APBO | | 13,772 | | 7,668 | | 8,746 | | 4,563 | | 3,810 | | 5,759 | | 2,124 |
Expected return on assets | | (9,966) | | - | | - | | (3,620) | | (3,155) | | (7,538) | | (2,043) |
Amortization of transition obligation | | 821 | | 337 | | 382 | | 351 | | 1,661 | | 265 | | 8 |
Amortization of prior service cost/(credit) | | (788) | | 583 | | 467 | | (246) | | 361 | | 289 | | (1,130) |
Recognized net loss | | 5,757 | | 1,977 | | 2,715 | | 2,133 | | 1,164 | | 1,425 | | 702 |
Net other postretirement benefit cost | | $16,420 | | $15,568 | | $16,704 | | $5,238 | | $5,020 | | $2,623 | | $1,714 |
| | | | | | | | | | | | | | |
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax) | | | | | | | | | | | | | | |
Arising this period: | | | | | | | | | | | | | | |
Prior service credit for period | | $- | | ($4,571) | | $- | | $- | | $- | | ($851) | | $- |
Net (gain)/loss | | 38,149 | | (88) | | (3,024) | | 8,786 | | 7,982 | | 23,158 | | 8,291 |
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year: | | | | | | | | | | | | | | |
Amortization of transition obligation | | (821) | | (337) | | (382) | | (351) | | (1,661) | | (265) | | (8) |
Amortization of prior service cost/(credit) | | 788 | | (583) | | (467) | | 246 | | (361) | | (289) | | 1,130 |
Amortization of net loss | | (5,757) | | (1,977) | | (2,715) | | (2,133) | | (1,164) | | (1,425) | | (702) |
Total | | $32,359 | | ($7,556) | | ($6,588) | | $6,548 | | $4,796 | | $20,328 | | $8,711 |
Total recognized as net periodic other postretirement cost, regulatory asset, and/or AOCI (before tax) | | $48,779 | | $8,012 | | $10,116 | | $11,786 | | $9,816 | | $22,951 | | $10,425 |
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year | | | | | | | | | | | | | | |
Transition (asset)/obligation | | $821 | | $239 | | $382 | | $351 | | $1,661 | | $265 | | $8 |
Prior service cost/(credit) | | ($788) | | ($306) | | $467 | | ($246) | | $361 | | $76 | | ($1,130) |
Net loss | | $7,502 | | $2,322 | | $2,444 | | $2,415 | | $1,297 | | $2,689 | | $1,335 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Benefit Obligations, Plan Assets, Funded Status, and Amounts Not Yet Recognized and Recognized in the Balance Sheet of Entergy Corporation and its Subsidiaries as of December 31, 20092010 and 2008
| | December 31, | |
| | 2009 | | | 2008 | |
| | (In Thousands) | |
Change in APBO | | | | | | |
Balance at beginning of year | | $ | 1,155,072 | | | $ | 1,129,631 | |
Service cost | | | 46,765 | | | | 47,198 | |
Interest cost | | | 75,265 | | | | 71,295 | |
Plan amendments | | | - | | | | (5,422 | ) |
Plan participant contributions | | | 17,394 | | | | 8,618 | |
Actuarial (gain)/loss | | | 59,537 | | | | (33,168 | ) |
Benefits paid | | | (79,076 | ) | | | (68,799 | ) |
Medicare Part D subsidy received | | | 5,119 | | | | 5,719 | |
Balance at end of year | | $ | 1,280,076 | | | $ | 1,155,072 | |
| | | | | | | | |
Change in Plan Assets | | | | | | | | |
Fair value of assets at beginning of year | | $ | 295,908 | | | $ | 350,719 | |
Actual return on plan assets | | | 58,038 | | | | (64,350 | ) |
Employer contributions | | | 70,135 | | | | 69,720 | |
Plan participant contributions | | | 17,394 | | | | 8,618 | |
Acquisition | | | - | | | | - | |
Benefits paid | | | (79,076 | ) | | | (68,799 | ) |
Fair value of assets at end of year | | $ | 362,399 | | | $ | 295,908 | |
| | | | | | | | |
Funded status | | $ | (917,677 | ) | | $ | (859,164 | ) |
| | | | | | | | |
Amounts recognized in the balance sheet | | | | | | | | |
Current liabilities | | $ | (31,189 | ) | | $ | (29,594 | ) |
Non-current liabilities | | | (886,488 | ) | | | (829,570 | ) |
Total funded status | | $ | (917,677 | ) | | $ | (859,164 | ) |
| | | | | | | | |
Amounts recognized as a regulatory asset (before tax) | | | | | | | | |
Transition obligation | | $ | 9,325 | | | $ | 12,436 | |
Prior service cost/(credit) | | | 1,877 | | | | (966 | ) |
Net loss | | | 239,400 | | | | 266,086 | |
| | $ | 250,602 | | | $ | 277,556 | |
Amounts recognized as AOCI (before tax) | | | | | | | | |
Transition obligation | | $ | 1,862 | | | $ | 2,483 | |
Prior service credit | | | (21,855 | ) | | | (35,108 | ) |
Net loss | | | 147,563 | | | | 114,864 | |
| | $ | 127,570 | | | $ | 82,239 | |
2009
| | December 31, |
| | 2010 | | 2009 |
| | (In Thousands) |
Change in APBO | | | | |
Balance at beginning of year | | $1,280,076 | | $1,155,072 |
Service cost | | 52,313 | | 46,765 |
Interest cost | | 76,078 | | 75,265 |
Plan amendments | | (50,548) | | - |
Plan participant contributions | | 14,275 | | 17,394 |
Actuarial (gain)/loss | | 92,340 | | 59,537 |
Benefits paid | | (83,613) | | (79,076) |
Medicare Part D subsidy received | | 5,449 | | 5,119 |
Balance at end of year | | $1,386,370 | | $1,280,076 |
| | | | |
Change in Plan Assets | | | | |
Fair value of assets at beginning of year | | $362,399 | | $295,908 |
Actual return on plan assets | | 36,364 | | 58,038 |
Employer contributions | | 75,005 | | 70,135 |
Plan participant contributions | | 14,275 | | 17,394 |
Benefits paid | | (83,613) | | (79,076) |
Fair value of assets at end of year | | $404,430 | | $362,399 |
| | | | |
Funded status | | ($981,940) | | ($917,677) |
| | | | |
Amounts recognized in the balance sheet | | | | |
Current liabilities | | ($30,225) | | ($31,189) |
Non-current liabilities | | (951,715) | | (886,488) |
Total funded status | | ($981,940) | | ($917,677) |
| | | | |
Amounts recognized as a regulatory asset (before tax) | | | | |
Transition obligation | | $5,118 | | $9,325 |
Prior service cost/(credit) | | (8,442) | | 1,877 |
Net loss | | 253,415 | | 239,400 |
| | $250,091 | | $250,602 |
Amounts recognized as AOCI (before tax) | | | | |
Transition obligation | | $1,242 | | $1,862 |
Prior service credit | | (48,925) | | (21,855) |
Net loss | | 198,466 | | 147,563 |
| | $150,783 | | $127,570 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Benefit Obligations, Plan Assets, Funded Status, and Amounts Not Yet Recognized and Recognized in the Balance Sheets of the Registrant Subsidiaries as of December 31, 20092010 and 2008
2009 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | |
| | (In Thousands) | |
Change in APBO | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of year | | $ | 231,877 | | | $ | 123,144 | | | $ | 141,579 | | | $ | 72,117 | | | $ | 60,095 | | | $ | 91,926 | | | $ | 36,974 | |
Service cost | | | 7,058 | | | | 4,783 | | | | 4,589 | | | | 2,119 | | | | 1,242 | | | | 2,475 | | | | 2,051 | |
Interest cost | | | 15,036 | | | | 8,020 | | | | 9,188 | | | | 4,690 | | | | 3,869 | | | | 5,959 | | | | 2,421 | |
Plan participant contributions | | | 4,374 | | | | 1,947 | | | | 2,236 | | | | 1,148 | | | | 545 | | | | 1,631 | | | | 637 | |
Actuarial (gain)/loss | | | 3,529 | | | | 14,746 | | | | 6,080 | | | | (1,321 | ) | | | 300 | | | | 11,226 | | | | 4,599 | |
Benefits paid | | | (17,602 | ) | | | (8,881 | ) | | | (11,115 | ) | | | (5,450 | ) | | | (5,161 | ) | | | (6,840 | ) | | | (3,803 | ) |
Medicare Part D subsidy received | | | 1,194 | | | | 679 | | | | 762 | | | | 398 | | | | 421 | | | | 581 | | | | 120 | |
Balance at end of year | | $ | 245,466 | | | $ | 144,438 | | | $ | 153,319 | | | $ | 73,701 | | | $ | 61,311 | | | $ | 106,958 | | | $ | 42,999 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $ | 102,893 | | | $ | - | | | $ | - | | | $ | 36,711 | | | $ | 40,424 | | | $ | 76,001 | | | $ | 21,657 | |
Actual return on plan assets | | | 21,463 | | | | - | | | | - | | | | 7,625 | | | | 6,508 | | | | 15,099 | | | | 4,088 | |
Employer contributions | | | 18,548 | | | | 6,934 | | | | 8,879 | | | | 6,722 | | | | 5,094 | | | | 7,388 | | | | 3,299 | |
Plan participant contributions | | | 4,374 | | | | 1,947 | | | | 2,236 | | | | 1,148 | | | | 545 | | | | 1,631 | | | | 637 | |
Benefits paid | | | (17,602 | ) | | | (8,881 | ) | | | (11,115 | ) | | | (5,450 | ) | | | (5,161 | ) | | | (6,840 | ) | | | (3,803 | ) |
Fair value of assets at end of year | | $ | 129,676 | | | $ | - | | | $ | - | | | $ | 46,756 | | | $ | 47,410 | | | $ | 93,279 | | | $ | 25,878 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Funded status | | $ | (115,790 | ) | | $ | (144,438 | ) | | $ | (153,319 | ) | | $ | (26,945 | ) | | $ | (13,901 | ) | | $ | (13,679 | ) | | $ | (17,121 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-current asset | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Current liabilities | | | - | | | | (7,736 | ) | | | (9,130 | ) | | | - | | | | - | | | | - | | | | - | |
Non-current liabilities | | | (115,790 | ) | | | (136,702 | ) | | | (144,189 | ) | | | (26,945 | ) | | | (13,901 | ) | | | (13,679 | ) | | | (17,121 | ) |
Total funded status | | $ | (115,790 | ) | | $ | (144,438 | ) | | $ | (153,319 | ) | | $ | (26,945 | ) | | $ | (13,901 | ) | | $ | (13,679 | ) | | $ | (17,121 | ) |
2009
2010 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
Change in APBO | | | | | | | | | | | | | | | |
Balance at beginning of year | | | $245,466 | | $144,438 | | $153,319 | | $73,701 | | $61,311 | | $106,958 | | $42,999 |
Service cost | | | 7,372 | | 5,481 | | 5,483 | | 2,200 | | 1,389 | | 2,789 | | 2,251 |
Interest cost | | | 14,515 | | 8,574 | | 9,075 | | 4,370 | | 3,598 | | 6,326 | | 2,562 |
Plan amendment | | | (5,023) | | (3,109) | | (3,204) | | (1,529) | | (1,587) | | (2,871) | | (519) |
Plan participant contributions | | | 3,440 | | 1,584 | | 2,241 | | 969 | | 668 | | 1,297 | | 548 |
Actuarial (gain)/loss | | | 8,071 | | 6,583 | | 7,734 | | 7,046 | | 655 | | 3,449 | | 4,749 |
Benefits paid | | | (18,217) | | (9,800) | | (11,742) | | (5,713) | | (5,737) | | (7,467) | | (3,229) |
Medicare Part D subsidy received | | | 1,235 | | 715 | | 814 | | 420 | | 438 | | 625 | | 140 |
Balance at end of year | | | $256,859 | | $154,466 | | $163,720 | | $81,464 | | $60,735 | | $111,106 | | $49,501 |
| | | | | | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | | $129,676 | | $ - | | $ - | | $46,756 | | $47,410 | | $93,279 | | $25,878 |
Actual return on plan assets | | | 13,819 | | - | | - | | 4,832 | | 4,032 | | 9,399 | | 2,552 |
Employer contributions | | | 19,904 | | 8,216 | | 9,501 | | 5,220 | | 5,632 | | 6,706 | | 3,598 |
Plan participant contributions | | | 3,440 | | 1,584 | | 2,241 | | 969 | | 668 | | 1,297 | | 548 |
Benefits paid | | | (18,217) | | (9,800) | | (11,742) | | (5,713) | | (5,737) | | (7,467) | | (3,229) |
Fair value of assets at end of year | | | $148,622 | | $ - | | $ - | | $52,064 | | $52,005 | | $103,214 | | $29,347 |
| | | | | | | | | | | | | | | |
Funded status | | | ($108,237) | | ($154,466) | | ($163,720) | | ($29,400) | | ($8,730) | | ($7,892) | | ($20,154) |
| | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet | | | | | | | | | | | | | | | |
Non-current asset | | | $- | | $- | | $- | | $- | | $- | | $- | | $- |
Current liabilities | | | - | | (7,159) | | (8,614) | | - | | - | | - | | - |
Non-current liabilities | | | (108,237) | | (147,307) | | (155,106) | | (29,400) | | (8,730) | | (7,892) | | (20,154) |
Total funded status | | | ($108,237) | | ($154,466) | | ($163,720) | | ($29,400) | | ($8,730) | | ($7,892) | | ($20,154) |
| | | | | | | | | | | | | | | |
Amounts recognized in regulatory asset (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transition obligation | | $ | 2,462 | | | $ | - | | | $ | - | | | $ | 1,054 | | | $ | 4,983 | | | $ | 795 | | | $ | 25 | | | $1,641 | | $- | | $- | | $703 | | $2,379 | | $374 | | $17 |
Prior service cost | | | 1,031 | | | | - | | | | - | | | | 439 | | | | 1,195 | | | | 226 | | | | (1,142 | ) | | (3,206) | | - | | - | | (844) | | 190 | | (2,565) | | (898) |
Net loss | | | 105,644 | | | | - | | | | - | | | | 30,204 | | | | 19,396 | | | | 46,970 | | | | 19,912 | | | 102,918 | | - | | - | | 34,066 | | 17,823 | | 44,884 | | 22,678 |
| | | $101,353 | | $- | | $- | | $33,925 | | $20,392 | | $42,693 | | $21,797 |
| | $ | 109,137 | | | $ | - | | | $ | - | | | $ | 31,697 | | | $ | 25,574 | | | $ | 47,991 | | | $ | 18,795 | | | | | | | | | | | | | | | |
Amounts recognized in AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transition obligation | | $ | - | | | $ | 715 | | | $ | 1,147 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $- | | $477 | | $765 | | $- | | $- | | $- | | $- |
Prior service cost | | | - | | | | (1,532 | ) | | | 2,082 | | | | - | | | | - | | | | - | | | | - | | | - | | (4,335) | | (1,589) | | - | | - | | - | | - |
Net loss | | | - | | | | 46,277 | | | | 44,601 | | | | - | | | | - | | | | - | | | | - | | | - | | 50,207 | | 49,895 | | - | | - | | - | | - |
| | $ | - | | | $ | 45,460 | | | $ | 47,830 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $- | | $46,349 | | $49,071 | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2008 | | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | | |
2009 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | | (In Thousands) |
Change in APBO | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of year | | $ | 218,817 | | | $ | 121,241 | | | $ | 138,932 | | | $ | 72,382 | | | $ | 60,948 | | | $ | 91,603 | | | $ | 33,378 | | | $231,877 | | $123,144 | | $141,579 | | $72,117 | | $60,095 | | $91,926 | | $36,974 |
Service cost | | | 6,824 | | | | 5,003 | | | | 4,394 | | | | 2,057 | | | | 1,179 | | | | 2,423 | | | | 2,053 | | | 7,058 | | 4,783 | | 4,589 | | 2,119 | | 1,242 | | 2,475 | | 2,051 |
Interest cost | | | 13,772 | | | | 7,668 | | | | 8,746 | | | | 4,563 | | | | 3,810 | | | | 5,759 | | | | 2,124 | | | 15,036 | | 8,020 | | 9,188 | | 4,690 | | 3,869 | | 5,959 | | 2,421 |
Amendment | | | - | | | | (4,571 | ) | | | - | | | | - | | | | - | | | | (851 | ) | | | - | | |
Plan participant contributions | | | 1,944 | | | | 875 | | | | 1,139 | | | | 630 | | | | 207 | | | | 981 | | | | 249 | | | 4,374 | | 1,947 | | 2,236 | | 1,148 | | 545 | | 1,631 | | 637 |
Actuarial (gain)/loss | | | 5,094 | | | | (88 | ) | | | (3,024 | ) | | | (3,288 | ) | | | (1,744 | ) | | | (1,843 | ) | | | 1,796 | | | 3,529 | | 14,746 | | 6,080 | | (1,321) | | 300 | | 11,226 | | 4,599 |
Benefits paid | | | (15,940 | ) | | | (7,698 | ) | | | (9,485 | ) | | | (4,695 | ) | | | (4,814 | ) | | | (6,855 | ) | | | (2,747 | ) | | (17,602) | | (8,881) | | (11,115) | | (5,450) | | (5,161) | | (6,840) | | (3,803) |
Medicare Part D subsidy received | | | 1,366 | | | | 714 | | | | 877 | | | | 468 | | | | 509 | | | | 709 | | | | 121 | | | 1,194 | | 679 | | 762 | | 398 | | 421 | | 581 | | 120 |
Balance at end of year | | $ | 231,877 | | | $ | 123,144 | | | $ | 141,579 | | | $ | 72,117 | | | $ | 60,095 | | | $ | 91,926 | | | $ | 36,974 | | | $245,466 | | $144,438 | | $153,319 | | $73,701 | | $61,311 | | $106,958 | | $42,999 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Change in Plan Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Fair value of assets at beginning of year | | $ | 117,916 | | | $ | - | | | $ | - | | | $ | 43,502 | | | $ | 45,737 | | | $ | 92,024 | | | $ | 26,731 | | | $102,893 | | $ - | | $ - | | $36,711 | | $40,424 | | $76,001 | | $21,657 |
Actual return on plan assets | | | (23,089 | ) | | | - | | | | - | | | | (8,454 | ) | | | (6,571 | ) | | | (17,463 | ) | | | (4,452 | ) | | 21,463 | | - | | - | | 7,625 | | 6,508 | | 15,099 | | 4,088 |
Employer contributions | | | 22,062 | | | | 6,823 | | | | 8,346 | | | | 5,728 | | | | 5,865 | | | | 7,314 | | | | 1,876 | | | 18,548 | | 6,934 | | 8,879 | | 6,722 | | 5,094 | | 7,388 | | 3,299 |
Plan participant contributions | | | 1,944 | | | | 875 | | | | 1,139 | | | | 630 | | | | 207 | | | | 981 | | | | 249 | | | 4,374 | | 1,947 | | 2,236 | | 1,148 | | 545 | | 1,631 | | 637 |
Benefits paid | | | (15,940 | ) | | | (7,698 | ) | | | (9,485 | ) | | | (4,695 | ) | | | (4,814 | ) | | | (6,855 | ) | | | (2,747 | ) | | (17,602) | | (8,881) | | (11,115) | | (5,450) | | (5,161) | | (6,840) | | (3,803) |
Fair value of assets at end of year | | $ | 102,893 | | | $ | - | | | $ | - | | | $ | 36,711 | | | $ | 40,424 | | | $ | 76,001 | | | $ | 21,657 | | | $129,676 | | $ - | | $ - | | $46,756 | | $47,410 | | $93,279 | | $25,878 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Funded status | | $ | (128,984 | ) | | $ | (123,144 | ) | | $ | (141,579 | ) | | $ | (35,406 | ) | | $ | (19,671 | ) | | $ | (15,925 | ) | | $ | (15,317 | ) | | ($115,790) | | ($144,438) | | ($153,319) | | ($26,945) | | ($13,901) | | ($13,679) | | ($17,121) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Amounts recognized in the balance sheet | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Non-current asset | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $- | | $- | | $- | | $- | | $- | | $- | | $- |
Current liabilities | | | - | | | | (6,895 | ) | | | (8,912 | ) | | | - | | | | - | | | | - | | | | - | | | - | | (7,736) | | (9,130) | | - | | - | | - | | - |
Non-current liabilities | | | (128,984 | ) | | | (116,249 | ) | | | (132,667 | ) | | | (35,406 | ) | | | (19,671 | ) | | | (15,925 | ) | | | (15,317 | ) | | (115,790) | | (136,702) | | (144,189) | | (26,945) | | (13,901) | | (13,679) | | (17,121) |
Total funded status | | $ | (128,984 | ) | | $ | (123,144 | ) | | $ | (141,579 | ) | | $ | (35,406 | ) | | $ | (19,671 | ) | | $ | (15,925 | ) | | $ | (15,317 | ) | | ($115,790) | | ($144,438) | | ($153,319) | | ($26,945) | | ($13,901) | | ($13,679) | | ($17,121) |
| | | | | | | | | | | | | | | |
Amounts recognized in regulatory asset (before tax) | | | | | | | | | | | | | | | |
Transition obligation | | | $2,462 | | $- | | $- | | $1,054 | | $4,983 | | $795 | | $25 |
Prior service cost | | | 1,031 | | - | | - | | 439 | | 1,195 | | 226 | | (1,142) |
Net loss | | | 105,644 | | - | | - | | 30,204 | | 19,396 | | 46,970 | | 19,912 |
| | | $109,137 | | $- | | $- | | $31,697 | | $25,574 | | $47,991 | | $18,795 |
| | | | | | | | | | | | | | | |
Amounts recognized in AOCI (before tax) | | | | | | | | | | | | | | | |
Transition obligation | | | $- | | $715 | | $1,147 | | $- | | $- | | $- | | $- |
Prior service cost | | | - | | (1,532) | | 2,082 | | - | | - | | - | | - |
Net loss | | | - | | 46,277 | | 44,601 | | - | | - | | - | | - |
| | | $- | | $45,460 | | $47,830 | | $- | | $- | | $- | | $- |
Amounts recognized in regulatory asset (before tax) | | | | | | | | | | | | | | | | | | | | | |
Transition obligation | | $ | 3,283 | | | $ | - | | | $ | - | | | $ | 1,406 | | | $ | 6,645 | | | $ | 1,060 | | | $ | 34 | |
Prior service cost | | | 243 | | | | - | | | | - | | | | 193 | | | | 1,556 | | | | 302 | | | | (2,122 | ) |
Net loss | | | 123,355 | | | | - | | | | - | | | | 38,752 | | | | 24,392 | | | | 47,815 | | | | 19,023 | |
| | $ | 126,881 | | | $ | - | | | $ | - | | | $ | 40,351 | | | $ | 32,593 | | | $ | 49,177 | | | $ | 16,935 | |
Amounts recognized in AOCI (before tax) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Transition obligation | | $ | - | | | $ | 954 | | | $ | 1,529 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Prior service cost | | | - | | | | (1,838 | ) | | | 2,549 | | | | - | | | | - | | | | - | | | | - | |
Net loss | | | - | | | | 33,506 | | | | 40,736 | | | | - | | | | - | | | | - | | | | - | |
| | $ | - | | | $ | 32,622 | | | $ | 44,814 | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accounting for Pension and Other Postretirement Benefits
Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans. This is measured as the difference between plan assets at fair value and the benefit obligation. Entergy uses a December 31 measurement date for its pension and other postretirement plans. Employers are to record previously unrecognized gains and losses, prior service costs, and any remaining transition asset or obligation (that resulted from adopting prior pension and other postretirement benefits accounting standards) as comprehensive income and/or as a regulatory asset reflective of the recovery mechanism for pension and other postretirement benefit costs in the Utility’s jurisdictions. For the portion of Entergy Gulf Stat es Louisiana that is not regulated, the unrecognized prior service cost, gains and losses, and transition asset/obligation for its pension and other postretirement benefit obligations are recorded as other comprehensive income. Entergy Gulf States Louisiana and Entergy Louisiana recover other postretirement benefit costs on a pay as you go basis and record the unrecognized prior service cost, gains and losses, and transition obligation for its other postretirement benefit obligation as other comprehensive income. Accounting standards also requires that changes in the funded status be recorded as other comprehensive income and/or a regulatory asset in the period in which the changes occur.
With regard to pension and other postretirement costs, Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV.
Qualified Pension and Other Postretirement Plans'Plans’ Assets
Entergy'sEntergy’s qualified pension and postretirement plans' weighted-average asset allocations by asset category at December 31, 20092010 and 20082009 are as follows:
| Qualified Pension | | Postretirement | | Qualified Pension | | Postretirement |
Actual Asset Allocation | 2009 | | 2008 | | 2009 | 2008 | | 2010 | | 2009 | | 2010 | | 2009 |
| | | | | Non-Taxable | Taxable | Non-Taxable | Taxable | | | | | | Non- Taxable | | Taxable | | Non- Taxable | | Taxable |
Domestic Equity Securities | 46% | | 43% | | 40% | 36% | 37% | | 44% | | 46% | | 39% | | 39% | | 40% | | 36% |
International Equity Securities | 21% | | 19% | | 19% | 0% | 17% | 0% | | 20% | | 21% | | 18% | | 0% | | 19% | | 0% |
Fixed Income Securities | 32% | | 36% | | 41% | 63% | 46% | 63% | | 35% | | 32% | | 43% | | 60% | | 41% | | 63% |
Other | 1% | | 2% | | 0% | 1% | 0% | | 1% | | 1% | | 0% | | 1% | | 0% | | 1% |
The Plan Administrator'sAdministrator’s trust asset investment strategy is to invest the assets in a manner whereby long term earnings on the assets (plus cash contributions) provide adequate funding for retiree benefit payments. The mix of assets is based on an optimization study that identifies asset allocation targets in order to achieve the maximum return for an acceptable level of risk, while minimizing the expected contributions and pension and postretirement expense.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In the optimization study, the Plan Administrator formulates assumptions about characteristics, such as expected asset class investment returns, volatility (risk), and correlation coefficients among the various asset classes. The future market assumptions used in the optimization study are determined by examining historical market characteristics of the various asset classes, and making adjustments to reflect future conditions expected to prevail over the study period. The following targets and ranges were established in the study to produce an acceptable economically efficient plan to manage around the targets:
The optimization analysis utilized in the Plan Administrator's latest study produced the following approved asset class target allocations. | | Qualified Pension | | |
| | | | | | | | |
Asset Class | | Target | | Range | | Target | | Range | | Target | | Range |
Domestic Equity Securities | | 45% | | 35% to 55% | | 38% | | 33% to 43% | | 35% | | 30% to 40% |
International Equity Securities | | 20% | | 15% to 25% | | 17% | | 12% to 22% | | 0% | | 0% |
Total Equity | | 65% | | 60% to 70% | | 55% | | 50% to 60% | | 35% | | 30% to 40% |
Fixed Income Securities | | 35% | | 30% to 40% | | 45% | | 40% to 50% | | 65% | | 60% to 70% |
Other | | 0% | | 0% to 10% | | 0% | | 0% to 5% | | 0% | | 0% to 5% |
Target Asset Allocation | Pension | | Postretirement |
| | | Non-Taxable | Taxable |
Domestic Equity Securities | 45% | | 38% | 35% |
International Equity Securities | 20% | | 17% | 0% |
Fixed Income Securities | 35% | | 45% | 65% |
The expected long term rate of return of 8.5% for 2010 and 2009(8.5% for 2009) for the qualified retirement planspension plans’ assets is based on the expected long term returngeometric average of each asset class,the historical annual performance of a representative portfolio weighted by the target asset allocation for each class as defined in the table above. The source for each asset class’ expected long term rate of return is the geometric mean of the respective asset class’ historical total return. The time period reflected in the total returns is a long dated period spanning several decades.
The expected long term rate of return of 7.75% for 2010 (8.5%(7.75% for 2009) for the non-taxable postretirement trust assets is based ondetermined using the expected long term return of eachsame methodology described above for pension assets, but the asset class, weighted byallocation specific to the target allocation for each class as defined in the table above. The source for each asset class’ expected long term rate of returnpostretirement assets is the geometric mean of the respective asset class’ historical total return. The time period reflected in the total returns is a long dated period spanning several decades.used.
For the taxable postretirement trust assets, the investment allocation includes a high percentage of tax-exempt fixed income securities. The tax-exempt fixed income long term totalThis asset allocation in combination with the same methodology employed to determine the expected return was estimated using historical total return data from the 2009 Economic Report of the President. The time period reflected in the tax-exempt fixed income total return is 1940for other trust assets (as described above), with a modification to 2008. After reflecting the tax-exempt fixed income percentage and unrelated business income tax, thereflect applicable taxes, produces an expected long term rate of return of 5.5% for 2010 (5.5% for 2009) for the taxable postretirement trust assets is expected to be 5.5% for 2010 (6% for 2009) annually.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
assets.Since precise allocation targets are inefficient to manage security investments, the following ranges were established to produce an acceptable economically efficient plan to manage around the targets:
| Pension | | Postretirement |
| | | Non-Taxable | Taxable |
Domestic Equity Securities | 35% to 55% | | 33% to 43% | 30% to 40% |
International Equity Securities | 15% to 25% | | 12% to 22% | 0% |
Total Equity
| 60% to 70% | | 50% to 60% | 30% to 40% |
Fixed Income Securities | 25% to 35% | | 40% to 50% | 60% to 70% |
Other | 0% to 10% | | 0% to 5% | 0% to 5% |
Concentrations of Credit Risk
Entergy’s investment guidelines mandate the avoidance of risk concentrations. Types of concentrations specified to be avoided include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, geographic area and individual security issuance. As of December 31, 20092010 all investment managers and assets were materially in compliance with the approved investment guidelines, therefore there were no significant concentrations (defined as greater than 10 percent of plan assets) of risk in Entergy’s pension and other postretirement benefit plan assets.
Fair Value Measurements
For fiscal years ending after December 31, 2009, fair value measurements and disclosures for plan assets are required.
Fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Interest bearing cash, treasury notes and bonds, and common stocks are stated at fair value determined by quoted market prices. Fixed income securities (corporate, government, and securitized), are stated at fair value as determined by broker
Entergy Corporation and Subsidiaries
Notes to Financial Statements
quotes. Common collective investment trust funds and registered investment company trust funds are stated at estimated fair value based on the fair market value of the underlying investments. The unallocated insurance contract investments are recorded at contract value, which approximates fair value. The contract value represents contributions made under the contract, plus interest, less funds used to pay benefits and contract expenses, and less distributions to the Master Trust.master trust. The other remaining assets are U.S. municipal and foreign government bonds stated at fair value as determined by broker quotes.
The classification levels for fair value are as follows:
· | Level 1 - Level 1 inputs are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. |
· | Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by an independent party that uses inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Level 2 inputs include the following: |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical assets or liabilities in inactive markets;
- inputs other than quoted prices that are observable for the asset or liability; or
- inputs that are derived principally from or corroborated by observable market data by correlation or other means.
| - | inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
If an asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.
· | Level 3 - Level 3 refers to securities valued based on significant unobservable inputs. |
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth by level within the fair value hierarchy a summary of the investments held for the qualified pension and other postretirement plans measured at fair value on a recurring basis at December 31, 2010 and December 31, 2009.
Qualified Pension Trust
(In Thousands)
| Level 1 | | Level 2 | | Level 3 | | Total |
Equity securities: | | | | | | | |
Corporate stocks: | | | | | | | |
Preferred | $- | | $5,318 | | $- | | $5,318 |
Common | 1,336,454 | | | | - | | 1,336,454 |
Common collective trusts | - | | 431,703 | | - | | 431,703 |
Fixed securities: | | | | | | | |
U.S. Government securities | 60,048 | | 100,025 | | - | | 160,073 |
Corporate debt instruments: | | | | | | | |
Preferred | - | | 164,448 | | - | | 164,448 |
All others | - | | 202,377 | | - | | 202,377 |
Registered investment companies | - | | 264,643 | | - | | 264,643 |
| - | | 6,084 | | - | | 6,084 |
| | | | | | | |
Other: | | | | | | | |
Insurance company general account (unallocated contracts) | | | | | | | |
| | | | | | | |
Total investments | $1,396,502 | | $1,207,020 | | $- | | $2,603,522 |
Cash | | | | | | | 1,382 |
Interest receivable | | | | | | | 6,422 |
Other pending transactions | | | | | | | (1,716) |
Less: Other postretirement assets included in total investments | | | | | | | |
Total fair value of qualified pension assets | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Qualified Pension Trust
2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Thousands) |
Equity securities: | | | | | | | | |
Corporate stocks: | | | | | | | | |
Preferred | | $- | | $8,354 | | $- | | $8,354 |
Common | | 1,375,531 | | - | | - | | 1,375,531 |
Common collective trusts (a) | | - | | 657,075 | | - | | 657,075 |
Fixed income securities: | | | | | | | | |
Interest-bearing cash | | 103,731 | | - | | - | | 103,731 |
U.S. Government securities | | 75,124 | | 187,957 | | - | | 263,081 |
Corporate debt instruments: | | | | | | | | |
Preferred | | - | | 88,709 | | - | | 88,709 |
All others | | - | | 210,051 | | - | | 210,051 |
Registered investment companies (c) | | - | | 385,020 | | - | | 385,020 |
Other: | | | | | | | | |
International securities | | - | | 101,257 | | - | | 101,257 |
State and local obligations | | - | | 7,048 | | - | | 7,048 |
Other: | | | | | | | | |
Insurance company general account (unallocated contracts) | | - | | 33,439 | | - | | 33,439 |
Total investments | | $1,554,386 | | $1,678,910 | | $- | | $3,233,296 |
| | | | | | | | |
Cash | | | | | | | | 321 |
Other pending transactions | | | | | | | | (14,954) |
Less: Other postretirement assets included in total investments | | | | | | | | (2,395) |
Total fair value of qualified pension assets | | | | | | | | $3,216,268 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Thousands) |
Equity securities: | | | | | | | | |
Corporate stocks: | | | | | | | | |
Preferred | | $- | | $5,318 | | $- | | $5,318 |
Common | | 1,336,454 | | - | | - | | 1,336,454 |
Common collective trusts (b) | | - | | 431,703 | | - | | 431,703 |
Fixed income securities: | | | | | | | | |
U.S. Government securities | | 60,048 | | 100,025 | | - | | 160,073 |
Corporate debt instruments: | | | | | | | | |
Preferred | | - | | 164,448 | | - | | 164,448 |
All others | | - | | 202,377 | | - | | 202,377 |
Registered investment companies (c) | | - | | 264,643 | | - | | 264,643 |
Other | | - | | 6,084 | | | | 6,084 |
Other: | | | | | | | | |
Insurance company general account (unallocated contracts) | | - | | 32,422 | | - | | 32,422 |
Total investments | | $1,396,502 | | $1,207,020 | | $- | | $2,603,522 |
| | | | | | | | |
Cash | | | | | | | | 1,382 |
Interest receivable | | | | | | | | 6,422 |
Other pending transactions | | | | | | | | (1,716) |
Less: Other postretirement assets included in total investments | | | | | | | | (2,336) |
Total fair value of qualified pension assets | | | | | | | | $2,607,274 |
(a) | In 2010, there were two common collective trusts holding investments in accordance with stated objectives. The investment strategy of the both trusts was to capture the growth potential of equity markets by replicating the performance of a specified index. Net asset value per share of the common collective trusts estimated fair value. |
(b) | In 2009, there were two common collective trusts holding investments in accordance with stated objectives. The investment strategy of the first trust was to capture the growth potential of equity markets by replicating the performance of a specified index. Fair value for this trust was estimated at net asset value per share. The other common collective trust was invested in short-term fixed income securities and other securities with debt-like characteristics and a high degree of liquidity. This common collective trust fund used the amortization cost method of valuation pursuant to Rule 2a7 of the Investment Company Act of 1940, which allowed it to maintain a stable net asset value of $1.00 per share. |
(c) | In 2009 and 2010, the registered investment companies held investments in domestic and international bond markets and estimated fair value using net asset value per share. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Postretirement Trusts
(In Thousands)
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | | |
2010 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | | | (In Thousands) |
Equity securities: | | | | | | | | | | | | | | | | | | | | |
Corporate common stocks | | $ | 50,698 | | | $ | - | | | $ | - | | | $ | 50,698 | | |
Common collective trust | | | - | | | | 140,096 | | | | - | | | | 140,096 | | |
| | | | | | | | | | | | | | | | | |
Fixed securities: | | | | | | | | | | | | | | | | | |
Common collective trust (a) | | | $- | | $211,835 | | $- | | $211,835 |
Fixed income securities: | | | | | | | | | |
Interest-bearing cash | | | 6,115 | | | | - | | | | - | | | | 6,115 | | | 4,014 | | - | | - | | 4,014 |
U.S. Government securities | | | 25,487 | | | | 50,714 | | | | - | | | | 76,201 | | | 37,823 | | 52,326 | | - | | 90,149 |
Corporate debt instruments | | | - | | | | 35,099 | | | | - | | | | 35,099 | | | - | | 37,128 | | - | | 37,128 |
Other: | | | | | | | | | |
International securities | | | - | | 1,756 | | - | | 1,756 |
State and local obligations | | | - | | | | 53,443 | | | | - | | | | 53,443 | | | - | | 56,960 | | - | | 56,960 |
Total investments | | $ | 82,300 | | | $ | 279,352 | | | $ | - | | | $ | 361,652 | | | $41,837 | | $360,005 | | $- | | $401,842 |
Interest receivable | | | | | | | | | | | | | | | 1,567 | | |
| | | | | | | | | |
Other pending transactions | | | | | | | | | | | | | | | (3,156 | ) | | | | | | | | 193 |
Plus: Other postretirement assets included in the investments of the qualified pension trust | | | | | | | | | | | | | | | 2,336 | | | | | | | | | 2,395 |
Total fair value of other postretirement assets | | $ | 82,300 | | | $ | 279,352 | | | $ | - | | | $ | 362,399 | | | | | | | | | $404,430 |
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Thousands) |
Equity securities: | | | | | | | | |
Corporate common stocks | | $50,698 | | $- | | $- | | $50,698 |
Common collective trust (b) | | - | | 140,096 | | - | | 140,096 |
Fixed income securities: | | | | | | | | |
Interest-bearing cash | | 6,115 | | - | | - | | 6,115 |
U.S. Government securities | | 25,487 | | 50,714 | | - | | 76,201 |
Other: | | | | | | | | |
Corporate debt instruments | | - | | 35,099 | | - | | 35,099 |
State and local obligations | | - | | 53,443 | | - | | 53,443 |
Total investments | | $82,300 | | $279,352 | | $- | | $361,652 |
| | | | | | | | |
Interest receivable | | | | | | | | 1,567 |
Other pending transactions | | | | | | | | (3,156) |
Plus: Other postretirement assets included in the investments of the qualified pension trust | | | | | | | | 2,336 |
Total fair value of other postretirement assets | | | | | | | | $362,399 |
(a) | In 2010, there were two common collective trusts holding investments in accordance with stated objectives. The investment strategy of the both trusts was to capture the growth potential of equity markets by replicating the performance of a specified index. Net asset value per share of the common collective trusts estimated fair value. |
(b) | In 2009, there was one common collective trust holding investments in accordance with stated objectives. The investment strategy of this trust was to capture the growth potential of equity markets by replicating the performance of a specified index. Net asset value per share of the common collective trusts estimated fair value. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accumulated Pension Benefit Obligation
The accumulated benefit obligation for Entergy'sEntergy’s qualified pension plans was $3.4$3.8 billion and $2.9$3.4 billion at December 31, 20092010 and 2008,2009, respectively.
The qualified pension accumulated benefit obligation for each of the Registrant Subsidiaries as of December 31, 20092010 and 20082009 was as follows:
| | December 31, | | December 31, |
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | |
Entergy Arkansas | | $753,029 | | $650,540 | | $864,476 | | $753,029 |
Entergy Gulf States Louisiana | | $369,092 | | $288,293 | | $388,292 | | $369,092 |
Entergy Louisiana | | $435,725 | | $382,821 | | $537,329 | | $435,725 |
Entergy Mississippi | | $235,988 | | $205,859 | | $261,248 | | $235,988 |
Entergy New Orleans | | $91,345 | | $80,365 | | $115,223 | | $91,345 |
Entergy Texas | | $248,919 | | $220,285 | | $268,350 | | $248,919 |
System Energy | | $132,072 | | $109,839 | | $185,904 | | $132,072 |
Estimated Future Benefit Payments
Based upon the assumptions used to measure Entergy'sEntergy’s qualified pension and other postretirement benefit obligation at December 31, 2009,2010, and including pension and other postretirement benefits attributable to estimated future employee service, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be received over the next ten years for Entergy Corporation and its subsidiaries will be as follows:
Entergy Corporation and Subsidiaries
Notes to Financial Statements | | Estimated Future Benefits Payments | | |
| | Qualified Pension | | Non-Qualified Pension | | Other Postretirement (before Medicare Subsidy) | | Estimated Future Medicare Subsidy Receipts |
| | (In Thousands) |
Year(s) | | | | | | | | |
2011 | | $163,212 | | $9,637 | | $68,816 | | $5,991 |
2012 | | $172,221 | | $8,716 | | $73,119 | | $6,829 |
2013 | | $183,364 | | $16,334 | | $77,715 | | $7,736 |
2014 | | $196,083 | | $13,451 | | $82,540 | | $8,694 |
2015 | | $210,586 | | $13,549 | | $87,629 | | $9,691 |
2016 - 2020 | | $1,342,629 | | $77,109 | | $523,912 | | $65,454 |
| | Estimated Future Benefits Payments | | |
| | Qualified Pension | | Non-Qualified Pension | | Other Postretirement (before Medicare Subsidy) | | Estimated Future Medicare Subsidy Receipts |
| | (In Thousands) |
Year(s) | | | | | | | | |
2010 | | $157,279 | | $23,842 | | $71,439 | | $5,596 |
2011 | | $162,897 | | $9,561 | | $75,386 | | $6,108 |
2012 | | $172,636 | | $8,259 | | $79,388 | | $7,008 |
2013 | | $183,210 | | $15,417 | | $83,440 | | $7,833 |
2014 | | $196,157 | | $12,983 | | $87,773 | | $8,676 |
2015 - 2019 | | $1,244,961 | | $73,554 | | $510,913 | | $57,300 |
Based upon the same assumptions, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be received over the next ten years for the Registrant Subsidiaries will be as follows:
Estimated Future Qualified Pension Benefits Payments | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | |
Year(s) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | $43,155 | | $16,080 | | $25,221 | | $13,723 | | $4,610 | | $14,811 | | $4,586 | |
2011 | | $43,163 | | $16,473 | | $25,343 | | $14,138 | | $4,722 | | $14,920 | | $4,802 | | $45,301 | | $16,841 | | $27,893 | | $13,887 | | $5,173 | | $14,716 | | $6,286 |
2012 | | $44,158 | | $17,379 | | $25,590 | | $14,736 | | $4,911 | | $15,449 | | $4,993 | | $46,159 | | $17,650 | | $28,328 | | $14,571 | | $5,405 | | $15,331 | | $6,550 |
2013 | | $45,188 | | $18,158 | | $26,295 | | $15,326 | | $5,135 | | $15,946 | | $5,326 | | $47,438 | | $18,446 | | $29,303 | | $15,385 | | $5,714 | | $16,025 | | $7,072 |
2014 | | $46,702 | | $19,192 | | $27,181 | | $16,081 | | $5,317 | | $16,323 | | $5,812 | | $49,095 | | $19,466 | | $30,379 | | $16,276 | | $5,990 | | $16,596 | | $7,612 |
2015 - 2019 | | $271,057 | | $119,905 | | $154,677 | | $90,907 | | $31,870 | | $89,434 | | $39,901 | |
2015 | | | $51,205 | | $20,802 | | $31,572 | | $17,151 | | $6,408 | | $17,204 | | $8,198 |
2016 - 2020 | | | $304,194 | | $130,699 | | $183,268 | | $99,288 | | $39,730 | | $98,798 | | $57,340 |
Estimated Future Non-Qualified Pension Benefits Payments | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | |
| | (In Thousands) | |
Year(s) | | | | | | | | | | | | | |
2010 | | $341 | | $285 | | $23 | | $107 | | $16 | | $935 | |
2011 | | $204 | | $280 | | $22 | | $104 | | $16 | | $1,225 | |
2012 | | $207 | | $276 | | $20 | | $100 | | $16 | | $924 | |
2013 | | $198 | | $269 | | $19 | | $106 | | $16 | | $904 | |
2014 | | $287 | | $274 | | $21 | | $97 | | $16 | | $1,659 | |
2015 - 2019 | | $1,215 | | $1,469 | | $76 | | $428 | | $94 | | $3,242 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Estimated Future Non-Qualified Pension Benefits Payments | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | |
| | (In Thousands) | |
Year(s) | | | | | | | | | | | | | |
2011 | | $207 | | $256 | | $18 | | $107 | | $25 | | $1,354 | |
2012 | | $210 | | $252 | | $17 | | $103 | | $24 | | $1,040 | |
2013 | | $202 | | $245 | | $16 | | $109 | | $23 | | $1,023 | |
2014 | | $290 | | $255 | | $14 | | $100 | | $23 | | $1,798 | |
2015 | | $272 | | $237 | | $13 | | $95 | | $22 | | $812 | |
2016 - 2020 | | $1,239 | | $1,101 | | $49 | | $511 | | $114 | | $3,865 | |
Estimated Future Other Postretirement Benefits Payments (before Medicare Part D Subsidy) | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | (In Thousands) |
Year(s) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | $16,456 | | $8,373 | | $9,941 | | $4,649 | | $5,166 | | $7,126 | | $2,071 | |
2011 | | $17,122 | | $8,796 | | $10,281 | | $4,931 | | $5,274 | | $7,416 | | $2,255 | | $15,474 | | $7,833 | | $9,472 | | $4,561 | | $4,723 | | $6,729 | | $2,162 |
2012 | | $17,645 | | $9,225 | | $10,632 | | $5,209 | | $5,321 | | $7,693 | | $2,413 | | $16,142 | | $8,306 | | $9,851 | | $4,838 | | $4,815 | | $7,035 | | $2,326 |
2013 | | $18,147 | | $9,670 | | $10,995 | | $5,484 | | $5,349 | | $7,900 | | $2,565 | | $16,793 | | $8,817 | | $10,301 | | $5,181 | | $4,887 | | $7,284 | | $2,484 |
2014 | | $18,640 | | $10,131 | | $11,395 | | $5,778 | | $5,403 | | $8,104 | | $2,714 | | $17,439 | | $9,336 | | $10,784 | | $5,524 | | $4,979 | | $7,533 | | $2,645 |
2015 - 2019 | | $101,690 | | $57,903 | | $63,242 | | $33,267 | | $27,854 | | $44,634 | | $15,911 | |
2015 | | | $18,112 | | $9,897 | | $11,272 | | $5,909 | | $5,100 | | $7,842 | | $2,819 |
2016 - 2020 | | | $101,558 | | $58,347 | | $64,154 | | $34,332 | | $26,728 | | $44,412 | | $17,200 |
Estimated Future Medicare Part D Subsidy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) | | (In Thousands) |
Year(s) | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | $1,395 | | $637 | | $811 | | $523 | | $529 | | $644 | | $94 | |
2011 | | $1,534 | | $706 | | $834 | | $605 | | $555 | | $698 | | $108 | | $1,460 | | $674 | | $858 | | $554 | | $526 | | $679 | | $110 |
2012 | | $1,699 | | $784 | | $986 | | $622 | | $584 | | $758 | | $139 | | $1,639 | | $761 | | $965 | | $612 | | $563 | | $749 | | $138 |
2013 | | $1,874 | | $862 | | $1,078 | | $678 | | $612 | | $823 | | $170 | | $1,833 | | $848 | | $1,070 | | $676 | | $599 | | $825 | | $172 |
2014 | | $2,050 | | $940 | | $1,168 | | $733 | | $629 | | $885 | | $207 | | $2,036 | | $938 | | $1,178 | | $742 | | $624 | | $900 | | $211 |
2015 - 2019 | | $12,937 | | $5,960 | | $7,220 | | $4,466 | | $3,286 | | $5,143 | | $1,697 | |
2015 | | | $2,241 | | $1,029 | | $1,286 | | $802 | | $645 | | $968 | | $252 |
2016 - 2020 | | | $14,486 | | $6,722 | | $8,135 | | $5,022 | | $3,441 | | $5,675 | | $2,057 |
Contributions
Entergy currently expects to contribute approximately $270$368.8 million to its pension plans and approximately $76$78 million to other postretirement plans in 2010.2011. The expected 20102011 pension and other postretirement plan contributions of the Registrant Subsidiaries are shown below. The required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant2011.
Entergy Corporation and Subsidiaries
Notes to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy's and each of the Registrant Subsidiaries’ pension contributions in the future.Financial Statements
The Registrant Subsidiaries expect to contribute approximately the following to the pension and other postretirement plans in 2010:2011:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Pension Contributions | | $73,128 | | $21,902 | | $27,050 | | $17,791 | | $5,078 | | $9,763 | | $12,487 |
| | | | | | | | | | | | | | |
Other Postretirement Contributions | | $21,601 | | $8,373 | | $9,941 | | $5,002 | | $5,191 | | $7,745 | | $3,388 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| | | | | | | | | | | | | | |
Pension Contributions | | $107,114 | | $24,626 | | $52,959 | | $26,388 | | $10,631 | | $15,866 | | $24,988 |
Other Postretirement Contributions | | $26,313 | | $7,833 | | $9,472 | | $5,027 | | $5,205 | | $5,153 | | $3,489 |
Actuarial Assumptions
The significant actuarial assumptions used in determining the pension PBO and the other postretirement benefit APBO as of December 31, 2010, and 2009 were as follows:
| 2010 | | 2009 |
| | | |
Weighted-average discount rate: | | | |
Qualified pension | 5.60% - 5.70% | | 6.10% - 6.30% |
Other postretirement | 5.50% | | 6.10% |
Non-qualified pension | 4.90% | | 5.40% |
Weighted-average rate of increase in future compensation levels | 4.23% | | 4.23% |
The significant actuarial assumptions used in determining the net periodic pension and other postretirement benefit costs for 2010, 2009, and 2008 were as follows:
| 2010 | | 2009 | | 2008 |
| | | | | |
Weighted-average discount rate: | | | | | |
Qualified pension | 6.10% - 6.30% | | 6.75% | | 6.50% |
Other postretirement | 6.10% | | 6.70% | | 6.50% |
Non-qualified pension | 5.40% | | 6.75% | | 6.50% |
Weighted-average rate of increase in future compensation levels | 4.23% | | 4.23% | | 4.23% |
Expected long-term rate of return on plan assets: | | | | | |
Pension assets | 8.50% | | 8.50% | | 8.50% |
Other postretirement non-taxable assets | 7.75% | | 8.50% | | 8.50% |
Other postretirement taxable assets | 5.50% | | 6.00% | | 5.50% |
Entergy’s other postretirement benefit transition obligations are being amortized over 20 years ending in 2012.
The assumed health care cost trend rate used in measuring the December 31, 2010 APBO of Entergy was 7.5%8.5% for 2010,pre-65 retirees and 8% for post-65 retirees for 2011, gradually decreasing each successive year until it reaches 4.75% in 20162019 and beyond.beyond for pre-65 retirees and 4.75% in 2018 and beyond for post-65 retirees. The assumed health care cost trend rate used in measuring the Net Other Postretirement Benefit Cost of Entergy was 8.5%7.5% for 2009,2010, gradually decreasing each successive year until it reaches 4.75% in 2016 and beyond. A one percentage point change in the assumed health care cost trend rate for 20092010 would have the following effects:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | 1 Percentage Point Increase | | 1 Percentage Point Decrease | | 1 Percentage Point Increase | | 1 Percentage Point Decrease |
2009 | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost | |
2010 | | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost |
| | Increase /(Decrease) (In Thousands) | | Increase /(Decrease) (In Thousands) |
| | | | | | | | | | | | | | | | |
Entergy Corporation and its subsidiaries | | $138,924 | | $16,804 | | ($123,118) | | ($14,399) | | $136,203 | | $13,833 | | ($121,015) | | ($11,914) |
A one percentage point change in the assumed health care cost trend rate for 20092010 would have the following effects for the Registrant Subsidiaries:
| | 1 Percentage Point Increase | | 1 Percentage Point Decrease |
2009 | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost |
| | Increase/(Decrease) (In Thousands) |
| | | | | | | | |
Entergy Arkansas | | $23,595 | | $2,804 | | ($21,148) | | ($2,421) |
Entergy Gulf States Louisiana | | $15,948 | | $1,854 | | ($14,189) | | ($1,586) |
Entergy Louisiana | | $14,915 | | $1,798 | | ($13,357) | | ($1,547) |
Entergy Mississippi | | $7,094 | | $849 | | ($6,343) | | ($733) |
Entergy New Orleans | | $4,908 | | $562 | | ($4,465) | | ($490) |
Entergy Texas | | $10,765 | | $1,112 | | ($9,663) | | ($962) |
System Energy | | $5,242 | | $692 | | ($4,609) | | ($587) |
The significant actuarial assumptions used in determining the pension PBO and the other postretirement benefit APBO as of December 31, 2009, and 2008 were as follows:
| | 2009 | | 2008 |
| | | | |
| Weighted-average discount rate: | | | |
| Qualified pension | 6.10% - 6.30% | | 6.75% |
| Other postretirement | 6.10% | | 6.70% |
| Non-qualified pension | 5.40% | | 6.75% |
| Weighted-average rate of increase in future compensation levels | 4.23% | | 4.23% |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The significant actuarial assumptions used in determining the net periodic pension and other postretirement benefit costs for 2009, 2008, and 2007 were as follows:
| 2009 | | 2008 | | 2007 |
| | | | | |
Weighted-average discount rate: | | | | | |
Qualified pension | 6.75% | | 6.50% | | 6.00% |
Other postretirement | 6.70% | | 6.50% | | 6.00% |
Non-qualified pension | 6.75% | | 6.50% | | 6.00% |
Weighted-average rate of increase in future compensation levels | 4.23% | | 4.23% | | 3.25% |
Expected long-term rate of return on plan assets: | | | | | |
Taxable assets | 6.00% | | 5.50% | | 5.50% |
Non-taxable assets | 8.50% | | 8.50% | | 8.50% |
Entergy's other postretirement benefit transition obligations are being amortized over 20 years ending in 2012.
Accounting Mechanisms
With regard to pension and other postretirement costs, Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets. Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns. For other postretirement benefit plan assets Entergy uses fair value when determining MRV. | | 1 Percentage Point Increase | | 1 Percentage Point Decrease |
2010 | | Impact on the APBO | | Impact on the sum of service costs and interest cost | | Impact on the APBO | | Impact on the sum of service costs and interest cost |
| | Increase/(Decrease) (In Thousands) |
| | | | | | | | |
Entergy Arkansas | | $23,736 | | $2,405 | | ($21,274) | | ($2,088) |
Entergy Gulf States Louisiana | | $16,236 | | $1,671 | | ($14,444) | | ($1,440) |
Entergy Louisiana | | $15,165 | | $1,647 | | ($13,581) | | ($1,420) |
Entergy Mississippi | | $7,577 | | $682 | | ($6,775) | | ($593) |
Entergy New Orleans | | $4,766 | | $528 | | ($4,336) | | ($460) |
Entergy Texas | | $10,824 | | $1,035 | | ($9,716) | | ($901) |
System Energy | | $5,666 | | $595 | | ($4,981) | | ($509) |
Medicare Prescription Drug, Improvement and Modernization Act of 2003
In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 became law. The Act introduces a prescription drug benefit cost under Medicare (Part D), which started in 2006, as well as a federal subsidy to employers who provide a retiree prescription drug benefit that is at least actuarially equivalent to Medicare Part D.
The actuarially estimated effect of future Medicare subsidies reduced the December 31, 2010 and 2009 Accumulated Postretirement Benefit Obligation by $267 million and $215 million, respectively, and reduced the 2010, 2009, and 2008 other postretirement benefit cost by $26.6 million, $24.0 million and $24.7 million, respectively. In 2010, Entergy received $5.4 million in Medicare subsidies for prescription drug claims.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The actuarially estimated effect of future Medicare subsidies reduced the December 31, 2009 and 2008 Accumulated Postretirement Benefit Obligation by $215 million and $187 million, respectively, and reduced the 2009, 2008, and 2007 other postretirement benefit cost by $24.0 million, $24.7 million, and $26.5 million, respectively. In 2009, Entergy received $5.1 million in Medicare subsidies for prescription drug claims.
The actuarially estimated effect of future Medicare subsidies and the actual subsidies received for the Registrant Subsidiaries was as follows:
| | Entergy Arkansas | | | Entergy Gulf States Louisiana | | | Entergy Louisiana | | | Entergy Mississippi | | | Entergy New Orleans | | | Entergy Texas | | | System Energy | |
| | Increase/(Decrease) In Thousands | |
Impact on 12/31/2009 APBO | | $ | (45,809 | ) | | $ | (22,227 | ) | | $ | (25,443 | ) | | $ | (14,824 | ) | | $ | (9,798 | ) | | $ | (16,652 | ) | | $ | (7,965 | ) |
Impact on 12/31/2008 APBO | | $ | (40,610 | ) | | $ | (19,650 | ) | | $ | (22,222 | ) | | $ | (13,280 | ) | | $ | (9,135 | ) | | $ | (14,961 | ) | | $ | (6,628 | ) |
Impact on 2009 other postretirement benefit cost | | $ | (4,941 | ) | | $ | (3,257 | ) | | $ | (2,780 | ) | | $ | (1,562 | ) | | $ | (1,043 | ) | | $ | (958 | ) | | $ | (923 | ) |
Impact on 2008 other postretirement benefit cost | | $ | (5,063 | ) | | $ | (3,502 | ) | | $ | (2,824 | ) | | $ | (1,625 | ) | | $ | (1,114 | ) | | $ | (1,051 | ) | | $ | (945 | ) |
Impact on 2007 other postretirement benefit cost | | $ | (5,502 | ) | | $ | (4,888 | ) | | $ | (3,048 | ) | | $ | (1,753 | ) | | $ | (1,242 | ) | | $ | (688 | ) | | $ | (984 | ) |
Medicare subsidies received in 2009 | | $ | (1,194 | ) | | $ | (679 | ) | | $ | (762 | ) | | $ | (398 | ) | | $ | (421 | ) | | $ | (581 | ) | | $ | (120 | ) |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | Increase/(Decrease) In Thousands |
Impact on 12/31/2010 APBO | | ($55,459) | | ($27,330) | | ($31,259) | | ($17,998) | | ($11,073) | | ($19,830) | | ($10,431) |
Impact on 12/31/2009 APBO | | ($45,809) | | ($22,227) | | ($25,443) | | ($14,824) | | ($9,798) | | ($16,652) | | ($7,965) |
| | | | | | | | | | | | | | |
Impact on 2010 other postretirement benefit cost | | ($5,254) | | ($3,401) | | ($3,143) | | ($1,649) | | ($1,070) | | ($1,109) | | ($1,068) |
Impact on 2009 other postretirement benefit cost | | ($4,941) | | ($3,257) | | ($2,780) | | ($1,562) | | ($1,043) | | ($958) | | ($923) |
| | | | | | | | | | | | | | |
Medicare subsidies received in 2010 | | $1,235 | | $715 | | $814 | | $420 | | $438 | | $625 | | $140 |
Non-Qualified Pension Plans
Entergy also sponsors non-qualified, non-contributory defined benefit pension plans that provide benefits to certain key employees. Entergy recognized net periodic pension cost related to these plans of $27.2 million in 2010, $23.6 million in 2009, and $17.2 million in 2008,2008. In 2010 and $20.6 million in 2007. In 2009, Entergy recognized a$9.3 million and $6.7 million, respectively in settlement chargecharges related to the payment of lump sum benefits out of the plan that is included in the non-qualified pension plan cost above. The projected benefit obligation was $147.9$148.3 million and $138.4$147.9 million as of December 31, 2010 and 2009, and 2008, respectively. There were $0.2 million in plan assets for a pre-merger Entergy Gulf States Louisiana plan at December 31, 2008 and none at December 31, 2009. The accumulated benefit obligation was $134.1$131.6 million and $125.5$134.1 million as of December 31, 20092010 and 2008,2009, respectively.
Entergy'sEntergy’s non-qualified, non-current pension liability at December 31, 2010 and 2009 and 2008 was $124.1$138.7 million and $121.5$124.1 million, respectively; and its current liability was $23.8$9.6 million and $16.7$23.8 million, respectively. The unamortized transition asset, prior service cost and net loss are recognized in regulatory assets ($51.653.5 million at December 31, 20092010 and $44.1$51.6 million at December 31, 2008)2009) and accumulated other comprehensive income before taxes ($2324.3 million at December 31, 20092010 and $18.2$23 million at December 31, 2008.2009.)
The Registrant Subsidiaries (except System Energy) participate in Entergy'sEntergy’s non-qualified, non-contributory defined benefit pension plans that provide benefits to certain key employees. The net periodic pension cost for the non-qualified plans for 2010, 2009, 2008, and 20072008, was as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) | | (In Thousands) |
2010 | | | $501 | | $162 | | $102 | | $206 | | $26 | | $683 |
2009 | | $395 | | $1,245 | | $30 | | $174 | | $84 | | $743 | | $395 | | $1,245 | | $30 | | $174 | | $84 | | $743 |
2008 | | $533 | | $313 | | $28 | | $218 | | $48 | | $908 | | $533 | | $313 | | $28 | | $218 | | $48 | | $908 |
2007 | | $493 | | $1,268 | | $25 | | $175 | | $228 | | $922 | |
Included in the 2010 net periodic pension cost above are settlement charges of $86 thousand for Entergy Arkansas, $80 thousand for Entergy Louisiana, and $5 thousand for Entergy Texas related to the lump sum benefits paid out of the plan. Included in Entergy Gulf States Louisiana’s 2009 cost above is a $947 thousand settlement charge related to the payment of lump sum benefits out of the plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The projected benefit obligation for the non-qualified plans as of December 31, 20092010 and 20082009 was as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) | | (In Thousands) |
2010 | | | $3,791 | | $2,717 | | $124 | | $1,561 | | $320 | | $11,136 |
2009 | | $3,443 | | $3,272 | | $198 | | $1,453 | | $608 | | $9,542 | | $3,443 | | $3,272 | | $198 | | $1,453 | | $608 | | $9,542 |
2008 | | $3,321 | | $6,470 | | $189 | | $1,232 | | $454 | | $11,701 | |
The accumulated benefit obligation for the non-qualified plans as of December 31, 20092010 and 20082009 was as follows:
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) | | (In Thousands) |
2010 | | | $3,387 | | $2,691 | | $124 | | $1,335 | | $294 | | $11,030 |
2009 | | $3,180 | | $3,181 | | $189 | | $1,257 | | $478 | | $9,474 | | $3,180 | | $3,181 | | $189 | | $1,257 | | $478 | | $9,474 |
2008 | | $3,114 | | $6,131 | | $180 | | $1,048 | | $352 | | $11,634 | |
The following amounts were recorded on the balance sheet as of December 31, 20092010 and 2008:2009:
2009 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | |
2010 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities | | ($341) | | ($285) | | ($23) | | ($107) | | ($16) | | ($935) | | ($207) | | ($256) | | ($18) | | ($107) | | ($25) | | ($1,354) |
Non-current liabilities | | ($3,102) | | ($2,986) | | ($175) | | ($1,346) | | ($592) | | ($8,607) | | ($3,584) | | ($2,461) | | ($106) | | ($1,454) | | ($295) | | ($9,782) |
Total Funded Status | | ($3,443) | | ($3,272) | | ($198) | | ($1,453) | | ($608) | | ($9,542) | | ($3,791) | | ($2,717) | | ($124) | | ($1,561) | | ($320) | | ($11,136) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Regulatory Asset | | $1,844 | | $685 | | $118 | | $592 | | $389 | | ($1,209) | | $2,207 | | $320 | | ($37) | | $654 | | $82 | | $618 |
Accumulated other comprehensive income (before taxes) | | $- | | $160 | | $- | | $- | | $- | | $- | | $- | | $70 | | $- | | $- | | $- | | $- |
2008 | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | |
2009 | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Current liabilities | | ($332) | | ($583) | | ($23) | | ($105) | | ($16) | | ($1,269) | | ($341) | | ($285) | | ($23) | | ($107) | | ($16) | | ($935) |
Non-current liabilities | | ($2,989) | | ($5,887) | | ($166) | | ($1,127) | | ($438) | | ($10,274) | | ($3,102) | | ($2,986) | | ($175) | | ($1,346) | | ($592) | | ($8,607) |
Total Funded Status | | ($3,321) | | ($6,470) | | ($189) | | ($1,232) | | ($454) | | ($11,543) | | ($3,443) | | ($3,272) | | ($198) | | ($1,453) | | ($608) | | ($9,542) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Regulatory Asset | | $1,736 | | $2,026 | | $114 | | $431 | | $314 | | $628 | | $1,844 | | $685 | | $118 | | $592 | | $389 | | ($1,209) |
Accumulated other comprehensive income (before taxes) | | $- | | $358 | | $- | | $- | | $- | | $- | | $- | | $160 | | $- | | $- | | $- | | $- |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Defined Contribution Plans
Entergy sponsors the Savings Plan of Entergy Corporation and Subsidiaries (System Savings Plan). The System Savings Plan is a defined contribution plan covering eligible employees of Entergy and its subsidiaries. The employing Entergy subsidiary makes matching contributions for all non-bargaining and certain bargaining employees to the System Savings Plan in an amount equal to 70% of the participants'participants’ basic contributions, up to 6% of their eligible earnings per pay period. The 70% match is allocated to investments as directed by the employee.
Entergy also sponsors the Savings Plan of Entergy Corporation and Subsidiaries II (established in 2001), the Savings Plan of Entergy Corporation and Subsidiaries IV (established in 2002), the Savings Plan of Entergy Corporation and Subsidiaries VI (established in April 2007), and the Savings Plan of Entergy Corporation and Subsidiaries VII (established in April 2007) to which matching contributions are also made. The plans are defined contribution plans that cover eligible employees, as defined by each plan, of Entergy and its subsidiaries.
Entergy's subsidiaries'Entergy’s subsidiaries’ contributions to defined contribution plans collectively were $41.8 million in 2010, $41.9 million in 2009, and $38.4 million in 2008, and $36.6 million in 2007.2008. The majority of the contributions were to the System Savings Plan.
The Registrant Subsidiaries'Subsidiaries’ 2010, 2009, 2008, and 20072008 contributions to defined contribution plans were as follows:
Year | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | | $3,177 | | $1,792 | | $2,289 | | $1,886 | | $683 | | $1,626 |
2009 | | $3,197 | | $1,828 | | $2,356 | | $1,906 | | $732 | | $1,712 | | $3,197 | | $1,828 | | $2,356 | | $1,906 | | $732 | | $1,712 |
2008 | | $3,144 | | $1,741 | | $2,172 | | $1,884 | | $697 | | $1,622 | | $3,144 | | $1,741 | | $2,172 | | $1,884 | | $697 | | $1,622 |
2007 | | $3,064 | | $1,635 | | $2,063 | | $1,796 | | $664 | | $1,637 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 12. STOCK-BASED COMPENSATION (Entergy Corporation)
Entergy grants stock options and long-term incentive and restricted liability awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans which are shareholder-approved stock-based compensation plans. The Equity Ownership Plan, as restated in February 2003 (2003 Plan), had 706,950715,584 authorized shares remaining for long-term incentive and restricted liability awards as of December 31, 2009.2010. Effective January 1, 2007, Entergy'sEntergy’s shareholders approved the 2007 Equity Ownership and Long-Term Cash Incentive Plan (2007 Plan). The maximum aggregate number of common shares that can be issued from the 2007 Plan for stock-based awards is 7,000,000 with no more than 2,000,000 available for non-option grants. The 2007 Plan, whichwhic h only applies to awards made on or after January 1, 2007, will expire after 10 years. As of December 31, 2009,2010, there were 2,569,9261,543,228 authorized shares remaining for stock-based awards, including 2,000,000all of which are available for non-option grants.
Stock Options
Stock options are granted at exercise prices that equal the closing market price of Entergy Corporation common stock on the date of grant. Generally, stock options granted will become exercisable in equal amounts on each of the first three anniversaries of the date of grant. Unless they are forfeited previously under the terms of the grant, options expire ten years after the date of the grant if they are not exercised.
The following table includes financial information for stock options for each of the years presented:
| 2009 | | 2008 | | 2007 |
| (in Millions) |
| | | | | |
Compensation expense included in Entergy's Consolidated Net Income | $17.0 | | $17.0 | | $15.0 |
Tax benefit recognized in Entergy's Consolidated Net Income | $6.0 | | $7.0 | | $6.0 |
Compensation cost capitalized as part of fixed assets and inventory | $3.0 | | $3.0 | | $3.0 |
| 2010 | | 2009 | | 2008 |
| (In Millions) |
| | | | | |
Compensation expense included in Entergy’s Consolidated Net Income | $15.0 | | $17.0 | | $17.0 |
Tax benefit recognized in Entergy’s Consolidated Net Income | $6.0 | | $6.0 | | $7.0 |
Compensation cost capitalized as part of fixed assets and inventory | $3.0 | | $3.0 | | $3.0 |
Entergy determines the fair value of the stock option grants by considering factors such as lack of marketability, stock retention requirements, and regulatory restrictions on exercisability in accordance with accounting standards. The stock option weighted-average assumptions used in determining the fair values are as follows:
| 2009 | | 2008 | | 2007 | 2010 | | 2009 | | 2008 |
| | | | | | | | | | |
Stock price volatility | 24.39% | | 18.9% | | 17.0% | 25.73% | | 24.39% | | 18.9% |
Expected term in years | 5.33 | | 4.64 | | 4.59 | 5.46 | | 5.33 | | 4.64 |
Risk-free interest rate | 2.22% | | 2.77% | | 4.85% | 2.57% | | 2.22% | | 2.77% |
Dividend yield | 3.50% | | 2.96% | | 3.0% | 3.74% | | 3.50% | | 2.96% |
Dividend payment per share | $3.00 | | $3.00 | | $2.16 | $3.24 | | $3.00 | | $3.00 |
Stock price volatility is calculated based upon the weekly public stock price volatility of Entergy Corporation common stock over the last four to five years. The expected term of the options is based upon historical option exercises and the weighted average life of options when exercised and the estimated weighted average life of all vested but unexercised options. In 2008, Entergy implemented stock ownership guidelines for its senior executive officers. These guidelines require an executive officer to own shares of Entergy common stock equal to a specified multiple of his or her salary. Until an executive officer achieves this ownership position the executive officer is required to retain 75% of the after-tax net profit upon exercise of the option to be held in Entergy Corporation common stock. The reduction in fair value of the stock options due to this restriction is based upon an estimate of the call option value of the reinvested gain discounted to present value over the applicable reinvestment period.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
A summary of stock option activity for the year ended December 31, 20092010 and changes during the year are presented below:
| | Number of Options | | Weighted- Average Exercise Price | | Aggregate Intrinsic Value | | Weighted- Average Contractual Life |
| | | | | | | | |
Options outstanding as of January 1, 2009 | | 11,098,331 | | $66.45 | | | | |
| | | | | | | | |
Options granted | | 1,084,800 | | $77.53 | | | | |
Options exercised | | (802,319) | | $34.81 | | | | |
Options forfeited/expired | | (59,741) | | $87.77 | | | | |
| | | | | | | | |
Options outstanding as of December 31, 2009 | | 11,321,071 | | $69.64 | | $138 million | | 5.3 years |
| | | | | | | | |
Options exercisable as of December 31, 2009 | | 8,786,486 | | $63.08 | | $165 million | | 4.5 years |
| | | | | | | | |
Weighted-average grant-date fair value of options granted during 2009 | | $12.47 | | | | | | |
| | Number of Options | | Weighted- Average Exercise Price | | Aggregate Intrinsic Value | | Weighted- Average Contractual Life |
| | | | | | | | |
Options outstanding as of January 1, 2010 | | 11,321,071 | | $69.64 | | | | |
| | | | | | | | |
Options granted | | 1,407,900 | | $77.10 | | | | |
Options exercised | | (1,113,411) | | $45.63 | | | | |
Options forfeited/expired | | (389,835) | | $84.35 | | | | |
Options outstanding as of December 31, 2010 | | 11,225,725 | | $72.45 | | $- | | 4.1 years |
| | | | | | | | |
Options exercisable as of December 31, 2010 | | 8,955,247 | | $69.67 | | $10 million | | 4.2 years |
Weighted-average grant-date fair value of options granted during 2010 | | $13.18 | | | | | | |
The weighted-average grant-date fair value of options granted during the year was $12.47 for 2009 and $14.41 for 2008 and $14.15 for 2007.2008. The total intrinsic value of stock options exercised was $36.6 million during 2010, $35.6 million during 2009, and $63.7 million during 2008, and $116.7 million during 2007.2008. The intrinsic value, which has no effect on net income, of the stock options exercised is calculated by the difference in Entergy Corporation'sCorporation’s common stock price on the date of exercise and the exercise price of the stock options granted. Because Entergy’s year-end stock price is less than the weighted average exercise price, the aggregate intrinsic value of outstanding stock options as of December 31, 2010 was zero. The intrinsic value of “in the money” stock options is $87 million as of December 31, 2010. ; Entergy recognizes compensation cost over the vesting period of the options based on their grant-date fair value. The total fair value of options that vested was approximately $21 million during 2010, $22 million during 2009, and $18 million during 2008, and $15 million during 2007.2008.
The following table summarizes information about stock options outstanding as of December 31, 2009:2010:
| | Options Outstanding | | Options Exercisable | | Options Outstanding | | Options Exercisable |
Range of Exercise Prices | | As of 12/31/2009 | | Weighted-Avg. Remaining Contractual Life-Yrs. | | Weighted- Avg. Exercise Price | | Number Exercisable as of 12/31/2009 | | Weighted- Avg. Exercise Price | | As of 12/31/2010 | | Weighted-Avg. Remaining Contractual Life-Yrs. | | Weighted- Avg. Exercise Price | | Number Exercisable as of 12/31/2010 | | Weighted- Avg. Exercise Price |
| | | | | | | | | | | | | | | | | | | | |
$23 - $36.99 | | 60,782 | | 0.9 | | $23.00 | | 60,782 | | $23.00 | |
$37 - $50.99 | | 3,215,531 | | 2.1 | | $41.28 | | 3,215,531 | | $41.28 | | 2,472,520 | | 1.3 | | $42.12 | | 2,472,520 | | $42.12 |
$51 - $64.99 | | 1,080,613 | | 4.1 | | $58.43 | | 1,080,613 | | $58.43 | | 984,055 | | 3.2 | | $58.58 | | 984,055 | | $58.58 |
$65 - $78.99 | | 3,674,831 | | 6.5 | | $71.69 | | 2,650,931 | | $69.43 | | 4,616,768 | | 4.1 | | $73.10 | | 2,797,769 | | $70.40 |
$79 - $91.99 | | 1,720,448 | | 7.1 | | $91.81 | | 1,189,930 | | $91.81 | | 1,650,516 | | 6.1 | | $91.81 | | 1,650,516 | | $91.81 |
$92 - $108.20 | | 1,568,866 | | 8.1 | | $108.20 | | 588,699 | | $108.20 | | 1,501,866 | | 7.1 | | $108.20 | | 1,050,387 | | $108.20 |
$23 - $108.20 | | 11,321,071 | | 5.3 | | $69.64 | | 8,786,486 | | $63.08 | |
| | | | | | | | | | | |
$37 - $108.20 | | | 11,225,725 | | 4.1 | | $72.45 | | 8,955,247 | | $69.67 |
Stock-based compensation cost related to non-vested stock options outstanding as of December 31, 20092010 not yet recognized is approximately $17$18 million and is expected to be recognized on a weighted-average period of 1.61.8 years.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Long-Term Incentive Awards
Entergy grants long-term incentive awards earned under its stock benefit plans in the form of performance units, which are equal to the cash value of shares of Entergy Corporation common stock at the end of the performance period, which is the last trading day of the year. Performance units will pay out to the extent that the performance conditions are satisfied. In addition to the potential for equivalent share appreciation or depreciation, performance units will earn the cash equivalent of the dividends paid during the three-year performance period applicable to each plan. The costs of incentive awards are charged to income over the three-year period.
The following table includes financial information for the long-term incentive awards for each of the years presented:
| 2009 | | 2008 | | 2007 | 2010 | | 2009 | | 2008 |
| (In Millions) | (In Millions) |
| | | | | | | | | | |
Fair value of long-term incentive awards as of December 31, | $17 | | $41 | | $54 | $10.1 | | $17.2 | | $40.9 |
Compensation expense included in Entergy's Consolidated Net Income for the year | $6 | | $20 | | $35 | |
Tax benefit recognized in Entergy's Consolidated Net Income for the year | $2 | | $8 | | $14 | |
Compensation expense included in Entergy’s Consolidated Net Income for the year | | ($0.9) | | $5.6 | | $19.7 |
Tax benefit (expense) recognized in Entergy’s Consolidated Net Income for the year | | ($0.4) | | $2.2 | | $7.6 |
Compensation cost capitalized as part of fixed assets and inventory | $1 | | $5 | | $6 | $0.1 | | $1.0 | | $4.7 |
Entergy paid $30.6$6.3 million in 20092010 for awards earned under the Long-Term Incentive Plan. The distribution is applicable to the 20062007 - 20082009 performance period.
Restricted Awards
Entergy grants restricted awards earned under its stock benefit plans in the form of stock units that are subject to time-based restrictions. The restricted units are equal to the cash value of shares of Entergy Corporation common stock at the time of vesting. The costs of restricted awards are charged to income over the restricted period, which varies from grant to grant. The average vesting period for restricted awards granted is 4037 months. As of December 31, 2009,2010, there were 234,502218,921 unvested restricted units that are expected to vest over an average period of 2216 months.
The following table includes financial information for restricted awards for each of the years presented:
| 2009 | | 2008 | | 2007 | 2010 | | 2009 | | 2008 |
| (In Millions) | (In Millions) |
| | | | | | | | | | |
Fair value of restricted awards as of December 31, | $4.6 | | $7.5 | | $11.2 | $8.3 | | $4.6 | | $7.5 |
Compensation expense included in Entergy's Consolidated Net Income for the year | $2.0 | | $2.0 | | $6.5 | |
Tax benefit recognized in Entergy's Consolidated Net Income for the year | $0.8 | | $0.8 | | $2.5 | |
Compensation expense included in Entergy’s Consolidated Net Income for the year | | $3.9 | | $2.0 | | $2.0 |
Tax benefit recognized in Entergy’s Consolidated Net Income for the year | | $1.5 | | $0.8 | | $0.8 |
Compensation cost capitalized as part of fixed assets and inventory | $0.5 | | $0.4 | | $1.1 | $0.9 | | $0.5 | | $0.4 |
Entergy paid $5.1$1.1 million in 20092010 for awards under the Restricted Awards Plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 13. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy'sEntergy’s reportable segments as of December 31, 20092010 are Utility and Non-Utility Nuclear.Entergy Wholesale Commodities. Utility generates, transmits, distributes,includes the generation, transmission, distribution, and sellssale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and provides natural gas utility service in portions of Louisiana. Non-Utility Nuclear ownsEntergy Wholesale Commodities includes the ownership and operatesoperation of six nuclear power plants located in the northern United States and is primarily focused on sellingthe sale of the electric power produced by those plants to wholesale customers. "All Other"Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. “All Other” includes the parent company,com pany, Entergy Corporation, and other business activity, including the non-nuclear wholesale assets business and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005, and reported Entergy New Orleans results under the equity method of accounting in the Utility segment in 2006. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007.
Entergy'sIn the fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization. The 2009 and 2008 information in the tables below has been restated to reflect the change in reportable segments.
Entergy’s segment financial information is as follows:
2009 | Utility | | Non-Utility Nuclear* | | All Other* | | Eliminations | | Consolidated | |
2010 | | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated |
| (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | |
Operating revenues | $8,055,353 | | $2,555,254 | | $161,506 | | ($26,463) | | $10,745,650 | | $8,941,332 | | $2,566,156 | | $7,442 | | ($27,353) | | $11,487,577 |
Deprec., amort. & decomm. | $1,025,922 | | $240,747 | | $15,169 | | $- | | $1,281,838 | | $1,006,385 | | $270,658 | | $4,587 | | $- | | $1,281,630 |
Interest and dividend income | $180,505 | | $170,033 | | $88,106 | | ($202,016) | | $236,628 | |
Equity in loss of unconsolidated equity affiliates | $1 | | $- | | ($7,794) | | $- | | ($7,793) | |
Interest and other charges | $462,206 | | $55,884 | | $180,931 | | ($128,577) | | $570,444 | |
Interest and investment income | | | $182,493 | | $171,158 | | $44,757 | | ($212,953) | | $185,455 |
Interest expense | | | $493,241 | | $71,817 | | $129,505 | | ($119,396) | | $575,167 |
Income taxes (benefits) | $388,682 | | $379,266 | | ($135,208) | | $- | | $632,740 | | $454,227 | | $268,649 | | ($105,637) | | $- | | $617,239 |
Consolidated net income (loss) | $708,905 | | $631,020 | | ($15,437) | | ($73,438) | | $1,251,050 | |
Consolidated net income | | | $829,719 | | $489,422 | | $44,721 | | ($93,557) | | $1,270,305 |
Total assets | $29,694,732 | | $10,590,809 | | ($294,277) | | ($2,626,667) | | $37,364,597 | | $31,080,240 | | $10,102,817 | | ($714,968) | | ($1,782,813) | | $38,685,276 |
Investment in affiliates - at equity | $200 | | $- | | $39,380 | | $- | | $39,580 | | $199 | | $59,456 | | ($18,958) | | $- | | $40,697 |
Cash paid for long-lived asset additions | $1,872,997 | | $654,003 | | $1,719 | | $- | | $2,528,719 | | $1,766,609 | | $687,313 | | $75 | | $- | | $2,453,997 |
2008 | Utility | | Non-Utility Nuclear* | | All Other* | | Eliminations | | Consolidated | |
2009 | | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated |
| (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | |
Operating revenues | $10,318,630 | | $2,558,378 | | $241,715 | | ($24,967) | | $13,093,756 | | $8,055,353 | | $2,711,078 | | $5,682 | | ($26,463) | | $10,745,650 |
Deprec., amort. & decomm. | $984,651 | | $220,128 | | $15,490 | | $- | | $1,220,269 | | $1,025,922 | | $251,147 | | $4,769 | | $- | | $1,281,838 |
Interest and dividend income | $122,657 | | $112,129 | | $116,830 | | ($153,744) | | $197,872 | |
Equity in loss of unconsolidated equity affiliates | ($3) | | $- | | ($11,681) | | $- | | ($11,684) | |
Interest and other charges | $425,216 | | $53,926 | | $243,745 | | ($113,966) | | $608,921 | |
Interest and investment income (loss) | | | $180,505 | | $196,492 | | ($10,470) | | ($129,899) | | $236,628 |
Interest expense | | | $462,206 | | $78,278 | | $86,420 | | ($56,460) | | $570,444 |
Income taxes (benefits) | $371,281 | | $319,107 | | ($87,390) | | $- | | $602,998 | | $388,682 | | $322,255 | | ($78,197) | | $- | | $632,740 |
Consolidated net income (loss) | $605,144 | | $797,280 | | ($122,110) | | ($39,779) | | $1,240,535 | | $708,905 | | $641,094 | | ($25,511) | | ($73,438) | | $1,251,050 |
Total assets | $28,810,147 | | $7,848,195 | | $2,586,456 | | ($2,627,980) | | $36,616,818 | | $29,892,088 | | $11,134,791 | | ($646,756) | | ($2,818,170) | | $37,561,953 |
Investment in affiliates - at equity | $199 | | $- | | $66,048 | | $- | | $66,247 | | $200 | | $- | | $39,380 | | $- | | $39,580 |
Cash paid for long-lived asset additions | $2,478,014 | | $478,285 | | $18,730 | | $- | | $2,975,029 | | $1,872,997 | | $661,596 | | ($5,874) | | $- | | $2,528,719 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2007 | Utility | | Non-Utility Nuclear* | | All Other* | | Eliminations | | Consolidated | |
2008 | | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Consolidated |
| (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | | | | | |
Operating revenues | $9,255,075 | | $2,029,666 | | $225,216 | | ($25,559) | | $11,484,398 | | $10,318,630 | | $2,793,637 | | $6,456 | | ($24,967) | | $13,093,756 |
Deprec., amort. & decomm. | $939,152 | | $177,872 | | $14,586 | | $- | | $1,131,610 | | $984,651 | | $230,439 | | $5,179 | | $- | | $1,220,269 |
Interest and dividend income | $124,992 | | $107,754 | | $88,066 | | ($81,901) | | $238,911 | |
Equity in earnings of unconsolidated equity affiliates | ($2) | | $- | | $3,178 | | $- | | $3,176 | |
Interest and other charges | $422,382 | | $34,738 | | $261,832 | | ($81,900) | | $637,052 | |
Interest and investment income | | | $122,657 | | $163,200 | | $7,421 | | ($95,406) | | $197,872 |
Interest expense | | | $425,216 | | $100,757 | | $138,576 | | ($55,628) | | $608,921 |
Income taxes (benefits) | $382,025 | | $230,407 | | ($98,015) | | $- | | $514,417 | | $371,281 | | $289,643 | | ($57,926) | | $- | | $602,998 |
Consolidated net income (loss) | $704,393 | | $539,200 | | ($83,639) | | $- | | $1,159,954 | | $605,144 | | $798,227 | | ($123,057) | | ($39,779) | | $1,240,535 |
Total assets | $26,174,159 | | $7,014,484 | | $1,982,429 | | ($1,528,070) | | $33,643,002 | | $28,810,147 | | $9,295,722 | | $334,600 | | ($1,823,651) | | $36,616,818 |
Investment in affiliates - at equity | $202 | | $- | | $78,790 | | $- | | $78,992 | | $199 | | $- | | $66,048 | | $- | | $66,247 |
Cash paid for long-lived asset additions | $1,497,174 | | $821,790 | | $2,754 | | $1,255 | | $2,322,973 | | $2,478,014 | | $490,348 | | $6,667 | | $- | | $2,975,029 |
Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation.“competitive businesses.” Eliminations are primarily intersegment activity. Almost all of Entergy'sEntergy’s goodwill is related to the Utility segment.
Earnings were negatively affectedOn April 5, 2010, Entergy announced that, effective immediately, it planned to unwind the business infrastructure associated with its proposed plan to spin-off its non-utility nuclear business. As a result of the plan to unwind the business infrastructure, Entergy recorded expenses in the fourth quarter 2007 by expensesEntergy Wholesale Commodities segment. Other operating and maintenance expense includes the write-off of $22.2$64 million ($13.6of capital costs, primarily for software that will not be utilized. Interest charges include the write-off of $39 million net-of-tax)of debt financing costs, primarily incurred for Utility and $29.9the $1.2 billion credit facility related to the planned spin-off of Entergy’s non-utility nuclear business that will not be used. Approximately $16 million ($18.4 million net-of-tax) for Non-Utility Nuclear recordedof other costs were incurred in 2010 in connection with aunwindi ng the planned non-utility nuclear operations fleet alignment. This process was undertaken with the goals of eliminating redundancies, capturing economies of scale, and clearly establishing organizational governance. Most of the expenses related to the voluntary severance program offered to employees. Approximately 200 employees from the Non-Utility Nuclear business and 150 employees in the Utility business accepted the voluntary severance program offers.spin-off transaction.
Geographic Areas
For the years ended December 31, 20092010 and 2008,2009, the amount of revenue Entergy derived from outside of the United States was insignificant. As of December 31, 20092010 and 2008,2009, Entergy had no long-lived assets located outside of the United States.
Registrant Subsidiaries
Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business. Each of the Registrant Subsidiaries'Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 14. EQUITY METHOD INVESTMENTS (Entergy Corporation)
As of December 31, 2009,2010, Entergy owns investments in the following companies that it accounts for under the equity method of accounting:
Investment | | Ownership | | Description |
| | | | |
Entergy-Koch | | 50% partnership interest | | Entergy-Koch was in the energy commodity marketing and trading business and gas transportation and storage business until the fourth quarter 2004 when these businesses were sold. In December 2009, Entergy reorganized its investment in Entergy-Koch, received a $25.6 million cash distribution, and received a distribution of certain software owned by the joint venture. |
| | | | |
RS Cogen LLC | | 50% member interest | | Co-generation project that produces power and steam on an industrial and merchant basis in the Lake Charles, Louisiana area. |
| | | | |
Top Deer | | 50% member interest | | Wind-powered electric generation joint venture. |
Following is a reconciliation of Entergy'sEntergy’s investments in equity affiliates:
| | 2009 | | 2008 | | 2007 |
| | (In Thousands) |
| | | | | | |
Beginning of year | | $66,247 | | $78,992 | | $229,089 |
Entergy New Orleans (a) | | - | | - | | (153,988) |
Income (loss) from the investments | | (7,793) | | (11,684) | | 3,176 |
Dispositions and other adjustments | | (18,874) | | (1,061) | | 715 |
End of year | | $39,580 | | $66,247 | | $78,992 |
(a) | As a result of Entergy New Orleans' bankruptcy filing in September 2005, Entergy deconsolidated Entergy New Orleans and reflected Entergy New Orleans' financial results under the equity method of accounting retroactive to January 1, 2005. In May 2007, with confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans retroactive to January 1, 2007 and no longer accounts for Entergy New Orleans under the equity method of accounting. See Note 18 to the financial statements for further discussion of the bankruptcy proceeding. |
| | 2010 | | 2009 | | 2008 |
| | (In Thousands) |
| | | | | | |
Beginning of year | | $39,580 | | $66,247 | | $78,992 |
Loss from the investments | | (2,469) | | (7,793) | | (11,684) |
Dispositions and other adjustments | | 3,586 | | (18,874) | | (1,061) |
End of year | | $40,697 | | $39,580 | | $66,247 |
Related-party transactions and guarantees
See Note 18 to the financial statements for a discussion of the Entergy New Orleans bankruptcy proceedings and activity between Entergy and Entergy New Orleans.
Entergy Gulf States Louisiana purchased approximately $50.8 million, $49.3 million, $82.5 million, and $68.4$82.5 million of electricity generated from Entergy'sEntergy’s share of RS Cogen in 2010, 2009, and 2008, and 2007, respectively. Entergy'sEntergy’s operating transactions with its other equity method investees were not significant in 2010, 2009, 2008, or 2007.2008.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 15. ACQUISITIONS AND DISPOSITIONS (Entergy Corporation, Entergy Arkansas, and Entergy Gulf States Louisiana, and Entergy Mississippi)Louisiana)
Calcasieu
In March 2008, Entergy Gulf States Louisiana purchased the Calcasieu Generating Facility, a 322 MW simple-cycle gas-fired power plant located near the city of Sulphur in southwestern Louisiana, for approximately $56 million from a subsidiary of Dynegy, Inc. Entergy Gulf States Louisiana received the plant, materials and supplies, SO2 emission allowances, and related real estate in the transaction. The FERC and the LPSC approved the acquisition.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Ouachita
In September 2008, Entergy Arkansas purchased the Ouachita Plant, a 789 MW three-train gas-fired combined cycle generating turbine (CCGT) electric power plant located 20 miles south of the Arkansas state line near Sterlington, Louisiana, for approximately $210 million from a subsidiary of Cogentrix Energy, Inc. Entergy Arkansas received the plant, materials and supplies, and related real estate in the transaction. The FERC and the APSC approved the acquisition. The APSC also approved the recovery of the acquisition and ownership costs through a rate rider and the planned sale of one-third of the capacity and energy to Entergy Gulf States Louisiana.
The LPSC also approved the purchase of one-third of the capacity and energy by Entergy Gulf States Louisiana, subject to certain conditions, including a study to determine the costs and benefits of Entergy Gulf States Louisiana exercising an option to purchase one-third of the plant (Unit 3) from Entergy Arkansas. In April 2009, Entergy Gulf States Louisiana made a filing with the LPSC seeking approval of Entergy Gulf States Louisiana exercising its option to convert its purchased power agreement into the ownership interest in Unit 3 and a one-third interest in the Ouachita common facilities. In September 2009 the LPSC, pursuant to an uncontested settlement, approved the acquisition and a cost recovery mechanism. Entergy Gulf States Louisiana purchased UnitUn it 3 and a one-third interest in the Ouachita common facilities for $75 million in November 2009.
Palisades Purchased Power Agreement
In AprilEntergy’s purchase of the Palisades plant in 2007 Entergy's Non-Utility Nuclear business purchased the 798 MW Palisades nuclear energy plant located near South Haven, Michigan from Consumers Energy Company for a net cash payment of $336 million. Entergy received the plant, nuclear fuel, inventories, and other assets. The liability to decommission the plant, as well as related decommissioning trust funds, was also transferred to Entergy's Non-Utility Nuclear business. Entergy's Non-Utility Nuclear business executedincluded a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant'splant’s output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. In the first quarter 2007, the NRC renewed Palisades' operating license until 2031. As part of the transaction, Entergy's Non-Utility Nuclear business assumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan. Palisades' financial results since April 2007 are included in Entergy's Non-Utility Nuclear business segment. The following table summarizes the assets acquired and liabilities assumed at the date of acquisition.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | Amount |
| | (In Millions) |
| | |
Plant (including nuclear fuel) | | $727
|
Decommissioning trust funds | | 252 |
Other assets | | 41 |
Total assets acquired | | 1,020 |
| | |
Purchased power agreement (below market) | | 420 |
Decommissioning liability | | 220 |
Other liabilities | | 44 |
Total liabilities assumed | | 684 |
| | |
Net assets acquired | | $336 |
Subsequent to the closing, Entergy received approximately $6 million from Consumers Energy Company as part of the Post-Closing Adjustment defined in the Asset Sale Agreement. The Post-Closing Adjustment amount resulted in an approximately $6 million reduction in plant and a corresponding reduction in other liabilities.
For the PPA, which was at below-market prices at the time of the acquisition, Non-Utility NuclearEntergy will amortize a liability to revenue over the life of the agreement. The amount that will be amortized each period is based upon the difference between the present value calculated at the date of acquisition of each year'syear’s difference between revenue under the agreement and revenue based on estimated market prices. Amounts amortizedam ortized to revenue were $46 million in 2010, $53 million in 2009, and $76 million in 2008, and $50 million in 2007.2008. The amounts to be amortized to revenue for the next five years will be $46 million for 2010, $43 million for 2011, $17 million in 2012, $18 million for 2013, and $16 million for 2014.2014, and $15 million for 2015.
NYPA Value Sharing Agreements
Non-Utility Nuclear'sEntergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA. In October 2007, Non-Utility NuclearEntergy subsidiaries and NYPA amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements, Non-Utility NuclearEntergy subsidiaries will make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Non-Utility NuclearEntergy subsidiaries will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million. The annual payment for each year's outputyear’s outp ut is due by January 15 of the following year. Non-Utility NuclearEntergy will record itsthe liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. An amount equal to the liability will be recorded to the plant asset account as contingent purchase price consideration for the plants. In 2010, 2009, and 2008, and 2007, Non-Utility NuclearEntergy Wholesale Commodities recorded $72 million as plant for generation during each of those years. This amount will be depreciated over the expected remaining useful life of the plants.
Asset Dispositions
Harrison County
In August 2008, Non-Utility Nuclear entered intothe fourth quarter 2010, Entergy sold its ownership interest in the Harrison County Power Project 550 MW combined-cycle plant to two Texas electric cooperatives that owned a resolution of a dispute with NYPA over the applicabilityminority share of the value sharing agreements toMarshall, Texas unit. Entergy sold its FitzPatrick and Indian Point 3 nuclear power plants after the planned spin-off61 percent share of the Non-Utility Nuclear business. Underplant for $219 million and realized a gain of $44.2 million ($27.2 million net-of-tax) on the resolution, Non-Utility Nuclear agreed not to treat the separation as a "Cessation Event" that would terminate its obligation to make the payments under the value sharing agreements. As a result, after the spin-off transaction, Enexus will continue to be obligated to make payments to NYPA under the amended and restated value sharing agreements.sale.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Asset Dispositions
Entergy-Koch Businesses
In the fourth quarter 2004, Entergy-Koch sold its energy trading and pipeline businesses to third parties. The sales came after a review of strategic alternatives for enhancing the value of Entergy-Koch. Entergy received $862 million of cash distributions in 2004 from Entergy-Koch after the business sales. Due to the November 2006 expiration of contingencies on the sale of Entergy-Koch'sEntergy-Koch’s trading business, and the corresponding release to Entergy-Koch of sales proceeds held in escrow, Entergy recorded a gain related to its Entergy-Koch investment of approximately $55 million, net-of-tax, in the fourth quarter 2006 and received additional cash distributions of approximately $163 million. In December 2009, Entergy reorganized its investmentinvest ment in Entergy-Koch, received a $25.6 million cash distribution, and received a distribution of certain software owned by the joint venture.
Other
In the second quarter 2008, Entergy sold its remaining interest in Warren Power and realized a gain of $11.2 million ($6.9 million net-of-tax) on the sale.
NOTE 16. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market and Commodity Risks
In the normal course of business, Entergy is exposed to a number of market and commodity risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular instrument or commodity. All financial and commodity-related instruments, including derivatives, are subject to market risk. Entergy is subject to a number of commodity and market risks, including:
Type of Risk | | Affected Businesses |
| | |
Power price risk | | Utility, Non-Utility Nuclear, Non-nuclear wholesale assetsEntergy Wholesale Commodities |
Fuel price risk | | Utility, Non-Utility Nuclear, Non-nuclear wholesale assetsEntergy Wholesale Commodities |
Foreign currency exchange rate risk | | Utility, Non-Utility Nuclear, Non-nuclear wholesale assetsEntergy Wholesale Commodities |
Equity price and interest rate risk - investments | | Utility, Non-Utility NuclearEntergy Wholesale Commodities |
Entergy manages a portion of these risks using derivative instruments, some of which are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sales transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, and fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity futures, forwards, swaps, and options; foreign currency forwards; and interest rate swaps. Entergy will occasionally enter into financially settled option contracts to manage market risk under certain hedging transactions which may or may not be designated as hedging instruments. Entergy enters into derivatives only to manage natural risks inherent in its physical or financial assets or liabilities.
Entergy manages fuel price riskvolatility for its Louisiana jurisdictions (Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy New Orleans) and Entergy Mississippi primarily through the purchase of short-term natural gas swaps. These swaps are marked-to-market with offsetting regulatory assets or liabilities. The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation and projected winter purchases for gas distribution at Entergy Gulf States Louisiana and Entergy New Orleans.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy'sEntergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option'soption’s contractual strike or exercise price also affects the level of market risk. A
Entergy Corporation and Subsidiaries
Notes to Financial Statements
significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy'sEntergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy'sEntergy’s objectives.
Derivatives
The fair values of Entergy'sEntergy’s derivative instruments in the consolidated balance sheet as of December 31, 2010 are as follows:
Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (a) | | Business |
| | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Electricity futures, forwards, swaps, and options | | Prepayments and other (current portion) | | $160 million | | ($7) million | | Entergy Wholesale Commodities |
Electricity futures, forwards, swaps, and options | | Other deferred debits and other assets (non-current portion) | | $82 million | | ($29) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Liabilities: | | | | | | | | |
Electricity futures, forwards, swaps, and options | | Other current liabilities (current portion) | | $5 million | | ($5) million | | Entergy Wholesale Commodities |
Electricity futures, forwards, swaps, and options | | Other non-current liabilities (non-current portion) | | $47 million | | ($30) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Electricity futures, forwards, swaps, and options | | Prepayments and other (current portion) | | $2 million | | ($-) | | Entergy Wholesale Commodities |
Electricity futures, forwards, swaps, and options | | Other deferred debits and other assets (non-current portion) | | $14 million | | ($8) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Liabilities: | | | | | | | | |
Electricity futures, forwards, swaps, and options | | Other current liabilities (current portion) | | $2 million | | ($2 million) | | Entergy Wholesale Commodities |
Electricity futures, forwards, swaps, and options | | Other non-current liabilities (non-current portion) | | $7 million | | ($7) million | | Entergy Wholesale Commodities |
Natural gas swaps | | Other current liabilities | | $2 million | | ($-) | | Utility |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2009 are as follows:
Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (a) | | Business |
| | | | | | | | |
Derivatives designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | |
Electricity futures, forwards, and swaps | | Prepayments and other (current portion)
| | $109 million
| | Non-Utility Nuclear
|
| | | | | | |
Electricity futures, forwards, swaps, and options | | Prepayments and other (current portion) | | $117 million | | ($8) million | | Entergy Wholesale Commodities |
Electricity futures, forwards, swaps, and options | | Other deferred debits and other assets (non-current portion) | | $9195 million | | Non-Utility Nuclear ($4) million | | Entergy Wholesale Commodities |
| | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Natural gas swaps | | Prepayments and other | | $8 million | | ($-) | | Utility |
Entergy Corporation and Subsidiaries
Notes to Financial Statements(a) | The balances of derivative assets and liabilities in this table are presented gross. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented on the Entergy Consolidated Balance Sheets on a net basis in accordance with accounting guidance for Derivatives and Hedging. |
The effect of Entergy'sEntergy’s derivative instruments designated as cash flow hedges on the consolidated income statements of income for the yearyears ended December 31, 2010 and 2009 is as follows:
Instrument | | Amount of gain (loss) recognized in OCI (effective (effective portion) | | Income Statement of Income location | | Amount of gain (loss) reclassified from accumulated OCI into income (effective portion) |
| | | | | | |
2010 | | | | | | |
Electricity futures, forwards, swaps, and swaps options | | $315206 million | | Competitive businesses operating revenues | | $322220 million |
| | | | | | |
2009 | | | | | | |
Electricity futures, forwards, swaps, and options | | $315 million | | Competitive businesses operating revenues | | $322 million |
Electricity over-the-counter swaps that financially settle against day-ahead power pool prices are used to manage price exposure for Non-Utility NuclearEntergy Wholesale Commodities generation. Based on market prices as of December 31, 2009,2010, cash flow hedges relating to power sales totaled $200$190 million of net gains, of which approximately $109$155 million are expected to be reclassified from accumulated other comprehensive income (OCI) to operating revenues in the next twelve months. The actual amount reclassified from accumulated OCI, however, could vary due to future changes in market prices. Gains totaling approximately $220 million and $322 million were realized on the maturity of cash flow hedges, before taxes of $77 million and $113 million, for 2009.December 31, 2010 and 2009, res pectively. Unrealized gains or losses recorded in OCI result from hedging power output at the Non-Utility NuclearEntergy Wholesale Commodities power plants. The related gains or losses from hedging power are included in operating revenues when realized. The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(Palisades is price hedged through April 2022) for forecasted power transactions as ofat December 31, 20092010 is approximately threefour years. Planned generation currently sold forward from Non-Utility NuclearEntergy Wholesale Commodities power plants as of December 31, 20092010 is 88%96% for 20102011 of which approximately 40%47% is sold under financial hedgesderivatives and the remainder under normal purchase/sale contracts. The ineffective portion of the change in the value of Entergy'sEntergy’s cash flow hedges for 2010 and 2009 was insignificant. Certain of the agreements to sell the power produced by Entergy's Non-Utility NuclearEntergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations when the current market prices exceed the contracted power prices. The primary form of collateral to satisfy these requirements is an Entergy Corporation guaranty. As of December 31, 2009,2010, hedge contracts with one counterpartytwo counterparties were in a liability position (approximately $2$17 million total), but were significantly below the amountsamount of guaranteesthe guarantee provided under their contractsthe contract and no cash collateral was required. If the Entergy Corporation credit rating falls below investment grade, the impact of the corporate guarantee is ignored and Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date. From time to time, Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge. Gains or losses accumulated in OCI prior to de-designation continue to be deferred in OCI until they are included in income as the original hedged transaction occurs. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.
Natural gas over-the-counter swaps that financially settle against NYMEX futures are used to manage fuel price riskvolatility for the Utility'sUtility’s Louisiana and Mississippi customers. All benefits or costs of the program are recorded in fuel costs. The total volume of natural gas swaps outstanding as of December 31, 20092010 is 36,710,00037,120,000 MMBtu for Entergy, 9,530,00010,090,000 MMBtu for Entergy Gulf States Louisiana, 15,590,00016,780,000 MMBtu for Entergy Louisiana, 10,480,0009,340,000 MMBtu for Entergy Mississippi, and 1,110,000910,000 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps areis covered by master agreements that do not require collateralization based on mark-to-market value, but do carry material adverse change clausesadequate assurance language that may lead to collateralization requests.
The effect of Entergy'sEntergy’s derivative instruments not designated as hedging instruments on the consolidated income statements of income for the yearyears ended December 31, 2010 and 2009 is as follows:
Instrument | | Amount of gain (loss) recognized in OCI (de-designated hedges) | | Income Statement of Income Locationlocation | | | Amount of gain (loss) recorded in income |
| | | | | | |
2010 | | | | | | |
Natural gas swaps | | $ - | | Fuel, fuel-related expenses, and gas purchased for resale | | ($95) million |
Electricity futures, forwards, swaps, and options de-designated as hedged items | | $15 million | | Competitive business operating revenues | | $ - |
| | | | | | |
2009 | | | | | | |
Natural gas swaps | | $ - | | Fuel, fuel-related expenses, and gas purchased for resale | | ($160) million |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Due to regulatory treatment, the natural gas swaps are marked to market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as offsetting regulatory assets or liabilities. The gains or losses recorded as fuel expenses when the swaps are settled are recovered through each Registrant's fuel cost recovery mechanism.mechanisms.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries'Subsidiaries’ derivative instruments on their balance sheets as of December 31, 2010 and 2009 are as follows:
Instrument | | Balance Sheet Location | | Fair Value | | Registrant |
| | | | | | |
Derivatives not designated as hedging instruments | | | | |
| | | | | | |
2010 | | | | | | |
Assets: | | | | | | |
Natural gas swaps | | Prepayments and other | | $0.3 million | | Entergy Mississippi |
| | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Other current liabilities | | $1.0 million | | Entergy Gulf States Louisiana |
Natural gas swaps | | Other current liabilities | | $0.4 million | | Entergy Louisiana |
Natural gas swaps | | Other current liabilities | | $0.5 million | | Entergy New Orleans |
| | | | | | |
2009 | | | | | | |
Assets: | | | | | | |
Natural gas swaps | | Prepayments and other | | $2.1 million | | Entergy Gulf States Louisiana |
Natural gas swaps | | Gas hedge contracts | | $3.4 million | | Entergy Louisiana |
Natural gas swaps | | Gas hedge contractsPrepayments and other | | $2.9 million | | Entergy Mississippi |
| | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Other current liabilities | | $0.3 million | | Entergy Gulf States Louisiana |
The effects of the Registrant Subsidiaries'Subsidiaries’ derivative instruments not designated as hedging instruments on their statements of income for the yearyears ended December 31, 2010 and 2009 are as follows:
Instrument | | Statement of Income Location | | Amount of gain (loss) recorded in income | | Registrant |
| | | | | | |
2010 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($25.0) million | | Entergy Gulf States Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($40.5) million | | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($27.5) million | | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($1.7) million | | Entergy New Orleans |
| | | | | | |
2009 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($42.0) million | | Entergy Gulf States Louisiana |
| | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($66.4) million | | Entergy Louisiana |
| | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($40.7) million | | Entergy Mississippi |
| | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($10.5) million | | Entergy New Orleans |
Entergy Corporation and Subsidiaries
Notes to regulatory treatment, the natural gas swaps are marked to market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as offsetting regulatory assets or liabilities. The gains or losses recorded as fuel expenses when the swaps are settled are recovered through each Registrant's fuel recovery mechanism.Financial Statements
Fair Values
The estimated fair values of Entergy'sEntergy’s financial instruments and derivatives are determined using bid prices, market quotes, and market quotes.financial modeling. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments other than forward energy contracts held by regulatedcompetitive businesses may beare reflected in future rates and therefore do not accrue to the benefit or detriment of shareholders. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the shorts hort maturity of these instruments.
Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs. The three levels of the fair value hierarchy are:
· | Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents, debt instruments, and gas hedge contracts, the securitization trust recovery account, and storm reserve escrow accounts.contracts. |
· | Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following: |
- | quoted prices for similar assets or liabilities in active markets; |
- | quoted prices for identical assets or liabilities in inactive markets; |
- | inputs other than quoted prices that are observable for the asset or liability; or |
- | inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
Level 2 consists primarily of individually owned debt instruments or shares in common trusts. Common trust funds are stated at estimated fair value based on the fair market value of the underlying investments.
· | Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management'smanagement’s best estimate of fair value for the asset or liability. Level 3 consists primarily of derivative power contracts used as cash flow hedges of power sales at merchant power plants. |
The values for the cash flow hedges that are recorded as derivative contract assets or liabilities are based on both observable inputs including public market prices and unobservable inputs such as model-generated prices for longer-term markets and are classified as Level 3 assets and liabilities. The amounts reflected as the fair value of derivative assets or liabilities are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable or payable by Entergy if the contracts were settled at that date. These derivative contracts
Entergy Corporation and Subsidiaries
Notes to Financial Statements
include cash flow hedges that swap fixed for floating cash flows for sales of the output from Entergy's Non-Utility NuclearEntergy’s Entergy Wholesale Commodities business. The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from a combination of quoted forward power market prices for the period for which such curves are available, and model-generated prices using quoted forward gas market curves and estimates regarding heat rates to convert gas to power and the costs associated with the transportation of the power from the plants'plants’ bus bar to the contract'scontract’s point of delivery, generally a power market hub, for the period thereafter. The differencedifferences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties'counterparties’ credit adjustedadjus ted risk free rate are recorded as derivative contract assets or liabilities. $202 million of cash flow hedges asAs of December 31, 2009 are2010, Entergy had in-the-money derivative contracts with a fair value of $214 million with counterparties or their guarantor who are all currently investment grade. $2$17 million of the cash flow hedgesderivative contracts as of December 31, 20092010 are out-of-the-money contracts supported by corporate guarantees, which would require additional cash or letters of credit in the event of a decrease in Entergy Corporation’s credit rating to below investment grade.
The following tables settable sets forth, by level within the fair value hierarchy, Entergy'sEntergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of December 31, 20092010 and 2008.December 31, 2009. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.
2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $1,218 | | $- | | $- | | $1,218 |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 387 | | 1,689 | | - | | 2,076 |
Debt securities | | 497 | | 1,023 | | - | | 1,520 |
Power contracts | | - | | - | | 214 | | 214 |
Securitization recovery trust account | | 43 | | - | | - | | 43 |
Storm reserve escrow account | | 329 | | - | | - | | 329 |
| | $2,474 | | $2,712 | | $214 | | $5,400 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Power contracts | | $- | | $- | | $17 | | $17 |
Gas hedge contracts | | 2 | | - | | - | | 2 |
| | $2 | | $- | | $17 | | $19 |
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $1,624 | | $- | | $- | | $1,624 |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 528 | | 1,260 | | - | | 1,788 |
Debt securities | | 443 | | 980 | | - | | 1,423 |
Power contracts | | - | | - | | 200 | | 200 |
Securitization recovery trust account | | 13 | | - | | - | | 13 |
Gas hedge contracts | | 8 | | - | | - | | 8 |
Other investments | | 42 | | - | | - | | 42 |
| | $2,658 | | $2,240 | | $200 | | $5,098 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $1,624 | | $- | | $- | | $1,624 |
Decommissioning trust funds: | | | | | | | | |
Equity securities | | 528 | | 1,260 | | - | | 1,788 |
Debt securities | | 443 | | 980 | | - | | 1,423 |
Power contracts | | - | | - | | 200 | | 200 |
Securitization recovery trust account | | 13 | | - | | - | | 13 |
Gas hedge contracts | | 8 | | - | | - | | 8 |
Other investments | | 42 | | - | | - | | 42 |
| | $2,658 | | $2,240 | | $200 | | $5,098 |
2008 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $1,805 | | $- | | $- | | $1,805 |
Decommissioning trust funds | | 508 | | 2,324 | | - | | 2,832 |
Power contracts | | - | | - | | 207 | | 207 |
Securitization recovery trust account | | 12 | | - | | - | | 12 |
Other investments | | 35 | | - | | - | | 35 |
| | $2,360 | | $2,324 | | $207 | | $4,891 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $67 | | $- | | $- | | $67 |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the years ended December 31, 2010, 2009, and 2008:
| | 2009 | | 2008 | | 2010 | | 2009 | | 2008 |
| | (In Millions) | | (In Millions) |
| | | | | | | | | | |
Balance as of January 1, | | $207 | | ($12) | | $200 | | $207 | | ($12) |
| | | | | | | | | | |
Price changes (unrealized gains/losses) | | 315 | | 156 | | 221 | | 310 | | 226 |
Originated | | | (4) | | 5 | | (70) |
Settlements | | (322) | | 63 | | (220) | | (322) | | 63 |
| | | | | | | | | | |
Balance as of December 31, | | $200 | | $207 | | $197 | | $200 | | $207 |
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries'Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of December 31, 20092010 and 2008.December 31, 2009. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
Entergy Arkansas
2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $101.9 | | $- | | $- | | $101.9 |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 3.4 | | 316.3 | | - | | 319.7 |
Debt securities | | 41.4 | | 159.7 | | - | | 201.1 |
Securitization recovery trust account | | 2.4 | | - | | - | | 2.4 |
| | $149.1 | | $476.0 | | $- | | $625.1 |
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $82.9 | | $- | | $- | | $82.9 |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 15.4 | | 205.3 | | - | | 220.7 |
Debt securities | | 17.6 | | 201.9 | | - | | 219.5 |
| | $115.9 | | $407.2 | | $- | | $523.1 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
| | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
2009 | | | | | | | | |
Assets: | | | | | | | | |
Temporary cash investments | | $82.9 | | $- | | $- | | $82.9 |
Decommissioning trust funds: | | | | | | | | |
Equity securities | | 15.4 | | 205.3 | | - | | 220.7 |
Debt securities | | 17.6 | | 201.9 | | - | | 219.5 |
| | $115.9 | | $407.2 | | $- | | $523.1 |
2008 | | |
Assets: | | | | | | | | |
Temporary cash investments | | $36.3 | | $- | | $- | | $36.3 |
Decommissioning trust funds | | 16.4 | | 374.1 | | - | | 390.5 |
| | $52.7 | | $374.1 | | $- | | $426.8 |
Entergy Gulf States Louisiana
2010 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | Level 1 | | Level 2 | | Level 3 | | Total | | (In Millions) |
2009 | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Temporary cash investments | | $144.3 | | $- | | $- | | $144.3 | | $154.9 | | $- | | $- | | $154.9 |
Decommissioning trust funds: | | | | | | | | | |
Decommissioning trust funds (a): | | | | | | | | | |
Equity securities | | 6.7 | | 175.5 | | - | | 182.2 | | 3.8 | | 231.1 | | - | | 234.9 |
Debt securities | | 25.3 | | 142.0 | | - | | 167.3 | | 32.2 | | 126.5 | | - | | 158.7 |
Storm reserve escrow account | | | 90.1 | | - | | - | | 90.1 |
| | | $281.0 | | $357.6 | | $- | | $638.6 |
| | | | | | | | | |
Liabilities: | | | | | | | | | |
Gas hedge contracts | | 2.1 | | - | | - | | 2.1 | | $1.0 | | $- | | $- | | $1.0 |
| | $178.4 | | $317.5 | | $- | | $495.9 | |
2008 | | | | | | | | | |
2009 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | | | | | | | | | |
Temporary cash investments | | $26.6 | | $- | | $- | | $26.6 | | $144.3 | | $- | | $- | | $144.3 |
Decommissioning trust funds | | 22.3 | | 280.9 | | - | | 303.2 | |
Decommissioning trust funds (a): | | | | | | | | | |
Equity securities | | | 6.7 | | 175.5 | | - | | 182.2 |
Debt securities | | | 25.3 | | 142.0 | | - | | 167.3 |
Gas hedge contracts | | | 2.1 | | - | | - | | 2.1 |
| | $48.9 | | $280.9 | | $- | | $329.8 | | $178.4 | | $317.5 | | $- | | $495.9 |
| | | | | | | | | | | | | | | | |
Liabilities: | | | | | | | | | | | | | | | | |
Gas hedge contracts | | $20.2 | | $- | | $- | | $20.2 | | $0.3 | | $- | | $- | | $0.3 |
| | | | | | | | | |
Entergy Louisiana
2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $122.5 | | $- | | $- | | $122.5 |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 1.3 | | 142.6 | | - | | 143.9 |
Debt securities | | 45.7 | | 50.9 | | - | | 96.6 |
Storm reserve escrow account | | 201.0 | | - | | - | | 201.0 |
| | $370.5 | | $193.5 | | $- | | $564.0 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $0.4 | | $- | | $- | | $0.4 |
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $151.7 | | $- | | $- | | $151.7 |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 7.0 | | 110.9 | | - | | 117.9 |
Debt securities | | 44.3 | | 46.9 | | - | | 91.2 |
Gas hedge contracts | | 3.4 | | - | | - | | 3.4 |
Storm reserve escrow account | | 0.8 | | - | | - | | 0.8 |
| | $207.2 | | $157.8 | | $- | | $365.0 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
| | Level 1 | | Level 2 | | Level 3 | | Total |
2009 | | | | | | | | |
Assets: | | | | | | | | |
Temporary cash investments | | $151.7 | | $- | | $- | | $151.7 |
Decommissioning trust funds: | | | | | | | | |
Equity securities | | 7.0 | | 110.9 | | - | | 117.9 |
Debt securities | | 44.3 | | 46.9 | | - | | 91.2 |
Gas hedge contracts | | 3.4 | | - | | - | | 3.4 |
Other investments | | 0.8 | | - | | - | | 0.8 |
| | $207.2 | | $157.8 | | $- | | $365.0 |
| | | | | | | | |
2008 | | | | | | | | |
Assets: | | | | | | | | |
Temporary cash investments | | $138.9 | | $- | | $- | | $138.9 |
Decommissioning trust funds | | 51.0 | | 129.9 | | - | | 180.9 |
Other investments | | 0.8 | | - | | - | | 0.8 |
| | $190.7 | | $129.9 | | $- | | $320.6 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $26.7 | | $- | | $- | | $26.7 |
| | | | | | | | |
| | | | | | | | |
Entergy Mississippi
| | Level 1 | | Level 2 | | Level 3 | | Total |
2009 | | | | | | | | |
Assets: | | | | | | | | |
Temporary cash investments | | $90.3 | | $- | | $- | | $90.3 |
Gas hedge contracts | | 2.9 | | - | | - | | 2.9 |
Other investments | | 31.9 | | - | | - | | 31.9 |
| | $125.1 | | $- | | $- | | $125.1 |
2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Gas hedge contracts | | $0.3 | | $- | | $- | | $0.3 |
Storm reserve escrow account | | 31.9 | | - | | - | | 31.9 |
| | $32.2 | | $- | | $- | | $32.2 |
| | | | | | | | |
2008 | | | | | | | | |
| | | | | | | | |
Assets: | | | | | | | | |
Other investments | | $31.7 | | $- | | $- | | $31.7 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $15.6 | | $- | | $- | | $15.6 |
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $90.3 | | $- | | $- | | $90.3 |
Gas hedge contracts | | 2.9 | | - | | - | | 2.9 |
Storm reserve escrow account | | 31.9 | | - | | - | | 31.9 |
| | $125.1 | | $- | | $- | | $125.1 |
Entergy New Orleans
2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $53.6 | | $- | | $- | | $53.6 |
Storm reserve escrow account | | 6.0 | | - | | - | | 6.0 |
| | $59.6 | | $- | | $- | | $59.6 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $0.5 | | $- | | $- | | $0.5 |
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $190.0 | | $- | | $- | | $190.0 |
Storm reserve escrow account | | 9.5 | | - | | - | | 9.5 |
| | $199.5 | | $- | | $- | | $199.5 |
Entergy Texas
2010 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $33.6 | | $- | | $- | | $33.6 |
Securitization recovery trust account | | 40.6 | | - | | - | | 40.6 |
| | $74.2 | | $- | | $- | | $74.2 |
2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $199.2 | | $- | | $- | | $199.2 |
Securitization recovery trust account | | 13.1 | | - | | - | | 13.1 |
| | $212.3 | | $- | | $- | | $212.3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New OrleansSystem Energy
2010 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | Level 1 | | Level 2 | | Level 3 | | Total | | (In Millions) |
2009 | | | | | | | | | |
Assets: | | | | | | | | | | | | | | | | |
Temporary cash investments | | $190.0 | | $- | | $- | | $190.0 | | $262.9 | | $- | | $- | | $262.9 |
Other investments | | 9.5 | | - | | - | | 9.5 | |
Decommissioning trust funds (a): | | | | | | | | | |
Equity securities | | | 3.1 | | 220.9 | | - | | 224.0 |
Debt securities | | | 95.7 | | 68.2 | | - | | 163.9 |
| | $199.5 | | $- | | $- | | $199.5 | | $361.7 | | $289.1 | | $- | | $650.8 |
2008 | | | | | | | | |
Assets: | | | | | | | | |
Other investments | | $2.8 | | $- | | $- | | $2.8 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $4.3 | | $- | | $- | | $4.3 |
| | | | | | | | |
Entergy Texas2009 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $263.6 | | $- | | $- | | $263.6 |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 2.1 | | 180.2 | | - | | 182.3 |
Debt securities | | 78.4 | | 66.3 | | - | | 144.7 |
| | $344.1 | | $246.5 | | $- | | $590.6 |
(a) | | Level 1 | | Level 2 | | Level 3 | | Total |
2009 | | | | | | | | |
Assets: | | | | | | | | |
Temporary cash investments | | $199.2 | | $- | | $- | | $199.2 |
Securitization recovery trust account | | 13.1 | | - | | - | | 13.1 |
| | $212.3 | | $- | | $- | | $212.3 |
2008 | | | | | | | | |
Assets: | | | | | | | | |
Securitization recovery trust account | | $12.0 | | $- | | $- | | $12.0 |
System Energy
| | Level 1 | | Level 2 | | Level 3 | | TotalThe decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indexes. Fixed income securities are held in various governmental and corporate securities with an average coupon rate of 4.34%. See Note 17 for additional information on the investment portfolios. |
2009 Assets: | | | | | | | | |
Temporary cash investments | | $263.6 | | $- | | $- | | $263.6 |
Decommissioning trust funds: | | | | | | | | |
Equity securities | | 2.1 | | 180.2 | | - | | 182.3 |
Debt securities | | 78.4 | | 66.3 | | - | | 144.7 |
| | $344.1 | | $246.5 | | $- | | $590.6 |
2008 | | | | | | | | |
Assets: | | | | | | | | |
Temporary cash investments | | $102.5 | | $- | | $- | | $102.5 |
Decommissioning trust funds | | 69.5 | | 199.3 | | - | | 268.8 |
| | $172.0 | | $199.3 | | $- | | $371.3 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 17. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)
Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA currently retains the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick). The funds are invested primarily in equity securities; fixed-rate, fixed-income securities; and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the nonregulated portion of River Bend, Entergy Gulf States Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealizedunrealiz ed gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders'shareholders’ equity because these assets are classified as available for sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders'shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. Effective January 1, 2009,Generally, Entergy adopted an accounting pronouncement providing guidance regarding recognitionrecords realized gains and presentation of other-than-temporary impairments relatedlosses on its debt and equity securities using the specific identification method to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy hasdetermine the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy's trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. securities.
The securities held as of December 31, 2009 and 2008 are summarized as follows:
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2009 | | | | | | |
Equity Securities | | $1,788 | | $311 | | $30 |
Debt Securities | | 1,423 | | 63 | | 8 |
Total | | $3,211 | | $374 | | $38 |
| | | | | | |
| | | | | | |
2008 | | | | | | |
Equity Securities | | $1,436 | | $85 | | $177 |
Debt Securities | | 1,396 | | 77 | | 21 |
Total | | $2,832 | | $162 | | $198 |
The amortized cost of debt securities was $1,368 million as of December 31, 2009 and $1,340 million as of December 31, 2008. As of December 31, 2009, the debt securities have an average coupon rate of approximately 4.68%, an average duration of approximately 5.08 years, and an average maturity of approximately 8.3 years. The equity securities are generally
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The securities held as of December 31, 2010 and 2009 are summarized as follows:
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2010 | | | | | | |
Equity Securities | | $2,076 | | $436 | | $9 |
Debt Securities | | 1,520 | | 67 | | 12 |
Total | | $3,596 | | $503 | | $21 |
| | | | | | |
| | | | | | |
2009 | | | | | | |
Equity Securities | | $1,788 | | $311 | | $30 |
Debt Securities | | 1,423 | | 63 | | 8 |
Total | | $3,211 | | $374 | | $38 |
Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $130 million and $66 million as of December 31, 2010 and 2009, respectively. The amortized cost of debt securities was $1,475 million as of December 31, 2010 and $1,368 million as of December 31, 2009. As of December 31, 2010, the debt securities have an average coupon rate of approximately 4.34%, an average duration of approximately 5.21 years, and an average maturity of approximately 8.82 years. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor'sPoor’s 500 Index. A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $15 | | $1 | | $474 | | $11 |
More than 12 months | | 105 | | 8 | | 4 | | 1 |
Total | | $120 | | $9 | | $478 | | $12 |
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2009:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $57 | | $1 | | $311 | | $6 |
More than 12 months | | 205 | | 29 | | 18 | | 2 |
Total | | $262 | | $30 | | $329 | | $8 |
The unrealized losses in excess of twelve months on equity securities above relate to Entergy'sEntergy’s Utility operating companies and System Energy.
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20092010 and 20082009 are as follows:
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
less than 1 year | | $31 | | $21 | | $37 | | $31 |
1 year - 5 years | | 676 | | 526 | | 557 | | 676 |
5 years - 10 years | | 388 | | 490 | | 512 | | 388 |
10 years - 15 years | | 131 | | 146 | | 163 | | 131 |
15 years - 20 years | | 34 | | 52 | | 47 | | 34 |
20 years+ | | 163 | | 161 | | 204 | | 163 |
Total | | $1,423 | | $1,396 | | $1,520 | | $1,423 |
During the years ended December 31, 2010, 2009, 2008, and 2007,2008, proceeds from the dispositions of securities amounted to $2,606 million, $2,571 million, $1,652 million, and $1,583$1,652 million, respectively. During the years ended December 31, 2010, 2009, 2008, and 2007,2008, gross gains of $69 million, $80 million, $26 million, and $5$26 million, respectively, and gross losses of $9 million, $30 million, $20 million, and $4$20 million, respectively, were reclassified out of other comprehensive income into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 20092010 and 20082009 are summarized as follows:
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
2010 | | | | | | | |
Equity Securities | | | $319.7 | | $74.2 | | $0.3 |
Debt Securities | | | 201.1 | | 11.0 | | 1.0 |
Total | | | $520.8 | | $85.2 | | $1.3 |
| | (In Millions) | | | | | | |
2009 | | | | | | | | | | | | |
Equity Securities | | $220.7 | | $60.1 | | $3.4 | | $220.7 | | $60.1 | | $3.4 |
Debt Securities | | 219.5 | | 10.7 | | 1.7 | | 219.5 | | 10.7 | | 1.7 |
Total | | $440.2 | | $70.8 | | $5.1 | | $440.2 | | $70.8 | | $5.1 |
| | | | | | | |
2008 | | | | | | | |
Equity Securities | | $165.6 | | $31.7 | | $13.7 | |
Debt Securities | | 224.9 | | 12.8 | | 2.4 | |
Total | | $390.5 | | $44.5 | | $16.1 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The amortized cost of debt securities was $191.2 million as of December 31, 2010 and $210.5 million as of December 31, 2009 and $214.5 million as of December 31, 2008.2009. As of December 31, 2009,2010, the debt securities have an average coupon rate of approximately 4.59%4.14%, an average duration of approximately 4.714.62 years, and an average maturity of approximately 5.85.48 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor'sPoor’s 500 Index. A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $- | | $- | | $44.3 | | $1.0 |
More than 12 months | | 6.6 | | 0.3 | | - | | - |
Total | | $6.6 | | $0.3 | | $44.3 | | $1.0 |
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2009:
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $- | | $- | | $31.9 | | $1.2 |
More than 12 months | | 26.8 | | 3.4 | | 3.9 | | 0.5 |
Total | | $26.8 | | $3.4 | | $35.8 | | $1.7 |
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20092010 and 20082009 are as follows:
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
| | | | | | | | |
less than 1 year | | $6.7 | | $2.0 | | $5.3 | | $6.7 |
1 year - 5 years | | 133.2 | | 127.0 | | 100.1 | | 133.2 |
5 years - 10 years | | 68.2 | | 93.9 | | 85.2 | | 68.2 |
10 years - 15 years | | 5.1 | | 2.0 | | 4.5 | | 5.1 |
15 years - 20 years | | - | | - | | - | | - |
20 years+ | | 6.3 | | - | | 6.0 | | 6.3 |
Total | | $219.5 | | $224.9 | | $201.1 | | $219.5 |
During the years ended December 31, 2010, 2009, and 2008, proceeds from the dispositions of securities amounted to $367.3 million, $154.6 million, and $162.1 million, respectively. During the years ended December 31, 2010, 2009, and 2008, gross gains of $29.2 million, $2.6 million, and $3.8 million, respectively, and gross losses of $0.8 million, $1.4 million, and $0.5 million, respectively, were recorded in earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
During the years ended December 31, 2009, 2008, and 2007, proceeds from the dispositions of securities amounted to $154.6 million, $162.1 million, and $96.0 million, respectively. During the years ended December 31, 2009, 2008, and 2007, gross gains of $2.6 million, $3.8 million, and $0.4 million, respectively, and gross losses of $1.4 million, $0.5 million, and $0.4 million, respectively, were recorded in earnings.
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 20092010 and 20082009 are summarized as follows:
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
2010 | | | | | | | |
Equity Securities | | | $234.9 | | $41.7 | | $1.4 |
Debt Securities | | | 158.7 | | 8.8 | | 0.8 |
Total | | | $393.6 | | $50.5 | | $2.2 |
| | (In Millions) | | | | | | |
2009 | | | | | | | | | | | | |
Equity Securities | | $182.2 | | $17.0 | | $5.3 | | $182.2 | | $17.0 | | $5.3 |
Debt Securities | | 167.3 | | 10.0 | | 0.9 | | 167.3 | | 10.0 | | 0.9 |
Total | | $349.5 | | $27.0 | | $6.2 | | $349.5 | | $27.0 | | $6.2 |
| | | | | | | | | | | | |
2008 | | | | | | | |
Equity Securities | | $132.3 | | $4.6 | | $24.5 | |
Debt Securities | | 170.9 | | 8.7 | | 3.3 | |
Total | | $303.2 | | $13.3 | | $27.8 | |
The amortized cost of debt securities was $150.0 million as of December 31, 2010 and $158.5 million as of December 31, 2009 and $165.5 million as of December 31, 2008.2009. As of December 31, 2009,2010, the debt securities have an average coupon rate of approximately 4.76%4.53%, an average duration of approximately 6.236.08 years, and an average maturity of approximately 9.69.32 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor'sPoor’s 500 Index. A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2009:2010:
| | Equity Securities | | Debt Securities | | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | | (In Millions) |
| | | | | | | | | | | | | | | | |
Less than 12 months | | $- | | $- | | $24.7 | | $0.6 | | $- | | $- | | $22.6 | | $0.6 |
More than 12 months | | 48.9 | | 5.3 | | 4.3 | | 0.3 | | 18.6 | | 1.4 | | 0.9 | | 0.2 |
Total | | $48.9 | | $5.3 | | $29.0 | | $0.9 | | $18.6 | | $1.4 | | $23.5 | | $0.8 |
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2009:
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $- | | $- | | $24.7 | | $0.6 |
More than 12 months | | 48.9 | | 5.3 | | 4.3 | | 0.3 |
Total | | $48.9 | | $5.3 | | $29.0 | | $0.9 |
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20092010 and 20082009 are as follows:
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
| | | | | | | | |
less than 1 year | | $3.3 | | $6.5 | | $4.7 | | $3.3 |
1 year - 5 years | | 46.1 | | 36.5 | | 35.0 | | 46.1 |
5 years - 10 years | | 53.9 | | 75.7 | | 54.2 | | 53.9 |
10 years - 15 years | | 52.0 | | 36.0 | | 48.1 | | 52.0 |
15 years - 20 years | | 3.5 | | 8.7 | | 3.7 | | 3.5 |
20 years+ | | 8.5 | | 7.5 | | 13.0 | | 8.5 |
Total | | $167.3 | | $170.9 | | $158.7 | | $167.3 |
During the years ended December 31, 2010, 2009, 2008, and 2007,2008, proceeds from the dispositions of securities amounted to $100.8 million, $95.2 million, $65.1 million, and $64.6$65.1 million, respectively. During the years ended December 31, 2010, 2009, 2008, and 2007,2008, gross gains of $2.0 million, $2.4 million, $1.0 million, and $0.1$1.0 million, respectively, and gross losses of $0.6$0.4 million, $0.6 million, and $0.2$0.6 million, respectively, were recorded in earnings.
Entergy Louisiana
Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 20092010 and 20082009 are summarized as follows:
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
2010 | | | | | | | |
Equity Securities | | | $143.9 | | $31.0 | | $1.7 |
Debt Securities | | | 96.6 | | 5.3 | | 0.1 |
Total | | | $240.5 | | $36.3 | | $1.8 |
| | (In Millions) | | | | | | |
2009 | | | | | | | | | | | | |
Equity Securities | | $117.9 | | $15.3 | | $5.3 | | $117.9 | | $15.3 | | $5.3 |
Debt Securities | | 91.2 | | 3.9 | | 0.9 | | 91.2 | | 3.9 | | 0.9 |
Total | | $209.1 | | $19.2 | | $6.2 | | $209.1 | | $19.2 | | $6.2 |
| | | | | | | |
2008 | | | | | | | |
Equity Securities | | $93.3 | | $3.9 | | $17.2 | |
Debt Securities | | 87.6 | | 7.1 | | 1.6 | |
Total | | $180.9 | | $11.0 | | $18.8 | |
The amortized cost of debt securities was $91.0 million as of December 31, 2010 and $88.2 million as of December 31, 2009 and $82.1 million as of December 31, 2008.2009. As of December 31, 2009,2010, the debt securities have an average coupon rate of approximately 3.95%4.10%, an average duration of approximately 4.824.49 years, and an average maturity of approximately 9.88.98 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor'sPoor’s 500 Index. A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $- | | $- | | $4.8 | | $0.1 |
More than 12 months | | 18.9 | | 1.7 | | 0.2 | | - |
Total | | $18.9 | | $1.7 | | $5.0 | | $0.1 |
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2009:
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $- | | $- | | $29.7 | | $0.8 |
More than 12 months | | 37.5 | | 5.3 | | 0.9 | | 0.1 |
Total | | $37.5 | | $5.3 | | $30.6 | | $0.9 |
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20092010 and 20082009 are as follows:
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
| | | | | | | | |
less than 1 year | | $2.2 | | $1.2 | | $5.3 | | $2.2 |
1 year - 5 years | | 31.9 | | 33.4 | | 28.1 | | 31.9 |
5 years - 10 years | | 23.7 | | 21.4 | | 31.5 | | 23.7 |
10 years - 15 years | | 12.1 | | 10.5 | | 14.1 | | 12.1 |
15 years - 20 years | | 5.5 | | 6.8 | | 2.9 | | 5.5 |
20 years+ | | 15.8 | | 14.3 | | 14.7 | | 15.8 |
Total | | $91.2 | | $87.6 | | $96.6 | | $91.2 |
During the years ended December 31, 2010, 2009, 2008, and 2007,2008, proceeds from the dispositions of securities amounted to $44.5 million, $47.5 million, $23.5 million, and $23.8$23.5 million, respectively. During the years ended December 31, 2010, 2009, 2008, and 2007,2008, gross gains of $0.7 million, $1.7 million, $0.5 million, and $0.6$0.5 million, respectively, and gross losses of $0.3 million, $1.1 million, $0.4 million, and $0.3,$0.4, respectively, were recorded in earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of December 31, 20092010 and 20082009 are summarized as follows:
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
2010 | | | | | | | |
Equity Securities | | | $224.0 | | $37.3 | | $5.2 |
Debt Securities | | | 163.9 | | 4.4 | | 1.5 |
Total | | | $387.9 | | $41.7 | | $6.7 |
| | (In Millions) | | | | | | |
2009 | | | | | | | | | | | | |
Equity Securities | | $182.3 | | $17.8 | | $14.7 | | $182.3 | | $17.8 | | $14.7 |
Debt Securities | | 144.7 | | 2.8 | | 0.8 | | 144.7 | | 2.8 | | 0.8 |
Total | | $327.0 | | $20.6 | | $15.5 | | $327.0 | | $20.6 | | $15.5 |
| | | | | | | |
2008 | | | | | | | |
Equity Securities | | $127.8 | | $2.0 | | $36.3 | |
Debt Securities | | 141.0 | | 6.9 | | 3.9 | |
Total | | $268.8 | | $8.9 | | $40.2 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The amortized cost of debt securities was $159.3 million as of December 31, 2010 and $142.8 million as of December 31, 2009 and $138.0 million as of December 31, 2008.2009. As of December 31, 2009,2010, the debt securities have an average coupon rate of approximately 4.31%3.73%, an average duration of approximately 4.674.75 years, and an average maturity of approximately 7.47.98 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor'sPoor’s 500 Index. A relatively small percentage of the securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2010:
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $- | | $- | | $63.0 | | $1.5 |
More than 12 months | | 61.1 | | 5.2 | | - | | - |
Total | | $61.1 | | $5.2 | | $63.0 | | $1.5 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2009:
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| | | | | | | | |
Less than 12 months | | $- | | $- | | $56.4 | | $0.6 |
More than 12 months | | 89.3 | | 14.7 | | 3.2 | | 0.2 |
Total | | $89.3 | | $14.7 | | $59.6 | | $0.8 |
The fair value of debt securities, summarized by contractual maturities, as of December 31, 20092010 and 20082009 are as follows:
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
| | | | | | | | |
less than 1 year | | $1.0 | | $2.0 | | $1.8 | | $1.0 |
1 year - 5 years | | 84.0 | | 48.0 | | 79.8 | | 84.0 |
5 years - 10 years | | 36.2 | | 44.0 | | 52.3 | | 36.2 |
10 years - 15 years | | 4.2 | | 10.0 | | 2.5 | | 4.2 |
15 years - 20 years | | 2.3 | | 1.2 | | 3.8 | | 2.3 |
20 years+ | | 17.0 | | 35.8 | | 23.7 | | 17.0 |
Total | | $144.7 | | $141.0 | | $163.9 | | $144.7 |
During the years ended December 31, 2010, 2009, 2008, and 2007,2008, proceeds from the dispositions of securities amounted to $322.8 million, $393.0 million, $483.4 million, and $105.7$483.4 million, respectively. During the years ended December 31, 2010, 2009, 2008, and 2007,2008, gross gains of $4.4 million, $4.7$4.4 million, and $0.9$4.7 million, respectively, and gross losses of $0.6 million, $6.5 million, $4.2 million, and $0.4$4.2 million, respectively, were recorded in earnings.
Other-than-temporary impairments and unrealized gains and losses
Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy evaluate unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred. Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding recognition and presentation of other-than-temporary impairments related to investments in debt securities. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairmentimpairm ent is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). For debt securities held as of January 1, 2009 for which an other-than-temporary impairment had
Entergy Corporation and Subsidiaries
Notes to Financial Statements
previously been recognized but for which assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities
infor the years ended December 31, 2010 and 2009. The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to be based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the
investmentinvest ment will recover its value within a reasonable period of time.
Entergy'sEntergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.
Non-Utility NuclearEntergy Wholesale Commodities recorded charges to other income of
$1 million in 2010, $86 million in 2009,
and $50 million in 2008,
and $5 million in 2007, resulting from the recognition of the other-than-temporary impairment of certain equity securities held in its decommissioning trust funds.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 18. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDINGVARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
AsUnder applicable authoritative accounting guidance, a resultvariable interest entity (VIE) is an entity that conducts a business or holds property that possesses any of the effectsfollowing characteristics: an insufficient amount of Hurricane Katrinaequity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or where equity holders do not receive expected losses or returns. An entity may have an interest in a VIE through ownership or other contractual rights or obligations, and is required to consolidate a VIE if it is the VIE’s primary beneficiary.
The FASB issued authoritative accounting guidance that became effective in the first quarter 2010 that revised the manner in which entities evaluate whether consolidation is required for VIEs. Under the revised guidance, the primary beneficiary of a VIE is the entity that has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and has the obligation to absorb losses or has the right to residual returns that would potentially be significant to the entity. In conjunction with the adoption of the new guidance, Entergy updated reviews of its contracts and arrangements to determine whether Entergy is the primary beneficiary of a VIE based on the revisions to the previous consolidation model and other provisio ns of this standard. Based on this review Entergy determined that Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy should consolidate the respective companies from which they lease nuclear fuel, usually in a sale and leaseback transaction. This determination is because Entergy directs the nuclear fuel companies with respect to nuclear fuel purchases, assists the nuclear fuel companies in obtaining financing, and, if financing cannot be arranged, the lessee (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, or System Energy) is responsible to repurchase nuclear fuel to allow the nuclear fuel company (the VIE) to meet its obligations. Under the previous guidance, the determination of the primary beneficiary of a VIE was based on ownership interests and the risks and rewards in the entity attributable to the variable interest holders. Therefore, the Entergy companies did not previously consolidate the nuclear fuel companies. Because Entergy has historically accounted for the leases with the nuclear fuel companies as capital lease obligations, the effect of extensive flooding that resulted from levee breaks in and aroundconsolidating the New Orleans area, on September 23, 2005, Entergy New Orleans filed a voluntary petition in bankruptcy court seeking reorganization relief under Chapter 11nuclear fuel companies did not materially affect Entergy’s financial statements. During the term of the U.S. Bankruptcy Code. On May 7, 2007,arrangements, none of the bankruptcy judge entered an order confirming Entergy New Orleans' planoperating companies have been required to provide financial support apart from their scheduled lease payments. See Note 4 to the financial statements for details of reorganization. With the receipt of CDBG funds,nuclear fuel companies’ credit facility and commercial paper borrowings and long-term debt that are reported by Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy. These amounts also represent Entergy’s and the agreement on insurance recoveryrespective Registrant Subsidiary’s maximum exposure to losses associated with one of its excess insurers, Entergy New Orleans waivedtheir respective interests in the conditions precedent in its plan of reorganization and the plan became effective on May 8, 2007. Following are significant terms in Entergy New Orleans' plan of reorganization:nuclear fuel companies.
· | Entergy New Orleans paid in full, in cash, the allowed third-party prepetition accounts payable (approximately $29 million, including interest). Entergy New Orleans paid interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest (9.5%) plus 1% for 2007 through the date of payment. |
Entergy Texas determined that Entergy Gulf States Reconstruction Funding I, LLC, and Entergy Texas Restoration Funding, LLC, companies wholly-owned and consolidated by Entergy Texas, are variable interest entities and that Entergy Texas is the primary beneficiary. In June 2007, Entergy Gulf States Reconstruction Funding issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s Hurricane Rita reconstruction costs. In November 2009, Entergy Texas Restoration Funding issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs. With the proceeds, the variable interest entities purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of the variable interest entities, including the transition property, and the creditors of the variable interest entities do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to the variable interest entities except to remit transition charge collections. See Note 5 to the financial statements for additional details regarding the securitization bonds.· | Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%. The Louisiana judicial rate of interest is 9.5% for 2007, 8.5% for 2008, 5.5% for 2009, and 3.5% for 2010. |
· | Entergy New Orleans repaid in full, in cash, the outstanding borrowings under the debtor-in-possession credit agreement between Entergy New Orleans and Entergy Corporation (approximately $67 million). |
· | Entergy New Orleans' first mortgage bonds remain outstanding with their stated maturity dates and interest terms. Pursuant to an agreement with its first mortgage bondholders, Entergy New Orleans paid the first mortgage bondholders an amount equal to the one year of interest from the bankruptcy petition date that the bondholders had waived previously in the bankruptcy proceeding (approximately $12 million). |
· | Entergy New Orleans' preferred stock will remain outstanding on its stated dividend terms, and Entergy New Orleans paid its unpaid preferred dividends in arrears (approximately $1 million). |
· | Litigation claims were generally unaltered, and will generally proceed as if Entergy New Orleans had not filed for bankruptcy protection, with exceptions for certain claims. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(Entergy Corporation)Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, is a variable interest entity and Entergy Arkansas is the primary beneficiary. In August 2010, Entergy Arkansas Restoration Funding issued storm cost recovery bonds to finance Entergy Arkansas’s January 2009 ice storm damage restoration costs. With the proceeds, Entergy Arkansas Restoration Funding purchased from Entergy Arkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy Arkansas balance sheet. The creditors of Entergy Arkansas do not have recourse to the assets or revenues of Ente rgy Arkansas Restoration Funding including the storm recovery property, and the creditors of Entergy Arkansas Restoration Funding do not have recourse to the assets or revenues of Entergy Arkansas. Entergy Arkansas has no payment obligations to Entergy Arkansas Restoration Funding except to remit storm recovery charge collections. See Note 5 to the financial statements for additional details regarding the storm cost recovery bonds.
With confirmationEntergy Louisiana and System Energy are also considered to each hold a variable interest in the lessors from which they lease undivided interests representing approximately 9.3% of the planWaterford 3 and 11.5% of reorganization,the Grand Gulf nuclear plants, respectively. Entergy reconsolidatedLouisiana and System Energy are the lessees under these arrangements, which are described in more detail in Note 10 to the financial statements. Entergy New OrleansLouisiana made payments on its lease, including interest, of $35.1 million in 2010, $32.5 million in 2009, and $22.6 million in 2008. System Energy made payments on its lease, including interest, of $48.6 million in 2010, $47.8 million in 2009, and $47.1 million in 2008. The lessors are banks acting in the second quarter 2007, retroactivecapacity of owner trustee for the benefit of equity investors in the transactions pursuant to January 1, 2007.trust agreements entered solely for the purpose of facilitating the lease transactions. It is possible that Entergy Louisiana and System Energy may be considered as the primary beneficiary of the lessors, but Entergy is unable to apply the revised authoritative accounting guidance with respect to these VIEs because the lessors are not required to, and could not, provide the necessary financial information to consolidate the lessors. Because Entergy owns allaccounts for these leasing arrangements as capital financings, however, Entergy believes that consolidating the lessors would not materially affect the financial statements. In the unlikely event of default under a lease, remedies available to the lessor include payment by the lessee of the common stockfair value of the undivided interest in the plant, payment of the present value of the basic rent payments, or payment of a predetermined casualty value. Entergy New Orleans, reconsolidationbelieves , however, that the obligations recorded on the balance sheets materially represent each company’s potential exposure to loss.
Entergy has also reviewed various lease arrangements, power purchase agreements, and other agreements in which it holds a variable interest. In these cases, Entergy has determined that it is not the primary beneficiary of the related VIE because it does not have the power to direct the activities of the VIE that most significantly affect the amount of net incomeVIE’s economic performance, or it does not have the obligation to absorb losses or the right to residual returns that Entergy records from Entergy New Orleans' operations for any currentwould potentially be significant to the entity, or prior periods, but does result in Entergy New Orleans' results being included in each individual income statement line item in 2007.both.
NOTE 19. TRANSACTIONS WITH AFFILIATES (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Each Registrant Subsidiary purchases electricity from or sells electricity to the other Registrant Subsidiaries, or both, under rate schedules filed with FERC. The Registrant Subsidiaries purchase fuel from System Fuels; receive management, technical, advisory, operating, and administrative services from Entergy Services; and receive management, technical, and operating services from Entergy Operations. These transactions are on an "at cost"“at cost” basis. In addition, Entergy Power sells electricity to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans. RS Cogen sells electricity to Entergy Gulf States Louisiana.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As described in Note 1 to the financial statements, all of System Energy'sEnergy’s operating revenues consist of billings to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
Additionally, as described in Note 4 to the financial statements, the Registrant Subsidiaries participate in Entergy'sEntergy’s money pool and earn interest income from the money pool. Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans also receive interest income from System Fuels, Inc.
The tables below contain the various affiliate transactions of the Utility operating companies, System Energy, and other Entergy affiliates.
Intercompany Revenues
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) | | (In Millions) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | | $307.1 | | $462.9 | | $228.0 | | $56.7 | | $55.8 | | $372.8 | | $558.6 |
2009 | | $354.5 | | $475.5 | | $260.2 | | $53.4 | | $87.6 | | $295.0 | | $554.0 | | $354.5 | | $475.5 | | $260.2 | | $53.4 | | $87.6 | | $295.0 | | $554.0 |
2008 | | $419.1 | | $644.1 | | $257.8 | | $99.7 | | $161.0 | | $438.7 | | $529.0 | | $419.1 | | $644.1 | | $257.8 | | $99.7 | | $161.0 | | $438.7 | | $529.0 |
2007 | | $302.7 | | $234.3 | | $317.4 | | $145.9 | | $102.9 | | $398.8 | | $553.2 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Intercompany Operating Expenses
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) | | (In Millions) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (1) | | (2) | | (3) | | | | (4) | | | | | | (1) | | (2) | | (3) | | | | (4) | | | | |
2010 | | | $545.6 | | $602.7 | | $483.0 | | $372.9 | | $235.8 | | $519.0 | | $122.7 |
2009 | | $844.5 | | $547.6 | | $496.6 | | $353.1 | | $212.6 | | $417.6 | | $136.3 | | $844.5 | | $547.6 | | $496.6 | | $353.1 | | $212.6 | | $417.6 | | $136.3 |
2008 | | $723.4 | | $908.8 | | $587.5 | | $385.1 | | $213.1 | | $553.7 | | $118.5 | | $723.4 | | $908.8 | | $587.5 | | $385.1 | | $213.1 | | $553.7 | | $118.5 |
2007 | | $766.0 | | $619.2 | | $521.9 | | $369.1 | | $222.2 | | $483.0 | | $115.2 | |
(1) | Includes $0.1 million in 2010, $0.1 million in 2009, and $0.5 million in 2008 and $4.8 million in 2007 for power purchased from Entergy Power. |
(2) | Includes power purchased from RS Cogen of $51.4 million in 2010, $49.3 million in 2009, $82.5 million in 2008, $68.4 million in 2007.2008. |
(3) | Includes power purchased from Entergy Power of $12.0 million in 2010 and $11.6 million in 2009 and $10.5 million in 2008.2009. |
(4) | Includes power purchased from Entergy Power of $11.8 million in 2010 and $11.3 million in 2009 and $10.3 million in 2008.2009. |
Intercompany Interest Income
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Millions) | | (In Millions) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | | $0.6 | | $26.5 | | $67.6 | | $0.3 | | $0.2 | | $0.1 | | $0.7 |
2009 | | $0.9 | | $19.5 | | $55.5 | | $0.8 | | $0.7 | | $0.4 | | $1.9 | | $0.9 | | $19.5 | | $55.5 | | $0.8 | | $0.7 | | $0.4 | | $1.9 |
2008 | | $1.4 | | $12.3 | | $31.4 | | $0.9 | | $2.0 | | $2.6 | | $2.1 | | $1.4 | | $12.3 | | $31.4 | | $0.9 | | $2.0 | | $2.6 | | $2.1 |
2007 | | $2.8 | | $7.9 | | $1.7 | | $2.4 | | $0.4 | | $4.1 | | $6.1 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Operating results for the four quarters of 20092010 and 20082009 for Entergy Corporation and subsidiaries were:
| Operating Revenues | | Operating Income | | Net Income |
| (In Thousands) |
2009: | |
First Quarter | $2,789,112 | | $506,527 | | $235,335 |
Second Quarter | $2,520,789 | | $474,496 | | $226,813 |
Third Quarter | $2,937,095 | | $800,304 | | $455,169 |
Fourth Quarter | $2,498,654 | | $503,119 | | $313,775 |
| | | | | |
2008: | | | | | |
First Quarter | $2,864,734 | | $606,233 | | $308,749 |
Second Quarter | $3,264,271 | | $568,109 | | $270,954 |
Third Quarter | $3,963,884 | | $752,092 | | $470,289 |
Fourth Quarter | $3,000,867 | | $356,733 | | $170,574 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements | Operating Revenues | | Operating Income | | Consolidated Net Income | | Net Income Attributable to Entergy Corporation |
| (In Thousands) |
2010: | | | |
First Quarter | $2,759,347 | | $476,714 | | $218,814 | | $213,799 |
Second Quarter | $2,862,950 | | $626,241 | | $320,283 | | $315,266 |
Third Quarter | $3,332,176 | | $770,642 | | $497,901 | | $492,886 |
Fourth Quarter | $2,533,104 | | $393,780 | | $233,307 | | $228,291 |
| | | |
2009: | | | |
First Quarter | $2,789,112 | | $506,527 | | $240,333 | | $235,335 |
Second Quarter | $2,520,789 | | $474,496 | | $231,811 | | $226,813 |
Third Quarter | $2,937,095 | | $800,304 | | $460,167 | | $455,169 |
Fourth Quarter | $2,498,654 | | $503,119 | | $318,739 | | $313,775 |
Earnings per Average Common Share
| 2009 | | 2008 | 2010 | | 2009 |
| Basic | | Diluted | | Basic | | Diluted | Basic | | Diluted | | Basic | | Diluted |
| | | | | | | | | | | | | | |
First Quarter | $1.22 | | $1.20 | | $1.60 | | $1.56 | $1.13 | | $1.12 | | $1.22 | | $1.20 |
Second Quarter | $1.16 | | $1.14 | | $1.42 | | $1.37 | $1.67 | | $1.65 | | $1.16 | | $1.14 |
Third Quarter | $2.35 | | $2.32 | | $2.47 | | $2.41 | $2.65 | | $2.62 | | $2.35 | | $2.32 |
Fourth Quarter | $1.66 | | $1.64 | | $0.90 | | $0.89 | $1.27 | | $1.26 | | $1.66 | | $1.64 |
The business of the Utility operating companies is subject to seasonal fluctuations with the peak periods occurring during the third quarter. Operating results for the Registrant Subsidiaries for the four quarters of 20092010 and 20082009 were:
Operating Revenue |
| | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
2009: | | | | | | | | | | | | | | |
First Quarter | | $535,994 | | $488,905 | | $529,257 | | $261,705 | | $171,094 | | $413,474 | | $127,372 |
Second Quarter | | $518,009 | | $441,263 | | $527,156 | | $290,615 | | $137,137 | | $377,319 | | $130,387 |
Third Quarter | | $649,395 | | $486,772 | | $624,829 | | $356,545 | | $174,071 | | $399,496 | | $148,789 |
Fourth Quarter | | $507,865 | | $427,446 | | $502,344 | | $268,439 | | $158,120 | | $373,534 | | $147,459 |
2008: | | | | | | | | | | | | | | |
First Quarter | | $499,374 | | $558,564 | | $564,744 | | $294,850 | | $191,355 | | $397,042 | | $114,372 |
Second Quarter | | $580,462 | | $702,536 | | $753,778 | | $351,982 | | $227,508 | | $565,349 | | $128,366 |
Third Quarter | | $711,835 | | $856,882 | | $1,021,588 | | $491,113 | | $215,603 | | $621,321 | | $142,045 |
Fourth Quarter | | $536,678 | | $615,383 | | $711,184 | | $324,237 | | $179,917 | | $428,546 | | $144,215 |
Operating Revenue
Operating Income (Loss) | |
| | | | | | | | | | | | | | | | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | (In Thousands) |
| | (In Thousands) | |
2010: | | | | | | | | | | | | | | | |
First Quarter | | | $531,894 | | $498,675 | | $611,524 | | $243,557 | | $180,099 | | $336,206 | | $128,584 |
Second Quarter | | | $540,535 | | $509,225 | | $619,473 | | $308,492 | | $138,581 | | $471,153 | | $124,419 |
Third Quarter | | | $575,062 | | $632,772 | | $768,190 | | $407,906 | | $189,599 | | $514,786 | | $151,781 |
Fourth Quarter | | | $434,956 | | $456,349 | | $539,579 | | $270,230 | | $150,987 | | $368,286 | | $153,800 |
2009: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
First Quarter | | $50,055 | | $56,825 | | $41,377 | | $18,649 | | $10,858 | | $20,452 | | $43,481 | | $535,994 | | $488,905 | | $529,257 | | $261,705 | | $171,094 | | $413,474 | | $127,372 |
Second Quarter | | $57,346 | | $58,437 | | $55,011 | | $51,309 | | $18,579 | | $16,434 | | $46,122 | | $518,009 | | $441,263 | | $527,156 | | $290,615 | | $137,137 | | $377,319 | | $130,387 |
Third Quarter | | $110,666 | | $84,018 | | $125,919 | | $67,333 | | $22,302 | | $74,327 | | $43,461 | | $649,395 | | $486,772 | | $624,829 | | $356,545 | | $174,071 | | $399,496 | | $148,789 |
Fourth Quarter | | ($1,226) | | $91,155 | | $42,113 | | $28,896 | | $8,999 | | $39,879 | | $40,945 | | $507,865 | | $427,446 | | $502,344 | | $268,439 | | $158,120 | | $373,534 | | $147,459 |
2008: | | | | | | | | | | | | | | | |
First Quarter | | $52,661 | | $58,867 | | $47,219 | | $19,169 | | $19,368 | | $27,134 | | $45,342 | |
Second Quarter | | $65,801 | | $50,740 | | $73,127 | | $40,107 | | $20,905 | | $42,238 | | $44,562 | |
Third Quarter | | $108,293 | | $97,111 | | $97,600 | | $55,127 | | $21,985 | | $48,763 | | $50,936 | |
Fourth Quarter | | ($21,261) | | $37,000 | | $32,152 | | $20,787 | | $7,501 | | $17,784 | | $48,393 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Net Income (Loss) |
| | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
2009: | | | | | | | | | | | | | | |
First Quarter | | $16,070 | | $27,121 | | $36,538 | | $6,238 | | $5,399 | | $6,303 | | $22,392 |
Second Quarter | | $16,423 | | $28,802 | | $39,990 | | $23,927 | | $8,995 | | $5,172 | | $23,693 |
Third Quarter | | $52,939 | | $46,212 | | $86,969 | | $34,558 | | $12,272 | | $38,181 | | $22,026 |
Fourth Quarter | | ($18,557) | | $50,912 | | $69,348 | | $12,913 | | $4,359 | | $14,185 | | ($19,203) |
2008: | | | | | | | | | | | | | | |
First Quarter | | $22,718 | | $30,826 | | $19,596 | | $5,679 | | $7,947 | | $7,712 | | $21,601 |
Second Quarter | | $27,521 | | $23,187 | | $36,544 | | $20,130 | | $11,631 | | $21,416 | | $22,091 |
Third Quarter | | $50,273 | | $59,935 | | $64,225 | | $27,924 | | $12,104 | | $22,916 | | $22,384 |
Fourth Quarter | | ($53,360) | | $30,819 | | $37,178 | | $5,977 | | $3,265 | | $5,851 | | $24,991 |
Operating Income (Loss)
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
2010: | | | | | | | | | | | | | | |
First Quarter | | $41,917 | | $75,702 | | $56,328 | | $26,923 | | $21,552 | | $42,083 | | $38,396 |
Second Quarter | | $108,793 | | $82,594 | | $90,115 | | $63,804 | | $9,923 | | $53,615 | | $42,292 |
Third Quarter | | $166,575 | | $127,825 | | $120,872 | | $61,702 | | $26,257 | | $72,496 | | $42,033 |
Fourth Quarter | | $8,731 | | $38,486 | | $29,359 | | $26,110 | | $3,917 | | $22,380 | | $42,426 |
2009: | | | | | | | | | | | | | | |
First Quarter | | $50,055 | | $56,825 | | $41,377 | | $18,649 | | $10,858 | | $20,452 | | $43,481 |
Second Quarter | | $57,346 | | $58,437 | | $55,011 | | $51,309 | | $18,579 | | $16,434 | | $46,122 |
Third Quarter | | $110,666 | | $84,018 | | $125,919 | | $67,333 | | $22,302 | | $74,327 | | $43,461 |
Fourth Quarter | | ($1,226) | | $91,155 | | $42,113 | | $28,896 | | $8,999 | | $39,879 | | $40,945 |
Net Income (Loss)
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
2010: | | | | | | | | | | | | | | |
First Quarter | | $15,253 | | $38,083 | | $36,833 | | $11,193 | | $11,561 | | $12,418 | | $20,613 |
Second Quarter | | $55,401 | | $32,154 | | $61,259 | | $34,269 | | $5,467 | | $22,333 | | $20,442 |
Third Quarter | | $93,290 | | $76,939 | | $94,320 | | $34,014 | | $15,481 | | $31,132 | | $22,299 |
Fourth Quarter | | $8,674 | | $43,562 | | $39,023 | | $4,211 | | ($1,504) | | $317 | | $19,270 |
2009: | | | | | | | | | | | | | | |
First Quarter | | $16,070 | | $27,121 | | $36,538 | | $6,238 | | $5,399 | | $6,303 | | $22,392 |
Second Quarter | | $16,423 | | $28,802 | | $39,990 | | $23,927 | | $8,995 | | $5,172 | | $23,693 |
Third Quarter | | $52,939 | | $46,212 | | $86,969 | | $34,558 | | $12,272 | | $38,181 | | $22,026 |
Fourth Quarter | | ($18,557) | | $50,912 | | $69,348 | | $12,913 | | $4,359 | | $14,185 | | ($19,203) |
Earnings Applicable to Common Equity
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans |
| | (In Thousands) |
2010: | | | | | | | | | | |
First Quarter | | $13,535 | | $37,877 | | $35,095 | | $10,486 | | $11,320 |
Second Quarter | | $53,683 | | $31,946 | | $59,521 | | $33,562 | | $5,226 |
Third Quarter | | $91,572 | | $76,733 | | $92,582 | | $33,307 | | $15,239 |
Fourth Quarter | | $6,955 | | $43,355 | | $37,287 | | $3,504 | | ($1,745) |
2009: | | | | | | | | | | |
First Quarter | | $14,352 | | $26,915 | | $34,800 | | $5,531 | | $5,158 |
Second Quarter | | $14,705 | | $28,596 | | $38,252 | | $23,220 | | $8,754 |
Third Quarter | | $51,221 | | $46,006 | | $85,231 | | $33,851 | | $12,031 |
Fourth Quarter | | ($20,276) | | $50,705 | | $67,612 | | $12,206 | | $4,117 |
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
ENTERGY'S BUSINESS (continued from page 3)Entergy is an integrated energy company engaged primarily in electric power production and retail electric distribution operations. Entergy own and operate power plants with approximately 30,000 MW of aggregate electric generating capacity, and Entergy is the second-largest nuclear power generator in the United States. Entergy deliver electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. Entergy generated annual revenues of $11.5 billion in 2010 and had approximately 15,000 employees as of December 31, 2010.
Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.
· | The Utility business segment includes the generation, transmission, distribution, and sale of electric power in service territories in four states that include portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas distribution business. |
· | The Entergy Wholesale Commodities business segment includes the ownership and operation of six nuclear power plants located in the northern United States and the sale of the electric power produced by those plants to wholesale customers. This business also provides services to other nuclear power plant owners. Entergy Wholesale Commodities also owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers while it focuses on improving operating and financial performance of these plants, consistent with Entergy’s market-based point-of-view. |
In the fourth quarter 2010, Entergy finished integrating its former Non-Utility Nuclear business segment and its non-nuclear wholesale asset business into the new Entergy Wholesale Commodities business in an internal reorganization. The prior period financial information in this Form 10-K has been restated to reflect the change in reportable segments.
See Note 13 to the financial statements for financial information regarding Entergy’s business segments.
Entergy aspires to achieve industry-leading total shareholder returns in an environmentally responsible fashion by leveraging the scale and expertise inherent in its core nuclear and utility operations. Entergy’s scope includes electricity generation, transmission and distribution as well as natural gas transportation and distribution. Entergy focuses on operational excellence with an emphasis on safety, reliability, customer service, sustainability, cost efficiency, and risk management. Entergy also focuses on portfolio management to make periodic buy, build, hold, or sell decisions based upon its analytically-derived points of view, which are updated as market conditions evolve.
The Utility business segment includes six wholly-owned retail electric utility subsidiaries: Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas. These companies generate, transmit, distribute and sell electric power to retail and wholesale customers in Arkansas, Louisiana, Mississippi, and Texas. Entergy Gulf States Louisiana and Entergy New Orleans also provide natural gas utility services to customers in and around Baton Rouge, Louisiana, and New Orleans, Louisiana, respectively. Also included in the Utility is System Energy, a wholly-owned subsidiary of Entergy Corporation that owns or leases 90 percent of Grand Gulf. System Energy sells its power and capacity from Grand Gulf at wholesale to Entergy Arkansas, EntergyEnt ergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
The six retail utility subsidiaries are each regulated primarily by state utility commissions, or, in the case of Entergy New Orleans, the City Council. System Energy is regulated by FERC asbecause all of its transactions are at the wholesale level.wholesale. The Utility continues to operate as a rate-regulated business as efforts toward deregulation have been delayed, abandoned or have not been initiated in its service territories. The overall generation portfolio of the Utility, which relies heavily on natural gas and nuclear generation, is consistent with Entergy'sEntergy’s strong support for the environment.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
The Utility is focused on providing highly reliable and cost-effective electricity and gas service while working in an environment that provides the highest level of safety for its employees. Since 1998, the Utility has significantly improved key customer service, reliability, and safety metrics and continues to actively pursue additional improvements.
As of December 31, 2009,2010, the Utility operating companies provided retail electric and gas service to customers in Arkansas, Louisiana, Mississippi, and Texas, as follows:
| | | Electric Customers | | Gas Customers | | | | Electric Customers | | Gas Customers |
| Area Served | | (In Thousands) | | (%) | | (In Thousands) | | (%) | Area Served | | (In Thousands) | | (%) | | (In Thousands) | | (%) |
| | | | | | | | | | | | | | | | | | |
Entergy Arkansas | Portions of Arkansas | | 689 | | 25% | | | | | Portions of Arkansas | | 693 | | 25% | | | | |
Entergy Gulf States Louisiana | Portions of Louisiana | | | | | | | | | Portions of Louisiana | | 381 | | 14% | | 92 | | 48% |
Entergy Louisiana | Portions of Louisiana | | 663 | | 24% | | | | | Portions of Louisiana | | 667 | | 24% | | | | |
Entergy Mississippi | Portions of Mississippi | | 435 | | 16% | | | | | Portions of Mississippi | | 437 | | 16% | | | | |
Entergy New Orleans | City of New Orleans* | | 150 | | 6% | | 96 | | 51% | City of New Orleans* | | 157 | | 6% | | 99 | | 52% |
Entergy Texas | Portions of Texas | | 403 | | 15% | | | | | Portions of Texas | | 408 | | 15% | | | | |
Total customers | | | 2,719 | | 100% | | 188 | | 100% | | | 2,743 | | 100% | | 191 | | 100% |
* | Excludes the Algiers area of the city, where Entergy Louisiana provides electric service. |
The electric energy sales of the Utility operating companies are subject to seasonal fluctuations, with the peak sales period normally occurring during the third quarter of each year. On June 24, 2009,August 2, 2010, Entergy reached a 20092010 peak demand of 21,009 MW,21,799 MWh, compared to the 20082009 peak of 21,241 MW21,009 MWh recorded on July 28 of that year.June 24, 2009. Selected electric energy sales data is shown in the table below:
Selected 2010 Electric Energy Sales Data
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy (a) |
| | (In GWh) |
Sales to retail customers | | 22,004 | | 19,823 | | 30,649 | | 13,743 | | 5,069 | | 16,142 | | - | | 107,510 |
Sales for resale: | | | | | | | | | | | | | | | | |
Affiliates | | 7,853 | | 8,516 | | 2,860 | | 268 | | 906 | | 3,758 | | 8,692 | | - |
Others | | 850 | | 1,705 | | 101 | | 402 | | 13 | | 1,300 | | - | | 4,372 |
Total | | 30,707 | | 30,044 | | 33,610 | | 14,413 | | 5,988 | | 21,200 | | 8,692 | | 111,882 |
| | | | | | | | | | | | | | | | |
Average use per residential customer (kWh) | | 14,592 | | 16,961 | | 16,480 | | 16,572 | | 13,401 | | 16,689 | | - | | 15,943 |
(a) | Includes the effect of intercompany eliminations. |
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Selected 2009 Electric Energy Sales Data
| | Entergy Arkansas | | Entergy Gulf States Louisiana | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | | Entergy (a) |
| | (In GWh) |
Sales to retail customers | | 19,926 | | 17,962 | | 28,396 | | 12,697 | | 4,721 | | 15,446 | | - | | 99,148 |
Sales for resale: | | | | | | | | | | | | | | | | |
Affiliates | | 9,980 | | 7,084 | | 1,513 | | 198 | | 1,528 | | 3,630 | | 9,898 | | - |
Others | | 1,631 | | 2,546 | | 109 | | 330 | | 15 | | 231 | | - | | 4,862 |
Total | | 31,537 | | 27,592 | | 30,018 | | 13,225 | | 6,264 | | 19,307 | | 9,898 | | 104,010 |
| | | | | | | | | | | | | | | | |
Average use per residential customer (kWh) | | 12,855 | | 15,697 | | 15,092 | | 14,647 | | 11,891 | | 15,463 | | - | | 14,423 |
(a) | Includes the effect of intercompany eliminations. |
The following table illustrates the Utility operating companies' 2009companies’ 2010 combined electric sales volume as a percentage of total electric sales volume, and 20092010 combined electric revenues as a percentage of total 20092010 electric revenue, each by customer class.
Customer Class | | % of Sales Volume | | % of Revenue | | % of Sales Volume | | % of Revenue |
| | | | | | | | |
Residential | | 32.3 | | 38.1 | | 33.5 | | 38.6 |
Commercial | | 26.4 | | 27.7 | | 25.8 | | 26.5 |
Industrial (a) | | 34.3 | | 25.3 | | 34.6 | | 25.3 |
Governmental | | 2.3 | | 2.6 | | 2.2 | | 2.4 |
Wholesale | | 4.7 | | 6.3 | |
Wholesale/Other | | | 3.9 | | 7.2 |
(a) | Major industrial customers are in the chemical, petroleum refining, and pulp and paper industries. |
See "Selected“Selected Financial Data"Data” for each of the Utility operating companies for the detail of their sales by customer class for 2005-2009.2006-2010.
Selected 20092010 Natural Gas Sales Data
Entergy New Orleans and Entergy Gulf States Louisiana provide both electric power and natural gas to retail customers. Entergy New Orleans and Entergy Gulf States Louisiana sold 9,171,20110,817,774 and 6,380,3757,942,714 Mcf, respectively, of natural gas to retail customers in 2009.2010. In 2009,2010, 96% of Entergy Gulf States Louisiana'sLouisiana’s operating revenue was derived from the electric utility business, and only 4% from the natural gas distribution business. For Entergy New Orleans, 84%82% of operating revenue was derived from the electric utility business and 16%18% from the natural gas distribution business in 2009.2010. Following is data concerning Entergy New Orleans' 2009Orleans’s 2010 retail operating revenue sources.
Customer Class | | Electric Operating Revenue | | Natural Gas Revenue |
| | | | |
Residential | | 38% | | 49% |
Commercial | | 38% | | 25% |
Industrial | | 8% | | 10% |
Governmental/Municipal | | 16% | | 16% |
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy Customer Class | | Electric Operating Revenue | | Natural Gas Revenue |
| | | | |
Residential | | 41% | | 54% |
Commercial | | 36% | | 23% |
Industrial | | 8% | | 9% |
Governmental/Municipal | | 15% | | 14% |
General (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Each Utility operating company regularly participates in retail rate proceedings on a consistent basis.proceedings. The status of material retail rate proceedings is described in Note 2 to the financial statements. Certain aspects of the Utility operating companies'companies’ retail rate mechanisms are discussed below.
Entergy Arkansas
Fuel and Purchased Power Cost Recovery
Entergy Arkansas'Arkansas’s rate schedules include an energy cost recovery rider to recover fuel and purchased energy costs in monthly bills. The rider utilizes prior calendar year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year. The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs. In December 2007, the APSC issued an order stating that Entergy Arkansas'Arkansas’s energy cost recovery rider will remain in effect, and any future termination of the rider would be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing. See Note 2 to the financial statements for a discussion
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of proceedings regarding recovery of Entergy Arkansas'Arkansas’s storm restoration costs.
Entergy Gulf States Louisiana
Fuel Recovery
Entergy Gulf States Louisiana'sLouisiana’s electric rates include a fuel adjustment clause designed to recover the cost of fuel and purchased power costs. The fuel adjustment clause contains a surcharge or credit for deferred fuel expense and related carrying charges arising from the monthly reconciliation of actual fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
To help stabilize electricity costs, Entergy Gulf States Louisiana received approval from the LPSC to hedge its exposure to natural gas price volatility through the use of financial instruments. Entergy Gulf States Louisiana hedges approximately one-third of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed on an annual basis.
Entergy Gulf States Louisiana'sLouisiana’s gas rates include a purchased gas adjustment clause based on estimated gas costs for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
To help stabilize retail gas costs, Entergy Gulf States Louisiana received approval from the LPSC to hedge its exposure to natural gas price volatility for its gas purchased for resale through the use of financial instruments. Entergy Gulf States Louisiana hedges approximately one-half of the projected natural gas volumes used to serve its natural gas customers for November through March. The hedge quantity is reviewed on an annual basis.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of Entergy Gulf States Louisiana'sLouisiana’s filings to recover storm-related costs.
Entergy Louisiana
Fuel Recovery
Entergy Louisiana'sLouisiana’s rate schedules include a fuel adjustment clause designed to recover the cost of fuel and purchased power costs. The fuel adjustment clause contains a surcharge or credit for deferred fuel expense and related carrying charges arising from the monthly reconciliation of actual fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.
In the Delaney vs. Entergy Louisiana proceeding, the LPSC ordered Entergy Louisiana, beginning with the May 2000 fuel adjustment clause filing, to re-price costs flowed through its fuel adjustment clause related to the Evangeline gas contract so that the price included for fuel adjustment clause recovery shall thereafter be at the rate of the Henry Hub first of the month cash market price (as reported by the publication Inside FERC) plus $0.24 per mmBtu for the month for which the fuel adjustment clause is calculated, irrespective of the actual cost for the Evangeline contract quantity reflected in that month'smonth’s fuel adjustment clause.
To help stabilize electricity costs, Entergy Louisiana received approval from the LPSC in 2001 to hedge its exposure to natural gas price volatility through the use of financial instruments. Entergy Louisiana hedges approximately one-third of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed on an annual basis.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
In September 2002, Entergy Louisiana settled a proceeding that concerned a contract entered into by Entergy Louisiana to purchase, through 2031, energy generated by a hydroelectric facility known as the Vidalia project. In the settlement, the LPSC approved Entergy Louisiana'sLouisiana’s proposed treatment of the regulatory effect of the benefit from a tax accounting election related to that project. In general, the settlement permits Entergy Louisiana to keep a portion of the tax benefit in exchange for bearing the risk associated with sustaining the tax treatment. The LPSC settlement divided the term of the Vidalia contract into two segments: 2002-2012 and 2013-2031. During the first eight years of the 2002-2012 segment, Entergy Louisiana agreed to credit ratesrat es by flowing through its fuel adjustment calculation $11 million each year, beginning monthly in October 2002. Entergy Louisiana must credit rates in this way and by this amount even if Entergy Louisiana is unable to sustain the tax deduction. Entergy Louisiana also must credit rates by $11 million each year for an additional two years unless either the tax accounting method elected is retroactively repealed or the IRS denies the entire deduction related to the tax accounting method. In addition, in accordance with an LPSC settlement, Entergy Louisiana credited rates in August 2007 by $11.8 million (including interest) as a result of a settlement with the IRS of the 2001 tax treatment of the Vidalia contract. Entergy Louisiana agreed to credit ratepayers additional amounts unless the tax accounting election was not sustained. During the years 2013-2031, Entergy Louisiana and its ratepayers would share the remaining benefits of this tax accounting election.electi on. Note 8 to the financial statements contains further discussion of the obligations related to the Vidalia project.
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of Entergy Louisiana'sLouisiana’s filings to recover storm-related costs.
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
Entergy Mississippi
Fuel Recovery
Entergy Mississippi'sMississippi’s rate schedules include energy cost recovery riders to recover fuel and purchased energy costs. The rider utilizes projected energy costs filed quarterly by Entergy Mississippi to develop an energy cost rate. The energy cost rate is redetermined each calendar quarter and includes a true-up adjustment reflecting the over-recovery or under-recovery of the energy cost as of the second quarter preceding the redetermination. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
In August 2009 the MPSC retained an independent audit firm to audit Entergy Mississippi's fuel adjustment clause submittals for the period October 2007 through September 2009. The independent audit firm submitted its report to the MPSC in December 2009. The report does not recommend that any costs be disallowed for recovery. The report did suggest that some costs, less than one percent of the fuel and purchased power costs recovered during the period, may have been more reasonably charged to customers through base rates rather than through fuel charges, but the report did not suggest that customers should not have paid for those costs. In November 2009 the MPSC also retained another firm to review processes and practices related to fuel and pur chased energy. The results of that review were filed with the MPSC in March 2010. In that report, the independent consulting firm found that the practices and procedures in activities that directly affect the costs recovered through Entergy Mississippi's fuel adjustment clause appear reasonable. Both audit reports were certified by the MPSC to the Mississippi Legislature, as required by Mississippi law.
Power Management Rider
The MPSC approved the purchase of the Attala power plant in November 2005. In December 2005, the MPSC issued an order approving the investment cost recovery through its power management rider and limited the recovery to a period that begins with the closing date of the purchase and ends the earlier of the date costs are incorporated into base rates or December 31, 2006. As a consequence of the events surrounding Entergy Mississippi's Mississippi’s
Part I Item 1
Entergy Corporation, Utility operating companies, and System Energy
ongoing efforts to recover storm restoration costs associated with Hurricane Katrina, in October 2006, the MPSC approved a revision to Entergy Mississippi'sMississippi’s power management rider. The revision has the effect of allowing Entergy Mississippi to recover the annual ownership costs of the Attala plant until such time as a general rate case is filed.
To help stabilize electricity costs, Entergy Mississippi received approval from the MPSC to hedge its exposure to natural gas price volatility through the use of financial instruments. Entergy Mississippi hedges approximately one-half of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year. The hedge quantity is reviewed on an annual basis.
Storm Cost Recovery
See Note 2Entergy Mississippi maintains a storm damage reserve pursuant to orders of the MPSC and consistent with the regulatory accounting requirements. Entergy Mississippi's storm damage reserve is funded through its storm damage rider schedule. In December 2010, Entergy Mississippi filed with the MPSC a notice of its intent to revise the storm damage rider schedule to increase the level of monthly accruals to the financial statements for a discussionstorm damage reserve from the current level of $750,000 per month to $1.75 million per month, and to increase the current level of the storm reserve cap during which funds will accrue from $15 million to $25 million. The cap is the level of the storm reserve balance at which monthly accruals would temporarily cease, and under Entergy Mississippi’s curr ent filing, when the reserve balance falls below $15 million, monthly accruals would begin to be collected until the cap again is reached. The amounts of the monthly accruals and the cap have not been revised since 2001 and the current amounts do not reflect the costs of current storm restoration activities. Consideration of Entergy Mississippi's filings to recover storm-related costs.Mississippi’s notice is pending.
Entergy New Orleans
Fuel Recovery
Entergy New Orleans'Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges. In June 2006, the City Council authorized the recovery of all Grand Gulf costs through Entergy New Orleans'Orleans’s fuel adjustment clause (a significant portion of Grand Gulf costs was previously recovered through base rates), and continued that authorization in approving the October 2006 formula rate plan filing settlement. Effective June 2009, the majority of Grand Gulf costs were realignedrealigne d to base rates and are no longer flowed through the fuel adjustment clause.
Entergy New Orleans'Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges. In October 2005, the City Council approved modification of the current gas cost collection mechanism effective November 2005 in order to address concerns regarding its fluctuations, particularly during the winter heating season. The modifications are intended to minimize fluctuations in gas rates during the winter months.
To help stabilize retail gas costs, Entergy New Orleans received approval from the City Council to hedge its exposure to natural gas price volatility for its gas purchased for resale through the use of financial instruments. Entergy New Orleans hedges approximately one-half of the projected natural gas volumes used to serve its natural gas customers for November through March. The hedge quantity is reviewed on an annual basis.
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Storm Cost Recovery
See Note 2 to the financial statements for a discussion of Entergy New Orleans'Orleans’s efforts to recover storm-related costs.
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Entergy Texas
Fuel Recovery
Entergy Texas'Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges, that are not recoveredincluded in base rates. The fixed fuel factor formula was revised and approved by a PUCT order in August 2006. The new formula was implemented in September 2006. Under the new method, semi-annualSemi-annual revisions of the fixed fuel factor will continue to beare made in March and September based on the expected change in the market price of natural gas over the next 12 months. The method also accounts forand changes in resource mix and retail sales. To the extent actual costs vary from the fixed fuel factor, refunds or surcharges are required or permitted.mix. The amounts collected under theEntergy Texas’s fixed fuel factor through the start of retail open accessand any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT. The PUCT fuel cost reviews are discussed in Note 2 to the financial statements.
Storm Cost Recovery
See Note 2 to the financial statements for a discussion of proceedings regarding recovery of Entergy Texas’s storm restoration costs.
Franchises
Entergy Arkansas holds exclusive franchises to provide electric service in approximately 307 incorporated cities and towns in Arkansas. These franchises are unlimited in duration and continue unless the municipalities purchase the utility property. In Arkansas, franchises are considered to be contracts and, therefore, are terminable upon breach ofpursuant to the terms of the franchise.franchise agreement and applicable statutes.
Entergy Gulf States Louisiana holds non-exclusive franchises, permits, or certificates of convenience and necessity to provide electric service in approximately 56 incorporated municipalities and the unincorporated areas of approximately 18 parishes, and to provide gas service in the City of Baton Rouge and the unincorporated areas of two parishes. Most of Entergy Gulf States Louisiana'sLouisiana’s franchises have a term of 60 years. Entergy Gulf States Louisiana'sLouisiana’s current electric franchises expire during 2015-2046.
Entergy Louisiana holds non-exclusive franchises to provide electric service in approximately 116 incorporated Louisiana municipalities. Most of these franchises have 25-year terms. Entergy Louisiana also supplies electric service in approximately 353 unincorporated communities, all of which are located in the 45 Louisiana parishes in which it holds non-exclusive franchises. Entergy Louisiana'sLouisiana’s electric franchises expire during 2010-2036.2011-2036.
Entergy Mississippi has received from the MPSC certificates of public convenience and necessity to provide electric service to areas within 45 counties, including a number of municipalities, in western Mississippi. Under Mississippi statutory law, such certificates are exclusive. Entergy Mississippi may continue to serve in such municipalities upon payment of a statutory franchise fee, regardless of whether an original municipal franchise is still in existence.
Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to indeterminate permits set forth in city ordinances (except electric service in Algiers, which is provided by Entergy Louisiana). These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans'Orleans’s electric and gas utility properties.
Entergy Texas holds a certificate of convenience and necessity from the PUCT to provide electric service to areas within approximately 2627 counties in eastern Texas, and holds non-exclusive franchises to provide electric service in approximately 68 incorporated municipalities. Entergy Texas was typically is granted 50-year franchises, but recently has been receiving 25-year franchises. Entergy Texas'Texas’s electric franchises expire during 2010-2045.2011-2045.
The business of System Energy is limited to wholesale power sales. It has no distribution franchises.
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Generating Stations
The total capability of the generating stations owned and leased by the Utility operating companies and System Energy as of December 31, 2009,2010, is indicated below:
| | Owned and Leased Capability MW(1) | | Owned and Leased Capability MW(1) |
Company | | Total | | Gas/Oil | | Nuclear | | Coal | | Hydro | | Total | | Gas/Oil | | Nuclear | | Coal | | Hydro |
| | | | | | | | | | | | | | | | | | | | |
Entergy Arkansas | | 4,799 | | 1,682 | | 1,839 | | 1,208 | | 70 | | 4,787 | | 1,669 | | 1,835 | | 1,209 | | 74 |
Entergy Gulf States Louisiana | | 3,329 | | 1,988 | | 978 | | 363 | | - | | 3,325 | | 1,988 | | 974 | | 363 | | - |
Entergy Louisiana | | 5,834 | | 4,658 | | 1,176 | | - | | - | | 5,667 | | 4,499 | | 1,168 | | - | | - |
Entergy Mississippi | | 3,223 | | 2,803 | | - | | 420 | | - | | 3,229 | | 2,809 | | - | | 420 | | - |
Entergy New Orleans | | 745 | | 745 | | - | | - | | - | | 748 | | 748 | | - | | - | | - |
Entergy Texas | | 2,543 | | 2,274 | | - | | 269 | | - | | 2,543 | | 2,274 | | - | | 269 | | - |
System Energy | | 1,133 | | - | | 1,133 | | - | | - | | 1,126 | | - | | 1,126 | | - | | - |
Total | | 21,606 | | 14,150 | | 5,126 | | 2,260 | | 70 | | 21,425 | | 13,987 | | 5,103 | | 2,261 | | 74 |
(1) | "“Owned and Leased Capability"Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize. |
The Entergy System's load and capacity projections are reviewed periodically to assess the need and timing for additional generating capacity and interconnections. These reviews consider existing and projected demand, the availability and price of power, the location of new load, and the economy. Summer peak load in the Entergy System service territory has averaged 21,03621,119 MW from 2002-2009.2002-2010. In the 2002 time period, the Entergy System's long-term capacity resources, allowing for an adequate reserve margin, were approximately 3,000 MW less than the total capacity required for peak period demands. In this time period the Entergy System met its capacity shortages almost entirely through short-term power purchases in the wholesale spot market. In the fall of 2002, the Entergy System began a program to add new resources to its existing generation portfolio and began a process of issuing requests for proposals (RFP) to procure supply-side resources from sources other than the spot market to meet the unique regional needs of the Utility operating companies. The Entergy System has adopted a long-term resource strategy that calls for the bulk of capacity needs to be met through long-term resources, whether owned or contracted. The SystemEntergy refers to this strategy as "The Portfoliothe "Portfolio Transformation Strategy". Over the past eightnine years, Portfolio Transformation has resulted in the addition of about 4,000 MW of new long-term resources, including approximately 900the 580 MW Acadia resource that is expected to close by the end of the first quarter 2011. These figures do not include transactions currently in negotiations as a result of the Summer 2009 RFP. When the Summer 2009 RFP transactions are included in the Entergy S ystem portfolio of long-term resources that are currently under regulatory review. Adjustingand adjusting for unit deactivations of older generation, currently, the System's portfolio of long-term resourcesEntergy System is about 1,500approximately 600 MW short of its projected 20102012 peak load plus reserve margin. The remaining need has beenis expected to be met withthrough a nuclear uprate at Grand Gulf and limited-term resource procurements. The Entergy System will continue to access the spot power market to economically purchase energy in order to minimize customer cost. In addition, Entergy considers in its planning processes the implications of the notices from Entergy Arkansas and Entergy Mississippi regarding their future withdrawal from the System Agreement. Furthermore, as with other transmission systems, there are certain times during which congestion occurs on the Utility operating companies' transmission system that limits the ability of the Utility operating companies as well as other parties to fully utilize the generating resources that have been granted transmission service.
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RFP Procurements
The RFPs issued by the Entergy System since the fall of 2002 have sought resources needed to meet near-term summer reliability requirements as well as longer-term resources through a broad range of wholesale power products, including limited-term (1 to 3 years) and long-term contractual products and asset acquisitions. Detailed evaluation processes have been developed to analyze submitted proposals, and, with the exception of the January
2008 RFP and the 2008 Western Region RFP, each RFP has been overseen by an independent monitor. The following table illustrates the results of the RFP process for resources acquired since the Fall 2002 RFP. The contracts below were primarily with non-affiliated suppliers,
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with the exception of contracts with EWO Marketing for the sale of 185 MW to 206 MW from the RS Cogen plant and contracts with Entergy Power for the sale of approximately 100 MW from the Independence plant. In 2009, Entergy Louisiana requested permission from the LPSC to cancel the Little Gypsy Unit 3 re-powering project selected from the 2006 Long-Term RFP.
RFP | | Short-term 3rd Short- term 3rd party | | Limited-term affiliate | | Limited-term 3rd Limited- term 3rd party | | Long-term affiliate | | Long-term 3rd party | | Total |
| | | | | | | | | | | | |
Fall 2002 | | - | | 185-206 MW (a) | | 231 MW | | 101-121 MW (b) | | 718 MW (d) | | 1,235-1,276 MW |
January 2003 supplemental | | 222 MW | | -
| | - | | - | | - | | 222 MW |
Spring 2003 | | - | | - | | 381 MW | | (c) | | - | | 381 MW |
Fall 2003 | | - | | - | | 390 MW | | - | | - | | 390 MW |
Fall 2004 | | - | | - | | 1,250 MW | | - | | - | | 1,250 MW |
2006 Long-Term | | - | | - | | - | | 538 MW (e) | | 789 MW (f) | | 1,327 MW |
Fall 2006 | | - | | - | | 780 MW | | - | | - | | 780 MW |
January 2008 (g) | | - | | - | | - | | - | | - | | - |
2008 Western Region | | | | | | | | | | | | |
Summer 2008 (h) | | - | | - | | 200 MW | | - | | - | | 200 MW |
January 2009 Western Region | | - | | -
| | -
| | -
| | 150-300
| | 150-300 MW
|
July 2009 Baseload | | - | | 336 MW (i) | | - | | | | | | |
Summer 2009 (j) | | - | | - | | - | | TBD- | | TBD150-300 MW | | TBD150-300 MW |
July 2009 Baseload | | - | | 336 MW (i) | | - | | - | | - | | 336 MW |
Total | | 222 MW | | 521-542 MW | | 3,532 MW | | 639-659 MW | | 1,657-1,807 MW | | 6,571-6,762 MW |
(a) | Includes a conditional option to increase the capacity up to the upper bound of the range. |
(b) | The contracted capacity will increaseincreased from 101 MW to 121 MW in 2010. |
(c) | This table does not reflect (i) the River Bend 30% life-of-unit purchased power agreements totaling approximately 300 MW between Entergy Gulf States Louisiana and Entergy Louisiana (200 MW), and between Entergy Gulf States Louisiana and Entergy New Orleans (100 MW) related to Entergy Gulf States Louisiana's unregulated portion of the River Bend nuclear station, which portion was formerly owned by Cajun Electric Power Cooperative, Inc. or (ii) the Entergy Arkansas wholesale base load capacity life-of-unit purchased power agreements executed in 2003 totaling approximately 220 MW between Entergy Arkansas and Entergy Louisiana (110 MW) and between Entergy Arkansas and Entergy New Orleans (110 MW) related to the sale of a portion of Entergy Arkansas'Arkansas’s coal and nuclear base load resources (which were not included in retail rates); or (iii) 12 month12-month agreements originally executed in 2005 and which are renewed annually between Entergy Arkansas and Entergy Gulf States Louisiana and Entergy Texas, and between Entergy Arkansas and Entergy Mississippi, relating to the sale of a portion of Entergy Arkansas'Arkansas’s coal and nuclear base load resources (which were not included in retail rates) to those companies. These resources were identified outside of the formal RFP process but were submitted as formal proposals in response to the Spring 2003 RFP, which confirmed the economic merits of these resources. |
(d) | Entergy Louisiana's June 2005 purchase of the 718 MW, gas-fired Perryville plant, of which a total of 75% of the output is sold to Entergy Gulf States Louisiana and Entergy Texas. |
(e) | In 2009, Entergy Louisiana requested permission from the LPSC to cancel the Little Gypsy Unit 3 re-powering project. |
(f) | Entergy Arkansas'Arkansas’s September 2008 purchase of the 789 MW, combined-cycle, gas-fired Ouachita Generating Facility, of which one-third of the output was sold to Entergy Gulf States Louisiana prior to the purchase of one-third of the facility by Entergy Gulf States Louisiana in November 2009. |
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(g) | At the direction of the LPSC, but with full reservation of all legal rights, Entergy Services issued the January 2008 RFP for Supply-Side Resources seeking fixed price unit contingent products. Although the LPSC request was directed to Entergy Gulf States Louisiana and Entergy Louisiana, Entergy Services issued the RFP on behalf of all of the Utility operating companies. No proposals were selected from this RFP. |
(h) | OnIn October 15, 2008, and in response to the USU.S. financial crisis, ESIEntergy Services on behalf of the Entergy Operating CompaniesUtility operating companies terminated all long-term procurement efforts, including the long-term portion of the Summer 2008 RFP. |
(i) | Represents the self-supply alternative considered in the RFP, consisting of a cost-based purchase by Entergy Texas, Entergy Louisiana, and Entergy Mississippi of wholesale baseload capacity from Entergy Arkansas. |
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(j) | In September 2009, on behalf of the Entergy operating companies, Entergy Services issued the Summer 2009 Long-Term RFP seeking proposals for long-term capacity and energy through products offered in the RFP. The RFP includes a Utility self-build option. The tentative RFP schedule targets resource selection in the third quarter 2010 and execution of definitive agreements by the fourth quarter 2010. |
Entergy Louisiana and Entergy New Orleans currently purchase, 101pursuant to ten-year purchased power agreements that expire in 2013, 121 MW of capacity and energy from Entergy Power Inc. sourced from Independence Steam Electric Station Unit 2. The transaction, which originated from the Fall 2002 RFP, included an option for Entergy Louisiana and Entergy New Orleans to acquire an ownership interest in the unit for a total price of $80 million, subject to various adjustments. OnIn March 5, 2008, Entergy Louisiana and Entergy New Orleans provided notice of their intent to exercise the option. The partiesEntergy Louisiana and Entergy New Orleans are negotiatingevaluating the economics of proceeding with this option and have been in discussions with Entergy Power regarding the terms and conditions of the ownership acquisition.
In JanuarySeptember 2009, Entergy Texas issued an RFP seeking long-term CCGT resources for the Western Regionon behalf of the Entergy System in pursuit of multiple supply procurement objectives. As a result of the RFP, Entergy Services, as agent for Entergy Texas, has signed a PPA with Exelon Generation Company, LLC to purchase 150-300 megawatts of capacity and energy from the Tenaska Frontier Generating Station located in Grimes County, Texas. The PPA has an approximately ten-year delivery term and may be terminated by Entergy Texas if necessary regulatory approvals, including full cost recovery, are not obtained.
In July 2009,Utility operating companies, Entergy Services issued the Summer 2009 RFP seeking proposals for long-term capacity and energy through products offered in the RFP. The RFP included a self-build option at Entergy Louisiana’s Ninemile site. Entergy Services concluded its review and evaluation of the proposals submitted in response to the RFP in July 2009 Baseload2010 and awarded five proposals. The awarded proposals included four acquisition proposals totaling approximately 2,800 MW (including the Ninemile self-build option identified in the RFP) and one PPA proposal totaling approximately 500 MW. Subsequent to the RFP selections, one of the acquisition proposals that had been selected for award was withdrawn by the bidder. Entergy Services, on behalf of t he Utility operating companies, is negotiating definitive agreements associated with the selected proposals.
In December 2010, on behalf of Entergy Texas, EntergyGulf States Louisiana and Entergy MississippiLouisiana, Entergy Services issued the 2010 RFP for Long-Term Renewable Energy Resources seeking limited-term flexible baseload resources. A self-supply alternative was considered and ultimately selected fromup to 233 MW of renewable generation resources to meet the RFP, and consistsrequirements of a 336 MW limited-term cost-based wholesale baseload purchase from Entergy Arkansas.an LPSC general order issued in December 2010.
Other Procurements From Third Parties
The above table does not include resource acquisitions made outside of the RFP process, including Entergy Mississippi's January 2006 acquisition of the 480 MW, combined-cycle, gas-fired Attala power plant, and Entergy Gulf States Louisiana's March 2008 acquisition of the 322 MW, simple-cycle, gas-fired Calcasieu Generating Facility. In addition, in October 2009, Entergy Louisiana LLC entered into a Purchase and Sale Agreementan agreement to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, Louisiana, from Acadia Power Partners, LLC, an independent power producer. The Acadia purchase is contingent on regulatory approvals.expected to close by the end of the first quarter 2011. The above table also does not reflect various limited- and long-term contracts that have been entered into in recent years by the Utility operating companies as a result of bilateral negotiations.
Interconnections
The Entergy System's generating units are interconnected by a transmission system operating at various voltages up to 500 kV. These generating units consist primarily of steam-electric production facilities and are centrally dispatched and operated. Entergy's Utility operating companies are interconnected with many neighboring utilities. In addition, the Utility operating companies are members of the SERC Reliability Corporation. The primary purpose of SERC is to ensure the reliability and adequacy of the electric bulk power supply in the southeast region of the United States. SERC is a member of the North American Electric Reliability Corporation.
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Gas Property
As of December 31, 2009,2010, Entergy New Orleans distributed and transported natural gas for distribution within Algiers and New Orleans, Louisiana, through a total of 3334 miles of gas transmission pipeline, 1,6551,678 miles of gas distribution pipeline, and 855824 miles of gas service pipeline from the distribution mains to the customers. As of December 31, 2009,2010, the gas properties of Entergy Gulf States Louisiana, which are located in and around Baton Rouge, Louisiana, were not material to Entergy Gulf States Louisiana's financial position.
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Titles
The Entergy System's generating stations are generally located on properties owned in fee simple. Most of the substations and transmission and distribution lines are constructed on private property or public rights-of-way pursuant to easements, servitudes, or appropriate franchises. Some substation properties are owned in fee simple. The Utility operating companies generally have the right of eminent domain, whereby they may perfect title to, or secure easements or servitudes on, private property for their utility operations.
Substantially all of the physical properties and assets owned by Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are subject to the liens of mortgages securing bonds issued by those companies. The Lewis Creek generating station is owned by GSG&T, Inc., a subsidiary of Entergy Texas, and is not subject to its mortgage lien. Lewis Creek is leased to and operated by Entergy Texas.
The sources of generation and average fuel cost per kWh for the Utility operating companies and System Energy for the years 2007-20092008-2010 were:
| | Natural Gas | | Fuel Oil | | Nuclear | | Coal | | Purchased Power | | Natural Gas | | Nuclear | | Coal | | Purchased Power |
Year | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh | | % of Gen | | Cents Per kWh |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2010 | | | 22 | | 5.39 | | 36 | | .78 | | 13 | | 2.00 | | 29 | | 5.28 |
2009 | | 19 | | 5.64 | | - | | - | | 34 | | .66 | | 12 | | 2.04 | | 35 | | 5.29 | | 19 | | 5.64 | | 34 | | .66 | | 12 | | 2.04 | | 35 | | 5.29 |
2008 | | 19 | | 10.28 | | - | | 19.45 | | 30 | | .60 | | 12 | | 2.06 | | 39 | | 7.92 | | 19 | | 10.28 | | 30 | | .60 | | 12 | | 2.06 | | 39 | | 7.92 |
2007 | | 18 | | 8.05 | | - | | 14.13 | | 33 | | .57 | | 12 | | 1.86 | | 37 | | 6.27 | |
Actual 20092010 and projected 20102011 sources of generation for the Utility operating companies and System Energy, including certain power purchases from affiliates under life of unit power purchase agreements, are:
| Natural Gas | | Fuel Oil | | Nuclear | | Coal | | Purchased Power |
| 2009 | | 2010 | | 2009 | | 2010 | | 2009 | | 2010 | | 2009 | | 2010 | | 2009 | | 2010 |
| | | | | | | | | | | | | | | | | | | |
Entergy Arkansas (a) | 3% | | 12% | | - | | - | | 46% | | 48% | | 24% | | 25% | | 26% | | 14% |
Entergy Gulf States Louisiana | | | | | | | | | | | | | | | | | | | |
Entergy Louisiana | 22% | | 19% | | - | | - | | 36% | | 44% | | 2% | | 2% | | 40% | | 35% |
Entergy Mississippi | 25% | | 48% | | - | | - | | 3% | | 3% | | 21% | | 29% | | 51% | | 20% |
Entergy New Orleans | 34% | | 40% | | - | | - | | 22% | | 31% | | 9% | | 14% | | 35% | | 15% |
Entergy Texas | 36% | | 28% | | - | | - | | 13% | | 20% | | 10% | | 13% | | 41% | | 39% |
System Energy | - | | - | | - | | - | | 100%(b) | | 100%(b) | | - | | - | | - | | - |
| | | | | | | | | | | | | | | | | | | |
Utility (a) | 19% | | 22% | | - | | - | | 34% | | 36% | | 12% | | 13% | | 35% | | 29% |
| | Natural Gas | | Nuclear | | Coal | | Purchased Power |
| | 2010 | | 2011 | | 2010 | | 2011 | | 2010 | | 2011 | | 2010 | | 2011 |
| | | | | | | | | | | | | | | | |
Entergy Arkansas (a) | | 3% | | 11% | | 46% | | 46% | | 25% | | 25% | | 26% | | 17% |
Entergy Gulf States Louisiana | | 25% | | 31% | | 29% | | 15% | | 9% | | 9% | | 37% | | 45% |
Entergy Louisiana | | 27% | | 28% | | 37% | | 38% | | 2% | | 3% | | 34% | | 31% |
Entergy Mississippi | | 35% | | 41% | | 3% | | 3% | | 20% | | 27% | | 42% | | 29% |
Entergy New Orleans | | 30% | | 47% | | 24% | | 27% | | 9% | | 13% | | 37% | | 13% |
Entergy Texas | | 35% | | 22% | | 14% | | 17% | | 10% | | 13% | | 41% | | 48% |
System Energy (b) | | - | | - | | 100% | | 100% | | - | | - | | - | | - |
Utility (a) | | 22% | | 23% | | 33% | | 34% | | 12% | | 13% | | 33% | | 30% |
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(a) | Hydroelectric power provided less than 1% of Entergy Arkansas'Arkansas’s generation in 20092010 and is expected to provide approximately 1% of its generation in 2010.2011. |
(b) | Capacity and energy from System Energy'sEnergy’s interest in Grand Gulf was historicallyis allocated as follows:follows under the Unit Power Sales Agreement: Entergy Arkansas - 36%; Entergy Louisiana - 14%; Entergy Mississippi - 33%; and Entergy New Orleans - 17%. Pursuant to purchased power agreements, Entergy Arkansas is selling a portion of its owned capacity and energy from Grand Gulf to Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. |
Some of the Utility’s gas-fired plants are capable of also using fuel oil, if necessary. Although based on current economics the Utility does not expect fuel oil use in 2011, it is possible that various operational events including weather or pipeline maintenance may require the use of fuel oil.
Natural Gas
The Utility operating companies have long-term firm and short-term interruptible gas contracts for both supply and gas transportation. Long-term firm contracts for power plants comprise less than 15%25% of the Utility operating companies' total requirements. Short-term contracts and spot-market purchases satisfy additional gas requirements. Entergy Texas owns a gas storage facility that provides reliable and flexible natural gas service to certain generating stations.
Entergy Louisiana has a long-term natural gas supply contract, which expires in 2012, in which Entergy Louisiana agreed to purchase natural gas in annual amounts equal to approximately one-third of its projected annual fuel requirements for certain generating units. Annual demand charges associated with this contract are estimated to be $6.6 million.
Many factors, including wellhead deliverability, storage and pipeline capacity, and demand requirements of end users, influence the availability and price of natural gas supplies for power plants. Demand is tied to weather conditions as well as to the prices and availability of other energy sources. Pursuant to federal and state regulations, gas supplies to power plants may be interrupted during periods of shortage. To the extent natural gas supplies are disrupted or natural gas prices significantly increase, the Utility operating companies will use alternate fuels, such as oil, or rely to a larger extent on coal, nuclear generation, and purchased power.
Coal
Entergy Arkansas has a long-term contract for low-sulfur Powder River Basin (PRB) coal which expires in 2011 and is expected to provide for approximately 40%30% of the total expected coal requirements for 2010. Over the past three years,2011. Entergy Arkansas has committed to sevenfour medium-term (one- to three-year) contracts that will supply approximately 55%62% of the total coal supply needs in 2010.2011. These contracts are staggered in term so that not all contracts have to be renewed the same year. The additional 5%remaining 8% of total coal requirements will be satisfied by spot market or over-the-counter purchases. Based on greater PRB coal deliveries and the high cost of foreign coal, no alternative coal consumption is expected at Entergy Arkansas during 2010.2011. Entergy Arkansas has an existing long-term railroad transportation contract that will provide all of Entergy Arkansas'Arkansas’s coal transportation requirements for 20102011 and will provide most of the transportation requirements for several years beyond 2010.2011.
Entergy Gulf States Louisiana has executed three medium-term contracts for the supply of low-sulfur PRB coal for Nelson Unit 6 that will expire in late 2010 and 2011. These three contracts will supply approximately 95%90% of Nelson Unit 6 coal needs in 2010.2011. Additional PRB coal will be purchased through spot market or over-the-counter purchases provided that adequate transportation is available from BNSF Railway Company. For the same reasons as for Entergy Arkansas'Arkansas’s plants, no alternative coal consumption is expected at Nelson Unit 6 during 2010.2011. Coal will be transported to Nelson via an existing rail transportation agreement with BNSF Railway Company during 2010.2011.
For the year 2009,2010, coal transportation delivery to all Utility operating company coal-fired units have met coal demand at the plants. It is expected that improved delivery times experienced in 2009 and 2010 will continue through 2010.2011. Both Entergy Arkansas and Entergy Gulf States Louisiana control a sufficient number of railcars to satisfy the rail transportation requirement.
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The operator of Big Cajun 2 - Unit 3, Louisiana Generating, LLC, has advised Entergy Gulf States Louisiana and Entergy Texas that it has adequate rail car and barge capacity to meet the volumes of low-sulfur PRB coal requested for 2010.2011. Entergy Gulf States LouisianaLouisiana’s and Entergy TexasTexas’s coal nomination requests to Big Cajun 2 - Unit 3 are made on an annual basis.
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Nuclear Fuel
The nuclear fuel cycle consists of the following:
· | mining and milling of uranium ore to produce a concentrate; |
· | conversion of the concentrate to uranium hexafluoride gas; |
· | enrichment of the uranium hexafluoride gas; |
· | fabrication of nuclear fuel assemblies for use in fueling nuclear reactors; and |
· | disposal of spent fuel. |
System Fuels, a company owned by Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, is responsible for contracts to acquire nuclear material to be used in fueling Entergy'sEntergy’s Utility nuclear units, except for River Bend. System Fuels also maintains inventories of such materials during the various stages of processing. The Utility operating companies, except Entergy Gulf States Louisiana, purchase enriched uranium hexafluoride from System Fuels, but contract separately for the fabrication of their own nuclear fuel. The requirements for River Bend are met pursuant to contracts made by Entergy Gulf States Louisiana. All contracts for the disposal of spent nuclear fuel are between the Department of Energy (DOE) anda nd each of the nuclear power plants.
Based upon currently planned fuel cycles, Entergy'sthe nuclear units in both the Utility and Non-Utility Nuclear nuclear unitsEntergy Wholesale Commodities segments have a diversified portfolio of contracts and inventory that provides substantially adequate nuclear fuel materials and conversion and enrichment services at what Entergy believes are reasonably predictable or fixed prices through most of 2010,2011, and with substantial additional amounts after that time. Entergy'sEntergy’s ability to purchase nuclear fuel at reasonably predictable prices, however, depends upon the creditworthiness and performance reliability of uranium miners, as well as upon the structure of Entergy'sEntergy’s contracts for the purchase of nuclear fuel. For example, some of the supply under Entergy's contracts for nuclear fuel is effectively on a "mine-contingent" basis, which means that if applicable mines are unable to supply sufficient uranium, Entergy may be required to purchase some nuclear fuel from another supplier. There are a number of possible alternate suppliers that may be accessed to mitigate such an event,u nexpected supply disruption events, including potentially drawing upon Entergy'sEntergy’s inventory intended for later generation periods depending upon its risk management strategy at that time, although the pricing of any such alternate uranium supply from the market will be dependent upon the market for uranium supply at that time. In addition, some nuclear fuel contracts are on a non-fixed price basis subject to prevailing prices at the time of delivery.
Uranium supply became extremely limited in 2006 and 2007, but this supply shortfall was substantially eliminated in 2008. Market prices for uranium concentrates increased from about $7 per pound in December 2000 to a range of $70 to $135 per pound in 2007. In 2008, however, market prices for uranium concentrates ranged from $45 to $90 per pound and from January 1, 2009 through December 31, 2009 ranged from $40 to $55 per pound. The effects of market price changes may be reduced and deferred by risk management strategies (such as buying for inventory or entering into forward physical contracts at fixed prices when Entergy believes it is appropriate and useful). Entergy buys uranium from a diversified mix of sellers located in a diversified mix of countries, and from time to time purchases from nearly all qualified reliable major market participants worldwide that sell into the U.S.United States.
The recent higher nuclear fuel market prices of 2006-2009 compared to the 2000-2005 period affects the U.S. nuclear utility industry, including Entergy, first in cash flow requirements for fuel acquisition, and then, some time later, in nuclear fuel expenses. For example, for a nuclear fleet the size of Entergy's, the current market value of annual enriched uranium requirements has increased by several hundred million dollars compared to about five years ago. As nuclear fuel installed in the core in nuclear power plants is replaced fractionally over an approximate five-year period, nuclear fuel expense is beginning to, and will eventually with a time lag, reflect current market prices and can be expected to increase from the previously reported industry levels of about 0.5 cents per kWh to closer to 1.0 cent per kWh. Entergy's nuclear fuel contract portfolio has provided a degree of price hedging against the full extent of market prices through 2010, but market trends will eventually affect the costs of all nuclear plant operators.
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Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy each have made arrangements to lease nuclear fuel and related equipment and services. The lessors, which are consolidated in the financial statements of Entergy and the applicable Registrant Subsidiary, finance the acquisition and ownership of nuclear fuel through credit agreements and the issuance of notes. These arrangements are subject to periodic renewal. See Note 10 to the financial statements for a discussion of nuclear fuel leases.
Natural Gas Purchased for Resale
Entergy New Orleans has several suppliers of natural gas. Its system is interconnected with three interstate and three intrastate pipelines. Entergy New Orleans has a "no-notice" service gas purchase contract with Atmos Energy which guarantees Entergy New Orleans gas delivery at specific delivery points and at any volume within the minimum and maximum set forth in the contract amounts. The Atmos Energy gas supply is transported to Entergy New Orleans pursuant to a transportation service agreement with Gulf South Pipeline Co. This service is subject to FERC-approved rates. Entergy New Orleans also makes interruptible spot market purchases. In recent years, natural gas deliveries to Entergy New Orleans have been subject primarily to weather-related curtailments.curta ilments.
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As a result of the implementation of FERC-mandated interstate pipeline restructuring in 1993, curtailments of interstate gas supply could occur if Entergy New Orleans'Orleans's suppliers failed to perform their obligations to deliver gas under their supply agreements. Gulf South Pipeline Co. could curtail transportation capacity only in the event of pipeline system constraints.
Entergy Gulf States Louisiana purchases natural gas for resale under a firm contract from Enbridge Marketing (U.S.) Inc. In August 2008, Entergy Gulf States Louisiana entered into a new five-year contract with Enbridge Marketing (U.S.) Inc. The gas is delivered through a combination of intrastate and interstate pipelines.
State or local regulatory authorities, as described above, regulate the retail rates of the Utility operating companies. FERC regulates wholesale rates (including intrasystem sales pursuant to the System Agreement) and interstate transmission of electricity, as well as rates for System Energy'sEnergy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement.
System Agreement (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. Under the terms of the System Agreement, generating capacity and other power resources are jointly operated by the Utility operating companies. The System Agreement provides, among other things, that parties having generating reserves greater than their allocated share of reserves (long companies) shall receive payments from those parties having generating reserves that are less than their allocated share of reserves (short companies). Such payments are at amounts sufficient to cover certain of thet he long companies'companies’ costs for intermediate and peaking oil/gas-fired generation, including operating expenses, fixed charges on debt, dividend requirements on preferred equity, and a fair rate of return on common equity investment. Under the System Agreement, these chargesthe rates used to compensate long companies are based on costs associated with the long companies'companies’ steam electric generating units fueled by oil or gas and having an annual average heat rate above 10,000 Btu/kWh. In addition, for all energy exchanged among the Utility operating companies under the System Agreement, the companies purchasing exchange energy are required to pay the cost of fuel consumed in generating such energy plus a charge to cover other associated costs.
Citing its concerns that the benefits of its continued participation in the current form of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective ninety-six (96) months from the date of the notice or such earlier date as authorized by the FERC. Entergy Arkansas indicated, however, that a properly structured replacement agreement could be a viable alternative. In November 2007, pursuant to the provisions of the System Agreement, Entergy Mississippi provided its written notice to terminate its participation in the System Agreement effective ninety-six (96) months from the
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date of the notice or such earlier date as authorized by the FERC.FERC . In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the potential for a new agreement. Likewise, the New Orleans City Council opened a docket to gather information on progress towards a successor agreement.
In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month notice period without payment of a fee or being required to otherwise compensate the remaining Utility operating companies as a result of withdrawal. The FERC stated it expected Entergy and all interested parties to move forward and develop details of all needed successor arrangements and encouraged Entergy to file its Section 205 filing for post 2013 arrangements as soon as possible. The LPSCIn February 2011 the FERC denied the LPSC’s and the City Council have requestedCouncil’s rehearing requests. The LPSC has appealed the FERC’s decision to the U.S. Court of Appeals fo r the FERC's decision.District of Columbia.
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See "“System Agreement Proceedings"” in Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for discussion of the proceedings at the FERC involving the System Agreement and other related proceedings.
Transmission
See "“Independent Coordinator of Transmission"” in the "“Rate, Cost-recovery, and Other Regulation"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis.
System Energy and Related Agreements
System Energy recovers costs related to its interest in Grand Gulf through rates charged to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans for capacity and energy under the Unit Power Sales Agreement (described below). In December 1995, System Energy commenced a rate proceeding at the FERC. In July 2001, the rate proceeding became final, with the FERC approving a prospective 10.94% return on equity. The FERC'sFERC’s decision also affected other aspects of System Energy'sEnergy’s charges to the Utility operating companies that it supplies with power. In 1998, the FERC approved requests by Entergy Arkansas and Entergy Mississippi to accelerate a portion of their Grand Gulf purchased power obligations. Entergy Arkansas'E ntergy Arkansas’s and Entergy Mississippi'sMississippi’s acceleration of Grand Gulf purchased power obligations ceased effective July 2001 and July 2003, respectively, as approved by FERC.
Unit Power Sales Agreement
The Unit Power Sales Agreement allocates capacity, energy, and the related costs from System Energy's current 90%Energy’s ownership and leasehold interests in Grand Gulf to Entergy Arkansas (36%), Entergy Louisiana (14%), Entergy Mississippi (33%), and Entergy New Orleans (17%). Each of these companies is obligated to make payments to System Energy for its entitlement of capacity and energy on a full cost-of-service basis regardless of the quantity of energy delivered, so long as Grand Gulf remains in commercial operation. Payments under the Unit Power Sales Agreement are System Energy'sEnergy’s only source of operating revenue. The financial condition of System Energy depends upon the continued commercial operation of Grand Gulf and the receipt of such payments. 160;Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans generally recover payments made under the Unit Power Sales Agreement through rates charged to their customers.
In the case of Entergy Arkansas and Entergy Louisiana, payments are also recovered through sales of electricity from their respective retained shares of Grand Gulf. Under a settlement agreement entered into with the APSC in 1985 and amended in 1988, Entergy Arkansas retains 22% of its 36% share of Grand Gulf-related costs and recovers the remaining 78% of its share in rates. In the event that Entergy Arkansas is not able to sell its retained share to third parties, it may sell such energy to its retail customers at a price equal to its avoided cost, which is currently less than Entergy Arkansas'Arkansas’s cost from its retained share. Entergy Arkansas has life-of-resources purchased power agreements with Entergy Louisiana and Entergy New Orleans that sell a portion of the output of Entergy Arkansas'Arkansas’s retained share of Grand Gulf to those companies. In a series of LPSC orders, court decisions, and
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agreements from late 1985 to mid-1988, Entergy Louisiana was granted rate relief with respect to costs associated with Entergy Louisiana'sLouisiana’s share of capacity and energy from Grand Gulf, subject to certain terms and conditions. Entergy Louisiana retains and does not recover from retail ratepayers 18% of its 14% share of the costs of Grand Gulf capacity and energy and recovers the remaining 82% of its share in rates. Entergy Louisiana is allowed to recover through the fuel adjustment clause 4.6 cents per kWh for the energy related to its retained portion of these costs. Alternatively, Entergy Louisiana may sell such energy to non-affiliated parties at prices above the fuel adjustment clause recovery amount, subject to the LPSC'sLPSC’s approval.
Availability Agreement
The Availability Agreement among System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans was entered into in 1974 in connection with the financing by System Energy of Grand Gulf. The Availability Agreement provides that System Energy make available to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans all capacity and energy available from System Energy'sEnergy’s share of Grand Gulf.
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Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans also agreed severally to pay System Energy monthly for the right to receive capacity and energy from Grand Gulf in amounts that (when added to any amounts received by System Energy under the Unit Power Sales Agreement) would at least equal System Energy'sEnergy’s total operating expenses for Grand Gulf (including depreciation at a specified rate) and interest charges. The September 1989 write-off of System Energy'sEnergy’s investment in Grand Gulf 2, amounting to approximately $900 million, is being amortized for Availability Agreement purposes over 27 years.
The allocation percentages under the Availability Agreement are fixed as follows: Entergy Arkansas - 17.1%; Entergy Louisiana - 26.9%; Entergy Mississippi - 31.3%; and Entergy New Orleans - 24.7%. The allocation percentages under the Availability Agreement would remain in effect and would govern payments made under such agreement in the event of a shortfall of funds available to System Energy from other sources, including payments under the Unit Power Sales Agreement.
System Energy has assigned its rights to payments and advances from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under the Availability Agreement as security for its first mortgage bonds and reimbursement obligations to certain banks providing letters of credit in connection with the equity funding of the sale and leaseback transactions described in Note 10 to the financial statements under "“Sale and Leaseback Transactions - Grand Gulf Lease Obligations."” In these assignments, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans further agreed that, in the event they were prohibited by governmental action from making payments under the Availability Agreement (for example, if FERC reduced or disallowed such payments as constituting excessive rates), they would then make subordinated advances to System Energy in the same amounts and at the same times as the prohibited payments. System Energy would not be allowed to repay these subordinated advances so long as it remained in default under the related indebtedness or in other similar circumstances.
Each of the assignment agreements relating to the Availability Agreement provides that Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans will make payments directly to System Energy. However, if there is an event of default, those payments must be made directly to the holders of indebtedness that are the beneficiaries of such assignment agreements. The payments must be made pro rata according to the amount of the respective obligations secured.
The obligations of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans to make payments under the Availability Agreement are subject to the receipt and continued effectiveness of all necessary regulatory approvals. Sales of capacity and energy under the Availability Agreement would require that the Availability Agreement be submitted to FERC for approval with respect to the terms of such sale. No such filing with FERC has been made because sales of capacity and energy from Grand Gulf are being made pursuant to the Unit Power Sales Agreement. If, for any reason, sales of capacity and energy are made in the future pursuant to the Availability Agreement, the jurisdictional portions of the Availability Agreement would be submitted to FERC forf or approval.
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Since commercial operation of Grand Gulf began, payments under the Unit Power Sales Agreement to System Energy have exceeded the amounts payable under the Availability Agreement. Therefore, no payments under the Availability Agreement have ever been required. If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power Sales Agreement payments, and System Energy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleans could become subject to claims or demands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreement payments because their Availability Agreement obligations exceed their Unit Power Sales Agreement obligations.
The Availability Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, without further consent of any assignees or other creditors.
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Capital Funds Agreement
System Energy and Entergy Corporation have entered into the Capital Funds Agreement, whereby Entergy Corporation has agreed to supply System Energy with sufficient capital to (i) maintain System Energy'sEnergy’s equity capital at an amount equal to a minimum of 35% of its total capitalization (excluding short-term debt) and (ii) permit the continued commercial operation of Grand Gulf and pay in full all indebtedness for borrowed money of System Energy when due.
Entergy Corporation has entered into various supplements to the Capital Funds Agreement. System Energy has assigned its rights under such supplements as security for its first mortgage bonds and for reimbursement obligations to certain banks providing letters of credit in connection with the equity funding of the sale and leaseback transactions described in Note 10 to the financial statements under "“Sale and Leaseback Transactions - Grand Gulf Lease Obligations."” Each such supplement provides that permitted indebtedness for borrowed money incurred by System Energy in connection with the financing of Grand Gulf may be secured by System Energy'sEnergy’s rights under the Capital Funds Agreement on a pro rata basis (except for the Specific Payments, as defined below). In addition, in the supplements to the Capital Funds Agreement relating to the specific indebtedness being secured, Entergy Corporation has agreed to make cash capital contributions directly to System Energy sufficient to enable System Energy to make payments when due on such indebtedness (Specific Payments). However, if there is an event of default, Entergy Corporation must make those payments directly to the holders of indebtedness benefiting from the supplemental agreements. The payments (other than the Specific Payments) must be made pro rata according to the amount of the respective obligations benefiting from the supplemental agreements.
The Capital Funds Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, upon obtaining the consent, if required, of those holders of System Energy'sEnergy’s indebtedness then outstanding who have received the assignments of the Capital Funds Agreement.
Entergy Services, a corporation wholly-owned by Entergy Corporation, provides management, administrative, accounting, legal, engineering, and other services primarily to the Utility operating companies. Entergy Operations is also wholly-owned by Entergy Corporation and provides nuclear management, operations and maintenance services under contract for ANO, River Bend, Waterford 3, and Grand Gulf, subject to the owner oversight of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy, respectively. Entergy Services and Entergy Operations provide their services to the Utility operating companies and System Energy on an "at cost"“at cost” basis, pursuant to cost allocation methodologies for these service agreements that were approved by the FERC.
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Effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utility companies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole retail jurisdiction of the LPSC, Entergy Gulf States Louisiana. Management believes that the jurisdictional separation will better align Entergy Gulf States, Inc.'s’s Louisiana and Texas operations to serve customers in those states and to operate consistent with state-specific regulatory requirements as the utility regulatory environments in those jurisdictions evolve. The jurisdictional separation provides for regulation of each separated company by a single retail regulator, which should reduce regulatory complexity.
Entergy Texas now owns all Entergy Gulf States, Inc. distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, undivided 42.5% ownership shares of Entergy Gulf States, Inc.'s’s 70% ownership interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana, and other assets and contract rights to the extent related to utility operations in Texas. Entergy Gulf States Louisiana now owns all of the remaining assets that were owned by Entergy Gulf States, Inc. On a book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana and approximately 41.9% were allocated to Entergy Texas.
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Entergy Gulf States Louisiana remainsremained primarily liable for all of the long-term debt issued by Entergy Gulf States, Inc. that was outstanding on December 31, 2007. Under a debt assumption agreement with Entergy Gulf States Louisiana, Entergy Texas assumed its pro rata share of this long-term debt, which was $1.079 billion, or approximately 46%, of which $168 million remains outstanding athas been entirely paid-off as of December 31, 2009.2010. The pro rata share of the long-term debt assumed by Entergy Texas was determined by first determining the net assets for each company on a book value basis, and then calculating a debt assumption ratio that resulted in the common equity ratios for each company being approximately the same as the Entergy Gulf States, Inc. common equity ratio immediately prior to the jurisdictional separation. Entergy Texas' debt assumption does not discharge Entergy Gulf States Louisiana's liability for the long-term debt. To secure its debt assumption obligations, Entergy Texas granted to Entergy Gulf States Louisiana a first lien on Entergy Texas' assets that were previously subject to the Entergy Gulf States, Inc. mortgage. Entergy Texas has until December 31, 2010 to repay the assumed debt. In addition, Entergy Texas, as the owner of Entergy Gulf States Reconstruction Funding I, LLC ("EGSRF I"), reports the $329.5 million of senior secured transition bonds ("securitization bonds") issued by EGSRF I as long-term debt on its consolidated balance sheet. The securitization bonds are non-recourse to Entergy Texas.
Entergy Texas will purchasepurchases from Entergy Gulf States Louisiana pursuant to a life-of-unit purchased power agreement (PPA) a 42.5% share of capacity and energy from the 70% of River Bend subject to retail regulation. Entergy Texas was allocated a share of River Bend'sBend’s nuclear and environmental liabilities that is identical to the share of the plant'splant’s output purchased by Entergy Texas under the PPA. Entergy Gulf States Louisiana will purchasepurchases a 57.5% share of capacity and energy from the gas-fired generating plants owned by Entergy Texas, and Entergy Texas will purchasepurchases a 42.5% share of capacity and energy from the gas-fired generating plants owned by Entergy Gulf States Louisiana. The PPAs associated with the gas-fired generating plants will terminate when retail open access commences in Entergy Texas' jurisdiction or when the unit(s) isis/are no longer dispatched by the Entergy System. If Entergy Texas implements retail open access, it will terminate its participation in the System Agreement, except for the portion of the System Agreement related to transmission equalization. The dispatch and operation of the generating plants will not change as a result of the jurisdictional separation.
The jurisdictional separation occurred through completion of the following steps:
· | Through a Texas statutory merger-by-division, Entergy Gulf States, Inc. was renamed as Entergy Gulf States Louisiana, Inc., a Texas corporation, and the new Texas business corporation Entergy Texas, Inc. was formed. |
· | Entergy Gulf States, Inc. allocated the assets described above to Entergy Texas, and all of the capital stock of Entergy Texas was issued directly to Entergy Gulf States, Inc.'s’s parent company, Entergy Corporation. |
· | Entergy Corporation formed EGS Holdings, Inc., a Texas corporation, and contributed all of the common stock of Entergy Gulf States Louisiana, Inc. to EGS Holdings, Inc. |
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· | EGS Holdings, Inc. formed the Louisiana limited liability company Entergy Gulf States Louisiana, L.L.C. and then owned all of the issued and outstanding membership interests of Entergy Gulf States Louisiana, L.L.C. |
· | Entergy Gulf States Louisiana, Inc. then merged into Entergy Gulf States Louisiana, L.L.C., with Entergy Gulf States Louisiana, L.L.C. being the surviving entity. |
· | Entergy Corporation now owns EGS Holdings, Inc. and Entergy Texas in their entirety, and EGS Holdings, Inc. now owns Entergy Gulf States Louisiana'sLouisiana’s common membership interests in their entirety. |
Entergy Louisiana Corporate Restructuring
Effective December 31, 2005, Entergy Louisiana, LLC, a limited liability company organized under the laws of the State of Texas, as part of a restructuring involving a Texas statutory merger-by-division succeeded to all of the regulated utility operations of Entergy Louisiana, Inc. Entergy Louisiana, LLC was allocated substantially all of the property and other assets of Entergy Louisiana, Inc., including all assets used to provide retail and wholesale electric service to Entergy Louisiana, Inc.'s customers. Entergy Louisiana, LLC also assumed substantially all of the liabilities of Entergy Louisiana, Inc., including all of its debt securities and leases but excluding the outstanding preferred stock of Entergy Louisiana, Inc.
As the operator of Entergy Louisiana, Inc.'s retail utility operations, Entergy Louisiana, LLC is subject to the jurisdiction of the LPSC over electric service, rates and charges to the same extent that the LPSC possessed jurisdiction over Entergy Louisiana, Inc.'s retail utility operations. The restructuring implemented a recommendation from the LPSC staff, intended to reduce corporate franchise taxes, and is expected to result in a decrease in that component of Entergy Louisiana, LLC's rates to its Louisiana retail customers.
On December 31, 2005, and immediately prior to the formation of Entergy Louisiana, LLC, Entergy Louisiana, Inc. changed its state of incorporation from Louisiana to Texas and its name to Entergy Louisiana Holdings, Inc. Upon the effectiveness of the statutory merger-by-division on December 31, 2005, Entergy Louisiana, LLC was organized and Entergy Louisiana Holdings held all of Entergy Louisiana, LLC's common membership interests. All of the common membership interests of Entergy Louisiana, LLC continue to be held by Entergy Louisiana Holdings and all of the common stock of Entergy Louisiana Holdings continues to be held by Entergy Corporation. As part of the merger-by-division, Entergy Louisiana Holdings succeeded to Entergy Louisiana, Inc.'s rights and obligations with respect to Entergy Louisiana, Inc.'s outstanding preferred stock, which had an aggregate par value of approximately $100 million. In June 2006, Entergy Louisiana Holdings redeemed all of its preferred stock and amended its charter to eliminate authority to issue any future series of preferred stock.
Although Entergy Louisiana, LLC has been consolidated for financial reporting purposes since its inception, it did not join in the filing of Entergy's consolidated federal income tax return through the tax year 2007. Entergy Louisiana, LLC filed separate federal income tax returns, paid federal income taxes on a stand-alone basis, and was not a party to the Entergy System's intercompany tax allocation agreement through 2007. As such, Entergy Louisiana, LLC may have made elections for tax purposes that may differ from those made by the Entergy consolidated tax group, which may result in Entergy Louisiana, LLC having more exposure to tax liability than it would have had, had it been included in the Entergy consolidated tax return. Beginning in 2008, Entergy Louisiana, LLC joined the consolidated federal income tax return and participated in the Entergy System's intercompany tax allocation agreement. Entergy Louisiana Holdings will continue as a party to the Entergy System's intercompany tax allocation agreement.
After the merger-by-division, Entergy Louisiana, LLC issued $100 million of its preferred membership interests, which grant the holders thereof the power to vote together, as a single class, with Entergy Corporation as the holder of the common membership interests. The preferred membership interests have approximately 23% of the total voting power. Because Entergy Corporation, indirectly through Entergy Louisiana Holdings, owns all of the common membership interests in Entergy Louisiana, LLC, Entergy Corporation will be able to elect the entire board of directors of Entergy Louisiana, LLC, except in certain circumstances if distributions on Entergy Louisiana, LLC's preferred membership interests are in arrears.
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The Registrant Subsidiaries'Subsidiaries’ ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends or distributions pursuant to Item 503 of SEC Regulation S-K are as follows:
| | Ratios of Earnings to Fixed Charges Years Ended December 31, | | Ratios of Earnings to Fixed Charges Years Ended December 31, |
| | 2009 | | 2008 | | 2007 | | 2006 | | 2005 | | 2010 | | 2009 | | 2008 | | 2007 | | 2006 |
| | | | | | | | | | | | | | | | | | | | |
Entergy Arkansas | | 2.39 | | 2.33 | | 3.19 | | 3.37 | | 3.75 | | 3.91 | | 2.39 | | 2.33 | | 3.19 | | 3.37 |
Entergy Gulf States Louisiana | | 2.99 | | 2.44 | | 2.84 | | 3.01 | | 3.34 | | 3.58 | | 2.99 | | 2.44 | | 2.84 | | 3.01 |
Entergy Louisiana | | 3.52 | | 3.14 | | 3.44 | | 3.23 | | 3.50 | | 3.41 | | 3.52 | | 3.14 | | 3.44 | | 3.23 |
Entergy Mississippi | | 3.25 | | 2.92 | | 3.22 | | 2.54 | | 3.16 | | 3.30 | | 3.25 | | 2.92 | | 3.22 | | 2.54 |
Entergy New Orleans | | 3.66 | | 3.71 | | 2.74 | | 1.52 | | 1.22 | | 4.41 | | 3.66 | | 3.71 | | 2.74 | | 1.52 |
Entergy Texas | | 1.92 | | 2.04 | | 2.07 | | 2.12 | | 2.06 | | 2.10 | | 1.92 | | 2.04 | | 2.07 | | 2.12 |
System Energy | | 3.73 | | 3.29 | | 3.95 | | 4.05 | | 3.85 | | 3.64 | | 3.73 | | 3.29 | | 3.95 | | 4.05 |
| | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends or Distributions Years Ended December 31, |
| | 2009 | | 2008 | | 2007 | | 2006 | | 2005 |
| | | | | | | | | | |
Entergy Arkansas | | 2.09 | | 1.95 | | 2.88 | | 3.06 | | 3.34 |
Entergy Gulf States Louisiana | | 2.95 | | 2.42 | | 2.73 | | 2.90 | | 3.18 |
Entergy Louisiana | | 3.27 | | 2.87 | | 3.08 | | 2.90 | | 3.50 |
Entergy Mississippi | | 3.01 | | 2.67 | | 2.97 | | 2.34 | | 2.83 |
Entergy New Orleans | | 3.38 | | 3.45 | | 2.54 | | 1.35 | | 1.12 |
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| | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends or Distributions Years Ended December 31, |
| | 2010 | | 2009 | | 2008 | | 2007 | | 2006 |
| | | | | | | | | | |
Entergy Arkansas | | 3.50 | | 2.09 | | 1.95 | | 2.88 | | 3.06 |
Entergy Gulf States Louisiana | | 3.53 | | 2.95 | | 2.42 | | 2.73 | | 2.90 |
Entergy Louisiana | | 3.13 | | 3.27 | | 2.87 | | 3.08 | | 2.90 |
Entergy Mississippi | | 3.06 | | 3.01 | | 2.67 | | 2.97 | | 2.34 |
Entergy New Orleans | | 3.97 | | 3.38 | | 3.45 | | 2.54 | | 1.35 |
The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.
Entergy'sDuring 2010 Entergy integrated its former Non-Utility Nuclear business owns and operatesnon-nuclear wholesale assets businesses into a new organization called Entergy Wholesale Commodities.
Entergy Wholesale Commodities includes the ownership and operation of six nuclear power plants, five of which are located in the Northeast United States, with the sixth located in Michigan, and is primarily focused on selling electric power produced by those plants to wholesale customers. Non-Utility Nuclear'sEntergy Wholesale Commodities’ revenues are primarily derived from sales of energy and sales of generation capacity. This businesscapacity from these plants. Entergy Wholesale Commodities also provides operations and management services, including decommissioning services, to nuclear power plants owned by other utilities in the United States. Operations and management services, including decommissioning services, are provided through Entergy's wholly-owned subsidiary, Entergy Nuclear, Inc.
PropertyEntergy Wholesale Commodities also includes the ownership, or participation in joint ventures that own, non-nuclear power plants and the sale to wholesale customers of the electric power produced by these plants while it focuses on improving their operating and financial performance, consistent with Entergy’s market-based point-of-view.
Nuclear Generating Stations
Entergy's Non-Utility Nuclear business ownsEntergy Wholesale Commodities includes the ownership of the following nuclear power plants:
Power Plant | | Market | | In Service Year | | Acquired | | Location | | Reactor Type | | License Expiration Date | | Net Book Value (in millions) | | Market | | In Service Year | | Acquired | | Location | | Capacity- Reactor Type | | License Expiration Date |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Pilgrim | | IS0-NE | | 1972 | | July 1999 | | Plymouth, MA | | Boiling Water | | 2012 | | $253 | | IS0-NE | | 1972 | | July 1999 | | Plymouth, MA | | 688 MW - Boiling Water | | 2012 |
FitzPatrick | | NYISO | | 1975 | | Nov. 2000 | | Oswego, NY | | Boiling Water | | 2034 | | $417 | | NYISO | | 1975 | | Nov. 2000 | | Oswego, NY | | 838 MW - Boiling Water | | 2034 |
Indian Point 3 | | NYISO | | 1976 | | Nov. 2000 | | Buchanan, NY | | Pressurized Water | | 2015 | | $626 | | NYISO | | 1976 | | Nov. 2000 | | Buchanan, NY | | 1,041 MW - Pressurized Water | | 2015 |
Indian Point 2 | | NYISO | | 1974 | | Sept. 2001 | | Buchanan, NY | | Pressurized Water | | 2013 | | $952 | | NYISO | | 1974 | | Sept. 2001 | | Buchanan, NY | | 1,028 MW - Pressurized Water | | 2013 |
Vermont Yankee | | IS0-NE | | 1972 | | July 2002 | | Vernon, VT | | Boiling Water | | 2012 | | $333 | | IS0-NE | | 1972 | | July 2002 | | Vernon, VT | | 605 MW - Boiling Water | | 2012 |
Palisades | | MISO | | 1971 | | Apr. 2007 | | South Haven, MI | | Pressurized Water | | 2031 | | $737 | | MISO | | 1971 | | Apr. 2007 | | South Haven, MI | | 798 MW - Pressurized Water | | 2031 |
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Non-Utility NuclearWholesale Commodities also ownsincludes the ownership of two non-operating nuclear facilities, Big Rock Point in Michigan and Indian Point 1 in New
York, that were acquired when Non-Utility NuclearEntergy purchased the Palisades and Indian Point 2 nuclear plants, respectively. These facilities are in various stages of the decommissioning process.
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The operating licenses for Vermont Yankee, Pilgrim, Indian Point 2, and Indian Point 3 expire inbetween 2012 and 2015. Under federal law, nuclear power plants may continue to 2015. Licenseoperate beyond their license expiration dates while their renewal applications are pending at the NRC for these four plants, and are the subject of public and local political debate as well as state permitting requirements.approval. Various parties have expressed opposition to renewal of the pending license renewal applications. Therelicenses. Renewal of the Indian Point licenses is anthe subject of ongoing proceedingproceedings, which are discussed further below, before the Atomic Safety and Licensing Board (ASLB) of the NRC andNRC. Certain contentions have been admitted for litigation, regardingand new and amended contentions filed by parties in January and February 2011 have not been acted upon by the Indian Point License renewals.ASLB. Hearings on the contentions admitted by the ASLB currently are expected to begin in early 2012. 160; The ASLB has completed its proceedings regarding Vermont Yankee, but the New England Coalition filed a petition fornew contention that the ASLB denied in October 2010. The New England Coalition requested NRC review of the ASLB's decision on July 23, 2009. Also,denial in November 2010. Finally, with respect to the Pilgrim license renewal, the NRC has issued decisions resolving all but one of the issues that were previously appealed by Pilgrim Watch. The NRC remanded one issue, to the ASLB, has completed its proceedings regarding Pilgrim, butwhich ordered that testimony be filed in January 2011 and scheduled a hearing for March 2011. Meanwhile, Pilgrim Watch filed a petition for NRC reviewtwo new contentions, one of which it subsequently amended, in December 2010 and January 2011. The ASLB has not decided whether to admit or deny the ASLB's decision on November 12, 2008. Both the Vermont Yankee andnew Pilgrim license renewals are awaiting an NRC decision on the petitions for review. On September 8, 2008, the NRC granted Entergy's request for a renewed operating license for the FitzPatrick nuclear plant, which extends the operating license term for that plant by twenty years, to October 17, 2034.Watch contentions.
In addition to its federal NRC license, there is a two-step state law licensing process for obtaining a Certificate of Public Good (CPG) to operate Vermont Yankee the state certificates of public good to operate the plant and store spent nuclear fuel also expire in 2012. Non-Utility Nuclearbeyond March 21, 2012, when the current CPG expires. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed CPG for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the CPG. The Entergy affiliates that own and operate Vermont Yankee filed an application with the Vermont Public Service Board onin March 3, 2008 for approvala certificate of continued operationspublic good to operate for 20 years beginning March 22, 2012 and storage ofto store spent nuclear fuel generated after March 21, 2012. Under Vermont lawaft er that date. Ten days of hearings were held in May and June 2009. The Department of Public Service and other parties contended during the Vermont General Assembly approval of Non-Utility Nuclear's request is requiredhearing that a favorable power purchase agreement for the requestsale of power from Vermont Yankee to Vermont utilities would be granted. important to demonstrating that renewal of the certificate of public good promoted the public interest. Proceedings in that docket currently are in abeyance.
During its 2009 session, which concluded in May, several committees of the Vermont General Assembly held hearings on Vermont Yankee, but no bill or resolution was introduced for approval of continued operation and storage of spent nuclear fuel generated after March 21, 2012. Entergy had anticipated thatIn January 2010, the Vermont General Assembly might consider authorizing continued operationGovernor of the State of Vermont Yankee and spent fuel storage during its 2010 session, which began in January. Governor Jim Douglas, however, issued a statement on January 27, 2010 indicating he would not ask the Vermont General Assembly to consider Vermont Yankee licensethe renewal of a certificate of public good during its 2010 session, pending an ongoing investigation relating to elevated levelsbased on the discovery of tritium found inleakage from Vermont Yankee, groundwater monitoring wells. The Governor's statement also expressed concerns about potential decommissioning costsmiscommunication by Entergy Nuclear Vermont Yankee and about inconsistent informationEntergy Nuclear Operations related to underground piping at Vermont Yankee carrying radionuclides, that was provided by Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations, Inc. in a proceeding before the Vermont Public Service Board related to extending operation of Vermont Yankee beyond its current operating license. Notwithstanding the Governor’s position,other issues including decommissioning. Nevertheless, on February 24, 2010, a bill to authorize the V ermont Public Service Board to approve the continued operation of Vermont Yankee was advanced to a vote bydefeated in the Vermont Senate leadership and defeated by a marginvote of 26 to 4. This vote does not precludeNeither house of the Vermont Senate from voting againGeneral Assembly has voted on a similar bill in the future. Vermont is the only state of which Entergy is aware the state legislature has assertedsince that it has the authority to approve the continued operation of a Non-Utility Nuclear plant for a renewed license term.time.
In April 2007, Non-Utility NuclearEntergy submitted an application to the NRC to renew the operating licenses for Indian Point 2 and 3 for an additional 20 years. The NRC Staff currently is performing its technical and environmental reviews of the application. It issued a draft supplemental environmental impact statement in December 2008, a final supplemental environmental impact statement in December 2010, a safety evaluation with open items in January 2009, and a final safety evaluation report in August 2009. The New York Department of Environmental Conservation has taken the position that Indian Point must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process. Indian Point also must obtain a CoastalCo astal Zone Management Act consistency determination from the New York Department of State prior to getting its renewed license. For a discussion concerning the status of Non-Utility Nuclear’sEntergy Wholesale Commodities’ efforts to obtain these certifications and determinations, see "Environmental“Environmental Regulation, Clean Water Act"Act” below.
The NRC is requiredIn July 2008, the ASLB admitted 17 contentions raised by statute to provide an opportunity to members of the public to request a hearing on the Indian Point 2 and 3 license renewal application. In early December 2007, the NRC received thirteen petitions to intervene in the license renewal proceeding for Indian Point 2 and 3. The petitions were filed by various state and local government entities, including the StatesState of New York, Riverkeeper, and Connecticut, as well as several public interest groups.Clearwater that were then combined into 13 issues. In June 2010, the ASLB admitted two additional contentions raised by the State of New York, which were combined into one issue. In total, there are 19 admitted contentions that have been consolidated into 14 discrete issues. The ASLB summarily rejected four ofissued its initial case management and schedule order during the thirteen petitions tofirst
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intervene in December 2007. The nine remaining petitions contained over 160 proposed contentions, which are issues of law or fact pertaining to the license renewal application that the petitioners seek to have adjudicated by the NRC.
In January 2008, in accordance with the NRC's hearing rules, Non-Utility Nuclear filed nine detailed answers to the petitions, opposing all of the petitioners' proposed contentions. The NRC Staff, which functions as an independent party in any hearing, also filed detailed responses to the petitions. The NRC Staff opposed admission of all but a few of the petitioners' proposed contentions. On July 31, 2008, the ASLB granted, in part, the petitions to intervene of the State of New York, Riverkeeper, Inc., and Hudson River Sloop Clearwater, Inc., admitting a total of 17 technical and environmental contentions for adjudication. Due to similarities among certain contentions, the Board consolidated the 17 admitted contentions into 13 discrete issues. The ASLB subsequently permitted the Town of Cortlandt, Village of Buchanan, City of New York, State of Connecticut, and Westchester County to participate in the proceeding as "interested" governmental entities, as allowed by the NRC regulations. The ASLB issued its initial case management and scheduling order during the first quarter 2009, although the parties began the discovery process pursuant to an ASLB order issued in December 2008 and an agreement reached by the parties in January 2009 regarding disclosure issues. Any evidentiaryIn January and February 2011, the State of New York, Riverkeeper, and Clearwater submitted new and amended contentions to the ASLB based on the NRC's updated Waste Confidence Rule and the NRC's Final Supplemental Environmental Impact Statement issued for Indian Point license renewal. The ASLB has not yet acted on the proposed new and amended contentions. Evidentiary hearings on the admitted contentions are currently expected to occurbegin in 2010.early 2012.
The hearing process is an integral component of the NRC'sNRC’s regulatory framework, and evidentiary hearings on license renewal applications are not uncommon. Non-Utility NuclearEntergy intends to participate fully in the hearing process as permitted by the NRC'sNRC’s hearing rules. As noted in Non-Utility Nuclear'sEntergy’s responses to the various petitions to intervene, Non-Utility NuclearEntergy believes that many of the issues raised by the petitioners are unsupported and without merit. Furthermore, Non-Utility NuclearEntergy believes that it will carry its burden of proof with respect to any issues that were admitted for evidentiary hearings. Non-Utility NuclearEntergy will continue to work with the NRC Staff as it completes its technical and environmental reviews of the license renewal application, and based on current scheduling expectsapplication.
Non-nuclear Generating Stations
Entergy Wholesale Commodities includes the ownership, or interests in joint ventures that own, the following non-nuclear power plants:
Plant | | Location | | Ownership | | Net Owned Capacity(1) | | Type |
| | | | | | | | |
Ritchie Unit 2, 544 MW | | Helena, AR | | 100% | | 544 MW | | Gas/Oil |
Independence Unit 2, 842 MW (2) | | Newark, AR | | 14% | | 121 MW(3) | | Coal |
Top of Iowa, 80 MW (4) | �� | Worth County, IA | | 50% | | 40 MW | | Wind |
White Deer, 80 MW (4) | | Amarillo, TX | | 50% | | 40 MW | | Wind |
RS Cogen, 425 MW (4) | | Lake Charles, LA | | 50% | | 213 MW | | Gas/Steam |
(1) | “Net Owned Capacity” refers to the nameplate rating on the generating unit. |
(2) | Entergy Louisiana and Entergy New Orleans currently purchase 101 MW of capacity and energy from Independence Unit 2. The transaction included an option for Entergy Louisiana and Entergy New Orleans to acquire an ownership interest in the unit for a total price of $80 million, subject to various adjustments. On March 5, 2008, Entergy Louisiana and Entergy New Orleans provided notice of their intent to exercise the option. The parties are negotiating the terms and conditions of the ownership acquisition. |
(3) | The owned MW capacity is the portion of the plant capacity owned by Entergy Wholesale Commodities. For a complete listing of Entergy’s jointly-owned generating stations, refer to “Jointly-Owned Generating Stations” in Note 1 to the financial statements. |
(4) | Indirectly owned through interests in unconsolidated joint ventures. |
In addition to obtain 20-year license renewals for Indian Point 2 and Indian Point 3 in 2011.these generating stations, Entergy Wholesale Commodities has a contract to take 60 MW of the power from a portion of the Nelson 6 coal plant owned by a third party.
In the fourth quarter 2010, Entergy sold its 61 percent share of the Harrison County 550 MW combined cycle gas-fired power plant.
Interconnections
The Pilgrim and Vermont Yankee plants fall under the authority of the Independent System Operator (ISO) New England and the FitzPatrick and Indian Point plants fall under the authority of the New York Independent System Operator (NYISO). The Palisades plant falls under the authority of the Midwest Independent System Operator (MidwestISO). The primary purpose of ISO New England, NYISO and MidwestISO is to direct the operations of the major generation and transmission facilities in their respective regions and in doing so also takes responsibility for ensuring grid reliability, administering and monitoring wholesale electricity markets and planning for their respective region’s energy needs.
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As a wholesale generator, Entergy's Non-Utility Nuclear business'sEntergy Wholesale Commodities core business is selling energy, measured in MWh, to its customers. Non-Utility NuclearEntergy Wholesale Commodities enters into forward contracts with its customers and sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Non-Utility NuclearEntergy Wholesale Commodities sells unforced capacity to load-serving entities, which allows those companies to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Non-Utility Nuclear'sEntergy Wholesale Commodities’ forward fixed price power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy. While the terminologyterm inology and payment mechanics vary in these contracts, each of these types of contracts requires Non-Utility NuclearEntergy Wholesale Commodities to deliver MWh of energy to its counterparties, make capacity available to them, or both. See "“Commodity Price Risk - - Power Generation"Generation” in Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for additional information regarding these contracts.
In addition to the contracts discussed in "“Commodity Price Risk - - Power Generation," Non-Utility Nuclear's” Entergy’s purchase of the Vermont Yankee plant included a value sharing agreement providing for payments to the seller in the event that the plant'splant’s operating license term is renewed beyond its original expiration in 2012. Under the value sharing agreement, to the extent that the average annual price of the energy sales from the plant exceeds the specified strike price, initially $61/MWh and then adjusted annually based on three indices, the Non-Utility Nuclear businessVermont Yankee will pay 50% of the amount exceeding the strike prices to the seller. These payments, if required, will be recorded as adjustments to the purchase price of the plants. The value sharingshar ing would begin in 2012 and extend into 2022.
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As part of the purchase of the Palisades plant, Entergy's Non-Utility Nuclear businessEntergy executed a 15-year PPA with the seller, Consumers Energy, for 100% of the plant'splant’s output, excluding any future uprates. Under the purchased power agreement, Consumers Energy will receive the value of any new environmental credits for the first ten years of the agreement. EntergyPalisades and Consumers Energy will share on a 50/50 basis the value of any new environmental credits for years 11 through 15 of the agreement. The environmental credits are defined as benefits from a change in law that causes capability of the plant as of the purchase date to become a tradable attribute (e.g., emission credit, renewable energy credit, environmental credit, "green"“green” credit, etc.) or otherwise to have a market value.
Customers
Non-Utility Nuclear'sEntergy Wholesale Commodities’ customers for the sale of both energy and capacity from its nuclear plants include retail power providers, utilities, electric power co-operatives, power trading organizations and other power generation companies. These customers include Consolidated Edison, NYPA, and Consumers Energy, companies from which Non-Utility NuclearEntergy purchased plants, and ISO New England and NYISO. As of December 31, 2009,2010, the counterparties or their guarantors for 99.7% of the planned energy output under contract for Non-Utility NuclearEntergy Wholesale Commodities nuclear plants through 2014, 99.7% of the planned energy output is under contract with counterparties with2015 have public investment grade credit ratings and 0.3% is with load-serving entities without public credit ratings.
Competition
The ISO New England and NYISO markets are highly competitive. Non-Utility NuclearEntergy Wholesale Commodities has approximately 85 competitors in New England and 70 competitors in New York, including generation companies affiliated with regulated utilities, other independent power producers, municipal and co-operative generators, owners of co-generation plants and wholesale power marketers. Non-Utility NuclearEntergy Wholesale Commodities is an independent power producer, which means it generates power for sale to third parties at market prices to the extent that the power is not sold under a fixed price contract. Municipal and co-operative generators also generate power but use most of it to deliver power to their municipal or co-operative power customers. Owners of co-generation plants produce power primarily for their own consumption.co nsumption. Wholesale power marketers do not own generation; rather they buy power from generators or other market participants and resell it to retail providers or other market participants. Competition in the New England and New York power markets is affected by, among other factors, the amount of generation and transmission capacity in these markets. Based on the latest available information, Non-Utility Nuclear'sEntergy Wholesale Commodities plants provided approximately 7% of the aggregate net generation capacity serving the New England power market
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and 16% of the aggregate net generation capacity serving the New York power market. The MidwestISO market includes approximately 280 participants. The MidwestISO does not have a formal, centralized forward capacity market, but load serving entities do transact capacity through bilateral contracts. Palisades'Palisades’s current output is fully contracted to Consumers Energy through 2022 and, therefore, Non-Utility NuclearEntergy Wholesale Commodities does not expect to be materially affected by competition in the MidwestISO market in the near term.
Seasonality
Non-Utility Nuclear'sEntergy Wholesale Commodities’ revenues and operating income are subject to mild fluctuations during the year due to seasonal factors and weather conditions. When outdoor and cooling water temperatures are lower, generally during colder months, Non-Utility Nuclear'sEntergy Wholesale Commodities’ nuclear power plants operate more efficiently, and consequently, it generatesgenerate more electricity and records higher revenues and operating income.electricity. Although some of its annual contracts provide for monthly pricing, Non-Utility NuclearEntergy Wholesale Commodities derives the majority of its revenues from fixed price forward power sales that are generally sold at a single price for a calendar year, which can offset the effects of seasonality and weather conditions on monthly power prices.
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Nuclear Fuel
See "“Fuel Supply, Nuclear Fuel"” in the Utility portion of Part I, Item 1 for a discussion of the nuclear fuel cycle and markets. Entergy Nuclear Fuels Company, a wholly-owned subsidiary, is responsible for contracts to acquire nuclear materials, except for fuel fabrication, for Non-Utility Nuclear'sEntergy Wholesale Commodities’ nuclear power plants, while Entergy Nuclear Operations, Inc. acts as the agent for the purchase of nuclear fuel assembly fabrication services. All contracts for the disposal of spent nuclear fuel are between the DOE and each of the nuclear power plants.
Entergy Nuclear Power Marketing, LLC (ENPM) was formed in 2005 to centralize the power marketing function for Non-Utility Nuclear.Entergy Wholesale Commodities nuclear plants. Upon its formation, ENPM entered into long-term power purchase agreements with the Non-Utility NuclearEntergy Wholesale Commodities subsidiaries that own that business'snuclear power plants (generating subsidiaries). As part of a series of agreements, ENPM agreed to assume and/or otherwise service the existing power purchase agreements that were in effect between the generating subsidiaries and their customers. ENPM functions include origination of new energy and capacity transactions, generation scheduling, contract management (including billing and settlements), and market and credit risk mitigation.
Entergy Nuclear, Inc. pursues service agreements with other nuclear power plant owners who seek the advantages of Entergy'sEntergy’s scale and expertise but do not necessarily want to sell their assets. Services provided by either Entergy Nuclear, Inc. or other Non-Utility NuclearEntergy Wholesale Commodities subsidiaries include engineering, operations and maintenance, fuel procurement, management and supervision, technical support and training, administrative support, and other managerial or technical services required to operate, maintain, and decommission nuclear electric power facilities. Entergy Nuclear, Inc. provided decommissioning services for the Maine Yankee nuclear power plant and continues to pursue opportunities for Non-Utility NuclearEntergy Wholesale Comm odities with other nuclear plant owners through operating agreements or innovative arrangements such as structured leases.
In September 2003, Entergy's Non-Utility Nuclear business agreed to provide plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska. The contract is for 10 years, the remaining term of the plant's current operating license. Entergy will receive $14 million in each of the remaining years of the contract. Entergy can also receive up to $6 million more per year if safety and regulatory goals are met. In addition, Entergy will be reimbursed for all employee-related expenses. In 2006, Entergy Nuclear, Inc. signed an agreement to provide license renewal services for the Cooper Nuclear Station. Entergy Nuclear, Inc. has now signed an agreement with Nebraska Public Power District to extend management support services to Cooper Nuclear Station until January 2029. The plant’s original operating license, currently due to expire in 2014, is currently under review by the NRC for a 20-year license renewal.
Entergy Nuclear, Inc.also offers operating license renewal and life extension services to nuclear power plantsplant owners. TLG Services, a subsidiary of Entergy Nuclear Inc., through its subsidiary, TLG Services, offers decommissioning, engineering, and related services to nuclear power plant owners. In April 2009, Non-Utility NuclearEntergy announced that it will team with energy firm ENERCON to offer nuclear development services ranging from plant relicensing to full-service, new plant deployment. ENERCON has experience in engineering, environmental, technical and management services.
Non-Nuclear Wholesale Assets BusinessIn September 2003, Entergy agreed to provide plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska. The original contract was to expire in 2014 corresponding to the original operating license life of the plant. In 2006, an Entergy subsidiary signed an agreement to provide license renewal services for the Cooper Nuclear Station. The Cooper Nuclear Station received its license renewal from the NRC on November 29, 2010. Entergy continues to provide implementation services for the renewed license. In 2010, an Entergy subsidiary signed an agreement to extend the management support services to Cooper Nuclear Station by 15 years, through January 2029. The contract extension allows for Entergy to initially receiv e $16 million per year with an opportunity to receive an additional $4 million if safety and regulatory goals are met.
The non-nuclear wholesale assets business sells to wholesale customers the electric power produced by power plants that it owns while it focuses on improving performance and exploring sales or restructuring opportunities for its power plants. Such opportunities are evaluated consistent with Entergy's market-based point-of-view.
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Property
Generating Stations
The capacity of the generating stations owned in Entergy's non-nuclear wholesale assets business as of December 31, 2009 is indicated below:Entergy-Koch
Plant
| | Location
| | Ownership
| | Net Owned
Capacity(1)
| | Type
|
| | | | | | | | |
Ritchie Unit 2, 544 MW | | Helena, AR | | 100% | | 544 MW | | Gas/Oil |
Independence Unit 2, 842 MW (2) | | Newark, AR | | 14% | | 121 MW(3) | | Coal |
Top of Iowa, 80 MW (4) | | Worth County, IA | | 50% | | 40 MW | | Wind |
White Deer, 80 MW (4) | | Amarillo, TX | | 50% | | 40 MW | | Wind |
RS Cogen, 425 MW (4) | | Lake Charles, LA | | 50% | | 213 MW | | Gas/Steam |
Harrison County, 550 MW | | Marshall, TX | | 61% | | 335 MW(3) | | Combined Cycle Gas Turbine |
(1) | "Net Owned Capacity" refers to the nameplate rating on the generating unit. |
(2) | Entergy Louisiana and Entergy New Orleans currently purchase 101 MW of capacity and energy from Independence Unit 2. The transaction included an option for Entergy Louisiana and Entergy New Orleans to acquire an ownership interest in the unit for a total price of $80 million, subject to various adjustments. On March 5, 2008, Entergy Louisiana and Entergy New Orleans provided notice of their intent to exercise the option. The parties are negotiating the terms and conditions of the ownership acquisition. |
(3) | The owned MW capacity is the portion of the plant capacity owned by Entergy's non-nuclear wholesale assets business. For a complete listing of Entergy's jointly-owned generating stations, refer to "Jointly-Owned Generating Stations" in Note 1 to the financial statements.
|
(4) | Indirectly owned through interests in unconsolidated joint ventures. |
In addition to these generating stations, Entergy's non-nuclear wholesale assets business has a contract to take 60 MW of the power from a portion of the Nelson 6 coal plant owned by a third party.
Entergy-Koch
Entergy-Koch is a joint venture owned 50% each by Entergy and Koch Industries, Inc, through subsidiaries. Entergy-Koch began operations on February 1, 2001. Entergy contributed most of the assets and trading contracts of its power marketing and trading business and $414 million cash to the venture and Koch contributed its approximately 8,000-mile Koch Gateway Pipeline (renamed Gulf South Pipeline), gas storage facilities, and Koch Energy Trading, which marketed and traded electricity, gas, weather derivatives, and other energy-related commodities and services. As specified in the partnership agreement, Entergy contributed an additional $72.7 million to the partnership in January 2004.
In the fourth quarter of 2004, Entergy-Koch sold its energy trading and pipeline businesses to third parties. The sales came after a review of strategic alternatives for enhancing the value of Entergy-Koch, LP. Entergy received $862 million of cash distributions in 2004 from Entergy-Koch after the business sales. Due to the November 2006 expiration of contingencies on the sale of Entergy-Koch'sEntergy-Koch’s trading business, and the corresponding release to Entergy-Koch of sales proceeds held in escrow, Entergy received additional cash distributions of approximately $163 million during the fourth quarter of 2006 and recorded a gain of approximately $55 million (net-of-tax). In December 2009, Entergy reorganized its investment in Entergy-Koch, receivedrec eived a $25.6 million cash distribution, and received a distribution of certain software owned by the joint venture. Entergy-Koch is no longer an operating entity.
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The Energy Policy Act of 2005 became law in August 2005. The legislation contains electricity provisions that, among other things:
· | Repealed PUHCA 1935, through enactment of PUHCA 2005, effective February 8, 2006; PUHCA 2005 and/or related amendments to Section 203(a) of the Federal Power Act (a) remove various limitations on Entergy Corporation as a registered holding company under PUHCA 1935; (b) require the maintenance and retention of books and records by certain holding company system companies for inspection by the FERC and state commissions, as appropriate; and (c) effectively leave to the jurisdiction of the FERC (or state or local regulatory bodies, as appropriate) (i) the issuance by an electric utility of securities; (ii) (A) the disposition of jurisdictional FERC electric facilities by an electric utility; (B) the acquisition by an electric utility of securities of an electric utility; (C) the acquisition by an electric utility of electric generating facilities (in eacheac h of the cases in (A), (B) and (C) only in transactions in excess of $10 million); (iv) electric public utility mergers; and (v) the acquisition by an electric public utility holding company of securities of an electric public utility company or its holding company in excess of $10 million or the merger of electric public utility holding company systems. PUHCA 2005 and the related FERC rule-making also provide a savings provision which permits continued reliance on certain PUHCA 1935 rules and orders after the repeal of PUHCA 1935. |
· | Codifies the concept of participant funding or cost causation, a form of cost allocation for transmission interconnections and upgrades, and allows the FERC to apply participant funding in all regions of the country. Participant funding helps ensure that a utility'sutility’s native load customers only bear the costs that are necessary to provide reliable transmission service to them and do not bear costs imposed by generators (the participants) who seekfor transmission projects that are not required for reliability and that are not anticipated to deliver power to other regions.provide the customers net benefits. |
· | Provides financing benefits, including loan guarantees and production tax credits, for new nuclear plant construction, and reauthorizes the Price-Anderson Act, the law that provides an umbrella of insurance protection for the payment of public liability claims in the event of a major nuclear power plant incident. |
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· | Revises current tax law treatment of nuclear decommissioning trust funds by allowing regulated and non-regulated taxpayers to make deductible contributions to fund the entire amount of estimated future decommissioning costs. |
· | Provides a more rapid tax depreciation schedule for transmission assets to encourage investment. |
· | Creates mandatory electricity reliability guidelines with enforceable penalties to help ensure that the nation'snation’s power transmission grid is kept in good repair and that disruptions in the electricity system are minimized. Entergy already voluntarily complies with National Electricity Reliability Council standards, which are similar to the guidelines mandated by the Energy Policy Act of 2005. |
· | Establishes conditions for the elimination of the Public Utility Regulatory Policy Act'sAct’s (PURPA) mandatory purchase obligation from qualifying facilities. |
· | Significantly increased the FERC'sFERC’s authorization to impose criminal and civil penalties for violations of the provisions of the Federal Power Act. |
The Federal Power Act regulates:provides the FERC the authority to regulate:
· | the transmission and wholesale sale of electric energy in interstate commerce; |
· | sales or acquisition of certain assets; |
· | the licensing of certain hydroelectric projects; |
· | certain other activities, including accounting policies and practices of electric and gas utilities; and |
· | changes in control of FERC jurisdictional entities or rate schedules. |
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The Federal Power Act gives FERC jurisdiction over the rates charged by System Energy for Grand Gulf capacity and energy provided to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans and over some of the rates charged by Entergy Arkansas and Entergy Gulf States Louisiana. FERC also regulates the rates charged for intrasystem sales pursuant to the System Agreement and the provision of transmission service to wholesale market participants.
Entergy Arkansas holds a FERC license that expires in 2053 for two hydroelectric projects totaling 70 MW of capacity.
State RegulationUtility
Entergy Arkansas is subject to regulation by the APSC, which includes the authority to:
· | oversee utility service; |
· | determine reasonable and adequate service; |
· | require proper accounting; |
· | control the acquisition or sale of any public utility plant or property constituting an operating unit or system; |
· | set rates of depreciation; |
· | issue certificates of convenience and necessity and certificates of environmental compatibility and public need; and |
· | regulate the issuance and sale of certain securities. |
To the extent authorized by governing legislation,
Part I Item 1
Entergy Texas is subject to the original jurisdiction of the municipal authorities of a number of incorporated cities in Texas with appellate jurisdiction over such matters residing in the PUCT. Entergy Texas is also subject to regulation by the PUCT as to:Corporation, Utility operating companies, and System Energy
· | retail rates and service in unincorporated areas of its service territory; |
· | customer service standards; |
· | certification of new transmission lines; and |
· | extensions of service into new areas. |
Entergy Gulf States Louisiana'sLouisiana’s electric and gas business and Entergy Louisiana are subject to regulation by the LPSC as to:
· | retail rates and charges; |
· | certification of generating facilities; |
· | power or capacity purchase contracts; and |
· | depreciation accounting, and other matters. |
Entergy Louisiana is also subject to the jurisdiction of the City Council with respect to such matters within Algiers in Orleans Parish, although the precise scope of that jurisdiction differs from that of the LPSC.
Entergy Mississippi is subject to regulation by the MPSC as to the following:
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Entergy Mississippi is also subject to regulation by the APSC as to the certificate of environmental compatibility and public need for the Independence Station, which is located in Arkansas.
Entergy New Orleans is subject to regulation by the City Council as to the following:
· | retail rates and charges; |
· | depreciation, accounting, and |
· | issuance and sale of certain securities; and |
To the extent authorized by governing legislation, Entergy Texas is subject to the original jurisdiction of the municipal authorities of a number of incorporated cities in Texas with appellate jurisdiction over such matters residing in the PUCT. Entergy Texas is also subject to regulation by the PUCT as to:
· | retail rates and service in unincorporated areas of its service territory, and in municipalities that have ceded jurisdiction to the PUCT; |
· | customer service standards; |
· | certification of new transmission lines; and |
· | extensions of service into new areas. |
Entergy Wholesale Commodities
In November 2007, the Board approved a plan to pursue a separation of Entergy’s non-utility nuclear business from Entergy through a spin-off of the business to Entergy shareholders. In July 2010, Entergy withdrew its spin-off transaction petition that was filed with the NYPSC. In August 2010 the NYPSC issued an order closing the proceeding. In the order, the NYPSC also instituted a new proceeding directing Entergy and its subsidiaries with New York nuclear operations (Entergy Corporation, Entergy Nuclear FitzPatrick, LLC, Entergy Nuclear Indian Point 2, LLC, Entergy Nuclear Indian Point 3, LLC, and Entergy Nuclear Operations, Inc., together, the “Entergy Owners”) to show cause why they should not be required to give notice to the NYPSC a t least 60 days prior to “any contemplated transactions which could jeopardize the financial strength of any or all of the Entergy New York nuclear subsidiaries.” The facilities to which the order relates are the James A. FitzPatrick Nuclear Station and the Indian Point Energy Center (New York facilities).
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The order states that the intent of the NYPSC is not to impose “an overly broad application” of this notice requirement, and that the NYPSC is “not concerned about transactions that would not jeopardize the financial integrity of New York entities.” By way of example, the order states that the NYPSC is not suggesting that notice be provided “whenever Entergy or an intermediate parent of the New York facilities issues debt, as is often the case, without restrictions being placed on the financial capacity of its New York subsidiaries to borrow or to support debt needed to finance capital projects at the New York facilities.” The order states, however, that the NYPSC may consider an advance notice requirement for any transaction R 20;that would reduce the credit quality of the Entergy Owners below a credit rating of ‘BBB-’ or the equivalent or, in connection with the transaction and in order to provide credit support to a corporate parent, that would restrict a New York facility from issuing its own debt or otherwise require the facility to provide dividend income to its parent, when, in light of the facility’s capital needs, the issuance of such dividends would be inappropriate.”
In September 2010, Entergy filed a response to the NYPSC’s order, which raised a number of concerns with regard to the NYPSC’s jurisdiction to impose the proposed notice requirement and the practical difficulties with implementing such a requirement. In October 2010 the New York Attorney General’s Office filed a response to Entergy’s filing addressing the NYPSC’s jurisdiction to impose the proposed notice requirement, to which Entergy filed a reply. A technical conference was held on February 10, 2011.
Atomic Energy Act of 1954 and Energy Reorganization Act of 1974
Under the Atomic Energy Act of 1954 and the Energy Reorganization Act of 1974, the operation of nuclear plants is heavily regulated by the NRC, which has broad power to impose licensing and safety-related requirements. The NRC has broad authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved. Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy, as owners of all or portions of ANO, River Bend, Waterford 3, and Grand Gulf, respectively, and Entergy Operations, as the licensee and operator of these units, are subject to the jurisdiction of the NRC. Entergy's Non-Utility Nuclear business isEntergy subsidiaries in the Entergy Wholesale Commodities segment are subject to the NRC'sN RC’s jurisdiction as the ownerowners and operator of Pilgrim, Indian Point Energy Center, FitzPatrick, Vermont Yankee, and Palisades. Substantial capital expenditures at Entergy'sEntergy’s nuclear plants because of revised safety requirements of the NRC could be required in the future.
Nuclear Waste Policy Act of 1982
Spent Nuclear Fuel
Under the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee, to construct storage facilities for, and to dispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors. Entergy'sEntergy’s nuclear owner/licensee subsidiaries provide for the estimated future disposal costs of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982. The affected Entergy companies entered into contracts with the DOE, whereby the DOE is to furnish disposal services at a cost of one mill per net kWh generated and sold after April 7, 1983, plus a one-time fee for generation prior to that date. Entergy Arkansas is the only one of the Utility operating companies that generated electric power with nuclear fuel prior to that date and has a recorded liability as of December 31, 20092010 of $180.7$180.9 million for the one-time fee. Entergy's Non-Utility Nuclear business hasEntergy accepted assignment of the Pilgrim, FitzPatrick and Indian Point 3, Indian Point 1 and 2, Vermont Yankee, Palisades, and Palisades/Big Rock Point spent fuel disposal contracts with the DOE held by their previous owners. The previous owners have paid or retained liability for the fees for all generation prior to the purchase dates of those plants. The fees payable to the DOE may be adjusted in the future to assure full recovery. Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be proper components of nuclear fuel expense. Provisions to recover such costs have been or will be made in applications to regulatory authorities for the Utility plants. Entergy'sEntergy’s total spent fuel fees to date, including the one-time fee liability of Entergy Arkansas, have surpassed $1$1.3 billion.
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The permanent spent fuel repository in the U.S. has been legislated to be Yucca Mountain, Nevada. The DOE is required by law to proceed with the licensing (the DOE filed the license application in June 2008) and, after the license is granted by the NRC, proceed with the repository construction and commencement of receipt of spent fuel. Because the DOE has not begun accepting spent fuel, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts. The DOE continues to delay meeting its obligation. Moreover, the Obama administration has expressed its intention and taken specific steps to discontinue the Yucca Mountain project and plans to study a new spent fuel strategy. Therefore,Such actions incl ude a motion to the NRC to withdraw the license application with prejudice and the establishment of a commission to develop recommendations for alternative spent fuel storage solutions. However, on June 29, 2010, a panel of the NRC’s Atomic Safety and Licensing Board denied the administration’s motion to withdraw the application. Nevertheless, large uncertainty remains regarding the time frame under which the DOE will begin to accept spent fuel from Entergy's facilities for storage or disposal. As a result, continuing future expenditures will be required to increase spent fuel storage capacity at Entergy's nuclear sites.
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As a result of the DOE's failure to begin disposal of spent nuclear fuel in 1998 pursuant to the Nuclear Waste Policy Act of 1982 and the spent fuel disposal contracts, Entergy's nuclear owner/licensee subsidiaries have incurred and will continue to incur damages. In November 2003 these subsidiaries, except for the owner of Palisades, began litigation to recover the damages caused by the DOE's delay in performance. In two separate decisions in October 2007, the U.S. Court of Federal Claims awarded $10.0 million jointly to System Fuels, System Energy, and SMEPA, and awarded $48.7 million jointly to System Fuels and Entergy Arkansas, in damages related to the DOE's breach of its obligations. BothIn a revised decision issued in March 2010, the court awarded $9.7 million jointly to System Fuels, System Energy, and SMEPA. Also in March 2010, in two separate d ecisions, the court awarded $106.1 million to Entergy Nuclear Indian Point 2, and $4.2 million to Entergy Nuclear Generation Company (the owner of Pilgrim). In September 2010, the court awarded $46.6 million to Entergy Nuclear Vermont Yankee. All of these decisions are subject to appealhave been appealed by the DOE and the DOE has filed an appeal of the Entergy Arkansas decision withto the U.S. Court of Appeals for the Federal Circuit. The System Energy case awaits a final decision in the trial court, but a DOE appeal is likely upon issuance of the final decision. Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.
Pending DOE acceptance and disposal of spent nuclear fuel, the owners of nuclear plants are providing their own spent fuel storage. Storage capability additions using dry casks began operations at Palisades in 1993, at ANO in 1996, at FitzPatrick in 2002, at River Bend in 2005, at Grand Gulf in 2006, and at Indian Point and Vermont Yankee in 2008. These facilities will be expanded as needed. Current on-site spent fuel storage capacity at Waterford 3 and Pilgrim is estimated to be sufficient until approximately 2012 and 2014, respectively; by which time dry cask storage facilities are planned to be placed into service at these units.
Nuclear Plant Decommissioning
Entergy Arkansas, Entergy Gulf States Louisiana, andEntergy Louisiana, Entergy Texas, Entergy Louisiana, and System Energy are entitled to recover from customers through electric rates the estimated decommissioning costs for ANO, the portion of River Bend subject to retail rate regulation, Waterford 3, and Grand Gulf, respectively. These amounts are deposited in trust funds that can only be used for future decommissioning costs. Entergy periodically reviews and updates the estimated decommissioning costs to reflect inflation and changes in regulatory requirements and technology, and then makes applications to the regulatory authorities to reflect, in rates, the changes in projected decommissioning costs.
In June 2001,2008, Entergy Arkansas received notification fromexperienced declines in the NRCmarket value of approvalassets held in the trust funds for a renewed operating license authorizing operations at ANO 1 through May 2034. In July 2005,meeting the decommissioning funding assurance obligations for the nuclear plants. This decline adversely affected the affected Entergy Arkansas received notification from the NRC of approval for a renewed operating license authorizing operations at ANO 2 through July 2038. Entergy Arkansas' projections showed thatsubsidiaries’ ability to demonstrate compliance with the assumption of 20 years of extended operational lifeNRC’s requirements for both units, the decommissioning fund balances with earnings over the extended life would be sufficient to decommission both units. Pursuant to APSC approval, which was granted based on assumption of renewed licenses for ANO 1 and 2, beginning in 2001 Entergy Arkansas stopped collecting funds to decommission ANO 1 and 2. The APSC requires Entergy Arkansas to update every five years the estimated costs to decommission ANO. In March 2009, Entergy Arkansas filed with the APSC its fourth five-year estimate of ANO decommissioning costs. The updated estimate indicated the cost to decommission the two ANO units would be $1,265 million.
In December 2002, the LPSC approved a settlement between Entergy Gulf States, Inc. and the LPSC staff. The settlement included, among other things, the requirement to cease collection of funds to decommission River Bend based on an assumed license renewal for River Bend.
As part of the Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades/Big Rock Point purchases, the former owners transferred decommissioning trust funds, along with the liability to decommission the plants, to Entergy. As part of the Indian Point 1 and 2 purchase, Entergy also funded an additional $25 million to the decommissioning trust fund. As part of the Palisades transaction, Non-Utility Nuclear assumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan. Once the spent fuel is removed from the site, Non-Utility Nuclear will dismantle the spent fuel storage facility and complete site decommissioning. Non-Utility Nuclear expects to fund this activity from operating revenue, and Non-Utility Nuclear is providing $5 million in credit support to provide financial assurance for this obligation to the NRC.
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Ondecommissioning funding for some of its plants. In June 18, 2009, the NRC issued letters indicating that the NRC staff had concluded that there were shortfalls in the amount of decommissioning funding assurance provided for Indian Point 2, Vermont Yankee, Palisades, Waterford 3, and River Bend. The NRC staff subsequently conducted a telephone conference with Entergy on this issue on June 29,and, in August 2009, and Entergy agreed to submitsubmitted a plan by August 13, 2009, for addressing the identified shortfalls. In its August 13, 2009 submittal, Entergy provided updated analysesanalysis to the NRC that indicatedindicating that there was no current shortfall in the amounts of the required decommissioning funding assurance for Palisades based upon the trust fund balances as of July 31, 2009 and for Indian Point 2 based upon the trust fund balances as of July 31, 2009 and an analysis of the costs that would be incurred if Entergy elected to use a sixty-year period of safe storage for decommissioning, as permitted by the NRC'sNRC’s rules. TheIn December 2009 the NRC accepted the analyses regarding Palisades and Indian Point 2 by letters dated December 12, 2009 and December 28, 2009, and, with respect to each plant, the NRC concluded that no further action was required. For Vermont Yankee, Entergy concluded that, based uponwhen using the balances as of July 31,September 30, 2009 and an analysis of the costs that would be incurred if Entergy elected to use a sixty-year period of safe storage for decommissioning,trust fund balance, there was a
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shortfall of approximately $58$40 million. This $40 million which could beshortfall was satisfied with additional financial assurance in a current dollar value$40 million guarantee from Entergy Corporation that was effective as of approximately $51 million. Entergy also indicated that it planned to address this shortfall by December 31, 2009 by providing a financial assurance mechanism that is consistent with the regulatory requirements and acceptable to the NRC. A subsequent submittal to the NRC indicated that increases in the decommissioning fund, as of September 30, 2009, have lowered the shortfall to approximately $40 million, or approximately $35 million on a current dollar basis. This submittal proposed using a corporate guarantee as financial assurance, and a corporate guarantee in the amount of $40 million was executed by December 31, 2009 for this purpose.2009. For Waterford 3 and River Bend, Entergy subsidiaries made the appropriate filings by December 31, 2009 with itstheir retail regulators that request increases in ratesdecommissioning funding from customers to address the shortfalls identified by the NRC. On July 28, 2010, the LPSC approved increased decommissioning collections for Waterford 3 and the Louisiana regulated share of River Bend. On December 13, 2010, the PUCT approved increased decommissioning collections for the Texas share of River Bend. Entergy currently believes these approved increases in decommissioning funding will be sufficient to address the shortfalls, althoug h decommissioning cost inflation and trust fund performance will ultimately determine the adequacy of the funding amounts.
For the Indian Point 3 and FitzPatrick plants purchased in 2000, NYPA retained the decommissioning trusts and the decommissioning liability. NYPA and Entergy subsidiaries executed decommissioning agreements, which specify their decommissioning obligations. NYPA has the right to require the Entergy subsidiaries to assume the decommissioning liability provided that it assigns the corresponding decommissioning trust, up to a specified level, to Entergy.the Entergy subsidiaries. If the decommissioning liability is retained by NYPA, the responsible Entergy subsidiary will perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trusts.
Additional information with respect to Entergy’s decommissioning costs and decommissioning trust funds is found in Note 9 and Note 17 to the financial statements.
Price-Anderson Act
The Price-Anderson Act requires that reactor licensees purchase insurance and participate in a secondary insurance pool that provides insurance coverage for the public in the event of a nuclear power plant accident. The costs of this insurance are borne by the nuclear power industry. Congress amended and renewed the Price-Anderson Act in 2005 for a term through 2025. The Price-Anderson Act limits contingent liability for a single nuclear incident to approximately $117.5 million per reactor (with 104 nuclear industry reactors currently participating). Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, System Energy, and Entergy's Non-Utility Nuclear businessEntergy Wholesale Commodities have protection with respect to this liabilityliabili ty through a combination of private insurance and an industry assessment program, as well as insurance for property damage, costs of replacement power, and other risks relating to nuclear generating units. The Price-Anderson Act and insurance applicable to the nuclear programs of Entergy are discussed in more detail in Note 8 to the financial statements.
Entergy'sEntergy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy'sEntergy’s businesses are in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance requirements and costs cannot be precisely estimated. Except to the extent discussed below, at this time compliance with federal, state, and local provisions regulating the discharge of materials into the environment, or otherwise protecting the environment, is incorporatedincorporat ed into the routine cost structure of Entergy'sEntergy’s businesses and is not expected to have a material adverse effect on their competitive position, results of operations, cash flows or financial position.
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Clean Air Act and Subsequent Amendments
The Clean Air Act and its subsequent Amendmentsamendments established several programs that currently or in the future may affect Entergy'sEntergy’s fossil-fueled generation facilities. Individual states also operate similar independent state programs or delegated federal programs that may include requirements more stringent than federal regulatory requirements. These programs include:
· | New source review and preconstruction permits for new sources of criteria air pollutants and significant modifications to existing facilities; |
· | Acid rain program for control of sulfur dioxide (SO2) and nitrogen oxides (NOx); |
· | Nonattainment area programs for control of criteria air pollutants; |
· | Hazardous air pollutant emissions reduction program; |
· | Interstate Air Transport; |
· | Operating permits program for administration and enforcement of these and other Clean Air Act programs; and |
· | Regional Haze and Best Available Retrofit Technology programs. |
New Source Review (NSR)
Preconstruction permits are required for new facilities and for existing facilities that undergo a modification that results in a significant net emissions increase and is not classified as routine repair, maintenance, or replacement. Units that undergo a non-routine modification must obtain a permit modification and may be required to install additional air pollution control technologies. Entergy has an established process for identifying modifications requiring additional permitting approval and has followed the regulations and associated guidance provided by the states and the federal government with regard to the determination of routine repair, maintenance, and replacement. In recent years, however, the EPA has begun an enforcement initiative, aimed primarily at coal plants, to identify modificationsmodificati ons that it does not consider routine and that have failed tofor which the unit did not obtain a permit modification. Entergy to date has not been included in any of these enforcement actions. Nevertheless, variousmodified permit. Various courts and the EPA have been inconsistent in their judgments regarding what modifications that are considered routine.
In April 2007September 2010 the U.S. Supreme Court ruled thatowner of a minority interest in Entergy’s White Bluff and Independence facilities, both located in Arkansas, received a request from the applicabilityEPA for several categories of information concerning capital and maintenance projects at the facilities in order to determine compliance with the Clean Air Act NSR requirementsAct. It is possible that this request eventually will be referred to Entergy for response as the majority owner and operator. The EPA request for information does not limited onlyallege that either facility violated the law. In February 2011 Entergy received a similar request from the EPA. Entergy will respond to modifications that create an increase in hourly emission rates, but also can apply to modifications that create an increase in annual emission rates (Environmental Defense v. Duke Energy). This Supreme Court decision has resulted in a renewed effort by the EPA to bring enforcement actions against electric generating units for major non-permitted facility modifications.information requests as appropriate.
Acid Rain Program
The Clean Air Act provides SO2 allowances to most of the affected Entergy generating units for emissions based upon past emission levels and operating characteristics. Each allowance is an entitlement to emit one ton of SO2 per year. Plant owners are required to possess allowances for SO2 emissions from affected generating units. Virtually all Entergy fossil-fueled generating units are subject to SO2 allowance requirements. Entergy could be required to purchase additional allowances when it generates power using fuel oil. Fuel oil usage is determined by economic dispatch and influenced by the price of natural gas, incremental emission allowance costs, and the availability and cost of purchased power.
Ozone Nonattainment
Entergy Gulf States Louisiana and Entergy Texas each operate fossil-fueled generating units in geographic areas that are not in attainment of the currently-enforced national ambient air quality standards for ozone. The Louisiana nonattainment area that affects Entergy Gulf States Louisiana is the Baton Rouge area. The Texas nonattainment areasarea that affectaffects Entergy Texas areis the Houston-Galveston-Brazoria and the Beaumont-Port Arthur areas.area. Areas in nonattainment are classified as "marginal","marginal," "moderate," "serious," or "severe." When an area fails to meet the ambient air standard, the EPA requires state regulatory authorities to prepare state implementation plans meant to cause progress toward bringing the area into attainment with applicable standards.
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In April 2004, the EPA issued a final rule, effective June 2005, revoking a 1-hour ozone standard, including designations and classifications. In a separate action over the same period, the EPA enacted 8-hour ozone nonattainment classifications and stated that areas designated as nonattainment under a new 8-hour ozone standard shall have one year to adjust to the new requirements with submittal of a new attainment plan.
The Baton Rouge area wasis classified as a ''marginal""moderate" nonattainment area underfor the 8-hour ozone standard, with an attainment date of June 15, 2007.2010. On March 21, 2008,June 25, 2010, the EPA published a notice in the Federal Register of a proposed determination that the Baton Rouge area had failed to meethas attained the standard by the attainment date and that the EPA was proceeding with a "bump-up" of the area to the next higher nonattainment level. The Baton Rouge area is now classified as a "moderate" nonattainment area with an attainment date of June 15, 2010.
The Beaumont-Port Arthur area was originally classified as a "marginal" nonattainment area under the 8-hour standard with an attainment date of June 15, 2007. On March 18, 2008, the EPA published a notice that the Beaumont-Port Arthur area had failed to meet the standard by the attainment date based on the area's 2004-2006 monitoring data and that the EPA was proceeding with a "bump-up" of the area to the next higher nonattainment level. The 2005-2007 monitoring data showed the area to be in attainment, however, and on July 9, 2008, the Texas Commission on Environmental Quality proposed a plan for EPA re-designation of the area from nonattainment to attainment under the1997 8-hour ozone standard.standard, but formal redesignation to “attainment” has not been finalized.
The Houston-Galveston-Brazoria area was originally classified as "moderate" nonattainment under the 8-hour standard with an attainment date of June 15, 2010. On June 15, 2007, the Texas governor petitioned the EPA to reclassify Houston-Galveston-Brazoria from "moderate" to "severe." On October 1, 2008, the EPA granted the request by the Texas governor to voluntarily reclassify the Houston-Galveston-Brazoria area from a "moderate" 8-hour ozone nonattainment area to a "severe" 8-hour ozone nonattainment area. The EPA also set April 15, 2010, as the date for the State of Texas to submit a revised state implementation plan (SIP) addressing the "severe" ozone nonattainment area requirements of the Clean Air Act. In March 2010 the Texas commission ad opted the Houston-Galveston-Brazoria Attainment Demonstration SIP Revision and the Houston-Galveston-Brazoria Reasonable Further Progress SIP Revision for the 1997 eight-hour ozone standard and associated rules. EPA approval is pending. The area's new attainment date for the 8-hour ozone standard is as expeditiously as practicable, but no later than June 15, 2019.
In December 2006, the EPA's revocation of the 1-hour ozone standard was rejected in a judicial proceeding. As a result, numerous requirements can return for areas that fail to meet 1-hour ozone levels by dates set by the law. These requirements include the potential to increase fees significantly for plants operating in these areas. In addition, it is possible that new emission controls may be required. Specific costs of compliance cannot be estimated at this time, but Entergy is monitoring development of the respective state implementation plans and will develop specific compliance strategies as the plans move through the adoption process. Additionally,The Houston-Galveston-Brazoria area is classified as “severe” nonattainment for 1- hour ozone. However, in February 2010 the EPA published a determination that the Baton Rouge area has reached attainment status for the former 1-hour ozone level. This determination may reduce or eliminate any fees required in the area.
In March 2008, the EPA revised the National Ambient Air Quality Standard for ozone, creating the potential for additional counties and parishes in which Entergy operates to be placed in nonattainment status. The LDEQ recommended that eleven parishes be designated as nonattainment for the 75 parts per billion ozone standard. Entergy Gulf States Louisiana has two fossil plants and Entergy Louisiana has one fossil plant affected by this recommendation. In Arkansas, the governor recommended that Pulaski County be designated in nonattainment with the new ozone standard, where two of Entergy Arkansas'Arkansas’s smaller facilities are located. These recommendations have not been approved yet by the EPA, and in September 2009 the EPA announced that it is reconsidering the 75 parts per billion standard and may lower it further. Lowering the standard would cause the need forrequire additional analysis of county and parish attainment status. On January 7, 2010, the EPA proposed to set the primary 8-hour ozone standard at a level between 60 to 70 parts per billion. The proposal is expected to result in 11 additional Entergy facilities operating
in areas designated as non-attainment for ozone. Following nonattainment designation, states will be required to develop state implementation plans that outline control requirements that will enable the affected counties and parishes to reach attainment status. Entergy facilities in these areas may be subject to installation of NOx controls, but the degree of control will remain unknown until the state implementation plans are developed. Entergy will continue to monitor and engage in the state implementation plan development process in Entergy states.
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Hazardous Air Pollutants
In March 2005, the EPA issued a federal rule to cap and reduce mercury emissions from coal-fired power plants. The Clean Air Mercury Rule (CAMR) established "standards of performance" limiting mercury emissions from new and existing coal-fired power plants and created a market-based cap-and-trade program intended to reduce nationwide utility emissions of mercury in two distinct phases. The rule was challenged in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit). On February 8, 2008, the D.C. Circuit struck down CAMR and remanded the rule to the EPA for further consideration. The EPA likely will proceed withis developing a Maximum Achievable Control Technology (MACT) retrofit standard for new and existing coal and oil-fired units. In 2009 the EPA issued an Information Collection Request to gather data needed for promulgation of Hazardous Air Pollutant regulations. It is currently expected that the EPA will propose a mercury MACT rule for mercury and other hazardous air pollutants in 2011mid-2011 with a final rule in 2013.by late-2011. Entergy is continuing to conduct mercury research through coordination with the Electric Power Research Institute (EPRI) and others and remains involved in the current rulemaking process.
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Interstate Air Transport
In March 2005, the EPA finalized the Clean Air Interstate Rule (CAIR), which is intended to reduce SO2 and NOx emissions from electric generation plants in order to improve air quality in twenty-nine eastern states. The rule requires a combination of investment of capital to install pollution control equipment and increased operating costs through the purchase of emission allowances. Entergy's capital investment and annual allowance purchase costs under the CAIR will depend on the economic assessment of NOx and SO2 allowance markets, the cost of control technologies, and unit usage. Entergy began implementation in 2007, including installation of controls at several facilities and the development of an emission allowance procurement strategy.
The effectBased on capital spending could be offset by emission allowance markets which allow for purchases or use of allocated allowances; however,several court challenges, the allocation of the emission allowances and the set up of the market will determine the ultimate cost to Entergy. Entergy believes that the original allocation was unfairly skewed towards states with relatively higher emissions by the use of a fuel-adjustment factor. Entergy filed a challenge to this aspect of the rule in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit).
The CAIR was vacated and remanded to EPA by the D.C. Circuit in July 2008. The court found that the EPA failed to address basic obligations under the Clean Air Act's "good neighbor" provision regarding "upwind" states' contribution to air quality impairment in "downwind" states. The court also ruled favorably on Entergy's challenge, finding that the EPA exceeded its statutory authority when it included a fuel adjustment factor to calculate the state NOx emission budgets.
On December 23, 2008, the D.C. Circuit remanded the CAIR decision to the EPA without vacatur, allowingallowed the CAIR to become effective on January 1, 2009, while the EPA revisesrevised the rule. The revisedEPA released the proposed Transport Rule to replace the CAIR on July 9, 2010. The EPA expects to issue the final Transport Rule in late spring 2011. As proposed, the rule must address allwill become effective January 2012. Entergy’s capital investment and annual allowance purchase costs under the flaws identified inTransport Rule will depend on the D.C. Circuit decision, includingeconomic assessment of NOx and SO2 allowance markets, the usecost of a fuel adjustment factorcontrol technologies, generation unit utilization, and the useavailabil ity and cost of acid rain SO2 allowances for the CAIR. Entergy has reactivated its compliance effort for the CAIR based on this court ruling. The EPA is expected to issue a proposed CAIR replacement rule in 2010.purchased power.
Regional Haze
In June 2005, the EPA issued final Best Available Retrofit Control Technology (BART) regulations that could potentially result in a requirement to install SO2 and NOx pollution control technology on certain of Entergy'sEntergy’s coal and oil generation units. The rule leaves certain BART determinations to the states. The Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for Arkansas facilities to implement its obligations under the Clean Air Visibility Rule. The ADEQ determined that Entergy Arkansas'Arkansas’s White Bluff power plant affects a Class I AreaArea’s visibility and will be subject to the EPA'sEPA’s presumptive BART requirements tot o install scrubbers and low NOx burners. Under then current regulations, the scrubbers would have had to be operational by October 2013. Entergy filed a petition in December 2009 with the Arkansas Pollution Control and Ecology Commission
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requesting a variance from this deadline, however, because the EPA has not approved Arkansas'Arkansas’s Regional Haze SIP and the EPA has recently expressed concerns about Arkansas'Arkansas’s Regional Haze SIP and questioned the appropriateness of issuing an air permit prior to that approval. Entergy Arkansas'Arkansas’s petition requestsrequested that, consistent with federal law, the compliance deadline be changed to as expeditiously as practicable, but in no event later than five years after EPA approval of the Arkansas Regional Haze SIP. The Arkansas Pollution Control and Ecology (PC&E) Commission adopted a procedural schedule that includes a public hearing and a comment period endingapproved the variance in March 2010 with the expectation that the variance could be considered at the Commission's March 26, 2010 meeting.2010. The timeline for EPA action on the Arkansas Regional Haze SIP is uncertain at this time.
In March 2009, Entergy Arkansas made a filing with the APSC seeking a declaratory order that the White Bluff project is in the public interest. In May 2009 the APSC Staff filed a motion requesting that the APSC require Entergy Arkansas to file testimony on several issues. In December 2009, in response to the EPA concerns regarding Arkansas' Regional Haze SIP, the APSC suspended the procedural schedule in the proceeding.
Currently, the White Bluff project is suspended, but the latest conceptual cost estimate indicatedEntergy Arkansas estimates that Entergy Arkansas'its share of the project could cost approximately $465$500 million. TheEntergy Arkansas expects the plant wouldto continue to operate during construction, although an outage would be necessary to complete the tie intie-in of the scrubbers. Entergy continues to review potential environmental spending needs and financing alternatives for any such spending, and future spending estimates could change based on the results of this continuing analysis.
Potential Legislative, Regulatory, and Judicial Developments (Air)
In addition to the specific instances described above, there are a number of legislative and regulatory initiatives relating to the reduction of emissions that are under consideration at the federal, state, and local level. Because of the nature of Entergy'sEntergy’s business, the adoptionimposition of eachany of these initiatives could affect itsEntergy’s operations. Entergy continues to monitor these initiatives and activities in order to analyze their potential operational and cost implications. These initiatives include:
· | designation by the EPA and state environmental agencies of areas that are not in attainment with national ambient air quality standards; |
· | introduction of several bills in Congress and development of regulations by the EPA proposing further limits on NOx, SO2,SO2, mercury, and CO2carbon dioxide and other greenhouse gas emissions. New legislation or regulations applicable to stationary sources could take the form of market-based cap-and-trade programs, direct requirements for the installation of air emission controls onto air emission sources, or other or combined regulatory programs. Entergy cannot estimate the effect of any future legislation at this time due to the uncertainty of the regulatory format; |
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· | efforts to implement a voluntary program intended to reduce CO2carbon dioxide emissions and efforts in Congress to establish a mandatory federal CO2carbon dioxide emission control structure; |
· | passage and implementation of the Regional Greenhouse Gas Initiative by several states in the northeast U.S.United States and similar actions inon the Midwest and California;west coast of the United States; |
· | efforts on the state and federal level to codify renewable portfolio standards requiring utilities to produce or purchase a certain percentage of their power from defined renewable energy sources; |
· | efforts to develop more stringent state water quality standards, effluent limitations for Entergy’s industry sector, and stormwater runoff control regulations; and |
· | efforts by certain external groups to encourage reporting and disclosure of CO2carbon dioxide emissions and risk. Entergy has prepared responses for the Carbon Disclosure Project'sProject’s (CDP) annual questionnaire for the past several years and has given permission for those responses to be posted to CDP'sCDP’s website. |
In addition to these initiatives, certain states and environmental advocacy groups are seekingsought judicial action to require the EPA to promulgate regulations under existing provisions of the Clean Air Act to control CO2carbon dioxide emissions from power plants. In April 2007 the U.S. Supreme Court held that the EPA is authorized by the current provisions of the Clean Air Act to regulate emissions of CO2carbon dioxide and other "greenhouse gases"“greenhouse gases” as "pollutants"“pollutants” (Massachusetts v. EPA) and that the EPA is required to regulate these emissions from motor vehicles if the emissions are anticipated to endanger public health or welfare. The Supreme Court directed the EPA to make further findings in this regard. The decision is expected to affect a similar case pending in the U.S. Court of Appeals for the D.C. Circuit (Coke Oven Environmental Task Force v. EPA) considering the same question under a similar Clean Air Act provision in the context of CO2 emissions from electric generating units.re gard. Entergy participated as a friend of the court in Massachusetts v. EPA and has been granted the same status in Coke Oven. Entergy will continue to advocate in support of reasonable market-based regulation of CO2.carbon dioxide. Entergy has also supported the comments of various industry groups
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advocating national legislation to address CO2carbon dioxide emissions instead of attempting to regulate under the provisions of the Clean Air Act. Entergy continues to monitor these and similar actions in order to analyze their potential operational and cost implications and benefits.
In 2009 the EPA published an "endangerment finding"“endangerment finding” stating that the emission of greenhouse“greenhouse” gases "may“may reasonably be anticipated to endanger public health or welfare"welfare” and that the emission of these pollutants from mobile sources (such as cars and trucks) contributes to this endangerment. The EPA has statedissued final mobile source emission regulations on April 1, 2010. On April 2, 2010, the EPA issued a policy stating that the endangerment finding itself does not create any immediate requirements for any emissions source; however, in 2009 the EPA also proposed rules limiting the emissions of certain greenhouse gases, including CO2, from cars and light trucks, adopting a policy that the "actual control"regulation of greenhouse gas emissions (suchfrom mobile sources would, as byof January 2, 2011 (the date that the mobile source rule) wouldrule “takes effect”), trigger the applicationregulation of new source review permitting requirements forgreenhouse gases from stationary sources under section 165the Prevention of Significant Deterioration (PSD) and Title V programs of the Clean Air Act, and creating a threshold of 25,000 tons of emissions forAct.
In June 2010 the application of new source review permitting for newEPA published the final Tailoring Rule outlining the applicability criteria that determine which stationary sources and 10,000modification projects become subject to 25,000 tonspermitting requirements for modifications. These changes, taken together and if finalized bygreenhouse gas emissions under the EPA, would likely require new stationary sourcesClean Air Act. The Tailoring Rule establishes a two-step process for implementing regulation of greenhouse gas emissions under the PSD and significant modificationsTitle V programs. The first step, which began on January 2, 2011, limits the applicability of existing sources to undergo a new source review permitting process that would include the required application of best available control technology (BACT)PSD and Title V requirements for the control of suchgreenhouse gas emissions to sources that are already subject to PSD and Title V based on the emission of non-greenhouse gas pollutants. Specifically, projects undertaken at stationary source. The likely outcomesources will trigger PSD permitting requirements if the project increas es net greenhouse gas emissions by at least 75,000 tons per year carbon dioxide equivalent and significantly increases emissions of permit-by-permit determinationsat least one non-greenhouse gas pollutant. During step one, only sources subject to Title V based on their emission of required BACT and the associated costs is, at this time, uncertain. Additionally, subsequent to the endangerment finding, the EPA maynon-greenhouse gas pollutants will be required to developaddress greenhouse gas emissions in their Title V permit.
The second step of the Tailoring Rule, which will begin on July 1, 2011, subjects to Title V requirements any new or existing source performance standards for bothnot already subject to Title V that emits, or has the potential to emit, at least 100,000 tons per year carbon dioxide equivalent. In addition, new sources that have the potential to emit at least 100,000 tons per year carbon dioxide equivalent and significantly modified existing sources of greenhouse gas emissions.that emit or have the potential to emit at least 75,000 tons per year carbon dioxide equivalent will also be subject to PSD requirements.
Both the Endangerment Finding and the Tailoring Rule are subject to pending judicial review. The details of these standardsrules have not been stayed by the court and any required operational changes are uncertain.in effect pending review.
In anticipation of the potential imposition of CO2carbon dioxide emission limits on the electric industry in the future, Entergy has initiated actions designed to reduce its exposure to potential new governmental requirements related to CO2carbon dioxide emissions. These voluntary actions included establishment of a formal program to stabilize power plant CO2carbon dioxide emissions at 2000 levels through 2005, and Entergy succeeded in actually reducing emissions
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below 2000 levels. Total carbon dioxide emissions representing Entergy’s ownership share of power plants in the United States were approximately 53.2 million tons in 2000 and 35.6 million tons in 2005. Entergy has now established a second formal voluntary program to stabilize power plant CO2carbon dioxide emissions and emissions from controllable power purchases at 20% below 2000 levels through 2010 and continues to support national legislation that would increase planning certainty for electric utilities while addressing emissions in a responsible and flexible manner. By virtue of its proportionally large investment in low- or non-emitting gas-fired and nuclear generation technologies, Entergy'sEntergy’s overall CO2carbon dioxide emission "intensity,"“intensity,” or rate of CO2carbon dioxide emitted per kilowatt-hourkilowatt-hou r of electricity generated, is already among the lowest in the industry. Total CO2 emissions representing Entergy's ownership share of power plants in the United States were approximately 53.2 million tons in 2000, 49.6 million tons in 2001, 44.2 million tons in 2002, 36.8 million tons in 2003, 38.3 million tons in 2004, 35.6 million tons in 2005, 38.8 million tons in 2006, 40.2 million tons in 2007, 43.9 million tons in 2008, and 39.8 million tons in 2009. In 2006, Entergy changed its method of calculating emissions and now includes emissions from controllable power purchases as well as its ownership share of generation, which accounts for the increase beginninggeneration. Total carbon dioxide emissions were approximately 45.0 million tons in 2006 compared to the trend for the prior years.2010.
Greenhouse Gas Reporting
In September 2009, the EPA finalized a rule to require reporting of several greenhouse gases. This rule will require Entergy to report annually report greenhouse gas emissions from operating power plants and natural gas distribution operations. Entergy has developed compliance plans, is collecting the necessary data, and will report as required in 2011.
New Source Performance Standards for Greenhouse Gas Emissions
The EPA announced a schedule for establishing new source performance standards (NSPS) for greenhouse gas (GHG) emissions from power plants and refineries. Under the schedule, EPA will issue proposed regulations for power plants by July 26, 2011 and final regulations no later than May 26, 2012. These regulations would establish GHG NSPS for new and modified sources, and emission guidelines for existing sources. Entergy will continue to monitor and be engaged in the rulemaking process.
Clean Water Act
The 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basis for the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge of pollutants from point sources to waters of the United States. The Clean Water Act requires virtually all discharges of pollutants to waters of the United States to be permitted, sectionpermitted. Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401 of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, and section 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.
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NPDES Permits and Section 401 Water Quality Certifications
NPDES permits are subject to renewal every five years. Consequently, Entergy is currently in various stages of the data evaluation and discharge permitting process for its Utility power plants and its Non-Utility Nuclear power plants. Additionally, the State of New York has taken the position that a new state-issued water quality certification is required as part of the NRC license renewal process. Therefore, Non-Utility Nuclear'sEntergy Wholesale Commodities’ Indian Point nuclear facilities in New York facilities also are seeking or have obtained, a section 401 certification prior to license renewal. The FitzPatrick nuclear facility has obtained a section 401 certification.
FitzPatrickIndian Point
As agreed to as settlement of the FitzPatrick discharge permit and water quality certification, Entergy installed Ristroph screens for safely removing fish from intake screens, and plans to install an initial fish return system during the next five-year permit cycle. Additionally, Entergy is undertaking studies regarding the feasibility and effectiveness of relocating FitzPatrick’s offshore intake structure and of additional fish return technologies. The permit issued under the agreement requires thatinvolved in an administrative permitting process with the New York State Department of Environmental Conservation (NYSDEC) initiate a permit modification, triggering Entergy's right to challenge, if New York State decides to require the installation and operation of additional fish return technology. The Clean Water Act permit, water quality certification, and Coastal Zone Management Act consistency determination have now been issued.
Vermont Yankee
Opposition groups appealed a water discharge permit amendment issued to Vermont Yankee pursuant to the state's NPDES program in which the Vermont Agency of Natural Resources (VANR) allowed a small increase in the amount of heat the facility can discharge to the Connecticut River from June 16 to October 14 each year. The VANR permit amendment increases operational flexibility for the required usage rate of the existing cooling towers and for the generation rate of the facility that is especially helpful in conditions of high ambient temperatures or low river flow conditions. The trial of this matter occurred in the Vermont Environmental Court during the summer of 2007. On May 22, 2008, the Vermont Environmental Court entered its judgment and order granting the increased thermal discharge provided in the amendment for the period from July 8 through October 14 each year, but imposing additional management and measurement requirements with respect to the period from June 16 through July 7. Entergy and opposition groups appealed aspects of the ruling to the Vermont Supreme Court. On December 18, 2009, the Vermont Supreme Court affirmed the thermal increase but overturned the Vermont Environmental Court's imposition of additional management and measurement requirements.
Indian Point
Non-Utility Nuclear is involved in an administrative permitting process with the NYSDEC for renewal of the Indian Point 2 and Indian Point 3 discharge permits. In November 2003, the NYSDEC issued a draft permit indicating that closed cycle cooling would be considered the "best“best technology available"available” for minimizing alleged adverse environmental effects attributable to the intake of cooling water at Indian Point, 2 and Indian Point 3, subject to a feasibility determination and alternatives analysis for that technology, if Entergy applied for and received NRC license renewal atfor Indian Point 2 and Indian Point 3. Upon becoming effective, the draft permit also would have required payment of approximately $24 million annually, and an annualan nual 42 unit-day outage period, until closed cycle cooling is implemented. Non-Utility NuclearEntergy is participating in the administrative process to request that the draft permit be modified prior to final issuance, and opposes any requirement to install cooling towers at Indian Point 2 and Indian Point 3. In the past Non-Utility Nuclear notified the NYSDEC that the cost of retrofitting Indian Point 2 and Indian Point 3 with cooling towers likely would cost, in 2003 dollars, at least $740 million in capital costs and an additional $630 million in lost generation during construction.
In the February 2010 feasibility report noted in the paragraph below, Non-Utility Nuclear provided an updated estimate of the cost to retrofit Indian Point 2 and Indian Point 3 with cooling towers. Construction costs for retrofitting with cooling towers are now estimated to be at least $1.19 billion, in addition to lost generation of approximately 14.5 TWh during the estimated 42-week forced outage of both units. Non-Utility Nuclear also proposed an alternative to the cooling towers, the use of Wedgewire screens, that would cost up to approximately $100 million to install. Due to fluctuations in power pricing and because a retrofitting of this size and complexity has never been undertaken, significant uncertainties exist in these estimates and, therefore, they could be materially higher than estimated.Point.
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An August 13, 2008 ruling by the NYSDEC'sNYSDEC’s Assistant Commissioner has restructured the permitting and administrative process, including by applyingthe application of a new economic test designed to implement the U.S. Second Circuit's standard.Circuit Court of Appeals standard in that court’s review of EPA’s cooling water intake structure rules, which is discussed in the 316(b) Cooling Water Intake Structures section below. The NYSDEC has directed Entergy to develop detailed feasibility information regarding the construction and operation of cooling towers, and alternatives to closed cycle cooling, prior to the issuance of a new draft permit by the NYSDEC staff and commencement of the adjudicatory proceeding. The reports include a visual impact and aesthetics report filed onin June 1, 2009,200 9, a plume and emissions report filed onin September 1, 2009, a technical feasibility report due and filed in February 2010, and an economic report to establish whether the technology, if feasible, satisfies the economic test that is part of the New York standard. Entergy has also requested that the Assistant Commissioner reconsider the New York standard in light of the U.S. Supreme Court decision reversing the Second Circuit'sCircuit’s alternative economic test adopted in the August 13, 2008 ruling. The current procedural schedule calls for hearings on certain issues to commence in 2011.2011 in consolidation with certain issues in the water quality certification matter discussed below. The NYSDEC is expected to consider the information submitted and issue another draft permit with a new best technology available determination, which may or may notcould still be cooling towers. A new comment period and further contested proceedings likely would follow.
OnIn April 6, 2009, with a reservation of rights regarding the applicability of the section, Entergy'sEntergy’s Indian Point facility submitted a Section 401 water quality certification to the NYSDEC. The certification, or a waiver or exemption of the same, is potentially required pursuant to Section 401 of the Clean Water Act as a supporting document to the NRC'sNRC’s license renewal decision. On May 13, 2009,In April 2010 the NYSDEC deemed the application incomplete and requested additional information. The NYSDEC requested that Entergy respond within 120 days or by September 10, 2009 and set the deadline for submitting all the requested information as February 13, 2010. Entergy continues to work with the NYSDEC in order to provide the requested additional information and filed two additional reports with the NYSDEC in early February 2010. By law, the NYSDEC must act on thedenied Indian Point’s water quality certification application within one year of receipt.
Effluent Limitations
On December 1, 2009,concluding that Indian Point’s continued operation during a renewed NRC license period would not comply with existing New York state water quality standards. The denial was a NYSDEC staff decision and Entergy filed comments on this decision and has requested a hearing before a NYSDEC AL J. The ALJs held a Legislative Hearing (agency public comment session) and an Issues Conference (pre-trial conference) in July 2010 and set certain issues for trial in 2011. After the EPA publishedfull hearing on the merits a final rule directed at establishing effluent limitation guidelines and standards forparty to the construction and development water pollution point source category. Included withinproceeding can appeal the industry sector affected by this rulemaking are electric utility transmission line and substation construction projects. The effective date of this rulemaking is February 1, 2010. Indecision to the rulemaking the EPA is promulgating a series of non-numeric effluent limitations, as well as a numeric effluent limitation for turbidity. All construction sites will be required to meet the series of non-numeric effluent limitations. In general, the non-numeric effluent limitations are a reiterationCommissioner of the requirementNYSDEC and then to use siltation and erosion control best management practices directed at stormwater pollution prevention.
Of greater significance to Entergy, construction sites that disturb ten or more acres of land at one time will be required to monitor discharges from the site and comply with the numeric effluent limitation. If a project initially exceeds the acreage threshold but later, due to permanent stabilization of disturbed areas, falls below the threshold, the numeric effluent limit will no longer apply; consequently, phasing construction projects to limit the amount of soil disturbed at any given time will be an allowed strategy for addressing applicability of the rulemaking.state court. The EPA is phasing in the numeric effluent limitation over four years to allow permitting authorities adequate time to develop monitoring requirements and to allow the regulated community time to prepare for compliance with the numeric effluent limitation. The numeric limit established by this rulemaking is measured as a daily maximum value. Due to the nature of this analytical parameter, sampling and analysis of the effluent must occur on-site during any day that stormwater run-off occurs at a frequency that will be established by the permitting authority.
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The numeric turbidity limitation will apply to all discharges from the site except on days when total precipitation during the day exceeded the local 2-year, 24-hour storm. If the total precipitation in any one day is greater than the local 2-year, 24-hour storm event, then permittees would still need to sample (because they wouldn't know in advance whether the precipitation on that day was going to exceed the storm size threshold)NYSDEC staff decision does not restrict Indian Point operations, but the numeric effluent limitation would not applyissuance of a certification is potentially required prior to discharges for that day. The numeric effluent limitation is applicable to all discharges from the site on subsequent days, however, if there is no 2-year, 24-hour storm event during those days.NRC issuance of renewed unit licenses.
In order to achieve the numeric discharge limit, manyFebruary 2010 feasibility report Entergy construction projects exceeding the acreage threshold will likely be required to utilize chemical flocullants, either applied within a stormwater conveyance in the project watershed or in a stormwater detention basin. In some cases, capture of stormwater run-off and usage of fractionation tanks to temporarily store the water until sufficient settling of suspended soil particles may be required in order to meet the numeric limit.
Construction sites that disturb 20 or more acres at one time will be required to conduct monitoring of discharges from the site and comply with the numeric effluent limitation beginning 18 months after the effective dateprovided an updated estimate of the final rule. Assumingcost to retrofit Indian Point 2 and Indian Point 3 with cooling towers. Construction costs for retrofitting with cooling towers are estimated to be at least $1.19 billion, in addition to lost generation of approximately 14.5 terawatt-hours (TWh) during the rulemaking survives any legal challenge, this compliance deadline for 20 acre sites will be August 1, 2011. Construction sites that disturb ten or more acres at one time will be required to conduct monitoringestimated 42-week forced outage of discharges from the site and comply with the numeric effluent limitation beginning four years after the effective date of the final rule (February 1, 2014).
The final rule, in part based on the considerations of linear projects (electrical line construction), no longer contains a requirement to install a sediment basin and revisions were madeboth units. Entergy also proposed an alternative to the non-numeric effluent limitations based on comments concerningcooling towers, the feasibilityuse of wedgewire screens, which are currently expected to cost approximately $200 million to $250 million to install. Due to fluctuations in power pricing and because a retrofitting of this size and complexity has never been unde rtaken at linear projects. However, the EPA disagreed with comments from Entergyan operating nuclear facility, significant uncertainties exist in these estimates and, the Utility Water Act Group that suggested the EPA should either exempt all linear projects from the final rule or from the numeric effluent limitation. The EPA has determined that numeric effluent limitations are feasible for linear projects and passive treatment systems provide flexibility to linear projects to take into account site specific considerations. Additionally, the EPA believes that the permitting authority, which in Entergy's Utility service area is delegated to the states, should exercise discretion when determining the monitoring locations and monitoring frequency for linear construction projects. This establishes what will likelytherefore, they could be a very subjective development of requirements for electrical line construction projects.materially higher than estimated.
316(b) Cooling Water Intake Structures
The EPA finalized new regulations in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in water use and corresponding perceived aquatic impacts. Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the rule. In January 2007, the United StatesU.S. Second Circuit Court of Appeals for the Second Circuit remanded the rule to the EPA for reconsideration. The court instructed the EPA to reconsider several aspects of the rule that were beneficial to businesses affected by the regulated communityrule after finding that these provisions of the rule were contrary to the language of the Clean Water Act or were not
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sufficiently explained in the rule. In April 2008, the United StatesU.S. Supreme Court agreed to review the decision of the Second Circuit decision on the question of whether the EPA may take into consideration a cost-benefit analysis in developing these regulations, a consideration of potential benefit to businesses affected by the regulated communityrule that the Second Circuit disallowed. In March 2009, the Supreme Court ruled in favor of the petitioners that cost-benefit analysis may be taken into consideration. The EPA is scheduled to reissue this proposed rule in 2011, with finalization in 2012. The revised rule may now reissue a rulebe similar in structure to the rule remanded by the Second Circuit, or the EPA may issue a rule with a substantially different structure and effect. Until the EPA issues guidance to the regulated community on what actions should be taken to comply with the Clean Water Act, and until the form and substance of the new rule itself is determined, it is impossible to estimate the effect of the Supreme Court's decisionrule on Entergy's business. See the discussion above regarding the Indian Point and FitzPatrick permitting processesprocess under similar New York state provisions of law.
In March 2010 the NYSDEC released a new proposed policy establishing closed cycle cooling as the presumptive performance goal for best technology available (BTA) determinations for cooling water intake structures. The proposed policy applies primarily to electric generating facilities with thermal discharges and capacity factors of greater than fifteen percent that also are designed to withdraw at least 20 million gallons of water per day. If closed cycle cooling is not available for a particular facility because of construction, operational, or other relevant reasons, then the facility must implement an alternative technology that achieves a level of protection for aquatic life that is within ten percent of the expected or projected reductions associated with close d cycle cooling. The NYSDEC would make BTA determinations through the State Pollution Discharge Elimination System (SPDES) permitting program, but BTA decisions would be subject to further review and modification under the State Environmental Quality Review Act. Public comments on the draft policy were due July 9, 2010. Entergy filed comments and will continue to monitor these developments.
At the request of the EPA Region 1 (Boston), Entergy submitted extensive data to the agency in July 2008 concerning cooling water intake impacts at the Pilgrim nuclear power plant. AnalysisThe Engineering Study, included as part of technologies that may be appropriate for Pilgrim continues, but it appears at this pointthe July 2008 submittal, concluded that cooling towers are not feasible due to restrictions in the plant's condenser design and capacity. Other technologies, such as variable speed pumps and the relocation of the cooling water intake, are under analysis.were also analyzed as part of that submittal. EPA has not yet responded to the July 2008 submittal.
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Entergy's Utility business generation facilities are likewise in the process of reviewing data, considering implementation options, and providing information required by the current rule to the EPA and the affected states concerning cooling water intake structures. Entergy will continue to monitor the activities of the EPA and the states toward the implementation of section 316(b) of the Clean Water Act in the wake of the remand of the current rule and will respond accordingly.Act. Deadlines for determining compliance with Section 316(b) and for any required capital or operational expenditures are unknown at this time due to the remand of the rule to the EPA. As a result, management cannot predict the amounts Entergy will ultimately be required to spend to comply with Section 316(b) and any related state regulations, although such amounts could be significant.
Coastal Zone Management Act
The Coastal Zone Management Act requires federal activities within a coastal zone to be consistent with the state's federally approvedstate’s federally-approved coastal zone management program. Therefore, a nuclear facility located within a coastal zone must obtain a consistency certification from the state as part of the NRC'sNRC’s license renewal process.process (and other facilities may need determinations from time to time to support other federal permits and licenses, such as wetland dredge or fill permits). Entergy has Non-Utility Nuclearsubsidiaries own and operate plants that are within coastal zones.
Pilgrim has received its consistency determination from the Commonwealth of Massachusetts. Vermont Yankee is not within a coastal zone and does not need a consistency determination.
In New York, the Coastal Management Program promotes waterfront revitalization, protects fish and wildlife habitats, protects and enhances scenic and historic areas, and promotes water access and public recreation. As discussed above, FitzPatrick already has obtained its consistency certification. Indian Point expects to file its consistency determination application with the New York Department of State in mid-2010. The2011 or 2012, pending the accumulation of information being developed in other areas, such as the NRC final environmental impact statement associated with its NRC License Renewal Application and the State Environmental Quality Review Act (SEQRA) reports being prepared in the SPDES permit pr oceedings. When the application is deemed complete, the New York Department of State has six months from the date it deemsof the application complete to issue or deny the consistency certification.
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Generation Facility Effluent Limitations
The EPA selected the steam electric generating sector for the development of effluent guidelines revisions in December 2009. As part of this revision effort, the EPA distributed an information request to certain of the different types of power plants nationwide. Entergy received this questionnaire for several facilities, both fossil and nuclear, and has completed the questionnaires as requested. Entergy will continue to monitor the progress of the effluent guidelines revision efforts by the EPA.
Groundwater at Certain Nuclear Sites
The NRC requires nuclear power plants to regularly monitor and report the presence of radioactive material in the environment. Entergy joined other nuclear utilities and the Nuclear Energy Institute in 2006 to develop a voluntary groundwater monitoring and protection program. This initiative began after detection of very low levels of radioactive material, primarily tritium, in groundwater at several plants in the United States, including the Indian Point Energy Center.States. Tritium is a radioactive form of hydrogen that occurs naturally and is also a byproduct of nuclear plant operations. In addition to tritium, other radionuclides have been found in on site ground water at Indian Point.nuclear plants.
As part of the groundwater monitoring and protection program, Entergy has: (1) performed reviews of plant groundwater characteristics (hydrology) and historical records of past events on site that may have potentially impacted groundwater; (2) implemented fleet procedures on how to handle events that could impact groundwater; and (3) installed groundwater monitoring wells and began periodic sampling. The program also includes protocols for notifying local officials if contamination is found. To date, radionuclides such as tritium have been detected at Entergy'sEntergy’s FitzPatrick, Indian Point, Palisades, Pilgrim, Grand Gulf and Vermont Yankee plants. Based on current information, the concentrations and locations of tritium detected at these plants pose no threat to public health or safety.
At FitzPatrick, a sample collected from a reactor building perimeter sump in November 2009 showed elevated levels of tritium. Twenty-one monitoring wells are being sampled and analyzed on a periodic basis. Investigations are ongoing to determine the source of the tritium. No elevated levels of tritium have been found in any of the groundwater monitoring wells. The reactor building perimeter sump continues to show low concentrations of tritium.
Entergy identified and addressed two sources of the contamination at Indian Point: the Unit 1 and 2 spent fuel pools. In October 2007, the EPA announced that it was consulting with the NRC and the NYSDEC regarding Indian Point. The EPA stated that after reviewing data it confirmed with New York State that there have been no violations of federal drinking water standards for radionuclides in drinking water supplies. Indian Point has implemented an extensive groundwater monitoring and protection program, including installing approximately 35 monitoring wells, with five to six sampling points per well.wells. Entergy has been working cooperatively with the NRC and the NYSDEC in a split sample program to independently analyze test samples.
At Palisades, Entergy identified tritium in two groundwater monitoring wells in December 2007 caused by leakage from the buried piping for a recirculation line. Non-destructive evaluation ofFollowing investigation and repair work on this line, the decision was made to abandon the line identified one area of leakage and repairs were completed in 2008. Since early 2008, groundwater from three wells have been sampled and analyzed on a bi-weekly basis. Following the repairs, tritium levels declined in all of the wells and trended downward until one well spiked in March 2009. Additional investigation was performed to locate the source,
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including installation of 18 temporary monitoring wells along the path of the buried piping. A new leak location was identified and repairs at the location were completed in mid-summer 2009. However, when the system was put back in service, it became evident from groundwater samples that this same buried piping system was also breached at locations other than at the leak location that had earlier been repaired. Therefore, the piping system was again taken out of service and drained to prevent further leakage into the ground. Subsequently, Entergy decided to abandon this piping and to runinstall new, replacement buried pipe for this system. This effort was completed in December 2009.
Bi-weekly sampling will continue until the groundwaterGroundwater from three site monitoring wells has continued to show positive detections of tritium
levels in theand are being sampled and analyzed on a bi-weekly basis and remaining site monitoring wells are
below minimum detection levels.being sampled and analyzed quarterly.
At Pilgrim, six existing18 monitoring wells are being sampled and analyzed on a periodicroutine basis. Results continue to show low levels of tritium. A hydrogeological analysis was performed in 2009 to pinpoint the locationlocations for six additional evaluation wells, to further study the situation, and these wells will bewere installed in 2010. Currently, the detections are believed to be from wash out of atmospheric tritium. Precipitation studies are being performed to confirm this theory.
At FitzPatrick, a sample collected from a reactor building perimeter sumpTritium was discovered in November 2009 showed elevated levels of tritium. Follow up samples collected in December 2009 from a storm drain that communicates with this sump also found elevated levels of tritium.two onsite wells, and stakeholder notifications were made. Investigations are ongoingunderway to determine the source of the tritium, and split sampling is done routinely with the State of Massachusetts.
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At Grand Gulf, groundwater samples collected in June 2010 revealed the presence of low-level tritium. The detections are believed to be from tritium recapture from atmospheric deposition; however, further analysis and investigation are taking place to determine what action should be taken. No elevated levels of tritium have been found in manholes, equipment pits or any of the groundwater monitoring wells.cause.
In January 2010, Vermont Yankee was notified by its off-site analytical laboratory that a sample collected from a groundwater monitoring well in mid-November 2009 showed elevated levels of tritium. Subsequent analyses continue to confirm the presence of an elevated tritium concentration. Investigations are ongoing to determineIn March 2010, Vermont Yankee announced that it had identified the source of the tritium includingleakage at the installationplant, and that it had stopped the leakage. Remediation of additional monitoring wells in Februarythe soil is complete and groundwater remediation is ongoing. In October 2010, and to determine what action should be taken. No elevatedVermont Yankee received lab results confirming the presence of low levels of tritium at concentrations well below the EPA drinking water limit in a former on-site drinking water well. Vermont Yankee had discontinued use of this well as a drinking water source since February 2010. To date no tritium has been detected in the Connecticut River. Both the NRC and the Vermont Department of Health have stated that tritium at the Vermont Yankee facility has not been founda threat to public health and safety. In January 2011 periodic sample results from two wells detected the presence of tritium at concentrations below regulatory reporting requirements. Additional investigation is ongoing.
In February 2010 the Vermont Public Service Board (VPSB) began a proceeding to conduct an investigation into whether Vermont Yankee should be required to cease operations, or take other ameliorative actions, pending completion of repairs to stop releases of tritium or other radionuclides into the environment. This investigation will also consider whether good cause exists to modify or revoke the Vermont Yankee certificate of public good that the VPSB issued in 2002 and whether any potable water wells located on-penalties should be imposed on Vermont Yankee for any identified violations of Vermont statutes or off-site.VPSB orders related to those releases. The proceeding and VPSB investigation were opened prior to Vermont Yankee locating the source and beginning the remediation of the tritium leaking into groundwate r at the site. The VPSB conceded in its order that its jurisdiction to impose some or all of the relief requested may be preempted by federal law or regulation, and the parties were asked to brief preemption issues during the initial phase of the proceeding. Initial and reply briefs on the issue of the VPSB’s jurisdiction were filed by the parties, including Vermont Yankee, in August and September 2010. The VPSB held evidentiary hearings in January 2011 on the facts of the tritium leakage and remediation and on various parties’ requests for relief. Initial and reply post-hearing briefs are due in February 2011. There is no schedule for decision by the VPSB on jurisdiction or other issues.
Indian Point Units 1 and 2 Hazardous Waste Remediation
As part of the effort to terminate the current Indian Point 2 mixed waste (waste that is regulated as both low-level nuclear waste and hazardous waste) storage permit, Entergy was required to perform groundwater and soil sampling for metals, PCBs and other non-radiological contaminants on plant property, regardless of whether these contaminants stem from onsite activities or were related to the waste stored on-site pursuant to the permit. Entergy believes this permit is no longer necessary for the facility due to an exemption for mixed wastes (hazardous waste that is also radioactive) promulgated as part of the EPA'sEPA’s hazardous waste regulations. This exemption allows mixed waste to be regulated through the NRC license instead of through a separate EPA or state hazardous waste permit. In FebruaryFebr uary 2008, Entergy submitted its report on this sampling effort to the NYSDEC. The report indicated the presence of various metals in soils at levels above the NYSDEC cleanup objectives. It does not appear that these metals are connected to operation of the nuclear facility. At the request of the NYSDEC, Entergy submitted a plan onin August 8, 2008 for a study that will identify the sources of the metals. The NYSDEC recently approved this workplanwork plan with some conditions related to the need to study whether the soil impact observed may have originated from plant construction materials. This issue is being studied by Entergy to determine if any changes to the workplanwork plan are necessary. The NYSDEC may require additional work to define the vertical and lateral extent of the contamination on-site, and evaluate any potential for migration off-site. The NYSDEC plans to use the results of this investigation to determine whether the permit can be terminated and the metals left in place until plant decommissioning or if further investigation or remediation is required. Entergy is unable to determine what the extent or cost of required remediation, if any, will be at this time.
Prior to Entergy'sEntergy’s purchase of Indian Point Unit 1, the previous owner completed the cleanup and desludging of the Unit 1 water storage pool, generating mixed waste (waste that is regulated as both low-level nuclear waste and hazardous waste).waste. The waste currently is stored in the Unit 1 containment building in accordance with NRC regulations controlling low level radioactive waste. The waste is also regulated by the NYSDEC. The NYSDEC requires Entergy toa quarterly survey quarterlyof the availability of any commercial facility capable of
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treating, processing, and disposing of this waste in a commercially reasonable manner. Entergy continues to review this matter and to conduct its quarterly searches for a commercially reasonable vendor that is acceptable both to the NRC and the NYSDEC. The cost of this disposal cannot be estimated at this time due to the many variables existing in the type and manner of disposal.
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Comprehensive Environmental Response, Compensation, and Liability Act of 1980
The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (CERCLA), authorizes the EPA to mandate clean-up by, or to collect reimbursement of clean-up costs from, owners or operators of sites at which hazardous substances may be or have been released. Certain private parties also may use CERCLA to recover response costs. Parties that transported hazardous substances to these sites or arranged for the disposal of the substances are also deemed liable by CERCLA. CERCLA has been interpreted to impose strict, joint and several liability on responsible parties. Entergy'sEntergy subsidiaries in the Utility and Non-Utility NuclearEntergy Wholesale Commodities businesses have sent waste materials to various disposal sites over the years, and releasesre leases have occurred at Entergy facilities. In addition, environmental laws now regulate certain of Entergy'sEntergy’s operating procedures and maintenance practices that historically were not subject to regulation. Some disposal sites used by Entergy subsidiaries have been the subject of governmental action under CERCLA, resulting in site clean-up activities. Entergy's Utility and Non-Utility Nuclear businessesEntergy subsidiaries have participated to various degrees in accordance with their respective potential liabilities in such site clean-ups and have developed experience with clean-up costs. The affected Entergy companiessubsidiaries have established reservesprovisions for the liabilities for such environmental clean-up and restoration activities. Details of significant CERCLA liabilities that are not de minimis are discussed in the "Other“Other Environmental Matters"Matters” section below.
Coal Combustion Residuals
In June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that contains two primary regulatory options: (1) regulating CCRs destined for disposal in landfills or received (including stored) in surface impoundments as so-called “special wastes” under the hazardous waste program of RCRA Subtitle C; or (2) regulating CCRs destined for disposal in landfills or surface impoundments as non-hazardous wastes under Subtitle D of RCRA. Under both options, CCRs that are beneficially used would remain excluded from hazardous waste regulation.
The proposed regulations would create new compliance requirements including modified storage, new notification and reporting practices, new financial assurance requirements, and product disposal considerations. According to EPA estimates, the annualized cost of on-site disposal under the two proposals would be $3.6 million to $9 million for the White Bluff and Independence facilities and $1.7 million to $3.3 million for the Nelson Unit 6 facility. If Entergy utilized off-site disposal, which it would not plan to do, the EPA’s total cost estimates for disposal of CCRs under Subtitle C regulation ranges from $250 to $350 million per year.
Other Environmental Matters
Entergy Gulf States Louisiana and Entergy Texas
Several class action and other suits have been filed in state and federal courts seeking relief from Entergy Gulf States, Inc. and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Gulf States, Inc.'s’s premises (see "“Litigation"” below).
Entergy Gulf States Louisiana is currently involved in the second phase of the remedial investigation of the Lake Charles Service Center site, located in Lake Charles, Louisiana. A manufactured gas plant (MGP) is believed to have operated at this site from approximately 1916 to 1931. Coal tar, a by-product of the distillation process employed at MGPs, was apparently routed to a portion of the property for disposal. The same area has also been used as a landfill. In 1999, Entergy Gulf States, Inc. signed a second Administrative Consent Orderadministrative consent order with the EPA to perform removal action at the site. In 2002, approximately 7,400 tons of contaminated soil and debris were excavated and disposed of from an area within the service center. 160;In 2003, a cap was constructed over the remedial area to prevent the migration of contamination to the surface. In August 2005, an administrative order was issued by the EPA requiring that a 10-year groundwater study be conducted at this site. The groundwater monitoring study commenced in January 2006 and is continuing on a quarterly basis. Entergy Gulf States Louisiana and Entergy Texas each believe that its ultimateremaining responsibility for this site will not materially exceed the existing clean-up provisions of $0.4$0.3 million for Entergy Gulf States Louisiana and $0.3$0.2 million for Entergy Texas.
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In 1994, Entergy Gulf States, Inc. performed a site assessment in conjunction with a construction project at the Louisiana Station Generating Plant (Louisiana Station). In 1995, a further assessment confirmed subsurface soil and groundwater impact to three areas on the plant site. After validation, a notification was made to the LDEQ and a phased process was executed to remediate each area of concern. The final phase of groundwater clean-up and monitoring at Louisiana Station is expected to continue for several more years. The remediation cost incurred through December 31, 2009 for this site was $6.8 million. Future costs are not expected to exceed Entergy Gulf States Louisiana'sLouisiana’s existing provision of $0.7 million.
The Texas Commission on Environmental Quality (TCEQ) notified Entergy Gulf States, Inc. that the TCEQ believed that Entergy Gulf States, Inc. is one of many potentially responsible parties (PRP) concerning contamination existing at the Spector Salvage Yard proposed state superfund site in Orange, Texas. The TCEQ conducted a removal action
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consisting of the excavation and offsite disposal of contaminated surface soil. Entergy Gulf States Louisiana and Entergy Texas do not believe at this time that the former Gulf States Utilities contributed any significant amount of hazardous substances to this site and therefore are contesting liability. Entergy Texas and Entergy Gulf States Louisiana believe that their ultimate responsibility for this site will not exceed their existing clean-up provisions.
Entergy Louisiana and Entergy New Orleans
Several class action and other suits have been filed in state and federal courts seeking relief from Entergy Louisiana and Entergy New Orleans and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Louisiana'sLouisiana’s and Entergy New Orleans'Orleans’s premises (see "“Litigation"” below).
During 1993, the LDEQ issued new rules for solid waste regulation, including regulation of wastewater impoundments. Entergy Louisiana has determined that some of its power plant wastewater impoundments were affected by these regulations and may require remediation, repair, or closure. Completion of this work is dependent on pending LDEQ approval of submitted solid waste permit applications. As a result, a recorded liability in the amount of $1.9 million for Entergy Louisiana existed at December 31, 20092010 for ongoing wastewater remediation and repairs and closures. Management believes this reserve to be adequate based on current estimates.
Transmission and distribution storm teams entered wetland areas of Lafourche Parish to restore Entergy Louisiana'sLouisiana’s Barataria-Golden Meadow line shortly after Hurricane Katrina. A portion of this line crosses property owned by a third party. The landowner has requested that Entergy Louisiana conduct an extensive wetland mitigation program over a ten-acre area and has filed suit against Entergy Louisiana and certain other Entergy subsidiaries concerning the extent of the mitigation. Entergy Louisiana believesbelieved that the marsh area affected by its activities is less than 2 acres and that restoration cancould be conducted to the satisfaction of the U. S. Corps of Engineers and the State of Louisiana for substantially less than the over $4 million claimed by the plaintiff. Entergy Louisiana will meetresolved all outstanding claims with the Corps of Engineers andlandowner for less than $2 million, including any claims arising from previous work on the State of Louisiana to determine the extent of mitigation required by the Clean Water Act and parallel state law.
Entergy Louisiana and Entergy Texas
Damage sustained by Entergy Louisiana's and Entergy Texas' electrical transmission infrastructure due to the effects of Hurricane Gustav and Hurricane Ike necessitated that significant amounts of restoration work occur in areas classified as jurisdictional wetlands and coastal marsh. While measures were taken to minimize the impact in these environmentally-sensitive areas, some level of damage to the wetland and marsh areas likely occurred. Mitigation requirements for these possible impacts have yet to be assessed or required by regulatory authorities. Following Hurricane Katrina and Hurricane Rita, the regulatory authorities deferred assessing mitigation requirements for such impacts pending an evaluation of spontaneous recovery of the marsh and wetlands damaged during line repairs.property.
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas
The TCEQ notified Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Texas,Louisiana, Entergy Louisiana,New Orleans, and Entergy New OrleansTexas that the TCEQ believes those entities are PRPs concerning contamination existing at the San Angelo Electric Service Company (SESCO) facility in San Angelo, Texas. The facility operated as a transformer repair and scrapping facility from the 1930s until 2003. Both soil and groundwater contamination exists at the site. Entergy Gulf States, Inc. and Entergy Louisiana sent transformers to this facility during the 1980s. Entergy Gulf States Louisiana, Entergy Texas, Entergy Louisiana, and Entergy Arkansas responded to an information request from the TCEQ and continue to cooperate in this investigation. Entergy New Orleans provided requested information concerning its former status in bankruptcy. Entergy Gulf States Louisiana, Entergy Texas, and Entergy Louisiana joined a group of PRPs responding to site conditions in cooperation with the State of Texas, creating cost allocation models based on review of SESCO documents and employee interviews, and investigating contribution actions against other PRPs. Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Texas have agreed to contribute to the remediation of contaminated soil and groundwater at the site in a measure proportionate to those companies'companies’ involvement at the site, while Entergy Arkansas and Entergy New Orleans
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likely will pay de minimisminimus amounts. Current estimates, although preliminary and variable depending on the level of third-party cost contributions, indicate that Entergy'sEntergy’s total share of remediation costs likely will be less than $1 million. The TCEQ
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approved an Agreed Administrative Order onagreed administrative order in September 20, 2006 that allows the implementation of a Remedial Investigation/Feasibility Study at the SESCO site; with the ultimate disposition being a remedial action to remove contaminants of concern. The TCEQ approved the Remedial Investigation Work Plan in May 2007 and field sampling began in July 2007. Off-site removal activities of PCB-impacted soil and debris initiated at the site in August 2010.
Entergy Mississippi, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy New Orleans, and Entergy Texas
The EPA has notified Entergy Mississippi, Entergy Gulf States Louisiana, Entergy Texas, and Entergy New Orleans that the EPA believes those entities are PRPs concerning contamination of an area known as "Devil's“Devil’s Swamp Lake"Lake” near the Port of Baton Rouge, Louisiana. The area allegedly was contaminated by the operations of Rollins Environmental (LA), Inc, which operated a disposal facility to which many companies contributed waste. Documents provided by the EPA indicate that Entergy Louisiana may also be a PRP. Entergy continues to monitor this developing situation.
Entergy
In November 2010 a transformer at the Indian Point facility failed, resulting in a fire and the release of non-PCB oil to the ground surface. The fire was extinguished by the facility’s fire deluge system. No injuries occurred due to the transformer failure or company response. An undetermined amount of oil and water were released into the facility’s discharge canal and the environment surrounding the transformer and discharge canal, including the Hudson River, as a result of the failure, fire, and fire suppression. Once the fire was extinguished, Indian Point personnel and contractors began recovering free product from the damaged transformer, the transformer containment moat, and the area surrounding the transformer. Additional remedial wo rk continues, and the State of New York may assess a penalty due to the release of oil to waters of the state and the failure of the transformer containment moat to prevent this release of oil. Discussions with the state continue.
Entergy uses legal and appropriate means to contest litigation threatened or filed against it, but certain states in which Entergy operates have proven to be unusually litigious environments. Judges and juries in Louisiana, Mississippi, and Texas have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property damage, and business tort cases. The litigation environment in these states poses a significant business risk to Entergy.
Ratepayer and Fuel Cost Recovery Lawsuits (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Entergy New Orleans Fuel Adjustment Clause Litigation
In April 1999 a group of ratepayers filed a complaint against Entergy New Orleans, Entergy Corporation, Entergy Services, and Entergy Power in state court in Orleans Parish purportedly on behalf of all Entergy New Orleans ratepayers. The plaintiffs seeksought treble damages for alleged injuries arising from the defendants'defendants’ alleged violations of Louisiana'sLouisiana’s antitrust laws in connection with certain costs passed on to ratepayers in Entergy New Orleans'Orleans’s fuel adjustment filings with the City Council. In particular, plaintiffs allege thatthe fourth quarter 2010, Entergy New Orleans improperly included certain costs in the calculation of fuel charges and that Entergy New Orleans imprudently purchased high-cost fuel or energy from other Entergy affiliates. Plaintiffs allege that Entergy New Orleans and the other defendant Entergy companies conspired to make these purchases to the detriment of Entergy New Orleans' ratepayers and to the benefit of Entergy's shareholders, in violation of Louisiana's antitrust laws. Plaintiffs also seek to recover interest and attorneys' fees. Entergy filed exceptions to the plaintiffs' allegations, asserting, among other things, that jurisdiction over these issues restsreached a settlement agreement with the City Council andplaintiffs that ended the FERC. In March 2004, the plaintiffs supplemented and amended their petition. If necessary, at the appropriate time, Entergy will also raise its defenses to the antitrust claims.proceeding. The suit in state court was stayed by stipulation of the parties and order of the court pending review of the decision by the City Council in the proceeding discussed in the next paragraph.
Plaintiffs also filed a corresponding complaint with the City Council in order to initiate a review by the City Council of the plaintiffs' allegations and to force restitution to ratepayers of all costs they allege were improperly and imprudently included in the fuel adjustment filings. Testimony was filed on behalf of the plaintiffs in this proceeding asserting, among other things, that Entergy New Orleans and other defendants have engaged in fuel procurement and power purchasing practices and included costs in Entergy New Orleans' fuel adjustment that could have resulted in Entergy New Orleans customers being overcharged by more than $100 million over a period of years. Hearings were held in February and March 2002. In February 2004, the City Council approved a resolution that resulted in a refund to customers of $11.3 million, including interest, during the months of June through September 2004. In May 2005 the Civil District Court for the Parish of Orleans affirmed the City Council resolution, finding no support for the plaintiffs' claim that the refund amount should be higher. In June 2005, the plaintiffs appealed the Civil District Court decision to the Louisiana Fourth Circuit Court of Appeal. On February 25, 2008, the Fourth Circuit Court of Appeal
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issued a decision affirming in part, and reversing in part, the Civil District Court's decision. Although the Fourth Circuit Court of Appealsettlement did not reverse anymaterially affect Entergy’s results of the substantive findings and conclusions of the City Counciloperations, financial position, or the Civil District Court, the Fourth Circuit found that the amount of the refund was arbitrary and capricious and increased the amount of the refund to $34.3 million. Entergy New Orleans and the City Council filed with the Louisiana Supreme Court seeking, among other things, review and reversal of the Fourth Circuit decision. In April 2009 the Louisiana Supreme Court reversed the decision of the Louisiana Fourth Circuit Court of Appeal and reinstated the decision of the Civil District Court. In May 2009 the Louisiana Supreme Court denied the plaintiffs' request for rehearing. In January 2010 the plaintiffs filed a motion to lift the stay and to supplement and amend their state court petition.
In the Entergy New Orleans bankruptcy proceeding, the named plaintiffs in the Entergy New Orleans fuel clause lawsuit, together with the named plaintiffs in the Entergy New Orleans rate of return lawsuit, filed a Complaint for Declaratory Judgment asking the court to declare that Entergy New Orleans, Entergy Corporation, and Entergy Services are a single business enterprise, and, as such, are liable in solido with Entergy New Orleans for any claims asserted in the Entergy New Orleans fuel adjustment clause lawsuit and the Entergy New Orleans rate of return lawsuit, and, alternatively, that the automatic stay be lifted to permit the movants to pursue the same relief in state court. The bankruptcy court dismissed the action on April 26, 2006. The matter was appealed to the U.S. District Court for the Eastern District of Louisiana, and the district court affirmed the dismissal in October 2006, but on different grounds, concluding that the lawsuit was premature. In Entergy New Orleans' plan of reorganization that was confirmed by the bankruptcy court in May 2007, the plaintiffs' claims are treated as unimpaired "Litigation Claims," which will "ride through" the bankruptcy proceeding, with any legal, equitable and contractual rights to which the plaintiffs' Litigation Claim entitles the plaintiffs unaltered by the plan of reorganization.cash flows.
Entergy New Orleans Rate of Return Lawsuit
In April 1998 a group of residential and business ratepayers filed a complaint against Entergy New Orleans in state court in Orleans Parish purportedly on behalf of all ratepayers in New Orleans. The plaintiffs allegealleged that Entergy New Orleans overcharged ratepayers by at least $300 million since 1975 in violation of limits on Entergy New Orleans'Orleans’s rate of return that the plaintiffs allege were established by ordinances passed by the City Council in 1922. TheIn the fourth quarter 2010, Entergy reached a settlement agreement with the plaintiffs seek, among other things, (i) a declaratory judgment that such franchise ordinances have been violated; and (ii) a remand to the City Council for the establishment of the amount of overcharges plus interest. Entergy New Orleans believes the lawsuit is without merit. Entergy New Orleans has charged only those rates authorized by the City Council in accordance with applicable law. In May 2000, a court of appeal granted Entergy New Orleans' exception to jurisdiction in the case and dismissedended the proceeding. The Louisiana Supreme Court denied the plaintiffs' request for a writsettlement did not materially affect Entergy’s results of certiorari.
The plaintiffs then commenced a similar proceeding before the City Council. The plaintiffs and the advisors for the Council each filed their first round of testimony in January 2002. In their testimony, the plaintiffs allege that Entergy New Orleans earned in excess of the legally authorized rate of return during the period 1979 to 2000 and that Entergy New Orleans should be required to refund between $240 million and $825 million to its ratepayers. In the testimony submitted by the Council advisors, the advisors allege that Entergy New Orleans has not earned in excess of its authorized rate of return for the period at issue and that no refund is therefore warranted.
In December 2003, the Council advisors filed a motion in the City Council proceedings to bifurcate the hearing in this matter, such that the effect of the provision of the 1922 Ordinance in setting lawful rates would be considered first. Only if it is determined that this provision establishes a limitation would the remaining issues be reached. The motion to bifurcate was granted by the City Council in April 2004, and a hearing on the first part of the bifurcated proceeding was completed in June 2005. After the submission of briefs and oral argument in April 2006, the City Council dismissed with prejudice the plaintiffs' claims on multiple grounds. In May 2006, the plaintiffs appealed the City Council's decision, and the plaintiffs' appeal is currently pending in Civil District Court for the Parish of Orleans. Entergy New Orleans also appealed, separately, certain evidentiary rulings included in the City Council's decision. These matters were consolidated and oral argument on these appeals took place before the Civil District Court in August 2008.operations, financial position, or cash flows.
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Additionally, in the Entergy New Orleans bankruptcy proceeding, the named plaintiffs in the Entergy New Orleans rate of return lawsuit, together with the named plaintiffs in the Entergy New Orleans fuel adjustment clause lawsuit, filed a Complaint for Declaratory Judgment asking the court to declare that Entergy New Orleans, Entergy Corporation, and Entergy Services are a single business enterprise, and, as such, are liable in solido with Entergy New Orleans for any claims asserted in the Entergy New Orleans rate of return lawsuit and the Entergy New Orleans fuel adjustment clause lawsuit, and, alternatively, that the automatic stay be lifted to permit the movants to pursue the same relief in state court. The bankruptcy court dismissed the action on April 26, 2006. The matter was appealed to the U.S. District Court for the Eastern District of Louisiana, and the district court affirmed the dismissal in October 2006, but on different grounds, concluding that the lawsuit was premature. In Entergy New Orleans' plan of reorganization that was confirmed by the bankruptcy court in May 2007, the plaintiffs' claims are treated as unimpaired "Litigation Claims," which will "ride through" the bankruptcy proceeding, with any legal, equitable and contractual rights to which the plaintiffs' Litigation Claim entitles the plaintiffs unaltered by the plan of reorganization.
Texas Power Price Lawsuit
In August 2003, a lawsuit was filed in the district court of Chambers County, Texas by Texas residents on behalf of a purported class apparently of the Texas retail customers of Entergy Gulf States, Inc. who were billed and paid for electric power from January 1, 1994 to the present. The named defendants include Entergy Corporation, Entergy Services, Entergy Power, Entergy Power Marketing Corp., and Entergy Arkansas. Entergy Gulf States, Inc. was not a named defendant, but is alleged to be a co-conspirator. The court granted the request of Entergy Gulf States, Inc. to intervene in the lawsuit to protect its interests.
Plaintiffs allege that the defendants implemented a "price“price gouging accounting scheme"scheme” to sell to plaintiffs and similarly situated utility customers higher priced power generated by the defendants while rejecting and/or reselling to off-system utilities less expensive power offered and/or purchased from off-system suppliers and/or generated by the Entergy system. In particular, plaintiffs allege that the defendants manipulated and continue to manipulate the dispatch of generation so that power is purchased from affiliated expensive resources instead of buying cheaper off-system power.
Plaintiffs stated in their pleadings that customers in Texas were charged at least $57 million above prevailing market prices for power. Plaintiffs seek actual, consequential and exemplary damages, costs and attorneys'attorneys’ fees, and disgorgement of profits. The plaintiffs'plaintiffs’ experts have tendered a report calculating damages in a large range, from $153 million to $972 million in present value, under various scenarios. The Entergy defendants have tendered expert reports challenging the assumptions, methodologies, and conclusions of the plaintiffs'plaintiffs’ expert reports.
The case is pending in state district court, and the court has not set a date for a class certification hearing.
Mississippi Attorney General Complaint
The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The litigation is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. On December 29, 2008, the defendant Entergy companies filed to remove the attorney general'sgeneral’s suit to U.S. District Court (the forum that Entergy believes is appropriate to resolve the types of federal issues raised in the suit), where it is currently pending,pendin g, and additionally answered the complaint and filed a counter-claim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009, the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general'sgeneral’s complaint.
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Fiber Optic Cable Litigation (Entergy Corporation and Entergy Louisiana)
Several property owners have filed a class action suit against Entergy Louisiana, Entergy Services, ETHC, and Entergy Technology Company in state court in St. James Parish, Louisiana purportedly on behalf of all property owners in Louisiana who have conveyed easements to the defendants. The lawsuit alleges that Entergy installed fiber optic cable across the plaintiffs'plaintiffs’ property without obtaining appropriate easements. The plaintiffs seek damages equal to the fair market value of the surplus fiber optic cable capacity, including a share of the profits made through use of the fiber optic cables, and punitive damages. Entergy removed the case to federal court in New Orleans; however, the district court remanded the case back to state court. In February 2004, the state court entered an order certifying this matter as a class action. Entergy'sEntergy’s appeals of this ruling were denied. The parties have entered into a term sheet establishing basic terms for a settlement that must be approved by the court.
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Asbestos Litigation (Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Numerous lawsuits have been filed in federal and state courts primarily in Texas and Louisiana, primarily by contractor employees who worked in the 1940-1980s timeframe, against Entergy Gulf States Louisiana and Entergy Texas, and to a lesser extent the other Utility operating companies, as premises owners of power plants, for damages caused by alleged exposure to asbestos. Many other defendants are named in these lawsuits as well. Currently, there are approximately 500 lawsuits involving approximately 5,000 claimants. Management believes that adequate provisions have been established to cover any exposure. Additionally, negotiations continue with insurers to recover reimbursements. Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position or results of operation of the Utility operating companies.
Employment and Labor-related Proceedings (Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees. Generally, the amount of damages being sought is not specified in these proceedings. These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various EntergyEnt ergy Corporation sponsored plans. Entergy and the Registrant Subsidiaries are responding to these suits and proceedings and deny liability to the claimants.
Employees are an integral part of Entergy’s commitment to serving customers. As of December 31, 2010, Entergy subsidiaries employed 14,958 people.
Utility: | | |
Entergy Arkansas | | 1,411 |
Entergy Gulf States Louisiana | | 816 |
Entergy Louisiana | | 964 |
Entergy Mississippi | | 773 |
Entergy New Orleans | | 345 |
Entergy Texas | | 694 |
System Energy | | - |
Entergy Operations | | 2,901 |
Entergy Services | | 3,148 |
Entergy Nuclear Operations | | 3,791 |
Other subsidiaries | | 115 |
Total Entergy | | 14,958 |
Approximately 5,500 employees are represented by the International Brotherhood of Electrical Workers, the Utility Workers Union of America, the International Brotherhood of Teamsters, the United Government Security Officers of America, and the International Union, Security, Police, Fire Professionals of America.
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Employees
Entergy electronically files reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxies, and amendments to such reports. The public may read and copy any materials that Entergy files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at http://www.sec.gov.
EmployeesEntergy uses its website, http://www.entergy.com, as a routine channel for distribution of important information, including news releases, analyst presentations and financial information. Filings made with the SEC are posted and available without charge on Entergy's website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. These filings include our annual and quarterly reports on Forms 10-K and 10-Q (including related filings in XBRL format) and current reports on Form 8-K; our proxy statements; and any amendments to those reports or statements. All such postings and filings are available on Entergy's Investor Relations website free of charge. Entergy is providing the address to its Internet s ite solely for the information of investors and does not intend the address to be an integral partactive link or to otherwise incorporate the contents of Entergy's commitment to serving its customers. As of December 31, 2009, Entergy employed 15,181 people.the website into this report.
Utility: | | |
Entergy Arkansas | | 1,473 |
Entergy Gulf States Louisiana | | 840 |
Entergy Louisiana | | 1,005 |
Entergy Mississippi | | 797 |
Entergy New Orleans | | 368 |
Entergy Texas | | 727 |
System Energy | | - |
Entergy Operations | | 2,910 |
Entergy Services | | 3,234 |
Entergy Nuclear Operations | | 3,747 |
Other subsidiaries | | 80 |
Total Entergy | | 15,181 |
Approximately 5,500 employees are represented by the International Brotherhood of Electrical Workers Union, the Utility Workers Union of America, the International Brotherhood of Teamsters Union, and the United Government Security Officers of America.
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RISK FACTORS
Investors should review carefully the following risk factors and the other information in this Form 10-K. The risks that Entergy faces are not limited to those in this section. There may be additional risks and uncertainties (either currently unknown or not currently believed to be material) that could adversely affect Entergy's financial condition, results of operations and liquidity. See "FORWARD-LOOKING INFORMATION."
Utility Regulatory Risks
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas and System Energy)
The terms and conditions of service, including electric and gas rates, of the Utility operating companies and System Energy are determined through regulatory approval proceedings that are lengthy and subject to appeal that could result in delays in effecting rate changes and uncertainty as to ultimate results.
The rates that the Utility operating companies and System Energy charge reflect their capital expenditures, operations and maintenance charges, allowed rates of return, financing costs, and related costs of service. These rates significantly influence the financial condition, results of operations, and liquidity of Entergy and each of the Utility operating companies and System Energy. These rates are determined in regulatory proceedings and are subject to periodic regulatory review and adjustment.
In addition, regulators can initiate proceedings to investigate the prudence of costs in the Utility operating companies' base rates and examine, among other things, the prudence of the companies' operation and maintenance practices, level of expenditures (including storm costs), allowed rates of return and appropriate rate base, proposed resource acquisitions and previously incurred capital expenditures. The regulators can disallow costs found not to have been prudently incurred or found not to have been incurred in compliance with applicable tariffs, creating some risk to the ultimate recovery of those costs. Regulatory proceedings relating to rates and other matters typically involve multiple parties seeking to limit or reduce rates. The proceedings generally have long timelines, are primarilyprima rily based on historical costs, and may or may not be limited by statute, which could cause the Utility operating companies and System Energy to experience regulatory lag in recovering such costs through rates. Decisions are typically subject to appeal, potentially leading to additional uncertainty associated with rate case proceedings. Although four of the Utility operating companies currently obtain recovery under formula rate plans, at some point in the future these formula rate plans may no longer be extended, at which time these Utility operating companies would operate again in a more traditional rate case environment.
The Utility operating companies and System Energy, and the energy industry as a whole, have experienced a period of rising costs and investments, which could result in more frequent rate cases and requests for, and the continuation of, cost recovery mechanisms. For information regarding rate case proceedings and formula rate plans applicable to certain of the Utility operating companies, see Note 2 to the financial statements.
The Utility operating companies recover fuel and purchased power costs through rate mechanisms that are subject to risks of delay or disallowance in regulatory proceedings.
The Utility operating companies recover their fuel and purchased power costs from their customers through rate mechanisms subject to periodic regulatory review and adjustment. Because regulatory review can result in the disallowance of incurred costs found not to have been prudently incurred with the possibility of refunds to ratepayers, there exists some risk to the ultimate recovery of those costs. Regulators can initiate proceedings to investigate the continued usage or the adequacy and operation of the fuel and purchased power recovery clauses of the Utility operating companies.
The Utility operating companies' cash flows can be negatively affected by the time delays between when gas, power or other commodities are purchased and the ultimate recovery from customers of the purchased costs in rates. On occasion, when the level of incurred costs for fuel and purchased power rises very dramatically, some of the Utility operating companies may agree to defer recovery of a portion of that period's fuel and purchased power
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costs for recovery at a later date, which could increase the near-term working capital and borrowing requirements of those companies. For a description of fuel and purchased power recovery mechanisms and information regarding the regulatory proceedings for fuel and purchased power recovery, see Note 2 to the financial statements.Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
As a result of a challenge by the LPSC, the manner in which the Utility operating companies have traditionally shared the costs associated with coordinated planning, construction and operation of generating resources and bulk transmission facilities has been changed by the FERC, which will require adjustment of retail and wholesale rates in the jurisdictions where the Utility operating companies provide service and has introduced additional uncertainty in the ratemaking process.
The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating resources and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that has been approved by the FERC. In 2005, the FERC issued a decision requiring changes to the cost allocation methodology used in that rate schedule. In 2007 through 2009, payments were made by Entergy Arkansas to certain of the Utility operating companies. Although actual payments/receipts for 2010, based on calendar year 2009 production costs, will not be calculated until the Utility operating companies have filed their FERC Form 1s, preliminary estimates indicate that Entergy Arkansas will be required to make payments of approximately $70 million in 2010. Entergy's management believes that any changes in the allocation of production costs resulting from the FERC's decision and related retail proceedings should result in similar rate changes for retail customers. The timing of recovery of these costs in rates, however, could be the subject of additional regulatory and other proceedings.
In December 2005, Entergy Arkansas provided notice of its intent to terminate its participation in the System Agreement. In November 2007, Entergy Mississippi provided its notice to terminate its participation in the System Agreement. Each notice of termination is effective ninety-six (96) months from the date of notice or such earlier date as authorized by the FERC. The FERC accepted the notices in November 2009; the LPSC and City Council have requested rehearing of that order. Entergy cannot predict the timing or the form of any successor arrangement to the System Agreement, to the extent one is implemented, or the effect such a successor arrangement (or the absence thereof) will have on Entergy or the Utility operating companies.
The LPSC, APSC, MPSC and the AEEC have appealed the 2005 FERC decision to the Court of Appeals for the D.C. Circuit. Entergy and the City of New Orleans intervened in the various appeals. The D.C. Circuit issued its decision in April 2008. The D.C. Circuit affirmed the FERC's decision in most respects, but remanded the case to the FERC for further proceedings and reconsideration of its conclusion that it was prohibited from ordering refunds and its determination to implement the bandwidth remedy commencing with calendar year 2006 production costs (with the first payments/receipts commencing in June 2007), rather than commencing the remedy on June 1, 2005. The D.C. Circuit concluded the FERC had failed to offer a reasoned explanation regarding these issues.
In 2007 through 2010, payments were made by Entergy Arkansas to certain of the Utility operating companies in compliance with the 2005 FERC decision on the cost allocation methodology. There have been challenges to the level of payments made by Entergy Arkansas under the FERC’s decision and the prudence of the Utility operating companies’ production costs. The proceedingability to recover in rates any changes to the cost allocation resulting from the challenges, and timing of such recovery, is pending atuncertain and could be the FERC.subject of additional regulatory and other proceedings. For information regarding these and other proceedings associated with the System Agreement, as well as additional information regarding the System Agreement itself, see Note 2 to financial statements, System Agreement Cost Equalization Proceedings. The outcome and timing of this FERC proceeding and resulting recovery and impact on rates cannot be predicted at this time.
There is uncertainty as to the "timing or form of any successor arrangement to the System Agreement and the effect of such arrangement (or absence thereof) will have on Entergy and the Utility operating companies.
Based upon the effect of the FERC decision described in the preceding risk factor undermining the benefits of continued participation in the System Agreement, in December 2005, Entergy Arkansas provided notice of its intent to terminate its participation in the System Agreement. In November 2007, Entergy Mississippi provided its notice to terminate its participation in the System Agreement. Each notice of termination is effective ninety-six (96) months from the date of notice (December 2013 for Entergy Arkansas and November 2015 for Entergy Mississippi) or such earlier date as authorized by the FERC. The FERC accepted the notices in November 2009; the LPSC and City Council have requested rehearing of that order. In February 2011, the FERC denied the request for rehearing. Entergy cannot predict the timing or the form of any successor arrangement to the System Agreement, or in the alternative, participation in a regional transmission organization (RTO), and the effect such arrangement (or the absence thereof) will have on Entergy or the Utility operating companies.
For further information regarding the FERC and APSC proceedings see “Rate, Cost-recovery, and Other Regulation – Federal Regulation - – System Agreement Proceedings"Agreement” section of Management'sManagement’s Financial Discussion and Analysis for Entergy Corporation and eachSubsidiaries.
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Entergy Corporation, Utility operating companies, and purchased power cost recovery, Entergy Texas," in Note 2 to the financial statements for discussion of a PUCT decision that Entergy Texas is currently challenging regarding its rough production cost equalization receipts that could result in $18.6 million of trapped costs between Entergy's Texas and Louisiana jurisdictions. The outcome and timing of the FERC and these other proceedings and appeals cannot be predicted at this time.System Energy
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
A delay or failure in recovering amounts for storm restoration costs incurred, as a result of severe weather could have material adverse effects on Entergy and those Utility operating companies affected by severe weather.
Entergy's and its Utility operating companies' results of operations, liquidity and financial condition can be materially adversely affected by the destructive effects of severe weather. Severe weather can also result in significant outages for the customers of the Utility operating companies and, therefore, reduced revenues for the Utility operating companies during the period of the outages. A delay or failure in recovering amounts for storm restoration costs incurred or revenues lost as a result of severe weather could have a material adverse effect on Entergy and those Utility operating companies affected by severe weather.
The arrangement for the operation of the Utility operating companies’ transmission system faces regulatory challenges and uncertainty in connection with the scheduled expiration of the current Independent Coordinator of Transmission arrangement in November 2012.
In 2000, the FERC issued an order encouraging utilities to voluntarily place their transmission facilities under the control of an independent RTO. In November 2006, the Utility operating companies installed the SPP as their Independent Coordinator of Transmission (ICT) with responsibility for certain transmission tariff functions, including granting or denying transmission service, administering OASIS, evaluating all transmission requests, and serving as the reliability coordinator. The initial term of the ICT was for four years and in November 2010 the FERC approved an extension of the ICT arrangement for two years, or until November 2012. In its order issued in March 2009 pertaining to a requested modification regarding the weekly procurement process (WPP) through the ICT arrangement, the FERC impos ed conditions related to the ICT arrangement and indicated it wanted an evaluation of the success of the ICT arrangement and transmission access on the Entergy transmission system. In compliance with the FERC’s March 2009 order, the Utility operating companies filed with the FERC a process for evaluating the modification or replacement of the current ICT arrangement. An Entergy Regional State Committee (E-RSC), comprised of one representative from each of the Utility operating companies’ retail regulators has been formed and, in concert with the FERC, has requested a cost/benefit analysis of comparing the ICT arrangement to a proposal under which Entergy would join the SPP RTO. The scope of the study was expanded to consider Entergy joining the Midwest ISO RTO as another alternative. On September 30, 2010, the retained consultant presented its cost/benefit analysis of Entergy and Cleco regions joining the SPP RTO. The cost/benefit analysis in dicates that the Entergy region, including entities beyond the Utility operating companies, would realize a net cost of $438 million to a net benefit of $387 million, primarily depending upon transmission cost allocation issues. Addendum studies, including studies related to Entergy Arkansas and the Utility operating companies joining the Midwest ISO, are to be completed by the end of the first quarter 2011. For further information regarding the FERC and proceedings related to the ICT, see “Rate, Cost-recovery, and Other Regulation - Federal Regulation -Independent Coordinator of Transmission” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries.
There is uncertainty as to whether a successor ICT arrangement or alternative such as joining an RTO will have received regulatory approval and whether corresponding changes to cost recovery mechanisms will be in place prior to the termination of the current ICT arrangement in November 2012. To the extent successor ICT arrangements or alternatives have not been approved, an extension of the current ICT arrangement may be required. The outcome of any effort to negotiate an extension of the current arrangement or to make alternative arrangements cannot be predicted at this time.
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Entergy Corporation, Utility operating companies, and System Energy
Nuclear Operating and Regulatory Risks
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy)
Certain of the Utility operating companies, System Energy, and Entergy's Non-Utility Nuclear subsidiariesEntergy Wholesale Commodities must consistently operate their nuclear power plants at high capacity factors in order to be successful, and lower capacity factors could materially adversely affect Entergy's and their results of operations, financial condition and liquidity.
Nuclear capacity factors significantly affect the results of operations of certain Utility operating companies',companies, System Energy'sEnergy and the Non-Utility Nuclear subsidiaries' results of operations.Entergy Wholesale Commodities. Nuclear plant operations involve substantial fixed operating costs, as well as non-fixed costs associated with plant operating conditions and issues.costs. Consequently, to be successful, a plant owner must consistently operate its nuclear power plants at high capacity factors. LowerFor the Utility operating companies that own nuclear plants, lower capacity factors increase operatingproduction costs by requiring the affected companies to generate additional energy, sometimes at higher costs, from their fossil or hydroelectric facilities or purchase additional energy in the spot or forward markets in order to satisfy their supply needs. For the Entergy Wholesale Commodities nuclear plants, lower capacity factors directly affect revenues and cash flow from operations. Although most of the Non-Utility NuclearEntergy Wholesale Commodities nuclear forward sales are on a pure unit-contingent basis, which depends on the availability of the asset, some of the unit-contingent contracts guarantee a specificspecified minimum capacity factor. Non-Utility Nuclear forward sales can also be on a Firm LD basis. In the event these plants were operating below the guaranteed capacity factors, the unit-contingent contracts carrying damage provisionsEntergy would be subject the Entergy System to price risk for the undelivered power. Entergy Wholesale Commodities’ nuclear forward sales contracts can also be on a firm LD basis, which subjects Entergy to increasing price risk if capacity factors decrease.
Certain of the Utility operating companies, System Energy, and Entergy's Non-Utility Nuclear subsidiariesEntergy Wholesale Commodities’ nuclear plant owners periodically shutdown their nuclear power plants to replenish fuel. Plant maintenance and upgrades are often scheduled during such fuelrefueling outages. If refueling outages last longer than anticipated or if unplanned outages arise, Entergy's and their results of operations, financial condition and liquidity could be materially adversely affected.
Outages at nuclear power plants to replenish fuel require the plant to be "turned“turned off."” Refueling outages generally are planned to occur once every 18 to 24 months and have historically averaged approximately 30 days in duration. Plant maintenance and upgrades are often scheduled during such planned outages. When refueling outages last longer than anticipated or a plant experiences unplanned outages, capacity factors decrease and maintenance costs may increase. The Non-Utility Nuclear subsidiariesEntergy Wholesale Commodities’ nuclear plants may face lower margins due to higher costs and lower energy sales for unit-contingent power supply contracts or potentially higher energy replacement costs for unit-contingent contracts with capacity guarantees that are not met due to extended or unplanned outages.outag es.
Certain of the Utility operating companies, System Energy, and Entergy's Non-Utility Nuclear subsidiariesEntergy Wholesale Commodities face risks related to the purchase of uranium fuel (and its conversion, enrichment and fabrication), and their inabilitythe risk of being unable to effectively manage these risks by purchasing from a diversified mix of sellers located in a diversified mix of countries could materially adversely affect Entergy's and their results of operations, financial condition and liquidity.
Based upon currently planned fuel cycles, Entergy's nuclear units have a diversified portfolio of contracts and inventory that provides substantially adequate nuclear fuel materials and conversion and enrichment services at what Entergy believes are reasonably predictable prices through most of 2010. It will be necessary for Entergy to enter into additional arrangements to acquire nuclear fuel and related services beyond 2010.2011. Entergy's ability to purchase nuclear fuel at reasonably predictable prices, however, depends upon the creditworthiness and performance reliability of uranium miners, as well as upon the structure of Entergy's contracts for the purchase of nuclear fuel. For example, some of the supply under Entergy's contracts for nuclear fuel is effectively on a "mine-contingent" basis, which means that if applicable mines are unable to supply sufficient uranium, Entergy may be required to purchase some nuclear fuel from another supplier. There are a number of possible alternate suppliers that may be accessed to mitigate such an event,unexpected supply disruption events, including potentially drawing upon Entergy's own inventory intended for later generation periods depending upon its risk management strategy at thattha t time, although the pricing of any such alternate uranium supply from the market will be dependent upon the market for uranium supply at that time. The market for uranium supply became extremely limited in 2006 and 2007, but this supply shortfall was substantially eliminated in 2008 and 2009. Market prices for uranium concentrates rose from about $7 per pound in December 2000 to a 2007 range of $70 to $135 per pound. In 2008, however, market prices for uranium concentrates ranged from $45 to $90 per pound and from January 1, 2009 through December 31, 2009 ranged from $40 to $55 per pound. The recent higher nuclear fuel market prices of 2006-2009 compared to the 2000-2005 period affect the U.S. nuclear utility industry, including Entergy, first in cash flow requirements for fuel acquisition, and then, some time later, in nuclear fuel expenses. For example, for a nuclear fleet the size of Entergy's, the current market value of annual enriched
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Entergy Corporation, Utility operating companies, and System Energy
dependent upon the market for uranium requirements has increased by several hundred million dollars compared to about five years ago. As nuclear fuel installed in the core in nuclear power plants is replaced fractionally over an approximate five-year period, nuclear fuel expense is beginning to, and will eventually with a time lag, reflect current market prices and can be expected to increase from the previously reported industry levels of about 0.5 cents per kWh to closer to 1.0 cent per kWh.supply at that time. Entergy buys uranium from a diversified mix of sellers located in a diversified mix of countries, and from time to time purchases from nearly all qualified reliable major market participants worldwide that sell into the U.S. Entergy'sMarket prices for nuclear fuel have been extremely volatile from time to time in the past. Although Entergy’s nuclear fuel contract portfolio has providedprovides a degree of price hedging against market risks for several years, costs for nuclear fuel in the full extent offuture cannot be predicted with certainty due to normal inherent market prices through 2010, but market trends will eventuallyuncertainties, and price increases could materially adversely affect the costs of all nuclear plant operators. Entergy is dependent on the continued performance by suppliers of their obligations under their long-term agreementsliquidity, financial condition and Entergy’s ability to manage these risks by purchasing uranium from a diversified mix of sellers located in a diversified mix of countries. Entergy’s financial results could be materially adversely affected if Entergy is unable to successfully manage these risks and any one major supplier fails to fulfill its contractual obligations and Entergy is unable to find other suppliers that can perform under terms that allow Entergy to achieve the same level of profitability. As a result of the failure of a major supplier to meet its contractual obligations or Entergy’s ability to manage such a risk, Entergy may face higher costs to secure other suppliers, which may have a material adverse effect on the results of operations financial condition and liquidityof certain of the Utility operating companies, System Energy, and the Non-Utility Nuclear subsidiaries.Entergy Wholesale Commod ities.
Certain of the Utility operating companies, System Energy, and Entergy's Non-Utility Nuclear subsidiariesthe Entergy Wholesale Commodities business face the risk that the Nuclear Regulatory CommissionNRC will change or modify its regulations or suspend or revoke their licenses, which could materially adversely affect Entergy's and their results of operations, financial condition and liquidity.
Under the Atomic Energy Act and Energy Reorganization Act, the NRC regulates the operation of nuclear power plants. The NRC may modify, suspend or revoke licenses, shut down a nuclear facility and impose civil penalties for failure to comply with the Atomic Energy Act, related regulations or the terms of the licenses for nuclear facilities. A change in the Atomic Energy Act, other applicable statutes, or the applicable regulations or licenses may require a substantial increase in capital expenditures or may result in increased operating or decommissioning costs and could materially adversely affect the results of operations, liquidity or financial condition of Entergy (through its ownership of the Non-Utility Nuclear subsidiaries)Entergy Wholesale Commodities), its Utility operating companies or System Energy or the Non-Utility Nuclear subsidiaries. Energy. 60;Events at nuclear plants owned by others, as well as those owned by one of these companies, may cause the NRC to initiate such actions. As a result, if an incident were to occur at any nuclear generating unit, –whetherwhether an Entergy nuclear generating unit or not, - it could materially adversely affect the financial condition, results of operations and liquidity of Entergy, certain of the Utility operating companies, System Energy or the Non-Utility Nuclear subsidiaries.
A failure to obtain renewed licenses for the continued operation of Entergy’s nuclear power plants could have a material adverse effect on Entergy's operations and could lead to an increase in depreciation rates or an acceleration of the timing for the funding of decommissioning obligations.
The license renewal and related processes for Entergy's nuclear power plants has been and may continue to be the subject of significant public debate and regulatory and legislative review and scrutiny at the federal and, in certain cases, state level. The operating licenses for Vermont Yankee, Pilgrim, Indian Point 2 and Indian Point 3 expire between 2012 and 2015. Various parties have expressed opposition to the pending license renewal applications. There is an ongoing proceeding before the Atomic Safety and Licensing Board of the NRC and contentions have been admitted for litigation regarding the Indian Point license renewals. The Atomic Safety and Licensing Board has completed its proceedings regarding
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Vermont Yankee, but the New England Coalition filed a petition for NRC review of the Atomic Safety Licensing Board’s decision on July 23, 2009. Finally, with respect to the Pilgrim license renewal, the NRC has issued decisions resolving most of the issues that were previously on appeal, but the NRC has asked for further briefing regarding one final issue, which could later be referred back for further proceedings before the Atomic Safety and Licensing Board. In addition, a group of environmental and civic organizations has filed a petition with the NRC seeking a suspension of the currently pending license renewal proceedings for Indian Point, Pilgrim and Vermont Yankee.
In relation to Indian Point 2 and Indian Point 3, the New York Department of Environmental Conservation has taken the position that Indian Point must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process. Indian Point also must obtain a Coastal Zone Management Act consistency determination from the New York Department of State prior to getting its renewed license.
In addition to the NRC license renewal process with respect to Vermont Yankee, under Vermont law the Vermont Public Service Board will need to amend the certificate of public good held by Entergy Vermont Yankee, LLC and Entergy Nuclear Operations, Inc., which also requires Vermont legislative approval, and the Vermont Public Service Board and the Vermont legislature must approve and the Vermont Public Service Board must issue a certificate of public good for the continued operation of Vermont Yankee and storing of spent fuel generated in Vermont after March 21, 2012. An application has been filed with the Vermont Public Service Board (as required by Vermont law) for approval of continued operation and storage of spent nuclear fuel generated after that date. During its 2009 session, which concluded in May, several committees of the Vermont General Assembly held hearings on Vermont Yankee, but no bill or resolution was introduced for approval of continued operation and storage of spent nuclear fuel generated after March 21, 2012. In January 2010, the Governor of the State of Vermont issued a statement indicating he would not ask the Vermont General Assembly to consider the Vermont Yankee license renewal during its 2010 session, based on the discovery of tritium leakage from Vermont Yankee, concerns about miscommunication by Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations related to underground piping at Vermont Yankee carrying radionuclides, and other issues including decommissioning. Notwithstanding the Governor's position, on February 24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote by the Vermont Senate leadership and defeated by a margin of 26 to 4. This vote does not preclude the Vermont Senate from voting again on a similar bill in the future.
If the NRC does not renew the operating licenses for one or more of Entergy's nuclear power plants, or the states in which Entergy’s nuclear power plants are located do not otherwise take the necessary actions for the continued operation of these plants, to the extent applicable, Entergy’s results of operations could be materially adversely affected by loss of revenue associated with the plant or plants, potential impairments of the carrying value of the plants, increased depreciation rates, and an accelerated need for decommissioning funds, which could require additional funding. In addition, Entergy may incur increased operating costs depending on any conditions that may be imposed in connection with license renewal.Wholesale Commodities.
Certain of the Utility operating companies, System Energy, and Entergy's Non-Utility Nuclear subsidiariesEntergy Wholesale Commodities are exposed to risks and costs related to operating and maintaining their aging nuclear power plants, and their failure to maintain operational efficiency at their nuclear power plants could materially adversely affect Entergy's and their results of operations, financial condition and liquidity.
The nuclear generating units owned by certain of the Utility operating companies, System Energy, and Entergy's Non-Utility Nuclearthe Entergy Wholesale Commodities business began commercial operations in the 1970s-1980s. Older equipment may require significantmore capital expenditures to keep each of these nuclear power plants operating efficiently. This equipment is also likely to require periodic upgrading and improvement. Any unexpected failure, including failure associated with breakdowns, forced outages or any unanticipated capital expenditures, could result in reduced profitability. Operations at any of the nuclear generating units owned and operated by Entergy's subsidiaries could degrade to the pointp oint where the affected unit needs to be shut down or operated at less than full capacity. If this were to happen, identifying and correcting the causes may require significant time and expense. A decision may be made to close a unit rather than incur the expense of restarting it or returning the unit to full capacity. For the Non-Utility Nuclear subsidiaries,Entergy Wholesale Commodities, this could result in lost revenue and increased fuel and purchased power expense to meet supply commitments and penalties for failure to perform under their contracts with customers. Moreover, Entergy is becoming more dependent on fewer suppliers for key parts of Entergy's nuclear power plants that may need to be replaced or refurbished. This dependence on a reduced number of suppliers could result in delays in obtaining qualified replacement parts and, therefore, greater expense for Entergy.
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Entergy Corporation, Utility operating companies, and System Energy
The costs associated with the storage of the spent nuclear fuel of certain of the Utility operating companies, System Energy and the Non-Utility Nuclear subsidiaries,owners of the Entergy Wholesale Commodities nuclear power plants, as well as the costs of and their ability to fully decommission their nuclear power plants, could be significantly affected by the timing of the opening of a spent nuclear fuel storage facility, as well as interim storage and transportation requirements.
Certain of the Utility operating companies, System Energy and the Non-Utility Nuclear subsidiariesowners of the Entergy Wholesale Commodities nuclear plants incur costs on an annuala periodic basis for the on-site storage of spent nuclear fuel. The approval of a license for a national repository for the storage of spent nuclear fuel, such as the one proposed for Yucca Mountain, Nevada, and the timing of such facility opening, will significantly affect the costs associated with storage of spent nuclear fuel. For example, while the DOE is required by law to proceed with the licensing of Yucca Mountain and, after the license is granted by the NRC, to construct the repository and commence the receipt of spent fuel, the Obama administration has cut the budget for the Yucca Mountain project, and has made various statements that Yucca Mountain will not be the solution for spent fuel storage. These actions are likely tomay prolong the time before spent fuel is removed from Entergy’s plant sites. Because the DOE has not accomplished its objectives, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts.contracts, and Entergy has sued the DOE for such breach. Furthermore, Entergy is uncertain as to when the DOE plans to commence acceptance of spent fuel from its facilities for storage or disposal. As a result, continuing future expenditures will be required to increase spent fuel storage capacity at its nuclear sites. The costs of on-site storage are also affected by regulatory requirements for such storage and will be subject to the costs of transportation to a permanent storage facility.storage. In addition, the availability of a repository for spent nuclear fuel may affect the
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Entergy Corporation, Utility operating companies, and System Energy
ability to fully decommission the nuclear units and the costs relating to decommissioning. For further information regarding spent fuel storage, see the "Critical Accounting Estimates – Nuclear Decommissioning Costs -- Spent Fuel Disposal” section of Management's Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy.
Certain of the Utility operating companies, System Energy, and Entergy's Non-Utility Nuclear subsidiariesthe Entergy Wholesale Commodities nuclear plant owners may be required to pay substantial retrospective premiums imposed under the Price-Anderson Act in the event of a nuclear incident, and losses not covered by insurance could have a material adverse effect on Entergy's and their results of operations, financial condition or liquidity.
Accidents and other unforeseen problems at nuclear power plants have occurred both in the United States and elsewhere. The consequences of an accident can be severe and include personal injury, loss of life and property damage. The Price-Anderson Act limits each reactor owner's public liability (off-site) for a single nuclear incident to the payment of retrospective premiums into a secondary insurance pool of up to approximately $117.5 million per reactor. With 104 reactors currently participating, this translates to a total public liability cap of approximately $12.2 billion per incident. The limit is subject to change to account for the effects of inflation, a change in the primary limit of insurance coverage, and changes in the number of licensed reactors. As required by the Price-Anderson Act, the Utility operating companies, System Energy, and Non-Utility Nuclear subsidiariesEn tergy Wholesale Commodities carry the maximum available amount of primary nuclear off-site liability insurance with American Nuclear Insurers (currently $375 million for each operating site). Claims for any nuclear incident exceeding that amount are covered under the retrospective premiums paid into the secondary insurance pool. As a result, in the event of a nuclear incident that causes damages (off-site) in excess of the $375 million in primary insurance coverage, each owner of a nuclear plant reactor, including Entergy's Utility operating companies, System Energy, and the Non-Utility NuclearEntergy Wholesale Commodities plant owners, regardless of fault or proximity to the incident, will be required to pay a retrospective premium, equal to its proportionate share of the loss in excess of the $375 million primary level, up to a maximum of $117.5 million per reactor per incident (Entergy's maximum total contingent obligation per incident is $1.3 billion). The retrospective premium payment is currentlyc urrently limited to $17.5 million per year per incident per reactor until the aggregate public liability for each licensee is paid up to the $117.5 million cap. Nuclear accident damage
NEIL is a utility industry mutual insurance company, owned by its members. All member plants could be subject to on-site facilities is covered by Nuclear Electric Insurance Limitedassessments (retrospective premium of up to 10 times current annual premium for all policies) should the limitssurplus (reserve) be significantly depleted due to insured losses. As of April 1, 2010, the primarymaximum assessment amounts total $72.7 million for Nuclear South plants and excess property policies in force at$89.3 million for the time ofNuclear Northeast plants. Retrospective Premium Insurance available through NEIL’s reinsurance treaty can cover the accident. potential assessments. The Nuclear Northeast plants currently maintain the Retrospective Premium Insurance to cover this potential assessment.
As an owner of nuclear power plants, Entergy participates in these mandatory industry self-insurance programs and could be liable to fund claims should a plant owned by a different company experience a major event. Any resulting liability from a nuclear accident may exceed any of the Utility operating companies', System Energy's, or the Non-Utility Nuclear subsidiaries'applicable primary insurance coverage and require contribution of additional funds through the industry-wide program that could significantly affect the results of operations, financial condition or liquidity of Entergy, certain of the Utility operating companies, System Energy or the Non-Utility NuclearEntergy Wholesale Commodities subsidiaries.
Part I Item 1A & 1B
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Market performance and other changes may decrease the value of assets in the decommissioning trusts, which then could require significant additional funding.
Owners of nuclear generating plants have an obligation to decommission those plants. Certain of the Utility operating companies, System Energy and owners of the Non-Utility Nuclear subsidiariesEntergy Wholesale Commodities nuclear power plants maintain decommissioning trust funds for this purpose. Certain of the Utility operating companies collect funds from their customers, which are deposited into the trusts covering the units operated for or on behalf of those companies. Those rate collections are based upon operating license lives as well as estimated trust fund earnings and decommissioning costs. In connection with the acquisition of certain nuclear plants, the Entergy Non-Utility Nuclear subsidiariesWholesale Commodities plant owners also acquired decommissioning trust funds that are funded in accordanceaccorda nce with NRC regulations. Assets in these trust funds are subject to market fluctuations, will yield uncertain returns that may fall below projected return rates, and may result in losses resulting from the recognition of impairments of the value of certain securities held in these trust funds. As part of the Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades/Big Rock Point purchases, the former owners transferred decommissioning trust funds, along with the liability to decommission the plants, to Entergy.the respective Entergy Wholesale Commodities nuclear power plant owners. As part of the Indian Point 1 and 2 purchase, the Entergy Wholesale Commodities nuclear power plant owner also funded an additional $25 million to a supplemental ecommissioningdecommissioning trust fund. As part of the Palisades transaction, Non-Utility Nuclearthe Entergy Wholesale Commodities business assumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan. Once the spent fuel is removed from the site, Non-Utility Nuclearthe Entergy Wholesale Commodities business will dismantle the spent fuel storage facility and complete site decommissioning. Non-Utility NuclearThe Entergy Wholesale Commodities business expects to fund this activity from operating revenue, and Entergy is providing $5 million in credit support to provide financial assurance to the NRC for this obligation to the NRC.obligation.
In 2008, Entergy experienced declines in the market value of assets held in the trust funds for meeting its decommissioning funding assurance obligations for its plants. This decline adversely affected Entergy’s ability to demonstrate compliance with the NRC’s requirements for providing financial assurance for decommissioning funding for some of its plants. In June 2009, the NRC issued letters indicating that the NRC staff had concluded that there were shortfalls in the amount of decommissioning funding assurance provided for Indian Point 2, Vermont Yankee, Palisades, Waterford 3, and River Bend. The NRC staff subsequently conducted a telephone conference with Entergy on this issue and, in August 2009, Entergy submitted a plan for addressing the identified shortfalls. In its submittal, Entergy provided updated analyses to the NRC indicating that there was no current shortfall in the amounts of the required decommissioning funding assurance for Palisades and Indian Point 2, based upon the trust fund balances as of July 31, 2009 and an analysis of the costs that would be incurred if Entergy elected to use a sixty-year period of safe storage for decommissioning, as permitted by the NRC's rules. In December 2009 the NRC accepted the analyses regarding Palisades and Indian Point and, with respect to each plant, the NRC concluded that no further action was required. For Vermont Yankee, Entergy concluded that, when using the July 31, 2009 trust fund balance, and based on an analysis of the costs that would be incurred if Entergy elected to use a sixty year period of safe storage for decommissioning as permitted by the NRC’s rules, there was a shortfall of approximately $58 million,plants, which could be satisfied with a cash contribution to a decommissioning trust of approximately $51 million, or by using another financial assurance mechanism in the amount of approximately $58 million. In September 2009, the NRC requested further information regarding plans to address the shortfall in decommissioning funding assurance for Vermont Yankee, which Entergy provided in October 2009. Based on the trust fund balance as of September 30, 2009, the shortfall had decreased from $58 million to $40 million. This $40 million shortfall was satisfied with a $40 million guarantee from Entergy Corporation that was effective as of December 31, 2009. For Waterford 3 and River Bend, Entergy made the appropriate filings by December 31, 2009 with its retail regulators that request decommissioning funding from ratepayers to address the shortfalls identified by the NRC.
deficiencies have now been corrected. An early plant shutdown, poor investment results (depending on the(including results from poor performance of andor volatility in the capital markets)markets such as occurred in 2008) or higher than anticipated decommissioning costs could cause trust fund assets to be insufficient to meet the decommissioning obligations, with the result that the Non-Utility Nuclear subsidiariesEntergy Wholesale Com modities nuclear plant owners may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning. For further information regarding nuclear decommissioning costs, see the "Critical Accounting Estimates – Nuclear Decommissioning Costs" section of Management's Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, and System Energy and Note 9 to the financial statements.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
New or existing safety concerns regarding operating nuclear power plants and nuclear fuel could lead to restrictions upon the operation of Entergy’s nuclear power plants.
New and existing concerns are being expressed in public forums about the safety of nuclear generating units and nuclear fuel, in particular in the northeastern United States, which is where five of the six units in the current fleet of Non-Utility Nuclear generating unitsEntergy Wholesale Commodities nuclear power plants are located. These concerns have led to, and are expected to continue to lead to, various proposals to Federal regulators and governing bodies in some localities where Entergy's subsidiaries own nuclear generating units for legislative and regulatory changes that could lead to the shut-down of nuclear units, denial of license renewal applications, municipalization of nuclear units, restrictions on nuclear units as a result of unavailability of sites for spent nuclear fuel storage and disposal, or other adverse effects on owning and operating nuclear generating units. Entergy vigorously responds to these concerns and proposals. If any of the existing proposals, or any proposals that may arise in the future with respect to legislative and regulatory changes, become effective, they could have a material adverse effect on Entergy's results of operations, financial condition and liquidity.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
(Entergy Corporation)
A failure to obtain renewed licenses for the continued operation of the Entergy Wholesale Commodities nuclear power plants could have a material adverse effect on Entergy's results of operations, financial condition, and liquidity and could lead to an increase in depreciation rates or an acceleration of the timing for the funding of decommissioning obligations.
The license renewal and related processes for the Entergy Wholesale Commodities nuclear power plants have been and may continue to be the subject of significant public debate and regulatory and legislative review and scrutiny at the federal and, in certain cases, state level. The operating licenses for Vermont Yankee, Pilgrim, Indian Point 2 and Indian Point 3 expire in March 2012, June 2012, September 2013 and December 2015, respectively. Various parties have expressed opposition to renewal of these licenses. Renewal of the Indian Point licenses is the subject of ongoing proceedings before the Atomic Safety and Licensing Board (ASLB) of the NRC. Certain contentions have been admitted for litigation and new and amended contentions filed by parties in January and February 2011 have not been a cted upon by the ASLB. Hearings on the contentions admitted by the ASLB currently are expected to begin in early 2012. The ASLB has completed its proceedings regarding Vermont Yankee, but the New England Coalition filed a new contention, which the ASLB denied in October 2010. The New England Coalition requested NRC review of the denial in November 2010. Finally, with respect to the Pilgrim license renewal, the NRC has issued decisions resolving all but one of the issues that were previously appealed by Pilgrim Watch. The NRC remanded one issue to the ASLB, which ordered that testimony be filed in January 2011 and scheduled a hearing for March 9, 2011. Pilgrim Watch filed two new contentions, one of which it subsequently amended, in December 2010 and January 2011. The ASLB for Pilgrim have not decided whether to admit or deny the new contentions.
In relation to Indian Point 2 and Indian Point 3, the New York Department of Environmental Conservation has taken the position that these plant owners must obtain a new state-issued Clean Water Act Section 401 water quality certification as part of the license renewal process. For the Indian Point plants, the Entergy Wholesale Commodities plant owners also must obtain a Coastal Zone Management Act consistency determination from the New York Department of State prior to getting the renewed licenses. For further information regarding these environmental regulations see “Environmental Regulation, Clean Water Act” in Part I, Item 1.
Pursuant to Vermont law, Vermont Yankee is subject to state approvals to continue operations that are independent of NRC license renewal. Under state law, there is a two-step state law licensing process for obtaining a certificate of public good to continue to operate Vermont Yankee and store newly generated spent fuel after March 21, 2012. First, the Vermont legislature must vote affirmatively to permit the Vermont Public Service Board to consider Vermont Yankee’s application for a renewed certificate of public good for the continued operation of Vermont Yankee and for storage of spent fuel. Second, the Vermont Public Service Board must vote to renew the certificate of public good. The Entergy Wholesale Commodities affiliates that own and operate Vermont Yankee filed an application with th e Vermont Public Service Board in March 2008 to renew its certificate of public good to operate for 20 years beginning March 22, 2012 and to store spent nuclear fuel generated after that date. Ten days of hearings were held in May and June 2009. The Department of Public Service and other parties contended during the hearing that a favorable power purchase agreement for the sale of power from Vermont Yankee to Vermont utilities would be important to demonstrating that renewal of the certificate of public good promoted the public interest. Proceedings in that docket currently are in abeyance.
During its 2009 session, which concluded in May, several committees of the Vermont General Assembly held hearings on Vermont Yankee, but no bill or resolution was introduced for approval of continued operation and storage of spent nuclear fuel generated after March 21, 2012. In January 2010, the Governor of the State of Vermont issued a statement indicating he would not ask the Vermont General Assembly to consider the renewal of a certificate of public good during its 2010 session, based on the discovery of tritium leakage from Vermont Yankee, concerns about miscommunication by Entergy Nuclear Vermont Yankee and Entergy Nuclear Operations related to underground piping at Vermont Yankee carrying radionuclides, and other issues including decommissioning. Nevertheless, on February 24, 2010, a bill to authorize the P ublic Service Board to approve the continued operation of Vermont Yankee was defeated in the Vermont Senate by a vote of 26 to 4. Neither house of the Vermont General Assembly has voted on a similar bill since that time.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
If the NRC finally denies the applications for the renewal of operating licenses for one or more of the Entergy Wholesale Commodities nuclear power plants, or a state in which any such nuclear power plant is located does not take actions legally required for the continued operation of such plant, Entergy’s results of operations, financial condition, and liquidity could be materially adversely affected by loss of revenue and cash flow associated with the plant or plants, potential impairments of the carrying value of the plants, increased depreciation rates, and an accelerated need for decommissioning funds, which could require additional funding. In addition, Entergy may incur increased operating costs depending on any conditions that may be imposed in connection with license renewal. For further discussion regarding the license renewal processes for the Entergy Wholesale Commodities’ nuclear power plants, see “ENTERGY’S BUSINESS – Entergy Wholesale Commodities – Property – Nuclear Generating Stations” in Part I, Item 1 for Entergy Corporation and its subsidiaries.
The decommissioning trust fund assets for the nuclear power plants owned by Entergy's Non-Utility Nuclear subsidiariesEntergy Wholesale Commodities’ nuclear plant owners may not be adequate to meet decommissioning obligations if one or more of their nuclear power plants is retired earlier than the anticipated shutdown date or if current regulatory requirements change which then could require additional funding.
Under Nuclear Regulatory CommissionNRC regulations, Entergy isEntergy’s nuclear subsidiaries are permitted to project the Nuclear Regulatory Commission-requiredNRC-required decommissioning amount based on a Nuclear Regulatory Commissionan NRC formula and the amount in each of its Non-Utility Nuclearthe Entergy Wholesale Commodities nuclear power plant's decommissioning trusts.trusts combined with other decommissioning financial assurances in place. The projections are made based on the scheduled shutdownoperating license expiration date and the mid-point of the subsequent decommissioning process for each of these nuclear power plants, with the earliest scheduled shutdown being Vermont Yankee in 2012. As a result, if the projected amount of our decommissioning trusts exceeds the projected Nuclear Regulatory Commission-requiredNRC-required decommissioning amount, then its decommissioning obligations are considered to be funded in accordance with Nuclear Regulatory CommissionNRC regulations. In the event the Nuclear Regulatory Commission's formulaNRC's fo rmula does not sufficiently reflect the actual costs the applicable Entergy subsidiaries would be required to incur to decommission these nuclear power plants, and funding is otherwise inadequate, or if the formula is changed to require increased funding, additional resources would be required. Furthermore, depending upon the level of funding available in the trust funds, the Nuclear Regulatory CommissionNRC may not permit the trust funds to be used to pay for related costs such as the management of spent nuclear fuel that are not included in the formula. The Nuclear Regulatory CommissionNRC may also require that separate financial assurances be provided as part of a plan for the provision of separate funding offor spent fuel management costs. In addition to Nuclear Regulatory CommissionNRC requirements, there are other decommissioning-related obligations for certain of the states in which Entergy's Non-Utility NuclearEntergy Wholesale Commodities nuclear power plants, are located have imposed other decommissioning related obligations, which Entergymanagement believes it will be able to satisfy.
With respect to the decommissioning trusts for Vermont Yankee, Indian Point 2 and Palisades, the total amount in each of those trusts as of December 31, 20092010 would not have been sufficient to initiate and complete the immediate near-term decommissioning of the respective unit as of such date, but rather the funds would have been sufficient to place the unit in a condition of safe storage status pending future completion of decommissioning. For example, if an Entergy subsidiary had decided to shutdown and immediately begin decommissioning one of those nuclear power plants on December 31, 2009,2010, its trust funds for the plant would have been insufficient and the applicable Entergy subsidiary would have been required to rely on other capital resources to fund the entire decommissioning obligations unless the completion of decommissioning could be deferred during some number of years of safe storage status.status (as is permitted by NRC regulations). Thus, if an Entergy subsidiary decides to shutdown one of these nuclear power plants earlier than the scheduled shutdown date and conduct a prompt decommissioning, the applicable Entergy subsidiary may be unable to rely upon only the decommissioning trust to fund the entire decommissioning obligations, which would require it to obtain funding from other sources.
Further, federal or state regulatory changes, including mandated increases in decommissioning funding or changes in the methods or standards for decommissioning operations, may also increase the funding requirements of, or accelerate the timing for funding of, the obligations related to the decommissioning of its Non-Utility NuclearEntergy Wholesale Commodities’ nuclear power plants. As a result, under any of these circumstances, Entergy's results of operations, liquidity and financial condition could be materially adversely affected.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
TheEntergy Wholesale Commodities’ nuclear power plants owned by Entergy's Non-Utility Nuclear business will beare exposed to price risk to the extent they must compete for thethrough either advance sale of energy and capacity into forward markets or acceptaccepting spot prices primarily in the day-ahead markets.
Entergy and its subsidiaries are not guaranteed any rate of return on their capital investments in non-utility regulated businesses. In particular, the sale of capacity and energy from the Entergy Wholesale Commodities nuclear power plants, owned by Entergy's Non-Utility Nuclear business, unless otherwise contracted, is subject to the fluctuation of market power prices. As of December 31, 2009, the2010, Entergy Wholesale Commodities nuclear power generation plants owned by Entergy's Non-Utility Nuclear business had sold forward 88%96%, 74%87%, 32%40%, 18%25% and 17%15% of its generation portfolio's planned energy output for 2010, 2011, 2012, 2013, 2014 and 2014,2015, respectively. Many of Entergy’s Non-Utility Nuclearthe Entergy Wholesale Commodities business’s existing long-term contracts expire by the end of 2012. The obligations under most of these agreements are contingent on a generating asset that is operating; if the generation asset is not operating,opera ting, the seller generally is not liable for damages. For some unit-contingent obligations, however, there is also
a guarantee of availability that provides for the payment to the power purchaser of contract damages, if incurred, in the event the unit owner fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. In addition, forFor those obligations that are not unit-contingent, the unit owner willEntergy Wholesale Commodities may be required to paymake payments to the purchaser based on the difference between the market price at the delivery point and the contract price at times when the unit being hedged is not running, and to the extent market prices are higher than contract prices, the amount of such payments could be substantial.
Market prices may fluctuate substantially sometimes over relatively short periods of time and at other times experience sustained increases or decreases. Demand for electricity and its fuel stock can fluctuate dramatically, creating periods of substantial under- or over-supply. During periods of over-supply, prices might be depressed. Also, from time to time there may be political pressure, or pressure from regulatory authorities with jurisdiction over wholesale and retail energy commodity and transportation rates, to impose price limitations, credit requirements, bidding rules and other mechanisms to address volatility and other issues in these markets.
The price that different counterparties offer for forward sales is influenced both by market conditions as well as the contract terms such as damage provisions, credit support requirements and the number of available counterparties interested in contracting for the desired forward period. Depending on differences between market factors at the time of contracting versus current conditions, Non-Utility Nuclear'sEntergy Wholesale Commodities' contract portfolio may have average contract prices above or or below current market prices, including at the expiration of the contracts, which couldmay significantly affect Non-Utility Nuclear'sEntergy Wholesale Commodities’ results of operations, financial condition or liquidity. The recent economic downturn and liquidity.negative trends in the energy commodity markets have resulted in lower natural gas prices, and current prev ailing market prices for electricity in the New York and New England power regions are therefore generally below the prices of Entergy Wholesale Commodities’ existing contracts in those regions. To the extent these market conditions persist, Entergy Wholesale Commodities’ realized price per MWh can be expected to continue to decline. With operating licenses for Vermont Yankee, Pilgrim, Indian Point 2 and Indian Point 3 expiring between 2012 and 2015, delays in obtaining extension of the operating licenses and any other approvals required for continued operation of the plants, Entergy Wholesale Commodities may enter into fewer unit-contingent forward sales contracts for output from such plants for periods beyond the license expiration. Instead, in order to hedge future price risk to desired levels, Entergy Wholesale Commodities may enter into firm LD forward sales contacts under which it will be exposed to operational price risk to the extent that the plants do not run as expected.
Among the factors that could affect market prices for electricity and fuel, all of which are beyond Entergy's control to a significant degree, are:
· | prevailing market prices for natural gas, uranium (and its conversion, enrichment and fabrication), coal, oil, and other fuels used in electric generation plants, including associated transportation costs, and supplies of such commodities; |
· | availability of competitively priced alternative energy sources and the requirements of a renewable portfolio standard; |
· | changes in production and storage levels of natural gas, lignite, coal and crude oil and refined products; |
· | liquidity in the general wholesale electricity market, including the number of creditworthy counterparties available and interested in entering into forward sales agreements for Entergy’s full hedging term; |
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
· | the actions of external parties, such as the FERC and local independent system operators and other state or Federal energy regulatory bodies, that may impose price limitations and other mechanisms to address some of the volatility in the energy markets; |
· | electricity transmission, competing generation or fuel transportation constraints, inoperability or inefficiencies; |
· | the general demand for electricity, which may be significantly affected by national and regional economic conditions; |
· | weather conditions affecting demand for electricity or availability of hydroelectric power or fuel supplies; |
· | the rate of growth in demand for electricity as a result of population changes, regional economic conditions and the implementation of conservation programs; |
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
· | regulatory policies of state agencies that affect the willingness of Entergy's Non-Utility NuclearEntergy Wholesale Commodities nuclear customers to enter into long-term contracts generally, and contracts for energy in particular; |
· | increases in supplies due to actions of current Entergy Non-Utility NuclearWholesale Commodities nuclear competitors or new market entrants, including the development of new generation facilities, expansion of existing generation facilities, the disaggregation of vertically integrated utilities and improvements in transmission that allow additional supply to reach Entergy's Non-Utility NuclearEntergy Wholesale Commodities’ nuclear markets; |
· | union and labor relations; |
· | changes in Federal and state energy and environmental laws and regulations and other initiatives, including but not limited to, the price impacts of proposed emission controls such as the Regional Greenhouse Gas Initiative (RGGI); and |
· | natural disasters, terrorist actions, wars, embargoes and other catastrophic events. |
Entergy's Non-Utility NuclearThe Entergy Wholesale Commodities business is subject to substantial governmental regulation and may be adversely affected by legislative, regulatory or market design changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.
Entergy's Non-Utility NuclearThe Entergy Wholesale Commodities business is subject to extensive federal, state and local laws and regulation. Compliance with the requirements under these various regulatory regimes may cause the Non-Utility NuclearWholesale Commodities business to incur significant additional costs, and failure to comply with such requirements could result in the shutdown of the non-complying facility, the imposition of liens, fines and/or civil or criminal liability.
Public utilities under the Federal Power Act are required to obtain FERC acceptance of their rate schedules for wholesale sales of electricity. Each of the Non-Utility Nuclear business'sowners of the Entergy Wholesale Commodities nuclear power plants, as well as Entergy Nuclear Power Marketing, LLC, is a "public utility" under the Federal Power Act by virtue of making wholesale sales of electric energy. The FERC has granted these generating and power marketing companies the authority to sell electricity at market-based rates. The FERC’s orders that grant the Non-Utility Nuclear business'sEntergy Wholesale Commodities’ generating and power marketing companies market-based rate authority reserve the right to revoke or revise that authority if the FERC subsequently determines that the Non-Utility NuclearEntergy Wholesale Commodities business can exercise market power in transmission or generation, create barriers to entry, or engage in abusive affiliate transactions. In addition, the Non-Utility Nuclear business'sEntergy Wholesale Commodities’ market-based sales are subject to certain market behavior rules, and if any of its generating and power marketing companies were deemed to have violated one of those rules, they would be subject to potential disgorgement of profits associated with the violation and/or suspension or revocation of their market-based rate authority and potential penalties of up to $1 million per day per violation. If the Non-Utility Nuclear business'sEntergy Wholesale Commodities’ generating or power marketing companies were to lose their market-based rate authority, such companies would be required to obtain the FERC’s acceptance of a cost-of-service rate schedule and could become subject to the accounting, record-keeping and reporting requirements that are imposed on utilities with cost-based rate schedules. This could have an adverse effect on the rates the Non-Utility Nuclear businessEn tergy Wholesale Commodities charges for power from its facilities.
The Non-Utility NuclearEntergy Wholesale Commodities business is also affected by legislative and regulatory changes, as well as changes to market design, market rules, tariffs, cost allocations and bidding rules imposed by the existing Independent System Operators. The Independent System Operators that oversee most of the wholesale power markets impose, and in the future may continue to impose, mitigation, including price limitations, offer caps and other mechanisms, to address some of the volatility and the potential exercise of market power in these markets. These types of price limitations and other regulatory mechanisms may have an adverse effect on the profitability of the Non-Utility Nuclear business'sEntergy Wholesale Commodities business' generation facilities that sell energy and capacity into the wholesale power markets. For further inform ation regarding federal, state and local laws and regulation applicable to the Entergy Wholesale Commodities business, see “Entergy’s Business-Regulation of Entergy’s Business” in Part I, Item 1 for Entergy Corporation and its subsidiaries.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
The regulatory environment applicable to the electric power industry has undergone substantial changes over the past several years as a result of restructuring initiatives at both the state and federal levels. These changes are ongoing and Entergy cannot predict the future design of the wholesale power markets or the ultimate effect that the changing regulatory environment will have on the Non-Utility NuclearEntergy Wholesale Commodities business. In addition, in some of these markets, interested parties have proposed material market design changes, including the elimination of a single clearing price mechanism and have raised claims that the competitive marketplace is not working because energy prices in wholesale markets exceed the marginal cost ofo f operating nuclear power plants, as well as proposals to re-regulate the markets, impose a generation tax or require divestitures by generating companies to reduce their market share.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Other proposals to re-regulate may be made and legislative or other attention to the electric power market restructuring process may delay or reverse the deregulation process, which could require material changes to business planning models. If competitive restructuring of the electric power markets is reversed, modified, discontinued or delayed, the Non-Utility Nuclear business'sEntergy Wholesale Commodities business' results of operations, financial condition and liquidity could be materially adversely affected.
The nuclear power plants owned by the Entergy Wholesale Commodities business are subject to impairment charges in certain circumstances, which could have a material adverse effect on Entergy's results of operations, financial condition or liquidity.
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets. Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy over the remaining life of the assets. In particular, the assets of the Entergy Wholesale Commodities business, including the nuclear power plants, are subject to impairment if adverse market conditions arise and continue (such as declines in market prices for electricity), if adverse r egulatory events occur (including with respect to environmental regulation), if a unit ceases operation or if a unit's operating license is not renewed. Moreover, the failure of the Entergy Wholesale Commodities business to achieve forecasted operating results and cash flows, an unfavorable change in forecasted operating results or cash flows or a decline in observable industry market multiples could all result in potential impairment charges for the affected assets.
As discussed elsewhere in this Form 10-K, the operating licenses for Vermont Yankee, Pilgrim, Indian Point 2 and Indian Point 3 expire between 2012 and 2015 and are currently the subject of license renewal processes at the NRC and the states in which the plants operate. If Entergy concludes that any of these nuclear power plants is unlikely to operate significantly beyond its current license expiration date, which conclusion would be based on a variety of factors, such a conclusion could result in an impairment of part or all of the carrying value of the plant. Any impairment charge taken by Entergy with respect to its long-lived assets, including the nuclear power plants owned by the Entergy Wholesale Commodities business, would likely be material in the quarter that the charge is taken and could otherwise have a material adverse effect on Entergy's results of operations, financial condition or liquidity.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
General Business Risks
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
Entergy and the Utility operating companies depend on access to the capital markets and, at times, may face potential liquidity constraints, which could make it more difficult to handle future contingencies such as natural disasters or substantial increases in gas and fuel prices. Disruptions in the capital and credit markets may adversely affect Entergy and its subsidiaries' ability to meet liquidity needs, access capital and operate and grow their businesses, and the cost of capital.
Entergy's business is capital intensive and dependent upon its ability to access capital at reasonable rates and other terms. At times there are also spikes in the price for natural gas and other commodities that increase the liquidity requirements of the Utility operating companies. In addition, Entergy's and the Utility operating companies' liquidity needs could significantly increase in the event of a hurricane or other weather-related or unforeseen disaster similar to that experienced in Entergy's service territory with Hurricane Katrina and Hurricane Rita in 2005 and Hurricane Gustav and Hurricane Ike in 2008. The occurrence of one or more contingencies, including a delay in regulatory recovery of fuel or purchased power costs or storm restoration costs, higher than expected pension contributions, an acceleration of payments or decreased credit lines, less cash flow from operations than expected or other unknown events, such as future storms, could cause the financing needs of Entergy and its subsidiaries to increase. In addition, accessing the capital markets more frequently in these situations may result in an increase in leverage. Material leverage increases could negatively affect the credit ratings of Entergy and the Utility operating companies, which in turn could negatively affect access to the capital markets.
The global capital and credit markets experienced extreme volatility and disruption in the fourth quarter of 2008 and much of 2009. The inability to raise capital on favorable terms, particularly during times of uncertainty in the capital markets, could negatively affect Entergy and its subsidiaries' ability to maintain and to expand their businesses. Events beyond Entergy's control, such as the volatility and disruption in global capital and credit markets in 2008 and 2009, may create uncertainty that could increase its cost of capital or impair its ability to access the capital markets, including the ability to draw on its bank credit facilities. Entergy and its subsidiaries are unable to predict the degree of success they will have in renewing or replacing their credit facilities as they come upu p for renewal. Moreover, the size, terms, and covenants of any new credit facilities may not be comparable to, and may be more restrictive than, existing facilities. If Entergy and its subsidiaries are unable to access the credit and capital markets on terms that are reasonable, they may have to delay raising capital, issue shorter-term securities and/or bear an unfavorable cost of capital, which, in turn, could impact their ability to grow their businesses, decrease earnings, significantly reduce financial flexibility and/or limit Entergy'sEntergy Corporation's ability to sustain its current common stock dividend level.
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
A downgrade in Entergy Corporation's or its subsidiaries' credit ratings could negatively affect Entergy Corporation's and its subsidiaries' ability to access capital and/or could require Entergy Corporation or its subsidiaries to post collateral, accelerate certain payments or repay certain indebtedness.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
There are a number of factors that rating agencies evaluate to arrive at credit ratings for Entergy Corporation and the Registrant Subsidiaries, including the ability to cover liquidity requirements, the availability of committed external credit support, and Entergy Corporation's share repurchase program, dividend policy and other commitments for capital. If one or more rating agencies downgrade Entergy Corporation's, any of the Utility operating companies', or System Entergy'sEnergy's ratings, particularly below investment grade, borrowing costs would increase, the potential pool of investors and funding sources would likely decrease, and cash or letter of credit quality collateral demands may be triggered by the terms of a number of commodity contracts, leases and other agreements.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Most of Entergy Corporation's and its subsidiaries' large customers, suppliers and counterparties require sufficient creditworthiness to enter into transactions. If Entergy Corporation's or its subsidiaries' ratings decline, particularly below investment grade, or if certain counterparties believe Entergy Corporation or the Utility operating companies are losing creditworthiness and demand adequate assurance under fuel, gas and purchased power contracts, the counterparties may require posting of collateral in cash or letters of credit, prepayment for fuel, gas or purchased power or accelerated payment, or counterparties may decline business with Entergy Corporation or its subsidiaries. At December 31, 2009,2010, based on power prices at that time, Entergy had $369credit exposure of $14 million of collateralunder the guarantees in place to supportsupp orting Entergy Nuclear Power Marketing transactional activity, consisting primarily of(an Entergy Corporation guarantees, but also includingWholesale Commodities subsidiary) transactions, $20 million of guarantees that support letters of credit, and $2$3 million of posted cash collateral. As of December 31, 2009,2010, the credit exposure associated with Non-Utility NuclearEntergy Wholesale Commodities assurance requirements could increase by an estimated amount of up to $308$123 million for eacha $1 per MMBtu increase in gas prices in both the short- and long-term markets, but because market prices have fallen below most contract prices, the credit exposure would increase by only $8 million.markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, based on power prices as of December 31, 2009,2010, Entergy would have been required to provide approximately $73$78 million of additional cash or letters of credit under some of the agreements. The amount of Entergy Corporation guarantees Entergy would be required to replace will fluctuate depending on changes in power prices.
The construction of, and capital improvements to, power generation facilities involve substantial risks. Should construction or capital improvement efforts be unsuccessful, the financial conditions, results of operations or liquidity of Entergy and the Utility operating companies could be materially adversely affected.
Entergy's and the Utility operating companies' ability to complete construction of power generation facilities in a timely manner and within budget is contingent upon many variables and subject to substantial risks. These variables include, but are not limited to, project management expertise and escalating costs for materials, labor and environmental compliance. Delays in obtaining permits, shortages in materials and qualified labor, suppliers and contractors not performing as required under their contracts, changes in the scope and timing of projects, the inability to raise capital on favorable terms, downward changes in the economy and other events beyond the control of the Utility operating companies or the Entergy Wholesale C ommodities business may occur that may materially affect the schedule, cost and performance of these projects. If these projects are significantly delayed or become subject to cost overruns or cancellation, Entergy and the Utility operating companies could incur additional costs and termination payments, or face increased risk of potential write-off of the investment in the project. For further information regarding capital expenditure plans and other uses of capital in connection with the potential construction of additional generation supply sources within the Utility operating companies' service territory, and as to the Entergy Wholesale Commodities business, see the "Capital Expenditure Plans and Other Uses of Capital" section of Management's Financial Discussion and Analysis for Entergy and each of the Registrant Subsidiaries.
The Utility operating companies, System Energy and Entergy's Non-Utility Nuclearthe Entergy Wholesale Commodities business may incur substantial costs to fulfill their obligations related to, reliability standards, environmental and other matters.
The businesses in which the Utility operating companies, System Energy and the Non-Utility NuclearEntergy Wholesale Commodities business operate are subject to extensive environmental regulation by local, state and Federal authorities. These laws and regulations affect the manner in which the Utility operating companies, System Energy and the Non-Utility NuclearEntergy Wholesale Commodities business conduct their operations and make capital expenditures. These laws and regulations also affect how the Utility operating companies, System Energy and the Non-Utility NuclearEntergy Wholesale Commodities business manage air emissions, discharges to water, solid and hazardous waste storage and disposal, cooling and service water intake, the protection of threatened and endangered
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
species, hazardous materials transportation, and similar matters. Federal, state, and local authoritiesauthoriti es continually revise these laws and regulations, and the laws and regulations are subject to judicial interpretation and to the permitting and enforcement discretion vested in the implementing agencies. Developing and implementing plans for facility compliance with these requirements can lead to capital, personnel, and operation and maintenance expenditures. Violations of these requirements can subject the Utility operating companies, System Energy and the Non-Utility NuclearEntergy Wholesale Commodities business to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs or operating restrictions to achieve compliance, remediation and clean-up costs, civil penalties, and exposure to third parties' claims for alleged health or property damages or for violations of applicable permits or standards. In addition, the Utility operating companies, System Energy and the Non-Utility NuclearEntergy Wholesale Commodities business are subject to liability under
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
these laws for the costs of remediation of environmental contamination of property now or formerly owned or operated by the Utility operating companies, System Energy and the Non-Utility NuclearEntergy Wholesale Commodities business and of property contaminated by hazardous substances they generate. The Utility operating companies are currently involved in proceedings relating to sites where hazardous substances have been released and may be subject to additional proceedings in the future. The Utility operating companies, System Energy and the Non-Utility NuclearEntergy Wholesale Commodities business have incurred and expect to incur significant costs related to environmental compliance.
Emissions of nitrogen and sulfur oxides, mercury, particulates, and other regulated air contaminants from fossil-fueled generating plants are potentially subject to increased regulation, controls and mitigation expenses. In addition, existing air regulations and programs promulgated by the EPA often are challenged legally, sometimes resulting in large-scale changes to anticipated regulatory regimes. Risks relating to global climate change and initiatives to compel CO2 emission reductions are discussed below.
Entergy's business is also subject to extensive and mandatory reliability standards. Such standards, which are established by the North American Electric Reliability Corporation and the SERC Reliability Corporation, are approved by the FERC and currently are being reviewed and amended. Significant capital expenditures for the Utility operating companies' transmission system could be required to achieve on-going compliance with the requirements under these regimes, and failure to comply with such requirements could result in the imposition of fines or civil penalties, and exposure to third party claims for alleged violations of applicable standards. The laws and regulations are subject to judicial interpretation and to the enforcement discretion vested in the implementing agencies. The changes to the reliability requirements applicable to the electric power industry are ongoing, and Entergy cannot predict the ultimate effect that the changing reliability requirements will have on its business.
Entergy and its subsidiaries may not be able to obtain or maintain all required environmental regulatory approvals. If there is a delay in obtaining any required environmental regulatory approvals, or if Entergy and its subsidiaries fail to obtain, maintain or comply with any such approval, the operation of its facilities could be stopped or become subject to additional costs. For further information regarding environmental regulation and environmental matters, see the "Regulation of Entergy's Business – Environmental Regulation" section of Part I, Item 1.
The Utility operating companies, System Energy and the Entergy Wholesale Commodities business may incur substantial costs related to reliability standards.
Entergy's business is subject to extensive and mandatory reliability standards. Such standards, which are established by the North American Electric Reliability Corporation (NERC) and the SERC Reliability Corporation (SERC), are approved by the FERC and frequently are reviewed, amended and supplemented. Failure to comply with such standards could result in the imposition of fines or civil penalties, and potential exposure to third party claims for alleged violations of such standards. The standards, as well as the laws and regulations that govern them, are subject to judicial interpretation and to the enforcement discretion vested in the implementing agencies. In addition to exposure to civil penalties and fines, the Utility operating companies have incurred and expect to incur significant c osts related to compliance with new and existing reliability standards, including costs associated with the Utility operating companies’ transmission system. Entergy has notified the SERC of potential violations of certain NERC reliability standards, including certain Critical Infrastructure, Protection Facility Connection and System Protection Coordination standards. Entergy is working with the SERC to provide information concerning these potential violations. The changes to the reliability standards applicable to the electric power industry are ongoing, and Entergy cannot predict the ultimate effect that the reliability standards will have on its Utility and Entergy Wholesale Commodities business.
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)
The effects of weather and economic conditions and the related impact on electricity and gas usage, may materially adversely affect the Utility operating companies' results of operations.
Temperatures above normal levels in the summer tend to increase summer cooling electricity demand and revenues, and temperatures below moderate levels in the winter tend to increase winter heating electricity and gas demand and revenues. As a corollary, moderate temperatures tend to decrease usage of energy and resulting revenues. Seasonal pricing differentials, coupled with higher consumption levels, typically cause the Utility operating companies to report higher revenues in the third quarter of the fiscal year than in the other quarters. Extreme weather conditions or storms, however, may stress the Utility operating companies' generation facilities and transmission and distribution systems, resulting in increased maintenance and capital costs (and potential increased financing needs), limitslim its on their ability to meet peak customer demand, increased regulatory oversight, and lower customer satisfaction. These extreme conditions could have a material adverse effect on the Utility operating companies' financial condition, results of operations and liquidity.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Industrial sales volume was depressed in the latter part of 2008 and through most of 2009, in part because the overall economy declined, with lower usage across the industrial sector affecting both the large customer industrial segment as well as small and mid-sized industrial customers. Despite the apparently improving economic conditions in the service territories of the Utility operating companies insince the fourth quarter of 2009, it is possible that continued or recurrent poor economic conditions, combined with increasing rates in certain of the Utility operating companies' service territories, could result in slower or declining sales growth and increased bad debt expense relative to recent years, which could materially adversely affect Entergy's and the Utility operating companies' results of operations, financial condition and liquidity.
The effects of climate change and environmental and regulatory obligations intended to compel CO2 emission reductions could materially adversely affect the financial condition, results of operations and liquidity of Entergy and the Utility operating companies.
In an effort to address climate change concerns, Federal, state, and local authorities are calling for additional laws and regulations aimed at known or suspected causes of climate change. For example, in response to the United States Supreme Court's 2007 decision holding that the EPA has authority to regulate emissions of CO2 and other "greenhouse gases" under the Clean Air Act, the EPA, various environmental interest groups and other organizations are focusing considerable attention on CO2 emissions from power generation facilities and their potential role in climate change. In 2010, EPA promulgated its first regulations controlling greenhouse gas emissions from cer tain vehicles and from new and significantly modified stationary sources of emissions, including electric generating units, and additional new source performance standards are expected in 2012. Developing and implementing plans for compliance with CO2 emissions reduction requirements can lead to additional capital, personnel, and operation and maintenance expenditures.expenditures and could significantly affect the economic position of existing facilities and proposed projects. Violations of such requirements may subject Entergy and the Utility operating companies to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs or operating restrictions to achieve compliance, remediation and clean-up costs, civil penalties, and exposure to third parties' claims for alleged health or property damages or for violations of applicable permits or standards. To the extent Entergy believes any of these costs are recoverable in rates, however, additional material rate increases for customers could be resisted by Entergy's regulators and, in extreme cases, Entergy's regulators might deny or defer timely recovery of these costs. Future changes in environmental regulation governing the emission of CO2 and other "greenhouse gases" could make some of Entergy's electric generating units uneconomical to maintain or operate, and could increase the difficulty that Entergy and its subsidiaries have with obtaining or maintaining required environmental regulatory approvals, which could also materially adversely affect the financial condition, results of operations and liquidity of Entergy and the Utility operating companies. In addition, several lawsuits currently are pending against emitters of greenhouse gasesgas es alleging that these companies are liable for personal injuries and property damage caused by climate change. These lawsuits seek injunctive relief, monetary compensation, and punitive damages.
In addition to the regulatory and financial risks associated with climate change discussed above, physical risks from climate change include an increase in sea level, wetland and barrier island erosion, risks of flooding and changes in weather conditions, such as changes in precipitation, average temperatures and potential increased impacts of extreme weather conditions or storms. Entergy ownssubsidiaries own assets in, and serves,serve, communities that are at risk from sea level rise, changes in weather conditions, storms and loss of the protection offered by coastal wetlands. A significant portion of the nation’s oil and gas infrastructure is located in these areas and susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which couldco uld give rise to fuel supply interruptions and price spikes.
These and other physical changes could result in changes in customer demand, increased costs associated with repairing and maintaining generation facilities and transmission and distribution systems resulting in increased maintenance and capital costs (and potential increased financing needs), limits on the Entergy System's ability to meet peak customer demand, increased regulatory oversight, and lower customer satisfaction. Also, to the extent that climate change adversely impacts the economic health of a region or results in energy conservation or demand side management programs, it may adversely impact customer demand and revenues. Such physical or operational risks could have a material adverse effect on Entergy's and the Utility operating companies' financial condition,c ondition, results of operations and liquidity.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Entergy and its subsidiaries may not be adequately hedged against changes in commodity prices, which could materially adversely affect Entergy's and its subsidiaries' results of operations, financial condition and liquidity.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
To manage their near-term financial exposure related to commodity price fluctuations, Entergy and its subsidiaries may enter into contracts to hedge portions of their purchase and sale commitments, weather positions, fuel requirements and inventories of natural gas, uranium (and its conversion), lignite, coal, refined products, and other commodities, within established risk management guidelines. As part of this strategy, Entergy and its subsidiaries may utilize fixed- and variable-price forward physical purchase and sales contracts, futures, financial swaps, and option contracts traded in the over-the-counter markets or on exchanges. However, Entergy and its subsidiaries normally cover only a portion of the exposure of their assets and positions to market price volatility, and the coverage will vary over time. In addition, EntergyEnter gy also elects to leave certain volumes during certain years unhedged. To the extent Entergy and its subsidiaries have unhedged positions, fluctuating commodity prices can materially adversely affect Entergy's and its subsidiaries' results of operations and financial position.
Although Entergy and its subsidiaries devote a considerable effort to these risk management strategies, they cannot eliminate all the risks associated with these activities. As a result of these and other factors, Entergy and its subsidiaries cannot predict with precision the impact that risk management decisions may have on their business, results of operations or financial position.
Entergy has guaranteed or indemnified the performance of a portion of the obligations relating to hedging and risk management activities. Reductions in Entergy's or its subsidiaries' credit quality or changes in the market prices of energy commodities could increase the cash or Letterletter of Credit qualitycredit collateral required to be posted in connection with hedging and risk management activities, which could materially affect Entergy's or its subsidiaries' liquidity and financial position.
The Utility operating companies and the Entergy's Non-Utility Nuclear Wholesale Commodities business are exposed to the risk that counterparties may not meet their obligations, which may materially adversely affect the Utility operating companies'companies and Non-Utility Nuclear's business.Entergy Wholesale Commodities.
Entergy's Utility operating companies' and its Non-Utility Nuclear subsidiaries'The hedging and risk management activitiespractices of the Utility operating companies and the Entergy Wholesale Commodities business are exposed to the risk that counterparties that owe Entergy and its subsidiaries money, energy, or other commodities will not perform their obligations. Currently, some hedging agreements contain provisions that require the counterparties to provide credit support to secure their obligations to Entergy or its subsidiaries. If the counterparties to these arrangements fail to perform, Entergy or its subsidiaries might be forced to act on the credit support provided and acquire alternative hedging arrangements or draw on the credit support provided by the counterparties, which credit support may not always be adequate to cover the related obligations. In such event, Entergy and its subsidiaries might incur losses in addition to amounts, if any, already paid to the counterparties. In addition, the credit commitments of Entergy's lenders under its bank facilities may not be honored for a variety of reasons, including unexpected periods of financial distress affecting such lenders, which could materially adversely affect the adequacy of its liquidity sources.
New legislationThe Wall Street Transparency and Accountability Act of 2010 and rules and regulations promulgated under the act may subjectadversely affect the ability of the Utility operating companies and Entergy’s Non-Utility Nuclearthe Entergy Wholesale Commodities business to utilize certain commodity derivatives for hedging and mitigating commercial risk.
The Wall Street Transparency and Accountability Act of 2010, which was enacted on July 21, 2010 as part of the Dodd-Frank Act Wall Street Reform and Consumer Protection Act, and the rules and regulations to be promulgated under the act will impose governmental regulation of energy derivatives used in hedging and risk management transactions, which may materially adversely affect the Utility operating companies’ and Entergy’s Non-Utility Nuclear business.
New legislation may subject the Utility operating companies and Entergy’s Non-Utility Nuclear business to governmental regulation relating to certain hedging transactions. For example, Congress is considering legislation to impose restrictions on the use of over-the-counter derivatives,derivative market, including energy derivatives. The United States House of Representatives passed its version of the legislation (H.R. 4173, Title III) on December 11, 2009. If such legislation becomes law, Entergy’s subsidiaries could potentially face higher costs to hedge their risks, fewer potential counterparties still active in the newly regulated marketplace, and increased liquidity requirements. Under the proposed legislation, hedging and other risk management transactions conductedcommodity swaps used by the Utility operating companies and Entergy’s Non-Utility Nuclearthe Entergy Wholesale Commodities business wouldto hedge and mitigate commercial risk. Under the act, certain swaps will be regulated bysubject to mandatory clearing and exchange trading requirements. Swap dealers and major participants in the swap market will be subject to capital, margin, registration, reporting, recordkeeping and business conduct requirements with respect to their swap activities. Position limits will also apply to ce rtain swaps activities. The act requires the applicable regulators, which in the case of commodity swaps will be the Commodity Futures Trading Commission. IfCommission, to engage in substantial rulemaking in order to implement the provisions of the act and such legislation were to become law withoutrulemaking is not yet final. Both the addition of appropriate exemptions for energy transactions and energy markets, then Entergy believes that the forward hedging strategies and other risk management activities of its subsidiaries could either be curtailed or become significantly more expensive. A substantial number of these hedge transactions currently used by Entergy’s subsidiaries rely upon bilaterally negotiated contracts that are unsecured or utilize corporate guarantees or fixed credit supportUtility operating companies
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
structures. If Entergy’s subsidiaries were
and the Entergy Wholesale Commodities business currently utilize commodity swaps to hedge and mitigate commodity price risk. It is not known whether the act and regulations promulgated under the act will have an adverse effect upon the market for the commodity swaps used by the Utility operating companies and the Entergy Wholesale Commodities business. However, to the extent that the act and regulations promulgated under the act have the effect of increasing the price of such commodity swaps or limiting or reducing the availability of such commodity swaps, whether through the imposition of additional capital, margin or compliance costs upon market participants or otherwise, the financial performance of the Utility operating companies and/or the Entergy Wholesale Commodities business may be adversely affected. 60; To the extent that the Utility operating companies and the Entergy Wholesale Commodities business would be required to “clear” their transactions, or to post margin based on the mark-to-market forward price of power (asin connection with existing or future commodity swaps in addition to any margin is calculatedcurrently posted by Commodity Futures Trading Commission-regulated exchanges and clearing entities), then these subsidiaries wouldsuch entities, such entities may need to arrange a substantial amountsecure additional sources of additionalcapital to meet such liquidity in order to maintain their current level of hedging and risk management activities.needs or cease utilizing such commodity swaps.
Market performance and other changes may decrease the value of benefit plan assets, which then could require significant additional funding.
The performance of the capital markets affects the values of the assets held in trust under Entergy's pension and postretirement benefit plans. A decline in the market value of the assets may increase the funding requirements relating to Entergy's benefit plan liabilities. The recent significantrecession and volatility in the capital markets hashave affected the market value of these assets, which may affect Entergy's planned levels of contributions in the future. Additionally, changes in interest rates affect the liabilities under Entergy's pension and postretirement benefit plans; as interest rates decrease, the liabilities increase, potentially requiring additional funding. The funding requirements of the obligations relatedre lated to the pension benefit plans can also increase as a result of changes in, among other factors, retirement rates, life expectancy assumptions, or Federal regulations. Guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act of 2006 as a result of these discussions and efforts may affect the level of Entergy's pension contributions in the future. For further information regarding Entergy's pension and other postretirement benefit plans, reference is made to the "Critical Accounting Estimates – Qualified Pension and Other Postretirement Benefits" section of Management's Financial Discussion and Analysis for Entergy and each of its Registrant Subsidiaries and Note 11 to the consolidated financial statements.
The litigation environment in the states in which certain Entergy subsidiaries operate poses a significant risk to those businesses.
Entergy and its subsidiaries are involved in the ordinary course of business in a number of lawsuits involving employment, commercial, asbestos, hazardous material and ratepayer matters, and injuries and damages issues, among other matters. States in which the Utility operating companies operate, in particular Louisiana, Mississippi and Texas, have proven to be unusually litigious environments. Judges and juries in these states have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property damage, and business tort cases. Entergy and its subsidiaries use legal and appropriate means to contest litigation threatened or filed against them, but the litigation environment in these states poses a significant business risk.
Terrorist attacks, future war or risk of war may adversely affect Entergy's results of operations.
As power generators and distributors, Entergy and its subsidiaries face heightened risk of an act or threat of terrorism, including physical and cyber attacks, either as a direct act against one of Entergy's generation facilities, or an act against the transmission and distribution infrastructure used to transport power which affects its ability to operate.operate or an act against the information technology systems and network infrastructure of Entergy and its subsidiaries.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
Entergy and its subsidiaries operate in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure. Despite the implementation of security measures by Entergy and its subsidiaries, all technology systems are vulnerable to disability, failures or unauthorized access due to such activities. If Entergy’s or its subsidiaries’ technology systems were to fail or be breached and be unable to recover in a timely way, Entergy or its subsidiaries may be unable to fulfill critical business functions, and sensitive confidential and other data could be compromised.
If any such an attackattacks were to occur, Entergy's and the Utility operating companies’ business, financial condition and results of operations could be materially adversely affected. The risk of terrorist attacks also may cause Entergy and the Utility operating companies to incur increased capital and operating costs to implement increased security for its nuclear power plants and other facilities, such as additional physical facility security and additional security personnel.personnel, and for systems to protect its information technology and network infrastructure systems.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact Entergy's,Entergy’s, the Utility operating companies'companies’ and System Energy'sEnergy’s results of operations, financial condition and liquidity.
Entergy and its subsidiaries make judgments regarding the potential tax effects of various financial transactions and results of operations to estimate their obligations to taxing authorities. These tax obligations include income, franchise, real estate, sales and use and employment-related taxes. These judgments include reserves for potential adverse outcomes regarding tax positions that have been taken. Entergy and its subsidiaries also estimate their ability to utilize tax benefits, including those in the form of carryforwards for which the
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
benefits have already been reflected in the financial statements. Changes in Federal,federal, state, or local tax laws, adverse tax audit results or adverse tax rulings on positionsposi tions taken by Entergy and its subsidiaries could negatively affect Entergy's, the Utility operating companies' and System Energy's results of operations, financial condition and liquidity. For further information regarding Entergy's accounting for tax obligations, reference is made to Note 3 to the financial statements.
(Entergy Gulf States Louisiana and Entergy New Orleans)
The effect of higher purchased gas cost charges to customers may adversely affect Entergy Gulf States Louisiana's and Entergy New Orleans' results of operations and liquidity.
Gas rates charged to customers are comprised primarily of purchased gas cost charges, which provide no return or profit to Entergy Gulf States Louisiana or Entergy New Orleans, and distribution charges, which provide a return or profit to the utility. Distribution charges are affected by the amount of gas sold to customers. Purchased gas cost charges, which comprise most of a customer's bill and may be adjusted quarterly, represent gas commodity costs that Entergy Gulf States Louisiana or Entergy New Orleans recovers from its customers. Entergy Gulf States Louisiana's or Entergy New Orleans' cash flows can be affected by differences between the time period when gas is purchased and the time when ultimate recovery from customers occurs. When purchased gas cost charges increase substantially reflectingr eflecting higher gas procurement costs incurred by Entergy Gulf States Louisiana or Entergy New Orleans, customer usage may decrease, especially in weaker economic times, resulting in lower distribution charges for Entergy Gulf States Louisiana or Entergy New Orleans.
(System Energy)
System Energy owns and operates a single nuclear generating facility, and it is dependent on affiliated companies for all of its revenues.
System Energy's operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% ownership/leasehold interest in Grand Gulf. Charges under the Unit Power Sales Agreement are paid by the Utility operating companies as consideration for their respective entitlements to receive capacity and energy and are payable on a full cost-of-service basis only so long as Grand Gulf remains in commercial operation. The useful economic life of Grand Gulf is finite and is limited by the terms of its operating license, which is currently due to expire on November 1, 2024. System Energy's financial condition depends both on the receipt of payments from the Utility operating companies under the Unit Power Sales Agreement and on the continued commercial operation of GrandGran d Gulf. For information regarding the Unit Power Sales Agreement and certain other
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
agreements relating to the Entergy System companies' support of System Energy (including the Capital Funds Agreement), see the "Grand Gulf - Related Agreements" section of Note 8 to the financial statements and the "Utility - System Energy and Related Agreements" section of Part I, Item 1.
(Entergy Corporation)
Entergy Corporation's holding company structure could limit its ability to pay dividends.
Entergy Corporation is a holding company with no material assets other than the stock of its subsidiaries. Accordingly, all of its operations are conducted by its subsidiaries. Entergy Corporation's ability to pay dividends on its common stock depends on the payment to it of dividends or distributions by its subsidiaries. The payments of dividends or distributions to Entergy Corporation by its subsidiaries in turn depend on their results of operations and cash flows and other items affecting retained earnings.earnings, and on any applicable legal, regulatory, or contractual limitations on subsidiaries’ ability to pay such dividends or distributions. Provisions in the organizational documents, indentures for debt issuances, and other agreements of certain of Entergy Corporation's subsidiaries restrictre strict the payment of cash dividends to Entergy Corporation. For further information regarding dividend or distribution restrictions to Entergy Corporation, reference is made to the "COMMON EQUITY – Retained Earnings and Dividend Restrictions" section of Note 7 to the financial statements.
Entergy Corporation's proposed spin-off of its Non-Utility Nuclear business is subject to risks inherent to a large-scale transaction subject to regulatory approvals and the completion of complex financings.
Part I Item 1A & 1B
Entergy Corporation, Utility operating companies, and System Energy
The proposed spin-off of Entergy Corporation's Non-Utility Nuclear business is subject to multiple risks and uncertainties, including the risk that the spin-off will not be consummated, the risk that the financing transactions contemplated as part of the spin-off cannot be consummated on terms and conditions acceptable to Entergy Corporation or the risk that state and Federal regulatory jurisdictions may impose conditions to the transaction not acceptable to Entergy Corporation. If the spin-off is consummated, it is possible that Entergy Corporation or Enexus Energy Corporation, the wholly-owned subsidiary of Entergy whose shares will be distributed in the spin-off , may not achieve the full strategic and financial benefits that they expect will result from the transaction or that such benefits may be delayed or not occur due to unforeseen changes in market and economic conditions or other events. As a result, the aggregate market price of the common stock of Entergy Corporation and Enexus Energy Corporation as separate companies could be less than the market price of Entergy Corporation's common stock if the spin-off had not occurred.
Net Income
2010 Compared to 2009
Net income increased $105.7 million primarily due to higher net revenue, a lower effective income tax rate, higher other income, and lower depreciation and amortization expenses, partially offset by higher other operation and maintenance expenses.
2009 Compared to 2008
Net income increased $19.7 million primarily due to lower other operation and maintenance expenses and a lower effective income tax rate, partially offset by lower net revenue, higher depreciation and amortization expenses, higher nuclear refueling outage expenses, and higher interest expense.
2008Net Revenue
2010 Compared to 20072009
Net income decreased $92.0 millionrevenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $1,102.4 |
Volume/weather | | 84.2 |
Provision for regulatory proceedings | | 26.1 |
Retail electric price | | 16.1 |
2009 capitalization of Ouachita Plant service charges | | 12.5 |
ANO decommissioning trust | | (24.4) |
Net wholesale revenue | | (12.2) |
Other | | 12.0 |
2010 net revenue | | $1,216.7 |
The volume/weather variance is primarily due to higher other operationan increase of 2,078 GWh, or 10%, in billed electricity usage. Usage in the industrial sector increased primarily in the small industrial customers segment, as well as in the petroleum refining, chemicals, industrial inorganic, and maintenance expenses, higher depreciationpulp and amortization expenses, and a higher effective income tax rate, partially offset by higher net revenue.paper industries, reflecting strong sales growth on continuing signs of economic recovery. The higher other operation and maintenance expenses resulted primarily fromeffect of more favorable weather was the write-off of approximately $70.8 million of costs as a resultprimary driver of the December 2008 Arkansas Court of Appeals decisionincrease in Entergy Arkansas' 2006 base rate case. residential and commercial sales.
The 2006 base rate caseprovision for regulatory proceedings variance is discussedprimarily due to provisions recorded in more detail in2009. See Note 2 to the financial statements.statements for a discussion of regulatory proceedings affecting Entergy Arkansas.
The retail electric price variance is primarily due to a base rate increase effective July 2010, partially offset by the recovery in 2009 of 2008 extraordinary storm costs, as approved by the APSC, which ceased in January 2010. The recovery of storm costs is offset in other operation and maintenance expenses. See Note 2 to the financial statements for more discussion of the rate case settlement and the 2008 extraordinary storm costs.
Net RevenueEntergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
In 2009, Entergy Arkansas capitalized $12.5 million of Ouachita Plant service charges that were previously expensed. The result of the capitalization in 2009 was a decrease in net revenues with an offsetting decrease in other operation and maintenance expenses.
The ANO decommissioning trust variance is primarily related to the deferral of investment gains from the ANO 1 and 2 decommissioning trust. The gains resulted in an increase in interest and investment income and a corresponding increase in regulatory charges with no effect on net income in accordance with regulatory treatment.
The net wholesale revenue variance is primarily due to reduced margin on wholesale contracts including lower capacity billings to an affiliate for the Ouachita unit that was later purchased by the affiliate in November 2009, and lower margins on co-owner contracts, somewhat offset by lower wholesale energy costs.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues decreased primarily due to:
· | a decrease of $98.6 million in rider revenues primarily due to lower System Agreement payments in 2010; |
· | a decrease of $95.6 million in fuel cost recovery revenues due to a change in the energy cost recovery rider rate change effective April 2010; and |
· | a decrease of $72.5 million in gross wholesale revenue due to decreased sales to affiliated customers and the expiration of a wholesale customer contract in 2009. |
The decrease was offset by volume/weather, as discussed above.
Fuel and purchased power expenses decreased primarily due to a decrease in the average market price of purchased power.
2009 Compared to 2008
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $1,117.9 |
Provision for regulatory proceedings | | (26.1) |
Volume/weather | | (24.4) |
Retail electric price | | 26.5 |
Other | | 8.5 |
2009 net revenue | | $1,102.4 |
The provision for regulatory proceedings variance is primarily due to provisions recorded in 2009. See Note 2 to the financial statements for a discussion of regulatory proceedings affecting Entergy Arkansas.
The volume/weather variance is primarily due to the effect of less favorable weather and an 11.6% volume decrease in industrial sales primarily in the mid to small customer class.
The retail electric price variance is primarily due to the recovery of 2008 extraordinary storm costs as approved by the APSC, effective January 2009, which is discussed in Note 2 to the financial statements. Also contributing to the increase are increases in the capacity acquisition rider related to the Ouachita acquisition. The net income effect of the Ouachita plant cost recovery is limited to a portion representing an allowed return on equity with the remainder offset by Ouachita plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes.
Entergy Arkansas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues decreased primarily due to:
· | a decrease of $119.9 million in gross wholesale revenue due to a decrease in the average price of energy available for resale sales; |
· | a decrease of $63.2 million in fuel cost recovery revenues due to a change in the energy cost recovery rider effective April 2009 and decreased usage; and |
· | a decrease of $24.4 million related tothe volume/weather as discussed above. |
The decrease was offset by an increase of $90.7 million in rider revenues.
Fuel and purchased power expenses decreased primarily due to a decrease in the average market price of purchased power.
2008Other Income Statement Variances
2010 Compared to 20072009
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing 2008 to 2007.
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $1,110.6
|
Rider revenue | | 13.6 |
Purchased power capacity | | 4.8 |
Volume/weather | | (14.6) |
Other | | 3.5 |
2008 net revenue | | $1,117.9
|
The rider revenue variance is primarily due to an Energy Efficiency rider which became effective in November 2007. The establishment of the rider results in an increase in rider revenue and a corresponding increase in other operation and maintenance expense with no effect on net income. Also contributing to the variance was an increase in franchise tax rider revenue as a result of higher retail revenues. The corresponding increase is in taxes other than income taxes, resulting in no effect on net income.
The purchased power capacity variance is primarily due to lower reserve equalization expenses.
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales during the billed and unbilled sales periods compared to 2007 and a 2.9% volume decrease in industrial sales, primarily in the wood industry and the small customer class. Billed electricity usage decreased 333 GWh in all sectors. See "Critical Accounting Estimates" below and Note 1 to the financial statements for further discussion of the accounting for unbilled revenues.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to:
· | an increase of $114$21.7 million in gross wholesale revenue due tocompensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the average price of energy availableaccrual for resale sales and an increase in sales to affiliated customers; |
· | an increase of $106.1 million in production cost allocation rider revenues which became effective in July 2007 as a result of the System Agreement proceedings. As a result of the System Agreement proceedings, Entergy Arkansas also has a corresponding increase in deferred fuel expense for payments to other Entergy system companies such that there is no effect on net income. Entergy Arkansas makes payments over a seven-month period but collections from customers occur over a twelve-month period. The production cost allocation rider is discussed inincentive-based compensation. See Note 211 to the financial statements and the System Agreement proceedings are referenced below under "Federal Regulation"; and for further discussion of benefits costs; |
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
· | an increase of $58.9$6.2 million in fuel cost recovery revenuesvegetation and maintenance expenses; and |
· | an increase of $5.4 million in nuclear expenses primarily due to changes in the energy cost recovery rider effective April 2008higher labor costs, higher materials costs, and September 2008, partially offset by decreased usage. The energy cost recovery rider filings are discussed in Note 2 to the financial statements.additional projects. |
The increase was partially offset by a decrease of $14.6$19.4 million relateddue to volume/weather, as discussed above.2008 storm costs which were deferred per an APSC order and were recovered through revenues in 2009.
FuelDepreciation and purchased poweramortization expenses decreased primarily due to a decrease in depreciation rates as a result of the rate case settlement agreement approved by the APSC in June 2010.
Other income increased primarily due to an increase of $106.1 million in deferred System Agreement payments, asthe investment gains on the ANO 1 and 2 decommissioning trust discussed above and an increase in the average market price of purchased power.
Other Income Statement Variancesnet revenue.
2009 Compared to 2008
Nuclear refueling outage expenses increased primarily due to the amortization of higher expenses associated with the planned maintenance and refueling outage at ANO 1 which ended in December 2008 and the planned maintenance and refueling outage at ANO 2 which ended in September 2009.
Other operation and maintenance expenses decreased primarily due to:
· | the write off in the fourth quarter 2008 of $52 million of costs previously accumulated in Entergy Arkansas'Arkansas’s storm reserve and $16 million of removal costs associated with the termination of a lease, both in connection with the December 2008 Arkansas Court of Appeals decision in Entergy Arkansas'sArkansas’s 2006 base rate case. The 2006 base rate case is discussed in more detail in Note 2 to the financial statements; |
· | the capitalization in 2009 of $12.5 million of Ouachita service charges previously expensed in 2008; |
· | prior year storm damage charges as a result of several storms hitting Entergy Arkansas'Arkansas’s service territory in 2008, including Hurricane Gustav and Hurricane Ike in the third quarter 2008. Entergy Arkansas discontinued regulatory storm reserve accounting beginning July 2007 as a result of the APSC order issued in Entergy Arkansas'Arkansas’s rate case. As a result, non-capital storm expenses of $41 million were charged to other operation and maintenance expenses. In December 2008, $19.4 million of these storm expenses were deferred per an APSC order and were recovered through revenues in 2009; and |
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
· | a decrease of $10.8 million in payroll-related and benefits costs. |
The decrease was partially offset by the following:
· | an increase of $17.9 million due to higher fossil costs primarily due to a full year of Ouachita costs in 2009 and higher fossil plant outage costs in 2009; |
· | an increase of $14.4 million due to the reinstatement of storm reserve accounting effective January 2009; |
· | an increase of $9.6 million in nuclear expenses primarily due to increased nuclear labor and contract costs; |
· | an increase in legal expenses as a result of a reimbursement in April 2008 of $7 million of costs in connection with a litigation settlement; and |
· | an increase of $4.0 million in customer service costs primarily as a result of write-offs of uncollectible customer accounts. |
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Interest expense increased primarily due to an increase in long-term debt outstanding as a result of the issuance of $300 million of 5.40% Series first mortgage bonds in July 2008.
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
2008 Compared to 2007
Other operation and maintenance expenses increased primarily due to:
· | the write-off in the fourth quarter 2008 of $52 million of costs previously accumulated in Entergy Arkansas's storm reserve and $16 million of removal costs associated with the termination of a lease, both in connection with the December 2008 Arkansas Court of Appeals decision in Entergy Arkansas's 2006 base rate case. The 2006 base rate case is discussed in more detail in Note 2 to the financial statements;
|
· | an increase of $16.8 million in fossil plant expenses due to the Ouachita plant acquisition in 2008; and |
· | an increase of $15 million in storm damage charges as a result of several storms hitting Entergy Arkansas' service territory in 2008, including Hurricane Gustav and Hurricane Ike in the third quarter 2008. Entergy Arkansas discontinued regulatory storm reserve accounting beginning July 2007 as a result of the APSC order issued in Entergy Arkansas' 2006 base rate case. As a result, non-capital storm expenses of $41 million were charged to other operation and maintenance expenses. In December 2008, $19.4 million of these storm expenses were deferred per an APSC order and will be recovered through revenues in 2009. See Note 2 for discussion of the APSC order. |
The increase was partially offset by:
· | a decrease of $8.9 million in payroll-related and benefits costs; |
· | a decrease of $8.3 million related to expenses in connection with the nuclear fleet alignment in 2007, which is discussed in more detail in Note 13 to the financial statements; and |
· | a reimbursement of $7 million of costs in connection with a litigation settlement. |
Taxes other than income taxes increased primarily due to an increase in local franchise taxes as a result of higher residential and commercial revenue and an increase in ad valorem taxes due to a higher millage rate and a higher 2008 assessment.
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Income Taxes
The effective income tax rates for 2010, 2009, and 2008 and 2007 were 39.6%, 55.0%, 67.2%, and 38.1%67.2%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rate.
Cash Flow
Cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | 2009 | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $39,568 | | $212 | | $34,815 | Cash and cash equivalents at beginning of period | | $86,233 | | $39,568 | | $212 |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 384,192 | | 460,251 | | 366,118 | Operating activities | | 512,260 | | 384,192 | | 460,251 |
| Investing activities | | (281,512) | | (608,501) | | (290,130) | Investing activities | | (413,180) | | (281,512) | | (608,501) |
| Financing activities | | (56,015) | | 187,606 | | (110,591) | Financing activities | | (79,211) | | (56,015) | | 187,606 |
| Net increase (decrease) in cash and cash equivalents | | 46,665 | | 39,356 | | (34,603) | Net increase in cash and cash equivalents | | 19,869 | | 46,665 | | 39,356 |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $86,233 | | $39,568 | | $212 | Cash and cash equivalents at end of period | | $106,102 | | $86,233 | | $39,568 |
Operating Activities
Cash flow from operations increased $128.1 million in 2010 compared to 2009 primarily due to an increase in net revenue as discussed above, ice storm spending in 2009, and the collection of previously under-recovered fuel costs through the normal operation of the energy cost recovery rider. The increase was offset by an increase of $112 million in pension contributions, and an increase of $65 million in income tax payments. See “Critical Accounting Estimates” below for a discussion of qualified pension and other postretirement benefits funding. In 201 0 Entergy Arkansas made tax payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments result from the reversal of temporary differences for which Entergy Arkansas previously received cash tax benefits and from estimated federal income tax payments for tax year 2010.
Entergy Arkansas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Operating Activities
Cash flow from operations decreased $76.1 million in 2009 compared to 2008 primarily due to income tax payments of $1.4 million in 2009 compared to income tax refunds of $57.9 million in 2008 and an increase in storm spending in 2009, partially offset by a decrease of $14.1 million in pension contributions.
Investing Activities
CashNet cash flow from operationsused in investing activities increased $94.1$131.7 million in 20082010 compared to 20072009 primarily due to income tax refunds of $57.9 million in 2008 compared to income tax payments of $21.9 million in 2007 and an increase in recovery of fuel costs, partially offset by storm restoration spending.to:
Investing Activities· | the sale of one-third of the Ouachita plant for $75 million in 2009; |
· | proceeds from the sale/leaseback of nuclear fuel of $118.6 million in 2009. See Note 18 to the financial statements for a discussion of the consolidation of the nuclear fuel company variable interest entity effective January 1, 2010; and |
· | increases in nuclear construction expenditures primarily due to the ANO 1 reactor coolant pump upgrade project and security upgrades. |
The increase was offset by a decrease in distribution construction expenditures as a result of an ice storm hitting Entergy Arkansas’s service territory in the first quarter 2009.
Net cash flow used in investing activities decreased $327.0 million in 2009 compared to 2008 primarily due to the purchase of the Ouachita plant for $210 million in September 2008 and the sale of one-third of the plant for $75 million in 2009, decreases in nuclear construction expenditures resulting from various nuclear projects that occurred in 2008, and decreases in distribution and transmission construction expenditures resulting from Hurricane Gustav and Hurricane Ike in 2008. The decrease was partially offset by an increase in distribution construction expenditures as a result of an ice storm hitting Entergy Arkansas'Arkansas’s service territory in the first quarter 2009.
Financing Activities
Net cash flow used in investingfinancing activities increased $318.4$23.2 million in 20082010 compared to 20072009 primarily due to:
· | the purchaseretirements of the Ouachita plant for $210$450 million of first mortgage bonds in September 2008. See Note 15 to the financial statements for more details on the acquisition;2010; |
· | retirements of $139.5 million of pollution control bonds in 2010; and |
· | an increase of $125.1 million in nuclear construction expenditures resulting from various nuclear projectscommon stock dividends paid in 2008;2010. |
The increase was offset by:
· | an increaseissuances of $575 million of first mortgage bonds in distribution and transmission construction expenditures in 2008 due to Hurricane Gustav and Hurricane Ike, as well as several storms hitting Entergy Arkansas' service territory in the first quarter of 2008;2010; and |
· | money pool activity.the issuance in August 2010 of $124.1 million of storm cost recovery bonds by Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas. |
Increases in Entergy Arkansas' receivable from the money pool are a use of cash flow, and Entergy Arkansas' receivable from the money pool increased by $16 million in 2008 compared to decreasing by $14.3 million in 2007. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' need for external short-term borrowings.
Financing Activities
Entergy Arkansas'Arkansas’s financing activities used $56.0 million of cash in 2009 compared to providing $187.6 million in 2008 primarily due to:
· | issuance of $300 million of 5.4% Series first mortgage bonds in July 2008; |
· | an increase of $23.4 million in common stock dividends paid in 2009; and |
Decreases in Entergy Arkansas'Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas'Arkansas’s payable to the money pool decreased by $77.9 million in 2008.
Entergy Arkansas' financing activities provided $187.6 million of cash in 2008 compared to using $110.6 million in 2007 primarily due to the issuance of $300 million of 5.40% Series First Mortgage Bonds in July 2008 and a decrease of $156.7 million in common stock dividends paid in 2008, partially offset by money pool activity.
Decreases in Entergy Arkansas' payable to the money pool are a use of cash flow, and Entergy Arkansas' payable to the money pool decreased by $77.9 million in 2008 compared to increasing by $77.9 million in 2007.
See Note 5 to the financial statements for details of long-term debt.
Entergy Arkansas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Capital Structure
Entergy Arkansas'Arkansas’s capitalization is balanced between equity and debt, as shown in the following table.
| | December 31, 2009 | | December 31, 2008 |
| | | | |
Net debt to net capital | | 52.8% | | 52.9% |
Effect of subtracting cash from debt | | 1.2% | | 0.6% |
Debt to capital | | 54.0% | | 53.5% |
| | December 31, 2010 | | December 31, 2009 |
| | | | |
Debt to capital | | 55.9% | | 54.0% |
Effect of excluding the securitization bonds | | (1.6)% | | 0.0% |
Debt to capital, excluding securitization bonds (1) | | 54.3% | | 54.0% |
Effect of subtracting cash | | (1.5)% | | (1.2)% |
Net debt to net capital, excluding securitization bonds (1) | | 52.8% | | 52.8% |
(1) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas. |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and shareholders'common equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas'Arkansas’s financial condition.
Uses of Capital
Entergy Arkansas requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred stock maturities; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | dividend and interest payments. |
Following are the amounts of Entergy Arkansas'Arkansas’s planned construction and other capital investments, existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:
| | 2010 | | 2011-2012 | | 2013-2014 | | after 2014 | | Total | | | 2011 | | 2012-2013 | | 2014-2015 | | after 2015 | | Total | |
| | (In Millions) | | (In Millions) |
Planned construction and | | | | | | | | | | | | |
capital investment (1) | | $399 | | $1,001 | | N/A | | N/A | | $1,400 | | |
Planned construction and capital investment (1): | | Planned construction and capital investment (1): | | | | | | | | | |
Generation | | | $119 | | $483 | | N/A | | N/A | | $602 | |
Transmission | | | 103 | | 152 | | N/A | | N/A | | 255 | |
Distribution | | | 122 | | 251 | | N/A | | N/A | | 373 | |
Other | | | 13 | | 40 | | N/A | | N/A | | 53 | |
Total | | | $357 | | $926 | | N/A | | N/A | | $1,283 | |
Long-term debt (2) | | $178 | | $152 | | $429 | | $1,841 | | $2,600 | | | $118 | | $486 | | $190 | | $2,128 | | $2,922 | |
Capital lease payments | | $- | | $- | | $- | | $1 | | $1 | | | $- | | $0.5 | | $0.5 | | $1 | | $2 | |
Operating leases | | $21 | | $40 | | $33 | | $27 | | $121 | | | $23 | | $43 | | $40 | | $13 | | $119 | |
Purchase obligations (3) | | $662 | | $1,017 | | $948 | | $2,177 | | $4,804 | | | $635 | | $1,211 | | $929 | | $1,946 | | $4,721 | |
Nuclear fuel lease obligations (4) | | $73 | | $102 | | N/A | | N/A | | $175 | | |
(1) | Includes approximately $193$211 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Arkansas, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financial statements. |
(4) | It is expected that additional financing under the leases will be arranged as needed to acquire additional fuel, to pay interest, and to pay maturing debt. If such additional financing cannot be arranged, however, Entergy Arkansas must repurchase sufficient nuclear fuel to allow the lessor to meet its obligations. |
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
In addition, Entergy Arkansas currently expects to contribute approximately $73.1$107.1 million to its pension plans and approximately $21.6$26.3 million to other postretirement plans in 2010;2011; although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Arkansas’ pension contributions in the future.2011.
Also in addition to the contractual obligations, Entergy Arkansas has $178.1$40.3 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
The planned capital investment estimate for Entergy Arkansas also reflects capital required to support existing business and customer growth. Entergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The above amounts include approximately $420 million for installation of scrubbersestimated capital expenditures are subject to periodic review and low NOx burners at Entergy Arkansas' White Bluff coal plant, which is discussed below. Entergy Arkansas continues to review potential environmental spending needsmodification and financing alternatives for any such spending, and future spending estimates could changemay vary based on the resultsongoing effects of this continuing analysis.regulatory constraints, environmental compliance, market volatility, economic trends, business restructuring, changes in projec t plans, the ability to access capital, and the outcome of Entergy Arkansas’s exit from the Entergy System Agreement (which is discussed in “System Agreement” in the “Rate, Cost-recovery, and Other Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis). Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.
As a wholly-owned subsidiary, Entergy Arkansas pays dividends to Entergy Corporation from its earnings at a percentage determined monthly. Entergy Arkansas’s long-term debt indentures restrict the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock. As of December 31, 2010, Entergy Arkansas had restricted retained earnings unavailable for distribution to Entergy Corporation of $458 million.
White Bluff Coal Plant Project
In June 2005 the EPA issued final Best Available Retrofit Control Technology (BART) regulations that could potentially result in a requirement to install SO2 and NOx pollution control technology on certain of Entergy'sEntergy’s coal and oil generation units. The rule leaves certain BART determinations to the states. The Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for Arkansas facilities to implement its obligations under the Clean Air Visibility Rule. The ADEQ determined that Entergy Arkansas'Arkansas’s White Bluff power plant affects a Class I AreaArea’s visibility and will be subject to the EPA'sEPA’s presumptive BART requirements to install scrubbers and low NOx burners. Under then current regulations, the scrubbers would have had to be operational by October 2013. Entergy filed a petition in December 2009 with the Arkansas Pollution Control and Ecology (APC&E) Commission requesting a variance from this deadline, however, because the EPA has not approved Arkansas'Arkansas’s Regional Haze SIP and the EPA has recently expressed concerns about Arkansas'Arkansas’s Regional Haze SIP and questioned the appropriateness of issuing an air permit prior to that approval. Entergy Arkansas'Arkansas’s petition requestsrequested that, consistent with federal law, the compliance deadline be changed to as expeditiously as practicable, but in no event later than five years after EPA approval of the Arkansas Regional Haze SIP. The Arkansas Pollution Control and Ecology (PC&E)APC&E Commission adopted a procedural schedule that includes a public hearing and a comment period ending in March 2010 with the expectation thatapproved the variance could be considered at the Commission'sits March 26, 2010 meeting. No party appealed the variance, and the ruling is final. 160;The timeline for EPA action on the Arkansas Regional Haze SIP is uncertain at this time.
In March 2009, Entergy Arkansas made a filing with the APSC seeking a declaratory order that the White Bluff project is in the public interest. In May 2009 the APSC Staff filed a motion requesting that the APSC require Entergy Arkansas to file testimony on several issues. In December 2009, in response to the EPA concerns regarding Arkansas' Regional Haze SIP, the APSC suspended the procedural schedule in the proceeding.
Currently, the White Bluff project is suspended, but the latest conceptual cost estimate indicatedEntergy Arkansas estimates that Entergy Arkansas'its share of the project could cost approximately $465$500 million. The plant would continue to operate during construction, although an outage would be necessary to complete the tie intie-in of the scrubbers. Entergy continues to review potential environmental spending needs and financing alternatives for any such spending, and future spending estimates couldare likely to change based on the results of this continuing analysis.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Ouachita Power Plant
Entergy Arkansas filed with the APSC in September 2007 for its approval of the Ouachita plant acquisition, including full cost recovery. In June 2008 the APSC approved Entergy Arkansas'Arkansas’s acquisition of the Ouachita plant and approved recovery of the acquisition and ownership costs through a rate rider. The APSC also approved the planned sale of one-third of the capacity and energy to Entergy Gulf States Louisiana. Entergy Arkansas purchased the Ouachita plant in September 2008.
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
In August 2008, the LPSC issued an order approving an uncontested settlement between Entergy Gulf States Louisiana and the LPSC Staff authorizing Entergy Gulf States Louisiana'sLouisiana’s purchase, under a life-of-unit agreement, of one-third of the capacity and energy from the 789 MW Ouachita power plant. The LPSC'sLPSC’s approval was subject to certain conditions, including a study to determine the costs and benefits of Entergy Gulf States Louisiana exercising an option to purchase one-third of the plant (Unit 3) from Entergy Arkansas. In April 2009, Entergy Gulf States Louisiana made a filing with the LPSC seeking approval of Entergy Gulf States Louisiana exercising its option to convert its purchased power agreement into the ownership interest in Unit 3 and a one-third interest in the Ouachita common facilities.& #160; In September 2009 the LPSC, pursuant to an uncontested settlement, approved the acquisition and a cost recovery mechanism. Entergy Gulf States Louisiana purchased Unit 3 and a one-third interest in the Ouachita common facilities for $75 million in November 2009.
Entergy's Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, market volatility, economic trends, environmental compliance, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.
As a wholly-owned subsidiary, Entergy Arkansas pays dividends to Entergy Corporation from its earnings at a percentage determined monthly. Entergy Arkansas' long-term debt indentures restrict the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock. As of December 31, 2009, Entergy Arkansas had restricted retained earnings unavailable for distribution to Entergy Corporation of $461.6 million.
Sources of Capital
Entergy Arkansas'Arkansas’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred stock issuances; and |
· | bank financing under new or existing facilities. |
Entergy Arkansas may refinance or redeem debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common and preferred stock issuances by Entergy Arkansas require prior regulatory approval. Preferred stock and debt issuances are also subject to issuance tests set forth in Entergy Arkansas'Arkansas’s corporate charters, bond indentures, and other agreements. Entergy Arkansas has sufficient capacity under these tests to meet its foreseeable capital needs.
In April 2009, Entergy Arkansas renewed its credit facility through April 2010 in the amount of $88 million. There were no outstanding borrowings under the Entergy Arkansas credit facility as of December 31, 2009.
Entergy Arkansas'Arkansas’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:
2009 | | 2008 | | 2007 | | 2006 |
(In Thousands) |
| | | | | | |
$28,859 | | $15,991 | | ($77,882) | | $16,109 |
2010 | | 2009 | | 2008 | | 2007 |
(In Thousands) |
| | | | | | |
$41,463 | | $28,859 | | $15,991 | | ($77,882) |
In May 2007, $1.8 million of Entergy Arkansas'Arkansas’s receivable from the money pool was replaced by a note receivable from Entergy New Orleans. See Note 4 to the financial statements for a description of the money pool.
In April 2010, Entergy Arkansas Inc.renewed its credit facility through April 2011 in the amount of $75.125 million. There were no outstanding borrowings under the Entergy Arkansas credit facility as of December 31, 2010.
Management's Financial Discussion and Analysis
Entergy Arkansas has obtained short-term borrowing authorization from the FERCAPSC under which it may borrow through October 2011, up to the aggregate amount, at any one time outstanding, of $250 million. See Note 4 to the financial statements for further discussion of Entergy Arkansas'Arkansas’s short-term borrowing limits. Entergy Arkansas has also obtained an order from the APSC authorizing long-term securities issuances through December 2012.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Retail Rates
2009 Base Rate Filing
In September 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. In June 2010 the APSC approved a settlement and subsequent compliance tariffs that provide for a $63.7 million rate increase, effective for bills rendered for the first billing cycle of July 2010. The settlement provides for a 10.2% return on common equity.
2006 Base Rate Filing
In August 2006, Entergy Arkansas filed with the APSC a request for a change in base rates. Entergy Arkansas requested a general base rate increase (using an ROE of 11.25%), which it subsequently adjusted to a request for a $106.5 million annual increase. In June 2007, after hearings on the filing, the APSC ordered Entergy Arkansas to reduce its annual rates by $5 million, and set a return on common equity of 9.9% with a hypothetical common equity level lower than Entergy Arkansas'Arkansas’s actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy'sEntergy’s stock-based compensation plans. In addition, under the terms of the APSC's decision, the order eliminated storm reserve accountingplans, and set an amount of $14.4 million in base rates to address storm restoration costs, regardless of the actual annual amount of future restoration costs. The APSC's June 2007 decision left Entergy Arkansas with no mechanism to recover $52 million of costs previously accumulated in Entergy Arkansas'Arkansas’s storm reserve and $18 million of removal costs associated with the terminationterm ination of a lease.
The APSC denied Entergy Arkansas' request for rehearing of its June 2007 decision, and the base rate change was implemented August 29, 2007, effective for bills rendered after June 15, 2007. In
Entergy Arkansas sought to overturn the APSC’s decision, but in December 2008 the Arkansas Court of Appeals upheld almost all aspects of the APSC decision. After considering the progress of the proceeding in light of the decision of the Court of Appeals, Entergy Arkansas recorded in the fourth quarter 2008 an approximately $70 million charge to earnings, on both a pre- and after-tax basis because these are primarily flow-through items, to recognize that the regulatory assets associated with the storm reserve costs, lease termination removal costs, and stock-based compensation arewere no longer probable of recovery. In April 2009 the Arkansas Supreme Court denied Entergy Arkansas'Arkansas’s petition for review of the Court of Appeals decision.
2009 Base Rate Filing
On September 4, 2009, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. Entergy Arkansas requested a $223.2 million base rate increase that would become effective in July 2010. The filing reflects an 11.5% return on common equity using a projected capital structure, and proposes a formula rate plan mechanism. Proposed formula rate plan provisions include a +/- 25 basis point bandwidth, with earnings outside the bandwidth reset to the 11.5% return on common equity midpoint and rates changing on a prospective basis depending on whether Entergy Arkansas is over or under-earning. The proposed formula rate plan also includes a recovery mechanism for APSC-approved costs for additional capacity purchases or construction/acquisition of new transmission or generating facilities. Entergy Arkansas is also seeking an increase in its annual storm damage accrual from $14.4 million to $22.3 million. The APSC scheduled hearings in the proceeding beginning in May 2010.
Production Cost Allocation Rider
In its June 2007 decision on Entergy Arkansas' August 2006 rate filing, theThe APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings. These costs cause an increase in Entergy Arkansas'Arkansas’s deferred fuel cost balance, because Entergy Arkansas pays the costs over seven months but collects them from customers over twelve months. In December 2007, the APSC issued a subsequent order stating that termination of the rider would be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing.
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
See Note 2 to the financial statements and Entergy Corporation and Subsidiaries' "Subsidiaries “MANAGEMENT'SMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - System Agreement Proceedings"” for a discussiondiscussions of the System Agreement proceedings.
Energy Cost Recovery Rider
Entergy Arkansas'Arkansas’s retail rates include an energy cost recovery rider. In December 2007, the APSC issued an order stating that termination of the energy cost recovery rider would be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing.
In March 2009, Entergy Arkansas filed with the APSC its annual energy cost rate for the period April 2009 through March 2010. The filed energy cost rate decreased from $0.02456/kWh to $0.01552/kWh. The decrease was caused by the following: 1) all three of the nuclear power plants from which Entergy Arkansas obtains power, ANO 1 and 2 and Grand Gulf, had refueling outages in 2008, and the previous energy cost rate had been adjusted to account for the replacement power costs that would be incurred while these units were down; 2) Entergy Arkansas had a deferred fuel cost liability from over-recovered fuel costs at December 31, 2008, as compared to a deferred fuel cost asset from under-recovered fuel costs at December 31, 2007; offset by 3) an increase in the fuel and purchased power prices included in the calculation.
In August 2009, as provided for by its energy cost recovery rider, Entergy Arkansas filed with the APSC an interim revision to its energy cost rate. The revised energy cost rate is a decrease from $0.01552/kWh to $0.01206/kWh. The decrease was caused by a decrease in natural gas and purchased power prices from the levels used in setting the rate in March 2009. The interim revised energy cost rate went into effect for the first billing cycle of September 2009. In its order approving the new rate, the APSC ordered Entergy Arkansas to show cause why the rate should not be further reduced. In its September 14, 2009 response, Entergy Arkansas explained that it used the same methodology it had used in previous interim revisions, which is based on estimating what the rate would be in the next annual update based on the information known at the time. There has been no further activity in this proceeding.
APSC Investigations
In September 2005, Entergy Arkansas filed with the APSC an interim energy cost rate per the energy cost recovery rider, which provides for an interim adjustment should the cumulative over- or under-recovery for the energy period exceed 10 percent of the energy costs for that period. In early October 2005, the APSC initiated an investigation into Entergy Arkansas'Arkansas's interim energy cost recovery rate. The investigation is focused on Entergy Arkansas'Arkansas's 1) gas contracting, portfolio, and hedging practices; 2) wholesale purchases during the period; 3) management of the coal inventory at its coal generation plants; and 4) response to the contractual failure of the railroads to provide coal deliveries. In March 2006, the APSC extended its investigation to cover the costs included in Entergy Arkansas'Arkansas's March 2006 annual energy cost rate filing, and a hearing was held in the APSC energy cost recovery investigation in October 2006.
In January 2007, the APSC issued an order in its review of the energy cost rate. The APSC found that Entergy Arkansas failed to maintain an adequate coal inventory level going into the summer of 2005 and that Entergy Arkansas should be responsible for any incremental energy costs resulting from two outages caused by employee and contractor error. The coal plant generation curtailments were caused by railroad delivery problems and Entergy
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Arkansas has since resolved litigation with the railroad regarding the delivery problems. The APSC staff was directed to perform an analysis with Entergy Arkansas'Arkansas's assistance to determine the additional fuel and purchased energy costs associated with these findings and file the analysis within 60 days of the order. After a final determination of the costs is made by the APSC, Entergy Arkansas would be directed to refund that amount with interest to its customers as a credit on the energy cost recovery rider. Entergy Arkansas requested rehearing of the order. In March 2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas'Arkansas's petition for rehearing and for stay of the APSC order.
In October 2008, Entergy Arkansas filed a motion to lift the stay and to rescind the APSC's January 2007 order in light of the arguments advanced in Entergy Arkansas'Arkansas's rehearing petition and because the value for Entergy Arkansas'Arkansas's customers obtained through the resolved railroad litigation is significantly greater than the incremental cost of actions identified by the APSC as imprudent. The APSC staff, the AEEC, and the Arkansas attorney general support the lifting of the stay but request additional proceedings. In December 2008, the APSC denied the motion to lift the stay pending resolution of Entergy Arkansas'Arkansas's rehearing request and of the unresolved issues in the proceeding. The APSC ordered the
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
parties to submit their unresolved issues list in the pending proceeding, which the parties have done.did. In February 2010 the APSC denied Entergy Arkansas'Arkansas's request for rehearing, and scheduledheld a hearing forh earing in September 2010 to determine the amount of damages, if any, that should be assessed against Entergy Arkansas. A decision is pending. Entergy Arkansas expects the amount of damages, if any, to have an immaterial effect on its results of operations, financial position, or cash flows.
The APSC also established a separate docket to consider the resolved railroad litigation, and in February 2010 it established a procedural schedule that concludesconcluded with testimony through September 2010. TheTestimony has been filed and the APSC may set a hearingwill now decide the case based on the record in a future order, if necessary.the proceeding, including the prefiled testimony.
Storm Cost Recovery
Entergy Arkansas Storm Reserve Accounting
The APSC's June 2007 order in Entergy Arkansas' base rate proceeding eliminated storm reserve accounting for Entergy Arkansas. In March 2009 a law was enacted in Arkansas that requires the APSC to permit storm reserve accounting for utilities that request it. Entergy Arkansas filed its request with the APSC, and has reinstated storm reserve accounting effective January 1, 2009. A hearing on Entergy Arkansas' request is scheduled for March 2010.
Entergy Arkansas January 2009 Ice Storm
In January 2009, a severe ice storm caused significant damage to Entergy Arkansas'Arkansas’s transmission and distribution lines, equipment, poles, and other facilities. On January 30, 2009, the APSC issued an order inviting and encouraging electric public utilities to file specific proposals for the recovery of extraordinary storm restoration expenses associated with the ice storm. On February 16, 2009, Entergy Arkansas filed a request with the APSC for an accounting order authorizing deferral of the operating and maintenance cost portion of Entergy Arkansas' ice storm restoration costs pending their recovery. The APSC issued such an order in March 2009 subject to certain conditions, including that if Entergy Arkansas seeks to recover the deferred costs, those costs will be subject to investigation for whether they are incremental, prudent, and reasonable. A law was enacted in April 2009 in Arkansas that authorizes securitization of storm damage restoration costs. On February 1,In June 2010, Entergy Arkansas requestedthe APSC issued a financing order to issue approximately $127.5 million inauthorizing the issuance of storm cost recovery bonds, which includedincluding carrying costs of $11.7$11.5 million and $4.6 million of up-front financing costscosts. In August 2010, Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, issued $124.1 million of storm cost recovery bonds. See Note 5 to paythe financial statements for ice storm restoration because Entergy Arkansas' analysis demonstrates retail customers will benefit from lower costs using securitization. The APSC has established a procedural schedule that includes a hearing in April 2010 and states that the APSC will issue its final order by June 15, 2010. Entergy Arkansas' September 2009 general rate filing also requested recoveryadditional discussion of the January 2009 iceissuance of the storm costs over 10 years if it was expected that securitization would not produce lower costs for customers, and Entergy Arkansas will remove this request if the APSC approves securitization.cost recovery bonds.
Co-Owner-Initiated Proceeding at the FERC
In October 2004, Arkansas Electric Cooperative Corporation (AECC) filed a complaint at the FERC against Entergy Arkansas relating to a contract dispute over the pricing of substitute energy at the co-owned Independence and White Bluff coal plants. The main issue in the case related to the consequences under the governing contracts when the dispatch of the coal units is constrained due to system operating conditions. A hearing was held on the AECC complaint and an ALJ Initial Decision was issued in January 2006 in which the ALJ found AECC's claims to be without merit. On October 25, 2006, the FERC issued its order in the proceeding. In the order, the FERC reversed the ALJ's findings. Specifically, the FERC found that the governing contracts do not recognize the effects of dispatch constraints on the co-owned units. The FERC explained that for over twenty-three years the course of conduct of the parties was such that AECC received its full entitlement to the two coal units, regardless of any reduced output caused by system operating constraints. Based on the order, Entergy Arkansas is required to refund to AECC all excess amounts billed to AECC as a result of the system operating constraints. The FERC denied Entergy Arkansas' request
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
for rehearing and Entergy Arkansas refunded $22.1 million (including interest) to AECC in September 2007. Entergy Arkansas had previously recorded a provision for the estimated effect of this refund. In January 2010 the FERC issued an order conditionally accepting the refund report and ordering further refunds, noting that the refund period should have included the period July 1, 2004 through December 23, 2004. Entergy Arkansas had previously recorded a provision for the estimated effect of this refund.
System Agreement Proceedings
See "“System Agreement Proceedings" in Entergy Corporation and Subsidiaries' Management's Discussion and Analysis for discussion of the proceeding at the FERC involving the System Agreement and of other related proceedings.
Transmission
See "”, “Independent Coordinator of Transmission"”, “Notice to SERC Reliability Corporation regarding Reliability Standards”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries Management’s Finan cial Discussion and Analysis for further discussion.a discussion of these topics.
Utility Restructuring
In April 1999, the Arkansas legislature enacted Act 1556, the Arkansas Electric Consumer Choice Act, providing for competition in the electric utility industry through retail open access. In December 2001, the APSC recommended to the Arkansas General Assembly that legislation be enacted during the 2003 legislative session to either repeal Act 1556 or further delay retail open access until at least 2010. In February 2003, the Arkansas legislature voted to repeal Act 1556 and the repeal was signed into law by the governor.
Entergy Arkansas owns and operates, through an affiliate, the ANO 1 and ANO 2 nuclear power plants. Entergy Arkansas is, therefore, subject to the risks related to owning and operating nuclear plants. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of either ANO 1 or ANO 2, Entergy Arkansas may be required to file with the APSC a rate mechanism to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials associated with components within the reactor coolant system. The issue is applicable to ANO and is managed in accordance with industry standard practices and guidelines and includes in-service examinations, replacement and mitigation strategy. Several major modifications to the ANO units have been implemented to mitigate the susceptibility of large bore dissimilar metal welds. In addition, a replacement reactor vessel head has been fabricated for ANO 2.2 and is onsite. Routine inspections of the existing ANO 2 reactor vessel head have identified no significant material degradation issues for that component. These inspections will continue at planned refueling outages. 60;Timing for installation of the new reactor vessel head will be based on the results of future inspection efforts.
Entergy Arkansas'Arkansas’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Arkansas is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated. See "“Uses of Capital"” above for a discussion of the projectpotential requirement to install scrubbers and low NOx burnersb urners at Entergy Arkansas'Arkansas’s White Bluff coal plant, which under current environmental regulations must be operational by September 2013.plant.
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
The preparation of Entergy Arkansas'Arkansas’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Arkansas'Arkansas’s financial position or results of operations.
Nuclear Decommissioning Costs
See "“Nuclear Decommissioning Costs"” in the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
In the first quarter 2009, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and 2 as a result of a revised decommissioning cost study. The revised estimates resulted in an $8.9 million reduction in its decommissioning liability, along with a corresponding reduction in the related regulatory asset.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Arkansas records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month'smonth’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain componentsco mponents of the calculation.
Entergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for furtherfurt her discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate.
Entergy Arkansas, Inc.
Management's Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $2,199 | | $22,989 | | (0.25%) | | $2,410 | | $26,637 |
Rate of return on plan assets | | (0.25%) | | $1,434 | | - | | (0.25%) | | $1,489 | | - |
Rate of increase in compensation | | 0.25% | | $1,055 | | $4,982 | | 0.25% | | $1,064 | | $5,130 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $1,069 | | $5,659 | | 0.25% | | $1,080 | | $5,852 |
Discount rate | | (0.25%) | | $594 | | $6,327 | | (0.25%) | | $585 | | $6,621 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension cost for Entergy Arkansas in 20092010 was $19.8$31.7 million. Entergy Arkansas anticipates 20102011 qualified pension cost to be approximately $31.7$33.7 million. Entergy Arkansas'Arkansas’s contributions to the pension trust were $24.8$137 million in 20092010 and are currently estimated to be approximately $73.1$107.1 million in 2010;2011; although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Arkansas’ pension contributions in the future.2011.
Total postretirement health care and life insurance benefit costs for Entergy Arkansas in 20092010 were $21.9 million, including $4.9 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Arkansas expects 2010 postretirement health care and life insurance benefit costs to approximate $18.9 million, including $5.3 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Arkansas expects 2011 postretirement health care and life insurance benefit costs to approximate $17 million, including $6.3 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Arkansas expects to contribute approximately $21.6$26.3 million to other postretirement plans in 2010.2011.
New Accounting PronouncementsEntergy Arkansas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Federal Healthcare Legislation
See "the “NewQualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting PronouncementsEstimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Discussion and Analysis for further discussion.
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To the Board of Directors and Shareholders of
Entergy Arkansas, Inc. and Subsidiaries
Little Rock, Arkansas
We have audited the accompanying consolidated balance sheets of Entergy Arkansas, Inc. and Subsidiaries (the “Company”) as of December 31, 20092010 and 2008,2009, and the related consolidated income statements, consolidated statements of income, retained earnings,changes in common equity, and consolidated statements of cash flows (pages 273264 through 278268 and applicable items in pages 6349 through 193)184) for each of the three years in the period ended December 31, 2009.2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Arkansas, Inc. and Subsidiaries as of December 31, 20092010 and 2008,2009, and the results of itstheir operations and itstheir cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 201025, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
ENTERGY ARKANSAS, INC. | |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 2,211,263 | | | $ | 2,328,349 | | | $ | 2,032,965 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 298,219 | | | | 283,547 | | | | 132,830 | |
Purchased power | | | 795,526 | | | | 953,663 | | | | 818,549 | |
Nuclear refueling outage expenses | | | 42,148 | | | | 29,611 | | | | 28,511 | |
Other operation and maintenance | | | 475,222 | | | | 524,940 | | | | 458,042 | |
Decommissioning | | | 34,575 | | | | 35,083 | | | | 32,816 | |
Taxes other than income taxes | | | 80,829 | | | | 85,590 | | | | 78,449 | |
Depreciation and amortization | | | 252,742 | | | | 237,168 | | | | 228,354 | |
Other regulatory charges (credits) - net | | | 15,161 | | | | (26,747 | ) | | | (29,001 | ) |
TOTAL | | | 1,994,422 | | | | 2,122,855 | | | | 1,748,550 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 216,841 | | | | 205,494 | | | | 284,415 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 5,219 | | | | 6,259 | | | | 11,143 | |
Interest and dividend income | | | 19,321 | | | | 21,174 | | | | 19,116 | |
Miscellaneous - net | | | (3,569 | ) | | | (4,731 | ) | | | (3,263 | ) |
TOTAL | | | 20,971 | | | | 22,702 | | | | 26,996 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 85,484 | | | | 79,945 | | | | 77,348 | |
Other interest - net | | | 6,856 | | | | 7,787 | | | | 14,392 | |
Allowance for borrowed funds used during construction | | | (3,159 | ) | | | (3,311 | ) | | | (5,078 | ) |
TOTAL | | | 89,181 | | | | 84,421 | | | | 86,662 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 148,631 | | | | 143,775 | | | | 224,749 | |
| | | | | | | | | | | | |
Income taxes | | | 81,756 | | | | 96,623 | | | | 85,638 | |
| | | | | | | | | | | | |
NET INCOME | | | 66,875 | | | | 47,152 | | | | 139,111 | |
| | | | | | | | | | | | |
Preferred dividend requirements and other | | | 6,873 | | | | 6,873 | | | | 6,873 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON STOCK | | $ | 60,002 | | | $ | 40,279 | | | $ | 132,238 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
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ENTERGY ARKANSAS, INC. | |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 66,875 | | | $ | 47,152 | | | $ | 139,111 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Reserve for regulatory adjustments | | | (169 | ) | | | (751 | ) | | | (16,248 | ) |
Other regulatory charges (credits) - net | | | 15,161 | | | | (26,747 | ) | | | (29,001 | ) |
Depreciation, amortization, and decommissioning | | | 287,317 | | | | 272,251 | | | | 261,170 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 66,777 | | | | 186,283 | | | | 58,796 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 3,477 | | | | 67,197 | | | | (24,958 | ) |
Fuel inventory | | | 163 | | | | 5,282 | | | | 2,468 | |
Accounts payable | | | (338,993 | ) | | | 67,148 | | | | 327,578 | |
Taxes accrued | | | - | | | | - | | | | (37,161 | ) |
Interest accrued | | | (1,103 | ) | | | 7,760 | | | | (2,132 | ) |
Deferred fuel costs | | | (3,741 | ) | | | (4,298 | ) | | | (112,606 | ) |
Other working capital accounts | | | 330,263 | | | | (177,725 | ) | | | (274,898 | ) |
Provision for estimated losses and reserves | | | (2,708 | ) | | | 1,511 | | | | (125 | ) |
Changes in other regulatory assets | | | (70,412 | ) | | | (219,091 | ) | | | 15,626 | |
Changes in pension and other postretirement liabilities | | | 6,501 | | | | 181,539 | | | | 1,234 | |
Other | | | 24,784 | | | | 52,740 | | | | 57,264 | |
Net cash flow provided by operating activities | | | 384,192 | | | | 460,251 | | | | 366,118 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (338,752 | ) | | | (373,973 | ) | | | (304,901 | ) |
Allowance for equity funds used during construction | | | 5,219 | | | | 6,259 | | | | 11,143 | |
Nuclear fuel purchases | | | (118,379 | ) | | | (105,279 | ) | | | (40,353 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | 118,590 | | | | 105,062 | | | | 42,444 | |
Payment for purchase of plant | | | - | | | | (210,029 | ) | | | - | |
Proceeds from sale of plant | | | 74,818 | | | | - | | | | - | |
Proceeds from nuclear decommissioning trust fund sales | | | 154,644 | | | | 162,126 | | | | 96,034 | |
Investment in nuclear decommissioning trust funds | | | (164,879 | ) | | | (176,676 | ) | | | (108,814 | ) |
Change in money pool receivable - net | | | (12,868 | ) | | | (15,991 | ) | | | 14,298 | |
Other | | | 95 | | | | - | | | | 19 | |
Net cash flow used in investing activities | | | (281,512 | ) | | | (608,501 | ) | | | (290,130 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | - | | | | 297,261 | | | | - | |
Change in money pool payable - net | | | - | | | | (77,882 | ) | | | 77,882 | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (48,300 | ) | | | (24,900 | ) | | | (181,600 | ) |
Preferred stock | | | (6,873 | ) | | | (6,873 | ) | | | (6,873 | ) |
Other | | | (842 | ) | | | - | | | | - | |
Net cash flow provided by (used in) financing activities | | | (56,015 | ) | | | 187,606 | | | | (110,591 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 46,665 | | | | 39,356 | | | | (34,603 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 39,568 | | | | 212 | | | | 34,815 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 86,233 | | | $ | 39,568 | | | $ | 212 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 88,397 | | | $ | 71,645 | | | $ | 80,762 | |
Income taxes | | $ | 1,434 | | | $ | (57,902 | ) | | $ | 21,862 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY ARKANSAS, INC. |
BALANCE SHEETS |
ASSETS |
| | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents | | | | | | |
Cash | | $ | 3,336 | | | $ | 3,292 | |
Temporary cash investments | | | 82,897 | | | | 36,276 | |
Total cash and cash investments | | | 86,233 | | | | 39,568 | |
Accounts receivable: | | | | | | | | |
Customer | | | 93,754 | | | | 113,135 | |
Allowance for doubtful accounts | | | (21,853 | ) | | | (19,882 | ) |
Associated companies | | | 91,650 | | | | 56,534 | |
Other | | | 55,381 | | | | 64,762 | |
Accrued unbilled revenues | | | 76,126 | | | | 71,118 | |
Total accounts receivable | | | 295,058 | | | | 285,667 | |
Deferred fuel costs | | | 122,802 | | | | 119,061 | |
Fuel inventory - at average cost | | | 15,060 | | | | 15,223 | |
Materials and supplies - at average cost | | | 132,182 | | | | 121,769 | |
Deferred nuclear refueling outage costs | | | 34,492 | | | | 42,932 | |
System agreement cost equalization | | | 70,000 | | | | 394,000 | |
Prepayments and other | | | 32,668 | | | | 36,530 | |
TOTAL | | | 788,495 | | | | 1,054,750 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 11,201 | | | | 11,200 | |
Decommissioning trust funds | | | 440,220 | | | | 390,529 | |
Non-utility property - at cost (less accumulated depreciation) | | | 1,435 | | | | 1,439 | |
Other | | | 2,976 | | | | 5,391 | |
TOTAL | | | 455,832 | | | | 408,559 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 7,602,975 | | | | 7,305,165 | |
Property under capital lease | | | 1,364 | | | | 1,417 | |
Construction work in progress | | | 114,998 | | | | 142,391 | |
Nuclear fuel under capital lease | | | 173,076 | | | | 125,072 | |
Nuclear fuel | | | 11,543 | | | | 12,115 | |
TOTAL UTILITY PLANT | | | 7,903,956 | | | | 7,586,160 | |
Less - accumulated depreciation and amortization | | | 3,534,056 | | | | 3,272,280 | |
UTILITY PLANT - NET | | | 4,369,900 | | | | 4,313,880 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 51,340 | | | | 58,455 | |
Other regulatory assets | | | 746,955 | | | | 688,964 | |
Other | | | 23,118 | | | | 43,605 | |
TOTAL | | | 821,413 | | | | 791,024 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 6,435,640 | | | $ | 6,568,213 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY ARKANSAS, INC. |
BALANCE SHEETS |
LIABILITIES AND SHAREHOLDERS' EQUITY |
| | | | | | | | |
| | December 31, | |
| | | 2009 | | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Currently maturing long-term debt | | $ | 100,000 | | | $ | - | |
Accounts payable: | | | | | | | | |
Associated companies | | | 107,584 | | | | 433,460 | |
Other | | | 111,523 | | | | 142,974 | |
Customer deposits | | | 67,480 | | | | 60,558 | |
Accumulated deferred income taxes | | | 74,794 | | | | 198,902 | |
Interest accrued | | | 24,104 | | | | 25,207 | |
Obligations under capital leases | | | 72,838 | | | | 60,276 | |
Other | | | 14,742 | | | | 17,290 | |
TOTAL | | | 573,065 | | | | 938,667 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 1,493,580 | | | | 1,307,596 | |
Accumulated deferred investment tax credits | | | 47,909 | | | | 51,881 | |
Obligations under capital leases | | | 101,601 | | | | 66,214 | |
Other regulatory liabilities | | | 101,370 | | | | 27,141 | |
Decommissioning | | | 566,374 | | | | 540,709 | |
Accumulated provisions | | | 13,217 | | | | 15,925 | |
Pension and other postretirement liabilities | | | 448,421 | | | | 441,920 | |
Long-term debt | | | 1,518,569 | | | | 1,618,171 | |
Other | | | 43,623 | | | | 43,780 | |
TOTAL | | | 4,334,664 | | | | 4,113,337 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Preferred stock without sinking fund | | | 116,350 | | | | 116,350 | |
| | | | | | | | |
SHAREHOLDERS' EQUITY | | | | | | | | |
Common stock, $0.01 par value, authorized 325,000,000 | | | | | | | | |
shares; issued and outstanding 46,980,196 shares in 2009 | | | | | | | | |
and 2008 | | | 470 | | | | 470 | |
Paid-in capital | | | 588,444 | | | | 588,444 | |
Retained earnings | | | 822,647 | | | | 810,945 | |
TOTAL | | | 1,411,561 | | | | 1,399,859 | |
| | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 6,435,640 | | | $ | 6,568,213 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | |
| |
CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 2,082,447 | | | $ | 2,211,263 | | | $ | 2,328,349 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 378,699 | | | | 298,219 | | | | 283,547 | |
Purchased power | | | 485,447 | | | | 795,526 | | | | 953,663 | |
Nuclear refueling outage expenses | | | 41,800 | | | | 42,148 | | | | 29,611 | |
Other operation and maintenance | | | 495,443 | | | | 475,222 | | | | 524,940 | |
Decommissioning | | | 35,790 | | | | 34,575 | | | | 35,083 | |
Taxes other than income taxes | | | 85,564 | | | | 80,829 | | | | 85,590 | |
Depreciation and amortization | | | 232,085 | | | | 252,742 | | | | 237,168 | |
Other regulatory charges (credits) - net | | | 1,603 | | | | 15,161 | | | | (26,747 | ) |
TOTAL | | | 1,756,431 | | | | 1,994,422 | | | | 2,122,855 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 326,016 | | | | 216,841 | | | | 205,494 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 4,118 | | | | 5,219 | | | | 6,259 | |
Interest and investment income | | | 46,363 | | | | 19,321 | | | | 21,174 | |
Miscellaneous - net | | | (1,743 | ) | | | (3,569 | ) | | | (4,731 | ) |
TOTAL | | | 48,738 | | | | 20,971 | | | | 22,702 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 91,598 | | | | 92,340 | | | | 87,732 | |
Allowance for borrowed funds used during construction | | | (2,406 | ) | | | (3,159 | ) | | | (3,311 | ) |
TOTAL | | | 89,192 | | | | 89,181 | | | | 84,421 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 285,562 | | | | 148,631 | | | | 143,775 | |
| | | | | | | | | | | | |
Income taxes | | | 112,944 | | | | 81,756 | | | | 96,623 | |
| | | | | | | | | | | | |
NET INCOME | | | 172,618 | | | | 66,875 | | | | 47,152 | |
| | | | | | | | | | | | |
Preferred dividend requirements and other | | | 6,873 | | | | 6,873 | | | | 6,873 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON STOCK | | $ | 165,745 | | | $ | 60,002 | | | $ | 40,279 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY ARKANSAS, INC. | |
STATEMENTS OF RETAINED EARNINGS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
Retained Earnings, January 1 | | $ | 810,945 | | | $ | 795,566 | | | $ | 844,928 | |
| | | | | | | | | | | | |
Add: | | | | | | | | | | | | |
Net income | | | 66,875 | | | | 47,152 | | | | 139,111 | |
| | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | |
Dividends declared on common stock | | | 48,300 | | | | 24,900 | | | | 181,600 | |
Preferred dividend requirements and other | | | 6,873 | | | | 6,873 | | | | 6,873 | |
Total | | | 55,173 | | | | 31,773 | | | | 188,473 | |
| | | | | | | | | | | | |
Retained Earnings, December 31 | | $ | 822,647 | | | $ | 810,945 | | | $ | 795,566 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 172,618 | | | $ | 66,875 | | | $ | 47,152 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 347,587 | | | | 287,317 | | | | 272,251 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 100,071 | | | | 66,777 | | | | 186,283 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 34,214 | | | | 3,477 | | | | 67,197 | |
Fuel inventory | | | (22,639 | ) | | | 163 | | | | 5,282 | |
Accounts payable | | | (14,777 | ) | | | (338,993 | ) | | | 67,148 | |
Prepaid taxes | | | (63,188 | ) | | | 5,517 | | | | (18,183 | ) |
Interest accrued | | | 426 | | | | (1,103 | ) | | | 7,760 | |
Deferred fuel costs | | | 61,300 | | | | (3,741 | ) | | | (4,298 | ) |
Other working capital accounts | | | 31,550 | | | | 330,263 | | | | (177,725 | ) |
Changes in provisions for estimated losses | | | (5,247 | ) | | | (2,708 | ) | | | 1,511 | |
Changes in other regulatory assets | | | (87,087 | ) | | | (70,412 | ) | | | (219,091 | ) |
Changes in pension and other postretirement liabilities | | | (32,496 | ) | | | 6,501 | | | | 181,539 | |
Other | | | (10,072 | ) | | | 34,259 | | | | 43,425 | |
Net cash flow provided by operating activities | | | 512,260 | | | | 384,192 | | | | 460,251 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (291,267 | ) | | | (338,752 | ) | | | (373,973 | ) |
Allowance for equity funds used during construction | | | 4,118 | | | | 5,219 | | | | 6,259 | |
Nuclear fuel purchases | | | (82,371 | ) | | | (118,379 | ) | | | (105,279 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | - | | | | 118,590 | | | | 105,062 | |
Payment for purchase of plant | | | - | | | | - | | | | (210,029 | ) |
Proceeds from sale of equipment | | | 2,489 | | | | 74,818 | | | | - | |
Proceeds from nuclear decommissioning trust fund sales | | | 367,266 | | | | 154,644 | | | | 162,126 | |
Investment in nuclear decommissioning trust funds | | | (400,832 | ) | | | (164,879 | ) | | | (176,676 | ) |
Change in money pool receivable - net | | | (12,604 | ) | | | (12,868 | ) | | | (15,991 | ) |
Changes in other investments | | | 2,415 | | | | - | | | | - | |
Remittances to transition charge account | | | (2,412 | ) | | | - | | | | - | |
Other | | | 18 | | | | 95 | | | | - | |
Net cash flow used in investing activities | | | (413,180 | ) | | | (281,512 | ) | | | (608,501 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 684,851 | | | | - | | | | 297,261 | |
Retirement of long-term debt | | | (589,500 | ) | | | - | | | | - | |
Changes in credit borrowings - net | | | 5,711 | | | | - | | | | - | |
Change in money pool payable - net | | | - | | | | - | | | | (77,882 | ) |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (173,400 | ) | | | (48,300 | ) | | | (24,900 | ) |
Preferred stock | | | (6,873 | ) | | | (6,873 | ) | | | (6,873 | ) |
Other | | | - | | | | (842 | ) | | | - | |
Net cash flow provided by (used in) financing activities | | | (79,211 | ) | | | (56,015 | ) | | | 187,606 | |
| | | | | | | | | | | | |
Net increase in cash and cash equivalents | | | 19,869 | | | | 46,665 | | | | 39,356 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 86,233 | | | | 39,568 | | | | 212 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 106,102 | | | $ | 86,233 | | | $ | 39,568 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 85,639 | | | $ | 88,397 | | | $ | 71,645 | |
Income taxes | | $ | 66,403 | | | $ | 1,434 | | | $ | (57,902 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY ARKANSAS, INC. | |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 2,211,263 | | | $ | 2,328,349 | | | $ | 2,032,965 | | | $ | 2,092,683 | | | $ | 1,789,055 | |
Net Income | | $ | 66,875 | | | $ | 47,152 | | | $ | 139,111 | | | $ | 173,154 | | | $ | 174,635 | |
Total assets | | $ | 6,435,640 | | | $ | 6,568,213 | | | $ | 5,999,806 | | | $ | 5,541,036 | | | $ | 5,368,010 | |
Long-term obligations (1) | | $ | 1,620,170 | | | $ | 1,684,385 | | | $ | 1,391,808 | | | $ | 1,380,046 | | | $ | 1,353,462 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | | | 2005 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 769 | | | $ | 756 | | | $ | 690 | | | $ | 706 | | | $ | 620 | |
Commercial | | | 475 | | | | 463 | | | | 409 | | | | 418 | | | | 348 | |
Industrial | | | 433 | | | | 461 | | | | 407 | | | | 436 | | | | 362 | |
Governmental | | | 21 | | | | 21 | | | | 19 | | | | 19 | | | | 18 | |
Total retail | | | 1,698 | | | | 1,701 | | | | 1,525 | | | | 1,579 | | | | 1,348 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 350 | | | | 416 | | | | 302 | | | | 328 | | | | 192 | |
Non-associated companies | | | 102 | | | | 156 | | | | 156 | | | | 145 | | | | 211 | |
Other | | | 61 | | | | 55 | | | | 50 | | | | 41 | | | | 38 | |
Total | | $ | 2,211 | | | $ | 2,328 | | | $ | 2,033 | | | $ | 2,093 | | | $ | 1,789 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 7,464 | | | | 7,678 | | | | 7,725 | | | | 7,655 | | | | 7,653 | |
Commercial | | | 5,817 | | | | 5,875 | | | | 5,945 | | | | 5,816 | | | | 5,730 | |
Industrial | | | 6,376 | | | | 7,211 | | | | 7,424 | | | | 7,587 | | | | 7,334 | |
Governmental | | | 269 | | | | 274 | | | | 277 | | | | 273 | | | | 288 | |
Total retail | | | 19,926 | | | | 21,038 | | | | 21,371 | | | | 21,331 | | | | 21,005 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 9,980 | | | | 7,890 | | | | 7,185 | | | | 7,679 | | | | 4,555 | |
Non-associated companies | | | 1,631 | | | | 2,159 | | | | 2,651 | | | | 2,929 | | | | 4,103 | |
Total | | | 31,537 | | | | 31,087 | | | | 31,207 | | | | 31,939 | | | | 29,663 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| |
CONSOLIDATED BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents | | | | | | |
Cash | | $ | 4,250 | | | $ | 3,336 | |
Temporary cash investments | | | 101,852 | | | | 82,897 | |
Total cash and cash investments | | | 106,102 | | | | 86,233 | |
Securitization recovery trust account | | | 2,412 | | | | - | |
Accounts receivable: | | | | | | | | |
Customer | | | 79,905 | | | | 93,754 | |
Allowance for doubtful accounts | | | (24,402 | ) | | | (21,853 | ) |
Associated companies | | | 82,583 | | | | 91,650 | |
Other | | | 61,135 | | | | 55,381 | |
Accrued unbilled revenues | | | 74,227 | | | | 76,126 | |
Total accounts receivable | | | 273,448 | | | | 295,058 | |
Deferred fuel costs | | | 61,502 | | | | 122,802 | |
Fuel inventory - at average cost | | | 37,699 | | | | 15,060 | |
Materials and supplies - at average cost | | | 140,095 | | | | 132,182 | |
Deferred nuclear refueling outage costs | | | 23,099 | | | | 34,492 | |
System agreement cost equalization | | | 52,160 | | | | 70,000 | |
Prepaid taxes | | | 86,693 | | | | 23,505 | |
Prepayments and other | | | 7,877 | | | | 9,163 | |
TOTAL | | | 791,087 | | | | 788,495 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 11,200 | | | | 11,201 | |
Decommissioning trust funds | | | 520,841 | | | | 440,220 | |
Non-utility property - at cost (less accumulated depreciation) | | | 1,684 | | | | 1,435 | |
Other | | | 2,976 | | | | 2,976 | |
TOTAL | | | 536,701 | | | | 455,832 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 7,787,348 | | | | 7,602,975 | |
Property under capital lease | | | 1,303 | | | | 1,364 | |
Construction work in progress | | | 114,324 | | | | 114,998 | |
Nuclear fuel under capital lease | | | - | | | | 173,076 | |
Nuclear fuel | | | 188,611 | | | | 11,543 | |
TOTAL UTILITY PLANT | | | 8,091,586 | | | | 7,903,956 | |
Less - accumulated depreciation and amortization | | | 3,683,001 | | | | 3,534,056 | |
UTILITY PLANT - NET | | | 4,408,585 | | | | 4,369,900 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 98,836 | | | | 108,502 | |
Other regulatory assets (includes securitization property of | | | | | |
$118,505 as of December 31, 2010) | | | 892,449 | | | | 746,955 | |
Other | | | 23,710 | | | | 23,118 | |
TOTAL | | | 1,014,995 | | | | 878,575 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 6,751,368 | | | $ | 6,492,802 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | |
CONSOLIDATED BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | 35,000 | | | $ | 100,000 | |
Short-term borrowings | | | 62,777 | | | | - | |
Accounts payable: | | | | | | | | |
Associated companies | | | 92,627 | | | | 107,584 | |
Other | | | 114,454 | | | | 111,523 | |
Customer deposits | | | 72,535 | | | | 67,480 | |
Accumulated deferred income taxes | | | 82,820 | | | | 74,794 | |
Interest accrued | | | 27,020 | | | | 24,104 | |
Obligations under capital leases | | | 69 | | | | 72,838 | |
Other | | | 21,046 | | | | 14,742 | |
TOTAL | | | 508,348 | | | | 573,065 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 1,661,365 | | | | 1,550,742 | |
Accumulated deferred investment tax credits | | | 44,928 | | | | 47,909 | |
Obligations under capital leases | | | 1,234 | | | | 101,601 | |
Other regulatory liabilities | | | 140,801 | | | | 101,370 | |
Decommissioning | | | 602,164 | | | | 566,374 | |
Accumulated provisions | | | 7,970 | | | | 13,217 | |
Pension and other postretirement liabilities | | | 415,925 | | | | 448,421 | |
Long-term debt (includes securitization bonds | | | | | | | | |
of $124,066 as of December 31, 2010) | | | 1,828,910 | | | | 1,518,569 | |
Other | | | 19,467 | | | | 43,623 | |
TOTAL | | | 4,722,764 | | | | 4,391,826 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Preferred stock without sinking fund | | | 116,350 | | | | 116,350 | |
| | | | | | | | |
COMMON EQUITY | | | | | | | | |
Common stock, $0.01 par value, authorized 325,000,000 | | | | | |
shares; issued and outstanding 46,980,196 shares in 2010 | | | | | |
and 2009 | | | 470 | | | | 470 | |
Paid-in capital | | | 588,444 | | | | 588,444 | |
Retained earnings | | | 814,992 | | | | 822,647 | |
TOTAL | | | 1,403,906 | | | | 1,411,561 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 6,751,368 | | | $ | 6,492,802 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | |
| | Common Equity | | | | |
| | Common Stock | | | Paid-in Capital | | | Retained Earnings | | | Total | |
| | (In Thousands) | |
| | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 470 | | | $ | 588,527 | | | $ | 795,566 | | | $ | 1,384,563 | |
Net income | | | - | | | | - | | | | 47,152 | | | | 47,152 | |
Common stock dividends | | | - | | | | - | | | | (24,900 | ) | | | (24,900 | ) |
Preferred stock dividends | | | - | | | | - | | | | (6,873 | ) | | | (6,873 | ) |
Other | | | - | | | | (83 | ) | | | - | | | | (83 | ) |
Balance at December 31, 2008 | | $ | 470 | | | $ | 588,444 | | | $ | 810,945 | | | $ | 1,399,859 | |
Net income | | | - | | | | - | | | | 66,875 | | | | 66,875 | |
Common stock dividends | | | - | | | | - | | | | (48,300 | ) | | | (48,300 | ) |
Preferred stock dividends | | | - | | | | - | | | | (6,873 | ) | | | (6,873 | ) |
Balance at December 31, 2009 | | $ | 470 | | | $ | 588,444 | | | $ | 822,647 | | | $ | 1,411,561 | |
Net income | | | - | | | | - | | | | 172,618 | | | | 172,618 | |
Common stock dividends | | | - | | | | - | | | | (173,400 | ) | | | (173,400 | ) |
Preferred stock dividends | | | - | | | | - | | | | (6,873 | ) | | | (6,873 | ) |
Balance at December 31, 2010 | | $ | 470 | | | $ | 588,444 | | | $ | 814,992 | | | $ | 1,403,906 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 2,082,447 | | | $ | 2,211,263 | | | $ | 2,328,349 | | | $ | 2,032,965 | | | $ | 2,092,683 | |
Net Income | | $ | 172,618 | | | $ | 66,875 | | | $ | 47,152 | | | $ | 139,111 | | | $ | 173,154 | |
Total assets | | $ | 6,751,368 | | | $ | 6,492,802 | | | $ | 6,568,213 | | | $ | 5,999,806 | | | $ | 5,541,036 | |
Long-term obligations (1) | | $ | 1,946,494 | | | $ | 1,736,520 | | | $ | 1,800,735 | | | $ | 1,508,158 | | | $ | 1,496,396 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, and preferred stock without sinking fund. | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 773 | | | $ | 769 | | | $ | 756 | | | $ | 690 | | | $ | 706 | |
Commercial | | | 441 | | | | 475 | | | | 463 | | | | 409 | | | | 418 | |
Industrial | | | 415 | | | | 433 | | | | 461 | | | | 407 | | | | 436 | |
Governmental | | | 20 | | | | 21 | | | | 21 | | | | 19 | | | | 19 | |
Total retail | | | 1,649 | | | | 1,698 | | | | 1,701 | | | | 1,525 | | | | 1,579 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 302 | | | | 350 | | | | 416 | | | | 302 | | | | 328 | |
Non-associated companies | | | 78 | | | | 102 | | | | 156 | | | | 156 | | | | 145 | |
Other | | | 53 | | | | 61 | | | | 55 | | | | 50 | | | | 41 | |
Total | | $ | 2,082 | | | $ | 2,211 | | | $ | 2,328 | | | $ | 2,033 | | | $ | 2,093 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 8,501 | | | | 7,464 | | | | 7,678 | | | | 7,725 | | | | 7,655 | |
Commercial | | | 6,144 | | | | 5,817 | | | | 5,875 | | | | 5,945 | | | | 5,816 | |
Industrial | | | 7,082 | | | | 6,376 | | | | 7,211 | | | | 7,424 | | | | 7,587 | |
Governmental | | | 277 | | | | 269 | | | | 274 | | | | 277 | | | | 273 | |
Total retail | | | 22,004 | | | | 19,926 | | | | 21,038 | | | | 21,371 | | | | 21,331 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 7,853 | | | | 9,980 | | | | 7,890 | | | | 7,185 | | | | 7,679 | |
Non-associated companies | | | 850 | | | | 1,631 | | | | 2,159 | | | | 2,651 | | | | 2,929 | |
Total | | | 30,707 | | | | 31,537 | | | | 31,087 | | | | 31,207 | | | | 31,939 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas
Effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utility companies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole retail jurisdiction of the LPSC, Entergy Gulf States Louisiana. Management believes that the jurisdictional separation will better align Entergy Gulf States, Inc.'s Louisiana and Texas operations to serve customers in those states and to operate consistent with state-specific regulatory requirements as the utility regulatory environments in those jurisdictions evolve. The jurisdictional separation provides for regulation of each separated company by a single retail regulator, which should reduce regulatory complexity.
Entergy Texas now owns all Entergy Gulf States, Inc. distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, undivided 42.5% ownership shares of Entergy Gulf States, Inc.'s 70% ownership interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana, and other assets and contract rights to the extent related to utility operations in Texas. Entergy Gulf States Louisiana now owns all of the remaining assets that were owned by Entergy Gulf States, Inc. On a book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana and approximately 41.9% were allocated to Entergy Texas.
Entergy Gulf States Louisiana remains primarily liable for all of the long-term debt issued by Entergy Gulf States, Inc. that was outstanding on December 31, 2007. Under a debt assumption agreement with Entergy Gulf States Louisiana, Entergy Texas assumed its pro rata share of this long-term debt, which was $1.079 billion, or approximately 46%, of which $168 million remains outstanding at December 31, 2009. The pro rata share of the long-term debt assumed by Entergy Texas was determined by first determining the net assets for each company on a book value basis, and then calculating a debt assumption ratio that resulted in the common equity ratios for each company being approximately the same as the Entergy Gulf States, Inc. common equity ratio immediately prior to the jurisdictional separation. Entergy Texas' debt assumption does not discharge Entergy Gulf States Louisiana's liability for the long-term debt. To secure its debt assumption obligations, Entergy Texas granted to Entergy Gulf States Louisiana a first lien on Entergy Texas' assets that were previously subject to the Entergy Gulf States, Inc. mortgage. Entergy Texas has until December 31, 2010 to repay the assumed debt. In addition, Entergy Texas, as the owner of Entergy Gulf States Reconstruction Funding I, LLC ("EGSRF I"), reports the $329.5 million of senior secured transition bonds ("securitization bonds") issued by EGSRF I as long-term debt on its consolidated balance sheet. The securitization bonds are non-recourse to Entergy Texas.
Entergy Texas will purchase from Entergy Gulf States Louisiana pursuant to a life-of-unit purchased power agreement (PPA) a 42.5% share of capacity and energy from the 70% of River Bend subject to retail regulation. Entergy Texas was allocated a share of River Bend's nuclear and environmental liabilities that is identical to the share of the plant's output purchased by Entergy Texas under the PPA. Entergy Gulf States Louisiana will purchase a 57.5% share of capacity and energy from the gas-fired generating plants owned by Entergy Texas, and Entergy Texas will purchase a 42.5% share of capacity and energy from the gas-fired generating plants owned by Entergy Gulf States Louisiana. The PPAs associated with the gas-fired generating plants will terminate when retail open access commences in Entergy Texas' jurisdiction or when the unit(s) is no longer dispatched by the Entergy System. If Entergy Texas implements retail open access, it will terminate its participation in the System Agreement, except for the portion of the System Agreement related to transmission equalization. The dispatch and operation of the generating plants will not change as a result of the jurisdictional separation.
As the successor to Entergy Gulf States, Inc. for financial reporting purposes, Entergy Gulf States Louisiana's income statement and cash flow statement for the year ended December 31, 2007 include the operations of Entergy Texas.
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
Effect of Jurisdictional Separation on 2008 Results of Operations
Following are income statement variances for Entergy Gulf States Louisiana comparing the year ended December 31, 2008 to the year ended December 31, 2007 showing how much the line item increased or (decreased) in comparison to the prior period:
| | Year ended December 31, 2007 | | Variance caused directly by the jurisdictional separation | | Variance caused by other factors | | Year ended December 31, 2008 |
| | (In Thousands) |
| | | | | | | | |
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | | | | | | | |
Other operation and maintenance expenses | | 548,999 | | (179,119) | | (32,086) | | 337,794 |
Taxes other than income taxes | | 132,489 | | (50,617) | | (4,434) | | 77,438 |
Depreciation and amortization | | 208,648 | | (68,172) | | (3,870) | | 136,606 |
Other expenses | | 23,940 | | (173) | | 14,471 | | 38,238 |
Other income | | 88,815 | | 26,020 | | (29,829) | | 85,006 |
Interest charges | | 155,881 | | (23,012) | | (6,109) | | 126,760 |
Income taxes | | 123,701 | | (36,249) | | (30,255) | | 57,197 |
| | | | | | | | |
Net Income (Loss) | | $192,779 | | ($58,921) | | $10,909 | | $144,767 |
Net Income
2010 Compared to 2009
Net income increased $37.7 million primarily due to higher net revenue, a lower effective income tax rate, and lower interest expense, offset by higher other operation and maintenance expenses, lower other income, and higher taxes other than income taxes.
2009 Compared to 2008
Net income increased by $8.3 million primarily due to higher net revenue, lower interest and other charges,expense, and lower taxes other than income taxes, partially offset by a higher effective income tax rate and lower other income.
2008Net Revenue
2010 Compared to 20072009
Net income decreased $48revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $861.3 |
Retail electric price | | 66.7 |
Volume/weather | | 32.7 |
Fuel recovery | | (28.7) |
Other | | 1.6 |
2010 net revenue | | $933.6 |
The retail electric price variance is primarily due to formula rate plan increases effective November 2009, January 2010, and September 2010. See Note 2 to the financial statements for further discussion of the formula rate plan increases.
The volume/weather variance is primarily due to an increase of 1,861 GWh, or 10%, in billed electricity usage, primarily in the industrial sector as a result of increased consumption in the chemicals industry, and also the effect of more favorable weather on the residential and commercial sectors.
The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to:
· | an increase of $100.9 million in rider revenues due to lower System Agreement credits in 2010; |
· | formula rate plan increases effective November 2009, January 2010, and September 2010, as noted above; |
· | an increase of $64.5 million in fuel cost recovery revenues due to increased usage primarily in the industrial sector; and |
· | the increase related to volume/weather, as discussed above. |
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
The increase was partially offset by a decrease in gross wholesale revenues primarily due to the jurisdictional separationtransfer of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana andseveral wholesale customers to Entergy Texas effective December 31, 2007, in addition to lower other income2009 and lower net revenue other than the effects directly caused by the jurisdictional separation, partially offset by lower other operation and maintenance expenses and a lower effective income tax rate. For the year ended December 31, 2007, Entergy Texas reported net income of $58.9 million.decreased system agreement remedy receipts.
Net RevenueFuel and purchased power expenses increased primarily due to an increase in the average market price of purchased power.
2009 Compared to 2008
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing 2009 to 2008.
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $833.8 |
Fuel recovery | | 22.1 |
Volume/weather | | 18.2 |
Retail electric price | | (13.3) |
Other | | 0.5 |
2009 net revenue | | $861.3 |
The fuel recovery variance resulted primarily from an adjustment to deferred fuel costs in the fourth quarter 2009 relating to unrecovered nuclear fuel costs incurred since January 2008 that will now be recovered after a revision to the fuel adjustment clause methodology.
The volume/weather variance is primarily due to an increase in unbilled sales volume, including the effects of Hurricane Gustav and Hurricane Ike which decreased sales volume in 2008, and the effect of more favorable weather.
The retail electric price variance is primarily due to:
· | a formula rate plan provision of $3.7 million recorded in the third quarter of 2009 for refunds made to customers in November 2009 in accordance with a settlement approved by the LPSC. See Note 2 to the financial statements for further discussion of the settlement; |
· | a credit passed on to customers as a result of the Act 55 storm cost financing; and |
· | a net decrease in the formula rate plan effective September 2008 to remove interim storm recovery upon the Act 55 financing of storm costs as well as the storm damage accrual. A portion of the decrease is offset in other operation and maintenance expenses. See Note 2 to the financial statements for further discussion of the formula rate plan. |
The decrease was partially offset by a formula rate plan increase effective September 2008 and November 2009. Refer to "“MANAGEMENT'SMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation - -Retail Rates - Electric"Electric” and Note 2 to the financial statements for a discussion of the formula rate plan.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues decreased primarily due to:
· | a decrease of $638.2 million in electric fuel cost recovery revenues due to lower fuel rates; |
· | a decrease of $245 million in gross wholesale revenue due to a decrease in the average price of energy available for resale sales; and |
· | a decrease of $33.5 million in gross gas revenue primarily due to lower fuel rates. |
The decrease was partially offset by formula rate plan increases effective November 2009 as discussed above.
Fuel and purchased power expenses decreased primarily due to a decrease in the average market prices of natural gas and purchased power and a decrease in deferred fuel expense due to decreased recovery from customers of fuel costs in addition to a credit recorded in the fourth quarter 2009 as a result of a revision to the fuel adjustment clause methodology as explained above.
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
2008 Compared to 2007
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2008 to 2007.
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $1,297.6 |
Jurisdictional separation | | (442.3) |
Other | | (21.5) |
2008 net revenue | | $833.8 |
Net revenue decreased primarily due to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007.
The Other variance is primarily caused by various operational effects of the jurisdictional separation on revenues and fuel and purchased power expenses.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
The change in gross operating revenues, fuel and purchased power expenses, and other regulatory charges was primarily caused by the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007.
Other Income Statement Variances
2010 Compared to 2009
Other operation and maintenance expenses increased primarily due to an increase of $12.4 million in fossil expenses due to higher plant maintenance costs and plant outages and a $12.1 million increase in compensation and benefits costs resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See Note 11 to the financial statements for further discussion of benefit costs.
Taxes other than income taxes increased primarily due to an increase in local franchise taxes as a result of higher revenues primarily in the residential and commercial sectors and an increase in ad valorem taxes as a result of higher millage rates, a higher 2010 assessment, and a reduction in capitalized property taxes as compared to 2009.
Other income decreased primarily due to a decrease of $30.1 million in interest and investment income related to the debt assumption agreement with Entergy Texas. In June 2010, Entergy Texas repaid the outstanding assumed debt and the debt assumption agreement was terminated.
Interest expense decreased primarily due to a decrease in long-term debt outstanding as a result of redemptions of first mortgage bonds of $292 million in December 2009, $68 million in June 2010, and $304 million in November 2010, partially offset by issuances of first mortgage bonds of $300 million in October 2009 and $250 million in October 2010. See Note 5 to the financial statements for further discussion of the decrease in long-term debt.
2009 Compared to 2008
Other operation and maintenance expenses decreased primarily due to a decrease of $7.7 million in storm damage reserves in 2009 as a result of the completion of the Act 55 storm cost financing and a decrease of $5.5 million in payroll-related costs. The decrease was partially offset by an increase of $7.8 million in nuclear expenses due to higher nuclear labor and contract costs.
Taxes other than income taxes decreased primarily due to a decrease in local franchise taxes as a result of lower residential and commercial revenue.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Other income decreased primarily due to:
· | a decrease of $15.6 million in interest and dividendinvestment income related to the debt assumption agreement with Entergy Texas. Entergy Gulf States Louisiana remainsremained primarily liable on this debt, of which $168 million remained outstanding as of December 31, 2009 and $770 million remained outstanding as of December 31, 2008; |
· | the decrease of $4.7 million in carrying charges on Hurricane Katrina and Hurricane Rita storm restoration costs as a result of the Act 55 storm cost financing; and |
· | a decrease of $3.5 million in interest earned on money pool investments. |
The decrease is partially offset by additional distributions of $8.7 million earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received from the Act 55 storm costs financings and $5.5 million in carrying charges on Hurricane Gustav and Hurricane Ike storm restoration costs. See Note 2 to the financial statements for a discussion of the Act 55 storm cost financing.
Interest expense decreased primarily due to a decrease of $421 million in long-term debt outstanding. See Note 5 to the financial statements for a description of the decrease in long-term debt.
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
2008 Compared to 2007
Other operation and maintenance expenses decreased primarily due to:
· | a decrease of $179.1 million due to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007; |
· | a decrease of $16.3 million in payroll, payroll-related, and benefit costs; |
· | a decrease of $9.7 million in nuclear labor and contract costs due to a non-refueling plant outage in March 2007; and |
· | a decrease of $10.1 million in plant maintenance costs. |
The decrease was partially offset by an increase of $8.8 million in transmission spending due to higher transmission equalization expenses.
Taxes other than income taxes decreased primarily due to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007.
Nuclear refueling outage expenses increased due to the amortization of higher expenses associated with the planned maintenance and refueling outage at River Bend in the first quarter 2008 as well as the delay of this outage from late 2007 to early 2008 resulting in a shorter amortization period for these costs.
Depreciation and amortization decreased primarily due to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007.
Other income includes $60 million in interest and dividend income in 2008 related to the debt assumption agreement between Entergy Gulf States Louisiana and Entergy Texas and the $1.079 billion of debt assumed by Entergy Texas as of December 31, 2007. Entergy Gulf States Louisiana remains primarily liable on this debt, of which $770 million remained outstanding at December 31, 2008. The increase in interest income is partially offset by $34 million of other income reported by Entergy Texas for the year ended December 31, 2007. The income from the debt assumption agreement offsets the interest expense on the portion of long-term debt assumed by Entergy Texas. The remaining variance is primarily due to the cessation of carrying charges on storm restoration costs as a result of the securitization and a decrease in interest earned on money pool investments, partially offset by dividends of $10.3 million earned on preferred stock purchased from Entergy Holdings Company with the proceeds received from the Act 55 Storm Cost Financings. See Note 2 to the financial statements for a discussion of the Act 55 storm cost financing.
Interest and other charges decreased primarily due to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 31, 2007 and due to a decrease in long-term debt outstanding.
Income Taxes
The effective income tax rates were 36.8%28.5%, 28.3%36.8%, and 39.1%28.3% for 2010, 2009, 2008, and 2007,2008, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rate.
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
Cash Flow
Cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | 2009 | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $49,303 | | $108,036 | | $180,381 | Cash and cash equivalents at beginning of period | | $144,460 | | $49,303 | | $108,036 |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 234,930 | | 562,897 | | 560,740 | Operating activities | | 726,130 | | 234,930 | | 562,897 |
| Investing activities | | (286,486) | | (519,364) | | (801,499) | Investing activities | | (541,583) | | (286,486) | | (519,364) |
| Financing activities | | 146,713 | | (102,266) | | 168,414 | Financing activities | | (173,834) | | 146,713 | | (102,266) |
| Net increase (decrease) in cash and cash equivalents | | 95,157 | | (58,733) | | (72,345) | Net increase (decrease) in cash and cash equivalents | | 10,713 | | 95,157 | | (58,733) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $144,460 | | $49,303 | | $108,036 | Cash and cash equivalents at end of period | | $155,173 | | $144,460 | | $49,303 |
Operating Activities
Net cash flow provided by operating activities increased $491.2 million in 2010 compared to 2009 primarily due to:
· | storm cost proceeds of $240.3 million received from the LURC as a result of the Act 55 storm cost financings; |
· | the absence in 2010 of the storm restoration spending that occurred in 2009. See “Hurricane Gustav and Hurricane Ike” below and Note 2 to the financial statements for a discussion of the storm cost financings; and |
· | income tax refunds of $16.8 million in 2010 compared to income tax payments of $60.6 million in 2009. In 2010, Entergy Gulf States Louisiana received tax cash refunds in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The refunds resulted from the reversal of temporary differences for which Entergy Gulf States Louisiana previously made cash tax payments. |
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Net cash flow provided by operating activities decreased $328 million in 2009 compared to 2008 primarily due to storm cost proceeds of $274.7 million received from the Louisiana Utilities Restoration Corporation (LURC) as a result of the Act 55 storm cost financing in 2008, decreased recoveryan under-collection of deferred fuel costs through typical fuel adjustment clause activity, and income tax payments of $60.6 million in 2009 compared to income tax refunds of $1.8 million in 2008, partially offset by a decrease of $28.2 million in pension contributions and fluctuation in the timing of accounts receivable and payable activity.
Investing Activities
Net cash flow provided by operatingused in investing activities increased $2.2$255.1 million in 20082010 compared to 20072009 primarily due to storm cost proceeds of $274.7 million received from the LURC as a result of the Act 55 storm cost financing, almost entirely offset by the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisianato:
· | the investment of $150.3 million in affiliate securities and the investment of $90.1 million in the storm reserve escrow account as a result of the Act 55 storm cost financings. See “Hurricane Gustav and Hurricane Ike” below and Entergy Texas, effective December 31, 2007, increased recovery of fuel costs, and an increase of $17.9 million in pension contributions. See Note 2 to the financial statements for a discussion of the storm cost financings; |
· | proceeds from the sale/leaseback of nuclear fuel of $72.8 million in 2009. See Note 18 to the financial statements for discussion of the consolidation of nuclear fuel company variable interest entities effective January 1, 2010; and |
· | an increase in construction expenditures primarily due to $24.9 million in costs associated with the development of new nuclear generation at River Bend. See “New Nuclear Development” below. |
The increase was partially offset by the purchase of one-third of the Ouachita Power Plant for $75 million in November 2009 from Entergy Arkansas and money pool activity. See “Ouachita Power Plant” below for a discussion of the Act 55 storm cost financing.purchase of the Ouachita Power Plant.
Investing ActivitiesIncreases in Entergy Gulf States Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Gulf States Louisiana’s receivable from the money pool increased by $12.9 million for the year ended December 31, 2010 compared to increasing by $38.5 million for the year ended December 31, 2009. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Net cash flow used in investing activities decreased $232.9 million in 2009 compared to 2008 primarily due to:
· | the investment of $189.4 million in affiliate securities in 2008 as a result of the Act 55 storm cost financing. See Note 2 to the financial statements for a discussion of the Act 55 storm cost financing; |
· | higher construction expenditures in 2008 due to Hurricane Gustav; |
· | the purchase of the Calcasieu Generating Facility for $56 million in March 2008; and |
· | timing differences between nuclear fuel purchases and fuel trust reimbursements. |
The decrease was partially offset by money pool activity and the purchase of one-third of the Ouachita Power Plant for $75 million in November 2009 from Entergy Arkansas. See "“Ouachita Power Plant"Plant” below for a discussion of the purchase of the Ouachita Power Plant. Increases in Entergy Gulf States Louisiana'sLouisiana’s receivable from the money pool are a use of cash flow, and Entergy Gulf States Louisiana'sLouisiana’s receivable from the money pool increased by $38.5 million for the year ended December 31, 2009 compared to decreasing by $43.9 million for the year ended December 31, 2008. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries'subsidiaries’ need for external short-term borrowings.
Financing Activities
Financing activities used cash of $173.8 million in 2010 compared to providing cash of $146.7 million in 2009 primarily due to:
· | net cash issuances of $178.2 million of long-term debt in 2009; |
· | net cash redemptions of $38.6 million of long-term debt in 2010; and |
· | an increase of $93.6 million in common equity distributions. |
Entergy Gulf States Louisiana, L.L.C.
Management'sManagement’s Financial Discussion and Analysis
Net cash used in investing activities decreased $282.1 million in 2008 compared to 2007 primarily due to the cash allocated to Entergy Texas in the jurisdictional separation transaction in 2007 and due to the effect of the jurisdictional separation on money pool activity. The decrease was partially offset by the investment of $189.4 million in affiliate securities as a result of the Act 55 storm costs financings and the purchase of the Calcasieu Generating Facility for $56 million. See Note 2 to the financial statements for a discussion of the Act 55 storm cost financing. In March 2008, Entergy Gulf States Louisiana purchased Calcasieu, a 322 MW, simple-cycle, gas-fired power plant, from a subsidiary of Dynegy Inc. The facility is located near the city of Sulphur in southwestern Louisiana. Entergy Gulf States Louisiana received the plant, materials and supplies, SO2 emission allowances, and related real estate in the transaction. The FERC and the LPSC approved the acquisition.
Decreases in Entergy Gulf States Louisiana's receivable from the money pool are a source of cash flow, and Entergy Gulf States Louisiana's receivable from the money pool decreased by $43.9 million for the year ended December 31, 2008 compared to increasing by $134.6 million for the year ended December 31, 2007.
Financing Activities
Financing activities provided cash of $146.7 million in 2009 compared to using cash of $102.3 million in 2008 primarily due to the issuance of $300 million of 5.59% Series first mortgage bonds in October 2009 and a decrease of $73.5 million in common equity distributions, partially offset by the retirement of $119 million of long term debt in 2009.
Financing activities used cash of $102.3 million in 2008 compared to providing cash of $168.4 million in 2007 primarily due See Note 5 to the issuancefinancial statements for details of $329.5 million of securitization bonds in June 2007 by a subsidiary of Entergy Texas, partially offset by the redemption of all outstanding shares of Entergy Gulf States, Inc.'s preferred stock in December 2007.long-term debt.
Capital Structure
Entergy Gulf States Louisiana'sLouisiana’s capitalization is balanced between equity and debt, as shown in the following table. The calculation below does not reduce the debt by the debt assumed by Entergy Texas ($1680 as of December 31, 2010 and $168 million as of December 31, 2009, and $770 million as of December 31, 2008)2009) because Entergy Gulf States Louisiana remainswas primarily liable on the debt. The reductionfinal repayment in June 2010 by Entergy Texas of its obligations under the debt assumption agreement is the primary reason for the decline in debt to capital ratio in 2009 is primarily due to the repayment in 2009 of $602 million of assumed debt by Entergy Texas.at December 31, 2010.
| | December 31, 2009 | | December 31, 2008 | | December 31, 2010 | | December 31, 2009 |
| | | | | | | | |
Debt to capital | | | 51.2% | | 55.3% |
Effect of subtracting cash | | | (2.6)% | | (2.1)% |
Net debt to net capital | | 53.0% | | 61.6% | | 48.6% | | 53.2% |
Effect of subtracting cash from debt | | 2.1% | | 0.6% | |
Debt to capital | | 55.1% | | 62.2% | |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations preferred membership interests with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt and members'members’ equity. Net capital consists of capital less cash and cash equivalents. Entergy Gulf States Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Gulf States Louisiana'sLouisiana’s financial condition.
Uses of Capital
Entergy Gulf States Louisiana requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred equity maturities; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | distribution and interest payments. |
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
Following are the amounts of Entergy Gulf States Louisiana'sLouisiana’s planned construction and other capital investments, existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:
| 2010 | | 2011-2012 | | 2013-2014 | | after 2014 | | Total | | 2011 | | 2012-2013 | | 2014-2015 | | after 2015 | | Total |
| (In Millions) | (In Millions) |
Planned construction and | | | | | | | | | | | |
capital investment (1) | $255 | | $488 | | N/A | | N/A | | $743 | | |
Planned construction and capital investment (1): | | Planned construction and capital investment (1): | | | | | | | |
Generation | | $77 | | $150 | | N/A | | N/A | | $227 |
Transmission | | 77 | | 158 | | N/A | | N/A | | 235 |
Distribution | | 57 | | 117 | | N/A | | N/A | | 174 |
Other | | 17 | | 20 | | N/A | | N/A | | 37 |
Total | | $228 | | $445 | | N/A | | N/A | | $673 |
Long-term debt (2) | $105 | | $406 | | $194 | | $2,020 | | $2,725 | | $86 | | $362 | | $205 | | $2,008 | | $2,661 |
Operating leases | $13 | | $22 | | $27 | | $61 | | $123 | | $11 | | $21 | | $26 | | $67 | | $125 |
Purchase obligations (3) | $156 | | $221 | | $73 | | $78 | | $528 | | $216 | | $232 | | $223 | | $507 | | $1,178 |
Nuclear fuel lease obligations (4) | $30 | | $126 | | N/A | | N/A | | $156 | | |
(1) | Includes approximately $128$127 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Gulf States Louisiana, it primarily includes unconditional fuel and purchased power obligations. |
(4) | It is expected that additional financing under the leases will be arranged as needed to acquire additional fuel, to pay interest, and to pay maturing debt. If such additional financing cannot be arranged, however, Entergy Gulf States Louisiana must repurchase sufficient nuclear fuel to allow the lessor to meet its obligations. |
In addition to the contractual obligations given above, Entergy Gulf States Louisiana expects to contribute $21.9$24.6 million to its pension plans and $8.4$7.8 million to other postretirement plans in 2010;2011; although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Gulf States Louisiana’s pension contributions in the future.2011.
Also, in addition to the contractual obligations, Entergy Gulf States Louisiana has $245.8$279.1 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
The planned capital investment estimate for Entergy Gulf States Louisiana reflects capital required to support existing business and customer growth. Entergy'sEntergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental compliance, market volatility, economic trends, business restructuring, chan ges in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred membership interest maturities in Notes 5 and 6 to the financial statements.
As an indirect, wholly-owned subsidiary of Entergy Corporation, Entergy Gulf States Louisiana pays distributions from its earnings at a percentage determined monthly. Entergy Gulf States Louisiana'sLouisiana’s long-term debt indentures contain restrictions on the payment of cash dividends or other distributions on its common and preferred membership interests.
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
Ouachita Power Plant
In August 2008, the LPSC issued an order approving an uncontested settlement between Entergy Gulf States Louisiana and the LPSC Staff authorizing Entergy Gulf States Louisiana'sLouisiana’s purchase, under a life-of-unit agreement, of one-third of the capacity and energy from the 789 MW Ouachita power plant. The LPSC'sLPSC’s approval was subject to certain conditions, including a study to determine the costs and benefits of Entergy Gulf States Louisiana exercising an option to purchase one-third of the plant (Unit 3) from Entergy Arkansas. In April 2009, Entergy Gulf States Louisiana made a filing with the LPSC seeking approval of Entergy Gulf States Louisiana exercising its option to convert its purchased power agreement into the ownership interest in Unit 3 and a one-thirdone-th ird interest in the Ouachita common facilities. In September 2009 the LPSC, pursuant to an uncontested settlement, approved the acquisition and a cost recovery mechanism. Entergy Gulf States Louisiana purchased Unit 3 and a one-third interest in the Ouachita common facilities for $75 million in November 2009.
New Nuclear Development
Entergy Gulf States Louisiana and Entergy Louisiana provided public notice to the LPSC of their intention to make a filing pursuant to the LPSC'sLPSC’s general order that governs the development of new nuclear generation in Louisiana. The project option being developed by the companies is for new nuclear generation at River Bend. Entergy Gulf States Louisiana and Entergy Louisiana, together with Entergy Mississippi, have been engaged in the development of options to construct new nuclear generation at the River Bend and Grand Gulf sites. Entergy Gulf States Louisiana and Entergy Louisiana are leading the development at River Bend, and Entergy Mississippi is leading the development at Grand Gulf. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In the first quarter 2010, Entergy Gulf States Louisiana and Entergy Louisiana each paid for and will recognizerecognized on its books $24.9 million in costs associated with the development of new nuclear generation at the River Bend site; these costs previously had been recorded on
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
the books of Entergy New Nuclear Utility Development, LLC, a System Energy subsidiary. Entergy Gulf States Louisiana and Entergy Louisiana will share costs going forward on a 50/50 basis, which reflects each company'scompany’s current participation level in the project. In responseMarch 2010, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC seeking approval to continue the development activities. The parties have agreed to a procedural schedule that includes a hearing in May 2011. In January 2011, parties filed testimony responding to the companies' previous notice, dated August 10, 2009,application, and the only testimony was filed by the LPSC opened a docket. A procedural schedule will be established afterstaff. The LPSC staff did not oppose the companies file the certification application referredrequested relief but suggested several conditions to in the notice.LPSC approval.
Sources of Capital
Entergy Gulf States Louisiana'sLouisiana’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred membership interest issuances; and |
· | bank financing under new or existing facilities. |
Entergy Gulf States Louisiana may refinance or redeem debt and preferred equity/membership interests prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common and preferred equity/membership interest issuances by Entergy Gulf States Louisiana require prior regulatory approval. Preferred equity/membership interest and debt issuances are also subject to issuance tests set forth in its corporate charter, bond indentures and other agreements. Entergy Gulf States Louisiana has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Gulf States Louisiana'sLouisiana’s receivables from the money pool were as follows as of December 31 for each of the following years:
2009 | | 2008 | | 2007 | | 2006 |
(In Thousands) |
| | | | | | |
$50,131 | | $11,589 | | $55,509 | | $75,048 |
2010 | | 2009 | | 2008 | | 2007 |
(In Thousands) |
| | | | | | |
$63,003 | | $50,131 | | $11,589 | | $55,509 |
See Note 4 to the financial statements for a description of the money pool.
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
Entergy Gulf States Louisiana has a credit facility in the amount of $100 million scheduled to expire in August 2012. No borrowings were outstanding under the credit facility as of December 31, 2009.2010.
Entergy Gulf States Louisiana obtained short-term borrowing authorization from the FERC under which it may borrow through October 2011, up to the aggregate amount, at any one time outstanding, of $200 million. See Note 4 to the financial statements for further discussion of Entergy Gulf States Louisiana'sLouisiana’s short-term borrowing limits. Entergy Gulf States Louisiana has also obtained an order from the FERC authorizing long-term securities issuances through July 2011.
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy Gulf States Louisiana'sLouisiana’s service territory. The storms resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. In October 2008, Entergy Gulf States Louisiana drew all of its $85 million funded storm reserve. On October 15, 2008, the LPSC approved Entergy Gulf States Louisiana'sLouisiana’s request to defer and accrue carrying cost on unrecovered storm expenditures during the period the company seeks regulatory recovery. The approval was without prejudice to the ultimate resolution of the total amount of prudently incurred storm cost or final carryingcarr ying cost rate.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana made a supplemental filing to, among other things, recommend recoveryand the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and replenishmentissuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings). Entergy G ulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm reservescosts were financed primarily by Louisiana Act 55 (passed in 2007) financing.financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana recovered their costs from Hurricane Katrinaalso filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Hurricane Rita primarily by Act 55 financing as discussed below. Onsavings to customers via a Storm Cost Offset rider.
In December 30, 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that if approved, provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana.Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financing isfinancings are accomplished. TheIn March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding have agreed to a procedural schedulefiled with the LPSC an uncontested stipulated settlement that includes March/these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, hearing datesthe LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $244.1 million in bonds under Act 55. From the $240.3 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $90 million in a restricted escrow account as a storm damage reserve for bothEntergy Gulf States Louisiana and transferred $150.3 million directly to Entergy Gulf States Louisiana. From the recoverabilitybond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana used $150.3 million to acquire 1,502,643.04 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. D istributions are payable quarterly commencing on September 15, 2010, and the methodmembership interests have a liquidation price of recovery proceedings.$100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Gulf States Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LCDA, and there is no recourse against Entergy Gulf States Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee. Entergy Gulf States Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
Hurricane RitaKatrina and Hurricane KatrinaRita
In August and September 2005, Hurricanes Katrina and Rita hit Entergy Gulf States Inc.'s’s jurisdictions in Louisiana and Texas. The storms resulted in power outages; significant damage to electric distribution, transmission, and generation infrastructure; and the temporary loss of sales and customers due to mandatory evacuations. Entergy Gulf States Louisiana pursued a range of initiatives to recover storm restoration and business continuity costs and incremental losses. Initiatives included obtaining reimbursement of certain costs covered by insurance and pursuing recovery through existing or new rate mechanisms regulated by the FERC and local regulatory bodies, in combination with securitization.
Insurance Claims
Entergy has received a total of $317 million as of December 31, 2009 on its Hurricane Katrina and Hurricane Rita insurance claims, including the settlements of its Hurricane Katrina claims with each of its two excess insurers. Of the $317 million received, $21 million was allocated to Entergy Gulf States Louisiana. Entergy has substantially completed its insurance recoveries related to Hurricane Katrina and Hurricane Rita.
Entergy Gulf States Louisiana, L.L.C.
Management'sManagement’s Financial Discussion and Analysis
Storm Cost Financings
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to Act 64 traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 3, 2008, the Louisiana State Bond Commission granted preliminary approval for the Act 55 financings. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55 financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana'sLouisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
OnIn August 26, 2008 the LPFA issued $278.4 million in bonds under the aforementioned Act 55. From the $274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Gulf States Louisiana and transferred $187.7 million directly to Entergy Gulf States Louisiana. From the bond proceeds received by Entergy Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana invested $189.4 million, including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Gulf States Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LPFA, and there is no recourse against Entergy Gulf States Louisiana in the event of a bond default. To service the bonds, Entergy Gulf States Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee. Entergy Gulf States Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
The rates that Entergy Gulf States Louisiana charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Gulf States Louisiana is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the LPSC is primarily responsible for approval of the rates charged to customers.
Retail Rates - Electric
In March 2005, the LPSC approved a settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States Louisiana and Entergy Louisiana. The settlement included the establishment of a three-year formula rate plan for Entergy Gulf States Louisiana that, among other provisions, establishes a return on common equity mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% are allocated 60% to customers and 40% to Entergy Gulf States Louisiana. Entergy Gulf States Louisiana made its initial formula rate planp lan filing in June 2005. The formula rate plan was subsequently extended one year. As discussed below the formula rate plan has been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, and 2010 test years.
Entergy Gulf States Louisiana, L.L.C.
Management'sManagement’s Financial Discussion and Analysis
In October 2009 the LPSC approved a settlement that resolves Entergy Gulf States Louisiana's 2007 test year filing. The settlement provides for a new formula rate plan for the 2008, 2009, and 2010 test years. Entergy Gulf States Louisiana is permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.65% return on equity for the 2008 test year. 10.65% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset will be subject to refund pending review of the 2008 test year filing that was made on October 21, 2009. The settlement does not allow recovery through the formula rate plan of most of Entergy Gulf States Louisiana's costs associated with Entergy's stock option plan. Pursuant to the settlement Entergy Gulf States Louisiana refunded to its customers $3.7 million, which includes interest, in the November 2009 billing cycle. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. The discovery and comment period for the 2008 test year filing is currently open, and Entergy Gulf States Louisiana will implement any agreed changes by March 15, 2010. A procedural schedule to address any contested issues would be set after March 15, 2010.
In December 2009, Entergy Gulf States Louisiana filed an application seeking LPSC approval for a $9.7 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of River Bend, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Currently, Entergy Gulf States Louisiana's annual retail rates contain no amount for decommissioning funding.
In May 2008, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2007 test year. The filing reflected a 9.26% return on common equity, which was below the allowed earnings bandwidth, and indicated a $5.4 million revenue deficiency, offset by a $4.1 million decrease in required additional capacity costs. Entergy Gulf States Louisiana implemented a $20.7 million formula rate plan decrease, subject to refund, effective the first billing cycle in September 2008. The decrease included removal of interim storm cost recovery and a reduction in the storm damage accrual. Entergy Gulf States Louisiana then implemented a $16.0 million formula rate plan increase, subject to refund, effective the first billing cycle in October 2008 to collect previously deferred and ongoingongo ing costs associated with LPSC approved additional capacity, including the Ouachita power plant. In November 2008 Entergy Gulf States Louisiana filed to implement an additional increase of $9.3 million to recover the costs of a new purchased power agreement.
In October 2009 the LPSC approved a settlement that resolved Entergy Gulf States Louisiana’s 2007 test year filing and provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.65% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). Entergy Gulf States Louisiana, effective with the November 2009 billing cycle, reset its rates to achieve a 10.65% return on equity for the 2008 test year. The rate reset, a $44.3 million increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 tes t year filing that was made in October 2009. In January 2010, Entergy Gulf States Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing made in December 2009, primarily for incremental capacity costs approved by the LPSC. In May 2007,2010, Entergy Gulf States Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.8 million reduction in rates effective in the June 2010 billing cycle and a $0.5 million refund. At its May 19, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 20062009 test year. The filing reflected a 10.0% return on common equity, which was within the allowed earnings bandwidth, and an anticipated formula rate plan decrease of $23 million annually attributable to adjustments outside of the formula rate plan sharing mechanism related to capacity costs and the anticipated securitization of storm costs related to Hurricane Katrina and Hurricane Rita and the securitization of a storm reserve. In September 2007, Entergy Gulf States Louisiana modified the formula rate plan filing to reflect a 10.07% return on common equity, which was still within the allowed bandwidth. The modified filing also reflected implementation of a $4.1 million rate increase, subject to refund, attributable to recovery of additional LPSC-approved incremental deferred and ongoing capacity costs. The rate decrease anticipated in the original filing did not occur because of the additional capacity costs approved by the LPSC, and because securitization of storm costs associated with Hurricane Katrina and Hurricane Rita and the establishment of a storm reserve had not yet occurred. In October 2007, Entergy Gulf States Louisiana implemented a $16.4 million formula rate plan decrease that was due to the reclassification of certain franchise fees from base rates to collection via a line item on customer bills pursuant to an LPSC order. In March 2008 the LPSC approved an uncontested stipulated settlement that left the current base rates in place and extended the formula rate plan for one year.
In May 2006, Entergy Gulf States Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Gulf States Louisiana modified the filing in August 2006 to reflect an 11.1%10.25% return on common equity, which is within the allowed bandwidth. The modified filing includes aearnings bandwidth, indicating no cost of service rate change is necessary under the formula rate planplan. The filing does reflect, however, a revenue requirement increase to provide supplemental funding for the decommissioning trust maintained for the LPSC-regulated 70% share of $17.2River Bend, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate increase for incremental capacity costs. In July 2010 the LPSC approved a $7.8 million annually that providesincrease in the revenue requirement for 1) interim recovery of $10.5 million of storm costs from Hurricane Katrina and Hurricane Rita and 2) recovery of $6.7 million of LPSC-approved incremental deferred and ongoing
decommiss ioning, effective September 2010. In August 2010, Entergy Gulf States Louisiana L.L.C.
Management's Financial Discussionmade a revised 2009 test year filing. The revised filing reflected a 10.12% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The revised filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and Analysis
(2) $25.2 million for capacity costs. The increase was implementedrates reflected in the revised filing became effective, beginning with the first billing cycle of September 2006. In May 2007 the LPSC approved a settlement between2010. Entergy Gulf States Louisiana and the LPSC staff affirmingsubsequently submitted a joint report on the rates that were implemented2009 test year filing consistent with these terms and the LPSC approved the joint report in September 2006.January 2011.
Retail Rates - Gas
In January 2011, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2010. The filing showed an earned return on common equity of 8.84% and a revenue deficiency of $0.3 million. The sixty-day review and comment period for this filing remains open.
In January 2010, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2009. The filing showed an earned return on common equity of 10.87%, which is within the earnings bandwidth of 10.5% plus or minus fifty basis points.points, resulting in no rate change. In April 2010, Entergy Gulf States Louisiana filed a revised evaluation report reflecting changes agreed upon with the LPSC Staff. The sixty day review and comment period for this filing remains open.revised evaluation report also resulted in no rate change.
In January 2009, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ending September 30, 2008. The filing showed a revenue deficiency of $529 thousand based on a return on common equity mid-point of 10.5%. In April 2009, Entergy Gulf States Louisiana implemented a $255 thousand rate increase pursuant to an uncontested settlement with the LPSC staff.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
In January 2008, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ending September 30, 2007. The filing showed a revenue deficiency of $3.7 million based on a return on common equity mid-point of 10.5%. Entergy Gulf States Louisiana implemented a $3.4 million rate increase in April 2008 pursuant to an uncontested agreement with the LPSC staff.
Fuel and purchased power cost recovery
In January 2007,2003, the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 1995 through 2004. The LPSC Staff issued its audit report in December 2010. The report recommends the disallowance of $23 million of costs which, with interest, will total $43 million. $2.3 million of this total relates to a realignment to and recovery through base rates of certain SO2 costs. Entergy Gulf States Louisiana filed withcomments disputing the LPSC its gas rate stabilization plan forfindin gs in the test year ending September 30, 2006. The filing showedreport and requested a revenue deficiency of $3.5 million based on a return on common equity mid-point of 10.5%. In March 2007,hearing. Entergy Gulf States Louisiana filed a sethas recorded provisions for the estimated effect of rate and rider schedules that reflected all proposed LPSC staff adjustments and implemented a $2.4 million base rate increase effective with the first billing cycle of April 2007 pursuant to the rate stabilization plan.
Federal Regulation
System Agreement Proceedingsthis proceeding.
See "System Agreement Proceedings" inIn April 2010 the LPSC authorized its staff to initiate an audit of Entergy Corporation and Subsidiaries' Management's Discussion and AnalysisGulf States Louisiana's purchased gas adjustment clause filings for discussionits gas distribution operations. The audit includes a review of the proceeding atreasonableness of charges flowed through by Entergy Gulf States Louisiana for the FERC involving the System Agreement and of other related proceedings.period from 2003 through 2008. Discovery is in progress, but a procedural schedule has not been established.
Transmission
See "Independent Coordinator of Transmission" in Entergy Corporation and Subsidiaries' Management's Discussion and Analysis for further discussion.
Entergy Gulf States Louisiana'sLouisiana’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Gulf States Louisiana'sLouisiana’s industrial customer base. Entergy Gulf States Louisiana responds by working with industrial and commercial customers and negotiating electric service contracts to provide competitive rates that match specific customer needs and load profiles. Entergy Gulf States Louisiana actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers. Entergy Gulf States Louisiana does not currently expect additionaladditio nal significant losses to cogeneration because of the current economics of the electricity markets and Entergy Gulf States Louisiana'sLouisiana’s marketing efforts in retaining industrial customers.
See “System Agreement”, “Independent Coordinator of Transmission”, “Notice to SERC Reliability Corporation regarding Reliability Standards”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Gulf States Louisiana, L.L.C.
Management's FinancialCorporation and Subsidiaries Management’s Finan cial Discussion and Analysis for a discussion of these topics.
Entergy Gulf States Louisiana owns and, operates, through an affiliate, operates the River Bend nuclear power plant. Entergy Gulf States Louisiana is, therefore, subject to the risks related to owning and operating a nuclear plant. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of River Bend, Entergy Gulf StatesS tates Louisiana may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Entergy Gulf States Louisiana'sLouisiana’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Gulf States Louisiana is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
The preparation of Entergy Gulf States Louisiana'sLouisiana’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Gulf States Louisiana'sEntergy’s financial position or results of operations.
Nuclear Decommissioning Costs
See "“Nuclear Decommissioning Costs"” in the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries’ Management’s Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Gulf States Louisiana records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month'smonth’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions,
Entergy Gulf States Louisiana, L.L.C.
Management's Financial Discussion and Analysis
and accounting mechanisms. See the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for furtherfurth er discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate.
Entergy Gulf States Louisiana, L.L.C.
Management’s Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $1,160 | | $12,054 | | (0.25%) | | $1,270 | | $13,502 |
Rate of return on plan assets | | (0.25%) | | $884 | | - | | (0.25%) | | $904 | | - |
Rate of increase in compensation | | 0.25% | | $542 | | $2,658 | | 0.25% | | $552 | | $2,679 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $683 | | $3,814 | | 0.25% | | $768 | | $4,062 |
Discount rate | | (0.25%) | | $415 | | $4,074 | | (0.25%) | | $457 | | $4,357 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension incomecost for Entergy Gulf States Louisiana in 20092010 was $1.2$10 million. Entergy Gulf States Louisiana anticipates 20102011 qualified pension cost to be $10$9.4 million. Entergy Gulf States Louisiana contributed $6$31 million to its pension plans in 20092010 and estimates 20102011 pension contributions to be approximately $21.9$24.6 million; although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Gulf States Louisiana’s pension contributions in the future.2011.
Total postretirement health care and life insurance benefit costs for Entergy Gulf States Louisiana in 20092010 were $14.7 million, including $3.3 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Gulf States Louisiana expects 2010 postretirement health care and life insurance benefit costs to approximate $16.6 million, including $3.4 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Gulf States Louisiana expects 2011 postretirement health care and life insurance benefit costs to approximate $16.8 million, including $3.9 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Gulf States Louisiana expects to contribute approximately $8.4$7.8 million to its other postretirement plans in 2010.2011.
New Accounting PronouncementsFederal Healthcare Legislation
See "the “NewQualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting PronouncementsEstimates"” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries Management’s Financial Discussion and Analysis for a discussion of new accounting pronouncements.Federal Healthcare Legislation.
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Discussion and Analysis.
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To the Board of Directors and Members of
Entergy Gulf States Louisiana, L.L.C.
Baton Rouge, Louisiana
We have audited the accompanying balance sheets of Entergy Gulf States Louisiana, L.L.C. (the “Company”) as of December 31, 20092010 and 2008,2009, and the related income statements, statements of income, members’changes in equity and comprehensive income, and statements of cash flows (pages 296286 through 300290 and applicable items in pages 6349 through 193)184) for each of the three years in the period ended December 31, 2009.2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Entergy Gulf States Louisiana, L.L.C. as of December 31, 20092010 and 2008,2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the financial statements, Entergy Gulf States, Inc. completed a jurisdictional separation on December 31, 2007. As part of the separation, Entergy Gulf States, Inc. contributed certain assets and liabilities to Entergy Texas, Inc. and Subsidiaries and reflected the distribution in the accompanying balance sheet and statement of members’ equity as of December 31, 2007.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 201025, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
ENTERGY GULF STATES LOUISIANA, L.L.C. |
INCOME STATEMENTS |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) |
| | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 1,776,610 | | | $ | 2,632,952 | | | $ | 3,448,008 | |
Natural gas | | | 67,776 | | | | 100,413 | | | | 86,604 | |
TOTAL | | | 1,844,386 | | | | 2,733,365 | | | | 3,534,612 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 251,393 | | | | 474,314 | | | | 867,081 | |
Purchased power | | | 732,943 | | | | 1,425,936 | | | | 1,339,986 | |
Nuclear refueling outage expenses | | | 21,787 | | | | 25,705 | | | | 12,212 | |
Other operation and maintenance | | | 332,450 | | | | 337,794 | | | | 548,999 | |
Decommissioning | | | 13,591 | | | | 12,533 | | | | 11,728 | |
Taxes other than income taxes | | | 67,559 | | | | 77,438 | | | | 132,489 | |
Depreciation and amortization | | | 135,489 | | | | 136,606 | | | | 208,648 | |
Other regulatory charges (credits) - net | | | (1,261 | ) | | | (679 | ) | | | 29,923 | |
TOTAL | | | 1,553,951 | | | | 2,489,647 | | | | 3,151,066 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 290,435 | | | | 243,718 | | | | 383,546 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 5,426 | | | | 7,417 | | | | 11,666 | |
Interest and dividend income | | | 69,951 | | | | 83,105 | | | | 75,425 | |
Miscellaneous - net | | | (8,764 | ) | | | (5,516 | ) | | | 1,724 | |
TOTAL | | | 66,613 | | | | 85,006 | | | | 88,815 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 110,819 | | | | 123,439 | | | | 149,464 | |
Other interest - net | | | 7,424 | | | | 7,758 | | | | 13,945 | |
Allowance for borrowed funds used during construction | | | (3,427 | ) | | | (4,437 | ) | | | (7,528 | ) |
TOTAL | | | 114,816 | | | | 126,760 | | | | 155,881 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 242,232 | | | | 201,964 | | | | 316,480 | |
| | | | | | | | | | | | |
Income taxes | | | 89,185 | | | | 57,197 | | | | 123,701 | |
| | | | | | | | | | | | |
NET INCOME | | | 153,047 | | | | 144,767 | | | | 192,779 | |
| | | | | | | | | | | | |
Preferred distribution requirements and other | | | 825 | | | | 825 | | | | 3,968 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON EQUITY | | $ | 152,222 | | | $ | 143,942 | | | $ | 188,811 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 153,047 | | | $ | 144,767 | | | $ | 192,779 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Reserve for regulatory adjustments | | | - | | | | - | | | | 363 | |
Other regulatory charges (credits) - net | | | (1,261 | ) | | | (679 | ) | | | 29,923 | |
Depreciation, amortization, and decommissioning | | | 149,080 | | | | 149,139 | | | | 220,376 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 138,817 | | | | 47,846 | | | | 98,734 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 177,628 | | | | (8,661 | ) | | | (261,538 | ) |
Fuel inventory | | | 4,453 | | | | (1,941 | ) | | | (18,377 | ) |
Accounts payable | | | (131,603 | ) | | | (40,025 | ) | | | 38,685 | |
Taxes accrued | | | (418 | ) | | | 418 | | | | (27,781 | ) |
Interest accrued | | | (5,403 | ) | | | 714 | | | | 22,963 | |
Deferred fuel costs | | | (49,625 | ) | | | 97,620 | | | | 35,363 | |
Other working capital accounts | | | (116,816 | ) | | | (33,796 | ) | | | 197,802 | |
Provision for estimated losses and reserves | | | 773 | | | | 2,009 | | | | (91,241 | ) |
Changes in other regulatory assets | | | (44,612 | ) | | | 70,448 | | | | 116,317 | |
Changes in pension and other postretirement liabilities | | | 46,083 | | | | 85,880 | | | | (39,324 | ) |
Other | | | (85,213 | ) | | | 49,158 | | | | 45,696 | |
Net cash flow provided by operating activities | | | 234,930 | | | | 562,897 | | | | 560,740 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (199,283 | ) | | | (303,468 | ) | | | (334,933 | ) |
Allowance for equity funds used during construction | | | 5,426 | | | | 7,417 | | | | 11,666 | |
Insurance proceeds | | | 2,180 | | | | - | | | | 6,580 | |
Nuclear fuel purchases | | | (44,529 | ) | | | (55,001 | ) | | | (72,493 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | 72,843 | | | | 44,554 | | | | 54,362 | |
Payment for purchase of plant | | | (74,818 | ) | | | (56,409 | ) | | | - | |
Investment in affiliates | | | 160 | | | | (189,560 | ) | | | - | |
Payments to storm reserve escrow account | | | - | | | | (85,306 | ) | | | - | |
Receipts from storm reserve escrow account | | | - | | | | 85,254 | | | | - | |
Proceeds from nuclear decommissioning trust fund sales | | | 95,244 | | | | 65,125 | | | | 64,583 | |
Investment in nuclear decommissioning trust funds | | | (105,167 | ) | | | (79,369 | ) | | | (78,720 | ) |
Collections remitted to Texas transition charge account | | | - | | | | - | | | | (19,273 | ) |
Change in money pool receivable - net | | | (38,542 | ) | | | 43,920 | | | | (134,636 | ) |
Changes in other investments - net | | | - | | | | 3,934 | | | | (1,553 | ) |
Cash allocated to Entergy Texas in jurisdictional separation | | | - | | | | - | | | | (297,082 | ) |
Other | | | - | | | | (455 | ) | | | - | |
Net cash flow used in investing activities | | | (286,486 | ) | | | (519,364 | ) | | | (801,499 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 297,199 | | | | 369,493 | | | | 323,464 | |
Retirement of long-term debt | | | (118,961 | ) | | | (366,683 | ) | | | (5,530 | ) |
Proceeds from issuance of preferred membership interests | | | - | | | | - | | | | 9,993 | |
Redemption of preferred stock | | | - | | | | - | | | | (57,827 | ) |
Dividends/distributions paid: | | | | | | | | | | | | |
Common equity | | | (30,700 | ) | | | (104,200 | ) | | | (97,800 | ) |
Preferred membership interests | | | (825 | ) | | | (859 | ) | | | (3,886 | ) |
Other | | | - | | | | (17 | ) | | | - | |
Net cash flow provided by (used in) financing activities | | | 146,713 | | | | (102,266 | ) | | | 168,414 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 95,157 | | | | (58,733 | ) | | | (72,345 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 49,303 | | | | 108,036 | | | | 180,381 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 144,460 | | | $ | 49,303 | | | $ | 108,036 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 120,655 | | | $ | 127,152 | | | $ | 131,280 | |
Income taxes | | $ | 60,594 | | | $ | (1,759 | ) | | $ | (5,938 | ) |
| | | | | | | | | | | | |
Noncash financing activities: | | | | | | | | | | | | |
Repayment by Entergy Texas of assumed long-term debt | | $ | 602,229 | | | $ | 309,123 | | | $ | - | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 139 | | | $ | 22,671 | |
Temporary cash investments | | | 144,321 | | | | 26,632 | |
Total cash and cash equivalents | | | 144,460 | | | | 49,303 | |
Accounts receivable: | | | | | | | | |
Customer | | | 38,633 | | | | 69,264 | |
Allowance for doubtful accounts | | | (1,235 | ) | | | (1,230 | ) |
Associated companies | | | 102,807 | | | | 179,217 | |
Other | | | 22,425 | | | | 60,618 | |
Accrued unbilled revenues | | | 56,425 | | | | 50,272 | |
Total accounts receivable | | | 219,055 | | | | 358,141 | |
Accumulated deferred income taxes | | | - | | | | 50,039 | |
Fuel inventory - at average cost | | | 29,298 | | | | 33,751 | |
Materials and supplies - at average cost | | | 107,531 | | | | 104,579 | |
Deferred nuclear refueling outage costs | | | 26,722 | | | | 17,135 | |
Debt assumption by Entergy Texas | | | 167,742 | | | | 100,509 | |
Prepayments and other | | | 42,146 | | | | 6,381 | |
TOTAL | | | 736,954 | | | | 719,838 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliate preferred membership interests | | | 189,400 | | | | 189,560 | |
Decommissioning trust funds | | | 349,527 | | | | 303,178 | |
Non-utility property - at cost (less accumulated depreciation) | | | 146,190 | | | | 120,829 | |
Other | | | 11,342 | | | | 13,245 | |
TOTAL | | | 696,459 | | | | 626,812 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 6,855,075 | | | | 6,402,668 | |
Natural gas | | | 113,970 | | | | 106,125 | |
Construction work in progress | | | 84,161 | | | | 201,544 | |
Nuclear fuel under capital lease | | | 156,996 | | | | 140,689 | |
Nuclear fuel | | | 6,005 | | | | 11,177 | |
TOTAL UTILITY PLANT | | | 7,216,207 | | | | 6,862,203 | |
Less - accumulated depreciation and amortization | | | 3,714,199 | | | | 3,560,458 | |
UTILITY PLANT - NET | | | 3,502,008 | | | | 3,301,745 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 288,313 | | | | 316,421 | |
Other regulatory assets | | | 299,793 | | | | 287,912 | |
Deferred fuel costs | | | 100,124 | | | | 100,124 | |
Long-term receivables | | | 967 | | | | 21,558 | |
Debt assumption by Entergy Texas | | | - | | | | 669,462 | |
Other | | | 11,564 | | | | 13,089 | |
TOTAL | | | 700,761 | | | | 1,408,566 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 5,636,182 | | | $ | 6,056,961 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
BALANCE SHEETS | |
LIABILITIES AND MEMBERS' EQUITY | |
| | | | | | | | |
| | December 31, | |
| | | 2009 | | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
| | | | | | | | |
Currently maturing long-term debt | | $ | 11,975 | | | $ | 219,470 | |
Accounts payable: | | | | | | | | |
Associated companies | | | 52,622 | | | | 155,147 | |
Other | | | 91,604 | | | | 162,319 | |
Customer deposits | | | 45,645 | | | | 40,484 | |
Taxes accrued | | | - | | | | 418 | |
Accumulated deferred income taxes | | | 12,219 | | | | - | |
Interest accrued | | | 24,709 | | | | 30,112 | |
Deferred fuel costs | | | 42,351 | | | | 91,976 | |
Obligations under capital leases | | | 30,387 | | | | 24,368 | |
Pension and other postretirement liabilities | | | 8,021 | | | | 7,479 | |
Gas hedge contracts | | | 263 | | | | 20,184 | |
System agreement cost equalization | | | 10,000 | | | | 67,000 | |
Other | | | 8,790 | | | | 9,220 | |
TOTAL | | | 338,586 | | | | 828,177 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 1,345,984 | | | | 1,308,449 | |
Accumulated deferred investment tax credits | | | 88,246 | | | | 91,634 | |
Obligations under capital leases | | | 126,226 | | | | 116,321 | |
Other regulatory liabilities | | | 47,423 | | | | 22,007 | |
Decommissioning and asset retirement cost liabilities | | | 321,158 | | | | 222,909 | |
Accumulated provisions | | | 14,669 | | | | 13,896 | |
Pension and other postretirement liabilities | | | 234,473 | | | | 188,390 | |
Long-term debt | | | 1,614,366 | | | | 1,827,859 | |
Long-term payables - associated companies | | | 34,340 | | | | 88,031 | |
Other | | | 28,952 | | | | 17,145 | |
TOTAL | | | 3,855,837 | | | | 3,896,641 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
MEMBERS' EQUITY | | | | | | | | |
Preferred membership interests without sinking fund | | | 10,000 | | | | 10,000 | |
Members' equity | | | 1,473,930 | | | | 1,352,408 | |
Accumulated other comprehensive loss | | | (42,171 | ) | | | (30,265 | ) |
TOTAL | | | 1,441,759 | | | | 1,332,143 | |
| | | | | | | | |
TOTAL LIABILITIES AND MEMBERS' EQUITY | | $ | 5,636,182 | | | $ | 6,056,961 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | |
| |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 2,015,710 | | | $ | 1,776,610 | | | $ | 2,632,952 | |
Natural gas | | | 81,311 | | | | 67,776 | | | | 100,413 | |
TOTAL | | | 2,097,021 | | | | 1,844,386 | | | | 2,733,365 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 312,960 | | | | 251,393 | | | | 474,314 | |
Purchased power | | | 851,694 | | | | 732,943 | | | | 1,425,936 | |
Nuclear refueling outage expenses | | | 24,046 | | | | 21,787 | | | | 25,705 | |
Other operation and maintenance | | | 361,329 | | | | 332,450 | | | | 337,794 | |
Decommissioning | | | 13,400 | | | | 13,591 | | | | 12,533 | |
Taxes other than income taxes | | | 77,519 | | | | 67,559 | | | | 77,438 | |
Depreciation and amortization | | | 132,714 | | | | 135,489 | | | | 136,606 | |
Other regulatory credits - net | | | (1,248 | ) | | | (1,261 | ) | | | (679 | ) |
TOTAL | | | 1,772,414 | | | | 1,553,951 | | | | 2,489,647 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 324,607 | | | | 290,435 | | | | 243,718 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 5,513 | | | | 5,426 | | | | 7,417 | |
Interest and investment income | | | 42,293 | | | | 69,951 | | | | 83,105 | |
Miscellaneous - net | | | (8,016 | ) | | | (8,764 | ) | | | (5,516 | ) |
TOTAL | | | 39,790 | | | | 66,613 | | | | 85,006 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 101,318 | | | | 118,243 | | | | 131,197 | |
Allowance for borrowed funds used during construction | | | (3,537 | ) | | | (3,427 | ) | | | (4,437 | ) |
TOTAL | | | 97,781 | | | | 114,816 | | | | 126,760 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 266,616 | | | | 242,232 | | | | 201,964 | |
| | | | | | | | | | | | |
Income taxes | | | 75,878 | | | | 89,185 | | | | 57,197 | |
| | | | | | | | | | | | |
NET INCOME | | | 190,738 | | | | 153,047 | | | | 144,767 | |
| | | | | | | | | | | | |
Preferred distribution requirements and other | | | 827 | | | | 825 | | | | 825 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON EQUITY | | $ | 189,911 | | | $ | 152,222 | | | $ | 143,942 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 190,738 | | | $ | 153,047 | | | $ | 144,767 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 194,265 | | | | 149,080 | | | | 149,139 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 87,920 | | | | 138,817 | | | | 47,846 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (30,732 | ) | | | 177,628 | | | | (8,661 | ) |
Fuel inventory | | | 3,471 | | | | 4,453 | | | | (1,941 | ) |
Accounts payable | | | 80,874 | | | | (131,603 | ) | | | (40,025 | ) |
Prepaid taxes and taxes accrued | | | (8,176 | ) | | | (418 | ) | | | 418 | |
Interest accrued | | | 537 | | | | (5,403 | ) | | | 714 | |
Deferred fuel costs | | | (20,050 | ) | | | (49,625 | ) | | | 97,620 | |
Other working capital accounts | | | 13,068 | | | | (116,816 | ) | | | (33,796 | ) |
Changes in provisions for estimated losses | | | 83,011 | | | | 773 | | | | 2,009 | |
Changes in other regulatory assets | | | 114,528 | | | | (44,612 | ) | | | 70,448 | |
Changes in pension and other postretirement liabilities | | | (14,041 | ) | | | 46,083 | | | | 85,880 | |
Other | | | 30,717 | | | | (86,474 | ) | | | 48,479 | |
Net cash flow provided by operating activities | | | 726,130 | | | | 234,930 | | | | 562,897 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (237,251 | ) | | | (199,283 | ) | | | (303,468 | ) |
Allowance for equity funds used during construction | | | 5,513 | | | | 5,426 | | | | 7,417 | |
Insurance proceeds | | | 2,243 | | | | 2,180 | | | | - | |
Nuclear fuel purchases | | | (47,785 | ) | | | (44,529 | ) | | | (55,001 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | - | | | | 72,843 | | | | 44,554 | |
Payment for purchase of plant | | | - | | | | (74,818 | ) | | | (56,409 | ) |
Investment in affiliates | | | (150,264 | ) | | | 160 | | | | (189,560 | ) |
Payments to storm reserve escrow account | | | (90,073 | ) | | | - | | | | (85,306 | ) |
Receipts from storm reserve escrow account | | | - | | | | - | | | | 85,254 | |
Proceeds from nuclear decommissioning trust fund sales | | | 100,825 | | | | 95,244 | | | | 65,125 | |
Investment in nuclear decommissioning trust funds | | | (115,055 | ) | | | (105,167 | ) | | | (79,369 | ) |
Change in money pool receivable - net | | | (12,872 | ) | | | (38,542 | ) | | | 43,920 | |
Changes in other investments - net | | | 3,136 | | | | - | | | | 3,934 | |
Other | | | - | | | | - | | | | (455 | ) |
Net cash flow used in investing activities | | | (541,583 | ) | | | (286,486 | ) | | | (519,364 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 306,234 | | | | 297,199 | | | | 369,493 | |
Retirement of long-term debt | | | (344,841 | ) | | | (118,961 | ) | | | (366,683 | ) |
Changes in credit borrowings - net | | | (10,100 | ) | | | - | | | | - | |
Dividends/distributions paid: | | | | | | | | | | | | |
Common equity | | | (124,300 | ) | | | (30,700 | ) | | | (104,200 | ) |
Preferred membership interests | | | (827 | ) | | | (825 | ) | | | (859 | ) |
Other | | | - | | | | - | | | | (17 | ) |
Net cash flow provided by (used in) financing activities | | | (173,834 | ) | | | 146,713 | | | | (102,266 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 10,713 | | | | 95,157 | | | | (58,733 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 144,460 | | | | 49,303 | | | | 108,036 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 155,173 | | | $ | 144,460 | | | $ | 49,303 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 97,803 | | | $ | 120,655 | | | $ | 127,152 | |
Income taxes | | $ | (16,803 | ) | | $ | 60,594 | | | $ | (1,759 | ) |
| | | | | | | | | | | | |
Noncash financing activities: | | | | | | | | | | | | |
Repayment by Entergy Texas of assumed long-term debt | | $ | 167,742 | | | $ | 602,229 | | | $ | 309,123 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
STATEMENTS OF MEMBERS' EQUITY AND COMPREHENSIVE INCOME | |
| | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
MEMBERS' EQUITY | | | | | | | | | | | | | | | | | | |
Members' Equity - Beginning of period | | $ | 1,352,408 | | | | | | $ | 1,312,701 | | | | | | $ | 2,225,465 | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | |
Net Income | | | 153,047 | | | $ | 153,047 | | | | 144,767 | | | $ | 144,767 | | | | 192,779 | | | $ | 192,779 | |
Other | | | - | | | | | | | | - | | | | | | | | 479 | | | | | |
Total | | | 153,047 | | | | | | | | 144,767 | | | | | | | | 193,258 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends/distributions declared: | | | | | | | | | | | | | | | | | | | | | | | | |
Common equity | | | 30,700 | | | | | | | | 104,200 | | | | | | | | 97,800 | | | | | |
Preferred membership interests | | | 825 | | | | 825 | | | | 825 | | | | 825 | | | | 3,968 | | | | 3,968 | |
Entergy Texas, Inc. paid-in capital | | | - | | | | | | | | - | | | | | | | | 631,994 | | | | | |
Entergy Texas, Inc. shareholders' equity | | | - | | | | | | | | - | | | | | | | | 49,452 | | | | | |
Entergy Texas, Inc. retained earnings | | | - | | | | | | | | - | | | | | | | | 322,808 | | | | | |
Other | | | - | | | | | | | | 35 | | | | | | | | - | | | | | |
Total | | | 31,525 | | | | | | | | 105,060 | | | | | | | | 1,106,022 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Members' Equity - End of period | | $ | 1,473,930 | | | | | | | $ | 1,352,408 | | | | | | | $ | 1,312,701 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
ACCUMULATED OTHER COMPREHENSIVE | | | | | | | | | | | | | | | | | | | | | | | | |
LOSS (Net of Taxes): | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period: | | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities | | $ | (30,265 | ) | | | | | | $ | (22,934 | ) | | | | | | $ | (19,914 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax expense (benefit) | | |
of ($13,111), ($3,068) and $4,550) | | | (11,906 | ) | | | (11,906 | ) | | | (7,331 | ) | | | (7,331 | ) | | | (3,020 | ) | | | (3,020 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at end of period: | | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities | | $ | (42,171 | ) | | | | | | $ | (30,265 | ) | | | | | | $ | (22,934 | ) | | | | |
Comprehensive Income | | | | | | $ | 140,316 | | | | | | | $ | 136,611 | | | | | | | $ | 185,791 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 231 | | | $ | 139 | |
Temporary cash investments | | | 154,942 | | | | 144,321 | |
Total cash and cash equivalents | | | 155,173 | | | | 144,460 | |
Accounts receivable: | | | | | | | | |
Customer | | | 60,369 | | | | 38,633 | |
Allowance for doubtful accounts | | | (1,306 | ) | | | (1,235 | ) |
Associated companies | | | 119,252 | | | | 102,807 | |
Other | | | 27,728 | | | | 22,425 | |
Accrued unbilled revenues | | | 56,616 | | | | 56,425 | |
Total accounts receivable | | | 262,659 | | | | 219,055 | |
Fuel inventory - at average cost | | | 25,827 | | | | 29,298 | |
Materials and supplies - at average cost | | | 113,302 | | | | 107,531 | |
Deferred nuclear refueling outage costs | | | 7,372 | | | | 26,722 | |
Debt assumption by Entergy Texas | | | - | | | | 167,742 | |
Prepaid taxes | | | 40,946 | | | | 32,770 | |
Prepayments and other | | | 5,127 | | | | 9,376 | |
TOTAL | | | 610,406 | | | | 736,954 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliate preferred membership interests | | | 339,664 | | | | 189,400 | |
Decommissioning trust funds | | | 393,580 | | | | 349,527 | |
Non-utility property - at cost (less accumulated depreciation) | | | 156,845 | | | | 146,190 | |
Storm reserve escrow account | | | 90,125 | | | | 52 | |
Other | | | 12,011 | | | | 11,290 | |
TOTAL | | | 992,225 | | | | 696,459 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 6,907,268 | | | | 6,855,075 | |
Natural gas | | | 124,020 | | | | 113,970 | |
Construction work in progress | | | 119,017 | | | | 84,161 | |
Nuclear fuel under capital lease | | | - | | | | 156,996 | |
Nuclear fuel | | | 202,609 | | | | 6,005 | |
TOTAL UTILITY PLANT | | | 7,352,914 | | | | 7,216,207 | |
Less - accumulated depreciation and amortization | | | 3,812,394 | | | | 3,714,199 | |
UTILITY PLANT - NET | | | 3,540,520 | | | | 3,502,008 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 234,406 | | | | 221,214 | |
Other regulatory assets | | | 270,883 | | | | 299,793 | |
Deferred fuel costs | | | 100,124 | | | | 100,124 | |
Other | | | 14,832 | | | | 12,531 | |
TOTAL | | | 620,245 | | | | 633,662 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 5,763,396 | | | $ | 5,569,083 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | - | | | $ | 11,975 | |
Accounts payable: | | | | | | | | |
Associated companies | | | 71,601 | | | | 52,622 | |
Other | | | 160,246 | | | | 91,604 | |
Customer deposits | | | 48,631 | | | | 45,645 | |
Accumulated deferred income taxes | | | 1,749 | | | | 12,219 | |
Interest accrued | | | 27,261 | | | | 24,709 | |
Deferred fuel costs | | | 22,301 | | | | 42,351 | |
Obligations under capital leases | | | - | | | | 30,387 | |
Pension and other postretirement liabilities | | | 7,415 | | | | 8,021 | |
System agreement cost equalization | | | - | | | | 10,000 | |
Other | | | 15,049 | | | | 9,053 | |
TOTAL | | | 354,253 | | | | 338,586 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 1,405,374 | | | | 1,278,885 | |
Accumulated deferred investment tax credits | | | 84,858 | | | | 88,246 | |
Obligations under capital leases | | | - | | | | 126,226 | |
Other regulatory liabilities | | | 83,479 | | | | 47,423 | |
Decommissioning and asset retirement cost liabilities | | | 339,925 | | | | 321,158 | |
Accumulated provisions | | | 97,680 | | | | 14,669 | |
Pension and other postretirement liabilities | | | 220,432 | | | | 234,473 | |
Long-term debt | | | 1,584,332 | | | | 1,614,366 | |
Long-term payables - associated companies | | | 32,596 | | | | 34,340 | |
Other | | | 51,254 | | | | 28,952 | |
TOTAL | | | 3,899,930 | | | | 3,788,738 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
EQUITY | | | | | | | | |
Preferred membership interests without sinking fund | | | 10,000 | | | | 10,000 | |
Member's equity | | | 1,539,517 | | | | 1,473,930 | |
Accumulated other comprehensive loss | | | (40,304 | ) | | | (42,171 | ) |
TOTAL | | | 1,509,213 | | | | 1,441,759 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 5,763,396 | | | $ | 5,569,083 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues (2) | | $ | 1,844,386 | | | $ | 2,733,365 | | | $ | 3,534,612 | | | $ | 3,679,573 | | | $ | 3,367,171 | |
Net Income (2) | | $ | 153,047 | | | $ | 144,767 | | | $ | 192,779 | | | $ | 211,988 | | | $ | 206,497 | |
Total assets (3) | | $ | 5,636,182 | | | $ | 6,056,961 | | | $ | 6,072,691 | | | $ | 7,786,677 | | | $ | 7,809,497 | |
Long-term obligations (1), (3) | | $ | 1,740,592 | | | $ | 1,944,180 | | | $ | 1,756,087 | | | $ | 2,417,480 | | | $ | 2,392,804 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | | | 2005 | |
| | (Dollars In Millions) | |
Electric Operating Revenues (2): | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 393 | | | $ | 554 | | | $ | 1,042 | | | $ | 1,122 | | | $ | 960 | |
Commercial | | | 354 | | | | 520 | | | | 817 | | | | 883 | | | | 734 | |
Industrial | | | 383 | | | | 672 | | | | 1,035 | | | | 1,150 | | | | 1,014 | |
Governmental | | | 18 | | | | 25 | | | | 45 | | | | 49 | | | | 41 | |
Total retail | | | 1,148 | | | | 1,771 | | | | 2,939 | | | | 3,204 | | | | 2,749 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 475 | | | | 643 | | | | 233 | | | | 145 | | | | 186 | |
Non-associated companies | | | 105 | | | | 181 | | | | 196 | | | | 199 | | | | 188 | |
Other | | | 49 | | | | 38 | | | | 80 | | | | 47 | | | | 167 | |
Total | | $ | 1,777 | | | $ | 2,633 | | | $ | 3,448 | | | $ | 3,595 | | | $ | 3,290 | |
Billed Electric Energy Sales (GWh) (2): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 5,090 | | | | 4,888 | | | | 10,215 | | | | 10,110 | | | | 10,024 | |
Commercial | | | 5,058 | | | | 4,973 | | | | 8,980 | | | | 8,838 | | | | 8,486 | |
Industrial | | | 7,601 | | | | 8,416 | | | | 15,012 | | | | 15,065 | | | | 14,967 | |
Governmental | | | 213 | | | | 215 | | | | 448 | | | | 454 | | | | 441 | |
Total retail | | | 17,962 | | | | 18,492 | | | | 34,655 | | | | 34,467 | | | | 33,918 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 7,084 | | | | 6,490 | | | | 2,488 | | | | 3,259 | | | | 3,213 | |
Non-associated companies | | | 2,546 | | | | 2,524 | | | | 2,900 | | | | 2,896 | | | | 2,804 | |
Total | | | 27,592 | | | | 27,506 | | | | 40,043 | | | | 40,622 | | | | 39,935 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
(2) Entergy Gulf States Louisiana's income statements for the years ended December 31, 2008 and 2009 reflect the effects of the separation of the Texas business. Entergy Gulf States Louisiana's income statements for the years ended December 31, 2005, 2006, and 2007 include the operations of Entergy Texas. | |
(3) Entergy Gulf States Louisiana's balance sheets as of December 31, 2009, 2008, and 2007 reflect the effects of the separation of the Texas business. Entergy Gulf States Louisiana's balance sheets as of December 31, 2005 and 2006 include the operations of Entergy Texas. | |
| | | | | | | | | | | | | | | | | | | | |
| |
STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | |
| | | | | Common Equity | | | | |
| | Preferred Membership Interests | | | Member's Equity | | | Accumulated Other Comprehensive Income (Loss) | | | Total | |
| | (In Thousands) | |
| | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 10,000 | | | $ | 1,312,701 | | | $ | (22,934 | ) | | $ | 1,299,767 | |
Net income | | | - | | | | 144,767 | | | | - | | | | 144,767 | |
Other comprehensive income: | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax benefit of $3,068) | | | - | | | | - | | | | (7,331 | ) | | | (7,331 | ) |
Total comprehensive income | | | | | | | | | | | | | | | 137,436 | |
Dividends/distributions declared on common equity | | | - | | | | (104,200 | ) | | | - | | | | (104,200 | ) |
Dividends/distributions declared on preferred membership interests | | | - | | | | (825 | ) | | | - | | | | (825 | ) |
Other | | | - | | | | (35 | ) | | | - | | | | (35 | ) |
Balance at December 31, 2008 | | $ | 10,000 | | | $ | 1,352,408 | | | $ | (30,265 | ) | | $ | 1,332,143 | |
Net income | | | - | | | | 153,047 | | | | - | | | | 153,047 | |
Other comprehensive income: | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax benefit of $13,111) | | | - | | | | - | | | | (11,906 | ) | | | (11,906 | ) |
Total comprehensive income | | | | | | | | | | | | | | | 141,141 | |
Dividends/distributions declared on common equity | | | - | | | | (30,700 | ) | | | - | | | | (30,700 | ) |
Dividends/distributions declared on preferred membership interests | | | - | | | | (825 | ) | | | - | | | | (825 | ) |
Balance at December 31, 2009 | | $ | 10,000 | | | $ | 1,473,930 | | | $ | (42,171 | ) | | $ | 1,441,759 | |
Net income | | | - | | | | 190,738 | | | | - | | | | 190,738 | |
Other comprehensive income: | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax benefit of $340) | | | - | | | | - | | | | 1,867 | | | | 1,867 | |
Total comprehensive income | | | | | | | | | | | | | | | 192,605 | |
Dividends/distributions declared on common equity | | | - | | | | (124,300 | ) | | | - | | | | (124,300 | ) |
Dividends/distributions declared on preferred membership interests | | | - | | | | (827 | ) | | | - | | | | (827 | ) |
Other | | | - | | | | (24 | ) | | | - | | | | (24 | ) |
Balance at December 31, 2010 | | $ | 10,000 | | | $ | 1,539,517 | | | $ | (40,304 | ) | | $ | 1,509,213 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues (2) | | $ | 2,097,021 | | | $ | 1,844,386 | | | $ | 2,733,365 | | | $ | 3,534,612 | | | $ | 3,679,573 | |
Net Income (2) | | $ | 190,738 | | | $ | 153,047 | | | $ | 144,767 | | | $ | 192,779 | | | $ | 211,988 | |
Total assets (3) | | $ | 5,763,396 | | | $ | 5,569,083 | | | $ | 6,056,961 | | | $ | 6,072,691 | | | $ | 7,786,677 | |
Long-term obligations (1), (3) | | $ | 1,584,332 | | | $ | 1,740,592 | | | $ | 1,944,180 | | | $ | 1,756,087 | | | $ | 2,417,480 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Electric Operating Revenues (2): | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 498 | | | $ | 393 | | | $ | 554 | | | $ | 1,042 | | | $ | 1,122 | |
Commercial | | | 426 | | | | 354 | | | | 520 | | | | 817 | | | | 883 | |
Industrial | | | 489 | | | | 383 | | | | 672 | | | | 1,035 | | | | 1,150 | |
Governmental | | | 21 | | | | 18 | | | | 25 | | | | 45 | | | | 49 | |
Total retail | | | 1,434 | | | | 1,148 | | | | 1,771 | | | | 2,939 | | | | 3,204 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 463 | | | | 475 | | | | 643 | | | | 233 | | | | 145 | |
Non-associated companies | | | 79 | | | | 105 | | | | 181 | | | | 196 | | | | 199 | |
Other | | | 40 | | | | 49 | | | | 38 | | | | 80 | | | | 47 | |
Total | | $ | 2,016 | | | $ | 1,777 | | | $ | 2,633 | | | $ | 3,448 | | | $ | 3,595 | |
Billed Electric Energy Sales (GWh) (2): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 5,538 | | | | 5,090 | | | | 4,888 | | | | 10,215 | | | | 10,110 | |
Commercial | | | 5,274 | | | | 5,058 | | | | 4,973 | | | | 8,980 | | | | 8,838 | |
Industrial | | | 8,801 | | | | 7,601 | | | | 8,416 | | | | 15,012 | | | | 15,065 | |
Governmental | | | 210 | | | | 213 | | | | 215 | | | | 448 | | | | 454 | |
Total retail | | | 19,823 | | | | 17,962 | | | | 18,492 | | | | 34,655 | | | | 34,467 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 8,516 | | | | 7,084 | | | | 6,490 | | | | 2,488 | | | | 3,259 | |
Non-associated companies | | | 1,705 | | | | 2,546 | | | | 2,524 | | | | 2,900 | | | | 2,896 | |
Total | | | 30,044 | | | | 27,592 | | | | 27,506 | | | | 40,043 | | | | 40,622 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, and in 2006 preferred stock with sinking fund. | |
(2) Entergy Gulf States Louisiana's income statements for the years ended December 31, 2008, 2009, and 2010 reflect the effects of the separation of the Texas business. Entergy Gulf States Louisiana's income statements for the years ended December 31, 2006 and 2007 include the operations of Entergy Texas. | |
(3) Entergy Gulf States Louisiana's balance sheets as of December 31, 2010, 2009, 2008, and 2007 reflect the effects of the separation of the Texas business. Entergy Gulf States Louisiana's balance sheets as of December 31, 2006 include the operations of Entergy Texas. | |
| | | | | | | | | | | | | | | | | | | | |
Net Income
2010 Compared to 2009
Net income decreased slightly by $1.4 million primarily due to higher other operation and maintenance expenses, a higher effective income tax rate, and higher interest expense, almost entirely offset by higher net revenue.
2009 Compared to 2008
Net income increased $75.3 million primarily due to a lower effective income tax rate, higher other income, higher net revenue, and lower other operation and maintenance expenses, partially offset by higher depreciation and amortization expenses.
2008Net Revenue
2010 Compared to 20072009
Net income increased $14.2 millionrevenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $980.0 |
Volume/weather | | 52.9 |
Retail electric price | | 17.5 |
Other | | (6.7) |
2010 net revenue | | $1,043.7 |
The volume/weather variance is primarily due to lower other operationan increase of 2,253 GWh, or 8%, in billed electricity usage. Usage in the industrial sector increased primarily as a result of increased consumption by a large customer in the petroleum refining industry, as well as increases in the chemical industry. The effect of more favorable weather was the primary driver of the increase in the residential and maintenancecommercial sales.
The retail electric price variance is primarily due to a net increase in the formula rate plan effective November 2009 which allowed Entergy Louisiana to reset its rates to achieve a 10.25% return on equity for the 2008 test year. See Note 2 to the financial statements for further discussion of settlement and the formula rate plan reset.
Gross operating revenues and fuel and purchased power expenses higher other income, and a lower effective income tax rate, offset by lower net revenue and higher depreciation and amortization expenses.
Gross operating revenues increased primarily due to:
Net Revenue· | an increase of $200.7 million in fuel cost recovery revenues due to higher fuel rates and increased usage; |
· | an increase of $114.9 million in rider revenues primarily due to lower System Agreement credits in 2010; and |
· | the increase related to volume/weather, as discussed above. |
Entergy Louisiana, LLC
Management’s Financial Discussion and Analysis
Fuel and purchased power expenses increased primarily due to an increase in the average market price of purchased power, an increase in demand, and an increase in the recovery from customers of deferred fuel costs, partially offset by a decrease in the average market price of natural gas.
2009 Compared to 2008
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $959.2 |
Volume/weather | | 36.7 |
Retail electric price | | (19.2) |
Other | | 3.3 |
2009 net revenue | | $980.0 |
The volume/weather variance is primarily due to an increase of 504 GWh in billed electricity usage in all sectors, an increase in unbilled sales volume, including the effect of Hurricane Gustav and Hurricane Ike which decreased sales volume in 2008, and the effect of more favorable weather.
The retail electric price variance is primarily due to:
| · | a credit passed on to customers as a result of the Act 55 storm cost financing; |
| · | a net decrease in the formula rate plan effective August 2008 to remove interim storm cost recovery upon the Act 55 financing of storm costs as well as the storm damage accrual. A portion of the decrease is offset in other operation and maintenance expenses. See Note 2 to the financial statements for further discussion of the formula rate plan; and |
| · | a formula rate plan provision of $12.9 million recorded in the third quarter 2009 for refunds made to customers in November 2009 in accordance with a settlement approved by the LPSC. See Note 2 to the financial statements for further discussion of the settlement. |
The decrease was offset by an interruptible load provision of $13.4 million recorded in 2008 for rate refunds that occurred in August and September 2009 and formula rate plan increases effective November 2009.
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
Refer to "“MANAGEMENT'SMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Rita and Hurricane Katrina"” and Note 2 to the financial statements for a discussion of the interim recovery of storm costs and the Act 55 storm cost financing.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
Gross operating revenues decreased primarily due to a decrease of $763.4 million in fuel cost recovery revenues due to lower fuel rates and a decrease of $108.1 million in rider revenues. The decrease was partially offset by an increase of $36.7 million related to volume/weather, as discussed above.
Fuel and purchased power expenses decreased primarily due to decreases in the average market prices of natural gas and purchased power and a decrease in the recovery from customers of deferred fuel costs.
Other regulatory charges decreased primarily due to the amortization of deferred capacity charges, which ceased in August 2009, as a result of the May 2006 formula rate plan filing with the LPSC, the recognition of interim storm cost recoveries that ceased in July 2008 with the Act 55 financing of storm costs, and the refunds of Hurricane Katrina and Hurricane Rita insurance proceeds occurring over a twelve-month period. See Note 2 to the financial statements for a discussion of the formula rate plan, the interim recovery of storm costs, and the Act 55 storm cost financing.
2008 Compared to 2007
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2008 to 2007.
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $991.1 |
Retail electric price | | (17.1) |
Purchased power capacity | | (12.0) |
Net wholesale revenue | | (7.4) |
Other | | 4.6 |
2008 net revenue | | $959.2 |
The retail electric price variance is primarily due to the cessation of the interim storm recovery through the formula rate plan upon the Act 55 financing of storm costs and a credit passed on to customers as a result of the Act 55 storm cost financing, partially offset by increases in the formula rate plan effective October 2007. Refer to "Hurricane Rita and Hurricane Katrina" and "State and Local Rate Regulation" below for a discussion of the interim recovery of storm costs, the Act 55 storm cost financing, and the formula rate plan filing.
The purchased power capacity variance is due to the amortization of deferred capacity costs effective September 2007 as a result of the formula rate plan filing in May 2007. Purchased power capacity costs are offset in base revenues due to a base rate increase implemented to recover incremental deferred and ongoing purchased power capacity charges. See "State and Local Rate Regulation" below for a discussion of the formula rate plan filing.
The net wholesale revenue variance is primarily due to provisions recorded for potential rate refunds related to the treatment of interruptible load in pricing Entergy System affiliate sales.
Entergy Louisiana, LLC
Management'sManagement’s Financial Discussion and Analysis
Gross operating revenues and fuel and purchased power expensesOther Income Statement Variances
Gross operating revenues2010 Compared to 2009
Other operation and maintenance expenses increased primarily due to:
· | an increase of $16.2 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See Note 11 to the financial statements for further discussion of benefits costs; |
· | an increase of $6.4 million in fossil expenses due to higher outage expenses compared to prior year; and |
· | an increase of $5.9 million in nuclear expenses due to higher nuclear labor costs. |
Interest expense increased primarily due to an increasethe issuance of $364.7$400 million of 5.40% Series first mortgage bonds in fuel cost recovery revenues due to higher fuel rates offset by decreased usage. The increase was partially offset by a decrease of $56.8 million in gross wholesale revenue due to a decrease in System Agreement rough production cost equalization credits.
Fuel and purchased power expenses increased primarily due to increases in the average market prices of natural gas and purchased power, partially offset by a decrease in the recovery from customers of deferred fuel costs.
Other Income Statement VariancesNovember 2009.
2009 Compared to 2008
Other operation and maintenance expenses decreased primarily due to a decrease of $6.5 million in payroll-related costs and a decrease of $6.4 million in loss reserves in 2009, including a decrease in the storm damage reserve. The decrease was partially offset by an increase of $9.0 million in nuclear expenses due to higher nuclear labor and contract costs.
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Other income increased primarily due to:
· | an increase of $25 million in distributions earned on preferred membership interests purchased from Entergy Holdings Company with the proceeds received from the Act 55 storm cost financing. See "“MANAGEMENT'SMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Rita and Hurricane Katrina"” and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing; and |
· | an increase in the allowance for equity funds used during construction due to more construction work in progress throughout 2009. |
Interest and other charges increased slightly primarily due to the issuance of $300 million of 6.50% Series first mortgage bonds in August 2008 and the issuance of $400 million of 5.40% Series first mortgage bonds in November 2009, substantially offset by an increase in the allowance for borrowed funds used during construction due to more construction work in progress in 2009.
2008 Compared to 2007
Other operation and maintenance expenses decreased primarily due to:
· | a decrease of $9.3 million in nuclear spending due to a prior year non-refueling outage; |
· | a decrease of $8.6 million in payroll-related costs; |
· | a decrease of $8.1 million in loss reserves for storm damage in 2008 because of completion of the Act 55 storm cost financing; and |
· | a decrease of $5.7 million in customer service costs primarily as a result of write-offs in 2007 of uncollectible customer accounts. |
The decrease was partially offset by an increase of $4.5 million in transmission spending due to additional costs related to compliance, substation maintenance, and line and vegetation maintenance and an increase of $4.3 million in fossil expenses due to a fossil plant maintenance outage in 2008.
Depreciation and amortization expenses increased primarily due to:
· | a revision in the third quarter 2007 related to depreciation on storm cost-related assets. Recovery of the cost of those assets will now be through the Act 55 financing of storm costs as approved by the LPSC in the third quarter 2007. See "Hurricane Rita and Hurricane Katrina" below for a discussion of the Act 55 storm cost financing;
|
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
· | a revision in the fourth quarter 2008 of estimated depreciable lives involving certain intangible assets in accordance with formula rate plan treatment; and |
· | an increase in plant in service. |
Other income increased primarily due to:
· | distributions of $29.5 million earned on preferred stock purchased from Entergy Holdings Company with the proceeds received from the Act 55 Storm Cost Financings; |
· | interest earned on the deferred fuel balance; |
· | carrying charges on storm restoration costs approved by the LPSC; and |
· | an increase in the allowance for equity funds used during construction due to more construction work in progress in 2008. |
See "Hurricane Rita and Hurricane Katrina" below for a discussion of the Act 55 storm cost financing.
Income Taxes
The effective income tax rates for 2010, 2009, and 2008 and 2007 were 22.3%, 16.2%, 31.0%, and 36.8%31.0%, respectively. The decline in the rate for 2009 is primarily due to the reallocation of Entergy Corporation consolidated tax benefits based on the partial settlement of IRS audits of prior tax years, the exclusion of dividend income from Entergy Louisiana'sLouisiana’s preferred membership interest in Entergy Holdings Company, LLC, and the flow-through of the equity component of AFUDC. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rate and for a discussion of the IRS audits.
Entergy Louisiana, LLC
Management’s Financial Discussion and Analysis
Cash Flow
Cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | 2009 | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $138,918 | | $300 | | $2,743 | Cash and cash equivalents at beginning of period | | $151,849 | | $138,918 | | $300 |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 87,879 | | 1,082,592 | | 353,438 | Operating activities | | 932,334 | | 87,879 | | 1,082,592 |
| Investing activities | | (436,251) | | (1,170,994) | | (297,460) | Investing activities | | (861,329) | | (436,251) | | (1,170,994) |
| Financing activities | | 361,303 | | 227,020 | | (58,421) | Financing activities | | (99,600) | | 361,303 | | 227,020 |
| Net increase (decrease) in cash and cash equivalents | | 12,931 | | 138,618 | | (2,443) | Net increase (decrease) in cash and cash equivalents | | (28,595) | | 12,931 | | 138,618 |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $151,849 | | $138,918 | | $300 | Cash and cash equivalents at end of period | | $123,254 | | $151,849 | | $138,918 |
Operating Activities
Cash flow provided by operating activities increased $844.5 million in 2010 primarily due to proceeds of $462.4 million received from the LURC as a result of the Act 55 storm cost financings, the absence in 2010 of the storm restoration spending that occurred in 2009, a decrease of $195.3 million in income tax payments, and increased recovery of fuel costs due to a higher fuel rate for the period, offset by an increase of $58.5 million in pension contributions. See “Hurricane Gustav and Hurricane Ike” below and Note 2 to the financial statements herein for a discussion of the storm cost financings. See “MANAGEMENT’S FINANCIAL DISC USSION AND ANALYSIS – Critical Accounting Estimates” below for a discussion of qualified pension and other postretirement benefits. In 2010, Entergy Louisiana made tax payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments result from the reversal of temporary differences for which Entergy Louisiana previously received cash tax benefits and from estimated federal income tax payments for tax year 2010.
Cash flow provided by operating activities decreased $994.7 million in 2009 primarily due to storm cost proceeds of $679 million received in 2008 from the LURC as a result of the Act 55 storm cost financing and income tax payments of $223.6 million in 2009 compared to income tax refunds of $12.7 million in 2008. See Note 3 to the financial statements for a discussion of the tax payments in 2009.
Investing Activities
CashNet cash flow provided by operatingused in investing activities increased $729.2$425.1 million in 2008 compared to 20072010 primarily due to the investment in 2010 of $262.4 million in affiliate securities and the investment of $200 million in the storm cost proceeds of $679 million received from the LURCreserve escrow account as a result of the Act 55 storm cost financingfinancings, partially offset by decreased construction expenditures as a result of higher distribution construction expenditures in 2009 due to Hurricane Gustav and income tax refundsdecreased fossil construction expenditures due to the suspension of $12.7 millionthe Little Gypsy repowering project in 2008 compared to income tax payments of $119.1 million2009. The decrease in 2007. The increaseconstruction expenditures was partially offset by a lower amountan increase of $24.9 million in costs associated with the development of new nuclear generation at River Bend, as discussed below, increased nuclear construction expenditures pr imarily due to the Waterford 3 steam generator replacement project and the dry fuel costs recovered in 2008 than in 2007.storage project, and increased transmission construction expenditures primarily due to additional reliability work. See "“Hurricane RitaGustav and Hurricane KatrinaIke"” below and Note 2 to the financial statements for a discussion of the storm cost financings. See MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - “Little Gypsy Repowering Project” for a discussion of the suspension.
Entergy Louisiana, LLC
Management'sManagement’s Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $734.7 million in 2009 compared to 2008 primarily due to:
· | the investment in 2008 of $545 million in affiliate securities as a result of the Act 55 storm cost financing. See "“MANAGEMENT'SMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Hurricane Rita and Hurricane Katrina"” and Note 2 to the financial statements for a discussion of the Act 55 storm cost financing; |
· | higher construction expenditures in 2008 due to Hurricane Gustav and Hurricane Ike; |
· | the suspension of the Little Gypsy repowering project in 2009. See "“Little Gypsy Repowering Project"” below for a discussion of the suspension; |
· | lower transmission construction expenditures in 2009; and |
The decrease was partially offset by increased nuclear construction expenditures primarily due to the Waterford 3 steam generator replacement project, the dry fuel storage project, security upgrades, and the reactor coolant pump upgrades project.
Decreases in Entergy Louisiana'sLouisiana’s receivable from the money pool are a source of cash flow, and Entergy Louisiana'sLouisiana’s receivable from the money pool decreased $8.4 million in 2009 compared to increasing $61.2 million in 2008. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries'subsidiaries’ need for external short-term borrowings.
NetFinancing Activities
Entergy Louisiana’s financing activities used $99.6 million in 2010 compared to providing $361.3 million in 2009. The following cash flow used in investing activities increased $873.5 million in 2008 compared to 2007 primarily due to:activity occurred:
· | the investmentnet cash redemptions of $545$120 million of first mortgage bonds in affiliate securities as a result of the Act 55 storm cost financings. See "Hurricane Rita and Hurricane Katrina" below for a discussion of the storm cost financings; 2010; |
· | increased construction expendituresthe retirement in 2008 due to Hurricane Gustav and Hurricane Ike,January 2010 of the Little Gypsy Unit 3 repowering project, and various$30 million Series D note by the nuclear projects;fuel company variable interest entity; |
· | the issuance in October 2010 of $115 million of 5% Revenue Bonds Series 2010; |
· | the payment on credit borrowings of $24.1 million by the nuclear fuel company variable interest entity; |
· | $20.6 million in common equity distributions in 2009; and |
· | money pool activity.a principal payment of $17.3 million in 2010 for the Waterford 3 sale-leaseback obligation compared to a principal payment of $6.6 million in 2009. |
Increases in Entergy Louisiana's receivable from the money pool are a use of cash flow, and Entergy Louisiana's receivable from the money pool increased by $61.2 million in 2008.
Financing Activities
Entergy Louisiana'sLouisiana’s cash flow provided by financing activities increased $134.3 million in 2009 compared to 2008 primarily due to the issuance of $400 million of 5.40% Series first mortgage bonds in November 2009 compared to the issuance of $300 million of 6.50% Series first mortgage bonds in August 2008 and the repurchase in 2008 of $60 million of Auction Rate governmental bonds, partially offset by an increase of $20.6 million in common equity distributions paid in 2009.
Entergy Louisiana's financings activities provided $227.0 million of cash in 2008 compared to using $58.4 million of cash in 2007 primarily due to the issuance of $300 million of 6.50% Series first mortgage bonds in August 2008 and money pool activity, partially offset by the repurchase, prior to maturity, of $60 million of Auction Rate governmental bonds, which are being held for remarketing at a later date.
Decreases in Entergy Louisiana's payable to the money pool are a use of cash flow, and Entergy Louisiana's payable to the money pool decreased $2.8 million in 2008 and $51.3 million in 2007.
See Note 5 to the financial statements for details of long-term debt.
Entergy Louisiana, LLC
Management'sManagement’s Financial Discussion and Analysis
Capital Structure
Entergy Louisiana'sLouisiana’s capitalization is balanced between equity and debt, as shown in the following table. The increasedecrease in the debt to capital for Entergy Louisiana as of December 31, 20092010 is primarily due to the issuance of $400 million of 5.40% Series first mortgage bondsan increase in November 2009.common equity because Entergy Louisiana did not make common equity distributions in 2010.
| | December 31, 2009 | | December 31, 2008 | | December 31, 2010 | | December 31, 2009 |
| | | | | | | | |
Debt to capital | | | 46.1% | | 49.9% |
Effect of subtracting cash | | | (1.7)% | | (2.1)% |
Net debt to net capital | | 47.8% | | 43.6% | | 44.4% | | 47.8% |
Effect of subtracting cash from debt | | 2.1% | | 2.5% | |
Debt to capital | | 49.9% | | 46.1% | |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and members'members’ equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana'sLouisiana’s financial condition.
Uses of Capital
Entergy Louisiana requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred equity maturities; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | distribution and interest payments. |
Following are the amounts of Entergy Louisiana'sLouisiana’s planned construction and other capital investments, existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:
| 2010 | | 2011-2012 | | 2013-2014 | | After 2014 | | Total | | 2011 | | 2012-2013 | | 2014-2015 | | After 2015 | | Total |
| (In Millions) | (In Millions) |
Planned construction and | | | | | | | | | | | |
capital investment (1) | $503 | | $1,280 | | N/A | | N/A | | $1,783 | | |
Planned construction and capital investment (1): | | Planned construction and capital investment (1): | | | | | | | |
Generation | | $648 | | $668 | | N/A | | N/A | | $1,316 |
Transmission | | 113 | | 316 | | N/A | | N/A | | 429 |
Distribution | | 121 | | 244 | | N/A | | N/A | | 365 |
Other | | 8 | | 13 | | N/A | | N/A | | 21 |
Total | | $890 | | $1,241 | | N/A | | N/A | | $2,131 |
Long-term debt (2) | $329 | | $250 | | $332 | | $2,056 | | $2,967 | | $140 | | $244 | | $285 | | $2,699 | | $3,368 |
Operating leases | $9 | | $15 | | $11 | | $6 | | $41 | | $10 | | $17 | | $11 | | $3 | | $41 |
Purchase obligations (3) | $601 | | $1,302 | | $716 | | $4,389 | | $7,008 | | $614 | | $969 | | $703 | | $4,022 | | $6,308 |
Nuclear fuel lease obligations (4) | $57 | | $65 | | N/A | | N/A | | $122 | | |
(1) | Includes approximately $152$194 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Louisiana, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Vidalia purchased power agreement and the Unit Power Sales Agreement, both of which are discussed in Note 8 to the financial statements. |
(4) | It is expected that additional financing under the lease will be arranged as needed to acquire additional fuel, to pay interest, and to pay maturing debt. If such additional financing cannot be arranged, however, Entergy Louisiana must repurchase sufficient nuclear fuel to allow the lessor to meet its obligations. |
In addition to the contractual obligations given above, Entergy Louisiana currently expects to contribute approximately $27.1$53 million to its pension plans and approximately $9.9$9.5 million to other postretirement plans in 2010;2011; although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical
2011.
Entergy Louisiana, LLC
Management'sManagement’s Financial Discussion and Analysis
corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Louisiana’s pension contributions in the future.
Also in addition to the contractual obligations, Entergy Louisiana has $282.1$373.4 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
The planned capital investment estimate for Entergy Louisiana reflects capital required to support existing business and customer growth, including the purchase of Acadia Unit 2 and the replacement of the Waterford 3 steam generators, which are discussed below, and dry cask spent fuel storage. Entergy'sEntergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Entergy identified resources in the Summer 2009 Request for Proposal, including a self-build option at Entergy Louisiana’s Ninemile site. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental compliance, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Management provides more information on long-term debt and preferred stockmembership interest maturities in Notes 5 and 6 to the financial statements.
As an indirect, wholly-owned subsidiary of Entergy Corporation, Entergy Louisiana pays distributions from its earnings at a percentage determined monthly. Entergy Louisiana’s long-term debt indentures contain restrictions on the payment of cash dividends or other distributions on its common and preferred membership interests. As of December 31, 2010, Entergy Louisiana had member’s equity unavailable for distribution to Entergy Corporation of $465 million.
Acadia Unit 2 Purchase Agreement
In October 2009, Entergy Louisiana announced that it has signed an agreement to acquire Unit 2 of the Acadia Energy Center, a 580 MW generating unit located near Eunice, La., from Acadia Power Partners, LLC, an independent power producer. The Acadia Energy Center, which entered commercial service in 2002, consists of two combined-cycle gas-fired generating units, each nominally rated at 580 MW. Entergy Louisiana proposes to acquire 100 percent of Acadia Unit 2 and a 50 percent ownership interest in the facility’s common assets for approximately $300 million. In a separate transaction, Cleco Power is acquiringacquired Acadia Unit 1 and the other 50 percent interest in the facility’s common assets. Upon closing the transaction, Cleco Power will serve as operator for the entire facility. 160; Entergy Louisiana has committed to sell one thirdone-third of the output of Unit 2 to Entergy Gulf States Louisiana in accordance with terms and conditions detailed under the existing Entergy System Agreement.
Entergy Louisiana'sLouisiana’s purchase of the plant is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. Closing is expected to occur in late 2010 or early 2011.
Entergy Louisiana and Acadia Power Partners also have entered into a purchasedtwo purchase power agreements that are intended to provide access to the capacity and energy output of the unit during the period before the acquisition closes. The initial purchase power agreement forwas a call option agreement that commenced on June 1, 2010 and terminated on September 30, 2010. Beginning October 1, 2010, Entergy Louisiana began purchasing 100 percent of the output of Acadia Unit 2 thatunder a tolling agreement. The LPSC has approved both purchase power agreements.
In December 2010, Entergy Louisiana and Entergy Gulf States Louisiana filed an executed uncontested settlement term sheet, which was approved by the LPSC in January 2011. The term sheet provides for three scenarios allowing the transaction to proceed, depending upon the outcome of a FERC ruling on modifications to a System Agreement schedule to include acquisition adjustments. If the FERC approves the modifications to the System Agreement schedule prior to closing, Entergy Louisiana will purchase 100 percent of the plant and sell one-third of the output to Entergy Gulf States Louisiana as proposed. In the other two scenarios, Entergy Louisiana will retain
Entergy Louisiana, LLC
Management’s Financial Discussion and Analysis
and include in rates 100 percent of the unit for a period of up to one year, at which time Entergy Louisiana must file either to permanently retain 100 percent ownership of the unit or enter into a joint ownership arrangement with Entergy Gulf States Louisiana pursuant to which Entergy Gulf States Louisiana would purchase one-third of the unit. The commercial issues associated with joint ownership of a single generation unit are being evaluated, and it is possible Entergy Louisiana may seek approvals to purchase the full output of the unit permanently. Closing of the sale to Entergy Louisiana is expected to commence on May 1, 2010 and is set to expire atoccur by the closingend of the acquisition transaction. Entergy Louisiana has filed with the LPSC for approval of the transaction, and no party filed an opposition to the purchase power agreement and it has been forwarded to the LPSC for its review. The parties have agreed to a procedural schedule for the acquisition that would lead to LPSC consideration of the matter at its January 2011 meeting and includes a hearing before the ALJ in September 2010.first quarter 2011.
Waterford 3 Steam Generator Replacement Project
Entergy Louisiana plansplanned to replace the Waterford 3 steam generators, along with the reactor vessel closure head and control element drive mechanisms, in the spring 2011. Replacement of these components is common to pressurized water reactors throughout the nuclear industry. The nuclear industry continuesIn December 2010, Entergy Louisiana advised the LPSC that the replacement generators will not be completed and delivered by the manufacturer in time to address susceptibilityinstall them during the spring 2011 refueling outage. During the final steps in the manufacturing process, the manufacturer discovered separation of stainless steel cladding from the carbon steel base metal in the channel head of both replacement steam generators (RSGs), in areas beneath and adjacent to stress corrosion crackingthe divider plate. As a result of certain materials associated with these components withinthis damage, the reactor coolant system. The issue is applicablemanufacturer will be unable to Waterford 3meet the contractual delivery deadlines, and is managedthe RSGs cannot be installed in accordance with standard industry practices and guidelines. Routine inspectionsthe spring 2011. After the manufacturer completes its analysis of the steam generators during Waterford 3's Fall 2006cause of the failure and repair options, Entergy Louisiana will work with the manufacturer to fully develop and evaluate repair options and to revise the project schedule. In the interim, the spring 2011 outage has been converted to a normal refueling outage identified additional degradation of certain tube spacer supports in the steam generators that required repair beyond that anticipated priorand inspection. Prior to the outage. Corrective measures were successfully implemented to permit continued operationdelay, Entergy Louisiana estimated that it would spend approximately $511 million on this project, and the planned construction estimate above includes approximately $190 million in 2011 for the completion of this project. A revised estimate will be made after the development of the steam generators. While potential future replacement of these components had been contemplated, additional steam generator tube and component degradation necessitates replacement of
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
new project schedule, although it is likely that the steam generators as soon as reasonably achievable. The earliestestimated cost will increase, including increased carrying cost due to the new steam generators can be manufactured and delivered for installation is 2011. A mid-cycle outage performed in 2007 supports Entergy Louisiana's 2011 replacement strategy. The reactor vessel head and control element drive mechanisms will be replaced at the same time, utilizing the same reactor buildingdelayed construction opening that is necessary for the steam generator replacement. period.
In June 2008, Entergy Louisiana filed with the LPSC for approval of the replacement project, including full cost recovery. Following discovery and the filing of testimony by the LPSC staff and an intervenor, the parties entered into a stipulated settlement of the proceeding. The LPSC unanimously approved the settlement in November 2008. The settlement resolved the following issues: 1) the accelerated degradation of the steam generators is not the result of any imprudence on the part of Entergy Louisiana; 2) the decision to undertake the replacement project at the current estimatedthen-estimated cost of $511 million is in the public interest, is prudent, and would serve the public convenience and necessity; 3) the scope of the replacement project is in the public interest; 4) undertaking the replacement project at the targett arget installation date during the 2011 refueling outage is in the public interest; and 5) the jurisdictional costs determined to be prudent in a future prudence review are eligible for cost recovery, either in an extentionextension or renewal of the formula rate plan or in a full base rate case including necessary proforma adjustments. Upon completion of the replacement project, the LPSC will undertake a prudence review with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs.
In July 2009,June 2010, Entergy Louisiana filed an application at the LPSC granted Entergy Louisiana's motion to dismiss, without prejudice, its application seeking recoverycertify the estimated first year revenue requirement associated with the project. In January 2011 the procedural schedule in the proceeding was suspended pending the development and filing of cash earnings on construction work in progress (CWIP) for the steam generator replacementa revised project acknowledging Entergy Louisiana's right, at any time, to seek cash earnings on CWIP if Entergy Louisiana believes that circumstances or projected circumstances are such that a request for cash earnings on CWIP is merited. The cash earnings on CWIP application had been consolidated with a similar request for the Little Gypsy repowering project, which was also dismissed in response to the same motion.
Entergy Louisiana estimates that it will spend approximately $511 million on this project, including $299 million over the 2010-2011 period.schedule and cost estimate.
Little Gypsy Repowering Project
In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant, and Entergy Gulf States Louisiana filed subsequently with the LPSC seeking certification to participate in one-third of the project. Petroleum coke and coal would be the unit's primary fuel sources.plant. In July 2007, Entergy Louisiana filed with the LPSC for approval of the repowering project. In addition to seeking a finding that the project is in the public interest, the filing with the LPSC asked that Entergy Louisiana be allowed to recover a portion of the project's financing costs during the construction period.
On March 11, 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project'sproject’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. OnIn April 1, 2009, Entergy Louisiana complied with the LPSC'sLPSC’s directive and recommended that the project be suspended for an extended period of time of three years or more. Entergy Louisiana estimated that its total costs for the project, if suspended, including actual spending to date and estimated contract cancellation costs, would be approximately $300 million. Entergy Louisiana had obtained all major environmental permits required to begin construction. A longer-term suspension places these permits at risk and may adversely affect the project's economics and technological feasibility. OnIn May 22, 2009 the LPSC issued an order declaring that Entergy Louisiana'sLouisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year periodperiod. In June 2010 and August 2010, the LPSC Staff and Intervenors filed testimony. The LPSC Staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the project costs. The partiesdecision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the proceeding agreedcosts incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to a procedural schedule that results in a hearing in October 2010. Entergy Louisiana currently estimates that its total costs for the project, if canceled, will be approximately $215 million, of which approximately $193 million was incurred through December 31, 2009.
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Management'sManagement’s Financial Discussion and Analysis
consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, but at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it is probable that the Little Gypsy repowering project will be abandoned and accordingly has reclassified $199.8 million of project costs from construction work in progress to a regulatory asset. This accounting reclassification does not modify Entergy Louisiana’s requested relief pending before the LPSC. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties conducted a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement is expected to be presented to the LPSC for approval in the first quarter 2011.
New Nuclear Development
Entergy Gulf States Louisiana and Entergy Louisiana provided public notice to the LPSC of their intention to make a filing pursuant to the LPSC'sLPSC’s general order that governs the development of new nuclear generation in Louisiana. The project option being developed by the companies is for new nuclear generation at River Bend. Entergy Gulf States Louisiana and Entergy Louisiana, together with Entergy Mississippi, have been engaged in the development of options to construct new nuclear generation at the River Bend and Grand Gulf sites. Entergy Gulf States Louisiana and Entergy Louisiana are leading the development at River Bend, and Entergy Mississippi is leading the development at Grand Gulf. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In the first quarter 2010, Entergy Gulf States Louisiana and Entergy Louisiana each paid for and will recognizerecognized on its books $24.9 million in costs associated with the development of new nuclear generation at the River Bend site; these costs previously had been recorded on the books of Entergy New Nuclear Utility Development, LLC, a System Energy subsidiary. Entergy Gulf States Louisiana and Entergy Louisiana will share costs going forward on a 50/50 basis, which reflects each company'scompany’s current participation level in the project. In responseMarch 2010, Entergy Gulf States Louisiana and Entergy Louisiana filed with the LPSC seeking approval to continue the development activities. The parties have agreed to a procedural schedule that includes a hearing in May 2011. In January 2011, parties filed testimony responding to the companies' previous notice, dated August 10, 2009,application, and the only t estimony was filed by the LPSC opened a docket. A procedural schedule will be established afterstaff. The LPSC staff did not oppose the companies file the certification application referredrequested relief but suggested several conditions to in the notice.LPSC approval.
Sources of Capital
Entergy Louisiana'sLouisiana’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred membership interest issuances; and |
· | bank financing under new and existing facilities. |
Entergy Louisiana may refinance or redeem debt and preferred membership interests prior to maturity, to the extent market conditions and interest and distribution rates are favorable.
All debt and common and preferred membership interest issuances by Entergy Louisiana require prior regulatory approval. Preferred membership interest and debt issuances are also subject to issuance tests set forth in corporate charters,its bond indentures and other agreements. Entergy Louisiana has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Louisiana'sLouisiana, LLC
Management’s Financial Discussion and Analysis
Entergy Louisiana’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:
2009 | | 2008 | | 2007 | | 2006 |
(In Thousands) |
| | | | | | |
$52,807 | | $61,236 | | ($2,791) | | ($54,041) |
2010 | | 2009 | | 2008 | | 2007 |
(In Thousands) |
| | | | | | |
$49,887 | | $52,807 | | $61,236 | | ($2,791) |
See Note 4 to the financial statements for a description of the money pool.
Entergy Louisiana has a credit facility in the amount of $200 million scheduled to expire in August 2012. No borrowings were outstanding under the credit facility as of December 31, 2009.2010.
Entergy Louisiana obtained short-term borrowing authorization from the FERC under which it may borrow through October 2011, up to the aggregate amount, at any one time outstanding, of $250 million. See Note 4 to the financial statements for further discussion of Entergy Louisiana'sLouisiana’s short-term borrowing limits. Entergy Louisiana has also obtained an order from the FERC authorizing long-term securities issuances through July 2011.
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
Hurricane Gustav and Hurricane Ike
In September 2008, Hurricane Gustav (and, to a much lesser extent, Hurricane Ike) caused catastrophic damage to Entergy Louisiana'sLouisiana’s service territory. The storms resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. On October 9, 2008, Entergy Louisiana drew all of its $134 million funded storm reserve. On October 15, 2008, the LPSC approved Entergy Louisiana'sLouisiana’s request to defer and accrue carrying costs on unrecovered storm expenditures during the period the company seeks regulatory recovery. The approval was without prejudice to the ultimate resolution of the total amount of prudently incurred storm costs or final carryingcarryi ng costs rate.
Entergy Gulf States Louisiana and Entergy Louisiana filed their Hurricane Gustav and Hurricane Ike storm cost recovery case with the LPSC in May 2009. In September 2009, Entergy Gulf States Louisiana and Entergy Louisiana made a supplemental filing to, among other things, recommend recoveryand the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed with the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana’s and Entergy Louisiana’s storm costs, storm reserves, and replenishmentissuance costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Act 55 financings). Entergy Gulf States Louisiana’s and Entergy Louisiana’s Hurricane Katrina and Hurricane Rita storm reservescosts were financed primarily by Louisiana Act 55 (passed in 2007) financing.financings, as discussed below. Entergy Gulf States Louisiana and Entergy Louisiana recovered their costs from Hurricane Katrinaalso filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and Hurricane Rita primarily by Act 55 financing as discussed below. Onsavings to customers via a Storm Cost Offset rider.
In December 30, 2009, Entergy Gulf States Louisiana and Entergy Louisiana entered into a stipulation agreement with the LPSC Staff that if approved, provides for total recoverable costs of approximately $234 million for Entergy Gulf States Louisiana and $394 million for Entergy Louisiana.Louisiana, including carrying costs. Under this stipulation, Entergy Gulf States Louisiana agrees not to recover $4.4 million and Entergy Louisiana agrees not to recover $7.2 million of their storm restoration spending. The stipulation also permits replenishing Entergy Gulf States Louisiana's storm reserve in the amount of $90 million and Entergy Louisiana's storm reserve in the amount of $200 million when the Act 55 financing isfinancings are accomplished. TheIn March and April 2010, Entergy Gulf States Louisiana, Entergy Louisiana, and other parties to the proceeding have agreed to a procedural schedulefiled with the LPSC an uncontested stipulated settlement that includes March/these terms and also includes Entergy Gulf States Louisiana’s and Entergy Louisiana's proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $15.5 million and $27.75 million of customer benefits, respectively, through prospective annual rate reductions of $3.1 million and $5.55 million for five years. A stipulation hearing was held before the ALJ on April 13, 2010. On April 21, 2010, hearing datesthe LPSC approved the settlement and subsequently issued two financing orders and one ratemaking order intended to facilitate the implementation of the Act 55 financings. In June 2010 the Louisiana State Bond Commission approved the Act 55 financings.
Entergy Louisiana, LLC
Management’s Financial Discussion and Analysis
In July 2010 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $468.9 million in bonds under Act 55. From the $462.4 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $200 million in a restricted escrow account as a storm damage reserve for bothEntergy Louisiana and transferred $262.4 million directly to Entergy Louisiana. From the recoverabilitybond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $262.4 million to acquire 2,624,297.11 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing o n September 15, 2010, and the methodmembership interests have a liquidation price of recovery proceedings.$100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LCDA and there is no recourse against Entergy or Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee. Entergy Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
Hurricane Rita and Hurricane Katrina
In August and September 2005, Hurricane Katrina and Hurricane Rita, along with extensive flooding that resulted from levee breaks in and around Entergy Louisiana's service territory, caused catastrophic damage. The storms and flooding resulted in widespread power outages; significant damage to distribution, transmission, and generation infrastructure; and the temporary loss of sales and customers due to mandatory evacuations and destruction of homes and businesses due to wind, rain, and extended periods of flooding. Entergy pursued a broad range of initiatives to recover storm restoration and business continuity costs and incremental losses. Initiatives included obtaining reimbursement of certain costs covered by insurance and pursuing recovery through existingex isting or new rate mechanisms regulated by the FERC and local regulatory bodies, in combination with securitization.
Insurance Claims
Entergy has received a total of $317 million as of December 31, 2009 on its Hurricane Katrina and Hurricane Rita insurance claims, including the settlements of its Hurricane Katrina claims with each of its two excess insurers. Of the $317 million received, $45 million was allocated to Entergy Louisiana. Entergy has substantially completed its insurance recoveries related to Hurricane Katrina and Hurricane Rita.
Storm Cost Financings
In March 2008, Entergy Gulf States Louisiana, Entergy Louisiana, and the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, filed at the LPSC an application requesting that the LPSC grant financing orders authorizing the financing of Entergy Gulf States Louisiana and Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Act 55 of the Louisiana Legislature (Act 55 financings). The Act 55 financings are expected to produce additional customer benefits as compared to Act 64 traditional securitization. Entergy Gulf States Louisiana and Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a Storm Cost Offset rider. On April 3, 2008, the Louisiana State Bond Commission granted preliminary approval for the Act 55 financings. On April 8, 2008, the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financings, approved requests for the Act 55
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
financings. On April 10, 2008, Entergy Gulf States Louisiana and Entergy Louisiana and the LPSC Staff filed with the LPSC an uncontested stipulated settlement that includes Entergy Gulf States Louisiana and Entergy Louisiana'sLouisiana’s proposals under the Act 55 financings, which includes a commitment to pass on to customers a minimum of $10 million and $30 million of customer benefits, respectively, through prospective annual rate reductions of $2 million and $6 million for five years. On April 16, 2008, the LPSC approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financings. In May 2008, the Louisiana State Bond Commission granted final approval of the Act 55 financings.
OnIn July 29, 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55. From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana. From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million, including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate.& #160; Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per
Entergy Louisiana, LLC
Management’s Financial Discussion and Analysis
unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion.
Entergy Louisiana does not report the bonds on its balance sheet because the bonds are the obligation of the LPFA, and there is no recourse against Entergy Louisiana in the event of a bond default. To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee. Entergy Louisiana does not report the collections as revenue because it is merely acting as the billing and collection agent for the state.
The rates that Entergy Louisiana charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Louisiana is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the LPSC, is primarily responsible for approval of the rates charged to customers.
Entergy Louisiana made a rate filing with the LPSC requesting a base rate increase in January 2004. In May 2005 the LPSC approved a rate filing settlement that included the adoption of a three-year formula rate plan, the terms of which included an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing was made in May 2006. As discussed below the formula rate plan has been extended, with return on common equity provisions consistent with previously approved provisions, to cover the 2008, 2009, and 2010 test years.
In October 2009 the LPSC approved a settlement that resolves Entergy Louisiana's 2006 and 2007 test year filings. The settlement provides for a new formula rate plan for the 2008, 2009, and 2010 test years. Entergy Louisiana is permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%). The rate reset, a $2.5 million increase that includes a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset will be subject to refund pending review of the 2008 test year filing that was made on October 21, 2009. The settlement does not allow recovery through the formula rate plan of most of Entergy Louisiana's costs associated with Entergy's stock option plan. Pursuant to the settlement Entergy Louisiana refunded to its customers $12.9 million, which includes interest, in the November 2009 billing cycle. The LPSC Staff and one intervenor filed comments on the 2008 test year filing in January 2010. Entergy Louisiana has until March 2010 to provide an initial response to the proposed adjustments and discovery is ongoing. Entergy Louisiana will implement any agreed changes by March 15, 2010. A procedural schedule to address any contested issues would be set after March 15, 2010.
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
In December 2009, Entergy Louisiana filed an application seeking LPSC approval for a $10.3 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. Currently, Entergy Louisiana has $2.2 million in annual retail rates for decommissioning funding.
In May 2008, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2007 test year, seeking an $18.4 million rate increase, comprised of $12.6 million of recovery of incremental and deferred capacity costs and $5.8 million based on a cost of service revenue deficiency related to continued lost contribution to fixed costs associated with the loss of customers due to Hurricane Katrina. In August 2008, Entergy Louisiana implemented a $43.9 million formula rate plan decrease to remove interim storm cost recovery and to reduce the storm damage accrual. Entergy Louisiana then implemented a $16.9 million formula rate plan increase, subject to refund, effective the first billing cycle in September 2008, comprised of $12.6 million of recovery of incrementalincrementa l and deferred capacity costs and $4.3 million based on a cost of service deficiency.
In October 2009 the LPSC approved a settlement that resolved Entergy Louisiana’s 2006 and 2007 test year filings provided for a new formula rate plan for the 2008, 2009, and 2010 test years. 10.25% is the target midpoint return on equity for the new formula rate plan, with an earnings bandwidth of +/- 80 basis points (9.45% - 11.05%). Entergy Louisiana was permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a 10.25% return on equity for the 2008 test year. The rate reset, a $2.5 million increase that included a $16.3 million cost of service adjustment less a $13.8 million net reduction for decreased capacity costs and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset was subject to refund pending review of the 2008 test year filing that was made in October 2009. In April 2010, Entergy Louisiana and the LPSC staff submitted a joint report on the 2008 test year filing and requested that the LPSC accept the report, which resulted in a $0.1 million reduction in rates effective in the May 2007,2010 billing cycle and a $0.1 million refund. In addition, Entergy Louisiana moved the recovery of approximately $12.5 million of capacity costs from fuel adjustment clause recovery to base rate recovery. At its April 21, 2010 meeting, the LPSC accepted the joint report.
In May 2010, Entergy Louisiana made its formula rate plan filing with the LPSC for the 20062009 test year, indicatingyear. The filing reflected a 7.6% earned10.82% return on common equity. In September 2007, Entergy Louisiana modified its formula rate plan filing to reflect its implementation of certain adjustments proposed by the LPSC Staff in its review of Entergy Louisiana's original filing with which Entergy Louisiana agreed, and to reflect its implementation of an $18.4 million annual formula rate plan increase comprised of (1) a $23.8 million increase representing 60% of Entergy Louisiana's revenue deficiency, and (2) a $5.4 million decrease for reduced incremental and deferred capacity costs. In October 2007, Entergy Louisiana implemented a $7.1 million formula rate plan decrease that was due primarily to the reclassification of certain franchise fees from base rates to collection via a line item on customer bills pursuant to an LPSC Order.
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Louisiana modified the filing in August 2006 to reflect a 9.45% return on equity, which is within the allowed bandwidth.earnings bandwidth, indicating no cost of service rate change is necessary under the formula rate plan. The modified filing includes an increase of $24.2 million for interim recovery of storm costs from Hurricanes Katrina and Rita anddoes reflect, however, a $119.2 million raterevenue requirement increase to recover LPSC-approvedprovide supplemental funding for the decommissioning trust maintained for Waterford 3, in response to a NRC notification of a projected shortfall of decommissioning funding assurance. The filing also reflected a rate change for incremental deferredcapacity costs. In July 2010 the LPSC approved a $3.5 million increase in the retail revenue
Entergy Louisiana, LLC
Management’s Financial Discussion and ongoingAnalysis
requirement for decommissioning, effective September 2010. In August 2010 Entergy Louisiana made a revised 2009 test year formula rate plan filing. The revised filing reflected a 10.82% earned return on common equity, which is within the allowed earnings bandwidth resulting in no cost of service adjustment. The filing also reflected two increases outside of the formula rate plan sharing mechanism: (1) the previously approved decommissioning revenue requirement, and (2) $2.2 million for capacity costs. The rates reflected in the revised filing requested recovery of approximately $50 million for the amortization of capacity deferrals over a three-year period, including carrying charges, and approximately $70 million for ongoing capacity costs. The increase was implemented, subject to refund,became effective beginning with the first billing cycle of September 2006.2010. Entergy Louisiana subsequently updated its formula rate plan rider to reflect adjustments proposed byand the LPSC Staffstaff subsequently submitted a joint report on the 2009 test year filing consistent with which it agrees. The adjusted return on equity of 9.56% remains within the allowed bandwidth. Ongoing and deferred incremental capacity costs were reduced to $118.7 million. The updated formula rate plan rider was implemented, subject to refund, with the first billing cycle of October 2006. An uncontested stipulated settlement was filed in February 2008 that left the current base rates in place,these terms and the LPSC approved the settlementjoint repo rt in March 2008. December 2010.
In April 2010 the settlementLPSC authorized its staff to initiate an audit of Entergy Louisiana's fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana agreedfor the period from 2005 through 2009. Discovery is in progress, but a procedural schedule has not been established.
In August 2000 the LPSC authorized its staff to credit customers $7.2 million, plus $0.7 millioninitiate a proceeding to audit the fuel adjustment clause filings of interest,Entergy Louisiana. The time period that is the subject of the audit was January 1, 2000 through December 31, 2001. The scope of this docket was expanded to include a review of annual reports on fuel and purchased power transactions with affiliates and a prudence review of transmission planning issues and to include the years 2002 through 2004. Hearings were held and in May 2008 the ALJ issued a final recommendation that found in Entergy Louisiana’s favor on the issues, except for customer contributionsthe disallowance of hypothetical SO2 allowance costs included in affiliate purchase s. The ALJ recommended a refund of the SO2 allowance costs collected to date and a realignment of these costs into base rates prospectively with an amortization of the Central States Compactrefunded amount through base rates over a five-year period. The LPSC issued an order in Nebraska that was never completed and agreed to a one-time $2.6 million deduction fromDecember 2008 affirming the deferred capacity cost balance. The credit, for whichALJ’s recommendation. Entergy Louisiana had previously recorded a provision was madefor the disallowance, including interest, and refunded approximately $7 million to customers in May 2008.2009.
In addition to rate proceedings, Entergy Louisiana's fuel costs recovered from customers are subject to regulatory scrutiny. This regulatory risk represents Entergy Louisiana's largest potential exposure to price changes in the commodity markets.Industrial and Commercial Customers
Entergy Louisiana's retail rate matters and proceedings, including fuel cost recovery-related issues, are discussed further in Note 2 to the financial statements.
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
Federal Regulation
Interruptible Load Proceeding
See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - System Agreement Proceedings - Interruptible Load Proceeding." In October 2009, the LPSC issued an order approving the flow through to retail rates of the LPSC-jurisdictional portion of the payments and credits resulting from the FERC's orders that had not yet been flowed through to retail rates, which required a net refund to retail customers of $17.6 million, including interest. Of this amount, $5.4 million was refunded subject to adjustment in the event that future action by the FERC or the D.C. Circuit Court of Appeals results in a reversal or change in the amount of the refunds ordered by the FERC in September 2008.
System Agreement Proceedings
See "System Agreement Proceedings" in Entergy Corporation and Subsidiaries' Management's Discussion and Analysis for discussion of the proceeding at the FERC involving the System Agreement and of other related proceedings.
Transmission
See "Independent Coordinator of Transmission" in Entergy Corporation and Subsidiaries' Management's Discussion and Analysis for discussion.
Industrial and Commercial Customers
Entergy Louisiana'sLouisiana’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Louisiana'sLouisiana’s industrial customer base. Entergy Louisiana responds by working with industrial and commercial customers and negotiating electric service contracts to provide competitive rates that match specific customer needs and load profiles. Entergy Louisiana actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers. Entergy Louisiana does not currently expect additional significant losses to cogeneration because of the currentcurren t economics of the electricity markets and Entergy Louisiana'sLouisiana’s marketing efforts in retaining industrial customers.
See “System Agreement”, “Independent Coordinator of Transmission”, “Notice to SERC Reliability Corporation regarding Reliability Standards”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Finan cial Discussion and Analysis for a discussion of these topics.
Entergy Louisiana owns and, operates, through an affiliate, operates the Waterford 3 nuclear power plant. Entergy Louisiana is, therefore, subject to the risks related to owning and operating a nuclear plant. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of Waterford 3, Entergy Louisiana may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.
Entergy Louisiana, LLC
Management’s Financial Discussion and Analysis
The nuclear industry continues to address susceptibility to stress corrosion cracking of certain materials associated with components within the reactor coolant system. The issue is applicable to Waterford 3 and is managed in accordance with standard industry practices and guidelines. As discussed above in more detail, Entergy Louisiana plans to replace the Waterford 3 steam generators, along with the reactor vessel closure head and control element drive mechanisms, in 2011.
Entergy Louisiana, LLC
Management's Financial Discussion and Analysis
mechanisms.
Entergy Louisiana'sLouisiana’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Louisiana is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
The preparation of Entergy Louisiana'sLouisiana’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Louisiana'sLouisiana’s financial position or results of operations.
Nuclear Decommissioning Costs
See "“Nuclear Decommissioning Costs"” in the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Louisiana records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month'smonth’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain componentsc omponents of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for furtherfurth er discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate.
Entergy Louisiana, LLC
Management'sManagement’s Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $1,298 | | $13,578 | | (0.25%) | | $1,607 | | $17,737 |
Rate of return on plan assets | | (0.25%) | | $964 | | - | | (0.25%) | | $964 | | - |
Rate of increase in compensation | | 0.25% | | $646 | | $3,136 | | 0.25% | | $733 | | $3,704 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $673 | | $3,576 | | 0.25% | | $727 | | $3,782 |
Discount rate | | (0.25%) | | $387 | | $4,016 | | (0.25%) | | $418 | | $4,288 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension cost for Entergy Louisiana in 20092010 was $6.2$14.6 million. Entergy Louisiana anticipates 20102011 qualified pension cost to be $14.6$23.6 million. Entergy Louisiana contributed $7.6$66.1 million to its pension plans in 20092010 and anticipates funding approximately $27.1$53 million in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Louisiana’s pension contributions in the future.2011.
Total postretirement health care and life insurance benefit costs for Entergy Louisiana in 20092010 were $16.8 million, including $2.8 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Louisiana expects 2010 postretirement health care and life insurance benefit costs to approximate $17.8 million, including $3.1 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Louisiana expects 2011 postretirement health care and life insurance benefit costs to approximate $18.2 million, including $3.9 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Louisiana expects to contribute approximately $9.9$9.5 million to its other postretirement plans in 2010.2011.
New Accounting PronouncementsFederal Healthcare Legislation
See "the “NewQualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting PronouncementsEstimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Financial Discussion and Analysis for a discussion of new accounting pronouncements.Federal Healthcare Legislation.
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Discussion and Analysis.
To the Board of Directors and Members of
Entergy Louisiana, LLC
Baton Rouge, Louisiana
We have audited the accompanying balance sheets of Entergy Louisiana, LLC (the “Company”) as of December 31, 20092010 and 20082009 and the related income statements, statements of income, members’changes in equity and comprehensive income, and statements of cash flows (pages 318308 through 322312 and applicable items in pages 6349 through 193)184) for each of the three years in the period ended December 31, 2009.2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Entergy Louisiana, LLC as of December 31, 20092010 and 2008,2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 201025, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
| |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 2,538,766 | | | $ | 2,183,586 | | | $ | 3,051,294 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 667,744 | | | | 428,904 | | | | 1,048,502 | |
Purchased power | | | 847,464 | | | | 782,235 | | | | 1,010,804 | |
Nuclear refueling outage expenses | | | 24,955 | | | | 21,895 | | | | 19,638 | |
Other operation and maintenance | | | 432,341 | | | | 401,898 | | | | 408,489 | |
Decommissioning | | | 22,960 | | | | 21,377 | | | | 19,907 | |
Taxes other than income taxes | | | 68,687 | | | | 66,627 | | | | 63,184 | |
Depreciation and amortization | | | 198,133 | | | | 203,791 | | | | 197,909 | |
Other regulatory charges (credits) - net | | | (20,192 | ) | | | (7,561 | ) | | | 32,763 | |
TOTAL | | | 2,242,092 | | | | 1,919,166 | | | | 2,801,196 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 296,674 | | | | 264,420 | | | | 250,098 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 26,875 | | | | 27,990 | | | | 18,439 | |
Interest and investment income | | | 80,007 | | | | 75,522 | | | | 46,370 | |
Miscellaneous - net | | | (4,043 | ) | | | (4,425 | ) | | | (3,703 | ) |
TOTAL | | | 102,839 | | | | 99,087 | | | | 61,106 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 119,484 | | | | 103,671 | | | | 94,310 | |
Allowance for borrowed funds used during construction | | | (17,952 | ) | | | (18,059 | ) | | | (11,297 | ) |
TOTAL | | | 101,532 | | | | 85,612 | | | | 83,013 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 297,981 | | | | 277,895 | | | | 228,191 | |
| | | | | | | | | | | | |
Income taxes | | | 66,546 | | | | 45,050 | | | | 70,648 | |
| | | | | | | | | | | | |
NET INCOME | | | 231,435 | | | | 232,845 | | | | 157,543 | |
| | | | | | | | | | | | |
Preferred distribution requirements and other | | | 6,950 | | | | 6,950 | | | | 6,950 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON EQUITY | | $ | 224,485 | | | $ | 225,895 | | | $ | 150,593 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 2,183,586 | | | $ | 3,051,294 | | | $ | 2,737,552 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 428,904 | | | | 1,048,502 | | | | 887,749 | |
Purchased power | | | 782,235 | | | | 1,010,804 | | | | 814,779 | |
Nuclear refueling outage expenses | | | 21,895 | | | | 19,638 | | | | 17,664 | |
Other operation and maintenance | | | 401,898 | | | | 408,489 | | | | 427,241 | |
Decommissioning | | | 21,377 | | | | 19,907 | | | | 18,530 | |
Taxes other than income taxes | | | 66,627 | | | | 63,184 | | | | 60,293 | |
Depreciation and amortization | | | 203,791 | | | | 197,909 | | | | 178,841 | |
Other regulatory charges (credits) - net | | | (7,561 | ) | | | 32,763 | | | | 43,949 | |
TOTAL | | | 1,919,166 | | | | 2,801,196 | | | | 2,449,046 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 264,420 | | | | 250,098 | | | | 288,506 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 27,990 | | | | 18,439 | | | | 11,119 | |
Interest and dividend income | | | 75,522 | | | | 46,370 | | | | 8,901 | |
Miscellaneous - net | | | (4,425 | ) | | | (3,703 | ) | | | (3,497 | ) |
TOTAL | | | 99,087 | | | | 61,106 | | | | 16,523 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 96,353 | | | | 83,003 | | | | 74,021 | |
Other interest - net | | | 7,318 | | | | 11,307 | | | | 11,708 | |
Allowance for borrowed funds used during construction | | | (18,059 | ) | | | (11,297 | ) | | | (7,531 | ) |
TOTAL | | | 85,612 | | | | 83,013 | | | | 78,198 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 277,895 | | | | 228,191 | | | | 226,831 | |
| | | | | | | | | | | | |
Income taxes | | | 45,050 | | | | 70,648 | | | | 83,494 | |
| | | | | | | | | | | | |
NET INCOME | | | 232,845 | | | | 157,543 | | | | 143,337 | |
| | | | | | | | | | | | |
Preferred distribution requirements and other | | | 6,950 | | | | 6,950 | | | | 6,950 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON EQUITY | | $ | 225,895 | | | $ | 150,593 | | | $ | 136,387 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 231,435 | | | $ | 232,845 | | | $ | 157,543 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 285,330 | | | | 225,168 | | | | 217,816 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 28,896 | | | | (183,872 | ) | | | 123,219 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (6,245 | ) | | | 193,181 | | | | (111,579 | ) |
Accounts payable | | | 86,103 | | | | (25,074 | ) | | | 9,344 | |
Taxes accrued | | | (25,993 | ) | | | 300 | | | | 17,937 | |
Interest accrued | | | (2,991 | ) | | | (5,325 | ) | | | 8,541 | |
Deferred fuel costs | | | 57,594 | | | | (89,930 | ) | | | 42,779 | |
Other working capital accounts | | | (51,771 | ) | | | (168,238 | ) | | | 116,565 | |
Changes in provisions for estimated losses | | | 203,255 | | | | 1,455 | | | | 1,511 | |
Changes in other regulatory assets | | | 150,952 | | | | (84,503 | ) | | | 412,561 | |
Changes in pension and other postretirement liabilities | | | 49,378 | | | | 13,664 | | | | 136,897 | |
Other | | | (73,609 | ) | | | (21,792 | ) | | | (50,542 | ) |
Net cash flow provided by operating activities | | | 932,334 | | | | 87,879 | | | | 1,082,592 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (428,373 | ) | | | (467,519 | ) | | | (584,394 | ) |
Allowance for equity funds used during construction | | | 26,875 | | | | 27,990 | | | | 18,439 | |
Insurance proceeds | | | 188 | | | | 153 | | | | 11,317 | |
Nuclear fuel purchases | | | (617 | ) | | | (93,272 | ) | | | (71,328 | ) |
Proceeds from the sale/leaseback of nuclear fuel | | | - | | | | 93,672 | | | | 70,928 | |
Investment in affiliates | | | (262,430 | ) | | | 160 | | | | (545,154 | ) |
Payments to storm reserve escrow account | | | (200,166 | ) | | | - | | | | (134,423 | ) |
Receipts from storm reserve escrow account | | | - | | | | - | | | | 133,622 | |
Proceeds from nuclear decommissioning trust fund sales | | | 44,500 | | | | 47,520 | | | | 23,497 | |
Investment in nuclear decommissioning trust funds | | | (53,579 | ) | | | (54,379 | ) | | | (31,262 | ) |
Change in money pool receivable - net | | | 2,920 | | | | 8,429 | | | | (61,236 | ) |
Changes in other investments - net | | | 9,353 | | | | 995 | | | | (1,000 | ) |
Net cash flow used in investing activities | | | (861,329 | ) | | | (436,251 | ) | | | (1,170,994 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 498,801 | | | | 395,450 | | | | 296,761 | |
Retirement of long-term debt | | | (567,326 | ) | | | (6,597 | ) | | | (60,000 | ) |
Change in money pool payable - net | | | - | | | | - | | | | (2,791 | ) |
Changes in credit borrowings - net | | | (24,125 | ) | | | - | | | | - | |
Dividends/distributions paid: | | | | | | | | | | | | |
Common equity | | | - | | | | (20,600 | ) | | | - | |
Preferred membership interests | | | (6,950 | ) | | | (6,950 | ) | | | (6,950 | ) |
Net cash flow provided by (used in) financing activities | | | (99,600 | ) | | | 361,303 | | | | 227,020 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (28,595 | ) | | | 12,931 | | | | 138,618 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 151,849 | | | | 138,918 | | | | 300 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 123,254 | | | $ | 151,849 | | | $ | 138,918 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 118,676 | | | $ | 105,586 | | | $ | 82,449 | |
Income taxes | | $ | 28,266 | | | $ | 223,610 | | | $ | (12,718 | ) |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 232,845 | | | $ | 157,543 | | | $ | 143,337 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Other regulatory charges (credits) - net | | | (7,561 | ) | | | 32,763 | | | | 43,949 | |
Depreciation, amortization, and decommissioning | | | 225,168 | | | | 217,816 | | | | 197,371 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (183,872 | ) | | | 123,219 | | | | (26,634 | ) |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 193,181 | | | | (111,579 | ) | | | (65,082 | ) |
Accounts payable | | | (25,074 | ) | | | 9,344 | | | | (74,923 | ) |
Taxes accrued | | | 300 | | | | 17,937 | | | | 1,519 | |
Interest accrued | | | (5,325 | ) | | | 8,541 | | | | (750 | ) |
Deferred fuel costs | | | (89,930 | ) | | | 42,779 | | | | 95,094 | |
Other working capital accounts | | | (168,238 | ) | | | 116,565 | | | | 46,418 | |
Provision for estimated losses and reserves | | | 1,455 | | | | 1,511 | | | | (5,393 | ) |
Changes in other regulatory assets | | | (84,503 | ) | | | 412,561 | | | | (23,829 | ) |
Changes in pension and other postretirement liabilities | | | 13,664 | | | | 136,897 | | | | (860 | ) |
Other | | | (14,231 | ) | | | (83,305 | ) | | | 23,221 | |
Net cash flow provided by operating activities | | | 87,879 | | | | 1,082,592 | | | | 353,438 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (467,519 | ) | | | (584,394 | ) | | | (321,506 | ) |
Allowance for equity funds used during construction | | | 27,990 | | | | 18,439 | | | | 11,119 | |
Insurance proceeds | | | 153 | | | | 11,317 | | | | 10,065 | |
Nuclear fuel purchases | | | (93,272 | ) | | | (71,328 | ) | | | (3,131 | ) |
Proceeds from the sale/leaseback of nuclear fuel | | | 93,672 | | | | 70,928 | | | | 14,306 | |
Investment in affiliates | | | 160 | | | | (545,154 | ) | | | - | |
Payments to storm reserve escrow account | | | - | | | | (134,423 | ) | | | - | |
Receipts from storm reserve escrow account | | | - | | | | 133,622 | | | | - | |
Proceeds from nuclear decommissioning trust fund sales | | | 47,520 | | | | 23,497 | | | | 23,848 | |
Investment in nuclear decommissioning trust funds | | | (54,379 | ) | | | (31,262 | ) | | | (32,161 | ) |
Change in money pool receivable - net | | | 8,429 | | | | (61,236 | ) | | | - | |
Changes in other investments - net | | | 995 | | | | (1,000 | ) | | | - | |
Net cash flow used in investing activities | | | (436,251 | ) | | | (1,170,994 | ) | | | (297,460 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 395,450 | | | | 296,761 | | | | - | |
Additional equity from parent | | | - | | | | - | | | | 1,119 | |
Retirement of long-term debt | | | (6,597 | ) | | | (60,000 | ) | | | - | |
Change in money pool payable - net | | | - | | | | (2,791 | ) | | | (51,250 | ) |
Dividends/distributions paid: | | | | | | | | | | | | |
Common equity | | | (20,600 | ) | | | - | | | | - | |
Preferred membership interests | | | (6,950 | ) | | | (6,950 | ) | | | (8,069 | ) |
Other | | | - | | | | - | | | | (221 | ) |
Net cash flow provided by (used in) financing activities | | | 361,303 | | | | 227,020 | | | | (58,421 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 12,931 | | | | 138,618 | | | | (2,443 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 138,918 | | | | 300 | | | | 2,743 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 151,849 | | | $ | 138,918 | | | $ | 300 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 105,586 | | | $ | 82,449 | | | $ | 82,584 | |
Income taxes | | $ | 223,610 | | | $ | (12,718 | ) | | $ | 119,080 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 160 | | | $ | - | |
Temporary cash investments | | | 151,689 | | | | 138,918 | |
Total cash and cash equivalents | | | 151,849 | | | | 138,918 | |
Accounts receivable: | | | | | | | | |
Customer | | | 56,978 | | | | 127,765 | |
Allowance for doubtful accounts | | | (1,312 | ) | | | (1,698 | ) |
Associated companies | | | 110,425 | | | | 244,575 | |
Other | | | 9,174 | | | | 11,271 | |
Accrued unbilled revenues | | | 72,550 | | | | 67,512 | |
Total accounts receivable | | | 247,815 | | | | 449,425 | |
Note receivable - Entergy New Orleans | | | 9,353 | | | | - | |
Accumulated deferred income taxes | | | - | | | | 66,229 | |
Materials and supplies - at average cost | | | 127,812 | | | | 128,388 | |
Deferred nuclear refueling outage costs | | | 36,783 | | | | 19,962 | |
Gas hedge contracts | | | 3,409 | | | | - | |
Prepayments and other | | | 10,633 | | | | 10,046 | |
TOTAL | | | 587,654 | | | | 812,968 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliate preferred membership interests | | | 544,994 | | | | 545,154 | |
Decommissioning trust funds | | | 209,070 | | | | 180,862 | |
Non-utility property - at cost (less accumulated depreciation) | | | 1,124 | | | | 1,306 | |
Note receivable - Entergy New Orleans | | | - | | | | 9,353 | |
Other | | | 810 | | | | 1,805 | |
TOTAL | | | 755,998 | | | | 738,480 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 7,190,609 | | | | 6,734,732 | |
Property under capital lease | | | 262,111 | | | | 256,348 | |
Construction work in progress | | | 509,667 | | | | 602,070 | |
Nuclear fuel under capital lease | | | 122,011 | | | | 74,197 | |
TOTAL UTILITY PLANT | | | 8,084,398 | | | | 7,667,347 | |
Less - accumulated depreciation and amortization | | | 3,370,225 | | | | 3,245,701 | |
UTILITY PLANT - NET | | | 4,714,173 | | | | 4,421,646 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 132,086 | | | | 107,596 | |
Other regulatory assets | | | 477,020 | | | | 515,053 | |
Deferred fuel costs | | | 67,998 | | | | 67,998 | |
Long-term receivables | | | 1,500 | | | | 1,209 | |
Other | | | 18,762 | | | | 20,218 | |
TOTAL | | | 697,366 | | | | 712,074 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 6,755,191 | | | $ | 6,685,168 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
BALANCE SHEETS | |
LIABILITIES AND MEMBERS' EQUITY | |
| | | | | | | | |
| | December 31, | |
| | | 2009 | | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Currently maturing long-term debt | | $ | 222,326 | | | $ | - | |
Accounts payable: | | | | | | | | |
Associated companies | | | 56,057 | | | | 67,465 | |
Other | | | 141,311 | | | | 254,055 | |
Customer deposits | | | 82,864 | | | | 78,401 | |
Taxes accrued | | | 25,993 | | | | 25,693 | |
Accumulated deferred income taxes | | | 13,349 | | | | - | |
Interest accrued | | | 32,955 | | | | 38,280 | |
Deferred fuel costs | | | 1,633 | | | | 91,563 | |
Obligations under capital leases | | | 56,528 | | | | 38,362 | |
Pension and other postretirement liabilities | | | 9,153 | | | | 8,935 | |
System agreement cost equalization | | | 54,000 | | | | 156,000 | |
Gas hedge contracts | | | - | | | | 26,668 | |
Other | | | 9,831 | | | | 33,841 | |
TOTAL | | | 706,000 | | | | 819,263 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 1,703,272 | | | | 1,940,065 | |
Accumulated deferred investment tax credits | | | 79,650 | | | | 82,848 | |
Obligations under capital leases | | | 65,483 | | | | 35,843 | |
Other regulatory liabilities | | | 45,711 | | | | 43,562 | |
Decommissioning | | | 298,216 | | | | 276,839 | |
Accumulated provisions | | | 20,301 | | | | 19,916 | |
Pension and other postretirement liabilities | | | 296,347 | | | | 282,683 | |
Long-term debt | | | 1,557,226 | | | | 1,387,473 | |
Other | | | 71,176 | | | | 88,838 | |
TOTAL | | | 4,137,382 | | | | 4,158,067 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
MEMBERS' EQUITY | | | | | | | | |
Preferred membership interests without sinking fund | | | 100,000 | | | | 100,000 | |
Members' equity | | | 1,837,348 | | | | 1,632,053 | |
Accumulated other comprehensive loss | | | (25,539 | ) | | | (24,215 | ) |
TOTAL | | | 1,911,809 | | | | 1,707,838 | |
| | | | | | | | |
TOTAL LIABILITIES AND MEMBERS' EQUITY | | $ | 6,755,191 | | | $ | 6,685,168 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | |
ENTERGY LOUISIANA, LLC | |
STATEMENTS OF MEMBERS' EQUITY AND COMPREHENSIVE INCOME | |
| | | | | | | | | | | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | | | | |
MEMBERS' EQUITY | | | | | | | | | | | | | | | | | | |
Members' Equity, January 1 | | $ | 1,632,053 | | | | | | $ | 1,481,509 | | | | | | $ | 1,344,003 | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Add: | | | | | | | | | | | | | | | | | | | | | |
Net income | | | 232,845 | | | $ | 232,845 | | | | 157,543 | | | $ | 157,543 | | | | 143,337 | | | $ | 143,337 | |
Additional equity from parent | | | - | | | | | | | | - | | | | | | | | 1,119 | | | | | |
Total | | | 232,845 | | | | | | | | 157,543 | | | | | | | | 144,456 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | | | | | | | | | | | | | |
Dividends/distribution declared: | | | | | | | | | | | | | | | | | | | | | | | | |
Common equity | | | 20,600 | | | | | | | | - | | | | | | | | - | | | | | |
Preferred membership interests | | | 6,950 | | | | 6,950 | | | | 6,950 | | | | 6,950 | | | | 6,950 | | | | 6,950 | |
Other | | | - | | | | | | | | 49 | | | | | | | | - | | | | | |
Total | | | 27,550 | | | | | | | | 6,999 | | | | | | | | 6,950 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Members' Equity, December 31 | | $ | 1,837,348 | | | | | | | $ | 1,632,053 | | | | | | | $ | 1,481,509 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
ACCUMULATED OTHER COMPREHENSIVE | | | | | | | | | | | | | | | | | | | | | | |
INCOME (Net of Taxes): | | | | | | | | | | | | | | | | | | | | | | | | |
Balance at beginning of period: | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated other comprehensive income | | $ | (24,215 | ) | | | | | | $ | (27,968 | ) | | | | | | $ | (25,695 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax expense (benefit) | | | | | | | | | | | | | | | | | |
of ($1,692), $2,835, and ($6,703)) | | | (1,324 | ) | | | (1,324 | ) | | | 3,753 | | | | 3,753 | | | | (2,273 | ) | | | (2,273 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balance at end of period: | | | | | | | | | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities | | $ | (25,539 | ) | | | | | | $ | (24,215 | ) | | | | | | $ | (27,968 | ) | | | | |
Comprehensive Income | | | | | | $ | 224,571 | | | | | | | $ | 154,346 | | | | | | | $ | 134,114 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 708 | | | $ | 160 | |
Temporary cash investments | | | 122,546 | | | | 151,689 | |
Total cash and cash equivalents | | | 123,254 | | | | 151,849 | |
Accounts receivable: | | | | | | | | |
Customer | | | 85,799 | | | | 56,978 | |
Allowance for doubtful accounts | | | (1,961 | ) | | | (1,312 | ) |
Associated companies | | | 81,050 | | | | 110,425 | |
Other | | | 14,594 | | | | 9,174 | |
Accrued unbilled revenues | | | 71,659 | | | | 72,550 | |
Total accounts receivable | | | 251,141 | | | | 247,815 | |
Note receivable - Entergy New Orleans | | | - | | | | 9,353 | |
Accumulated deferred income taxes | | | 7,072 | | | | - | |
Materials and supplies - at average cost | | | 138,050 | | | | 127,812 | |
Deferred nuclear refueling outage costs | | | 11,364 | | | | 36,783 | |
Gas hedge contracts | | | - | | | | 3,409 | |
Prepayments and other | | | 35,729 | | | | 10,633 | |
TOTAL | | | 566,610 | | | | 587,654 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliate preferred membership interests | | | 807,424 | | | | 544,994 | |
Decommissioning trust funds | | | 240,535 | | | | 209,070 | |
Storm reserve escrow account | | | 200,972 | | | | 806 | |
Non-utility property - at cost (less accumulated depreciation) | | | 946 | | | | 1,128 | |
TOTAL | | | 1,249,877 | | | | 755,998 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 7,216,146 | | | | 7,190,609 | |
Property under capital lease | | | 264,266 | | | | 262,111 | |
Construction work in progress | | | 521,172 | | | | 509,667 | |
Nuclear fuel under capital lease | | | - | | | | 122,011 | |
Nuclear fuel | | | 134,528 | | | | - | |
TOTAL UTILITY PLANT | | | 8,136,112 | | | | 8,084,398 | |
Less - accumulated depreciation and amortization | | | 3,457,190 | | | | 3,370,225 | |
UTILITY PLANT - NET | | | 4,678,922 | | | | 4,714,173 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 235,404 | | | | 238,798 | |
Other regulatory assets | | | 662,746 | | | | 477,020 | |
Deferred fuel costs | | | 67,998 | | | | 67,998 | |
Other | | | 26,866 | | | | 20,262 | |
TOTAL | | | 993,014 | | | | 804,078 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 7,488,423 | | | $ | 6,861,903 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | 35,550 | | | $ | 222,326 | |
Short-term borrowings | | | 23,066 | | | | - | |
Accounts payable: | | | | | | | | |
Associated companies | | | 148,528 | | | | 56,057 | |
Other | | | 140,564 | | | | 141,311 | |
Customer deposits | | | 84,437 | | | | 82,864 | |
Taxes accrued | | | - | | | | 25,993 | |
Accumulated deferred income taxes | | | - | | | | 13,349 | |
Interest accrued | | | 31,889 | | | | 32,955 | |
Deferred fuel costs | | | 59,227 | | | | 1,633 | |
Obligations under capital leases | | | - | | | | 56,528 | |
Pension and other postretirement liabilities | | | 8,632 | | | | 9,153 | |
System agreement cost equalization | | | - | | | | 54,000 | |
Other | | | 17,514 | | | | 9,831 | |
TOTAL | | | 549,407 | | | | 706,000 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 1,896,685 | | | | 1,809,984 | |
Accumulated deferred investment tax credits | | | 76,453 | | | | 79,650 | |
Obligations under capital leases | | | - | | | | 65,483 | |
Other regulatory liabilities | | | 88,899 | | | | 45,711 | |
Decommissioning | | | 321,176 | | | | 298,216 | |
Accumulated provisions | | | 223,556 | | | | 20,301 | |
Pension and other postretirement liabilities | | | 345,725 | | | | 296,347 | |
Long-term debt | | | 1,771,566 | | | | 1,557,226 | |
Other | | | 78,085 | | | | 71,176 | |
TOTAL | | | 4,802,145 | | | | 4,244,094 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
EQUITY | | | | | | | | |
Preferred membership interests without sinking fund | | | 100,000 | | | | 100,000 | |
Member's equity | | | 2,061,833 | | | | 1,837,348 | |
Accumulated other comprehensive loss | | | (24,962 | ) | | | (25,539 | ) |
TOTAL | | | 2,136,871 | | | | 1,911,809 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 7,488,423 | | | $ | 6,861,903 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (In Thousands) |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 2,183,586 | | | $ | 3,051,294 | | | $ | 2,737,552 | | | $ | 2,451,258 | | | $ | 2,650,181 | |
Net Income | | $ | 232,845 | | | $ | 157,543 | | | $ | 143,337 | | | $ | 137,618 | | | $ | 128,082 | |
Total assets | | $ | 6,775,191 | | | $ | 6,685,168 | | | $ | 5,723,121 | | | $ | 5,654,842 | | | $ | 5,855,053 | |
Long-term obligations (1) | | $ | 1,622,709 | | | $ | 1,423,316 | | | $ | 1,149,478 | | | $ | 1,191,044 | | | $ | 1,208,140 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | | | 2005 | |
| | (Dollars In Millions) |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 669 | | | $ | 967 | | | $ | 854 | | | $ | 797 | | | $ | 828 | |
Commercial | | | 456 | | | | 660 | | | | 578 | | | | 533 | | | | 539 | |
Industrial | | | 664 | | | | 1,062 | | | | 872 | | | | 809 | | | | 834 | |
Governmental | | | 36 | | | | 51 | | | | 43 | | | | 40 | | | | 41 | |
Total retail | | | 1,825 | | | | 2,740 | | | | 2,347 | | | | 2,179 | | | | 2,242 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 252 | | | | 249 | | | | 310 | | | | 215 | | | | 339 | |
Non-associated companies | | | 5 | | | | 12 | | | | 8 | | | | 12 | | | | 14 | |
Other | | | 102 | | | | 50 | | | | 73 | | | | 45 | | | | 55 | |
Total | | $ | 2,184 | | | $ | 3,051 | | | $ | 2,738 | | | $ | 2,451 | | | $ | 2,650 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 8,684 | | | | 8,487 | | | | 8,646 | | | | 8,558 | | | | 8,559 | |
Commercial | | | 5,867 | | | | 5,784 | | | | 5,848 | | | | 5,714 | | | | 5,554 | |
Industrial | | | 13,386 | | | | 13,162 | | | | 13,209 | | | | 12,770 | | | | 12,348 | |
Governmental | | | 459 | | | | 459 | | | | 446 | | | | 441 | | | | 428 | |
Total retail (2) | | | 28,396 | | | | 27,892 | | | | 28,149 | | | | 27,483 | | | | 26,889 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 1,513 | | | | 2,028 | | | | 2,299 | | | | 2,369 | | | | 2,451 | |
Non-associated companies | | | 109 | | | | 205 | | | | 112 | | | | 101 | | | | 109 | |
Total | | | 30,018 | | | | 30,125 | | | | 30,560 | | | | 29,953 | | | | 29,449 | |
| | | | | | | | | | | | | | | | | | | | |
(2) 2006 billed electric energy sales includes 96 GWh of billings related to 2005 deliveries that were billed in 2006 because of billing delays following Hurricane Katrina, which results in an increase of 402 GWh in 2006, or 1.5% and an increase of 762 in 2007, or 2.8%. | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| |
STATEMENTS OF CHANGES IN EQUITY AND COMPREHENSIVE INCOME | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | |
| | | | | Common Equity | | | | |
| | Preferred Membership Interests | | | Member's Equity | | | Accumulated Other Comprehensive Income (Loss) | | | Total | |
| | (In Thousands) | | | | | | | |
| | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 100,000 | | | $ | 1,481,509 | | | $ | (27,968 | ) | | $ | 1,553,541 | |
Net income | | | - | | | | 157,543 | | | | - | | | | 157,543 | |
Other comprehensive income: | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax expense of $2,835) | | | - | | | | - | | | | 3,753 | | | | 3,753 | |
Total comprehensive income | | | | | | | | | | | | | | | 161,296 | |
Dividends/distributions declared on preferred membership interests | | | | (6,950 | ) | | | | | | | (6,950 | ) |
Other | | | | | | | (49 | ) | | | | | | | (49 | ) |
Balance at December 31, 2008 | | $ | 100,000 | | | $ | 1,632,053 | | | $ | (24,215 | ) | | $ | 1,707,838 | |
Net income | | | - | | | | 232,845 | | | | - | | | | 232,845 | |
Other comprehensive income: | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax benefit of $1,692) | | | - | | | | - | | | | (1,324 | ) | | | (1,324 | ) |
Total comprehensive income | | | | | | | | | | | | | | | 231,521 | |
Dividends/distributions declared on common equity | | | - | | | | (20,600 | ) | | | - | | | | (20,600 | ) |
Dividends/distributions declared on preferred membership interests | | | - | | | | (6,950 | ) | | | - | | | | (6,950 | ) |
Balance at December 31, 2009 | | $ | 100,000 | | | $ | 1,837,348 | | | $ | (25,539 | ) | | $ | 1,911,809 | |
Net income | | | - | | | | 231,435 | | | | - | | | | 231,435 | |
Other comprehensive income: | | | | | | | | | | | | | | | | |
Pension and other postretirement liabilities (net of tax benefit of $1,818) | | | - | | | | - | | | | 577 | | | | 577 | |
Total comprehensive income | | | | | | | | | | | | | | | 232,012 | |
Dividends/distributions declared on preferred membership interests | | | - | | | | (6,950 | ) | | | - | | | | (6,950 | ) |
Balance at December 31, 2010 | | $ | 100,000 | | | $ | 2,061,833 | | | $ | (24,962 | ) | | $ | 2,136,871 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 2,538,766 | | | $ | 2,183,586 | | | $ | 3,051,294 | | | $ | 2,737,552 | | | $ | 2,451,258 | |
Net Income | | $ | 231,435 | | | $ | 232,845 | | | $ | 157,543 | | | $ | 143,337 | | | $ | 137,618 | |
Total assets | | $ | 7,488,423 | | | $ | 6,861,903 | | | $ | 6,685,168 | | | $ | 5,723,121 | | | $ | 5,654,842 | |
Long-term obligations (1) | | $ | 1,771,566 | | | $ | 1,622,709 | | | $ | 1,423,316 | | | $ | 1,149,478 | | | $ | 1,191,044 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 840 | | | $ | 669 | | | $ | 967 | | | $ | 854 | | | $ | 797 | |
Commercial | | | 543 | | | | 456 | | | | 660 | | | | 578 | | | | 533 | |
Industrial | | | 817 | | | | 664 | | | | 1,062 | | | | 872 | | | | 809 | |
Governmental | | | 42 | | | | 36 | | | | 51 | | | | 43 | | | | 40 | |
Total retail | | $ | 2,242 | | | $ | 1,825 | | | | 2,740 | | | | 2,347 | | | | 2,179 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 220 | | | | 252 | | | | 249 | | | | 310 | | | | 215 | |
Non-associated companies | | | 5 | | | | 5 | | | | 12 | | | | 8 | | | | 12 | |
Other | | | 72 | | | | 102 | | | | 50 | | | | 73 | | | | 45 | |
Total | | $ | 2,539 | | | $ | 2,184 | | | $ | 3,051 | | | $ | 2,738 | | | $ | 2,451 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 9,533 | | | | 8,684 | | | | 8,487 | | | | 8,646 | | | | 8,558 | |
Commercial | | | 6,164 | | | | 5,867 | | | | 5,784 | | | | 5,848 | | | | 5,714 | |
Industrial | | | 14,473 | | | | 13,386 | | | | 13,162 | | | | 13,209 | | | | 12,770 | |
Governmental | | | 479 | | | | 459 | | | | 459 | | | | 446 | | | | 441 | |
Total retail (2) | | | 30,649 | | | | 28,396 | | | | 27,892 | | | | 28,149 | | | | 27,483 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 2,860 | | | | 1,513 | | | | 2,028 | | | | 2,299 | | | | 2,369 | |
Non-associated companies | | | 101 | | | | 109 | | | | 205 | | | | 112 | | | | 101 | |
Total | | | 33,610 | | | | 30,018 | | | | 30,125 | | | | 30,560 | | | | 29,953 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
(2) 2006 billed electric energy sales includes 96 GWh of billings related to 2005 deliveries that were billed in 2006 | |
because of billing delays following Hurricane Katrina, which results in an increase of 402 GWh in 2006, or 1.5%, and | |
an increase of 762 GWh in 2007, or 2.8%. | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net Income
2010 Compared to 2009
Net income increased $6.1 million primarily due to higher net revenue and higher other income, partially offset by higher taxes other than income taxes, higher depreciation and amortization expenses, and higher interest expense.
2009 Compared to 2008
Net income increased $17.9 million primarily due to higher net revenue, partially offset by higher interest expense and higher depreciation and amortization expenses.
2008Net Revenue
2010 Compared to 20072009
Net income decreased $12.4 millionrevenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $533.9 |
Volume/weather | | 18.9 |
Other | | (0.2) |
2010 net revenue | | $552.6 |
The volume/weather variance is primarily due to higher other operation and maintenance expenses, lower other income, and higher depreciation and amortization expenses, partially offset by higher net revenue.an increase of 1,046 GWh, or 8%, in billed electricity usage in all sectors, primarily due to the effect of more favorable weather on the residential sector.
Net RevenueGross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
Gross operating revenues increased primarily due to an increase of $22 million in power management rider revenue as the result of higher rates, the volume/weather variance discussed above, and an increase in Grand Gulf rider revenue as a result of higher rates and increased usage, offset by a decrease of $23.5 million in fuel cost recovery revenues due to lower fuel rates.
Fuel and purchased power expenses decreased primarily due to a decrease in deferred fuel expense as a result of prior over-collections, offset by an increase in the average market price of purchased power coupled with increased net area demand.
Other regulatory charges increased primarily due to increased recovery of costs associated with the power management recovery rider. There is no material effect on net income due to quarterly adjustments to the power management recovery rider.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
2009 Compared to 2008
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $498.8 |
Retail electric price | | 18.9 |
Net wholesale revenue | | 7.6 |
Reserve equalization | | 5.9 |
Other | | 2.7 |
2009 net revenue | | $533.9 |
The retail electric price variance is primarily due to a formula rate plan increase effective July 2009 and an increase in Attala power plant costs that are recovered through the power management rider. The formula rate plan filing is discussed further in "“State and Local Rate Regulation"” below. The net income effect of the Attala power plant costs recovery is limited to a portion representing an allowed return on equity with the remainder offset by Attala power plant costs in other operation and maintenance expenses, depreciation expenses, and taxes other than income taxes.
The net wholesale revenue variance is primarily due to a change in a contract with a wholesale customer that increased its monthly demand charge and an increased net balance on joint account sales as a result of lower fuel prices in 2009.
The reserve equalization variance is primarily due to increased reserve equalization revenue as a result of changes in the Entergy System generation mix compared to the same period in 2008.
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)
Gross operating revenues decreased primarily due to a decrease of $254.6 million in fuel cost recovery revenues due to lower fuel rates and decreased usage and a decrease of $52.1 million in gross wholesale revenues
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
primarily due to a decrease in volume as a result of less energy available for resale sales, partially offset by an increase of $20.4 million in power management rider revenue.
Fuel and purchased power expenses decreased primarily due to decreases in the average market prices of natural gas and purchased power.
Other regulatory charges (credits) decreased primarily due to decreased recovery of costs associated with the power management recovery rider and decreased recovery through the Grand Gulf Rider of Grand Gulf capacity costs due to lower rates and decreased usage. There is no material effect on net income due to quarterly adjustments to the power management recovery rider and annual adjustments to the Grand Gulf rider. See Note 2 to the financial statements for additional information regarding the power management recovery rider and the Grand Gulf Rider.
2008Other Income Statement Variances
2010 Compared to 20072009
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3)Taxes other regulatory charges. Following is an analysis of the change in net revenue comparing 2008 to 2007.
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $486.9 |
Attala costs | | 9.9 |
Rider revenue | | 6.0 |
Base revenue | | 5.1 |
Reserve equalization | | (2.4) |
Net wholesale revenue | | (4.0) |
Other | | (2.7) |
2008 net revenue | | $498.8 |
The Attala costs variance isthan income taxes increased primarily due to an increase in ad valorem taxes as a result of higher millage rates and a higher 2010 assessment as compared to 2009 and an increase in local franchise taxes as a result of higher revenues primarily in the Attala power plant costs that are recovered through the power management rider. The net income effect of this recovery in limited to a portion representing an allowed return on equity with the remainder offset by Attala power plant costs in other operationresidential and maintenance expenses, depreciation expenses, and taxes other than income taxes.commercial sectors.
The rider revenue variance is the result of a storm damage rider that became effective in October 2007. The establishment of this rider results in an increase in rider revenueDepreciation and a corresponding increase in other operation and maintenance expense for the storm reserve with no effect on net income.
The base revenue variance is primarily due to a formula rate plan increase effective July 2007. The formula rate plan filing is discussed further in "State and Local Rate Regulation" below.
The reserve equalization variance is primarily due to changes in the Entergy System generation mix compared to the same period in 2007.
The net wholesale revenue variance is primarily due to lower profit on joint account sales and reduced capacity revenue from the Municipal Energy Agency of Mississippi.
Gross operating revenues, fuel and purchased poweramortization expenses and other regulatory charges
Gross operating revenues increased primarily due to an increase of $152.5 million in fuel cost recovery revenues due to higher fuel rates, partially offset by a decrease of $43 millionplant in gross wholesale revenues due to a decrease in net generation and purchases in excess of decreased net area demand resulting in less energy available for resale sales coupled with a decrease in system agreement remedy receipts.service.
Entergy Mississippi, Inc.
Management'sManagement’s Financial Discussion and Analysis
Fuel and purchased power expensesOther income increased primarily due to increasesan increase in the average market prices of natural gas and purchased power, partially offset by decreased demand and decreased recovery from customers of deferred fuel costs.allowance for equity funds used during construction due to more construction work in progress in 2010, including the new nuclear development project that is discussed below.
Other regulatory chargesInterest expense increased primarily due to increased recovery through the Grand Gulf riderissuance of Grand Gulf capacity costs due to higher rates and increased recovery$150 million of costs associated with the power management recovery rider. There is no material effect on net income due to quarterly adjustments to the power management recovery rider. See Note 2 to the financial statements for additional information regarding the power management recovery rider and the Grand Gulf Rider.6.64% Series first mortgage bonds in June 2009.
Other Income Statement Variances
2009 Compared to 2008
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Other income increased primarily due to the gain recorded in 2009 on the sale of utility property, offset by a potential buyer'sbuyer’s forfeiture of a $1.7 million deposit in June 2008 for an option to purchase non-utility property.
Interest expense increased primarily due to the issuance of $150 million of 6.64% Series first mortgage bonds in June 2009.
2008 Compared to 2007
Other operation and maintenance expenses increased primarily due to:
· | an increase of $8.6 million in loss reserves in 2008 compared to 2007, including the effect of the storm damage rider implemented in October 2007; |
· | an increase of $3.5 million in fossil plant expenses due to increased outages, higher plant maintenance costs, and environmental costs; |
· | an increase of $2.8 million in distribution expenses due primarily to the timing of contract work and lower reimbursements; and |
· | an increase of $1.4 million in legal spending due to increased regulatory activity. |
The increase was partially offset by a decrease of $5.9 million in payroll, payroll-related, and benefit costs.
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Other income decreased primarily due to decreased interest earned on money pool investments and the gain recorded in 2007 on the sale of non-utility property.
Income Taxes
The effective income tax rates for 2010, 2009, and 2008 and 2007 were 37.0%, 35.3%, 35.8%, and 33.2%35.8%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rate.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Cash Flow
Cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | 2009 | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $1,082 | | $40,582 | | $73,417 | Cash and cash equivalents at beginning of period | | $91,451 | | $1,082 | | $40,582 |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 222,019 | | 80,000 | | 169,194 | Operating activities | | 120,107 | | 222,018 | | 80,000 |
| Investing activities | | (159,473) | | (133,289) | | (68,901) | Investing activities | | (174,096) | | (159,473) | | (133,289) |
| Financing activities | | 27,824 | | 13,789 | | (133,128) | Financing activities | | (36,246) | | 27,824 | | 13,789 |
| Net increase (decrease) in cash and cash equivalents | | 90,370 | | (39,500) | | (32,835) | Net increase (decrease) in cash and cash equivalents | | (90,235) | | 90,369 | | (39,500) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $91,452 | | $1,082 | | $40,582 | Cash and cash equivalents at end of period | | $1,216 | | $91,451 | | $1,082 |
Operating Activities
Cash flow provided by operating activities decreased $101.9 million in 2010 primarily due to decreased recovery of fuel costs primarily as a result of prior period over-collections and an increase of $27.7 million in pension contributions, offset by a decrease of $7.1 million in income tax payments. See Note 2 to the financial statements for a discussion of Entergy Mississippi’s fuel and purchased power cost recovery mechanism. See “Critical Accounting Estimates” below for further discussion of qualified pension and other postretirement benefits funding. 160; In 2010, Entergy Mississippi received federal tax cash refunds and made state tax cash payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The federal refunds result from the 2009 tax return filed in 2010 and the associated true up adjustment which relates primarily to the acceleration of deductions for plant-related expenditures. The state payments result from the allocation of the combined Mississippi tax reflected on the 2009 tax return filed in 2010 and for amended Mississippi returns for 2006-2008 filed in 2010.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
Cash flow provided by operating activities increased $142 million in 2009 primarily due to increased recovery of deferred fuel costs and a decrease of $5.9 million in pension contributions, offset by an increase of $22.4 million in income tax payments.
Investing Activities
Cash flow provided by operatingused in investing activities decreased $89.2increased $14.6 million in 20082010 primarily due to:to increased construction expenditures resulting from a $49 million payment to a System Energy subsidiary for costs associated with the development of new nuclear generation at Grand Gulf, as discussed below, and increased transmission construction expenditures resulting from additional transmission reliability work in 2010, offset by money pool activity.
· | decreased recovery of deferred fuel and purchased power costs; |
· | the receipt of $48 million of securitization proceeds in 2007; |
· | the timing of collections of receivables from customers and payments to vendors; and |
· | an increase of $10.9 million in pension contributions. |
Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased $31.4 million in 2010 compared to increasing by $31.4 million in 2009. The decrease was partially offset by a decrease in income tax payments.
Investing Activitiesmoney pool is an inter-company borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for external short-term borrowings.
Cash flow used in investing activities increased $26.2 million in 2009 primarily due to money pool activity, offset by decreased construction expenditures related to various fossil and distribution projects.
Increases in Entergy Mississippi'sMississippi’s receivable from the money pool are a use of cash flow, and Entergy Mississippi'sMississippi’s receivable from the money pool increased by $31.4 million in 2009. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries'Entergy’s subsidiaries’ need for external short-term borrowings.
Financing Activities
Cash flowEntergy Mississippi’s financing activities used $36.2 million of cash in investing activities increased $64.42010 compared to providing $27.8 million of cash in 20082009 primarily due to the receipt of proceeds in 2007 from funds held in trust in 2006 that were used for the redemption in January 2007, prior to maturity, of $100 million of 4.35% Series First Mortgage Bonds, partially offset by the transfer in 2007 of $30.7 million to the storm damage reserve escrow account and money pool activity.to:
· | the redemption, prior to maturity, of $100 million of 7.25% Series first mortgage bonds in April 2010; |
· | the issuance of $150 million of 6.64% Series first mortgage bonds in June 2009; and |
· | the issuance of $80 million of 6.20% Series first mortgage bonds in April 2010; offset by |
DecreasesIncreases in Entergy Mississippi's receivable fromMississippi’s payable to the money pool are a source of cash flow, and Entergy Mississippi's receivable fromMississippi’s payable to the money pool decreasedincreased by $21$33.3 million in 2008.2010 compared to decreasing by $66 million in 2009.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Financing Activities
Cash flow provided by financing activities increased $14 million in 2009 primarily due to the issuance of $150 million of 6.64% Series first mortgage bonds in June 2009, offset by money pool activity.
Decreases in Entergy Mississippi'sMississippi’s payable to the money pool are a use of cash flow, and Entergy Mississippi'sMississippi’s payable to the money pool decreased by $66 million in 2009.
Entergy Mississippi's financing activities provided $13.8 million in cash flow in 2008 compared to using $133.1 million in cash flow in 2007 primarily due to the redemption, prior to maturity, of $100 million of 4.35% Series First Mortgage Bonds in January 2007 and money pool activity, partially offset by an increase of $18 million in common stock dividends paid.
Increases in Entergy Mississippi's payable to the money pool are a source of cash flow, and Entergy Mississippi's payable to the money pool increased by $66 million in 2008.
See Note 5 to the financial statements for details on long-term debt.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
Capital Structure
Entergy Mississippi'sMississippi’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio is due to the issuance of $150 million of 6.64% Series first mortgage bonds in June 2009, as discussed below.
| | December 31, 2009 | | December 31, 2008 | | December 31, 2010 | | December 31, 2009 |
| | | | | | | | |
Debt to capital | | | 51.9% | | 53.5% |
Effect of subtracting cash | | | 0.0% | | (2.8)% |
Net debt to net capital | | 50.7% | | 49.5% | | 51.9% | | 50.7% |
Effect of subtracting cash from debt | | 2.8% | | 0.0% | |
Debt to capital | | 53.5% | | 49.5% | |
Net debt consists of debt less cash and cash equivalents. Debt consists of capital lease obligations and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi'sMississippi’s financial condition.
Uses of Capital
Entergy Mississippi requires capital resources for:
· | construction and other capital investments; |
· | debt and preferred stock maturities; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | dividend and interest payments. |
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Following are the amounts of Entergy Mississippi'sMississippi’s planned construction and other capital investments, and existing debt obligations and lease obligations (includes estimated interest payments):
| 2010 | | 2011-2012 | | 2013-2014 | | After 2014 | | Total | | 2011 | | 2012-2013 | | 2014-2015 | | After 2015 | | Total |
| (In Millions) | (In Millions) |
Planned construction and | | | | | | | | | | | |
capital investment (1) | $219 | | $375 | | N/A | | N/A | | $594 | | |
Planned construction and capital investment (1): | | Planned construction and capital investment (1): | | | | | | | |
Generation | | $18 | | $289 | | N/A | | N/A | | $307 |
Transmission | | 72 | | 115 | | N/A | | N/A | | 187 |
Distribution | | 86 | | 145 | | N/A | | N/A | | 231 |
Other | | 4 | | 11 | | N/A | | N/A | | 15 |
Total | | $180 | | $560 | | N/A | | N/A | | $740 |
Long-term debt (2) | $50 | | $173 | | $182 | | $1,080 | | $1,485 | | $125 | | $183 | | $77 | | $1,017 | | $1,402 |
Capital lease payments | $2 | | $4 | | $2 | | N/A | | $8 | | $3 | | $7 | | $3 | | $3 | | $16 |
Operating leases | $6 | | $7 | | $6 | | $9 | | $28 | | $6 | | $11 | | $8 | | $8 | | $33 |
Purchase obligations (3) | $187 | | $366 | | $351 | | $1,596 | | $2,500 | | $185 | | $364 | | $365 | | $1,525 | | $2,439 |
(1) | Includes approximately $123$121 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems, and to support normal customer growth. |
(2) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Mississippi, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financial statements. |
In addition to the contractual obligations given above, Entergy Mississippi currently expects to contribute approximately $17.8$26.4 million to its pension plans and approximately $5$5.0 million to other postretirement plans in 2010;2011; although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act2011.
Entergy Mississippi, Inc.
Management’s Financial Discussion and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Mississippi's pension contributions in the future.Analysis
Also in addition to the contractual obligations, Entergy Mississippi has $8$10.1 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
The planned capital investment estimate for Entergy Mississippi reflects capital required to support existing business and customer growth. Entergy'sEntergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental compliance, market volatility, economic trends, changes in project plans, and the abilityabil ity to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.
As a wholly-owned subsidiary, Entergy Mississippi dividends its earnings to Entergy Corporation at a percentage determined monthly. Entergy Mississippi'sMississippi’s long-term debt indentures restrict the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock. As of December 31, 2009,2010, Entergy Mississippi had restricted retained earnings unavailable for distribution to Entergy Corporation of $236$240.8 million.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
New Nuclear Development
Pursuant to the Mississippi Baseload Act and the Mississippi Public Utilities Act, Entergy Mississippi is developing a project option for new nuclear generation at Grand Gulf Nuclear Station. Entergy Mississippi, together with Entergy Gulf States Louisiana and Entergy Louisiana, has been engaged in the development of options to construct new nuclear generation at the Grand Gulf and River Bend Station sites. Entergy Mississippi is leading the development at Grand Gulf, and Entergy Gulf States Louisiana and Entergy Louisiana are leading the development at River Bend. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In 2010, Entergy MississippiMi ssissippi paid for and has recognized on its books $49.5$49 million in costs associated with the development of new nuclear generation at Grand Gulf; these costs previously had been recorded on the books of Entergy New Nuclear Utility Development, LLC, a System Energy subsidiary. In October 2010, Entergy Mississippi filed an application with the MPSC requesting that the MPSC determine that it is in the public interest to preserve the option to construct new nuclear generation at Grand Gulf and that the MPSC approve the deferral of Entergy Mississippi’s costs incurred to date and in the future related to this project, including the accrual of AFUDC or similar carrying charges.
Sources of Capital
Entergy Mississippi'sMississippi’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred stock issuances; and |
· | bank financing under new or existing facilities. |
Entergy Mississippi may refinance or redeem debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common and preferred stock issuances by Entergy Mississippi require prior regulatory approval. Preferred stock and debt issuances are also subject to issuance tests set forth in its corporate charter, bond indenture, and other agreements. Entergy Mississippi has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
In May and June 2009,2010, Entergy Mississippi renewed its twothree separate credit facilities through May 2010. In August 2009, Entergy Mississippi increased its borrowing capacity with a third line of credit which will also expire2011 in May 2010, increasing the borrowing limits to the aggregate amount of $70 million. No borrowings were outstanding under the credit facilities as of December 31, 2009.2010.
Entergy Mississippi'sMississippi’s receivables from or (payables(or payables to) the money pool were as follows as of December 31 for each of the following years:
2009 | | 2008 | | 2007 | | 2006 |
(In Thousands) |
| | | | | | |
$31,435 | | ($66,044) | | $20,997 | | $39,573 |
2010 | | 2009 | | 2008 | | 2007 |
(In Thousands) |
| | | | | | |
($33,255) | | $31,435 | | ($66,044) | | $20,997 |
In May 2007, $6.6 million of Entergy Mississippi'sMississippi’s receivable from the money pool was replaced by a note receivable from Entergy New Orleans. See Note 4 to the financial statements for a description of the money pool.
Entergy Mississippi has obtained short-term borrowing authorization from the FERC under which it may borrow through October 2011, up to the aggregate amount, at any one time outstanding, of $175 million. See Note 4 to the financial statements for further discussion of Entergy Mississippi'sMississippi’s short-term borrowing limits. Entergy Mississippi has also obtained an order from the FERC authorizing long-term securities issuances through July 2011.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
The rates that Entergy Mississippi charges for electricity significantly influence its financial position, results of operations, and liquidity. Entergy Mississippi is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the MPSC, is primarily responsible for approval of the rates charged to customers.
Formula Rate Plan
In September 2009, Entergy Mississippi filed with the MPSC proposed modifications to its formula rate plan rider. The proposed modifications include:In March 2010 the MPSC issued an order: (1) resettingproviding the opportunity for a reset of Entergy Mississippi's return on common equity to the middle ofa point within the formula rate plan bandwidth each year and eliminating the 50/50 sharing that had been in the current plan, (2) modifying the performance measurement process, and (3) replacing the current raterevenue change limit of two percent of revenues, which was subject to a $14.5 million revenue adjustment cap, with a proposed limit of four percent of revenues, (3) implementingalthough any adjustment above two percent requires a hearing before the MPSC. The MPSC did not approve Entergy Mississippi's request to use a projected test year for its annua l scheduled formula rate plan filing and, therefore, Entergy Mississippi will continue to use a historical test year for its annual evaluation reports under the plan.
In March 2010, Entergy Mississippi submitted its 2009 test year filing, its first annual filing under the new formula rate plan rider. In June 2010 the MPSC approved a joint stipulation between Entergy Mississippi and subsequent look-backthe Mississippi Public Utilities Staff that provides for no change in rates, but does provide for the prior year, and (4) modifyingdeferral as a regulatory asset of $3.9 million of legal expenses associated with certain litigation involving the performance measurement process.Mississippi Attorney General, as well as ongoing legal expenses in that litigation until the litigation is resolved.
In March 2009, Entergy Mississippi made with the MPSC its annual scheduled formula rate plan filing for the 2008 test year. The filing reported a $27.0 million revenue deficiency and an earned return on common equity of 7.41%. Entergy Mississippi requested a $14.5 million increase in annual electric revenues, which is the maximum increase allowed under the terms of the formula rate plan. The MPSC issued an order on June 30, 2009, finding that Entergy Mississippi'sMississippi’s earned return was sufficiently below the lower bandwidth limit set by the formula rate plan to require a $14.5 million increase in annual revenues, effective for bills rendered on or after June 30, 2009.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
In March 2008, Entergy Mississippi made its annual scheduled formula rate plan filing for the 2007 test year with the MPSC. The filing showed that a $10.1 million increase in annual electric revenues is warranted. In June 2008, Entergy Mississippi reached a settlement with the Mississippi Public Utilities Staff that would result in a $3.8 million rate increase. In January 2009 the MPSC rejected the settlement and left the current rates in effect. Entergy Mississippi appealed the MPSC'sMPSC’s decision to the Mississippi Supreme Court. After the decision of the MPSC regarding the formula rate plan filing for the 2008 test year, Entergy Mississippi filed a motion to dismiss its appeal to the Mississippi Supreme Court.
In March 2007, Entergy Mississippi made its annual scheduled formula rate plan filing for the 2006 test year with the MPSC. The filing showed that an increase of $12.9 million in annual electric revenues is warranted. In June 2007 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities staff that provides for a $10.5 million rate increase, which was effective beginning with July 2007 billings.
Fuel and Purchased Power Cost Recovery
Entergy Mississippi'sMississippi’s rate schedules include an energy cost recovery rider that is adjusted quarterly to reflect accumulated over- or under-recoveries from the second prior quarter. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
In July 2008 the MPSC began a proceeding to investigate the fuel procurement practices and fuel adjustment schedules of the Mississippi utility companies, including Entergy Mississippi. A two-day public hearing was held in July 2008, and after a recess during which the MPSC reviewed information, the hearing resumed on August 5, 2008, for additional testimony by an expert witness retained by the MPSC. The MPSC's witness presented testimony regarding a review of the utilities' fuel adjustment clauses. The MPSC stated that the goal of the proceeding is fact-finding so that the MPSC may decide whether to amend the current fuel cost recovery process. In February 2009 the MPSC published a final report of its expert witness, which discussed Entergy Mississippi's fuel procurement activities and made recommendations regarding fuel recovery practices in Mississippi.
In addition, in October 2008 the MPSC issued an order directing Entergy Mississippi and Entergy Services to provide documents associated with fuel adjustment clause litigation in Louisiana involving Entergy Louisiana and Entergy New Orleans, and in January 2009 issued an order requiring Entergy Mississippi to provide additional information related to the long-term Evangeline gas contract that had been an issue in the fuel adjustment clause litigation in Louisiana. Entergy Mississippi and Entergy Services filed a response
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
to the MPSC order stating that gas from the Evangeline gas contract had been sold into the Entergy System exchange and had an effect on the costs paid by Entergy Mississippi'sMississippi’s customers. The MPSC's investigation is ongoing.Further proceedings have not been scheduled.
In August 2009 the MPSC retained an independent audit firm to audit Entergy Mississippi's fuel adjustment clause submittals for the period October 2007 through September 2009. The independent audit firm submitted its report to the MPSC in December 2009. The report does not recommend that any costs be disallowed for recovery. The report did suggest that some costs, less than one percent of the fuel and purchased power costs recovered during the period, may have been more reasonably charged to customers through base rates rather than through fuel charges, but the report did not suggest that customers should not have paid for those costs. In November 2009 the MPSC also retained another firm to review processes and practices related to fuel and purchasedpur chased energy. The results of that review are due towere filed with the MPSC in March 2010.
In January 2010that report, the independent consulting firm found that the practices and procedures in activities that directly affect the costs recovered through Entergy Mississippi's fuel adjustment clause appear reasonable. Both audit reports were certified by the MPSC issued an order certifying to the Mississippi Legislature, the independent audit report and the Public Utilities Staff's annual fuel audit report for the years ended September 30, 2008 and 2009, which did not find any imprudent costs. The order stated that the MPSC will open a rulemaking docket to address certain policy issues regarding allowable fuel adjustment costs, fuel adjustment mechanisms, and related matters.as required by Mississippi law.
Mississippi Attorney General Complaint
The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The litigation is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believes the complaint is unfounded. On December 29, 2008, the defendant Entergy companies filed to remove the attorney general'sgeneral’s suit to U.S. District Court (the forum that Entergy believes is appropriate to resolve the types of federal issues raisedr aised in the suit), where it is currently pending, and additionally answered the complaint and filed a counter-claim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. The Mississippi attorney general has filed a pleading seeking to remand the matter to state court. In May 2009, the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the attorney general'sgeneral’s complaint.
System Agreement Proceedings
See "“System Agreement Proceedings" in Entergy Corporation and Subsidiaries' Management's Discussion and Analysis for discussion of the proceeding at the FERC involving the System Agreement and of other related proceedings.
Transmission
See "”, “Independent Coordinator of Transmission"”, “Notice to SERC Reliability Corporation regarding Reliability Standards”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries Management’s Finan cial Discussion and Analysis for further discussion.a discussion of these topics.
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
The preparation of Entergy Mississippi'sMississippi’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of Entergy Mississippi'sMississippi’s financial position or results of operations.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Mississippi records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month'smonth’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the "“Critical Accounting Estimates"�� section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for furtherfurth er discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $629 | | $6,592 | | (0.25%) | | $694 | | $7,781 |
Rate of return on plan assets | | (0.25%) | | $498 | | - | | (0.25%) | | $508 | | - |
Rate of increase in compensation | | 0.25% | | $304 | | $1,347 | | 0.25% | | $310 | | $1,499 |
Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $327 | | $1,700 | | 0.25% | | $320 | | $1,881 |
Discount rate | | (0.25%) | | $187 | | $1,945 | | (0.25%) | | $180 | | $2,150 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Costs and Funding
Total qualified pension cost for Entergy Mississippi in 20092010 was $3.4$7.3 million. Entergy Mississippi anticipates 20102011 qualified pension cost to be $7.3$7.7 million. Entergy Mississippi contributed $5.8$33.5 million to its qualified pension plans in 20092010 and anticipates that it will contribute approximately $17.8$26.4 million in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Mississippi's pension contributions in the future.2011.
Total postretirement health care and life insurance benefit costs for Entergy Mississippi in 20092010 were $6.5$5.0 million, including $1.6 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Mississippi expects 20102011 postretirement health care and life insurance benefit costs to approximate $5.0$5.5 million, including $1.6$2.0 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Mississippi expects to contribute approximately $5 million to its other postretirement plans in 2010.2011.
New Accounting PronouncementsFederal Healthcare Legislation
See "the “NewQualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting PronouncementsEstimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Financial Discussion and Analysis for a discussion of new accounting pronouncements.Federal Healthcare Legislation.
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Discussion and Analysis.
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To the Board of Directors and Shareholders of
Entergy Mississippi, Inc.
Jackson, Mississippi
We have audited the accompanying balance sheets of Entergy Mississippi, Inc. (the “Company”) as of December 31, 20092010 and 2008,2009, and the related income statements, statements of income, retained earnings,changes in common equity, and statements of cash flows (pages 336326 through 340330 and applicable items in pages 6349 through 193)184) for each of the three years in the period ended December 31, 2009.2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Entergy Mississippi, Inc. as of December 31, 20092010 and 2008,2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 201025, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
| |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 1,230,185 | | | $ | 1,177,304 | | | $ | 1,462,182 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 277,806 | | | | 340,804 | | | | 456,730 | |
Purchased power | | | 383,769 | | | | 359,664 | | | | 468,219 | |
Other operation and maintenance | | | 217,354 | | | | 217,452 | | | | 216,554 | |
Taxes other than income taxes | | | 66,841 | | | | 63,381 | | | | 63,807 | |
Depreciation and amortization | | | 89,875 | | | | 86,872 | | | | 83,297 | |
Other regulatory charges (credits) - net | | | 16,001 | | | | (57,056 | ) | | | 38,385 | |
TOTAL | | | 1,051,646 | | | | 1,011,117 | | | | 1,326,992 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 178,539 | | | | 166,187 | | | | 135,190 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 6,655 | | | | 2,964 | | | | 2,966 | |
Interest and investment income | | | 416 | | | | 863 | | | | 1,778 | |
Miscellaneous - net | | | (804 | ) | | | (564 | ) | | | (2,047 | ) |
TOTAL | | | 6,267 | | | | 3,263 | | | | 2,697 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 55,774 | | | | 51,282 | | | | 46,888 | |
Allowance for borrowed funds used during construction | | | (3,719 | ) | | | (1,791 | ) | | | (1,951 | ) |
TOTAL | | | 52,055 | | | | 49,491 | | | | 44,937 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 132,751 | | | | 119,959 | | | | 92,950 | |
| | | | | | | | | | | | |
Income taxes | | | 49,064 | | | | 42,323 | | | | 33,240 | |
| | | | | | | | | | | | |
NET INCOME | | | 83,687 | | | | 77,636 | | | | 59,710 | |
| | | | | | | | | | | | |
Preferred dividend requirements and other | | | 2,828 | | | | 2,828 | | | | 2,828 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON STOCK | | $ | 80,859 | | | $ | 74,808 | | | $ | 56,882 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, INC. | |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 1,177,304 | | | $ | 1,462,182 | | | $ | 1,372,802 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 340,804 | | | | 456,730 | | | | 456,346 | |
Purchased power | | | 359,664 | | | | 468,219 | | | | 414,763 | |
Other operation and maintenance | | | 217,452 | | | | 216,554 | | | | 202,952 | |
Taxes other than income taxes | | | 63,381 | | | | 63,807 | | | | 62,516 | |
Depreciation and amortization | | | 86,872 | | | | 83,297 | | | | 79,470 | |
Other regulatory charges (credits) - net | | | (57,056 | ) | | | 38,385 | | | | 14,810 | |
TOTAL | | | 1,011,117 | | | | 1,326,992 | | | | 1,230,857 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 166,187 | | | | 135,190 | | | | 141,945 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 2,964 | | | | 2,966 | | | | 3,900 | |
Interest and dividend income | | | 863 | | | | 1,778 | | | | 5,572 | |
Miscellaneous - net | | | (564 | ) | | | (2,047 | ) | | | 1,011 | |
TOTAL | | | 3,263 | | | | 2,697 | | | | 10,483 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 47,414 | | | | 41,560 | | | | 41,699 | |
Other interest - net | | | 3,868 | | | | 5,328 | | | | 5,321 | |
Allowance for borrowed funds used during construction | | | (1,791 | ) | | | (1,951 | ) | | | (2,548 | ) |
TOTAL | | | 49,491 | | | | 44,937 | | | | 44,472 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 119,959 | | | | 92,950 | | | | 107,956 | |
| | | | | | | | | | | | |
Income taxes | | | 42,323 | | | | 33,240 | | | | 35,850 | |
| | | | | | | | | | | | |
NET INCOME | | | 77,636 | | | | 59,710 | | | | 72,106 | |
| | | | | | | | | | | | |
Preferred dividend requirements and other | | | 2,828 | | | | 2,828 | | | | 2,768 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON STOCK | | $ | 74,808 | | | $ | 56,882 | | | $ | 69,338 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 83,687 | | | $ | 77,636 | | | $ | 59,710 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Depreciation and amortization | | | 89,875 | | | | 86,872 | | | | 83,297 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 48,744 | | | | 15,923 | | | | 32,031 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (40,053 | ) | | | 44,050 | | | | (46,490 | ) |
Fuel inventory | | | (1,003 | ) | | | 3,413 | | | | 1,078 | |
Accounts payable | | | 1,906 | | | | 3,511 | | | | 3,950 | |
Taxes accrued | | | (13,864 | ) | | | 707 | | | | 4,858 | |
Interest accrued | | | 1,915 | | | | 2,066 | | | | 1,919 | |
Deferred fuel costs | | | (76,064 | ) | | | 77,932 | | | | (81,607 | ) |
Other working capital accounts | | | 46,101 | | | | (37,373 | ) | | | 43,534 | |
Changes in provision for estimated losses | | | (1,937 | ) | | | 4,446 | | | | (13,307 | ) |
Changes in other regulatory assets | | | (5,780 | ) | | | (43,807 | ) | | | (98,387 | ) |
Changes in pension and other postretirement liabilities | | | (6,525 | ) | | | (6,786 | ) | | | 61,277 | |
Other | | | (6,895 | ) | | | (6,572 | ) | | | 28,137 | |
Net cash flow provided by operating activities | | | 120,107 | | | | 222,018 | | | | 80,000 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (223,787 | ) | | | (130,907 | ) | | | (156,224 | ) |
Allowance for equity funds used during construction | | | 6,655 | | | | 2,964 | | | | 2,966 | |
Proceeds from sale of assets | | | 3,951 | | | | - | | | | - | |
Change in money pool receivable - net | | | 31,435 | | | | (31,435 | ) | | | 20,997 | |
Changes in other investments - net | | | 7,615 | | | | - | | | | - | |
Payment to storm reserve escrow account | | | - | | | | (175 | ) | | | (944 | ) |
Other | | | 35 | | | | 80 | | | | (84 | ) |
Net cash flow used in investing activities | | | (174,096 | ) | | | (159,473 | ) | | | (133,289 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 76,727 | | | | 147,996 | | | | 28,873 | |
Retirement of long-term debt | | | (100,000 | ) | | | - | | | | (30,000 | ) |
Change in money pool payable - net | | | 33,255 | | | | (66,044 | ) | | | 66,044 | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (43,400 | ) | | | (51,300 | ) | | | (48,300 | ) |
Preferred stock | | | (2,828 | ) | | | (2,828 | ) | | | (2,828 | ) |
Net cash flow provided by (used in) financing activities | | | (36,246 | ) | | | 27,824 | | | | 13,789 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (90,235 | ) | | | 90,369 | | | | (39,500 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 91,451 | | | | 1,082 | | | | 40,582 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 1,216 | | | $ | 91,451 | | | $ | 1,082 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 51,250 | | | $ | 47,007 | | | $ | 42,960 | |
Income taxes | | $ | 16,401 | | | $ | 23,478 | | | $ | 1,055 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 1,207 | | | $ | 1,147 | |
Temporary cash investments | | | 9 | | | | 90,304 | |
Total cash and cash equivalents | | | 1,216 | | | | 91,451 | |
Accounts receivable: | | | | | | | | |
Customer | | | 58,204 | | | | 50,092 | |
Allowance for doubtful accounts | | | (985 | ) | | | (1,018 | ) |
Associated companies | | | 41,803 | | | | 36,565 | |
Other | | | 7,500 | | | | 12,842 | |
Accrued unbilled revenues | | | 41,714 | | | | 41,137 | |
Total accounts receivable | | | 148,236 | | | | 139,618 | |
Note receivable - Entergy New Orleans | | | - | | | | 7,610 | |
Deferred fuel costs | | | 3,157 | | | | - | |
Accumulated deferred income taxes | | | 19,308 | | | | 294 | |
Fuel inventory - at average cost | | | 6,878 | | | | 5,875 | |
Materials and supplies - at average cost | | | 34,499 | | | | 37,979 | |
Prepayments and other | | | 4,902 | | | | 2,820 | |
TOTAL | | | 218,196 | | | | 285,647 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 5,535 | | | | 5,535 | |
Non-utility property - at cost (less accumulated depreciation) | | | 4,753 | | | | 4,864 | |
Storm reserve escrow account | | | 31,862 | | | | 31,867 | |
TOTAL | | | 42,150 | | | | 42,266 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 3,174,148 | | | | 3,070,109 | |
Property under capital lease | | | 13,197 | | | | 6,418 | |
Construction work in progress | | | 147,169 | | | | 62,866 | |
TOTAL UTILITY PLANT | | | 3,334,514 | | | | 3,139,393 | |
Less - accumulated depreciation and amortization | | | 1,166,463 | | | | 1,115,756 | |
UTILITY PLANT - NET | | | 2,168,051 | | | | 2,023,637 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 63,533 | | | | 59,006 | |
Other regulatory assets | | | 253,231 | | | | 251,407 | |
Other | | | 16,474 | | | | 19,564 | |
TOTAL | | | 333,238 | | | | 329,977 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 2,761,635 | | | $ | 2,681,527 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY MISSISSIPPI, INC. | |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 77,636 | | | $ | 59,710 | | | $ | 72,106 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Other regulatory charges (credits) - net | | | (57,056 | ) | | | 38,385 | | | | 14,810 | |
Depreciation and amortization | | | 86,872 | | | | 83,297 | | | | 79,470 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 15,923 | | | | 32,031 | | | | (17,123 | ) |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 44,050 | | | | (46,490 | ) | | | 898 | |
Fuel inventory | | | 3,413 | | | | 1,078 | | | | (2,721 | ) |
Accounts payable | | | 3,511 | | | | 3,950 | | | | (13,379 | ) |
Taxes accrued | | | 707 | | | | 4,858 | | | | (9,649 | ) |
Interest accrued | | | 2,066 | | | | 1,919 | | | | 2,131 | |
Deferred fuel costs | | | 77,932 | | | | (81,607 | ) | | | (18,654 | ) |
Other working capital accounts | | | (37,373 | ) | | | 43,534 | | | | (12,432 | ) |
Provision for estimated losses and reserves | | | 4,446 | | | | (13,307 | ) | | | 40,228 | |
Changes in other regulatory assets | | | (43,807 | ) | | | (98,387 | ) | | | 37,381 | |
Changes in pension and other postretirement liabilities | | | (6,786 | ) | | | 61,277 | | | | (7,658 | ) |
Other | | | 50,484 | | | | (10,248 | ) | | | 3,786 | |
Net cash flow provided by operating activities | | | 222,018 | | | | 80,000 | | | | 169,194 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (130,907 | ) | | | (156,224 | ) | | | (156,643 | ) |
Allowance for equity funds used during construction | | | 2,964 | | | | 2,966 | | | | 3,900 | |
Proceeds from sale of assets | | | - | | | | - | | | | 2,616 | |
Change in money pool receivable - net | | | (31,435 | ) | | | 20,997 | | | | 11,974 | |
Changes in other temporary investments - net | | | - | | | | - | | | | 100,000 | |
Payment to storm reserve escrow account | | | (175 | ) | | | (944 | ) | | | (30,748 | ) |
Other | | | 80 | | | | (84 | ) | | | - | |
Net cash flow used in investing activities | | | (159,473 | ) | | | (133,289 | ) | | | (68,901 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 147,996 | | | | 28,873 | | | | - | |
Retirement of long-term debt | | | - | | | | (30,000 | ) | | | (100,000 | ) |
Change in money pool payable - net | | | (66,044 | ) | | | 66,044 | | | | - | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (51,300 | ) | | | (48,300 | ) | | | (30,300 | ) |
Preferred stock | | | (2,828 | ) | | | (2,828 | ) | | | (2,828 | ) |
Net cash flow provided by (used in) financing activities | | | 27,824 | | | | 13,789 | | | | (133,128 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 90,369 | | | | (39,500 | ) | | | (32,835 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 1,082 | | | | 40,582 | | | | 73,417 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 91,451 | | | $ | 1,082 | | | $ | 40,582 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | |
Cash paid during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 47,007 | | | $ | 42,960 | | | $ | 42,479 | |
Income taxes | | $ | 23,478 | | | $ | 1,055 | | | $ | 48,914 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, INC. | |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 1,147 | | | $ | 1,072 | |
Temporary cash investment | | | 90,304 | | | | 10 | |
Total cash and cash equivalents | | | 91,451 | | | | 1,082 | |
Accounts receivable: | | | | | | | | |
Customer | | | 50,092 | | | | 76,503 | |
Allowance for doubtful accounts | | | (1,018 | ) | | | (687 | ) |
Associated companies | | | 36,565 | | | | 29,291 | |
Other | | | 12,842 | | | | 11,675 | |
Accrued unbilled revenues | | | 41,137 | | | | 35,451 | |
Total accounts receivable | | | 139,618 | | | | 152,233 | |
Note receivable - Entergy New Orleans | | | 7,610 | | | | - | |
Deferred fuel costs | | | - | | | | 5,025 | |
Accumulated deferred income taxes | | | 294 | | | | 19,335 | |
Fuel inventory - at average cost | | | 5,875 | | | | 9,288 | |
Materials and supplies - at average cost | | | 37,979 | | | | 31,921 | |
Prepayments and other | | | 2,820 | | | | 6,290 | |
TOTAL | | | 285,647 | | | | 225,174 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 5,535 | | | | 5,615 | |
Non-utility property - at cost (less accumulated depreciation) | | | 4,864 | | | | 5,000 | |
Storm reserve escrow account | | | 31,867 | | | | 31,692 | |
Note receivable - Entergy New Orleans | | | - | | | | 7,610 | |
TOTAL | | | 42,266 | | | | 49,917 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 3,070,109 | | | | 2,951,636 | |
Property under capital lease | | | 6,418 | | | | 7,806 | |
Construction work in progress | | | 62,866 | | | | 81,959 | |
TOTAL UTILITY PLANT | | | 3,139,393 | | | | 3,041,401 | |
Less - accumulated depreciation and amortization | | | 1,115,756 | | | | 1,058,426 | |
UTILITY PLANT - NET | | | 2,023,637 | | | | 1,982,975 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 34,114 | | | | 23,693 | |
Other regulatory assets | | | 251,407 | | | | 226,933 | |
Other | | | 19,564 | | | | 19,451 | |
TOTAL | | | 305,085 | | | | 270,077 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 2,656,635 | | | $ | 2,528,143 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY MISSISSIPPI, INC. | |
BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | 80,000 | | | $ | - | |
Accounts payable: | | | | | | | | |
Associated companies | | | 75,128 | | | | 58,421 | |
Other | | | 53,417 | | | | 31,176 | |
Customer deposits | | | 65,873 | | | | 62,316 | |
Taxes accrued | | | 27,739 | | | | 41,603 | |
Interest accrued | | | 21,094 | | | | 19,179 | |
Deferred fuel costs | | | - | | | | 72,907 | |
System agreement cost equalization | | | 36,650 | | | | - | |
Other | | | 9,895 | | | | 5,399 | |
TOTAL | | | 369,796 | | | | 291,001 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 680,467 | | | | 603,651 | |
Accumulated deferred investment tax credits | | | 6,541 | | | | 7,514 | |
Obligations under capital lease | | | 10,747 | | | | 4,949 | |
Other regulatory liabilities | | | 262 | | | | 2,905 | |
Asset retirement cost liabilities | | | 5,375 | | | | 5,071 | |
Accumulated provisions | | | 39,466 | | | | 41,403 | |
Pension and other postretirement liabilities | | | 104,912 | | | | 111,437 | |
Long-term debt | | | 745,378 | | | | 845,304 | |
Other | | | 22,086 | | | | 29,146 | |
TOTAL | | | 1,615,234 | | | | 1,651,380 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Preferred stock without sinking fund | | | 50,381 | | | | 50,381 | |
| | | | | | | | |
COMMON EQUITY | | | | | | | | |
Common stock, no par value, authorized 12,000,000 | | | | | | | | |
shares; issued and outstanding 8,666,357 shares in 2010 and 2009 | | | 199,326 | | | | 199,326 | |
Capital stock expense and other | | | (690 | ) | | | (690 | ) |
Retained earnings | | | 527,588 | | | | 490,129 | |
TOTAL | | | 726,224 | | | | 688,765 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 2,761,635 | | | $ | 2,681,527 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| |
STATEMENTS OF CHANGES IN COMMON EQUITY | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | |
| | Common Equity | | | | |
| | Common Stock | | | Capital Stock Expense and Other | | | Retained Earnings | | | Total | |
| | (In Thousands) | |
| | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 199,326 | | | $ | (690 | ) | | $ | 458,039 | | | $ | 656,675 | |
Net income | | | - | | | | - | | | | 59,710 | | | | 59,710 | |
Common stock dividends | | | - | | | | - | | | | (48,300 | ) | | | (48,300 | ) |
Preferred stock dividends | | | - | | | | - | | | | (2,828 | ) | | | (2,828 | ) |
Balance at December 31, 2008 | | $ | 199,326 | | | $ | (690 | ) | | $ | 466,621 | | | $ | 665,257 | |
Net income | | | - | | | | - | | | | 77,636 | | | | 77,636 | |
Common stock dividends | | | - | | | | - | | | | (51,300 | ) | | | (51,300 | ) |
Preferred stock dividends | | | - | | | | - | | | | (2,828 | ) | | | (2,828 | ) |
Balance at December 31, 2009 | | $ | 199,326 | | | $ | (690 | ) | | $ | 490,129 | | | $ | 688,765 | |
Net income | | | - | | | | - | | | | 83,687 | | | | 83,687 | |
Common stock dividends | | | - | | | | - | | | | (43,400 | ) | | | (43,400 | ) |
Preferred stock dividends | | | - | | | | - | | | | (2,828 | ) | | | (2,828 | ) |
Balance at December 31, 2010 | | $ | 199,326 | | | $ | (690 | ) | | $ | 527,588 | | | $ | 726,224 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, INC. |
BALANCE SHEETS |
LIABILITIES AND SHAREHOLDERS' EQUITY |
| | | | | | | | |
| | December 31, | |
| | | 2009 | | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Accounts payable: | | | | | | | | |
Associated companies | | $ | 58,421 | | | $ | 115,876 | |
Other | | | 31,176 | | | | 39,623 | |
Customer deposits | | | 62,316 | | | | 58,517 | |
Taxes accrued | | | 41,603 | | | | 40,896 | |
Interest accrued | | | 19,179 | | | | 17,113 | |
Deferred fuel costs | | | 72,907 | | | | - | |
System agreement cost equalization | | | - | | | | 23,000 | |
Gas hedge contracts | | | - | | | | 15,610 | |
Other | | | 5,399 | | | | 5,373 | |
TOTAL | | | 291,001 | | | | 316,008 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 578,759 | | | | 571,193 | |
Accumulated deferred investment tax credits | | | 7,514 | | | | 8,605 | |
Obligations under capital lease | | | 4,949 | | | | 6,418 | |
Other regulatory liabilities | | | 2,905 | | | | 22,331 | |
Asset retirement cost liabilities | | | 5,071 | | | | 4,784 | |
Accumulated provisions | | | 41,403 | | | | 36,957 | |
Pension and other postretirement liabilities | | | 111,437 | | | | 118,223 | |
Long-term debt | | | 845,304 | | | | 695,330 | |
Other | | | 29,146 | | | | 32,656 | |
TOTAL | | | 1,626,488 | | | | 1,496,497 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Preferred stock without sinking fund | | | 50,381 | | | | 50,381 | |
| | | | | | | | |
SHAREHOLDERS' EQUITY | | | | | | | | |
Common stock, no par value, authorized 12,000,000 | | | | | | | | |
shares; issued and outstanding 8,666,357 shares in 2009 and 2008 | | | 199,326 | | | | 199,326 | |
Capital stock expense and other | | | (690 | ) | | | (690 | ) |
Retained earnings | | | 490,129 | | | | 466,621 | |
TOTAL | | | 688,765 | | | | 665,257 | |
| | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 2,656,635 | | | $ | 2,528,143 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | |
ENTERGY MISSISSIPPI, INC. | |
STATEMENTS OF RETAINED EARNINGS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
Retained Earnings, January 1 | | $ | 466,621 | | | $ | 458,039 | | | $ | 419,001 | |
| | | | | | | | | | | | |
Add: | | | | | | | | | | | | |
Net income | | | 77,636 | | | | 59,710 | | | | 72,106 | |
| | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | |
Preferred dividend requirements and other | | | 2,828 | | | | 2,828 | | | | 2,768 | |
Dividends declared on common stock | | | 51,300 | | | | 48,300 | | | | 30,300 | |
Total | | | 54,128 | | | | 51,128 | | | | 33,068 | |
| | | | | | | | | | | | |
Retained Earnings, December 31 | | $ | 490,129 | | | $ | 466,621 | | | $ | 458,039 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY MISSISSIPPI, INC. | |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 1,177,304 | | | $ | 1,462,182 | | | $ | 1,372,802 | | | $ | 1,450,008 | | | $ | 1,306,543 | |
Net Income | | $ | 77,636 | | | $ | 59,710 | | | $ | 72,106 | | | $ | 52,285 | | | $ | 62,103 | |
Total assets | | $ | 2,656,635 | | | $ | 2,528,143 | | | $ | 2,386,269 | | | $ | 2,440,891 | | | $ | 2,311,043 | |
Long-term obligations (1) | | $ | 850,253 | | | $ | 701,748 | | | $ | 703,072 | | | $ | 795,187 | | | $ | 695,157 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | | | 2005 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 467 | | | $ | 556 | | | $ | 500 | | | $ | 568 | | | $ | 503 | |
Commercial | | | 395 | | | | 482 | | | | 428 | | | | 484 | | | | 421 | |
Industrial | | | 147 | | | | 199 | | | | 185 | | | | 236 | | | | 209 | |
Governmental | | | 37 | | | | 44 | | | | 40 | | | | 45 | | | | 41 | |
Total retail | | | 1,046 | | | | 1,281 | | | | 1,153 | | | | 1,333 | | | | 1,174 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 49 | | | | 93 | | | | 139 | | | | 43 | | | | 62 | |
Non-associated companies | | | 28 | | | | 36 | | | | 33 | | | | 37 | | | | 37 | |
Other | | | 54 | | | | 52 | | | | 48 | | | | 37 | | | | 34 | |
Total | | $ | 1,177 | | | $ | 1,462 | | | $ | 1,373 | | | $ | 1,450 | | | $ | 1,307 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 5,358 | | | | 5,354 | | | | 5,474 | | | | 5,387 | | | | 5,333 | |
Commercial | | | 4,756 | | | | 4,841 | | | | 4,872 | | | | 4,746 | | | | 4,630 | |
Industrial | | | 2,178 | | | | 2,565 | | | | 2,771 | | | | 2,927 | | | | 2,967 | |
Governmental | | | 405 | | | | 411 | | | | 421 | | | | 417 | | | | 411 | |
Total retail | | | 12,697 | | | | 13,171 | | | | 13,538 | | | | 13,477 | | | | 13,341 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 198 | | | | 534 | | | | 1,025 | | | | 469 | | | | 516 | |
Non-associated companies | | | 330 | | | | 401 | | | | 468 | | | | 431 | | | | 420 | |
Total | | | 13,225 | | | | 14,106 | | | | 15,031 | | | | 14,377 | | | | 14,277 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 1,230,185 | | | $ | 1,177,304 | | | $ | 1,462,182 | | | $ | 1,372,802 | | | $ | 1,450,008 | |
Net Income | | $ | 83,687 | | | $ | 77,636 | | | $ | 59,710 | | | $ | 72,106 | | | $ | 52,285 | |
Total assets | | $ | 2,761,635 | | | $ | 2,681,527 | | | $ | 2,528,143 | | | $ | 2,386,269 | | | $ | 2,440,891 | |
Long-term obligations (1) | | $ | 806,506 | | | $ | 900,634 | | | $ | 752,129 | | | $ | 753,453 | | | $ | 845,568 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt), noncurrent capital lease obligations, and preferred stock without sinking fund. | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 509 | | | $ | 467 | | | $ | 556 | | | $ | 500 | | | $ | 568 | |
Commercial | | | 406 | | | | 395 | | | | 482 | | | | 428 | | | | 484 | |
Industrial | | | 145 | | | | 147 | | | | 199 | | | | 185 | | | | 236 | |
Governmental | | | 38 | | | | 37 | | | | 44 | | | | 40 | | | | 45 | |
Total retail | | | 1,098 | | | | 1,046 | | | | 1,281 | | | | 1,153 | | | | 1,333 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 52 | | | | 49 | | | | 93 | | | | 139 | | | | 43 | |
Non-associated companies | | | 33 | | | | 28 | | | | 36 | | | | 33 | | | | 37 | |
Other | | | 47 | | | | 54 | | | | 52 | | | | 48 | | | | 37 | |
Total | | $ | 1,230 | | | $ | 1,177 | | | $ | 1,462 | | | $ | 1,373 | | | $ | 1,450 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 6,077 | | | | 5,358 | | | | 5,354 | | | | 5,474 | | | | 5,387 | |
Commercial | | | 5,000 | | | | 4,756 | | | | 4,841 | | | | 4,872 | | | | 4,746 | |
Industrial | | | 2,250 | | | | 2,178 | | | | 2,565 | | | | 2,771 | | | | 2,927 | |
Governmental | | | 416 | | | | 405 | | | | 411 | | | | 421 | | | | 417 | |
Total retail | | | 13,743 | | | | 12,697 | | | | 13,171 | | | | 13,538 | | | | 13,477 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 268 | | | | 198 | | | | 534 | | | | 1,025 | | | | 469 | |
Non-associated companies | | | 402 | | | | 330 | | | | 401 | | | | 468 | | | | 431 | |
Total | | | 14,413 | | | | 13,225 | | | | 14,106 | | | | 15,031 | | | | 14,377 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net Income
2010 Compared to 2009
Net income remained relatively unchanged, decreasing $0.02 million, primarily due to higher other operation and maintenance expenses, higher taxes other than income taxes, lower other income, and higher depreciation and amortization expenses, almost entirely offset by higher net revenue and lower interest expense.
2009 Compared to 2008
Net income decreased $3.9 million primarily due to lower net revenue and lower other income, partially offset by lower interest expense and a lower effective income tax rate.
2008Net Revenue
2010 Compared to 20072009
Net income increased $10.4 millionrevenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $243.0 |
Volume/weather | | 17.0 |
Net gas revenue | | 14.2 |
Effect of 2009 rate case settlement | | (6.6) |
Other | | 5.1 |
2010 net revenue | | $272.7 |
The volume/weather variance is primarily due to higher net revenue, lower other operation and maintenance expenses, partially offset by lower other income and higher taxes other than income taxes.an increase of 348 GWh, or 7%, in billed retail electricity usage primarily due to more favorable weather compared to last year.
Net RevenueThe net gas revenue variance is primarily due to more favorable weather compared to last year, along with the recognition of a gas regulatory asset associated with the settlement of Entergy New Orleans’s electric and gas formula rate plans. See Note 2 to the financial statements for further discussion of the formula rate plan settlement.
The effect of 2009 rate case settlement variance results from the April 2009 settlement of Entergy New Orleans’s rate case, and includes the effects of realigning non-fuel costs associated with the operation of Grand Gulf from the fuel adjustment clause to electric base rates effective June 2009. See Note 2 to the financial statements for further discussion of the rate case settlement.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
2009 Compared to 2008
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $252.7 |
Effect of rate case settlement | | (14.4) |
Price applied to unbilled sales | | (4.1) |
Volume/weather | | 9.2 |
Other | | (0.4) |
2009 net revenue | | $243.0 |
The effect of rate case settlement variance results from the April 2009 settlement of Entergy New Orleans’Orleans’s rate case, and includes the effects of realigning non-fuel costs associated with the operation of Grand Gulf from the fuel adjustment clause to electric base rates effective June 2009. See Note 2 to the financial statements for further discussion of the rate case settlement.
The price applied to unbilled sales variance results from a decline in natural gas and purchased power prices.
The volume/weather variance is primarily due to an increase in electricity usage in the service territory, and more favorable weather in 2009 compared to the same period in 2008. Entergy New Orleans estimates that approximately 150,000 electric customers and 96,000 gas customers have returned since Hurricane Katrina and are taking service as of December 31, 2009, compared to approximately 141,000 electric customers and 93,000 gas customers as of December 31, 2008. Billed retail electricity usage increased a total of 238 GWh compared to the same period in 2008, an increase of 5.3%.
Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues decreased primarily due to:
· | a decrease of $107.5 million in electric fuel cost recovery revenues due to lower fuel rates offset by higher electricity usage; |
· | a decrease of $74.8 million in gross wholesale revenue due to a decrease in the average price of energy available for resale sales; and |
· | a decrease of $37 million in gross gas revenues primarily due to lower fuel cost recovery revenues. |
Fuel and purchased power expenses decreased primarily due to decreases in the average market prices of natural gas and purchased power, partially offset by an increase in demand.
2008Other Income Statement Variances
2010 Compared to 20072009
Net revenue consists of operating revenues net of: 1) fuel, fuel-relatedOther operation and maintenance expenses and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2008 to 2007.
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $231.0 |
Volume/weather | | 15.5 |
Net gas revenue | | 6.6 |
Rider revenue | | 3.9 |
Base revenue | | (11.3) |
Other | | 7.0 |
2008 net revenue | | $252.7 |
The volume/weather variance is due to an increase in electricity usage in the service territory in 2008 compared to the same period in 2007. Entergy New Orleans estimates that approximately 141,000 electric customers and 93,000 gas customers have returned since Hurricane Katrina and are taking service as of December 31, 2008, compared to approximately 132,000 electric customers and 86,000 gas customers as of December 31, 2007. Billed retail electricity usage increased a total of 184 GWh compared to the same period in 2007, an increase of 4%.
The net gas revenue variance is primarily due to an increase in base rates in March and November 2007. Refer to Note 2 to the financial statements for a discussion of the base rate increase.
The rider revenue variance is due primarily to higher total revenue and a storm reserve rider effective March 2007 as a result of the City Council's approval of a settlement agreement in October 2006. The approved storm reserve has been set to collect $75 million over a ten-year period through the rider and the funds will be held in a restricted escrow account. The settlement agreement is discussed in Note 2 to the financial statements.
The base revenue variance is primarily due to a base rate recovery credit, effective January 2008. The base rate credit is discussed in Note 2 to the financial statements.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to:
· | an increase of $58.9$15.1 million in gross wholesale revenuefossil expenses due to increased saleshigher outage expenses compared to affiliated customers and an increase in the average price of energy available for resale sales;prior year; |
· | an increase of $47.7$2.2 million in electric fuel cost recovery revenuesdistribution expenses primarily due to increases in vegetation maintenance, overhead and underground inspections, and substation maintenance and repairs; |
· | an increase of $1.9 million in compensation and benefits costs, resulting from decreasing discount rates, the amortization of benefit trust asset losses, and an increase in the accrual for incentive-based compensation. See Note 11 to the financial statements for further discussion of benefits costs; and |
· | an increase of $1.9 million primarily due to higher fuel rates and increased electricity usage; andtransmission equalization expenses in 2010. |
Entergy New Orleans, Inc.
Management'sManagement’s Financial Discussion and Analysis
· | an increase of $22 million in gross gas revenues due to higher fuel recovery revenues and increases in gas base rates in March 2007 and November 2007. |
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes as a result of higher millage rates and an increase in local franchise taxes resulting from higher electric and gas retail revenues as compared with the same period in 2009.
FuelDepreciation and purchased poweramortization expenses increased primarily due to increasesan increase in plant in service.
Other income decreased primarily due to carrying costs on Hurricane Gustav and Hurricane Ike storm restoration costs recorded in 2009.
Interest expense decreased primarily due to a decrease in the average market pricesinterest rate on notes payable issued to affiliates as part of natural gas and purchased powerEntergy New Orleans’s plan of reorganization, in addition to an increasethe repayment of those notes in demand.
Other Income Statement VariancesMay 2010 and the repayment, at maturity, of $30 million of 4.98% Series first mortgage bonds in July 2010.
2009 Compared to 2008
Other income decreased primarily due to a decrease in the interest rate earned on money pool investments.
Interest and other charges decreased primarily due to a decrease in the interest rate on notes payable issued to affiliates as part of Entergy New Orleans'Orleans’s plan of reorganization, as described more fully in Note 18 to the financial statements.
2008 Compared to 2007
Other operation and maintenance expenses decreased primarily due to:
· | a provision for storm-related bad debts of $11 million recorded in 2007; |
· | a decrease of $6.2 million in legal and professional fees; |
· | a decrease of $3.4 million in employee benefit expenses; and |
· | a decrease of $1.9 million in gas operations spending due to higher labor and material costs for reliability work in 2007. |
The decrease was partially offset by:
· | an increase of $3 million due to the accrual of Energy Efficiency and Economic Development Funds; |
· | an increase of $3 million in outside regulatory consultant fees; and |
· | an increase of $2.7 million in loss reserves primarily due to the implementation of the storm reserve rider in March 2007. The storm reserve rider is discussed above under "Net Revenue."
|
Taxes other than income taxes increased primarily due to higher franchise taxes in 2008 as a result of higher revenues.
Other income decreased due to a reduction in the allowance for equity funds used during construction related to a decrease in storm-related construction and lower carrying costs due to the reduction of the Hurricane Katrina storm costs regulatory asset.reorganization.
Income Taxes
The effective income tax rates for 2010, 2009, and 2008 and 2007 were 34.8%, 33.6%, 39.7%, and 35.5%39.7%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rate.
In August 2005, Hurricane Katrina caused catastrophic damage to Entergy New Orleans'Orleans’s service territory, including the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area. The storms and flooding resulted in power outages; significant damage to electric distribution, transmission, and generation and gas infrastructure; and the loss of sales and customers due to mandatory evacuations and the destruction of homes and businesses. Entergy pursued a broad range of initiatives to recover storm restoration and business continuity costs. Initiatives included obtaining reimbursement of certain costs covered by insurance, obtaining assistance through federal legislation for damage caused by Hurricanes Katrina and Rita,Ri ta, and pursuing recovery through existing or new rate mechanisms regulated by the FERC and the City Council.
Entergy New Orleans Inc.substantially completed its insurance recoveries related to Hurricane Katrina in 2009.
Management's Financial Discussion and Analysis
Community Development Block Grant (CDBG)
In December 2005, the U.S. Congress passed the Katrina Relief Bill, a hurricane aid package that included CDBG funding (for the states affected by Hurricanes Katrina, Rita, and Wilma) that allowed state and local leaders to fund individual recovery priorities. In March 2007, the City Council certified that Entergy New Orleans incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans'Orleans’s estimated costs of $465 million for its gas system rebuild (which is discussed below). Entergy New Orleans received $180.8 million of CDBG funds in 2007.2007 and $19.2 million in 2010.
Insurance Claims
Entergy has received a total of $317 million as of December 31, 2009 on its Hurricane Katrina and Hurricane Rita insurance claims, including the settlements of its Hurricane Katrina claims with each of its two excess insurers. Of the $317 million received, $206 million was allocated to Entergy New Orleans. Entergy has substantially completed its insurance recoveries related to Hurricane Katrina and Hurricane Rita.
Rate and Storm-related Riders Filings
See "“Formula Rate Plans and Storm-related Riders"” below for a discussion of Entergy New Orleans'Orleans’s June 2006 formula rate plan filings and request to implement two storm-related riders filed with the City Council.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Gas System Rebuild
In addition to the Hurricane Katrina storm restoration costs that Entergy New Orleans incurred, Entergy New Orleans expects that over a longer term rebuilding of the gas system in New Orleans will be necessary due to the massive salt water intrusion into the system caused by the flooding in New Orleans. The salt water intrusion is expected to shorten the life of the gas system, making it necessary to rebuild portions of that system over time, earlier than otherwise would be expected. Entergy New Orleans currently expects the cost to rebuild the gas system to be $465 million,expected, with the project extending many years into the future. Entergy New Orleans received insurance proceeds for a portion of the estimated future construction expenditures associated with rebuilding its gas system, and the October 2006 City Council resolution approving the settlement of Entergy New Orleans'Orleans’s rate and storm-cost recoveryreco very filings requires Entergy New Orleans to record those proceeds in a designated sub-account of other deferred credits until the proceeds are spent on the rebuild project. This other deferred credit is shown as "Gas“Gas system rebuild insurance proceeds"proceeds” on Entergy New Orleans'Orleans’s balance sheet.
Bankruptcy Proceedings
As a result of the effects of Hurricane Katrina and the effect of extensive flooding that resulted from levee breaks in and around the New Orleans area, on September 23, 2005, Entergy New Orleans filed a voluntary petition in bankruptcy court seeking reorganization relief under Chapter 11 of the U.S. Bankruptcy Code. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans'Orleans’s plan of reorganization. With the receipt of CDBG funds, and the agreement on insurance recovery with one of its excess insurers, Entergy New Orleans waived the conditions precedent in its plan of reorganization, and the plan became effective on May 8, 2007. Following are significantIncluded in the terms in Entergy New Orleans'the plan of reorganization:
· | Entergy New Orleans paid in full, in cash, the allowed third-party prepetition accounts payable (approximately $29 million, including interest). Entergy New Orleans paid interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest (9.5%) plus 1% for 2007 through the date of payment. |
· | Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%. The Louisiana judicial rate of interest is 9.5% for 2007, 8.5% for 2008, 5.5% for 2009, and 3.5% for 2010. |
reorganization Entergy New Orleans Inc.
Management's Financial Discussion and Analysis
· | Entergy New Orleans repaid in full, in cash, the outstanding borrowings under the debtor-in-possession credit agreement between Entergy New Orleans and Entergy Corporation (approximately $67 million). |
· | Entergy New Orleans' first mortgage bonds remain outstanding with their stated maturity dates and interest terms. Pursuant to an agreement with its first mortgage bondholders, Entergy New Orleans paid the first mortgage bondholders an amount equal to the one year of interest from the bankruptcy petition date that the bondholders had waived previously in the bankruptcy proceeding (approximately $12 million). |
· | Entergy New Orleans' preferred stock remains outstanding on its stated dividend terms, and Entergy New Orleans paid its unpaid preferred dividends in arrears (approximately $1 million). |
· | Litigation claims were generally unaltered, and are generally proceeding as if Entergy New Orleans had not filed for bankruptcy protection, with exceptions for certain claims. |
Liquidity and Capital Resources
Debtor-in-Possession Credit Facility
On September 26, 2005, Entergy New Orleans, as borrower, and Entergy Corporation, as lender, entered into a debtor-in-possession credit facilityissued notes to provide funding to Entergy New Orleans during its business restoration efforts. The credit facility provided for up to $200 million in loans. The interest rate on borrowings under the credit facility was the average interest rate of borrowings outstanding under Entergy Corporation's revolving credit facility. With the confirmation of Entergy New Orleans' plan of reorganization in May 2007,affilia tes. Entergy New Orleans repaid, at maturity in May 2010, these notes that represented affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy Corporation, in full, in cash, the $67 million of outstanding borrowings under the debtor-in-possession credit facility.System money pool.
Cash Flow
Cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | | 2010 | | 2009 | | 2008 |
| | | 2009 | | 2008 | | 2007 | | | (In Thousands) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $137,444 | | $92,010 | | $17,093 | Cash and cash equivalents at beginning of period | | $191,191 | | $137,444 | | $92,010 |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 148,556 | | 87,182 | | 207,394 | Operating activities | | 48,965 | | 148,556 | | 87,182 |
| Investing activities | | (59,848) | | (9,777) | | (78,441) | Investing activities | | (31,561) | | (59,848) | | (9,777) |
| Financing activities | | (34,961) | | (31,971) | | (54,036) | Financing activities | | (153,609) | | (34,961) | | (31,971) |
| Net increase in cash and cash equivalents | | 53,747 | | 45,434 | | 74,917 | Net increase (decrease) in cash and cash equivalents | | (136,205) | | 53,747 | | 45,434 |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $191,191 | | $137,444 | | $92,010 | Cash and cash equivalents at end of period | | $54,986 | | $191,191 | | $137,444 |
Operating Activities
Net cash flow provided by operating activities decreased $99.6 million in 2010 primarily due to income tax payments of $68.2 million made in 2010 compared to refunds of $22.1 million received in 2009 and an increase in pension contributions of $11.9 million. In 2010, Entergy New Orleans made tax payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments result from the reversal of temporary differences for which Entergy New Orleans previously received cash tax benefits and from estimated federal income tax payments for tax year 2010. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates” below for a discussion of quali fied pension and other postretirement benefits. The decrease was partially offset by the receipt of $19.2 million of Community Development Block Grant funds, as discussed above.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Net cash provided by operating activities increased $61.4 million in 2009 primarily due to:
· | the timing of collection of receivables from customers; |
· | income tax refunds of $22.1 million in 2009 compared to income tax payments of $5.8 million in 2008; and |
· | increased recovery of deferred fuel costs. |
The increase was partially offset by the timing of payments to vendors.
Investing Activities
Net cash provided by operatingflow used in investing activities decreased $120.2$28.3 million in 20082010 primarily due to money pool activity and a withdrawal from the receipt of $180.8 million of CBDG funds in 2007. This decreasestorm escrow account that was related to Hurricane Gustav costs, partially offset byby:
· | higher fossil construction expenses primarily due to current year outages and the Michoud 3 generator rewind project; |
· | higher distribution construction expenditures primarily due to increased reliability work; and |
· | a decrease in Hurricane Katrina insurance proceeds received in 2010 as compared to 2009. |
Decreases in Entergy New Orleans’s receivable from the money pool are a decreasesources of $43.6cash flow, and Entergy New Orleans’s receivable from the money pool decreased $44.3 million in pension contributions and the timing of payments2010 compared to vendors.
Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis
Investing Activitiesincreasing $6.1 million in 2009. The money pool is an inter-company borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for external short-term borrowings.
Net cash used in investing activities increased $50.1 million in 2009 primarily due to a decrease in Hurricane Katrina insurance proceeds received in 2009 as compared to 2008, partially offset by storm restoration spending in 2008 related to Hurricane Gustav.
Net cash used in investing activities decreased $68.7 million in 2008 primarily due to an increase in Hurricane Katrina insurance proceeds in 2008 as compared to 2007 and money pool activity, partially offset by proceeds of $10 million related to the sale of a power plant in 2007.
Increases in Entergy New Orleans' receivable from the money pool are a use of cash flow, and Entergy New Orleans' receivable from the money pool increased by $12.4 million in 2008. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' need for external short-term borrowings.
Financing Activities
Net cash flow used in financing activities increased $118.6 million in 2010 primarily due to:
· | the repayment of $74.3 million of affiliate notes payable in May 2010; |
· | the repayment, at maturity, of $30 million of 4.98% Series first mortgage bonds in July 2010; |
· | the repayment of $25 million of 6.75% Series first mortgage bonds in December 2010; and |
· | an increase of $14.1 million in dividends paid on common stock. |
The increase was partially offset by the issuance of $25 million of 5.10% Series first mortgage bonds in November 2010.
Net cash used in financing activities increased $3.0 million primarily due to $32.9 million of dividends paid on common stock in 2009, partially offset by the redemption, at maturity, of $30 million of 3.875% Series First Mortgage Bonds in August 2008.
Net cash used in financing activities decreased $22.1 million primarily due to the repayment of Entergy New Orleans' borrowings under the debtor-in-possession credit facility in 2007, partially offset by the redemption, at maturity, of $30 million of 3.875% Series First Mortgage Bonds in August 2008.
See Note 5 to the financial statements for details on long-term debt.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Capital Structure
Entergy New Orleans'Orleans’s capitalization is balanced between equity and debt as shown in the following table. The decrease in the debt to capital ratio is primarily due to the repayment of affiliate notes payable in May 2010 and the repayment of first mortgage bonds in July 2010.
| | December 31, 2009 | | December 31, 2008 | | December 31, 2010 | | December 31, 2009 |
| | | | | | | | |
Debt to capital | | | 44.2% | | 54.4% |
Effect of subtracting cash | | | (9.5)% | | (28.2)% |
Net debt to net capital | | 26.2% | | 37.0% | | 34.7% | | 26.2% |
Effect of subtracting cash from debt | | 28.2% | | 17.1% | |
Debt to capital | | 54.4% | | 54.1% | |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans'Orleans’s financial condition.
Uses of Capital
Entergy New Orleans requires capital resources for:
· | construction and other capital investments; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
Following are the amounts of Entergy New Orleans'Orleans’s planned construction and other capital investments and existing debt and lease obligations (includes estimated interest payments):
Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis
| 2010 | | 2011-2012 | | 2013-2014 | | After 2014 | | Total | 2011 | | 2012-2013 | | 2014-2015 | | After 2015 | | Total |
| (In Millions) | (In Millions) |
Planned construction and | | | | | | | | | | |
capital investment (1) | $86 | | $67 | | N/A | | N/A | | $153 | |
Planned construction and capital investment (1): | | Planned construction and capital investment (1): | | | | | | | |
Generation | | $41 | | $8 | | N/A | | N/A | | $49 |
Transmission | | 3 | | 5 | | N/A | | N/A | | 8 |
Distribution | | 23 | | 48 | | N/A | | N/A | | 71 |
Other | | 20 | | 41 | | N/A | | N/A | | 61 |
Total | | $87 | | $102 | | N/A | | N/A | | $189 |
Long-term debt (2) | $40 | | $19 | | $84 | | $153 | | $296 | $9 | | $86 | | $11 | | $150 | | $256 |
Operating leases | $1 | | $1 | | $- | | $1 | | $3 | $1 | | $3 | | $2 | | $1 | | $7 |
Purchase obligations (3) | $174 | | $354 | | $322 | | $1,870 | | $2,720 | $172 | | $331 | | $298 | | $1,625 | | $2,426 |
(1) | Includes approximately $35 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. Also includes spending for the long-term gas rebuild project. |
(2) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy New Orleans, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financial statements. |
In addition to the contractual obligations given above, Entergy New Orleans expects to make payments of approximately $59 million for the years 2010-2012 related to Hurricane Katrina restoration work and its gas rebuild project, of which $34 million is expected to be incurred in 2010. Also, Entergy New Orleans expects to contribute approximately $5.1$10.6 million to its pension plan and approximately $5.2 million to its other postretirement plans in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. 2011.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Also guidance pursuantin addition to the Pension Protection Actcontractual obligations, Entergy New Orleans has $13.3 million of 2006 rules,unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changessettlement of tax positions. See Note 3 to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy New Orleans’ pension contributions in the future.financial statements for additional information regarding unrecognized tax benefits.
The planned capital investment estimate for Entergy New Orleans reflects capital required to support existing business. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental compliance, market volatility, economic trends, changes in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 and to the financial statements.
As an indirect, wholly-owned subsidiary of Entergy Corporation, Entergy New Orleans pays dividends from its earnings at a percentage determined monthly. Entergy New Orleans’s long-term debt indentures contain restrictions on the payment of cash dividends or other distributions on its common and preferred stock.
Sources of Capital
Entergy New Orleans'Orleans’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt and preferred stock issuances. |
Entergy New Orleans may refinance or redeem debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis
Entergy New Orleans'Orleans’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:
2009 | | 2008 | | 2007 | | 2006 |
(In Thousands) |
| | | | | | |
$66,149 | | $60,093 | | 47,705 | | ($37,166) |
2010 | | 2009 | | 2008 | | 2007 |
(In Thousands) |
| | | | | | |
$21,820 | | $66,149 | | $60,093 | | $47,705 |
See Note 4 to the financial statements for a description of the money pool. As discussed above
Pursuant to its plan of reorganization, in "Bankruptcy Proceedings", inMay 2007, Entergy New Orleans issued notes due in 2010 to satisfythree years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its prepetition indebtedness to the Entergy System money pool of $37.2 million.pool. In May 2010, Entergy New Orleans repaid, at maturity, the notes payable.
Entergy New Orleans has obtained short-term borrowing authorization from the FERC under which it may borrow through October 2011, up to the aggregate amount, at any one time outstanding, of $100 million. See Note 4 to the financial statements for further discussion of Entergy New Orleans'Orleans’s short-term borrowing limits. The long-term securities issuances of Entergy New Orleans are limited to amounts authorized by the City Council, and the current authorization extends through August 2010.July 2012.
The rates that Entergy New Orleans charges for electricity and natural gas significantly influence its financial position, results of operations, and liquidity. Entergy New Orleans is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the City Council, is primarily responsible for approval of the rates charged to customers.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Rate Cases, Formula Rate Plans and Storm-related Riders
On July 31, 2008, Entergy New Orleans filed an electric and gas base rate case with the City Council. On April 2, 2009, the City Council approved a comprehensive settlement. The settlement provided for a net $35.3 million reduction in combined fuel and non-fuel electric revenue requirement, including conversion of thea $10.6 million voluntary recovery credit, implemented in January 2008, to a permanent reduction and substantial realignment of Grand Gulf cost recovery from fuel to electric base rates, and a $4.95 million gas base rate increase, both effective June 1, 2009, with adjustment of the customer charges for all rate classes. A new three-year formula rate plan was also adopted, with terms including an 11.1% benchmark electric return on common equity (ROE)( ROE) with a +/- 40 basis point bandwidth and a 10.75% benchmark gas ROE with a +/- 50 basis point bandwidth. Earnings outside the bandwidth reset to the midpoint benchmark ROE, with rates changing on a prospective basis depending on whether Entergy New Orleans is over- or under-earning. The formula rate plan also includes a recovery mechanism for City Council-approved capacity additions, plus provisions for extraordinary cost changes and force majeure events.
In May 2010, Entergy New Orleans filed its electric and gas formula rate plan evaluation reports. The filings requested a $12.8 million electric base revenue decrease and a $2.4 million gas base revenue increase. Entergy New Orleans and the City Council's Advisors reached a settlement that resulted in an $18.0 million electric base revenue decrease and zero gas base revenue change effective with the October 2010 billing cycle. The City Council approved the settlement in November 2010.
The 2008 rate case settlement also included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs. In September 2009 the City Council approved the energy efficiency programs filed by Entergy New Orleans. The rate settlement provides an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provides a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs. The programs are expected to begin in 2010.
In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council. The filings presented various alternatives to reflect the effect of Entergy New Orleans'Orleans’s lost customers and decreased revenue following Hurricane Katrina. The alternative that Entergy New Orleans recommended adjusts for lost customers and assumes that the City Council'sCouncil’s June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place during the rate-effective period (a significant portion of Grand Gulf costs was previously recovered through base rates).
Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis
At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establish a storm reserve to provide for the risk of another storm.
In October 2006, the City Council approved a settlement agreement that resolved Entergy New Orleans'Orleans’s rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respect to storm restoration costs the anticipated receipt of CDBG funding as recommended by the Louisiana Recovery Authority. The settlement provided for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause was continued. Gas base rates increased by $4.75 million in November 2006 and increased by an additional $1.5 million in March 2007 and an additional $4.75 million in November 2007. The settlementsettleme nt called for Entergy New Orleans to file a base rate case by July 31, 2008, which it did as discussed above. The settlement agreement discontinued the formula rate plan and the generation performance-based plan but permitted Entergy New Orleans to file an application to seek authority to implement formula rate plan mechanisms no sooner than six months following the effective date of the implementation of the base rates resulting from the July 31, 2008 base rate case. The settlement also authorized a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.
Entergy New Orleans, voluntarily implemented a 6.15% base rate credit (the recovery credit) for electric customers, which returned approximately $11.3 million to electric customers in 2008. Entergy New Orleans was able to implement this credit because during 2007 the recovery of New Orleans after Hurricane Katrina was occurring faster than expected in 2006 projections. In addition, Entergy New Orleans committed to set aside $2.5 million for an energy efficiency program focused on community educationInc.
Management’s Financial Discussion and outreach and weatherization of homes.Analysis
In addition to rate proceedings, Entergy New Orleans'Orleans’s fuel costs recovered from customers are subject to regulatory scrutiny. Entergy New Orleans'Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges. In June 2006 the City Council authorized the recovery of all Grand Gulf costs through Entergy New Orleans'Orleans’s fuel adjustment clause (a significant portion of Grand Gulf costs was previously recovered through base rates), and continued that authorization in approving the October 2006 formula rate plan filing settlement. Effective June 2009, the majority of Grand Gulf costs were realigned to base rates and are no longer flowed through the fuel adjustment clause.
Entergy New Orleans'Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges. In October 2005, the City Council approved modification of the gas cost collection mechanism effective November 2005 in order to address concerns regarding its fluctuations, particularly during the winter heating season. The modifications are intended to minimize fluctuations in gas rates during the winter months.
System Agreement Proceedings
See "“System Agreement Proceedings" in Entergy Corporation and Subsidiaries' Management's Discussion and Analysis for discussion of the proceeding at the FERC involving the System Agreement and of other related proceedings.
Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis
Transmission
See "”, “Independent Coordinator of Transmission"”, “Notice to SERC Reliability Corporation regarding Reliability Standards”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries Management’s Fi nancial Discussion and Analysis for further discussion.a discussion of these topics.
Entergy New Orleans'Orleans’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous solid wastes, and other environmental matters. Management believes that Entergy New Orleans is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
The preparation of Entergy New Orleans'Orleans’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of Entergy New Orleans'Orleans’s financial position or results of operations.
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy New Orleans records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month'smonth’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month, including fuel price. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period and fuel pricepri ce fluctuations, in addition to changes in certain components of the calculation. Effective June 2009, Entergy New Orleans reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in the unbilled calculation, which is in accordance with regulatory treatment.
Entergy New Orleans, Inc.
Management’s Financial Discussion and Analysis
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for furtherfurth er discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate.
Entergy New Orleans, Inc.
Management's Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $272 | | $2,903 | | (0.25%) | | $327 | | $3,763 |
Rate of return on plan assets | | (0.25%) | | $214 | | - | | (0.25%) | | $213 | | - |
Rate of increase in compensation | | 0.25% | | $133 | | $675 | | 0.25% | | $148 | | $787 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $221 | | $1,184 | | 0.25% | | $222 | | $1,161 |
Discount rate | | (0.25%) | | $110 | | $1,429 | | (0.25%) | | $109 | | $1,416 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension cost for Entergy New Orleans in 20092010 was $1.7$3.6 million. Entergy New Orleans anticipates 20102011 qualified pension cost to be $3.6$5.5 million. Entergy New Orleans contributed $1.1$13 million in qualified pension contributions in 20092010 and anticipates approximately a $5.1$10.6 million pension contribution in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 2010 valuations2011valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy New Orleans’ pension contributions in the future.2011.
Total postretirement health care and life insurance benefit costs for Entergy New Orleans in 20092010 were $5.9$5.2 million, including $1$1.1 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy New Orleans expects 20102011 postretirement health care and life insurance benefit costs to approximate $5.2$3.7 million, including $1.1$1.2 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy New Orleans expects to contribute approximately $5.2 million to its other postretirement plans in 2010.2011.
Entergy New Accounting PronouncementsOrleans, Inc.
Management’s Financial Discussion and Analysis
Federal Healthcare Legislation
See "the “NewQualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting PronouncementsEstimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Financial Discussion and Analysis for a discussion of new accounting pronouncements.Federal Healthcare Legislation.
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Discussion and Analysis.
To the Board of Directors and Shareholders of
Entergy New Orleans, Inc.
New Orleans, Louisiana
We have audited the accompanying balance sheets of Entergy New Orleans, Inc. (the “Company”) as of December 31, 20092010 and 2008,2009, and the related income statements, statements of income, retained earnings,changes in common equity, and statements of cash flows (pages 354344 through 358348 and applicable items in pages 6349 through 193)184) for each of the three years in the period ended December 31, 2009.2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of Entergy New Orleans, Inc. as of December 31, 20092010 and 2008,2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 201025, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
| |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 542,919 | | | $ | 535,985 | | | $ | 672,940 | |
Natural gas | | | 116,347 | | | | 104,437 | | | | 141,443 | |
TOTAL | | | 659,266 | | | | 640,422 | | | | 814,383 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 169,644 | | | | 196,917 | | | | 330,472 | |
Purchased power | | | 218,025 | | | | 198,836 | | | | 227,065 | |
Other operation and maintenance | | | 130,917 | | | | 107,803 | | | | 108,576 | |
Taxes other than income taxes | | | 44,749 | | | | 40,476 | | | | 41,641 | |
Depreciation and amortization | | | 35,354 | | | | 33,943 | | | | 32,756 | |
Other regulatory charges (credits) - net | | | (1,072 | ) | | | 1,709 | | | | 4,114 | |
TOTAL | | | 597,617 | | | | 579,684 | | | | 744,624 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 61,649 | | | | 60,738 | | | | 69,759 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 667 | | | | 230 | | | | 602 | |
Interest and investment income | | | 544 | | | | 3,762 | | | | 9,664 | |
Miscellaneous - net | | | (2,478 | ) | | | (1,125 | ) | | | (1,432 | ) |
TOTAL | | | (1,267 | ) | | | 2,867 | | | | 8,834 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 13,170 | | | | 16,965 | | | | 20,982 | |
Allowance for borrowed funds used during construction | | | (320 | ) | | | (98 | ) | | | (388 | ) |
TOTAL | | | 12,850 | | | | 16,867 | | | | 20,594 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 47,532 | | | | 46,738 | | | | 57,999 | |
| | | | | | | | | | | | |
Income taxes | | | 16,527 | | | | 15,713 | | | | 23,052 | |
| | | | | | | | | | | | |
NET INCOME | | | 31,005 | | | | 31,025 | | | | 34,947 | |
| | | | | | | | | | | | |
Preferred dividend requirements and other | | | 965 | | | | 965 | | | | 965 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON STOCK | | $ | 30,040 | | | $ | 30,060 | | | $ | 33,982 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 535,985 | | | $ | 672,940 | | | $ | 557,458 | |
Natural gas | | | 104,437 | | | | 141,443 | | | | 119,469 | |
TOTAL | | | 640,422 | | | | 814,383 | | | | 676,927 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 196,917 | | | | 330,472 | | | | 243,470 | |
Purchased power | | | 198,836 | | | | 227,065 | | | | 198,329 | |
Other operation and maintenance | | | 107,803 | | | | 108,576 | | | | 114,254 | |
Taxes other than income taxes | | | 40,476 | | | | 41,641 | | | | 38,439 | |
Depreciation and amortization | | | 33,943 | | | | 32,756 | | | | 32,287 | |
Other regulatory charges - net | | | 1,709 | | | | 4,114 | | | | 4,127 | |
TOTAL | | | 579,684 | | | | 744,624 | | | | 630,906 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 60,738 | | | | 69,759 | | | | 46,021 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 230 | | | | 602 | | | | 1,736 | |
Interest and dividend income | | | 3,762 | | | | 9,664 | | | | 11,583 | |
Miscellaneous - net | | | (1,125 | ) | | | (1,432 | ) | | | (1,057 | ) |
TOTAL | | | 2,867 | | | | 8,834 | | | | 12,262 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 11,628 | | | | 12,465 | | | | 12,978 | |
Other interest - net | | | 5,337 | | | | 8,517 | | | | 8,519 | |
Allowance for borrowed funds used during construction | | | (98 | ) | | | (388 | ) | | | (1,302 | ) |
TOTAL | | | 16,867 | | | | 20,594 | | | | 20,195 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 46,738 | | | | 57,999 | | | | 38,088 | |
| | | | | | | | | | | | |
Income taxes | | | 15,713 | | | | 23,052 | | | | 13,506 | |
| | | | | | | | | | | | |
NET INCOME | | | 31,025 | | | | 34,947 | | | | 24,582 | |
| | | | | | | | | | | | |
Preferred dividend requirements and other | | | 965 | | | | 965 | | | | 1,126 | |
| | | | | | | | | | | | |
EARNINGS APPLICABLE TO | | | | | | | | | | | | |
COMMON STOCK | | $ | 30,060 | | | $ | 33,982 | | | $ | 23,456 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 31,005 | | | $ | 31,025 | | | $ | 34,947 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Depreciation and amortization | | | 35,354 | | | | 33,943 | | | | 32,756 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (47,611 | ) | | | 54,797 | | | | 3,420 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (6,106 | ) | | | 19,448 | | | | (7,857 | ) |
Fuel inventory | | | (113 | ) | | | 5,665 | | | | (3,698 | ) |
Accounts payable | | | 3,307 | | | | (3,224 | ) | | | 5,157 | |
Taxes accrued | | | (1,677 | ) | | | (18,669 | ) | | | 15,365 | |
Interest accrued | | | (1,121 | ) | | | 19 | | | | (1,287 | ) |
Deferred fuel costs | | | 10,923 | | | | 13,751 | | | | (4,546 | ) |
Other working capital accounts | | | 5,777 | | | | 4,131 | | | | (2,009 | ) |
Changes in provisions for estimated losses | | | (4,785 | ) | | | 5,382 | | | | (3,720 | ) |
Changes in other regulatory assets | | | (10,073 | ) | | | (2,227 | ) | | | (35,134 | ) |
Changes in pension and other postretirement liabilities | | | 5,042 | | | | (5,549 | ) | | | 33,838 | |
Other | | | 29,043 | | | | 10,064 | | | | 19,950 | |
Net cash flow provided by operating activities | | | 48,965 | | | | 148,556 | | | | 87,182 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (80,218 | ) | | | (61,954 | ) | | | (103,298 | ) |
Allowance for equity funds used during construction | | | 667 | | | | 230 | | | | 602 | |
Insurance proceeds | | | 115 | | | | 14,553 | | | | 102,914 | |
Change in money pool receivable - net | | | 44,329 | | | | (6,056 | ) | | | (12,389 | ) |
Changes in other investments - net | | | 3,546 | | | | (6,621 | ) | | | 2,394 | |
Net cash flow used in investing activities | | | (31,561 | ) | | | (59,848 | ) | | | (9,777 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 24,349 | | | | - | | | | - | |
Retirement of long-term debt | | | (129,993 | ) | | | (728 | ) | | | (30,952 | ) |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (47,000 | ) | | | (32,900 | ) | | | - | |
Preferred stock | | | (965 | ) | | | (965 | ) | | | (965 | ) |
Other | | | - | | | | (368 | ) | | | (54 | ) |
Net cash flow used in financing activities | | | (153,609 | ) | | | (34,961 | ) | | | (31,971 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (136,205 | ) | | | 53,747 | | | | 45,434 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 191,191 | | | | 137,444 | | | | 92,010 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 54,986 | | | $ | 191,191 | | | $ | 137,444 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 13,550 | | | $ | 16,302 | | | $ | 21,557 | |
Income taxes | | $ | 68,160 | | | $ | (22,054 | ) | | $ | 5,821 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 31,025 | | | $ | 34,947 | | | $ | 24,582 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Other regulatory charges - net | | | 1,709 | | | | 4,114 | | | | 4,127 | |
Depreciation and amortization | | | 33,943 | | | | 32,756 | | | | 32,287 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 54,797 | | | | 3,420 | | | | 30,642 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 19,448 | | | | (7,857 | ) | | | 11,563 | |
Fuel inventory | | | 5,665 | | | | (3,698 | ) | | | 541 | |
Accounts payable | | | (3,224 | ) | | | 5,157 | | | | (26,746 | ) |
Taxes accrued | | | (18,669 | ) | | | 15,365 | | | | 2,895 | |
Interest accrued | | | 19 | | | | (1,287 | ) | | | (12,787 | ) |
Deferred fuel costs | | | 13,751 | | | | (4,546 | ) | | | 1,715 | |
Other working capital accounts | | | 4,131 | | | | (2,009 | ) | | | 9,473 | |
Provision for estimated losses and reserves | | | 5,382 | | | | (3,720 | ) | | | 5,944 | |
Changes in other regulatory assets | | | (2,227 | ) | | | (35,134 | ) | | | 181,061 | |
Changes in pension and other postretirement liabilities | | | (5,549 | ) | | | 33,838 | | | | (44,549 | ) |
Other | | | 8,355 | | | | 15,836 | | | | (13,354 | ) |
Net cash flow provided by operating activities | | | 148,556 | | | | 87,182 | | | | 207,394 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (61,954 | ) | | | (103,298 | ) | | | (93,676 | ) |
Allowance for equity funds used during construction | | | 230 | | | | 602 | | | | 1,736 | |
Insurance proceeds | | | 14,553 | | | | 102,914 | | | | 56,430 | |
Proceeds from the sale of assets | | | - | | | | - | | | | 10,046 | |
Change in money pool receivable - net | | | (6,056 | ) | | | (12,389 | ) | | | (47,705 | ) |
Changes in other investments - net | | | (6,621 | ) | | | 2,394 | | | | (5,272 | ) |
Net cash flow used in investing activities | | | (59,848 | ) | | | (9,777 | ) | | | (78,441 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Repayment on DIP credit facility | | | - | | | | - | | | | (51,934 | ) |
Retirement of long-term debt | | | (728 | ) | | | (30,952 | ) | | | (208 | ) |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (32,900 | ) | | | - | | | | - | |
Preferred stock | | | (965 | ) | | | (965 | ) | | | (1,894 | ) |
Other | | | (368 | ) | | | (54 | ) | | | - | |
Net cash flow used in financing activities | | | (34,961 | ) | | | (31,971 | ) | | | (54,036 | ) |
| | | | | | | | | | | | |
Net increase in cash and cash equivalents | | | 53,747 | | | | 45,434 | | | | 74,917 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 137,444 | | | | 92,010 | | | | 17,093 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 191,191 | | | $ | 137,444 | | | $ | 92,010 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 16,302 | | | $ | 21,557 | | | $ | 24,450 | |
Income taxes | | $ | (22,054 | ) | | $ | 5,821 | | | $ | (3,571 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents | | | | | | |
Cash | | $ | 1,179 | | | $ | 1,119 | |
Temporary cash investments | | | 190,012 | | | | 136,325 | |
Total cash and cash equivalents | | | 191,191 | | | | 137,444 | |
Accounts receivable: | | | | | | | | |
Customer | | | 41,284 | | | | 53,934 | |
Allowance for doubtful accounts | | | (1,166 | ) | | | (1,112 | ) |
Associated companies | | | 78,670 | | | | 70,608 | |
Other | | | 2,299 | | | | 3,270 | |
Accrued unbilled revenues | | | 20,328 | | | | 28,107 | |
Total accounts receivable | | | 141,415 | | | | 154,807 | |
Deferred fuel costs | | | 3,996 | | | | 21,827 | |
Accumulated deferred income taxes | | | 2,584 | | | | - | |
Fuel inventory - at average cost | | | 2,533 | | | | 8,198 | |
Materials and supplies - at average cost | | | 9,674 | | | | 9,472 | |
Prepayments and other | | | 4,311 | | | | 4,483 | |
TOTAL | | | 355,704 | | | | 336,231 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 3,259 | | | | 3,259 | |
Non-utility property at cost (less accumulated depreciation) | | | 1,016 | | | | 1,016 | |
Storm reserve escrow account | | | 9,499 | | | | 2,878 | |
TOTAL | | | 13,774 | | | | 7,153 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 789,367 | | | | 767,327 | |
Natural gas | | | 199,847 | | | | 197,231 | |
Construction work in progress | | | 21,148 | | | | 22,314 | |
TOTAL UTILITY PLANT | | | 1,010,362 | | | | 986,872 | |
Less - accumulated depreciation and amortization | | | 514,609 | | | | 542,499 | |
UTILITY PLANT - NET | | | 495,753 | | | | 444,373 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Deferred fuel costs | | | 4,080 | | | | - | |
Other regulatory assets | | | 125,686 | | | | 208,524 | |
Other | | | 6,079 | | | | 7,254 | |
TOTAL | | | 135,845 | | | | 215,778 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 1,001,076 | | | $ | 1,003,535 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY NEW ORLEANS, INC. |
BALANCE SHEETS |
LIABILITIES AND SHAREHOLDERS' EQUITY |
| | | | | | | | |
| | December 31, |
| | 2009 | | | | 2008 | |
| | (In Thousands) |
| | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Currently maturing long-term debt | | $ | 30,000 | | | $ | - | |
Notes payable - associated companies | | | 74,230 | | | | - | |
Accounts payable: | | | | | | | | |
Associated companies | | | 28,138 | | | | 24,523 | |
Other | | | 23,653 | | | | 39,327 | |
Customer deposits | | | 20,505 | | | | 18,944 | |
Taxes accrued | | | 1,677 | | | | 20,346 | |
Accumulated deferred income taxes | | | - | | | | 7,387 | |
Interest accrued | | | 3,949 | | | | 3,930 | |
System agreement cost equalization | | | 6,000 | | | | - | |
Other | | | 5,803 | | | | 9,203 | |
TOTAL CURRENT LIABILITIES | | | 193,955 | | | | 123,660 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 147,496 | | | | 112,827 | |
Accumulated deferred investment tax credits | | | 2,153 | | | | 2,471 | |
Regulatory liability for income taxes - net | | | 58,970 | | | | 72,046 | |
Other regulatory liabilities | | | 43,148 | | | | 12,040 | |
Retirement cost liability | | | 3,174 | | | | 2,966 | |
Accumulated provisions | | | 15,991 | | | | 10,609 | |
Pension and other postretirement liabilities | | | 43,773 | | | | 49,322 | |
Long-term debt | | | 168,023 | | | | 272,973 | |
Gas system rebuild insurance proceeds | | | 90,116 | | | | 98,418 | |
Other | | | 5,911 | | | | 14,997 | |
TOTAL NON-CURRENT LIABILITIES | | | 578,755 | | | | 648,669 | |
| | | | | | | | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Preferred stock without sinking fund | | | 19,780 | | | | 19,780 | |
| | | | | | | | |
SHAREHOLDERS' EQUITY | | | | | | | | |
Common stock, $4 par value, authorized 10,000,000 | | | | | | | | |
shares; issued and outstanding 8,435,900 shares in 2009 | | | | | | | | |
and 2008 | | | 33,744 | | | | 33,744 | |
Paid-in capital | | | 36,294 | | | | 36,294 | |
Retained earnings | | | 138,548 | | | | 141,388 | |
TOTAL | | | 208,586 | | | | 211,426 | |
| | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $ | 1,001,076 | | | $ | 1,003,535 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
STATEMENTS OF RETAINED EARNINGS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
Retained Earnings, January 1 | | $ | 141,388 | | | $ | 107,406 | | | $ | 83,950 | |
| | | | | | | | | | | | |
Add: | | | | | | | | | | | | |
Net income | | | 31,025 | | | | 34,947 | | | | 24,582 | |
| | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | |
Dividends declared on common stock | | | 32,900 | | | | - | | | | - | |
Dividends declared on preferred stock | | | 965 | | | | 965 | | | | 1,126 | |
| | | | | | | | | | | | |
Retained Earnings, December 31 | | $ | 138,548 | | | $ | 141,388 | | | $ | 107,406 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 640,422 | | | $ | 814,383 | | | $ | 676,927 | | | $ | 571,154 | | | $ | 673,326 | |
Net Income | | $ | 31,025 | | | $ | 34,947 | | | $ | 24,582 | | | $ | 5,344 | | | $ | 1,250 | |
Total assets | | $ | 1,001,076 | | | $ | 1,003,535 | | | $ | 876,195 | | | $ | 921,151 | | | $ | 1,120,121 | |
Long-term obligations (1) | | $ | 168,023 | | | $ | 272,973 | | | $ | 273,912 | | | $ | 229,875 | | | $ | 229,859 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt). | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | | | 2005 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 168 | | | $ | 172 | | | $ | 142 | | | $ | 106 | | | $ | 150 | |
Commercial | | | 166 | | | | 194 | | | | 181 | | | | 165 | | | | 145 | |
Industrial | | | 37 | | | | 48 | | | | 47 | | | | 45 | | | | 32 | |
Governmental | | | 70 | | | | 79 | | | | 72 | | | | 59 | | | | 59 | |
Total retail | | | 441 | | | | 493 | | | | 442 | | | | 375 | | | | 386 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 87 | | | | 161 | | | | 103 | | | | 46 | | | | 117 | |
Non-associated companies | | | 1 | | | | 2 | | | | 1 | | | | 45 | | | | 21 | |
Other | | | 7 | | | | 17 | | | | 11 | | | | 5 | | | | 12 | |
Total | | $ | 536 | | | $ | 673 | | | $ | 557 | | | $ | 471 | | | $ | 536 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 1,577 | | | | 1,394 | | | | 1,221 | | | | 914 | | | | 1,616 | |
Commercial | | | 1,813 | | | | 1,774 | | | | 1,763 | | | | 1,666 | | | | 1,798 | |
Industrial | | | 526 | | | | 541 | | | | 568 | | | | 547 | | | | 498 | |
Governmental | | | 805 | | | | 774 | | | | 747 | | | | 632 | | | | 800 | |
Total retail | | | 4,721 | | | | 4,483 | | | | 4,299 | | | | 3,759 | | | | 4,712 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 1,528 | | | | 1,336 | | | | 995 | | | | 519 | | | | 1,705 | |
Non-associated companies | | | 15 | | | | 25 | | | | 15 | | | | 779 | | | | 336 | |
Total | | | 6,264 | | | | 5,844 | | | | 5,309 | | | | 5,057 | | | | 6,753 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC.
MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS
Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas
Effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utility companies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole retail jurisdiction of the LPSC, Entergy Gulf States Louisiana. Management believes that the jurisdictional separation will better align Entergy Gulf States, Inc.'s Louisiana and Texas operations to serve customers in those states and to operate consistent with state-specific regulatory requirements as the utility regulatory environments in those jurisdictions evolve. The jurisdictional separation provides for regulation of each separated company by a single retail regulator, which should reduce regulatory complexity.
Entergy Texas now owns all Entergy Gulf States, Inc. distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, undivided 42.5% ownership shares of Entergy Gulf States, Inc.'s 70% ownership interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana, and other assets and contract rights to the extent related to utility operations in Texas. Entergy Gulf States Louisiana now owns all of the remaining assets that were owned by Entergy Gulf States, Inc. On a book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana and approximately 41.9% were allocated to Entergy Texas.
Entergy Gulf States Louisiana remains primarily liable for all of the long-term debt issued by Entergy Gulf States, Inc. that was outstanding on December 31, 2007. Under a debt assumption agreement with Entergy Gulf States Louisiana, Entergy Texas assumed its pro rata share of this long-term debt, which was $1.079 billion, or approximately 46%, of which $168 million remains outstanding at December 31, 2009. The pro rata share of the long-term debt assumed by Entergy Texas was determined by first determining the net assets for each company on a book value basis, and then calculating a debt assumption ratio that resulted in the common equity ratios for each company being approximately the same as the Entergy Gulf States, Inc. common equity ratio immediately prior to the jurisdictional separation. Entergy Texas' debt assumption does not discharge Entergy Gulf States Louisiana's liability for the long-term debt. To secure its debt assumption obligations, Entergy Texas granted to Entergy Gulf States Louisiana a first lien on Entergy Texas' assets that were previously subject to the Entergy Gulf States, Inc. mortgage. Entergy Texas has until December 31, 2010 to repay the assumed debt. In addition, Entergy Texas, as the owner of Entergy Gulf States Reconstruction Funding I, LLC ("EGSRF I"), will report the $329.5 million of senior secured transition bonds ("securitization bonds") issued by EGSRF I as long-term debt on its consolidated balance sheet. The securitization bonds are non-recourse to Entergy Texas.
Entergy Texas will purchase from Entergy Gulf States Louisiana pursuant to a life-of-unit purchased power agreement (PPA) a 42.5% share of capacity and energy from the 70% of River Bend subject to retail regulation. Entergy Texas was allocated a share of River Bend's nuclear and environmental liabilities that is identical to the share of the plant's output purchased by Entergy Texas under the PPA. Entergy Gulf States Louisiana will purchase a 57.5% share of capacity and energy from the gas-fired generating plants owned by Entergy Texas, and Entergy Texas will purchase a 42.5% share of capacity and energy from the gas-fired generating plants owned by Entergy Gulf States Louisiana. The PPAs associated with the gas-fired generating plants will terminate when retail open access commences in Entergy Texas' jurisdiction or when the unit(s) is no longer dispatched by the Entergy System. If Entergy Texas implements retail open access, it will terminate its participation in the System Agreement, except for the portion of the System Agreement related to transmission equalization. The dispatch and operation of the generating plants will not change as a result of the jurisdictional separation.
Because the jurisdictional separation was a transaction involving entities under common control, Entergy Texas recognized the assets and liabilities allocated to it at their carrying amounts in the accounts of Entergy Gulf States, Inc. at the time of the jurisdictional separation. Entergy Texas' financial statements report results of operations for 2007 as though the jurisdictional separation had occurred at the beginning of 2007, and presents its 2007 other financial information as of the beginning of 2007 as though the assets and liabilities had been allocated at that date. Financial statements and financial information presented for prior periods have also been presented on that basis to furnish comparative information.
| |
BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents | | | | | | |
Cash | | $ | 1,386 | | | $ | 1,179 | |
Temporary cash investments | | | 53,600 | | | | 190,012 | |
Total cash and cash equivalents | | | 54,986 | | | | 191,191 | |
Accounts receivable: | | | | | | | | |
Customer | | | 38,160 | | | | 41,284 | |
Allowance for doubtful accounts | | | (734 | ) | | | (1,166 | ) |
Associated companies | | | 44,842 | | | | 78,670 | |
Other | | | 1,824 | | | | 2,299 | |
Accrued unbilled revenues | | | 19,100 | | | | 20,328 | |
Total accounts receivable | | | 103,192 | | | | 141,415 | |
Deferred fuel costs | | | - | | | | 3,996 | |
Accumulated deferred income taxes | | | 15,092 | | | | 2,584 | |
Fuel inventory - at average cost | | | 2,646 | | | | 2,533 | |
Materials and supplies - at average cost | | | 9,896 | | | | 9,674 | |
Prepayments and other | | | 5,375 | | | | 4,311 | |
TOTAL | | | 191,187 | | | | 355,704 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investment in affiliates - at equity | | | 3,259 | | | | 3,259 | |
Non-utility property at cost (less accumulated depreciation) | | | 1,016 | | | | 1,016 | |
Storm reserve escrow account | | | 5,953 | | | | 9,499 | |
TOTAL | | | 10,228 | | | | 13,774 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 822,003 | | | | 789,367 | |
Natural gas | | | 206,148 | | | | 199,847 | |
Construction work in progress | | | 11,669 | | | | 21,148 | |
TOTAL UTILITY PLANT | | | 1,039,820 | | | | 1,010,362 | |
Less - accumulated depreciation and amortization | | | 531,871 | | | | 514,609 | |
UTILITY PLANT - NET | | | 507,949 | | | | 495,753 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Deferred fuel costs | | | 4,080 | | | | 4,080 | |
Other regulatory assets | | | 135,282 | | | | 125,686 | |
Other | | | 4,822 | | | | 6,079 | |
TOTAL | | | 144,184 | | | | 135,845 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 853,548 | | | $ | 1,001,076 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | - | | | $ | 30,000 | |
Notes payable - associated companies | | | - | | | | 74,230 | |
Accounts payable: | | | | | | | | |
Associated companies | | | 25,140 | | | | 28,138 | |
Other | | | 30,093 | | | | 23,653 | |
Customer deposits | | | 21,206 | | | | 20,505 | |
Taxes accrued | | | - | | | | 1,677 | |
Interest accrued | | | 2,828 | | | | 3,949 | |
Deferred fuel costs | | | 6,927 | | | | - | |
System agreement cost equalization | | | 15,510 | | | | 6,000 | |
Other | | | 2,655 | | | | 5,803 | |
TOTAL CURRENT LIABILITIES | | | 104,359 | | | | 193,955 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 180,290 | | | | 205,245 | |
Accumulated deferred investment tax credits | | | 1,835 | | | | 2,153 | |
Regulatory liability for income taxes - net | | | 40,142 | | | | 44,344 | |
Asset retirement cost liabilities | | | 3,396 | | | | 3,174 | |
Accumulated provisions | | | 11,206 | | | | 15,991 | |
Pension and other postretirement liabilities | | | 48,815 | | | | 43,773 | |
Long-term debt | | | 167,215 | | | | 168,023 | |
Gas system rebuild insurance proceeds | | | 75,700 | | | | 90,116 | |
Other | | | 9,184 | | | | 5,936 | |
TOTAL NON-CURRENT LIABILITIES | | | 537,783 | | | | 578,755 | |
| | | | | | | | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
Preferred stock without sinking fund | | | 19,780 | | | | 19,780 | |
| | | | | | | | |
COMMON EQUITY | | | | | | | | |
Common stock, $4 par value, authorized 10,000,000 | | | | | | | | |
shares; issued and outstanding 8,435,900 shares in 2010 | | | | | | | | |
and 2009 | | | 33,744 | | | | 33,744 | |
Paid-in capital | | | 36,294 | | | | 36,294 | |
Retained earnings | | | 121,588 | | | | 138,548 | |
TOTAL | | | 191,626 | | | | 208,586 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 853,548 | | | $ | 1,001,076 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| |
STATEMENTS OF CHANGES IN COMMON EQUITY | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | |
| | Common Equity | | | | |
| | Common Stock | | | Paid-in Capital | | | Retained Earnings | | | Total | |
| | (In Thousands) | |
| | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 33,744 | | | $ | 36,294 | | | $ | 107,406 | | | $ | 177,444 | |
Net income | | | - | | | | - | | | | 34,947 | | | | 34,947 | |
Preferred stock dividends | | | - | | | | - | | | | (965 | ) | | | (965 | ) |
Balance at December 31, 2008 | | $ | 33,744 | | | $ | 36,294 | | | $ | 141,388 | | | $ | 211,426 | |
Net income | | | - | | | | - | | | | 31,025 | | | | 31,025 | |
Common stock dividends | | | - | | | | - | | | | (32,900 | ) | | | (32,900 | ) |
Preferred stock dividends | | | - | | | | - | | | | (965 | ) | | | (965 | ) |
Balance at December 31, 2009 | | $ | 33,744 | | | $ | 36,294 | | | $ | 138,548 | | | $ | 208,586 | |
Net income | | | - | | | | - | | | | 31,005 | | | | 31,005 | |
Common stock dividends | | | - | | | | - | | | | (47,000 | ) | | | (47,000 | ) |
Preferred stock dividends | | | - | | | | - | | | | (965 | ) | | | (965 | ) |
Balance at December 31, 2010 | | $ | 33,744 | | | $ | 36,294 | | | $ | 121,588 | | | $ | 191,626 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 659,266 | | | $ | 640,422 | | | $ | 814,383 | | | $ | 676,927 | | | $ | 571,154 | |
Net Income | | $ | 31,005 | | | $ | 31,025 | | | $ | 34,947 | | | $ | 24,582 | | | $ | 5,344 | |
Total assets | | $ | 853,548 | | | $ | 1,001,076 | | | $ | 1,003,535 | | | $ | 876,195 | | | $ | 921,151 | |
Long-term obligations (1) | | $ | 186,995 | | | $ | 187,803 | | | $ | 292,753 | | | $ | 293,692 | | | $ | 249,655 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and preferred stock without sinking fund. | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 196 | | | $ | 168 | | | $ | 172 | | | $ | 142 | | | $ | 106 | |
Commercial | | | 174 | | | | 166 | | | | 194 | | | | 181 | | | | 165 | |
Industrial | | | 36 | | | | 37 | | | | 48 | | | | 47 | | | | 45 | |
Governmental | | | 70 | | | | 70 | | | | 79 | | | | 72 | | | | 59 | |
Total retail | | | 476 | | | | 441 | | | | 493 | | | | 442 | | | | 375 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 56 | | | | 87 | | | | 161 | | | | 103 | | | | 46 | |
Non-associated companies | | | 1 | | | | 1 | | | | 2 | | | | 1 | | | | 45 | |
Other | | | 10 | | | | 7 | | | | 17 | | | | 11 | | | | 5 | |
Total | | $ | 543 | | | $ | 536 | | | $ | 673 | | | $ | 557 | | | $ | 471 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 1,858 | | | | 1,577 | | | | 1,394 | | | | 1,221 | | | | 914 | |
Commercial | | | 1,899 | | | | 1,813 | | | | 1,774 | | | | 1,763 | | | | 1,666 | |
Industrial | | | 503 | | | | 526 | | | | 541 | | | | 568 | | | | 547 | |
Governmental | | | 809 | | | | 805 | | | | 774 | | | | 747 | | | | 632 | |
Total retail | | | 5,069 | | | | 4,721 | | | | 4,483 | | | | 4,299 | | | | 3,759 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 906 | | | | 1,528 | | | | 1,336 | | | | 995 | | | | 519 | |
Non-associated companies | | | 13 | | | | 15 | | | | 25 | | | | 15 | | | | 779 | |
Total | | | 5,988 | | | | 6,264 | | | | 5,844 | | | | 5,309 | | | | 5,057 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Net Income
2010 Compared to 2009
Net income increased by $2.4 million primarily due to higher net revenue and lower interest expense, partially offset by lower other income, higher taxes other than income taxes, and higher other operation and maintenance expenses.
2009 Compared to 2008
Net income increased by $5.9 million primarily due to higher net revenue and higher other income, partially offset by higher other operation and maintenance expenses and higher interest and other charges.
2008Net Revenue
2010 Compared to 20072009
Net income decreased $1 millionrevenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2010 to 2009.
| | Amount |
| | (In Millions) |
| | |
2009 net revenue | | $485.1 |
Net wholesale revenue | | 27.7 |
Volume/weather | | 27.2 |
Rough production cost equalization | | 18.6 |
Retail electric price | | 16.3 |
Securitization transition charge | | 15.3 |
Purchased power capacity | | (44.3) |
Other | | (5.7) |
2010 net revenue | | $540.2 |
The net wholesale revenue variance is primarily due to higher depreciationincreased sales to municipal and amortizationco-op customers due to the addition of new contracts.
The volume/weather variance is primarily due to increased electricity usage primarily in the residential and commercial sectors, resulting from a 1.5% increase in customers, coupled with the effect of more favorable weather on residential sales. Billed electricity usage increased a total of 777 GWh, or 5%.
The rough production cost equalization variance is due to an additional $18.6 million allocation recorded in the second quarter of 2009 for 2007 rough production cost equalization receipts ordered by the PUCT to Texas retail customers over what was originally allocated to Entergy Texas prior to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 2007, as discussed in Note 2 to the financial statements.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The retail electric price variance is primarily due to rate actions, including an annual base rate increase of $59 million beginning August 2010 as a result of the settlement of the December 2009 rate case. See Note 2 to the financial statements for further discussion of the rate case settlement.
The securitization transition charge variance is due to the issuance of securitization bonds. In November 2009, Entergy Texas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Texas, issued securitization bonds and with the proceeds purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The securitization transition charge is offset with a corresponding increase in interest on long-term debt with no impact on net income. See Note 5 to the financial statements for further discussion of the securitization bond issuance.
The purchased power capacity variance is primarily due to price increases in ongoing purchased power capacity expense and additional capacity purchases.
Gross operating revenues and fuel and purchased power expenses
Gross operating revenues increased primarily due to an increase of $145.6 million in gross wholesale revenues as a result of the addition of new customer contracts and lower other income,the increase related to volume/weather, as discussed above. The increase was partially offset by a decrease of $59.9 million in fuel cost recovery revenues primarily attributable to lower interestfuel rates and other chargesinterim fuel refunds in the first quarter 2010 and a lower effective income tax rate.the third and fourth quarters 2010. The interim fuel refunds and the PUCT approvals are discussed in Note 2 to the financial statements.
Net RevenueFuel and purchased power expenses increased primarily due to increases in the average market prices of purchased power and natural gas, substantially offset by a decrease in deferred fuel expenses as the result of lower fuel revenues, as discussed above.
2009 Compared to 2008
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2009 to 2008.
| | Amount |
| | (In Millions) |
| | |
2008 net revenue | | $440.9 |
Retail electric price | | 32.1 |
Volume/weather | | 19.0 |
Net wholesale revenue | | 15.0 |
Rough production cost equalization | | (18.6) |
Reserve equalization | | (8.1) |
Other | | 4.8 |
2009 net revenue | | $485.1 |
The retail electric price variance is primarily due to rate increases effective late-January 2009 and an Energy Efficiency rider which became effective December 31, 2008, which is substantially offset in other operation and maintenance expenses. See Note 2 to the financial statements for further discussion of the rate increases.
The volume/weather variance is primarily due to the effect of more favorable weather on billed and unbilled sales in 2009 compared to the same period in 2008 and an increase in unbilled sales volume, including the effects of Hurricane Ike which decreased sales volume in 2008.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
The net wholesale revenue variance is primarily due to higher capacity revenue as a result of the purchased power agreements between Entergy Gulf States Louisiana and Entergy Texas and increased volume to municipal and co-op customers.
As discussed further in Note 2 to the financial statements, the rough production cost equalization variance is due to an additional $18.6 million allocation of 2007 rough production cost equalization receipts ordered by the PUCT to Texas retail customers over what was originally allocated to Entergy Texas prior to the jurisdictional separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas, effective December 2007.
The reserve equalization variance is primarily due to increased reserve equalization expense related to changes in the Entergy System generation mix compared to the same period in 2008.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges
Gross operating revenues decreased primarily due to a decrease of $285.3 million in fuel cost recovery revenues primarily attributable to lower fuel rates and a decrease in affiliated wholesale revenue of $141.8 million due to a decrease in the average price of energy available for resale sales.
Fuel and purchased power expenses decreased primarily due to decreases in the average market prices of natural gas and purchased power, partially offset by an increase in deferred fuel expense due to fuel and purchased power expense decreases in excess of lower fuel cost recovery revenues.
Other regulatory charges increased primarily due to rough production cost equalization charges as described above.
2008Other Income Statement Variances
2010 Compared to 20072009
Net revenue consists of operating revenues net of: 1) fuel, fuel-relatedOther operation and maintenance expenses and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2008 to 2007.
| | Amount |
| | (In Millions) |
| | |
2007 net revenue | | $442.3 |
Volume/weather | | (4.6) |
Reserve equalization | | (3.3) |
Securitization transition charge | | 9.1 |
Fuel recovery | | 7.5 |
Other | | (10.1) |
2008 net revenue | | $440.9 |
The volume/weather variance isincreased primarily due to decreased usage during the unbilled sales period.amortization of $11 million of rate case expenses. See "Critical Accounting Estimates" below and Note 12 to the financial statements for further discussion of the accounting for unbilled revenues.
rate case settlement. The reserve equalization variance is primarily due to lower reserve equalization revenue related to changesincrease was partially offset by a charge of $6.8 million in June 2009 resulting from the Entergy System generation mix compared to the same period in 2007.
The securitization transition charge variance is primarily due to the issuance of securitization bonds. In June 2007, Entergy Gulf States Reconstruction Funding I, a company wholly-ownedHurricane Ike and consolidated by Entergy Texas, issued securitization bonds andHurricane Gustav storm cost recovery settlement with the proceeds purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds.PUCT. See Note 52 to the financial statements for additional information regarding the securitization bonds.discussion of this settlement.
The fuel recovery variance isTaxes other than income taxes increased primarily due to a reserveprovision recorded for potential rate refunds madesales and use taxes, an increase in the first quarter 2007local franchise taxes, and an increase in ad valorem taxes as a result of a PUCT ruling relatedhigher 2010 assessment as compared to the application of past PUCT rulings addressing transition to competition in Texas.
The other variance is primarily caused by various operational effects of the jurisdictional separation on revenues and fuel and purchased power expenses.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
Gross operating revenues, fuel and purchased power expenses, and other regulatory charges
Gross operating revenues increased $229.3 million primarily due to the following reasons:
· | an increase of $157 million in fuel cost recovery revenues due to higher fuel rates and increased usage,2009, partially offset by interim fuel refunds to customers for fuel cost recovery over-collections through November 2007. The refund was distributed over a two-month period beginning February 2008. The interim refund and the PUCT approval is discussed in Note 2 to the financial statements; |
· | an increase of $37.1 million in affiliated wholesale revenue primarily due to increases in the cost of energy; |
· | an increase in transition charge amounts collected from customers to service the securitization bonds as discussed above. See Note 5 to the financial statements for additional information regarding the securitization bonds; and |
· | implementation of an interim surcharge to collect $10.3 million in under-recovered incremental purchased capacity costs incurred through July 2007. The surcharge was collected over a two-month period beginning February 2008. The incremental capacity recovery rider and PUCT approval is discussed in Note 2 to the financial statements. |
Fuel and purchased power expenses increased primarily due to an increase in power purchases as a result of the purchased power agreements between Entergy Gulf States Louisiana and Entergy Texas and an increase in the average market prices of purchased power and natural gas, substantially offset by a decrease in deferred fuel expense as a result of decreased recovery from customers of fuel costs.lower millage rates.
Other regulatory charges increasedincome decreased primarily due to an increase of $6.9 millioncarrying costs recorded in the recovery of bond expenses related to the securitization bonds. The recovery became effective July 2007.2009 on storm restoration costs as approved by Texas legislation. See Note 52 to the financial statements for additional information regarding the securitization bonds.further discussion of Hurricane Ike storm cost recovery filings.
Other Income Statement VariancesInterest expense decreased primarily due to lower interest on deferred fuel costs and the pay-down of the debt assumption agreement liability. The decrease was partially offset by the issuance of $546 million in securitization bonds in November 2009.
2009 Compared to 2008
Other operation and maintenance expenses increased primarily due to:
· | an increase of $11.4 million in fossil expenses primarily due to higher plant maintenance costs and plant outages; |
· | an increase of $6.8 million due to the Hurricane Ike and Hurricane Gustav storm cost recovery settlement agreement, as discussed below under "“Hurricane Ike and Hurricane Gustav"”; |
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
· | an increase of $1.8 million in transmission spending primarily for costs related to the Independent Coordinator of Transmission and substation maintenance; |
· | an increase of $1.8 million in local easement fees as the result of higher gross revenues in certain locations within the Texas jurisdiction; and |
· | an increase of $1.7 million in customer service costs primarily as a result of write-offs of uncollectible customer accounts. |
Other income increased primarily due to carrying charges on Hurricane Ike storm restoration costs as authorized by Texas legislation in the second quarter 2009, partially offset by a decrease in taxes collected on advances for transmission projects and a decrease in interest earned on money pool investments. See Note 2 to the financial statements for further discussion of Hurricane Ike storm cost recovery filings.
Interest expense increased primarily due to an increase in long-term debt outstanding as a result of the issuance of $500 million of 7.125% Series mortgage bonds in January 2009 and the issuance of $150 million of 7.875% Series mortgage bonds in May 2009, partially offset by pay-down of debt assumption agreement liabilities.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
2008 Compared to 2007
Other operation and maintenance expenses decreased primarily due to:
· | a decrease of $4.7 million in transmission spending primarily due to lower transmission equalization expenses; |
· | a decrease of $3.9 million in plant maintenance costs; and |
· | a decrease of $3.6 million in customer service support costs, including a decrease in customer account write-offs. |
The decrease was partially offset by an increase of $7.3 million due to the write-off of certain disallowed costs resulting from the December 2008 rate case settlement agreement filed with the PUCT and an increase of $1.7 in payroll and payroll-related costs. The rate case settlement agreement is discussed in Note 2 to the financial statements.
Depreciation and amortization expenses increased primarily due to an increase in plant in service.
Other income decreased primarily due to the absence of carrying charges on storm restoration costs that were approved by the PUCT in the fourth quarter 2006 and a decrease in interest earned on money pool investments. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC issued securitization bonds and the carrying charges ended. The PUCT approval of carrying charges, the securitization filing and the approval for the recovery of reconstruction costs are discussed in Note 2 to the financial statements. The decrease was partially offset by an increase in taxes collected on advances for transmission projects.
Interest and other charges decreased primarily due to the absence of interest recorded on advances from independent power producers per a FERC order during the first quarter 2007 and a decrease in debt outstanding under the debt assumption agreement. This decrease was partially offset by an increase in interest charges recorded on the securitization bonds which were issued during the second quarter 2007. See Note 5 to the financial statements for additional information regarding the securitization bonds.
Income Taxes
The effective income tax rates were 36.6%39.0%, 32.7%36.6%, and 38.1%32.7% for 2010, 2009, 2008, and 2007,2008, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rate.
Cash Flow
Cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | 2009 | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 |
| | | (In Thousands) | |
�� | | | | (In Thousands) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $2,239 | | $297,082 | | $77,115 | Cash and cash equivalents at beginning of period | | $200,703 | | $2,239 | | $297,082 |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 287,533 | | 1,444 | | 175,991 | Operating activities | | 43,095 | | 287,533 | | 1,444 |
| Investing activities | | (216,649) | | (116,887) | | (234,716) | Investing activities | | (121,439) | | (216,649) | | (116,887) |
| Financing activities | | 127,580 | | (179,400) | | 278,692 | Financing activities | | (87,017) | | 127,580 | | (179,400) |
| Net increase (decrease) in cash and cash equivalents | | 198,464 | | (294,843) | | 219,967 | Net increase (decrease) in cash and cash equivalents | | (165,361) | | 198,464 | | (294,843) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $200,703 | | $2,239 | | $297,082 | Cash and cash equivalents at end of period | | $35,342 | | $200,703 | | $2,239 |
Operating Activities
Cash flow provided by operating activities decreased $244.4 million in 2010 compared to 2009 primarily due to:
· | the timing of collection of receivables from customers; |
· | income tax payments of $48.7 million in 2010 compared to income tax refunds of $72.3 million in 2009. In 2010, Entergy Texas made tax payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The tax payments result from differences between Entergy Texas’s estimated utilization of net operating losses and actual utilization on the 2009 tax return filed in 2010; |
· | an $87.8 million fuel cost refund made in the first quarter 2010 and an $77 million fuel cost refund made in the third and fourth quarters 2010; and |
· | an increase of $14.7 million in pension contributions. See “Critical Accounting Estimates” below for further discussion of qualified pension and other postretirement benefits funding. |
The decrease was partially offset by the absence in 2010 of Hurricane Ike restoration spending that occurred in 2009.
Entergy Texas, Inc. and Subsidiaries
Management'sManagement’s Financial Discussion and Analysis
Operating Activities
Cash flow provided by operating activities increased $286.1 million in 2009 compared to 2008 primarily due to:
· | the timing of collection of receivables from customers; |
· | increased recovery of deferred fuel costs. The increased fuel recovery was primarily caused by the $71 million fuel cost over-recovery refund in 2008 that is discussed in Note 2 to the financial statements, in addition to the over-recovery of fuel costs in 2009 compared to 2008; |
· | income tax refunds of $72.3 million in 2009 compared to income tax payments of $762 thousand in 2008; and |
· | a decrease of $15.3 million in pension contributions. |
The increase was partially offset by Hurricane Ike restoration spending in 2008.
CashInvesting Activities
Net cash flow provided by operatingused in investing activities decreased $174.5$95.2 million in 20082010 compared to 20072009 primarily due to money pool activity and a decrease in construction expenditures due to Hurricane Ike restoration spending decreased recoveryin 2009, offset by a decrease of deferred fuel costs, and an increase of $9.9$31.5 million in pension contributions, partially offset byinsurance proceeds and increased remittances to the timingsecuritization trust account as a result of collectionsthe issuance of receivables from customers and payments to vendors. The decreased fuel recovery was primarily caused by the $71$546 million fuel cost over-recovery refund that is discussed in securitization bonds in November 2009. See Note 25 to the financial statements for further discussion of the issuance of the securitization bonds.
Decreases in addition toEntergy Texas’s receivable from the over-recoverymoney pool are a source of fuel costs forcash flow, and Entergy Texas’s receivable from the year ended December 31, 2007money pool decreased by $55.6 million in 2010 compared to under-recoveringincreasing by $69.3 million in 2009. The money pool is an inter-company borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for the year ended December 31, 2008. Fuel prices increased and due to the time lag before the fuel recovery rate increases in response, Entergy Texas had under-recovered fuel costs in 2008.
Investing Activitiesexternal short-term borrowings.
Cash flow used in investing activities increased $99.8 million in 2009 compared to 2008 primarily due to money pool activity, partially offset by higher construction expenditures in 2008 due to Hurricane Ike and insurance proceeds received in 2009 relating to Hurricane Ike.
Increases in Entergy Texas'Texas’s receivable from the money pool are a use of cash flow, and Entergy Texas'Texas’s receivable from the money pool increased by $69.3 million in 2009 compared to decreasing by $154.2 million in 2008. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries'subsidiaries’ need for external short-term borrowings.
Financing Activities
Cash flowEntergy Texas’s financing activities used $87 million of cash in investing activities decreased $117.8 million in 20082010 compared to 2007providing $127.6 million of cash in 2009 primarily due to money pool activity, partially offset by an increase in distribution construction expenditures primarily due to Hurricane Ike.to:
· | the issuance of $545.9 million of securitization bonds in November 2009. See Note 5 to the financial statements for additional information regarding the securitization bonds; |
· | the issuance of $500 million of 7.125% Series mortgage bonds in January 2009; |
· | the issuance of $150 million of 7.875% Series mortgage bonds in May 2009; |
· | the issuance of $200 million of 3.60% Series mortgage bonds in May 2010; and |
· | the retirement of $199.1 million of long-term debt in 2010 compared to $619.9 million in 2009. |
The use of cash was partially offset by:
· | the repayment of Entergy Texas’s $160 million note payable to Entergy Corporation in January 2009; |
· | the repayment of $100 million outstanding on Entergy Texas’s credit facility in February 2009; |
· | money pool activity; and |
· | a decrease of $33.1 million in common equity distributions. |
Decreases in Entergy Texas' receivable fromTexas’s payable to the money pool are a sourceuse of cash flow, and Entergy Texas' receivable fromTexas’s payable to the money pool decreased by $154.2$50.8 million for 2008 compared to increasing by $56.9 million for 2007.in 2009.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Financing Activities
Financing activities provided cash of $127.6 million for 2009 compared to using cash of $179.4 million for 2008 primarily due to:
· | the issuance of $545.9 million of securitization bonds in November 2009. See Note 5 to the financial statements for additional information regarding the securitization bonds; |
· | the issuance of $500 million of 7.125% Series Mortgage Bonds in January 2009; |
· | the issuance of $150 million of 7.875% Series Mortgage Bonds in May 2009; and |
· | $150 million of capital returned to Entergy Corporation in February 2008. After the effects of Hurricane Katrina and Hurricane Rita, Entergy Corporation made a $300 million capital contribution to Entergy Gulf States, Inc. in 2005, which was part of Entergy'sEntergy’s financing plan that provided liquidity and capital resources to Entergy and its subsidiaries while storm restoration cost recovery was pursued. |
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
The cash provided was partially offset by:
· | the retirement of $619.9 million of long term debt in 2009 compared to $327.5 million in 2008; |
· | the repayment of $100 million outstanding on Entergy Texas'Texas’s credit facility in February 2009 as compared to borrowings of $100 million on Entergy Texas'Texas’s credit facility in 2008; |
· | the repayment of Entergy Texas'Texas’s $160 million note payable from Entergy Corporation in January 2009; |
· | an increase of $107.5 million in common stock dividends paid; and |
Decreases in Entergy Texas'Texas’s payable to the money pool are a use of cash flow, and Entergy Texas'Texas’s payable to the money pool decreased by $50.8 million in 2009 compared to increasing by $50.8 million in 2008. The money pool is an inter-company borrowing arrangement designed to reduce Entergy'sEntergy’s subsidiaries need for external short-term borrowings.
Financing activities used cash of $179.4 million for 2008 compared to providing cash of $278.7 million for 2007 primarily due to:
· | the issuance of $329.5 million of securitization bonds in June 2007. See Note 5 to the financial statements for additional information regarding the securitization bonds; |
· | the retirement of $327.5 million of long-term debt in 2008; and |
· | $150 million of capital returned to Entergy Corporation in February 2008. After the effects of Hurricane Katrina and Hurricane Rita, Entergy Corporation made a $300 million capital contribution to Entergy Gulf States, Inc. in 2005, which was part of Entergy's financing plan that provided liquidity and capital resources to Entergy and its subsidiaries while storm restoration cost recovery was pursued. |
The use of cash was partially offset by:
· | borrowing $160 million from Entergy Corporation in December 2008; |
· | borrowings of $100 million on Entergy Texas' credit facility; and |
Increases in Entergy Texas' payable to the money pool are a source of cash flow, and Entergy Texas' payable to the money pool increased by $50.8 million for 2008.
Capital Structure
Entergy Texas'Texas’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Texas as of December 31, 2009 is primarily due to the issuance of $500 million 7.125% Series mortgage bonds in January 2009, the issuance of $150 million 7.875% Series mortgage bonds in May 2009, and the issuance of $545.9 million senior secured transition bonds (securitization bonds) in November 2009 (which are non-recourse to Entergy Texas), partially offset by the repayment of Entergy Texas' $160 million note payable from Entergy Corporation in January 2009, the repayment of $100 million outstanding on Entergy Texas' credit facility in February 2009, and the retirement of $619.9 million of long-term debt prior to maturity.
| | December 31, 2009 | | December 31, 2008 |
| | | | |
Net debt to net capital | | 63.3% | | 59.9% |
Effect of subtracting cash from debt | | 3.0% | | 0.0% |
Debt to capital | | 66.3% | | 59.9% |
Entergy Texas, Inc.
Management's Financial Discussion and Analysis | | December 31, 2010 | | December 31, 2009 |
| | | | |
Debt to capital | | 66.8% | | 66.3% |
Effect of excluding the securitization bonds | | (16.0)% | | (17.1)% |
Debt to capital, excluding securitization bonds (1) | | 50.8% | | 49.2% |
Effect of subtracting cash | | (1.0)% | | (6.9)% |
Net debt to net capital, excluding securitization bonds (1) | | 49.8% | | 42.3% |
(1) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas. |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and long-term debt, including the currently maturing portion and also including the debt assumption liability. Capital consists of debt and shareholders'common equity. Net capital consists of capital less cash and cash equivalents. Entergy Texas uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas'Texas’s financial condition.
Uses of Capital
Entergy Texas requires capital resources for:
· | construction and other capital investments; |
· | debt maturities, including payments under the debt assumption agreement with Entergy Gulf States Louisiana;maturities; |
· | working capital purposes, including the financing of fuel and purchased power costs; and |
· | dividend and interest payments. |
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Following are the amounts of Entergy Texas'Texas’s planned construction and other capital investments, existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:
| 2010 | | 2011-2012 | | 2013-2014 | | after 2014 | | Total | | 2011 | | 2012-2013 | | 2014-2015 | | After 2015 | | Total |
| (In Millions) | (In Millions) |
Planned construction and | | | | | | | | | | | |
capital investment (1) | $180 | | $425 | | N/A | | N/A | | $605 | | |
Planned construction and capital investment (1): | | Planned construction and capital investment (1): | | | | | | | |
Generation | | $84 | | $162 | | N/A | | N/A | | $246 |
Transmission | | 36 | | 144 | | N/A | | N/A | | 180 |
Distribution | | 62 | | 132 | | N/A | | N/A | | 194 |
Other | | 6 | | 10 | | N/A | | N/A | | 16 |
Total | | $188 | | $448 | | N/A | | N/A | | $636 |
Long-term debt (2) | $260 | | $166 | | $219 | | $2,054 | | $2,699 | | $89 | | $216 | | $370 | | $1,968 | | $2,643 |
Operating leases | $4 | | $8 | | $6 | | $2 | | $20 | | $5 | | $9 | | $5 | | $2 | | $21 |
Purchase obligations (3) | $52 | | $130 | | $117 | | $239 | | $538 | | $77 | | $148 | | $142 | | $386 | | $753 |
(1) | Includes approximately $106$107 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For Entergy Texas, it primarily includes unconditional fuel and purchased power obligations. |
In addition to the contractual obligations given above, Entergy Texas expects to contribute approximately $9.7$15.9 million to its pension plans and approximately $7.7$5.2 million to other postretirement plans in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Texas’ pension contributions in the future.2011.
Entergy'sAlso in addition to the contractual obligations, Entergy Texas has $6.6 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
Entergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints, environmental compliance, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more informationinformati on on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.
As a wholly-owned subsidiary, Entergy Texas pays dividends to Entergy Corporation from its earnings at a percentage determined monthly.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
Sources of Capital
Entergy Texas'Texas’s sources to meet its capital requirements include:
· | internally generated funds; |
· | debt or preferred stock issuances; and |
· | bank financing under new or existing facilities. |
Entergy Texas may refinance or redeem debt prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
All debt and common and preferred stock issuances by Entergy Texas require prior regulatory approval. Preferred stock and debtDebt issuances are also subject to issuance tests set forth in its corporate charter, bond indentures and other agreements. Entergy Texas has sufficient capacity under these tests to meet its foreseeable capital needs.
Entergy Texas'Texas’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years:
2009 | | 2008 | | 2007 | | 2006 |
(In Thousands) |
| | | | | | |
$69,317 | | ($50,794) | | $154,176 | | $97,277 |
2010 | | 2009 | | 2008 | | 2007 |
(In Thousands) |
| | | | | | |
$13,672 | | $69,317 | | ($50,794) | | $154,176 |
See Note 4 to the financial statements for a description of the money pool.
Entergy Texas has a credit facility in the amount of $100 million scheduled to expire in August 2012. No borrowings were outstanding under the facility as of December 31, 2009.2010.
Entergy Texas has obtained short-term borrowing authorization from the FERC under which it may borrow through October 2011, up to the aggregate amount, at any one time outstanding, of $200 million. See Note 4 to the financial statements for further discussion of Entergy Texas'Texas’s short-term borrowing limits. Entergy Texas has also obtained an order from the FERC authorizing long-term securities issuances through July 2011.
In December 2008, Entergy Texas borrowed $160 million from its parent company, Entergy Corporation, under a $300 million revolving credit facility pursuant to an Inter-Company Credit Agreement between Entergy Corporation and Entergy Texas. This borrowing would have matured on December 3, 2013. Entergy Texas used these borrowings, together with other available corporate funds, to pay at maturity the portion of the $350 million Floating Rate series of First Mortgage Bonds due December 2008 that had been assumed by Entergy Texas, and that bond series is no longer outstanding. In January 2009, Entergy Texas repaid its $160 million note payable to Entergy Corporation with the proceeds from the $500 million bond issuance discussed above.
Hurricane Ike and Hurricane Gustav
In September 2008, Hurricane Ike caused catastrophic damage to Entergy Texas'Texas’s service territory. The storm resulted in widespread power outages, significant damage to distribution, transmission, and generation infrastructure, and the loss of sales during the power outages. Entergy Texas filed an application in April 2009 seeking a determination that $577.5 million of Hurricane Ike and Hurricane Gustav restoration costs are recoverable, including estimated costs for work to be completed. On August 5, 2009, Entergy Texas submitted to the ALJ an unopposed settlement agreement intended to resolve all issues in the storm cost recovery case. Under the terms of the agreement $566.4 million, plus carrying costs, are eligible for recovery. & #160;Insurance proceeds will be credited as an offset to the securitized amount. Of the $11.1 million difference between Entergy Texas'Texas’s request and the amount agreed to, which is part of the black box agreement and not directly attributable to any specific individual issues raised, $6.8 million is operation and maintenance expense for which Entergy Texas recorded a charge in the second quarter 2009. The remaining $4.3 million was recorded as utility plant. The PUCT approved the settlement in August 2009, and in September 2009 the PUCT approved recovery of the costs, plus carrying costs, by securitization. See Note 5 to the financial statements for a discussion of the November 2009 issuance of the securitization bonds.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
In the third quarter 2009, Entergy settled with its insurer on its Hurricane Ike claim and Entergy Texas received $75.5 million in proceeds (Entergy received a total of $76.5 million).
Hurricane Rita
In September 2005, Hurricane Rita hit Entergy Texas'Texas’s service territory. The storm resulted in power outages; significant damage to electric distribution, transmission, and generation infrastructure; and the temporary loss of sales and customers due to mandatory evacuations. In July 2006, Entergy Texas filed an application with the PUCT with respect to its Hurricane Rita reconstruction costs incurred through March 2006. The filing asked the PUCT to determine the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Texas allocates those costs among its retail customer classes. In December 2006, the PUCT approvedapp roved $381 million of reasonable and necessary hurricane reconstruction costs incurred through March 31, 2006, plus carrying costs, as eligible for recovery. After netting expected insurance proceeds, the amount is $353 million. In April 2007, the PUCT issued its financing order authorizing the issuance of securitization bonds to recover the $353 million of hurricane reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. See Note 5 to the financial statements for a discussion of the June 2007 issuance of the securitization bonds.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Entergy received a total of $317 million as of December 31, 2009 on its Hurricane Katrina and Hurricane Rita insurance claims, including the settlements of its Hurricane Katrina claims with each of its two excess insurers. Of the $317 million received, $34 million has been allocated to Entergy Texas. Entergy has substantially completed its insurance recoveries related to Hurricane Rita.
In June 2009, a law was enacted in Texas that requires Entergy Texas to cease all activities relating to Entergy Texas'Texas’s transition to competition. The law allows Entergy Texas to remain a part of the SERC Region, although it does not prevent Entergy Texas from joining the Southwest Power Pool.another power region. The law provides that proceedings to certify a power region that Entergy Texas belongs to as a qualified power region can be initiated by the PUCT, or on motion by another party, when the conditions supporting such a proceeding exist. Under the new law, the PUCT may not approve a transition to competition plan for Entergy Texas until the expiration of four years from the PUCT'sPUCT’s certification of Entergy Texas'Texas’s power region. In response to thet he new law, Entergy Texas in June 2009 gave notice to the PUCT of the withdrawal of its previously filed transition to competition plan, and requested that its transition to competition proceeding be dismissed. In July 2009 the ALJ dismissed the proceeding.
The new law also contains provisions that allow Entergy Texas to be included intake advantage of a cost recovery mechanism that permits annual filings for the recovery of reasonable and necessary expenditures for transmission infrastructure improvement and changes in wholesale transmission charges. This mechanism was previously available to other non-ERCOT Texas utility companies, but not to Entergy Texas.
The new law further amends already existing law that had required Entergy Texas to propose for PUCT approval a tariff to allow eligible customers the ability to contract for competitive generation. The amending language in the new law provides, among other things, that: 1) the tariff shall not be implemented in a manner that harms the sustainability or competitiveness of manufacturers who choose not to participate in the tariff; 2) Entergy Texas shall "purchase“purchase competitive generation service, selected by the customer, and provide the generation at retail to the customer"customer”; and 3) Entergy Texas shall provide and price transmission service and ancillary services under that tariff at a rate that is unbundled from its cost of service. 160; The new law directs that the PUCT may not issue an order on the tariff that is contrary to an applicable decision, rule, or policy statement of a federal regulatory agency having jurisdiction. The new law provides that the PUCT shall approve, reject, or modify the proposed tariff not later than September 1, 2010.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
The rates that Entergy Texas charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Texas is regulated and the rates charged to its customers are determined in regulatory proceedings. The PUCT, a governmental agency, is primarily responsible for approval of the rates charged to customers.
Filings with the PUCT
2009 Rate Case
In December 2009, Entergy Texas filed a rate case requesting a $198.7 million increase reflecting an 11.5% return on common equity based on an adjusted June 2009 test year. The filing includes a proposed cost of service adjustment rider with a three-year term beginning with the 2010 calendar year as the initial evaluation period. Key provisions include a plus or minus 15 basis point bandwidth, with earnings outside the bandwidth reset to the bottom or top of the band and rates changing prospectively depending upon whether Entergy Texas is under or over-earning. The annual change in revenue requirement is limited to a percentage change in the Consumer Price Index for urban areas, and the filing includes a provision for extraordinary events greater than $10 million per year that would be considered separately. The filing also proposes a purchased power recovery rider and a competitive generation service tariff, and will establish test year baseline values to be used in the transmission cost recovery factor rider authorized for use by Entergy Texas in the 2009 legislative session. The rate case also includesincluded a $2.8 million revenue requirement to provide supplemental funding for the decommissioning trust maintained for the 70% share of River Bend for which Entergy Texas retail customers are partially responsible, in response to an NRC notification of a projected shortfall of decommissioning funding assurance. The filing also includes a request to reconcile $1.8 billion of fuel and purchased power costs covering the period April 2007 through June 2009. Hearings in the proceeding are scheduled for July 2010, and the PUCT is required to issue a final order by November 1, 2010. Beginning in May 2010, Entergy Texas will be allowed to implementimplemented a $17.5 million interim rate increase, subject to refund. Intervenors and PUCT Staff filed testimony recommending adjustments that would result in a maximum rate increase, based on the PUCT Staff’s testi mony, of $58 million.
The rates set byparties filed a final ordersettlement in August 2010 intended to resolve the rate case proceeding. The settlement provides for a $59 million base rate increase for electricity usage beginning August 15, 2010, with an additional increase of $9 million for bills rendered beginning May 2, 2011. The settlement stipulates an authorized return on equity of 10.125%. Baseline values were established to be used in Entergy Texas's request for a transmission cost
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
recovery factor that will be effective back to September 13,made in a separate proceeding. The settlement states that Entergy Texas's fuel costs for the period April 2007 through June 2009 are reconciled, with $3.25 million of disallowed costs, which were included in an interim fuel refund. The settlement also sets River Bend decommissioning costs at $2.0 million annually. Consistent with the settlement, in the third quarter 2010, Entergy Texas amortized $11 million of rate case costs. The PUCT approved the settlement in December 2010.
2007 Rate Case
Entergy Texas made a rate filing in September 2007 with the PUCT requesting an annual rate increase totaling $107.5 million, including a base rate increase of $64.3 million and riders totaling $43.2 million. On December 16, 2008, Entergy Texas filed a term sheet that reflected a settlement agreement that included the PUCT Staff and the other active participants in the rate case. On December 19, 2008, the ALJs approved Entergy Texas'Texas’s request to implement interim rates reflecting the agreement. The agreement includes a $46.7 million base rate increase, among other provisions. Under the ALJs'ALJs’ interim order, Entergy Texas implemented interim rates, subject to refund and surcharge, reflecting the rates established through the settlement.settlement . These rates became effective with bills rendered on and after January 28, 2009, for usage on and after December 19, 2008. In addition, the existing recovery mechanism for incremental purchased power capacity costs ceased as of January 28, 2009, with purchased power capacity costs then subsumed within the base rates set in this proceeding. The agreement adopted by the PUCT also reconciles fuel and purchased power costs for the period January 1, 2006 through March 31, 2007. Certain Texas municipalities exercised their original jurisdiction and took final action to approve rates consistent with the interim rates approved by the ALJs. In March 2009, the PUCT approved the settlement, which made the interim rates final.
Fuel and Purchased Power Cost Recovery
Entergy Texas'Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including carrying charges, not recovered in base rates. The fixed fuel factor formula was revised and approved by a PUCT order in August 2006. The new formula was implemented in September 2006. Under the new methodology, semi-annualSemi-annual revisions of the fixed fuel factor will continue to beare made in March and September based on the market price of natural gas and changes in fuel mix. The amounts collected under Entergy Texas'Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
In July 2005, Entergy Texas filed with the PUCT a request for implementation of an incremental purchased capacity recovery rider. Through this rider Entergy Texas sought to recover incremental revenues that represent the incremental purchased capacity costs, including Entergy Texas' obligation to purchase power from Entergy Louisiana's Perryville plant, over what is already in Entergy Texas' base rates. The PUCT approved an initial rider to collect $18 million annually, which was increased to $21 million in subsequent years. Under the
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
settlement of the 2007 rate case discussed above, this rider ceased on January 28, 2009, with the implementation of stipulated base rates. The amounts collected through the rider are subject to reconciliation.
In May 2006, Entergy Texas filed with the PUCT a fuel and purchased power reconciliation case covering the period September 2003 through December 2005 for costs recoverable through the fixed fuel factor rate and the incremental purchased capacity recovery rider. Entergy Texas sought reconciliation of $1.6 billion of fuel and purchased power costs on a Texas retail basis. A hearing was conducted before the ALJs in April 2007. In July 2007, the ALJs issued a proposal for decision recommending that Entergy Texas be authorized to reconcile all of its requested fixed fuel factor expenses and recommending a minor exception to the incremental purchased capacity recovery calculation. The ALJs also recommended granting an exception to the PUCT rules to allow for recovery of an additional $11.4 million in purchased power capacity costs. In September 2007, the PUCT issued an order, which affirmed the ultimate result of the ALJs' proposal for decision. Upon motions for rehearing, the PUCT added additional language in its order on rehearing to further clarify its position that 30% of River Bend should not be regulated by the PUCT. Two parties filed a second motion for rehearing, but the PUCT declined to address them. The PUCT's decision has been appealed to the Travis County District Court.
In March 2007, Entergy Texas filed a request with the PUCT to refund $78.5 million, including interest, of fuel cost recovery over-collections through January 2007. In June 2007 the PUCT approved a unanimous stipulation and settlement agreement that updated the over-collection balance through April 2007 and established a refund amount, including interest, of $109.4 million. The refund was made over a two-month period beginning with the first billing cycle in July 2007.
In October 2007, Entergy Texas filed a request with the PUCT to refund $45.6 million, including interest, of fuel cost recovery over-collections through September 2007. In January 2008, Entergy Texas filed with the PUCT a stipulation and settlement agreement among the parties that updated the over-collection balance through November 2007 and established a refund amount, including interest, of $71 million. The PUCT approved the agreement in February 2008. The refund was made over a two-month period beginning February 2008, but was reduced by $10.3 million of under-recovered incremental purchased capacity costs.
In January 2008, Entergy Texas made a compliance filing with the PUCT describing how its 2007 Rough Production Cost Equalizationrough production cost equalization receipts under the System Agreement were allocated between Entergy Gulf States, Inc.'s Texas and Louisiana jurisdictions. A hearing was held at the end of July 2008, and in OctoberIn December 2008 the PUCT adopted an ALJ issued a proposal for decision recommending an additional $18.6 million allocation to Texas retail customers. The PUCT adopted the ALJ's proposal for decision in December 2008. Because the PUCT allocation to Texas retail customers is inconsistent with the LPSC allocation to Louisiana retail customers, the PUCT's decision would resultresults in trapped costs between the Texas and Louisiana jurisdictions with no mechanism for recovery. The PUCT denied Entergy Texas' motion for rehearing and Entergy Texas commenced proceedings in both state and federal district courts seeking to reverse the PUCT's decision. The federal proceeding has been abated pending further action by the FERC in the proceeding discussed below. No procedural schedule has been set for the state proceeding.
Entergy Texas also filed with the FERC a proposed amendment to the System Agreement bandwidth formula to specifically calculate the payments to Entergy Gulf States Louisiana and Entergy Texas of Entergy Gulf States, Inc.'s rough production cost equalization receipts for 2007. OnIn May 8, 2009 the FERC issued an order rejecting the proposed amendment, stating, among other things, that the FERC does not have jurisdiction over the allocation of an individual utility's receipts/payments among or between its retail jurisdictions and that this was a matter for the courts to review in the pending proceedings noted above.amendment. Because of the FERC's order, Entergy Texas recorded the effects of the PUCT's allocation of the additional $18.6 million to Texas retail customers in the second quarter 2009. On an after-tax basis, the charge to earnings was approximately $13.0 million (including interest). Entergy requested rehearing of the FERC's order,The PUCT and on July 8, 2009, the FERC granted the request for rehearing for the limited purpose of affording more time for consideration of Entergy's request.decisions are now final.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
In May 2009, Entergy Texas filed with the PUCT a request to refund $46.1 million, including interest, of fuel cost recovery over-collections through February 2009. Entergy Texas requested that the proposed refund be made over a four-month period beginning June 2009. Pursuant to a stipulation among the various parties, in June 2009 the PUCT issued an order approving a refund of $59.2 million, including interest, of fuel cost recovery overcollections through March 2009. The refund was made for most customers over a three-month period beginning July 2009, with the exception2009.
Entergy Texas, Inc. and seasonal/agricultural customers who received a one-month refund.Subsidiaries
Management’s Financial Discussion and Analysis
In October 2009, Entergy Texas filed with the PUCT a request to refund approximately $71 million, including interest, of fuel cost recovery over-collections through September 2009. Entergy Texas requested that the proposed refund be made over a six-month period beginning January 2010. Pursuant to a stipulation among the various parties, the PUCT issued an order approving a refund of $87.8 million, including interest, of fuel cost recovery overcollections through October 2009. The refund will bewas made for most customers over a three-month period beginning January 2010, with the exception of certain industrial and seasonal/agricultural customers who received a one-month refund.2010.
Federal RegulationIn June 2010, Entergy Texas filed with the PUCT a request to refund approximately $66 million, including interest, of fuel cost recovery over-collections through May 2010. In September 2010 the PUCT issued an order providing for a $77 million refund for fuel cost recovery over-collections through June 2010. The refund was made for most customers over a three-month period beginning with the September 2010 billing cycle.
System Agreement ProceedingsIn December 2010, Entergy Texas filed with the PUCT a request to refund approximately $52 million, including interest, of fuel cost recovery over-collections through October 2010. Pursuant to a stipulation among the parties that was approved on an interim basis and is pending final action by the PUCT, Entergy Texas will refund over-collections of approximately $72.7 million through November 2010. The refund will be made for most customers over a three-month period beginning with the February 2011 billing cycle.
See "“System Agreement Proceedings" in Entergy Corporation and Subsidiaries' Management's Discussion and Analysis for discussion of the proceeding at the FERC involving the System Agreement and of other related proceedings.
Transmission
See "”, “Independent Coordinator of Transmission"”, “Notice to SERC Reliability Corporation regarding Reliability Standards”, and “U.S. Department of Justice Investigation” in the “Rate, Cost-recovery, and Other Regulation – Federal Regulation” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries Management’s Finan cial Discussion and Analysis for further discussion.a discussion of these topics.
Entergy Texas'Texas’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Texas'Texas’s industrial customer base. Entergy Texas responds by working with industrial and commercial customers and negotiating electric service contracts to provide, under existing rate schedules, competitive rates that match specific customer needs and load profiles. Entergy Texas actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers. Entergy Texas does not currently expect additional significant losses to cogeneration because ofo f the current economics of the electricity markets and Entergy Texas'Texas’s marketing efforts in retaining industrial customers.
Entergy Texas'Texas’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Texas is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
The preparation of Entergy Texas'Texas’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Texas'Texas’s financial position or results of operations.
Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis
Unbilled Revenue
As discussed in Note 1 to the financial statements, Entergy Texas records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month'smonth’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period and fuel price fluctuations, in addition to changes in certain components of the calculation.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries’ Management’s Discussion and Analysis forfo r further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate.
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Qualified Projected Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $608 | | $6,517 | | (0.25%) | | $645 | | $7,335 |
Rate of return on plan assets | | (0.25%) | | $610 | | - | | (0.25%) | | $604 | | - |
Rate of increase in compensation | | 0.25% | | $296 | | $1,312 | | 0.25% | | $286 | | $1,312 |
Entergy Texas, Inc.
Management's Financial Discussion and Analysis
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $432 | | $2,583 | | 0.25% | | $477 | | $2,665 |
Discount rate | | (0.25%) | | $258 | | $3,017 | | (0.25%) | | $278 | | $3,134 |
Each fluctuation above assumes that the other components of the calculation are held constant.
Costs and Funding
Total qualified pension incomecost for Entergy Texas in 20092010 was $0.8$3.0 million. Entergy Texas anticipates 20102011 qualified pension expensecost to be $3$4.4 million. Entergy Texas contributed $3.6$18.3 million to its qualified pension plans in 2009.2010. Entergy Texas'Texas’s contributions to the pension trust are currently estimated to be approximately $9.7$15.9 million in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act2011.
Entergy Texas, Inc. and beyond, continues to evolve, be interpreted through technical corrections bills,Subsidiaries
Management’s Financial Discussion and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of Entergy Texas’ pension contributions in the future.Analysis
Total postretirement health care and life insurance benefit costs for Entergy Texas in 20092010 were $5.7 million, including $1 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Texas expects 2010 postretirement health care and life insurance benefit costs to approximate $5.6 million, including $1.1 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Texas expects 2011 postretirement health care and life insurance benefit costs to approximate $4.1 million, including $1.5 million in savings due to the estimated effect of future Medicare Part D subsidies. Entergy Texas expects to contribute approximately $7.7$5.2 million to its other postretirement plans in 2010.2011.
New Accounting PronouncementsFederal Healthcare Legislation
See "the “NewQualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting PronouncementsEstimates"” section of Entergy Corporation and Subsidiaries' Management'sSubsidiaries Management’s Financial Discussion and Analysis for a discussion of new accounting pronouncements.Federal Healthcare Legislation.
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Discussion and Analysis.
To the Board of Directors and Shareholder of
Entergy Texas, Inc. and Subsidiaries
Beaumont, Texas
We have audited the accompanying consolidated balance sheets of Entergy Texas, Inc. and Subsidiaries (the “Company”) as of December 31, 20092010 and 2008,2009, and the related consolidated income statements, consolidated statements of income, retained earningschanges in common equity, and paid-in capital, andconsolidated statements of cash flows (pages 376364 through 380368 and applicable items in pages 6349 through 193)184) for each of the three years in the period ended December 31, 2009.2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Entergy Texas, Inc. and Subsidiaries as of December 31, 20092010 and 2008,2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the financial statements, effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation and contributed certain assets and liabilities to the Company.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 201025, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
| |
CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 1,690,431 | | | $ | 1,563,823 | | | $ | 2,012,258 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 343,083 | | | | 449,335 | | | | 581,696 | |
Purchased power | | | 743,438 | | | | 584,550 | | | | 965,426 | |
Other operation and maintenance | | | 209,699 | | | | 204,524 | | | | 176,096 | |
Taxes other than income taxes | | | 63,897 | | | | 55,480 | | | | 53,615 | |
Depreciation and amortization | | | 76,057 | | | | 74,035 | | | | 75,309 | |
Other regulatory charges - net | | | 63,683 | | | | 44,807 | | | | 24,197 | |
TOTAL | | | 1,499,857 | | | | 1,412,731 | | | | 1,876,339 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 190,574 | | | | 151,092 | | | | 135,919 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 5,661 | | | | 5,232 | | | | 3,928 | |
Interest and investment income | | | 7,222 | | | | 47,541 | | | | 11,736 | |
Miscellaneous - net | | | (3,220 | ) | | | 544 | | | | 12,387 | |
TOTAL | | | 9,663 | | | | 53,317 | | | | 28,051 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 95,272 | | | | 106,163 | | | | 80,197 | |
Allowance for borrowed funds used during construction | | | (3,618 | ) | | | (2,510 | ) | | | (2,240 | ) |
TOTAL | | | 91,654 | | | | 103,653 | | | | 77,957 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 108,583 | | | | 100,756 | | | | 86,013 | |
| | | | | | | | | | | | |
Income taxes | | | 42,383 | | | | 36,915 | | | | 28,118 | |
| | | | | | | | | | | | |
NET INCOME | | $ | 66,200 | | | $ | 63,841 | | | $ | 57,895 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 66,200 | | | $ | 63,841 | | | $ | 57,895 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Depreciation, amortization, and decommissioning | | | 76,057 | | | | 74,035 | | | | 75,309 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 63,418 | | | | 4,365 | | | | (255 | ) |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (41,820 | ) | | | 281,710 | | | | (35,081 | ) |
Fuel inventory | | | 1,085 | | | | 2,688 | | | | (1,867 | ) |
Accounts payable | | | 23,415 | | | | (99,483 | ) | | | 104,912 | |
Taxes accrued | | | (49,030 | ) | | | 27,986 | | | | 33,842 | |
Interest accrued | | | 3,102 | | | | 8,473 | | | | (5,947 | ) |
Deferred fuel costs | | | (25,318 | ) | | | 123,927 | | | | (88,449 | ) |
Other working capital accounts | | | (115,753 | ) | | | (95,603 | ) | | | 121,081 | |
Changes in provision for estimated losses | | | (3,390 | ) | | | (4,226 | ) | | | 4,073 | |
Changes in other regulatory assets | | | 51,637 | | | | (187,250 | ) | | | (268,473 | ) |
Changes in pension and other postretirement liabilities | | | (5,998 | ) | | | (12,594 | ) | | | 76,898 | |
Other | | | (510 | ) | | | 99,664 | | | | (72,494 | ) |
Net cash flow provided by operating activities | | | 43,095 | | | | 287,533 | | | | 1,444 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (162,822 | ) | | | (188,277 | ) | | | (283,622 | ) |
Allowance for equity funds used during construction | | | 5,661 | | | | 5,232 | | | | 3,928 | |
Insurance proceeds | | | 5,293 | | | | 36,749 | | | | 1,420 | |
Change in money pool receivable - net | | | 55,645 | | | | (69,317 | ) | | | 154,176 | |
Changes in other investments | | | 2,318 | | | | - | | | | - | |
Remittances to transition charge account | | | (89,939 | ) | | | (36,999 | ) | | | (36,157 | ) |
Payments from transition charge account | | | 62,405 | | | | 35,963 | | | | 43,368 | |
Net cash flow used in investing activities | | | (121,439 | ) | | | (216,649 | ) | | | (116,887 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 198,435 | | | | 1,177,819 | | | | - | |
Return of capital to parent | | | - | | | | - | | | | (150,000 | ) |
Retirement of long-term debt | | | (199,052 | ) | | | (619,945 | ) | | | (327,514 | ) |
Change in money pool payable - net | | | - | | | | (50,794 | ) | | | 50,794 | |
Loan from Entergy Corporation | | | - | | | | - | | | | 160,000 | |
Repayment of loan from Entergy Corporation | | | - | | | | (160,000 | ) | | | - | |
Changes in credit borrowings - net | | | - | | | | (100,000 | ) | | | 100,000 | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (86,400 | ) | | | (119,500 | ) | | | (12,000 | ) |
Other | | | - | | | | - | | | | (680 | ) |
Net cash flow provided by (used in) financing activities | | | (87,017 | ) | | | 127,580 | | | | (179,400 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (165,361 | ) | | | 198,464 | | | | (294,843 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 200,703 | | | | 2,239 | | | | 297,082 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 35,342 | | | $ | 200,703 | | | $ | 2,239 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 87,147 | | | $ | 93,951 | | | $ | 82,635 | |
Income taxes | | $ | 48,713 | | | $ | (72,322 | ) | | $ | 762 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
CONSOLIDATED INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 1,563,823 | | | $ | 2,012,258 | | | $ | 1,782,923 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 449,335 | | | | 581,696 | | | | 546,413 | |
Purchased power | | | 584,550 | | | | 965,426 | | | | 777,419 | |
Other operation and maintenance | | | 204,524 | | | | 176,096 | | | | 179,119 | |
Decommissioning | | | 195 | | | | 184 | | | | 173 | |
Taxes other than income taxes | | | 55,480 | | | | 53,615 | | | | 50,617 | |
Depreciation and amortization | | | 73,840 | | | | 75,125 | | | | 68,172 | |
Other regulatory charges - net | | | 44,807 | | | | 24,197 | | | | 16,808 | |
TOTAL | | | 1,412,731 | | | | 1,876,339 | | | | 1,638,721 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 151,092 | | | | 135,919 | | | | 144,202 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 5,232 | | | | 3,928 | | | | 3,295 | |
Interest and dividend income | | | 47,541 | | | | 11,736 | | | | 31,397 | |
Miscellaneous - net | | | 544 | | | | 12,387 | | | | (600 | ) |
TOTAL | | | 53,317 | | | | 28,051 | | | | 34,092 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 98,957 | | | | 72,441 | | | | 74,343 | |
Other interest - net | | | 7,206 | | | | 7,756 | | | | 10,907 | |
Allowance for borrowed funds used during construction | | | (2,510 | ) | | | (2,240 | ) | | | (2,126 | ) |
TOTAL | | | 103,653 | | | | 77,957 | | | | 83,124 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 100,756 | | | | 86,013 | | | | 95,170 | |
| | | | | | | | | | | | |
Income taxes | | | 36,915 | | | | 28,118 | | | | 36,249 | |
| | | | | | | | | | | | |
NET INCOME | | $ | 63,841 | | | $ | 57,895 | | | $ | 58,921 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 63,841 | | | $ | 57,895 | | | $ | 58,921 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Reserve for regulatory adjustments | | | - | | | | (7,562 | ) | | | (363 | ) |
Other regulatory charges - net | | | 44,807 | | | | 24,197 | | | | 16,808 | |
Depreciation, amortization, and decommissioning | | | 74,035 | | | | 75,309 | | | | 68,345 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 4,365 | | | | (255 | ) | | | 218,873 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | 281,710 | | | | (35,081 | ) | | | (230,481 | ) |
Fuel inventory | | | 2,688 | | | | (1,867 | ) | | | (10,939 | ) |
Accounts payable | | | (99,483 | ) | | | 104,912 | | | | (1,328 | ) |
Taxes accrued | | | 27,986 | | | | 33,842 | | | | 4,936 | |
Interest accrued | | | 8,473 | | | | (5,947 | ) | | | 10,030 | |
Deferred fuel costs | | | 123,927 | | | | (88,449 | ) | | | 21,619 | |
Other working capital accounts | | | (95,603 | ) | | | 121,081 | | | | 86,598 | |
Provision for estimated losses and reserves | | | (4,226 | ) | | | 4,073 | | | | (568 | ) |
Changes in other regulatory assets | | | (187,250 | ) | | | (268,473 | ) | | | (21,038 | ) |
Changes in pension and other postretirement liabilities | | | (12,594 | ) | | | 76,898 | | | | (6,901 | ) |
Other | | | 54,857 | | | | (89,129 | ) | | | (38,521 | ) |
Net cash flow provided by operating activities | | | 287,533 | | | | 1,444 | | | | 175,991 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (188,277 | ) | | | (283,622 | ) | | | (167,083 | ) |
Allowance for equity funds used during construction | | | 5,232 | | | | 3,928 | | | | 3,295 | |
Insurance proceeds | | | 36,749 | | | | 1,420 | | | | 5,244 | |
Change in money pool receivable - net | | | (69,317 | ) | | | 154,176 | | | | (56,899 | ) |
Collections received from (remitted to) transition charge account | | | (1,036 | ) | | | 7,211 | | | | (19,273 | ) |
Net cash flow used in investing activities | | | (216,649 | ) | | | (116,887 | ) | | | (234,716 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 1,177,819 | | | | - | | | | 323,637 | |
Return of capital to parent | | | - | | | | (150,000 | ) | | | - | |
Retirement of long-term debt | | | (619,945 | ) | | | (327,514 | ) | | | (2,541 | ) |
Change in money pool payable - net | | | (50,794 | ) | | | 50,794 | | | | - | |
Loan from Entergy Corporation | | | - | | | | 160,000 | | | | - | |
Repayment of loan from Entergy Corporation | | | (160,000 | ) | | | - | | | | - | |
Changes in credit borrowings - net | | | (100,000 | ) | | | 100,000 | | | | - | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (119,500 | ) | | | (12,000 | ) | | | (42,404 | ) |
Other | | | - | | | | (680 | ) | | | - | |
Net cash flow provided by (used in) financing activities | | | 127,580 | | | | (179,400 | ) | | | 278,692 | |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 198,464 | | | | (294,843 | ) | | | 219,967 | |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 2,239 | | | | 297,082 | | | | 77,115 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 200,703 | | | $ | 2,239 | | | $ | 297,082 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid/(received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 93,951 | | | $ | 82,635 | | | $ | 70,561 | |
Income taxes | | $ | (72,322 | ) | | $ | 762 | | | $ | (1,930 | ) |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
CONSOLIDATED BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 1,552 | | | $ | 2,201 | |
Temporary cash investments | | | 199,151 | | | | 38 | |
Total cash and cash equivalents | | | 200,703 | | | | 2,239 | |
Securitization recovery trust account | | | 13,098 | | | | 12,062 | |
Accounts receivable: | | | | | | | | |
Customer | | | 51,194 | | | | 82,583 | |
Allowance for doubtful accounts | | | (844 | ) | | | (1,001 | ) |
Associated companies | | | 75,437 | | | | 258,629 | |
Other | | | 10,688 | | | | 14,122 | |
Accrued unbilled revenues | | | 35,727 | | | | 30,262 | |
Total accounts receivable | | | 172,202 | | | | 384,595 | |
Deferred fuel costs | | | - | | | | 21,179 | |
Accumulated deferred income taxes | | | 59,399 | | | | 88,611 | |
Fuel inventory - at average cost | | | 54,957 | | | | 57,645 | |
Materials and supplies - at average cost | | | 30,432 | | | | 36,329 | |
Prepayments and other | | | 16,357 | | | | 12,785 | |
TOTAL | | | 547,148 | | | | 615,445 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investments in affiliates - at equity | | | 845 | | | | 845 | |
Non-utility property - at cost (less accumulated depreciation) | | | 1,496 | | | | 1,788 | |
Other | | | 16,309 | | | | 17,451 | |
TOTAL | | | 18,650 | | | | 20,084 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 3,074,334 | | | | 2,912,972 | |
Construction work in progress | | | 82,167 | | | | 221,387 | |
TOTAL UTILITY PLANT | | | 3,156,501 | | | | 3,134,359 | |
Less - accumulated depreciation and amortization | | | 1,210,172 | | | | 1,104,116 | |
UTILITY PLANT - NET | | | 1,946,329 | | | | 2,030,243 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 95,894 | | | | 84,997 | |
Other regulatory assets | | | 1,232,101 | | | | 1,117,257 | |
Long-term receivables - associated companies | | | 34,340 | | | | 88,031 | |
Other | | | 21,176 | | | | 28,714 | |
TOTAL | | | 1,383,511 | | | | 1,318,999 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 3,895,638 | | | $ | 3,984,771 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND SHAREHOLDER'S EQUITY |
| | | | | | | |
| | December 31, |
| | 2009 | | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Currently maturing portion of debt assumption liability | | $ | 167,742 | | | $ | 100,509 | |
Accounts payable: | | | | | | | | |
Associated companies | | | 47,677 | | | | 144,662 | |
Other | | | 70,147 | | | | 342,449 | |
Customer deposits | | | 39,665 | | | | 40,589 | |
Taxes accrued | | | 77,581 | | | | 49,595 | |
Interest accrued | | | 30,575 | | | | 22,102 | |
Deferred fuel costs | | | 102,748 | | | | - | |
Pension and other postretirement liabilities | | | 935 | | | | 1,269 | |
System agreement cost equalization | | | 117,204 | | | | 214,315 | |
Other | | | 2,674 | | | | 4,551 | |
TOTAL | | | 656,948 | | | | 920,041 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 740,074 | | | | 756,996 | |
Accumulated deferred investment tax credits | | | 22,532 | | | | 24,128 | |
Other regulatory liabilities | | | 20,417 | | | | - | |
Asset retirement cost liabilities | | | 3,445 | | | | 3,250 | |
Accumulated provisions | | | 8,710 | | | | 12,936 | |
Pension and other postretirement liabilities | | | 78,722 | | | | 91,316 | |
Note payable to Entergy Corporation | | | - | | | | 160,000 | |
Long-term debt - assumption liability | | | - | | | | 669,462 | |
Other long-term debt | | | 1,490,283 | | | | 414,906 | |
Other | | | 30,017 | | | | 31,587 | |
TOTAL | | | 2,394,200 | | | | 2,164,581 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
SHAREHOLDER'S EQUITY | | | | | | | | |
Common stock, no par value, authorized 200,000,000 shares; | | | | | | | | |
issued and outstanding 46,525,000 shares in 2009 and 2008 | | | 49,452 | | | | 49,452 | |
Paid-in capital | | | 481,994 | | | | 481,994 | |
Retained earnings | | | 313,044 | | | | 368,703 | |
TOTAL | | | 844,490 | | | | 900,149 | |
| | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | | $ | 3,895,638 | | | $ | 3,984,771 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| |
CONSOLIDATED BALANCE SHEETS | |
ASSETS | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT ASSETS | | | | | | |
Cash and cash equivalents: | | | | | | |
Cash | | $ | 1,719 | | | $ | 1,552 | |
Temporary cash investments | | | 33,623 | | | | 199,151 | |
Total cash and cash equivalents | | | 35,342 | | | | 200,703 | |
Securitization recovery trust account | | | 40,632 | | | | 13,098 | |
Accounts receivable: | | | | | | | | |
Customer | | | 56,358 | | | | 51,194 | |
Allowance for doubtful accounts | | | (2,185 | ) | | | (844 | ) |
Associated companies | | | 53,128 | | | | 75,437 | |
Other | | | 11,605 | | | | 10,688 | |
Accrued unbilled revenues | | | 39,471 | | | | 35,727 | |
Total accounts receivable | | | 158,377 | | | | 172,202 | |
Accumulated deferred income taxes | | | 44,752 | | | | 59,399 | |
Fuel inventory - at average cost | | | 53,872 | | | | 54,957 | |
Materials and supplies - at average cost | | | 28,842 | | | | 30,432 | |
Prepayments and other | | | 14,856 | | | | 16,357 | |
TOTAL | | | 376,673 | | | | 547,148 | |
| | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
Investments in affiliates - at equity | | | 812 | | | | 845 | |
Non-utility property - at cost (less accumulated depreciation) | | | 1,223 | | | | 1,496 | |
Other | | | 17,037 | | | | 16,309 | |
TOTAL | | | 19,072 | | | | 18,650 | |
| | | | | | | | |
UTILITY PLANT | | | | | | | | |
Electric | | | 3,205,566 | | | | 3,074,334 | |
Construction work in progress | | | 80,096 | | | | 82,167 | |
TOTAL UTILITY PLANT | | | 3,285,662 | | | | 3,156,501 | |
Less - accumulated depreciation and amortization | | | 1,245,729 | | | | 1,210,172 | |
UTILITY PLANT - NET | | | 2,039,933 | | | | 1,946,329 | |
| | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
Regulatory assets: | | | | | | | | |
Regulatory asset for income taxes - net | | | 127,046 | | | | 120,389 | |
Other regulatory assets (includes securitization property of $763,841 as of December 31, 2010) | | | 1,168,960 | | | | 1,232,101 | |
Long-term receivables - associated companies | | | 32,596 | | | | 34,340 | |
Other | | | 19,584 | | | | 21,176 | |
TOTAL | | | 1,348,186 | | | | 1,408,006 | |
| | | | | | | | |
TOTAL ASSETS | | $ | 3,783,864 | | | $ | 3,920,133 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS AND PAID-IN CAPITAL | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
RETAINED EARNINGS | | | | | | | | | |
Retained Earnings - Beginning of period | | $ | 368,703 | | | $ | 322,808 | | | $ | 306,266 | |
Add: | | | | | | | | | | | | |
Net Income | | | 63,841 | | | | 57,895 | | | | 58,921 | |
Total | | | 63,841 | | | | 57,895 | | | | 58,921 | |
| | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | |
Dividends declared on common stock | | | 119,500 | | | | 12,000 | | | | 42,404 | |
Other deductions | | | - | | | | - | | | | (25 | ) |
Total | | | 119,500 | | | | 12,000 | | | | 42,379 | |
| | | | | | | | | | | | |
Retained Earnings - End of period | | $ | 313,044 | | | $ | 368,703 | | | $ | 322,808 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
PAID-IN CAPITAL | | | | | | | | | | | | |
Paid-in Capital - Beginning of period | | $ | 481,994 | | | $ | 631,994 | | | $ | 632,222 | |
| | | | | | | | | | | | |
Add (Deduct): | | | | | | | | | | | | |
Return of capital to parent | | | - | | | | (150,000 | ) | | | - | |
Other | | | - | | | | - | | | | (228 | ) |
| | | | | | | | | | | | |
Paid-in Capital - End of period | | $ | 481,994 | | | $ | 481,994 | | | $ | 631,994 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
CONSOLIDATED BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing portion of debt assumption liability | | $ | - | | | $ | 167,742 | |
Accounts payable: | | | | | | | | |
Associated companies | | | 69,862 | | | | 47,677 | |
Other | | | 70,325 | | | | 70,147 | |
Customer deposits | | | 38,376 | | | | 39,665 | |
Taxes accrued | | | 28,551 | | | | 77,581 | |
Interest accrued | | | 33,677 | | | | 30,575 | |
Deferred fuel costs | | | 77,430 | | | | 102,748 | |
Pension and other postretirement liabilities | | | 1,354 | | | | 935 | |
System agreement cost equalization | | | - | | | | 117,204 | |
Other | | | 4,222 | | | | 2,674 | |
TOTAL | | | 323,797 | | | | 656,948 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 829,668 | | | | 764,569 | |
Accumulated deferred investment tax credits | | | 20,936 | | | | 22,532 | |
Other regulatory liabilities | | | 26,178 | | | | 20,417 | |
Asset retirement cost liabilities | | | 3,651 | | | | 3,445 | |
Accumulated provisions | | | 5,320 | | | | 8,710 | |
Pension and other postretirement liabilities | | | 72,724 | | | | 78,722 | |
Long-term debt (includes securitization bonds of $807,066 as of December 31, 2010) | | | 1,659,230 | | | | 1,490,283 | |
Other | | | 18,070 | | | | 30,017 | |
TOTAL | | | 2,635,777 | | | | 2,418,695 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
COMMON EQUITY | | | | | | | | |
Common stock, no par value, authorized 200,000,000 shares; | | | | | | | | |
issued and outstanding 46,525,000 shares in 2010 and 2009 | | | 49,452 | | | | 49,452 | |
Paid-in capital | | | 481,994 | | | | 481,994 | |
Retained earnings | | | 292,844 | | | | 313,044 | |
TOTAL | | | 824,290 | | | | 844,490 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 3,783,864 | | | $ | 3,920,133 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| |
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | | | | |
| | Common Equity | | | | |
| | Common Stock | | | Paid-in Capital | | | Retained Earnings | | | Total | |
| | (In Thousands) | |
| | | | | | | | | | | | |
Balance at December 31, 2007 | | $ | 49,452 | | | $ | 631,994 | | | $ | 322,808 | | | $ | 1,004,254 | |
Net income | | | - | | | | - | | | | 57,895 | | | | 57,895 | |
Common stock dividends | | | - | | | | - | | | | (12,000 | ) | | | (12,000 | ) |
Return of capital to parent | | | - | | | | (150,000 | ) | | | - | | | | (150,000 | ) |
Balance at December 31, 2008 | | $ | 49,452 | | | $ | 481,994 | | | $ | 368,703 | | | $ | 900,149 | |
Net income | | | - | | | | - | | | | 63,841 | | | | 63,841 | |
Common stock dividends | | | - | | | | - | | | | (119,500 | ) | | | (119,500 | ) |
Balance at December 31, 2009 | | $ | 49,452 | | | $ | 481,994 | | | $ | 313,044 | | | $ | 844,490 | |
Net income | | | - | | | | - | | | | 66,200 | | | | 66,200 | |
Common stock dividends | | | - | | | | - | | | | (86,400 | ) | | | (86,400 | ) |
Balance at December 31, 2010 | | $ | 49,452 | | | $ | 481,994 | | | $ | 292,844 | | | $ | 824,290 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 1,563,823 | | | $ | 2,012,258 | | | $ | 1,782,923 | | | $ | 1,880,228 | | | $ | 1,734,221 | |
Net Income | | $ | 63,841 | | | $ | 57,895 | | | $ | 58,921 | | | $ | 54,137 | | | $ | 48,916 | |
Total assets | | $ | 3,895,638 | | | $ | 3,984,771 | | | $ | 3,606,752 | | | $ | 3,019,873 | | | $ | 3,041,100 | |
Long-term obligations (1) | | $ | 1,490,283 | | | $ | 1,084,368 | | | $ | 1,103,863 | | | $ | 1,085,680 | | | $ | 1,085,593 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | | | | 2005 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 533 | | | $ | 606 | | | $ | 544 | | | $ | 600 | | | $ | 502 | |
Commercial | | | 337 | | | | 417 | | | | 364 | | | | 406 | | | | 327 | |
Industrial | | | 332 | | | | 489 | | | | 414 | | | | 464 | | | | 388 | |
Governmental | | | 23 | | | | 27 | | | | 24 | | | | 27 | | | | 22 | |
Total retail | | | 1,225 | | | | 1,539 | | | | 1,346 | | | | 1,497 | | | | 1,239 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 294 | | | | 436 | | | | 398 | | | | 354 | | | | 468 | |
Non-associated companies | | | 10 | | | | 6 | | | | 6 | | | | 6 | | | | 6 | |
Other | | | 35 | | | | 31 | | | | 33 | | | | 23 | | | | 21 | |
Total | | $ | 1,564 | | | $ | 2,012 | | | $ | 1,783 | | | $ | 1,880 | | | $ | 1,734 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | �� | | | |
Residential | | | 5,453 | | | | 5,245 | | | | 5,280 | | | | 5,211 | | | | 5,207 | |
Commercial | | | 4,165 | | | | 4,092 | | | | 4,085 | | | | 4,002 | | | | 3,878 | |
Industrial | | | 5,570 | | | | 5,948 | | | | 5,911 | | | | 5,915 | | | | 5,650 | |
Governmental | | | 258 | | | | 248 | | | | 246 | | | | 255 | | | | 244 | |
Total retail | | | 15,446 | | | | 15,533 | | | | 15,522 | | | | 15,383 | | | | 14,979 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 3,630 | | | | 3,771 | | | | 4,366 | | | | 4,316 | | | | 4,994 | |
Non-associated companies | | | 231 | | | | 87 | | | | 89 | | | | 87 | | | | 89 | |
Total | | | 19,307 | | | | 19,391 | | | | 19,977 | | | | 19,786 | | | | 20,062 | |
| | | | | | | | | | | | | | | | | | | | |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 1,690,431 | | | $ | 1,563,823 | | | $ | 2,012,258 | | | $ | 1,782,923 | | | $ | 1,880,228 | |
Net Income | | $ | 66,200 | | | $ | 63,841 | | | $ | 57,895 | | | $ | 58,921 | | | $ | 54,137 | |
Total assets | | $ | 3,783,864 | | | $ | 3,920,133 | | | $ | 3,984,771 | | | $ | 3,606,752 | | | $ | 3,019,873 | |
Long-term obligations (1) | | $ | 1,659,230 | | | $ | 1,490,283 | | | $ | 1,084,368 | | | $ | 1,103,863 | | | $ | 1,085,680 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | 2010 | | | | 2009 | | | | 2008 | | | | 2007 | | | | 2006 | |
| | (Dollars In Millions) | |
Electric Operating Revenues: | | | | | | | | | | | | | | | | | | | | |
Residential | | $ | 559 | | | $ | 533 | | | $ | 606 | | | $ | 544 | | | $ | 600 | |
Commercial | | | 321 | | | | 337 | | | | 417 | | | | 364 | | | | 406 | |
Industrial | | | 305 | | | | 332 | | | | 489 | | | | 414 | | | | 464 | |
Governmental | | | 23 | | | | 23 | | | | 27 | | | | 24 | | | | 27 | |
Total retail | | | 1,208 | | | | 1,225 | | | | 1,539 | | | | 1,346 | | | | 1,497 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 373 | | | | 294 | | | | 436 | | | | 398 | | | | 354 | |
Non-associated companies | | | 76 | | | | 10 | | | | 6 | | | | 6 | | | | 6 | |
Other | | | 33 | | | | 35 | | | | 31 | | | | 33 | | | | 23 | |
Total | | $ | 1,690 | | | $ | 1,564 | | | $ | 2,012 | | | $ | 1,783 | | | $ | 1,880 | |
Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | | | | | |
Residential | | | 5,958 | | | | 5,453 | | | | 5,245 | | | | 5,280 | | | | 5,211 | |
Commercial | | | 4,271 | | | | 4,165 | | | | 4,092 | | | | 4,085 | | | | 4,002 | |
Industrial | | | 5,642 | | | | 5,570 | | | | 5,948 | | | | 5,911 | | | | 5,915 | |
Governmental | | | 271 | | | | 258 | | | | 248 | | | | 246 | | | | 255 | |
Total retail | | | 16,142 | | | | 15,446 | | | | 15,533 | | | | 15,522 | | | | 15,383 | |
Sales for resale: | | | | | | | | | | | | | | | | | | | | |
Associated companies | | | 3,758 | | | | 3,630 | | | | 3,771 | | | | 4,366 | | | | 4,316 | |
Non-associated companies | | | 1,300 | | | | 231 | | | | 87 | | | | 89 | | | | 87 | |
Total | | | 21,200 | | | | 19,307 | | | | 19,391 | | | | 19,977 | | | | 19,786 | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
System Energy'sEnergy’s principal asset currently consists of a 90% ownership and leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy'sEnergy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy'sEnergy’s only source of operating revenues.
Net Income
2010 Compared to 2009
Net income increased $33.7 million primarily due to a decrease in the effective income tax rate.
2009 Compared to 2008
Net income decreased $42.2 million primarily due to an increase in the effective income tax rate.
An increase in allowance for equity funds used during construction, primarily due to the new nuclear development project discussed below, was offset by a decrease in interest income, primarily on money pool investments.
2008 Compared to 2007
Net income decreased $45.0 million primarily due to an increase in the effective tax rate, a decrease in rate base in 2008 that resulted in lower operating income, and lower interest income. The lower interest income resulted from a decrease in interest earned on money pool investments and from $2.5 million in interest income recorded on an IRS audit settlement in 2007.
Income Taxes
The effective income tax rates for 2010, 2009, and 2008 and 2007 were 40.4%, 66.5%, 39.5%, and 25.0%39.5%, respectively. The increase in the rate for 2009 is primarily due to the reallocation of Entergy Corporation consolidated tax benefits based on the resolution of IRS audits of prior tax years. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rate and for a discussion of the IRS audits.
Cash Flow
Cash flows for the years ended December 31, 2010, 2009, 2008, and 20072008 were as follows:
| | | 2009 | | 2008 | | 2007 | | | 2010 | | 2009 | | 2008 |
| | | (In Thousands) | | | (In Thousands) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | $102,788 | | $105,005 | | $135,012 | Cash and cash equivalents at beginning of period | | $264,482 | | $102,788 | | $105,005 |
| | | | | | | | | | | | | | |
Cash flow provided by (used in): | Cash flow provided by (used in): | | | | | | | Cash flow provided by (used in): | | | | | | |
| Operating activities | | 417,877 | | 218,538 | | 221,901 | Operating activities | | 250,405 | | 417,877 | | 218,538 |
| Investing activities | | (149,344) | | (96,954) | | (96,955) | Investing activities | | (184,588) | | (149,344) | | (96,954) |
| Financing activities | | (106,839) | | (123,801) | | (154,953) | Financing activities | | (66,527) | | (106,839) | | (123,801) |
| Net increase (decrease) in cash and cash equivalents | | 161,694 | | (2,217) | | (30,007) | Net increase (decrease) in cash and cash equivalents | | (710) | | 161,694 | | (2,217) |
| | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $264,482 | | $102,788 | | $105,005 | Cash and cash equivalents at end of period | | $263,772 | | $264,482 | | $102,788 |
System Energy Resources, Inc.
Management'sManagement’s Financial Discussion and Analysis
Operating Activities
Cash flow provided by operations decreased $167.5 million in 2010 primarily due to income tax payments of $56 million in 2010 compared to income tax refunds of $120.4 in 2009, and an increase of $26.6 million in pension contributions. In 2010, System Energy made tax payments in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The payments result from the reversal of temporary differences for which System Energy previously received cash tax benefits and from estimated federal income tax payments for tax year 2010. See “Critical Accounting Estimates” below for a discussion of qualified pension and other postretirement benefits.
Cash flow from operations increased by $199.4 million in 2009 primarily due to income tax refunds of $120.4 million in 2009 compared to income tax payments of $54.4 million in 2008.
Cash flow from operations decreased by $3.4Investing Activities
Net cash used in investing activities increased $35.2 million in 20082010 primarily due to lower net income substantially offset by a decreasean increase of $30.7$129.5 million in income tax payments.nuclear fuel purchases due to the timing of refueling outages, and an increase of $62.3 million in construction costs primarily due to the Grand Gulf power uprate project.
Investing ActivitiesThe increase was partially offset by:
· | the proceeds from the transfer of $100.3 million in development costs related to Entergy New Nuclear Development, LLC discussed below; |
· | money pool activity; and |
· | the repayment by Entergy New Orleans of a $25.6 million note issued in resolution of its bankruptcy proceedings. |
Increases in System Energy’s receivable from the money pool are a use of cash flow, and System Energy’s receivable from the money pool increased by $7.4 million in 2010. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Net cash flow used in investing activities increased $52.4 million in cash flow in 2009 primarily due to money pool activity. Increases in System Energy's receivable from the money pool are a use of cash flow, and System Energy'sEnergy’s receivable from the money pool increased by $47.6 million in 2009 compared to decreasing by $10.7 million in 2008. The money pool is an intercompany borrowing arrangement designed to reduce Entergy’s subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow used in financing activities decreased $40.3 million in 2010 primarily due to:
· | the issuance in April 2010 of $60 million of 5.33% Series G notes by the nuclear fuel company variable interest entity to finance its fuel procurement activities; and |
· | commercial paper issuances by the nuclear fuel company variable interest entity to finance its fuel procurement activities. |
The decrease was partially offset by:
· | an increase of $24.9 million in dividends paid on common stock; and |
· | an increase of $13.3 million in the January 2010 principal payment made on the Grand Gulf sale-leaseback compared to the January 2009 principal payment. |
Net cash flow used in financing activities decreased $17.0 million in 2009 primarily due to a decrease of $21.8 million in common stock dividends paid.
Net cash flow used in financing activities decreased $31.2 million in 2008 primarily due to a decrease of $34 million in common stock dividends paid.
See Note 5 to the financial statements for details of long-term debt.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
Capital Structure
System Energy'sEnergy’s capitalization is balanced between equity and debt, as shown in the following table.
| | December 31, 2009 | | December 31, 2008 | | December 31, 2010 | | December 31, 2009 |
| | | | | | | | |
Debt to capital | | | 51.7% | | 49.7% |
Effect of subtracting cash | | | (9.0)% | | (9.6)% |
Net debt to net capital | | 40.1% | | 48.2% | | 42.7% | | 40.1% |
Effect of subtracting cash from debt | | 9.6% | | 3.0% | |
Debt to capital | | 49.7% | | 51.2% | |
Net debt consists of debt less cash and cash equivalents. Debt consists of capital lease obligations and long-term debt, including the currently maturing portion. Capital consists of debt and common shareholder'sshareholder’s equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy'sEnergy’s financial condition.
Uses of Capital
System Energy requires capital resources for:
· | construction and other capital investments; |
· | working capital purposes, including the financing of fuel costs; and |
· | dividend and interest payments. |
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Following are the amounts of System Energy'sEnergy’s planned construction and other capital investments, existing debt and lease obligations (includes estimated interest payments), and other purchase obligations:
| 2010 | | 2011-2012 | | 2013-2014 | | After 2014 | | Total | |
| (In Millions) |
Planned construction and | | | | | | | | | | |
capital investment | $170 | | $367 | | N/A | | N/A | | $537 | |
Long-term debt (1) | $77 | | $226 | | $151 | | $660 | | $1,114 | |
Nuclear fuel lease obligations (2) | $50 | | $25 | | N/A | | N/A | | $75 | |
Purchase obligations (3) | $18 | | $22 | | $24 | | $79 | | $143 | |
| 2011 | | 2012-2013 | | 2014-2015 | | After 2015 | | Total | |
| (In Millions) |
Planned construction and capital investment (1): | | | | | | | | |
Generation | $234 | | $193 | | N/A | | N/A | | $427 | |
Other | 1 | | 2 | | N/A | | N/A | | 3 | |
Total | $235 | | $195 | | N/A | | N/A | | $430 | |
Long-term debt (2) | $86 | | $306 | | $216 | | $583 | | $1,191 | |
Purchase obligations (3) | $1 | | $21 | | $23 | | $77 | | $122 | |
(1) | Includes approximately $15 million annually for maintenance capital, which is planned spending on routine capital projects that are necessary to support reliability of service, equipment or systems and to support normal customer growth. |
(2) | Includes estimated interest payments. Long-term debt is discussed in Note 5 to the financial statements. |
(2) | It is expected that additional financing under the lease will be arranged as needed to acquire additional fuel, to pay interest, and to pay maturing debt. If such additional financing cannot be arranged, however, System Energy must repurchase sufficient nuclear fuel to allow the lessor to meet its obligations. |
(3) | Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For System Energy, it includes nuclear fuel purchase obligations. |
In addition to the contractual obligations given above, System Energy expects to contribute approximately $12.5$25 million to its pension plans and approximately $3.4$3.5 million to its other postretirement plans in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of System Energy’s pension contributions in the future.2011.
Also in addition to the contractual obligations, System Energy has $168.1$172.2 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
The planned capital investment estimate for System Energy reflects capital required to support the existing business of System Energy. The estimate also includes the costs of System Energy'sEnergy’s planned approximate 178 MW uprate of the Grand Gulf nuclear plant. The project is currently expected to cost $575 million, including transmission upgrades. On November 30, 2009, the MPSC issued a Certificate of Public Convenience and Necessity for implementation of the uprate.
System Energy has also invested, through its subsidiary Entergy New Nuclear Development, LLC, in initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities. This project is in the early stages, and several issues remain to be addressed over time before significant additional capital would be committed to this project. In addition, Entergy temporarily suspended reviews of the two license applications for the sites and will explore alternative nuclear technologies for this project. As of December 31, 2009, $100.3 million in construction work in progress was recorded on System Energy'sEnergy’s balance sheet related to this project. In the first quarter 2010 this constructionc onstruction work in progress was transferred to Entergy Gulf States Louisiana, Entergy Louisiana, and Entergy Mississippi.
Entergy'sEntergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above.
As a wholly-owned subsidiary, System Energy dividends its earnings to Entergy Corporation at a percentage determined monthly. Currently, all of System Energy'sEnergy’s retained earnings are available for distribution.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Sources of Capital
System Energy'sEnergy’s sources to meet its capital requirements include:
· | internally generated funds; |
· | bank financing under new or existing facilities. |
System Energy may refinance or redeem debt prior to maturity, to the extent market conditions and interest and dividend rates are favorable.
All debt and common stock issuances by System Energy require prior regulatory approval. Debt issuances are also subject to issuance tests set forth in its bond indentures and other agreements. System Energy has sufficient capacity under these tests to meet its foreseeable capital needs.
System Energy has obtained a short-term borrowing authorization from the FERC under which it may borrow, through October 2011, up to the aggregate amount, at any one time outstanding, of $200 million. See Note 4 to the financial statements for further discussion of System Energy'sEnergy’s short-term borrowing limits. System Energy has also obtained an order from the FERC authorizing long-term securities issuances. The current long-term authorization extends through July 2011.
System Energy'sEnergy’s receivables from the money pool were as follows as of December 31 for each of the following years:
2009 | | 2008 | | 2007 | | 2006 |
(In Thousands) |
| | | | | | |
$90,507 | | $42,915 | | $53,620 | | $88,231 |
2010 | | 2009 | | 2008 | | 2007 |
(In Thousands) |
| | | | | | |
$97,948 | | $90,507 | | $42,915 | | $53,620 |
In May 2007, $22.5 million of System Energy'sEnergy’s receivable from the money pool was replaced by a note receivable from Entergy New Orleans. See Note 4 to the financial statements for a description of the money pool.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
System Energy owns and operates Grand Gulf. System Energy is, therefore, subject to the risks related to owning and operating a nuclear plant. These include risks from the use, storage, handling and disposal of high-level and low-level radioactive materials, regulatory requirement changes, including changes resulting from events at other plants, limitations on the amounts and types of insurance commercially available for losses in connection with nuclear operations, and technological and financial uncertainties related to decommissioning nuclear plants at the end of their licensed lives, including the sufficiency of funds in decommissioning trusts. In the event of an unanticipated early shutdown of Grand Gulf, System Energy may be required to provide additional funds or credit support to satisfy regulatoryregula tory requirements for decommissioning.
System Energy'sEnergy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that System Energy is in substantial compliance with environmental regulations currently applicable to its facilities and operations. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
The preparation of System Energy'sEnergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of System Energy'sEnergy’s financial position or results of operations.
Nuclear Decommissioning Costs
See "“Nuclear Decommissioning Costs"” in the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified defined benefit pension plans which cover substantially all employees. Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all employees who reach retirement age while still working for Entergy. Entergy'sEntergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms. See the "“Critical Accounting Estimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Discussion and Analysis for furtherfurth er discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy'sEntergy’s estimate of these costs is a critical accounting estimate.
System Energy Resources, Inc.
Management’s Financial Discussion and Analysis
Cost Sensitivity
The following chart reflects the sensitivity of qualified pension cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation | | Change in Assumption | | Impact on 2010 Qualified Pension Cost | | Impact on Projected Qualified Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Discount rate | | (0.25%) | | $485 | | $4,806 | | (0.25%) | | $615 | | $6,411 |
Rate of return on plan assets | | (0.25%) | | $326 | | - | | (0.25%) | | $348 | | - |
Rate of increase in compensation | | 0.25% | | $237 | | $1,282 | | 0.25% | | $273 | | $1,419 |
The following chart reflects the sensitivity of postretirement benefit cost to changes in certain actuarial assumptions (dollars in thousands):
Actuarial Assumption | | Change in Assumption | | Impact on 2009 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation | | Change in Assumption | | Impact on 2010 Postretirement Benefit Cost | | Impact on Accumulated Postretirement Benefit Obligation |
| | Increase/(Decrease) | | Increase/(Decrease) |
| | | | | | | | | | | | |
Health care cost trend | | 0.25% | | $244 | | $1,248 | | 0.25% | | $269 | | $1,429 |
Discount rate | | (0.25%) | | $175 | | $1,384 | | (0.25%) | | $189 | | $1,593 |
Each fluctuation above assumes that the other components of the calculation are held constant.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Costs and Funding
Total qualified pension cost for System Energy in 20092010 was $1.5$1.9 million. System Energy anticipates 20102011 qualified pension cost to be $1.9$6.9 million. System Energy contributed $4.8$31.3 million to its qualified pension plans in 20092010 and expects to contribute approximately $12.5$25 million in 20102011 although the required pension contributions will not be known with more certainty until the January 1, 20102011 valuations are completed by April 1, 2010. Also, guidance pursuant to the Pension Protection Act of 2006 rules, effective for the 2008 plan year and beyond, continues to evolve, be interpreted through technical corrections bills, and discussed within the industry and by congressional lawmakers. Any changes to the Pension Protection Act as a result of these discussions and efforts may affect the level of System Energy’s pension contributions in the future.2011.
Total postretirement health care and life insurance benefit costs for System Energy in 20092010 were $3.1$3.5 million, including $0.9$1.1 million in savings due to the estimated effect of future Medicare Part D subsidies. System Energy expects 20102011 postretirement health care and life insurance benefit costs to approximate $3.5$4.1 million, including $1.1$1.4 million in savings due to the estimated effect of future Medicare Part D subsidies. System Energy anticipates contributions for postretirement health care and life insurance benefits costs to be $3.4$3.5 million in 2010.2011.
New Accounting PronouncementsFederal Healthcare Legislation
See "the “NewQualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation” in the “Critical Accounting PronouncementsEstimates"” section of Entergy Corporation and Subsidiaries Management'sManagement’s Financial Discussion and Analysis for a discussion of new accounting pronouncements.Federal Healthcare Legislation.
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Discussion and Analysis.
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To the Board of Directors and Shareholder of
System Energy Resources, Inc.
Jackson, Mississippi
We have audited the accompanying balance sheets of System Energy Resources, Inc. (the “Company”) as of December 31, 20092010 and 2008,2009, and the related income statements, statements of income, retained earnings,changes in common equity, and statements of cash flows (pages 389378 through 394382 and applicable items in pages 6349 through 193)184) for each of the three years in the period ended December 31, 2009.2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of System Energy Resources, Inc. as of December 31, 20092010 and 2008,2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009,2010, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 201025, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 2010
25, 2011
SYSTEM ENERGY RESOURCES, INC. | |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 554,007 | | | $ | 528,998 | | | $ | 553,193 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 63,877 | | | | 44,506 | | | | 42,798 | |
Nuclear refueling outage expenses | | | 19,186 | | | | 17,266 | | | | 16,699 | |
Other operation and maintenance | | | 120,707 | | | | 120,165 | | | | 118,304 | |
Decommissioning | | | 29,451 | | | | 27,642 | | | | 25,713 | |
Taxes other than income taxes | | | 24,246 | | | | 15,896 | | | | 26,242 | |
Depreciation and amortization | | | 140,056 | | | | 126,441 | | | | 122,765 | |
Other regulatory credits - net | | | (17,525 | ) | | | (12,151 | ) | | | (8,854 | ) |
TOTAL | | | 379,998 | | | | 339,765 | | | | 343,667 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 174,009 | | | | 189,233 | | | | 209,526 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 12,484 | | | | 4,910 | | | | 3,178 | |
Interest and dividend income | | | 4,507 | | | | 12,086 | | | | 24,515 | |
Miscellaneous - net | | | (1,813 | ) | | | (643 | ) | | | 382 | |
TOTAL | | | 15,178 | | | | 16,353 | | | | 28,075 | |
| | | | | | | | | | | | |
INTEREST AND OTHER CHARGES | | | | | | | | | | | | |
Interest on long-term debt | | | 47,422 | | | | 56,404 | | | | 56,966 | |
Other interest - net | | | 148 | | | | 263 | | | | 151 | |
Allowance for borrowed funds used during construction | | | (4,192 | ) | | | (1,642 | ) | | | (1,044 | ) |
TOTAL | | | 43,378 | | | | 55,025 | | | | 56,073 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 145,809 | | | | 150,561 | | | | 181,528 | |
| | | | | | | | | | | | |
Income taxes | | | 96,901 | | | | 59,494 | | | | 45,447 | |
| | | | | | | | | | | | |
NET INCOME | | $ | 48,908 | | | $ | 91,067 | | | $ | 136,081 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| |
INCOME STATEMENTS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING REVENUES | | | | | | | | | |
Electric | | $ | 558,584 | | | $ | 554,007 | | | $ | 528,998 | |
| | | | | | | | | | | | |
OPERATING EXPENSES | | | | | | | | | | | | |
Operation and Maintenance: | | | | | | | | | | | | |
Fuel, fuel-related expenses, and | | | | | | | | | | | | |
gas purchased for resale | | | 69,962 | | | | 63,877 | | | | 44,506 | |
Nuclear refueling outage expenses | | | 17,398 | | | | 19,186 | | | | 17,266 | |
Other operation and maintenance | | | 124,690 | | | | 120,707 | | | | 120,165 | |
Decommissioning | | | 31,374 | | | | 29,451 | | | | 27,642 | |
Taxes other than income taxes | | | 23,412 | | | | 24,246 | | | | 15,896 | |
Depreciation and amortization | | | 138,641 | | | | 140,056 | | | | 126,441 | |
Other regulatory credits - net | | | (12,040 | ) | | | (17,525 | ) | | | (12,151 | ) |
TOTAL | | | 393,437 | | | | 379,998 | | | | 339,765 | |
| | | | | | | | | | | | |
OPERATING INCOME | | | 165,147 | | | | 174,009 | | | | 189,233 | |
| | | | | | | | | | | | |
OTHER INCOME | | | | | | | | | | | | |
Allowance for equity funds used during construction | | | 9,892 | | | | 12,484 | | | | 4,910 | |
Interest and investment income | | | 12,639 | | | | 4,507 | | | | 12,086 | |
Miscellaneous - net | | | (518 | ) | | | (1,813 | ) | | | (643 | ) |
TOTAL | | | 22,013 | | | | 15,178 | | | | 16,353 | |
| | | | | | | | | | | | |
INTEREST EXPENSE | | | | | | | | | | | | |
Interest expense | | | 51,912 | | | | 47,570 | | | | 56,667 | |
Allowance for borrowed funds used during construction | | | (3,425 | ) | | | (4,192 | ) | | | (1,642 | ) |
TOTAL | | | 48,487 | | | | 43,378 | | | | 55,025 | |
| | | | | | | | | | | | |
INCOME BEFORE INCOME TAXES | | | 138,673 | | | | 145,809 | | | | 150,561 | |
| | | | | | | | | | | | |
Income taxes | | | 56,049 | | | | 96,901 | | | | 59,494 | |
| | | | | | | | | | | | |
NET INCOME | | $ | 82,624 | | | $ | 48,908 | | | $ | 91,067 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
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| |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2010 | | | 2009 | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 82,624 | | | $ | 48,908 | | | $ | 91,067 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | | 219,552 | | | | 169,507 | | | | 154,083 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | (1,536 | ) | | | 211,297 | | | | 65,339 | |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (728 | ) | | | (2,296 | ) | | | 11,621 | |
Accounts payable | | | (14,351 | ) | | | 11,574 | | | | (146 | ) |
Prepaid taxes | | | 1,327 | | | | 5,413 | | | | (67,185 | ) |
Interest accrued | | | 3,503 | | | | 2,667 | | | | 1,187 | |
Other working capital accounts | | | (15,287 | ) | | | 11,672 | | | | (18,090 | ) |
Changes in provisions for estimated losses | | | (2,009 | ) | | | (16 | ) | | | (444 | ) |
Changes in other regulatory assets | | | (4,948 | ) | | | (4,824 | ) | | | (29,649 | ) |
Changes in pension and other postretirement liabilities | | | 29,797 | | | | 3,440 | | | | 41,977 | |
Other | | | (47,539 | ) | | | (39,465 | ) | | | (31,222 | ) |
Net cash flow provided by operating activities | | | 250,405 | | | | 417,877 | | | | 218,538 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (156,766 | ) | | | (90,778 | ) | | | (85,515 | ) |
Proceeds from the transfer of development costs | | | 100,280 | | | | - | | | | - | |
Allowance for equity funds used during construction | | | 9,892 | | | | 12,484 | | | | 4,910 | |
Nuclear fuel purchases | | | (129,504 | ) | | | - | | | | (76,527 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | - | | | | 180 | | | | 76,530 | |
Changes in other investments | | | 25,560 | | | | - | | | | - | |
Proceeds from nuclear decommissioning trust fund sales | | | 322,789 | | | | 392,959 | | | | 483,380 | |
Investment in nuclear decommissioning trust funds | | | (349,398 | ) | | | (416,597 | ) | | | (510,437 | ) |
Change in money pool receivable - net | | | (7,441 | ) | | | (47,592 | ) | | | 10,705 | |
Net cash flow used in investing activities | | | (184,588 | ) | | | (149,344 | ) | | | (96,954 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | 55,385 | | | | - | | | | - | |
Retirement of long-term debt | | | (41,715 | ) | | | (28,440 | ) | | | (26,701 | ) |
Changes in credit borrowings - net | | | 20,003 | | | | - | | | | - | |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (100,200 | ) | | | (75,300 | ) | | | (97,100 | ) |
Other | | | - | | | | (3,099 | ) | | | - | |
Net cash flow used in financing activities | | | (66,527 | ) | | | (106,839 | ) | | | (123,801 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | (710 | ) | | | 161,694 | | | | (2,217 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 264,482 | | | | 102,788 | | | | 105,005 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 263,772 | | | $ | 264,482 | | | $ | 102,788 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid (received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 41,888 | | | $ | 39,611 | | | $ | 50,340 | |
Income taxes | | $ | 55,963 | | | $ | (120,352 | ) | | $ | 54,436 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. | |
STATEMENTS OF CASH FLOWS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
Net income | | $ | 48,908 | | | $ | 91,067 | | | $ | 136,081 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | | |
Other regulatory credits - net | | | (17,525 | ) | | | (12,151 | ) | | | (8,854 | ) |
Depreciation, amortization, and decommissioning | | | 169,507 | | | | 154,083 | | | | 148,478 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | | 211,297 | | | | 65,339 | | | | (37,827 | ) |
Changes in working capital: | | | | | | | | | | | | |
Receivables | | | (2,296 | ) | | | 11,621 | | | | (8,741 | ) |
Accounts payable | | | 11,574 | | | | (146 | ) | | | 9,814 | |
Preapaid taxes and taxes accrued | | | 5,413 | | | | (67,185 | ) | | | (47,988 | ) |
Interest accrued | | | 2,667 | | | | 1,187 | | | | 1,268 | |
Other working capital accounts | | | 11,672 | | | | (18,090 | ) | | | (23,841 | ) |
Provision for estimated losses and reserves | | | (16 | ) | | | (444 | ) | | | 47 | |
Changes in other regulatory assets | | | (4,824 | ) | | | (29,649 | ) | | | 15,250 | |
Changes in pension and other postretirement liabilities | | | 3,440 | | | | 41,977 | | | | (2,029 | ) |
Other | | | (21,940 | ) | | | (19,071 | ) | | | 40,243 | |
Net cash flow provided by operating activities | | | 417,877 | | | | 218,538 | | | | 221,901 | |
| | | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | | | | |
Construction expenditures | | | (90,778 | ) | | | (85,515 | ) | | | (84,108 | ) |
Allowance for equity funds used during construction | | | 12,484 | | | | 4,910 | | | | 3,178 | |
Nuclear fuel purchases | | | - | | | | (76,527 | ) | | | (56,264 | ) |
Proceeds from sale/leaseback of nuclear fuel | | | 180 | | | | 76,530 | | | | 56,580 | |
Proceeds from nuclear decommissioning trust fund sales | | | 392,959 | | | | 483,380 | | | | 105,751 | |
Investment in nuclear decommissioning trust funds | | | (416,597 | ) | | | (510,437 | ) | | | (134,176 | ) |
Change in money pool receivable - net | | | (47,592 | ) | | | 10,705 | | | | 12,084 | |
Net cash flow used in investing activities | | | (149,344 | ) | | | (96,954 | ) | | | (96,955 | ) |
| | | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | | | | |
Proceeds from the issuance of long-term debt | | | - | | | | - | | | | 69,482 | |
Retirement of long-term debt | | | (28,440 | ) | | | (26,701 | ) | | | (93,335 | ) |
Dividends paid: | | | | | | | | | | | | |
Common stock | | | (75,300 | ) | | | (97,100 | ) | | | (131,100 | ) |
Other | | | (3,099 | ) | | | - | | | | - | |
Net cash flow used in financing activities | | | (106,839 | ) | | | (123,801 | ) | | | (154,953 | ) |
| | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 161,694 | | | | (2,217 | ) | | | (30,007 | ) |
| | | | | | | | | | | | |
Cash and cash equivalents at beginning of period | | | 102,788 | | | | 105,005 | | | | 135,012 | |
| | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 264,482 | | | $ | 102,788 | | | $ | 105,005 | |
| | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
Cash paid (received) during the period for: | | | | | | | | | | | | |
Interest - net of amount capitalized | | $ | 39,611 | | | $ | 50,340 | | | $ | 50,437 | |
Income taxes | | $ | (120,352 | ) | | $ | 54,436 | | | $ | 85,105 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | | | |
BALANCE SHEETS | BALANCE SHEETS | | BALANCE SHEETS | |
ASSETS | ASSETS | | ASSETS | |
| | | | | | | | | | | | |
| | December 31, | | | December 31, | |
| | 2009 | | | 2008 | | | 2010 | | | 2009 | |
| | (In Thousands) | | | (In Thousands) | |
| | | | | | | | | | | | |
CURRENT ASSETS | | | | | | | | | | | | |
Cash and cash equivalents: | | | | | | | | | | | | |
Cash | | $ | 926 | | | $ | 250 | | | $ | 903 | | | $ | 926 | |
Temporary cash investments | | | 263,556 | | | | 102,538 | | | | 262,869 | | | | 263,556 | |
Total cash and cash equivalents | | | 264,482 | | | | 102,788 | | | | 263,772 | | | | 264,482 | |
Accounts receivable: | | | | | | | | | | | | | | | | |
Associated companies | | | 139,602 | | | | 91,119 | | | | 147,180 | | | | 139,602 | |
Other | | | 4,479 | | | | 3,074 | | | | 5,070 | | | | 4,479 | |
Total accounts receivable | | | 144,081 | | | | 94,193 | | | | 152,250 | | | | 144,081 | |
Note receivable - Entergy New Orleans | | | 25,560 | | | | - | | | | - | | | | 25,560 | |
Materials and supplies - at average cost | | | 80,934 | | | | 74,496 | | | | 84,077 | | | | 80,934 | |
Deferred nuclear refueling outage costs | | | 8,432 | | | | 26,485 | | | | 22,627 | | | | 8,432 | |
Prepaid taxes | | | 69,366 | | | | 74,779 | | | | 68,039 | | | | 69,366 | |
Prepayments and other | | | 936 | | | | 993 | | | | 1,142 | | | | 936 | |
TOTAL | | | 593,791 | | | | 373,734 | | | | 591,907 | | | | 593,791 | |
| | | | | | | | | | | | | | | | |
OTHER PROPERTY AND INVESTMENTS | | | | | | | | | | | | | | | | |
Decommissioning trust funds | | | 327,046 | | | | 268,822 | | | | 387,876 | | | | 327,046 | |
Note receivable - Entergy New Orleans | | | - | | | | 25,560 | | |
TOTAL | | | 327,046 | | | | 294,382 | | | | 387,876 | | | | 327,046 | |
| | | | | | | | | | | | | | | | |
UTILITY PLANT | | | | | | | | | | | | | | | | |
Electric | | | 3,324,876 | | | | 3,314,473 | | | | 3,362,422 | | | | 3,324,876 | |
Property under capital lease | | | 481,065 | | | | 479,933 | | | | 489,175 | | | | 481,065 | |
Construction work in progress | | | 198,887 | | | | 122,952 | | | | 210,536 | | | | 198,887 | |
Nuclear fuel under capital lease | | | 75,438 | | | | 125,416 | | | | - | | | | 75,438 | |
Nuclear fuel | | | 9,333 | | | | 7,448 | | | | 155,282 | | | | 9,333 | |
TOTAL UTILITY PLANT | | | 4,089,599 | | | | 4,050,222 | | | | 4,217,415 | | | | 4,089,599 | |
Less - accumulated depreciation and amortization | | | 2,315,141 | | | | 2,206,780 | | | | 2,417,811 | | | | 2,315,141 | |
UTILITY PLANT - NET | | | 1,774,458 | | | | 1,843,442 | | | | 1,799,604 | | | | 1,774,458 | |
| | | | | | | | | | | | | | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | | | | | | | | | |
Regulatory assets: | | | | | | | | | | | | | | | | |
Regulatory asset for income taxes - net | | | 101,915 | | | | 89,473 | | | | 126,642 | | | | 138,484 | |
Other regulatory assets | | | 290,048 | | | | 333,389 | | | | 296,715 | | | | 290,048 | |
Other | | | 11,824 | | | | 10,970 | | | | 21,326 | | | | 11,824 | |
TOTAL | | | 403,787 | | | | 433,832 | | | | 444,683 | | | | 440,356 | |
| | | | | | | | | | | | | | | | |
TOTAL ASSETS | | $ | 3,099,082 | | | $ | 2,945,390 | | | $ | 3,224,070 | | | $ | 3,135,651 | |
| | | | | | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. | |
BALANCE SHEETS | |
LIABILITIES AND EQUITY | |
| | | | | | |
| | December 31, | |
| | 2010 | | | 2009 | |
| | (In Thousands) | |
| | | | | | |
CURRENT LIABILITIES | | | | | | |
Currently maturing long-term debt | | $ | 33,740 | | | $ | 41,715 | |
Short-term borrowings | | | 38,264 | | | | - | |
Accounts payable: | | | | | | | | |
Associated companies | | | 6,520 | | | | 5,349 | |
Other | | | 38,447 | | | | 45,826 | |
Accumulated deferred income taxes | | | 8,508 | | | | 3,040 | |
Interest accrued | | | 56,081 | | | | 51,257 | |
Obligations under capital leases | | | - | | | | 50,445 | |
Other | | | 2,258 | | | | - | |
TOTAL | | | 183,818 | | | | 197,632 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 617,012 | | | | 625,291 | |
Accumulated deferred investment tax credits | | | 54,755 | | | | 58,231 | |
Obligations under capital leases | | | - | | | | 24,993 | |
Other regulatory liabilities | | | 201,364 | | | | 197,437 | |
Decommissioning | | | 452,782 | | | | 421,408 | |
Accumulated provisions | | | - | | | | 2,009 | |
Pension and other postretirement liabilities | | | 105,245 | | | | 75,448 | |
Long-term debt | | | 796,728 | | | | 703,260 | |
TOTAL | | | 2,227,886 | | | | 2,108,077 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
COMMON EQUITY | | | | | | | | |
Common stock, no par value, authorized 1,000,000 shares; | | | | | |
issued and outstanding 789,350 shares in 2010 and 2009 | | | 789,350 | | | | 789,350 | |
Retained earnings | | | 23,016 | | | | 40,592 | |
TOTAL | | | 812,366 | | | | 829,942 | |
| | | | | | | | |
TOTAL LIABILITIES AND EQUITY | | $ | 3,224,070 | | | $ | 3,135,651 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
BALANCE SHEETS |
LIABILITIES AND SHAREHOLDER'S EQUITY |
| | | | | | | | |
| | December 31, | |
| | | 2009 | | | | 2008 | |
| | (In Thousands) | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Currently maturing long-term debt | | $ | 41,715 | | | $ | 28,440 | |
Accounts payable: | | | | | | | | |
Associated companies | | | 5,349 | | | | 2,723 | |
Other | | | 45,826 | | | | 35,215 | |
Accumulated deferred income taxes | | | 3,040 | | | | 9,645 | |
Interest accrued | | | 51,257 | | | | 48,590 | |
Obligations under capital leases | | | 50,445 | | | | 37,619 | |
TOTAL | | | 197,632 | | | | 162,232 | |
| | | | | | | | |
NON-CURRENT LIABILITIES | | | | | | | | |
Accumulated deferred income taxes and taxes accrued | | | 588,722 | | | | 365,134 | |
Accumulated deferred investment tax credits | | | 58,231 | | | | 61,708 | |
Obligations under capital leases | | | 24,993 | | | | 87,797 | |
Other regulatory liabilities | | | 197,437 | | | | 197,051 | |
Decommissioning | | | 421,408 | | | | 396,201 | |
Accumulated provisions | | | 2,009 | | | | 2,025 | |
Pension and other postretirement liabilities | | | 75,448 | | | | 72,008 | |
Long-term debt | | | 703,260 | | | | 744,900 | |
TOTAL | | | 2,071,508 | | | | 1,926,824 | |
| | | | | | | | |
Commitments and Contingencies | | | | | | | | |
| | | | | | | | |
SHAREHOLDER'S EQUITY | | | | | | | | |
Common stock, no par value, authorized 1,000,000 shares; | | | | | |
issued and outstanding 789,350 shares in 2009 and 2008 | | | 789,350 | | | | 789,350 | |
Retained earnings | | | 40,592 | | | | 66,984 | |
TOTAL | | | 829,942 | | | | 856,334 | |
| | | | | | | | |
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY | | $ | 3,099,082 | | | $ | 2,945,390 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | |
| |
STATEMENTS OF CHANGES IN COMMON EQUITY | |
For the Years Ended December 31, 2010, 2009, and 2008 | |
| | | | | | | | | |
| | Common Equity | | | | |
| | Common Stock | | | Retained Earnings | | | Total | |
| | (In Thousands) | |
| | | | | | | | | |
Balance at December 31, 2007 | | $ | 789,350 | | | $ | 73,017 | | | $ | 862,367 | |
Net income | | | - | | | | 91,067 | | | | 91,067 | |
Common stock dividends | | | - | | | | (97,100 | ) | | | (97,100 | ) |
Balance at December 31, 2008 | | $ | 789,350 | | | $ | 66,984 | | | $ | 856,334 | |
Net income | | | - | | | | 48,908 | | | | 48,908 | |
Common stock dividends | | | - | | | | (75,300 | ) | | | (75,300 | ) |
Balance at December 31, 2009 | | $ | 789,350 | | | $ | 40,592 | | | $ | 829,942 | |
Net income | | | - | | | | 82,624 | | | | 82,624 | |
Common stock dividends | | | - | | | | (100,200 | ) | | | (100,200 | ) |
Balance at December 31, 2010 | | $ | 789,350 | | | $ | 23,016 | | | $ | 812,366 | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. | |
STATEMENTS OF RETAINED EARNINGS | |
| | | | | | | | | |
| | For the Years Ended December 31, | |
| | 2009 | | | 2008 | | | 2007 | |
| | (In Thousands) | |
| | | | | | | | | |
Retained Earnings, January 1 | | $ | 66,984 | | | $ | 73,017 | | | $ | 68,036 | |
| | | | | | | | | | | | |
Add: | | | | | | | | | | | | |
Net income | | | 48,908 | | | | 91,067 | | | | 136,081 | |
| | | | | | | | | | | | |
Deduct: | | | | | | | | | | | | |
Dividends declared | | | 75,300 | | | | 97,100 | | | | 131,100 | |
| | | | | | | | | | | | |
Retained Earnings, December 31 | | $ | 40,592 | | | $ | 66,984 | | | $ | 73,017 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2010 | | | 2009 | | | 2008 | | | 2007 | | | 2006 | |
| | (Dollars In Thousands) | |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 558,584 | | | $ | 554,007 | | | $ | 528,998 | | | $ | 553,193 | | | $ | 555,459 | |
Net Income | | $ | 82,624 | | | $ | 48,908 | | | $ | 91,067 | | | $ | 136,081 | | | $ | 140,258 | |
Total assets | | $ | 3,224,070 | | | $ | 3,135,651 | | | $ | 2,945,390 | | | $ | 2,858,760 | | | $ | 2,858,760 | |
Long-term obligations (1) | | $ | 796,728 | | | $ | 728,253 | | | $ | 832,697 | | | $ | 824,824 | | | $ | 752,052 | |
Electric energy sales (GWh) | | | 8,692 | | | | 9,898 | | | | 8,475 | | | | 8,440 | | | | 9,727 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
| | | | | | | | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. | |
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON | |
| | | | | | | | | | | | | | | |
| | 2009 | | | 2008 | | | 2007 | | | 2006 | | | 2005 | |
| | (Dollars In Thousands) |
| | | | | | | | | | | | | | | |
Operating revenues | | $ | 554,007 | | | $ | 528,998 | | | $ | 553,193 | | | $ | 555,459 | | | $ | 533,929 | |
Net Income | | $ | 48,908 | | | $ | 91,067 | | | $ | 136,081 | | | $ | 140,258 | | | $ | 111,644 | |
Total assets | | $ | 3,099,082 | | | $ | 2,945,390 | | | $ | 2,858,760 | | | $ | 2,858,760 | | | $ | 3,046,039 | |
Long-term obligations (1) | | $ | 728,253 | | | $ | 832,697 | | | $ | 824,824 | | | $ | 752,052 | | | $ | 882,949 | |
Electric energy sales (GWh) | | | 9,898 | | | | 8,475 | | | | 8,440 | | | | 9,727 | | | | 9,070 | |
| | | | | | | | | | | | | | | | | | | | |
(1) Includes long-term debt (excluding currently maturing debt) and noncurrent capital lease obligations. | |
| | | | | | | | | | | | | | | | | | | | |
Information regarding the registrant'sregistrant’s properties is included in Part I. Item 1. - Business under the sections titled "“Utility - Property and Other Generation Resources"” and "“Non-Utility NuclearEntergy Wholesale Commodities - Property"” in this report.
Details of the registrant'sregistrant’s material environmental regulation and proceedings and other regulatory proceedings and litigation that are pending or those terminated in the fourth quarter of 20092010 are discussed in Part I. Item 1. - Business under the sections titled "“Retail Rate Regulation"”, "“Environmental Regulation"”, and "“Litigation"” in this report.
Item 4. Submission of Matters to a Vote of Security Holders(Removed and Reserved)
During the fourth quarter of 2009, no matters were submitted to a vote of the security holders of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, or System Energy.
Executive Officers
Name | Age | Position | | Period |
J. Wayne Leonard (a) | 5960 | Chairman of the Board of Entergy Corporation | | 2006-Present |
| | Chief Executive Officer and Director of Entergy Corporation | | 1999-Present |
| | | | |
Richard J. Smith (a) | 5859 | President, Entergy Wholesale Commodity Business of Entergy Corporation | | 2010-Present |
| | President and Chief Operating Officer of Entergy Corporation | | 2007-Present2007-2010 |
| | Group President, Utility Operations of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans | | 2001-2007 |
| | Director of Entergy Arkansas, Entergy Gulf States, Entergy Louisiana and Entergy Mississippi | | 2001-2007 |
| | Director of Entergy New Orleans | | 2001-2005 |
| | | | |
Gary J. Taylor (a) | 5657 | Group President, Utility Operations of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi and Entergy Texas | | 2007-Present |
| | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi and Entergy Texas | | 2007-Present |
| | Director of Entergy New Orleans | | 2008-Present |
| | Executive Vice President and Chief Nuclear Officer of Entergy Corporation | | 2004-2007 |
| | Director, President and Chief Executive Officer of System Energy | | 2003-2007 |
| | | | |
Leo P. Denault (a) | 5051 | Executive Vice President and Chief Financial Officer of Entergy Corporation | | 2004-Present |
| | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi and System Energy | | 2004-Present |
| | Director of Entergy Texas | | 2007-Present |
| | Director of Entergy New Orleans | | 2004-2005 |
| | | | |
Curtis L. Hebert, Jr.Mark T. Savoff (a) | 4754 | Executive Vice President External Affairs of Entergy Corporation | | 2001-Present |
| | | | |
John T. Herron (a) | 56 | President and Chief Executive Officer Nuclear Operations/ Chief NuclearOperating Officer of Entergy Corporation | | 2009-Present2010-Present |
| | Senior Vice President, Nuclear Operations | | 2007-2009 |
| | Senior Vice President, Chief Operating Officer of Entergy Nuclear Northeast | | 2003-2007 |
| | | | |
Mark T. Savoff (a) | 53 | Executive Vice President, Operations of Entergy Corporation | | 2004-Present2004-2010 |
| | Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana and Entergy Mississippi | | 2004-Present |
| | Director of Entergy Texas | | 2007-Present |
| | Director of Entergy New Orleans | | 2004-2005 |
| | Executive Vice President of Entergy Services, Inc. | | 2003-Present |
| | | | |
Roderick K. West (a) | 42 | Executive Vice President and Chief Administrative Officer of Entergy Corporation | | 2010-Present |
| | President and Chief Executive Officer of Entergy New Orleans | | 2007-2010 |
| | Director of Entergy New Orleans | | 2005-Present |
| | Director, Metro Distribution Operation of Entergy Services, Inc. | | 2005-2006 |
| | | | |
E. Renae Conley (a) | 53 | Executive Vice President, Human Resources and Administration of Entergy Corporation | | 2011-Present |
| | Executive Vice President of Entergy Corporation | | 2010-2011 |
| | Director of Entergy Gulf States Louisiana and Entergy Louisiana | | 2000-2010 |
| | President and Chief Executive Officer of Entergy Gulf States Louisiana and Entergy Louisiana | | 2000-2010 |
| | | | |
John T. Herron (a) | 57 | President and Chief Executive Officer Nuclear Operations/ Chief Nuclear Officer of Entergy Corporation | | 2009-Present |
| | Executive Vice President and Chief Nuclear Officer of Entergy Arkansas, Entergy Gulf States Louisiana and Entergy Louisiana | | 2010-Present |
| | President, Chief Executive Officer and Director of System Energy | | 2009-Present |
| | Senior Vice President, Nuclear Operations | | 2007-2009 |
| | Senior Vice President, Chief Operating Officer of Entergy Nuclear Northeast | | 2003-2007 |
| | | | |
Robert D. Sloan (a) | 6263 | Executive Vice President, General Counsel and Secretary of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy | | 2004-Present |
| | Executive Vice President, General Counsel and Secretary of Entergy Texas | | 2007-Present |
| | | | |
Theodore H. Bunting, Jr. (a) | 5152 | Senior Vice President and Chief Accounting Officer of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas and System Energy | | 2007-Present |
| | Acting principal financial officer of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans and Entergy Texas | | 2008-Present |
| | Vice President and Chief Financial Officer, Nuclear Operations of System Energy | | 2004-2007 |
| | | | |
Terry R. Seamons (a) | 6869 | Senior Vice President, Organizational Development | | 2011-Present |
| | Senior Vice President - Human Resources and Administration of Entergy Corporation | | 2007-Present2007-2011 |
| | Vice President and Managing Director of RHR, International | | 1984-2007 |
| | | | |
(a) | In addition, this officer is an executive officer and/or director of various other wholly owned subsidiaries of Entergy Corporation and its operating companies. |
Each officer of Entergy Corporation is elected yearly by the Board of Directors.
PART II
Entergy Corporation
The shares of Entergy Corporation'sCorporation’s common stock are listed on the New York Stock and Chicago Stock Exchanges under the ticker symbol ETR.
The high and low prices of Entergy Corporation'sCorporation’s common stock for each quarterly period in 20092010 and 20082009 were as follows:
| 2009 | | 2008 | 2010 | | 2009 |
| High | | Low | | High | | Low | High | | Low | | High | | Low |
| (In Dollars) | (In Dollars) |
| | | | | | | | | | | | | | |
First | 86.61 | | 59.87 | | 127.48 | | 99.45 | 83.09 | | 75.25 | | 86.61 | | 59.87 |
Second | 78.78 | | 63.39 | | 123.27 | | 107.94 | 84.33 | | 71.28 | | 78.78 | | 63.39 |
Third | 82.39 | | 71.76 | | 122.88 | | 83.78 | 80.80 | | 70.35 | | 82.39 | | 71.76 |
Fourth | 84.44 | | 76.10 | | 89.76 | | 61.93 | 77.90 | | 68.65 | | 84.44 | | 76.10 |
Consecutive quarterly cash dividends on common stock were paid to stockholders of Entergy Corporation in 20092010 and 2008.2009. In 2010, a dividend of $0.75 per share was paid in the first quarter and dividends of $0.83 per share were paid in the last three quarters. Quarterly dividends of $0.75 per share were paid in 2009 and 2008.2009.
As of January 30, 2010,31, 2011, there were 38,48036,958 stockholders of record of Entergy Corporation.
Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (1)
Period | | Total Number of
Shares Purchased
| | Average Price Paid
per Share
| | Total Number of
Shares Purchased as Part of a Publicly
Announced Plan
| | Maximum $ Amount
of Shares that May
Yet be Purchased Under a Plan (2)
|
| | | | | | | | |
10/01/2009-10/31/2009 | | - | | $- | | - | | $750,000,000 |
11/01/2009-11/30/2009 | | - | | $- | | - | | $750,000,000 |
12/01/2009-12/31/2009 | | - | | $- | | - | | $750,000,000 |
Total | | - | | $- | | - | | |
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Plan | | Maximum $ Amount of Shares that May Yet be Purchased Under a Plan (2) |
| | | | | | | | |
10/01/2010-10/31/2010 | | 620,000 | | $77.01 | | 620,000 | | $662,149,403 |
11/01/2010-11/30/2010 | | 1,120,000 | | $73.42 | | 1,120,000 | | $582,706,208 |
12/01/2010-12/31/2010 | | 1,170,000 | | $70.92 | | 1,170,000 | | $500,000,000 |
Total | | 2,910,000 | | $73.16 | | 2,910,000 | | |
In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise
of grants under the plans. In addition to this authority, in October 2009 the Board granted authority for a $750 million share repurchase program which was completed in the fourth quarter 2010. In October 2010 the Board granted authority for an additional $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities.
(1) | In accordance with Entergy's stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy's common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy's management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans. In addition to this authority, on January 29, 2007, the Board approved a repurchase program under which Entergy is authorized to repurchase up to $1.5 billion of its common stock. In January 2008, the Board authorized an incremental $500 million share repurchase program to enable Entergy to consider opportunistic purchases in response to equity market conditions. In 2009, Entergy repurchased 7,680,000 shares of common stock under both programs for a total purchase price of $613 million. Entergy completed both the $1.5 billion and $500 million programs in the third quarter 2009. In October 2009 the Board granted authority for an additional $750 million share repurchase program. See Note 12 to the financial statements for additional discussion of the stock-based compensation plans. |
(2) | Maximum amount of shares that may yet be repurchased does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans. |
The amount of share repurchases may vary as a result of material changes in business results or capital spending or new investment opportunities.
Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy
There is no market for the common stock of Entergy Corporation'sCorporation’s wholly owned subsidiaries. Cash dividends on common stock paid by the Registrant Subsidiaries to Entergy Corporation during 20092010 and 2008,2009, were as follows:
| | 2009 | | 2008 | | 2010 | | 2009 |
| | (In Millions) | | (In Millions) |
| | | | | | | | |
Entergy Arkansas | | $48.3 | | $24.9 | | $173.4 | | $48.3 |
Entergy Gulf States Louisiana | | $30.7 | | $104.2 | | $124.3 | | $30.7 |
Entergy Louisiana | | $20.6 | | $- | | - | | $20.6 |
Entergy Mississippi | | $51.3 | | $48.3 | | $43.4 | | $51.3 |
Entergy New Orleans | | $32.9 | | $- | | $47.0 | | $32.9 |
Entergy Texas | | $119.5 | | $12.0 | | $86.4 | | $119.5 |
System Energy | | $75.3 | | $97.1 | | $100.2 | | $75.3 |
Information with respect to restrictions that limit the ability of the Registrant Subsidiaries to pay dividends is presented in Note 7 to the financial statements and in "statements.
Refer to “SELECTED FINANCIAL DISCUSSION AND ANALYSISDATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., AND SUBSIDIARIES, ENTERGY GULF STATES LOUISIANA, L.L.C., ENTERGY LOUISIANA, LLC, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, INC., ENTERGY TEXAS, INC., AND SUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC."
Item 6. Selected Financial Data
Refer to "SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., ENTERGY GULF STATES LOUISIANA, L.L.C., ENTERGY LOUISIANA, LLC, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, INC., ENTERGY TEXAS, INC., and SYSTEM ENERGY RESOURCES, INC."” which follow each company'scompany’s financial statements in this report, for information with respect to selected financial data and certain operating statistics.
Refer to "MANAGEMENT'S“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC., AND SUBSIDIARIES, ENTERGY GULF STATES, LOUISIANA, L.L.C., ENTERGY LOUISIANA, LLC, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, INC., ENTERGY TEXAS, INC., AND SUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC."”
Refer to "MANAGEMENT'S“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION AND SUBSIDIARIES - Market and Credit Risk Sensitive Instruments OF ENTERGY CORPORATION AND SUBSIDIARIES.".”
Refer to "“TABLE OF CONTENTS - Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc."”
No event that would be described in response to this item has occurred with respect to Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, or System Energy.
Disclosure Controls and Procedures
As of December 31, 2009,2010, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (each individually a "Registrant"(individually “Registrant” and collectively the "Registrants"“Registrants”) management, including their respective ChiefPrincipal Executive Officers (CEO)(PEO) and ChiefPrincipal Financial Officers (CFO)(PFO). The evaluations assessed the effectiveness of the Registrants'Registrants’ disclosure controls and procedures. Based on the evaluations, each CEOPEO and CFOPFO has concluded that, as to the Registrant or Registrants for which they serve as CEOPEO or CFO,PFO, the Registrant'sRegistrant’s or Registrants'Registrants’ disclosure controls andan d procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant'sRegistrant’s or Registrants'Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant'sRegistrant’s or Registrants'Registrants’ management, including their respective CEOsPEOs and CFOs,PFOs, as appropriate to allow timely decisions regarding required disclosure.
Internal Control over Financial Reporting
(Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The managements of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually "Registrant"“Registrant” and collectively the "Registrants"“Registrants”) are responsible for establishing and maintaining adequate internal control over financial reporting for the Registrants. Each Registrant'sRegistrant’s internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of each Registrant'sRegistrant’s financial statements presented in accordance with generally accepted accounting principles.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Each Registrant'sRegistrant’s management assessed the effectiveness of each Registrant'sRegistrant’s internal control over financial reporting as of December 31, 2009.2010. In making this assessment, each management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.
Based on each management'smanagement’s assessment and the criteria set forth by COSO, each Registrant'sRegistrant’s management believes that each Registrant maintained effective internal control over financial reporting as of December 31, 2009.2010.
The Registrants'Registrants’ registered public accounting firm has issued an attestation report on each Registrant'sRegistrant’s internal control over financial reporting.
Changes in Internal ControlControls over Financial Reporting
Under the supervision and with the participation of the Registrants'Registrants’ management, including their respective CEOsPEOs and CFOs,PFOs, the Registrants evaluated changes in internal control over financial reporting that occurred during the quarter ended December 31, 20092010 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
New Orleans, Louisiana
We have audited the internal control over financial reporting of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2009,2010, based on criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactionstrans actions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 20092010 of the Corporation and our report dated February 24, 201025, 2011 expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph relating to the adoption of a new accounting standard regarding non-controlling interests.statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Arkansas, Inc. and Subsidiaries
Little Rock, Arkansas
We have audited the internal control over financial reporting of Entergy Arkansas, Inc. and Subsidiaries (the “Company”) as of December 31, 2009,2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that trans actions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2010 of the Company and our report dated February 25, 2011 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of
Entergy Gulf States Louisiana, L.L.C.
Baton Rouge, Louisiana
We have audited the internal control over financial reporting of Entergy Gulf States Louisiana, L.L.C. (the “Company”) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions ar e recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2010 of the Company and our report dated February 25, 2011 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Members of
Entergy Louisiana, LLC
Baton Rouge, Louisiana
We have audited the internal control over financial reporting of Entergy Louisiana, LLC (the “Company”) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that trans actions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 20092010 of the Company and our report dated February 24, 201025, 2011 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and MembersShareholders of
Entergy Gulf StatesMississippi, Inc.
Jackson, Mississippi
We have audited the internal control over financial reporting of Entergy Mississippi, Inc. (the “Company”) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that trans actions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2010 of the Company and our report dated February 25, 2011 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana L.L.C.
Baton Rouge,February 25, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy New Orleans, Inc.
New Orleans, Louisiana
We have audited the internal control over financial reporting of Entergy Gulf States Louisiana, L.L.C.New Orleans, Inc. (the “Company”) as of December 31, 2009,2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactio ns are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2010 of the Company and our report dated February 25, 2011 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 25, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Entergy Texas, Inc. and Subsidiaries
Beaumont, Texas
We have audited the internal control over financial reporting of Entergy Texas, Inc. and Subsidiaries (the “Company”) as of December 31, 2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions arear e recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 20092010 of the Company and our report dated February 24, 201025, 2011 expressed an unqualified opinion on those consolidated financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and MembersShareholder of
Entergy Louisiana, LLCSystem Energy Resources, Inc.
Baton Rouge, LouisianaJackson, Mississippi
We have audited the internal control over financial reporting of Entergy Louisiana, LLCSystem Energy Resources, Inc. (the “Company”) as of December 31, 2009,2010, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactionstransactio ns are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009,2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 20092010 of the Company and our report dated February 24, 201025, 2011 expressed an unqualified opinion on those financial statements.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy Mississippi, Inc.
Jackson, Mississippi
We have audited the internal control over financial reporting of Entergy Mississippi, Inc. (the “Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2009 of the Company and our report dated February 24, 2010 expressed an unqualified opinion on those financial statements.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Entergy New Orleans, Inc.
New Orleans, Louisiana
We have audited the internal control over financial reporting of Entergy New Orleans, Inc. (the “Company”) as of December 31, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2009 of the Company and our report dated February 24, 2010 expressed an unqualified opinion on those financial statements.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
Entergy Texas, Inc. and Subsidiaries
Beaumont, Texas
We have audited the internal control over financial reporting of Entergy Texas, Inc. and Subsidiaries (the “Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2009 of the Company and our report dated February 24, 2010 expressed an unqualified opinion on those consolidated financial statements.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholder of
System Energy Resources, Inc.
Jackson, Mississippi
We have audited the internal control over financial reporting of System Energy Resources, Inc. (the “Company”) as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statements as of and for the year ended December 31, 2009 of the Company and our report dated February 24, 2010 expressed an unqualified opinion on those financial statements.
DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 2010
PART III
Information required by this item concerning directors of Entergy Corporation is set forth under the heading “Item 1 – Election of Directors” contained in the Proxy Statement of Entergy Corporation, to be filed in connection with its Annual Meeting of Stockholders to be held May 7, 2010,6, 2011, and is incorporated herein by reference.
All officers and directors listed below held the specified positions with their respective companies as of the date of filing this report, unless otherwise noted.
Name | Age | Position | | Period |
| | | | |
ENTERGY ARKANSAS, INC. | | | |
| | | | |
Directors | | | | |
| | | | |
Hugh T. McDonald | 5152 | President and Chief Executive Officer of Entergy Arkansas | | 2000-Present |
| | Director of Entergy Arkansas | | 2000-Present |
| | | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
Leo P. DenaultE. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
Curtis L. Hebert, Jr.Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
Hugh T. McDonald | | See information under the Entergy Arkansas Directors Section above. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | | |
| | | | |
Directors | | | | |
| | | | |
E. Renae ConleyWilliam M. Mohl | 5251 | Director of Entergy Gulf States Louisiana and Entergy Louisiana | | 2000-Present2010-Present |
| | President and Chief Executive Officer of Entergy Gulf States Louisiana and Entergy Louisiana | | 2000-Present2010-Present |
| | Vice President, System Planning of Entergy Services, Inc. | | 2007-2010 |
| | Vice President, Commercial Operations of Entergy Services, Inc. | | 2005-2007 |
| | | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
William M. Mohl | | See information under the Entergy Gulf States Louisiana Directors Section above. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY LOUISIANA, LLC |
| | | | |
Directors | | | | |
| | | | |
William M. Mohl | | See information under the Entergy Gulf States Louisiana Directors Section above. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Corporation Officers Section in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
William M. Mohl | | See information under the Entergy Gulf States Louisiana Directors Section above. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY MISSISSIPPI, INC. |
| | | | |
Directors | | | | |
| | | | |
Haley R. Fisackerly | 45 | President and Chief Executive Officer of Entergy Mississippi | | 2008-Present |
| | Director of Entergy Mississippi | | 2008-Present |
| | Vice President, Nuclear Government Affairs of Entergy Services, Inc. | | 2007-2008 |
| | Vice President, Customer Service of Entergy Mississippi | | 2002-2007 |
| | | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Gulf States Louisiana DirectorsCorporation Officers Section above.in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Curtis L. Hebert, Jr.Haley R. Fisackerly | | See information under the Entergy Corporation OfficersMississippi Directors Section in Part I.above. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY LOUISIANA, LLC | | NEW ORLEANS, INC. |
| | | | |
Directors | | | | |
| | | | |
Charles L. Rice, Jr. | 46 | President and Chief Executive Officer of Entergy New Orleans | | 2010-Present |
| | Director of Entergy New Orleans | | 2010-Present |
| | Director, Utility Strategy of Entergy Services, Inc. | | 2009-2010 |
| | Law Partner in the firm of Barrasso, Usdin, Kupperman, Freeman & Sarver, L.L.C. | | 2005-2009 |
| | | | |
Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Gulf States LouisianaCorporation Officers Section in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
Charles L. Rice, Jr. | | See information under the Entergy New Orleans Directors Section above. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Roderick K. West | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY TEXAS, INC. |
| | | | |
Directors | | | | |
| | | | |
Joseph F. Domino | 62 | Director of Entergy Texas | | 2007-Present |
| | President and Chief Executive Officer of Entergy Texas | | 2007-Present |
| | Director of Entergy Gulf States | | 1999-2007 |
| | President and Chief Executive Officer - TX of Entergy Gulf States | | 1998-2007 |
| | | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
E. Renae Conley | | See information under the Entergy Gulf States Louisiana DirectorsCorporation Officers Section above.in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Curtis L. Hebert, Jr.Joseph F. Domino | | See information under the Entergy Corporation OfficersTexas Directors Section in Part I.above. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY MISSISSIPPI, INC. | | |
| | | | |
Directors | | | | |
| | | | |
Haley R. Fisackerly | 44 | President and Chief Executive Officer of Entergy Mississippi | | 2008-Present |
| | Director of Entergy Mississippi | | 2008-Present |
| | Vice President, Nuclear Government Affairs of Entergy Services, Inc. | | 2007-2008 |
| | Vice President, Customer Service of Entergy Mississippi | | 2002-2007 |
| | | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Haley R. Fisackerly | | See information under the Entergy Mississippi Directors Section above. | | |
Curtis L. Hebert, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
ENTERGY NEW ORLEANS, INC. | | |
| | | | |
Directors | | | | |
| | | | |
Roderick K. West | 41 | President and Chief Executive Officer of Entergy New Orleans | | 2007-Present |
| | Director of Entergy New Orleans | | 2005-Present |
| | Director, Metro Distribution Operations of Entergy Services, Inc. | | 2005-2006 |
| | Region Manager, Distribution Operations of Entergy Services, Inc. | | 2003-2005 |
Sherri Winslow | 50 | Director of Entergy New Orleans | | 2008-Present |
| | Vice President, Gas Distribution Business of Entergy Services, Inc. | | 2008-Present |
| | Director, Employee Development of Entergy Services, Inc. | | 2006-2008 |
| | Director, Customer Service Process Improvement of Entergy Services, Inc. | | 2006-2006 |
| | | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | | |
| | | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Curtis L. Hebert, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | | |
Roderick K. West | | See information under the Entergy New Orleans Directors Section above. | | | |
ENTERGY TEXAS, INC. | | |
| | | | |
Directors | | | | |
| | | | |
Joseph F. Domino | 61 | Director of Entergy Texas | | 2007-Present |
| | President and Chief Executive Officer of Entergy Texas | | 2007-Present |
| | Director of Entergy Gulf States | | 1999-2007 |
| | President and Chief Executive Officer - TX of Entergy Gulf States | | 1998-2007 |
| | | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
| | | | |
Officers | | | | |
| | | | |
Theodore H. Bunting, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
Leo P. Denault | | See information under the Entergy Corporation Officers Section in Part I. | | |
Joseph F. Domino | | See information under the Entergy Texas Directors Section above. | | |
Curtis L. Hebert, Jr. | | See information under the Entergy Corporation Officers Section in Part I. | | |
John T. Herron | | See information under the Entergy Corporation Officers Section in Part I. | | |
J. Wayne Leonard | | See information under the Entergy Corporation Officers Section in Part I. | | |
Mark T. Savoff | | See information under the Entergy Corporation Officers Section in Part I. | | |
Terry R. Seamons | | See information under the Entergy Corporation Officers Section in Part I. | | |
Robert D. Sloan | | See information under the Entergy Corporation Officers Section in Part I. | | |
Richard J. Smith | | See information under the Entergy Corporation Officers Section in Part I. | | |
Gary J. Taylor | | See information under the Entergy Corporation Officers Section in Part I. | | |
Each director and officer of the applicable Entergy company is elected yearly to serve by the unanimous consent of the sole stockholder with the exception of the directors and officers of Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC, who are elected yearly to serve by the unanimous consent of the sole common membership owners, EGS Holdings, Inc. and Entergy Louisiana Holdings, respectively. Entergy Corporation’s directors are elected annually at the annual meeting of shareholders. Entergy Corporation’s officers are elected at the annual meeting of the Board of Directors.
Corporate Governance Guidelines and Committee Charters
Each of the Audit, Corporate Governance and Personnel Committees of Entergy Corporation'sCorporation’s Board of Directors operates under a written charter. In addition, the full Board has adopted Corporate Governance Guidelines. Each charter and the guidelines are available through Entergy'sEntergy’s website (www.entergy.com) or upon written request.
Audit Committee of the Entergy Corporation Board
The following directors are members of the Audit Committee of Entergy Corporation'sCorporation’s Board of Directors:
Steven V. Wilkinson (Chairman)
Maureen S. Bateman
Stuart L. Levenick
James R. Nichols
All Audit Committee members are independent. For purposes of independence of members of the Audit Committee, an independent director also may not accept directly or indirectly any consulting, advisory or other compensatory fee from Entergy or be affiliated with Entergy as defined in SEC rules. All Audit Committee members possess the level of financial literacy and accounting or related financial management expertise required by the NYSE rules. Steven V. Wilkinson qualifies as an "audit“audit committee financial expert,"” as that term is defined in the SEC rules.
Code of Ethics
The Board of Directors has adopted a Code of Business Conduct and Ethics for Members of the Board of Directors. The code is available through Entergy'sEntergy’s website (www.entergy.com) or upon written request. The Board has also adopted a Code of Business Conduct and Ethics for Employees, that includes Special Provision Relating to Principal Executive Officer and Senior Financial Officers. The Code of Business Conduct and Ethics for Employees is to be read in conjunction with Entergy'sEntergy’s omnibus code of integrity under which Entergy operates called the Code of Entegrity as well as system policies. All employees are required to abide by the Codes. Non-bargaining employees are required to acknowledge annually that they understand andan d abide by the Code of Entegrity. The Code of Business Conduct and Ethics for Employees and the Code of Entegrity are available through Entergy'sEntergy’s website (www.entergy.com) or upon written request.
Source of Nominations to the Board of Directors; Nominating Procedure
The Corporate Governance Committee has adopted a policy on consideration of potential director nominees. The Committee will consider nominees from a variety of sources, including nominees suggested by shareholders, executive officers, fellow board members, or a third party firm retained for that purpose. It applies the same procedures to all nominees regardless of the source of the nomination.
Any party wishing to make a nomination should provide a written resume of the proposed candidate, detailing relevant experience and qualifications, as well as a list of references. The Committee will review the resume and may contact references. It will decide based on the resume and references whether to proceed to a more detailed investigation. If the Committee determines that a more detailed investigation of the candidate is warranted, it will invite the candidate for a personal interview, conduct a background check on the candidate, and assess the ability of the candidate to provide any special skills or characteristics identified by the Committee or the Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Information called for by this item concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders to be held on May 7, 2010,6, 2011, under the heading "Section“Section 16(a) Beneficial Ownership Reporting Compliance"Compliance”, which information is incorporated herein by reference.
ENTERGY CORPORATION
Information concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement under the headings "Compensation Discussion and Analysis," "Executive Compensation Tables," "Nominees for the Board of Directors," and "Non-Employee Director Compensation," all of which information is incorporated herein by reference.
ENTERGY ARKANSAS, ENTERGY GULF STATES LOUISIANA, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS AND ENTERGY TEXAS
COMPENSATION DISCUSSION AND ANALYSIS
Introduction
In this section, the salaries and other compensation elements paid in 20092010 to the Chief Executive Officers ("CEOs"), the Principal Financial Officer ("PFO"), the three other most highly compensated executive officers other than the CEO and PFO (collectively, the "Named Executive Officers") of each of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans and Entergy Texas (the "Subsidiaries") are discussed and analyzed. Entergy believes the executive pay programs described herein and in the accompanying tables have played a material role in its ability to drive strong financial results and to attract and retain a highly experienced and successful management team. The purpose of this section is to provide investors with material information necessary to understandunderst and the compensation policies for the Named Executive Officers. This section should be read in combination with the more detailed compensation tables and other data presented elsewhere in this report. For information regarding the compensation of the named executive officers of Entergy Corporation, see the Proxy Statement of Entergy Corporation.
The Named Executive Officers are identified in the Summary Compensation Table immediately following this Compensation Discussion and Analysis. Mr. Leonard, Mr. Denault and Mr. Smith also serve as executive officers of Entergy Corporation. Mr. Leonard, Mr. Denault and Mr. Smith do not receive additional compensation for serving as Named Executive Officers of the Subsidiaries. For more information about the officers of the Subsidiaries, see Part III, Item 10 of this report.
Executive SummaryOverview of 2010 Performance and Compensation
The compensation program2010 Performance and Significant Achievements. Entergy’s businesses delivered strong financial and operational performance in 2010, achieving record operational earnings per share for the Named Executive Officers has been designed to attract, retain, motivatesixth year in a row and reward executives who can contribute torecord cash flow from operations. Entergy’s operational earnings per share increased by 6.4% from 2009 and its consolidated cash flow from operations increased by 33.9%. Entergy believes the long-termefforts in 2010 also have positioned Entergy and the Subsidiaries for future success, as reflected in the following significant achievements and thereby build value for the shareholders of Entergy Corporation.recognitions:
The executive compensation package is comprised of a combination of short-term and long-term compensation elements. Short-term compensation includes base pay and annual cash bonus awards. Long-term compensation includes stock options and performance units.· | Achieved record operational earnings per share and operating cash flow; |
· | Increased dividend nearly 11%, while completing $750 million share repurchase program; |
The executive compensation program is approved by the Personnel Committee of Entergy Corporation, which is comprised entirely of independent board members.· | Implemented major leadership reorganization; |
· | Settled successfully Entergy Texas and Entergy Arkansas rate cases; |
· | Completed successfully Entergy Arkansas, Entergy Gulf States and Entergy Louisiana storm cost securitizations; |
· | Modified successfully Entergy Mississippi’s formula rate plan and successfully settled Entergy Louisiana formula rate plan; |
· | Selected five proposals from 2009 Summer Long Term Request for Proposals (one subsequently withdrawn), with definitive agreements targeted for 2011; |
· | Obtained approval from the Federal Energy Regulatory Commission for acquisition of Acadia Unit 2 power plant; |
· | Achieved on-line record runs at 5 of 7 Entergy Wholesale Commodity Business nuclear plants; |
· | Improved key customer service metrics, including call center responsiveness, low levels of complaints and low levels of outage frequency; |
· | Included on the Dow Jones Sustainability World Index for the ninth consecutive year, the only U.S. utility to be so honored; |
· | Received the 12th EEI Emergency Assistance Recovery Award, the only company to win emergency response awards every year since first presented in 1998; and |
· | Received multiple awards and recognition for community relations, corporate citizenship, climate protection and customer service. |
Despite these strong financial and operational results, Entergy’s total shareholder return in 2010 substantially lagged its peers, placing Entergy in the fourth quartile of the Philadelphia Utility Index for 2010 and in the third quartile for the three year period ending December 31, 2010. This is in contrast to Entergy’s total shareholder return measured over the past ten years, which has been in the top quartile of the Philadelphia Utility Index.
2010 Compensation. Due in large part to the effects on Entergy’s business and market salaries of the recent economic downturn, none of the Named Executive Officers received a base salary merit increase in 2010. However, the incentive compensation paid to the Named Executive Officers for 2010 performance reflected both Entergy’s strong financial and operational performance in 2010 and Entergy’s poor 2010 total shareholder return in relation to its peers. The payouts under the annual incentive plan properly rewarded the executive officers for substantially exceeding financial performance objectives in 2010 that were deemed to be important to Entergy and its stakeholders and position Entergy and the Subsidiaries for long te rm success. The Long-Term Performance Plan, on the other hand, paid out at a substantially lower level than in prior years and substantially below target as a result of Entergy’s poor total shareholder return in relation to its peers. These payouts reflect the pay-for-performance philosophy that underlies Entergy’s incentive compensation programs.
Annual Incentive Compensation Paid for 2010 Financial Performance. The following table summarizesannual incentive program is tied to Entergy’s financial performance through the principal factorsEntergy Achievement Multiplier (the performance metric used to determine awards under the Annual Incentive Plan), which is determined based on Entergy’s success in achieving its consolidated operational earnings per share and operating cash flow goals. Entergy exceeded its operational earnings per share goal of $6.80 in fiscal 2010 by $0.30 per share, and Entergy exceeded its operating cash flow goal of $3.04 billion by $0.94 billion. This resulted in an Entergy Achievement Multiplier of 172%, with Entergy’s Chief Executive Officer receiving an award equal to 206% of his b ase salary and the other Named Executive Officers each receiving awards equal to a range of 70% to 120% of their base salaries.
Long-Term Incentive Compensation Paid for 2008-2010 Financial Performance. Under the Long-Term Performance Plan, Entergy measures performance over a three year period by assessing Entergy's total shareholder return in relation to the total shareholder return of the companies included in the Philadelphia Utility Index, with payouts under the plan tied directly to Entergy’s performance in relation to the other companies in the index over the three year performance period. Relative total shareholder return is used as the measure of performance under this plan because it encourages Entergy’s executives to deliver superior shareholder value in relation to Entergy’s peers. For the 2008 – 2010 performance cycle, Entergy 8217;s total shareholder return in relation to the other companies in the Philadelphia Utility Index resulted in a minimum payout of 10% of target for the performance units granted in 2008.
2010 Changes to Executive Compensation. In 2010, with the assistance of the Personnel Committee’s independent executive compensation consultant, the Personnel Committee completed a review of Entergy’s overall approach to its executive compensation programs, which it undertakes annually to ensure that the programs continue to be in line with best practices of other companies in the industry as well as other Fortune 500 companies. As a result of that review, the Personnel Committee approved a number of changes to the executive compensation programs that are taken into accountintended to enhance the alignment of the executive compensation programs with best practices at companies in deciding the amountPhiladelphia Utility Index as well as other Fortune 500 compa nies in general. These changes include:
Key·
| Elimination of “gross up” payments with respect to excise taxes due on the payment of severance benefits to the named executive officers in the case of a change in control. See “Retention Agreements and Other Compensation ComponentsArrangements”. |
(where reported in summary
compensation table)
· | Factors |
Base Salary
(salary, column, c)
| -Entergy Corporation, business unit and individual performance
-Market data
-Internal pay equity
-The Committee's assessmentReduction of other elements of compensation
|
Non-Equitythe maximum payout under the Long-Term Incentive Plan from 250% to 200% of target beginning with the 2011-2013 performance cycle, combined with an increase in the minimum payout from 10% to 25% of target.
|
Compensation· | Modification of the components of long-term compensation to increase the portion of long-term compensation that will be derived from performance units from 50% to 60% and decrease the portion that will be derived from restricted stock and stock options to 40%. |
(non-equity plan compensation, column g)
· | -Compensation practices atAddition of awards of restricted stock to the peer group companiesexecutive officers, beginning in 2011, as a component of long-term compensation.
|
· | Elimination of club dues as a perquisite for the members of the Office of Chief Executive and the general marketelimination of gross-up payments on perquisites. |
· | Discontinuation of financial counseling as a perquisite for
companies Entergy Corporation's size-Desire to ensure that a substantial portionall executive officers with the value of total compensation is performance-based
-The Committee's assessment of other elements of compensation
-Entergy Corporation and individual performance
|
Performance Units
(stock awards, column e)
| -Compensation practices at Entergy peer group companies and in broader group of
utility companies
-Target long-term compensation valuesthis discontinued perquisite not being replaced in the marketexecutive’s compensation.
|
· | Adoption of a “double trigger” (requiring both a change in control and an involuntary job loss or substantial diminution of duties) for similar jobsthe acceleration of awards under the 2007 Equity Ownership and Long-Term Cash Incentive Plan. |
-The desire to ensure that· | Adoption of a substantial portion“clawback” policy providing for the recoupment of totalincentive compensation is performance-under appropriate circumstances. See “Executive Compensation Governance”. |
based
-The Committee's assessment· | Adoption of other elements of compensation |
Stock Options
(options, column f)
| -Individual performance
-Prevailing market practice
-Targeted long-term value createda policy prohibiting hedging transactions in Entergy’s common stock by the use of stock options
-Potential dilutive effect of stock option grants
-The Committee's assessment of other elements of compensation any officer, director or employee. See “Executive Compensation Governance”. |
Compensation decisions for eachIn January 2011, Entergy’s Board also adopted a policy that prohibits Entergy or its affiliates from engaging the independent consultant that provides executive officer are made after taking into account all elementsand director compensation services to the Personnel and Corporate Governance Committees or its affiliates to provide other services to Entergy with an aggregate value in excess of the officer's compensation. In making compensation decisions, the same compensation policies are applied to all of the executive officers; however, the application of these policies results$120,000 in different compensation amounts to individual executive officers because of: (i) differences in roles and responsibilities; (ii) differences in market-based compensation levels for specific officer positions; (iii) the assessment of individual performance; and (iv) variations in business unit performance.any fiscal year.
Objectives of the Executive Compensation Program
· | The greatest part of the compensation of the Named Executive Officers should be in the form of "at risk" performance-based compensation.compensation in order to focus the executives on the achievement of superior results. |
The compensation programs are designed to ensure that a significant percentage of the total compensation of the Named Executive Officers is contingent on achievement of performance goals that drive total shareholder return and result in increases in Entergy Corporation's common stock price. For example, each of the annual cash incentive and long-term performance unit programs is designed to pay out only if Entergy Corporation achieves pre-established performance goals. If minimum established performance goals are not achieved, no payouts are made under the incentive programs. Assuming achievement of these performance goals at target level, approximately 80% of the annual target total compensation (excluding non-qualified supplemental retirement income) of Entergy Corporation's Chief Executive Officer is represented byat risk because it is performance-based compensation and the remaining 20% is represented by base salary. For Mr. Denault and Mr. Smith, assuming achievement of performance goals at the target levels, approximately 65% of the annual target total compensation (excluding non-qualified supplemental retirement income) is represented byat risk because it is performance-based compensation and the remaining 35% is represented by base salary. For substantially all of the other Named Executive Officers, assuming achievement of performance goals at the target levels, at
least 50% of the annual target total compensation (excluding non-qualified supplemental retirement income) is represented byat risk because it is performance-based compensation and the remaining 50% is represented by base salary. Entergy Corporation's Chief Executive Officer's total compensation is at greater risk than the other Named Executive Officers, reflecting both market practice and acknowledging the leadership role of the Chief Executive Officer in setting companycom pany policy and strategies.
· | A substantial portion of the Named Executive Officers' compensation should be delivered in the form of equity awards. |
To align the economic interests of the Named Executive Officers with the shareholders of Entergy Corporation, Entergy Corporation believes a substantial portion of theirits total compensation should be in the form of equity-based awards. Awards are typicallyHistorically, awards were granted in the form of stock options with a three-year vesting schedule and performance units with a three-year performance cycle. Beginning in 2011, awards will be granted in the form of restricted stock, stock options and performance units. Stock options areand restricted stock generally will be subject only to time-based vesting. Performance units pay out only if Entergy Corporation achieves specified performance targets. Thetargets with the amount of payout depends contingent on the levell evel of performance achieved. These awards focus and reward executive officers on building shareholder value.
· | The compensation programs of Entergy Corporation and the Subsidiaries should enable the companies to attract, retain and motivate executive talent by offering competitive compensation packages that are competitive but fair.packages. |
It is in the shareholders' best interests that Entergy Corporation and the Subsidiaries attract and retain talented executives by offering compensation packages that are competitive, but fair.competitive. Entergy Corporation's Personnel Committee has sought to develop compensation programs that deliver total target compensation in aggregate at approximately the 50th percentile of the market.
The Starting Point
To develop a competitive compensation program, the Personnel Committee on an annual basisannually reviews base salary and other compensation data from two sources:
· | Survey Data: The Committee uses published and private compensation survey data to develop marketplace compensation levels for executive officers. The data, which is compiled by the Committee's independent compensation consultant, compares the current compensation levels received by each of the executive officers against the compensation levels received by executives holding similar positions at companies with corporate revenues consistent with the revenues of Entergy Corporation. For non-industry specific positions such as a chief financial officer, the Committee reviews general industry data. For management positions that are industry-specific such as Group President, Utility Operations, the Committee reviews data from energy services companies.companie s. The survey data reviewed by the Committee covers approximately 300800 public and private companies in general industry and approximately 70100 public and private companies in the energy services sector. In evaluating compensation levels against the survey data, the Committee considers only the aggregated survey data. The identity of the companies comprising the survey data is not disclosed to, or considered by, the Committee in its decision-making process and, thus, is not considered material by the Committee. |
The Committee uses the survey data to develop compensation programs that deliver total target compensation at approximately the 50th percentile of the surveyed companies. This survey data is used as the primary data for purposes of determining target compensation. For this purpose, the Committee reviews the results of the survey data (organized in tabular format) comparing each of the Named Executive Officer's compensation relative to the 25th, 50th (or median) and 75th percentile of the surveyed companies. & #160;The Committee considers its objectives to have been met if Entergy Corporation's Chief Executive Officer, the executive officers who constitute what is referred to as the Office of the Chief Executive, considered as a group (9(9) officers including Mr. Denault and Mr. Smith) and the other Named Executive Officers have a target compensation package that falls within the range of 90 - 110 percent of the 50th percentile of the surveyed companies.companies in the survey data. In 2009,2010, in the aggregate the target compensation of all of the Named Executive Officers fell within this range. Actual compensation received by an individual officer may be above or below the 50th percentile based on an individual officer's skills, performance and responsibilities.responsibilities, Entergy Corporation performance and internal equity.
· | Proxy Analysis: Although the survey data described above is the primary data source used in determining compensation, the Committee reviews data derived from proxy statements as an additional point of analysis. The proxy data is used to compare the compensation levels of the named executive officers against the compensation levels of the corresponding top five highest paid executive officers from 18 of the companies included in the Philadelphia Utilities Index. The analysis is used by the Committee to evaluate the reasonableness of the Company’s compensation program. The proxy market data compare Entergy executive officers to other proxy officers based on pay rank without regard to roles and responsibilities. These companies are: |
· AES Corporation | · Exelon Corporation |
· Ameren Corporation | · FirstEnergy Corporation |
· American Electric Power Co. Inc. | · FPL Group Inc.NextEra Energy |
· CenterPoint Energy Inc. | · Northeast Utilities |
· Consolidated Edison Inc. | · PG&E Corporation |
· Dominion Resources Inc. | · Progress Energy, Inc. |
· DTE Energy Company | · Public Service Enterprise Group, Inc. |
· Duke Energy Corporation | · Southern Company |
· Edison International | · XCELXcel Energy |
Elements of the Compensation Program
The major components of the executive compensation program are presented below:
Entergy’s executive compensation package consists of a combination of short-term and long-term compensation elements. For 2010, short-term compensation included base pay and annual cash bonus awards and long-term compensation included stock options and performance units. All of the incentive plans are linked to Entergy’s financial and stock performance or its total shareholder return in relation to its peers. The executive compensation program is approved by Entergy’s Personnel Committee, which consists entirely of independent board members.
The executive compensation programs reflect a balanced compensation approach to incentivizing and rewarding performance by combining a market-based base salary with reasonable annual and long-term incentive compensation programs. These incentive compensation programs are designed to reward the executive officers if they attain specified annual and long-term goals while taking an appropriate level of risk.
The following table summarizes the principal factors that are taken into account in deciding the amount of each compensation element paid or awarded to executives:
Key Compensation Components (where reported in summary compensation table) | Factors |
Base Salary (salary, column c) | -Entergy Corporation, business unit and individual performance -Market data -Internal pay equity -The Committee's assessment of other elements of compensation based upon Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself |
Non-Equity Incentive Plan Compensation (Cash Bonus) (non-equity plan compensation, column g) | -Compensation practices at the peer group companies and the general market for companies Entergy Corporation’s size -Desire to ensure that a substantial portion of total compensation is performance-based -The Committee's assessment of other elements of compensation based upon Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself -Entergy Corporation and individual performance |
Performance Units (stock awards, column e) | -Compensation practices at the peer group companies and in broader group of utility companies -Target long-term compensation values in the market for similar jobs -The desire to ensure that a substantial portion of total compensation is performance-based -The Committee's assessment of other elements of compensation based upon Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself |
Stock Options (options, column f) | -Individual performance -Prevailing market practice -Targeted long-term value created by the use of stock options -Potential dilutive effect of stock option grants -The Committee's assessment of other elements of compensation based upon Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself |
Compensation decisions for each executive officer are made after taking into account all elements of the officer’s compensation. In making compensation decisions, Entergy applies the same compensation policies to all of the executive officers; however, the application of these policies results in different compensation amounts to individual executive officers because of: (i) differences in roles and responsibilities; (ii) differences in market-based compensation levels for specific officer positions; (iii) the assessment of individual performance; (iv) internal equity; and (v) variations in business unit performance.
Short-Term Compensation
Base salary is a component of each Named Executive Officer's compensation package because the Committee believes it is appropriate that some portion of the compensation that is provided to these officers be provided in a form that is a fixed cash amount.stable. Also, base salary remains the most common form of payment throughout all industries. Its use ensures a competitive compensation package tofor the Named Executive Officers.
The Committee (in the case of Mr. Leonard, Mr. Denault and Mr. Smith) or certain senior Entergy officers (in the case of the other Named Executive Officers) determine whether to awardthe base salaries for these Named Executive Officers, including whether to grant annual merit increases in base salary based on the following factors:
· | Entergy Corporation, business unit and individual performance during the prior year; |
· | Internal pay equity; and |
· | The Committee's assessment of other elements of compensation provided to the Named Executive Officer.Officers; and |
· | Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself. |
The corporate and business unit goals and objectives vary by individual officers and include, among other things, corporate and business unit financial performance, capital expenditures, cost containment, safety, reliability, customer service, business development and regulatory matters.
The use of "internal pay equity" in setting merit increases is limited toassists the Committee in determining whether a change in an executive officer's role and responsibilities relative to other executive officers requires an adjustment in the officer's salary. The Committee has not established any predetermined formula against which the base salary of one Named Executive Officer is measured against another officer or employee.
In January 2009,2010, in light of the continued uncertainty in economic conditions and the projected slow growth in executive officer salaries in 20092010 based on Entergy’sthe review of general industry surveys prepared by various human resource consulting firms, the Personnel Committee decided not to increase the 2009 base salaries offrom the levels established in 2009 for the executive officers who constitute the Office of the Chief Executive from the 2008 base salaries.Executive.
In addition, based onfor the results of this study,same reasons listed above, the 20092010 base salaries for Ms. Conley,Mr. Bunting, Mr. Domino, Mr. Fisackerly, Mr. McDonald and Mr. WestMcDonald were not increased.
In June 2010, Ms. Conley was promoted from President, Entergy Louisiana to Executive Vice President, Human Resources and Administration. At the same time Mr. Domino, Mr. Fisackerly, Mr. McDonaldWest was promoted from President, Entergy New Orleans to Executive Vice President, Chief Administrative Officer. Ms. Conley’s base salary was increased from $407,680 to $425,000, and Mr. West, however, received a cash bonus in lieu of an increase in their base salary. See “2009 Summary Compensation Table” for the amount of the bonus paid to each of these officers. Mr. Bunting received a 2.5% merit increase to his 2008West’s base salary was increased from $315,000 to $550,000 to reflect the increased responsibilities of their new positions and comparative market data for senior accounting officers. officers in similar positions.
Also, in June 2010, Mr. Mohl was promoted to President, Entergy Louisiana and Mr. Rice was promoted to President, Entergy New Orleans. Mr. Mohl’s base salary was increased from $269,088 to $325,000 and Mr. Rice’s base salary was increased from $160,000 to $240,000 to reflect their new positions and responsibilities.
The 20092010 base salaries for the Named Executive Officers were:
Named Executive Officer | 20092010 Base Salary
|
J. Wayne Leonard | $1,291,500 |
Leo P. Denault | $630,000 |
Richard J. Smith | $645,000 |
Theodore H. Bunting, Jr. | $350,448 |
E. Renae Conley | $407,680425,000 |
Joseph F. Domino | $317,754 |
Haley R. Fisackerly | $275,000 |
Hugh T. McDonald | $322,132 |
Joseph F. DominoWilliam M. Mohl | $317,754325,000 |
Charles L. Rice, Jr. | $240,000 |
Roderick K. West | $315,000 |
Theodore H. Bunting | $350,447 |
Haley Fisackerly | $275,000550,000 |
Mr. Leonard’s salary is larger than the other Named Executive Officers because of his leadership role in setting company policy and strategic planning and reflects market practice for salaries for chief executive officers.
· | Non-Equity Incentive Plan (Cash Bonus) |
Performance-based incentives are included in the Named Executive Officers' compensation packages because it encouragesEntergy believes performance-based incentives encourage the Named Executive Officers to pursue objectives consistent with the overall goals and strategic direction that the Entergy boardBoard has set for Entergy Corporation.Corporation and the Subsidiaries. Annual incentive plans are commonly used by companies in a variety of industry sectors to compensate their executive officers.officers for achieving financial and operational goals.
The Named Executive Officers participate in a performance-based cash bonus plan known as the Executive Annual Incentive Plan or Executive Incentive Plan. The Executive Incentive Plan operates onUnder the plan, Entergy uses a calendar year basis. A performance metric known as the Entergy Achievement Multiplier is used to determine the payouts for each particular calendar year. The Entergy Achievement Multiplier is used to determine the percentage of target annual plan awards that will be paid each year to each Named Executive Officer. In December 2008,Each year the Personnel Committee selectedreviews the performance measures forused to determine the Entergy Achievement Multiplier. In December 2009, the Personnel Committee decided to retain the performance measures used in 2009. Accordingly, the 2010 performance measures used to determine the Entergy Achievement Multiplier to be based in equal part onwere consolidated operational earnings per share and operating cash flow, for 2009 awards. Thewith each measure weighted equally. ;The Committee selected these performance measures because:
· | earnings per share and operating cash flow have both a correlative and causal relationship to shareholder value performance;over time; |
· | earnings per share and operating cash flow targets are aligned with externally-communicated goals; and |
· | earnings per share and operating cash flow results are readily available in earning releases and SEC filings. |
In addition, these measures are commonly used by a number of other companies, including the industry peer group companies in the Philadelphia Utility Index, as components of their incentive programs. For example, approximately 5672 percent of the industry peer group companies use earnings per share as an incentive measure and 22 percent use some type of cash flow measure. The Personnel Committee evaluates and sets the performance measures used for the Executive Incentive Plan and the Management Incentive Plan on an annual basis.
The Committee sets minimum and maximum achievement levels under the Executive Incentive Plan. Payouts for performance between minimum and target achievement levels and between target and maximum levels are calculated using straight line interpolation. If Entergy does not achieve its minimum achievement levels, no payout occurs under the Executive Incentive Plan. In general, the Committee seeks to establish target achievement levels such that the relative difficulty of achieving the target level is consistent from year to year. Over the past five years ending with 2009,2010, the average Entergy Achievement Multiplier was 128%148% of target.
In December 2008,2009, the Committee set the 20092010 target awards for incentives to be paid in 20102011 under the Executive Incentive Plan. As a percentage of base salary, the target awards for certain of Entergy named executive officers were set as follows: J. Wayne Leonard, CEO of Entergy Corporation (120%); Leo P. Denault, Executive Vice President and Chief Financial Officer (70%); and Richard J. Smith, President and Chief Operating Officer of Entergy CorporationWholesale Commodity Business (70%). The Committee based its decision on the target awards for Mr. Denault and Mr. Smith on the recommendation of Entergy’s Chief Executive Officer.
In setting these target awards, the Personnel Committee considered several factors, including:
· | Analysis provided by the Committee's independent compensation consultant as to compensation practices at the industry peer group companies and the general market for companies the size of Entergy Corporation; |
· | Competitiveness of Entergy Corporation'sthe compensation plans and theirEntergy’s ability to attract and retain top executive talent; |
· | The individual performance of each Entergy named executive officer (other than the Chief Executive Officer of Entergy Corporation) as evaluated by the Chief Executive Officer of Entergy Corporation; |
· | Target bonus levels in the market for comparable positions; |
· | The desire to ensure that a substantial portion of total compensation is performance-based; |
· | The relative importance in any given year, of the short-term performance goals established pursuant to the Executive Incentive Plan; and |
· | The Committee's assessment of other elements of compensation provided to the Entergy named executive officers.Named Executive Officers; and |
· | Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself. |
The target awards for the other Named Executive Officers were set as follows: E. Renae Conley, former CEO - Entergy Gulf States Louisiana and CEO - - Entergy Louisiana (60%); Joseph F. Domino, CEO - Entergy Texas (50%); Hugh T. McDonald, CEO - Entergy Arkansas (50%); Roderick K. West, former CEO - Entergy New Orleans (40%(70%); Haley Fisackerly, CEO - Entergy Mississippi (40%); William M. Mohl (60%), CEO - Entergy Gulf States and Entergy Louisiana; Charles L. Rice, Jr. (40%), CEO - Entergy New Orleans and Theodore H. Bunting, –Jr. - Principal Accounting Officer –- the Subsidiaries (60%).
The target awards for the Named Executive Officers (other than Entergy named executive officers) were set by their respective supervisors (subject to ultimate approval of Entergy’s Chief Executive Officer) who allocated a potential incentive pool established by the Personnel Committee among various of their direct and indirect reports. In setting the target awards, the supervisor took into account considerations similar to those used by the Personnel Committee in setting the target awards for Entergy’s Named Executive Officers.
The Committee established a higher target percentage for Mr. Leonard compared to the other Named Executive Officers to reflect the following factors:
· | Mr. Leonard's leadership and contributions to Entergy Corporation's success as measured by, among other things, the overall performance of Entergy Corporation.Corporation, which, as measured by total shareholder return, has exceeded all but one of the companies in the Philadelphia Utility Index over his twelve-year tenure as Chief Executive Officer. |
· | Market practices that compensate chief executive officers at greater potential compensation levels with more "pay at risk" than other executive officers. |
· | The Personnel Committee's assessment of Mr. Leonard's strong performance based on the Board's annual performance evaluation, in which the Board reviews and assesses Mr. Leonard's performance based on: leadership, strategic planning, financial results, succession planning, communications with all of theEntergy’s stakeholders, external relations with the communities and industries in which Entergy Corporation operates and his relationship with the Board. |
Target awards are set based on an executive officer’s current position and executive management level within the Entergy organization. Executive management levels at Entergy range from Level 1 thorough Level 4. Mr. Denault, Mr. Smith and Mr. SmithWest hold positions in Level 2 whereas Mr. Bunting, and Ms. Conley and Mr. Mohl hold positions in Level 3 and Mr. Domino, Mr. Fisackerly, Mr. McDonald and Mr. WestRice hold positions in Level 4. Accordingly, their respective incentive targets differ one from another based on the external market data developed by the Committee’s independent compensation consultant and the other factors noted above.
In JanuaryDecember 2009, the Committee determined the Entergy Achievement MultiplierExecutive Incentive Plan targets to be used for purposes of establishing annual bonuses for 2009.2010. The Committee’s determination of the target levels was made after full Board review of management’s 2010 financial plan for Entergy Corporation, upon recommendation of the Finance Committee, and after the Committee’s determination that the established targets aligned with Entergy Corporation’s anticipated 2010 financial performance as reflected in the financial plan. The targets established to measure management performance against as reported results, excluding the impact of the activities associated with the previously planned separation of ourthe non-utility nuclear business (the “Spin Transaction”), were:
| Minimum | Target | Maximum | Minimum | Target | Maximum |
Earnings Per Share ($) | 6.30 | 7.00 | 7.70 | $6.12 | $6.80 | $7.48 |
Operating Cash Flow ($ in Billions) | 2.52 | 2.88 | 3.24 | $2.68 | $3.04 | $3.40 |
AfterIn January 2011, after reviewing earnings per share and operating cash flow results against the performance objectives in the above table, the Committee determined that Entergy Corporation had exceeded the operational EPS target of $6.80 by $0.40 in fiscal 2010 and inhad exceeded the operating cash flow goal of $3.04 by $0.94 billion. In accordance with the terms of the Executive Incentive Plan, adjusting for non-recurring charges for impairments to the nuclear decommissioning trust, in January 2010,2011, the Personnel Committee certified the 20092010 Entergy Achievement Multiplier at 115%172% of target.
Under the terms of the Management Effectiveness Program, the Entergy Achievement Multiplier is automatically increased by 25 percent for the members of the Office of the Chief Executive (including Mr. Leonard, Mr. Denault and Mr. Smith, but notif the other Named Executive Officers),pre-established underlying performance goals established by the Personnel Committee are satisfied at the end of the performance period, subject to the Personnel Committee's discretion to adjust the automatic multiplier downward or eliminate it altogether. In accordance with Section 162(m) of the Internal Revenue Code, the multiplier which Entergy refers to as the Management Effectiveness Factor is intended to provide the Committee, through the exercise of negative discretion, a mechanism to take into consideration the specific achievement factors relating to the overall performance of EntergyEnterg y Corporation. In January 2010,2011, the Committee exercised its negative discretion to eliminate the Management Effectiveness Factor with respect to the 20092010 incentive awards, reflecting the Personnel Committee's determination that the Entergy Achievement Multiplier, in and of itself without the Management Effectiveness Factor, was consistent with the performance levels achieved by management.
The annual incentive awards for the Named Executive Officers (other than Mr. Leonard, Mr. Denault and Mr. Smith) are awarded from an incentive pool approved by the Committee. From this pool, each named executive officer’s supervisor determines the annual incentive payment based on the Entergy Achievement Multiplier. The supervisor has the discretion to increase or decrease the multiple used to determine an incentive award based on individual and business unit performance. The incentive awards are subject to the ultimate approval of Entergy’s Chief Executive Officer.
The following table shows the Executive and Management Incentive PlansPlan payments as a percentage of base salary for 20092010 based on an Entergy Achievement Multiplier of 172% as well as the incentive awards for each Named Executive Officer:
Named Exeutive Officer | Target | Percentage Base Salary | 2009 Annual Incentive Award | |
Named Executive Officer | | Target | Percentage Base Salary | 2010 Annual Incentive Award |
J. Wayne Leonard | 120% | 138% | $1,782,270 | 120% | 206% | $2,665,656 |
Leo P. Denault | 70% | 81% | $ 507,150 | 70% | 120% | $758,520 |
Richard J. Smith | 70% | 81% | $ 519,225 | 70% | 120% | $776,580 |
Theodore H. Bunting, Jr. | | 60% | 150% | $525,000 |
E. Renae Conley | 60% | 75% | $ 307,000 | 60% | 103% | $438,600 |
Joseph F. Domino | | 50% | 100% | $317,754 |
Haley R. Fisackerly | | 40% | 70% | $192,500 |
Hugh T. McDonald | 50% | 40% | $ 128,066 | 50% | 92% | $297,972 |
Joseph F. Domino | 50% | 35% | $ 111,373 | |
William M. Mohl | | 60% | 117% | $380,250 |
Charles L. Rice, Jr. | | 40% | 80% | $192,000 |
Roderick K. West | 40% | 50% | $ 158,000 | 70% | 120% | $662,200 |
Haley Fisackerly | 40% | 50% | $ 138,000 | |
Theodore H. Bunting | 60% | 96% | $ 335,000 | |
Long-Term Compensation
Entergy Corporation'sEntergy’s goal for long-term incentive programs are intendedcompensation is to focus and reward the Named Executive Officersexecutive officers for achievement ofbuilding shareholder value creation overand to increase the long-term.executive officers’ ownership in Entergy Corporation common stock. In itsthe long-term incentive programs, Entergy Corporation primarily useshas historically used a mix of performance units and stock options in order to accomplish different objectives.options. Performance units reward the Named Executive Officers on the basis of total shareholder return, which is a measure of stock appreciation and dividend payments relative to the industry peer group companies.companies in the Philadelphia Utility Index. Stock options provide a direct incentive for increasing the price of Entergy Corporation common stock. In addition, Entergy Corporationrestricted stock units have occasionally awards restricted unitsbeen awarded for retention purposes or to offset forfeited compensation in order to attractattr act officers and managers from other companies.
Beginning in 2011, the long-term incentive program will include awards of restricted stock, in addition to grants of performance units and stock options. For 2010, the target value of long-term incentive compensation granted to an executive was divided equally between the value determined on the date of grant of the performance units and stock options granted under the program. Beginning in 2011, the target value of long-term incentive compensation will be allocated 60% to performance units and 40% to a combination, equally divided, of stock options and restricted stock, all based on their grant date values.
Each of the performance units and stock options and restricted units granted to the Named Executive Officers in 20092010 were awarded under the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation, which is referred to as the 2007 Equity Ownership Plan.
· | Performance Unit Program |
Entergy Corporation issues performance unit awards to the Named Executive Officers under its Performance Unit Program. Each Performance Unitperformance unit equals the cash value of one share of Entergy Corporation common stock at the end of the three-year performance cycle. Each unit also earns the cash equivalent of the dividends paid during the performance cycle. Dividends accrued during the performance cycle are paid out only to the extent the performance measures are achieved and a payout under the program for that cycle occurs. The Performance Unit Program is structured to reward Named Executive Officers only if performance goals set by the Personnel Committee are met. The Personnel Committee has no discretion to make awards if minimum performance goals are not achieved.
The Performance Unit Program provides a minimum, target and maximum achievement level. Performance is measured by assessing Entergy Corporation's total shareholder return relative to the total shareholder return of industry peer group companies.the companies in the Philadelphia Utility Index. The Personnel Committee chose total shareholder return as a measure of performance because it assesses Entergy Corporation's creation of shareholder value relative to other electric utilities over the performance cycle. It also takes into account dividends paid by the companies in this Index and normalizes events that affect the industry as a whole. Minimum, target and maximum performance levels are determined by reference to the quartilepercentile ranking of Entergy Corporation's total shareholder return against the total shareholder returnretur n of industry peer group companies.the companies in the Philadelphia Utility Index. At any given time, a participant in the Performance Unit Program is participating in three performance cycles. Currently participants are participating in the 2009-2011, the 2010-2012 and the 2011-2013 cycles.
The 2010-2012 Performance Grant. For the 2010-2012 performance cycle, the Personnel Committee identified the Philadelphia Utility Index as the industry peer group for total shareholder return performance because the companies represented in this index more closely approximate Entergy Corporationus in terms of size. The companies included in the Philadelphia Utility Index are provided above in the Compensation Discussionsize and Analysis under "The Starting Point - Proxy Analysis."scale.
Subject to achievement of the Performance Unit Program performance levels, the Personnel Committee established target amounts of 22,300 performance units for Mr. Leonard; and 5,300 performance units for each of Mr. Denault and Mr. Smith for the 2010-2012 performance cycle. The target amounts for the other Named Executive Officers are as follows: 2,2004,583 performance units for Mr. West, 2,220 performance units for Ms. Conley and Mr. Bunting; and 1,000 performance units for each of Mr. Domino, Mr. McDonald Mr. West, and Mr. Fisackerly.Fisackerly; 2,000 performance units for Mr. Mohl; and 833 performance units for Mr. Rice. The range of payouts under the program is shown below.
Performance Levels: | Minimum | Target | Maximum |
Total Shareholder Return | 25th percentile | 50th percentile | 75th percentile |
Payouts | 10% of Target | 100% of Target | 250% of Target |
Quartiles: | 4 | 3 | 2 | 1 |
Performance Levels: | Zero | Minimum | Target | Maximum |
Total Shareholder Return Ranges: | Below 25th percentile | 25th to 50th percentiles | 50th to 75th percentiles | 75th percentile and above |
Payouts: | No Payout | Interpolate between Minimum and Target (10% to 100% of Target) | Interpolate between Target and Maximum (100% to 250% of Target) | Maximum Payout (250% of Target) |
There is no payout for performance below the 25th percentile. Payouts between minimum and target and target and maximum are calculated using straight line interpolation.
The Personnel Committee sets payout opportunities for the Performance Unit Program at the outset of each performance cycle. In determining payout opportunities, the Committee considers several factors, including:
· | The advice of the Committee's independent compensation consultant regarding compensation practices at the industry peer group companies; |
· | Competitiveness of the Entergy Corporation'sEntergy’s compensation plans and their ability to attract and retain top executive talent; |
· | Target long-term compensation values in the market for similar jobs; |
· | The desire to ensure, as described above, that a substantial portion of total compensation is performance-based; |
· | The relative importance in any given year, of the long-term performance goals established pursuant to the Performance Unit Program; and |
· | The Committee'sCommittee’s assessment of other elements of compensation provided to the Named Executive Officer.Officers; and |
· | Entergy’s Chief Executive Officer’s recommendation for the Named Executive Officers other than himself. |
| For the 2007-2009 performance cycle, the target amounts established in January 2007 were: |
Payout for the 2008-2010 Performance Cycle. For the 2008-2010 performance cycle, the target amounts established in January 2008 were:
· | 23,80016,500 performance units for Mr. Leonard; |
· | 4,5003,900 performance units for Mr. Denault and Mr. Smith; |
· | 2,1001,400 performance units for Ms. Conley and Mr. Bunting; |
· | 1,233 performance units for Mr. West; |
· | 817 performance units for Mr. Mohl; |
· | 700 performance units each for Mr. Domino and Mr. McDonald; and |
· | 1,000583 performance units for each of Mr. Domino, Mr. McDonald and Mr. Fisackerly. |
Mr. Rice was not a participant in the 2008-2010 performance cycle.
Participants could earn performance units consistent with the range of payouts as described above for the 2010-2012 performance cycle. The Committee established a higher target amount for Mr. Leonard compared to the other Named Executive Officers based on the following factors:
· | Mr. Leonard's leadership and contributions to Entergy Corporation's success as measured by, among other things, the overall performance of Entergy Corporation. |
· | Market practices that compensate chief executive officers at greater potential compensation levels with more "pay at risk" than other named executive officers. |
In January 2010,2011, the Committee assessed Entergy Corporation's total shareholder return for the 2007-20092008-2010 performance periodcycle and determined the actual number of performance units to be paid to Performance Unit Program participants for the 2007-20092008-2010 performance cycle. Performance was measured in a manner similar to that described above for the 2010-2012 cycle, on the basis of relative total shareholder return.
For purposes of determining Entergy Corporation's relative performance for the 2007-2009 performance cycle period, the Committee used the Philadelphia Utility Index as the peer group. Based on market data and the recommendation of management, theThe Committee compared Entergy Corporation'sEntergy’s total shareholder return against the total shareholder return of the companies that comprisedare included in the Philadelphia Utility Index.
Based on athis comparison, of Entergy Corporation's performance relative to the Philadelphia Utility Index as described above, the Committee concluded that Entergy Corporation’sEntergy’s performance for the 2007-20092008-2010 performance cycle, ranked inat the bottom of the third quartile.quartile, or approximately the 25th percentile. This resulted in a paymentpayout at 10% of 57%target, or 10% of target.the target number of units awarded. Each performance unit was then automatically converted into cash at the rater ate of $81.84$70.83 per unit, the closing price of Entergy CorporationCorporation’s common stock on the last trading day of the performance cycle (December 31, 2009)2010), plus dividend
equivalents accrued over the three-year performance cycle. See the 20092010 Stock Option Exercises and Stock Vested table for the amount paid to each of the Named Executive Officers for the 2007-20092008-2010 performance cycle.
The Personnel Committee and, in the case of the Named Executive Officers (other than Mr. Leonard, Mr. Denault and Mr. Smith), Entergy’s Chief Executive Officer and the Named Executive Officer’s supervisor consider several factors in determining the amount of stock options it will grant under Entergy’s 2007 Equity Ownership Plan to the Named Executive Officers, including:
· | Individual performance; |
· | Prevailing market practice in stock option grants; |
· | The targeted long-term value created by the use of stock options; |
· | The number of participants eligible for stock options, and the resulting "burn rate" (i.e., the number of stock options authorized divided by the total number of shares outstanding) to assess the potential dilutive effect; and |
· | The Committee's assessment of other elements of compensation provided to the Named Executive OfficerOfficers based upon Entergy’s Chief Executive Officer’s recommendations for the Named Executive Officers other than himself. |
For stock option awards to the Named Executive Officers (other than Mr. Leonard), the Committee's assessment of individual performance of each Named Executive Officer in consultation with Entergy Corporation's Chief Executive Officer, which involves a review of each officer’s performance, role and responsibilities, strengths and developmental opportunities is the most important factor in determining the number of options awarded. The Committee also considers the significant achievements of Entergy for the prior year.
The following table sets forth the number of stock options granted to each Named Executive Officer in 2009.2010. The exercise price for each option was $77.53,$77.10, which was the closing fair market valueprice of Entergy Corporation common stock on the date of grant.
Named Executive Officer | Stock Options |
J. Wayne Leonard | 125,000135,000 |
Leo P. Denault | 45,00050,000 |
Richard J. Smith | 35,00040,000 |
Theodore H. Bunting, Jr. | 14,500 |
E. Renae Conley | 12,50012,700 |
Joseph F. Domino | 4,600 |
Haley R. Fisackerly | 9,000 |
Hugh T. McDonald | 4,5004,600 |
Haley FisackerlyWillliam M. Mohl | 3,800 |
Joseph F. Domino | 4,5009,000 |
Roderick K. West | 5,000 |
Theodore H. Bunting | 12,0007,000 |
The option grants awarded to the Named Executive Officers (other than Mr. Leonard) ranged in number between 3,8004,600 and 45,00050,000 shares. On the date of grant, Mr. Rice was not eligible to receive stock options. In the case of Mr. Leonard, who received 125,000135,000 stock options, the Committee took special note of his performance as Entergy Corporation's Chief Executive Officer. Among other things, the Committee noted that the total shareholder return of Entergy Corporation measured over the nine-yeareleven-year period between Mr. Leonard's appointment as CEOChief Executive Officer of Entergy Corporation in January 1999 and the January 29, 20092010 grant date exceeded all of the industry peer group companies as well as all other U.S. investor owned electric utility companies.
For additional information regarding stock options awarded in 20092010 to each of the Named Executive Officers, see the 20092010 Grants of Plan-Based Awards table.
Under the 2007 Equity Ownership Plan and Entergy’s predecessor equity plans, all stock options must have an exercise price equal to the closing fair market value of Entergy Corporation common stock on the date of grant. In 2008, Entergy Corporation implemented guidelines that require an executive officer to achieve and maintain a level of Entergy Corporation stock ownership equal to a multiple of his or her salary. Until an executive officer achieves the multiple of salary ownership position of Entergy Corporation common stock, the
executive officer (including a Named Executive Officer) upon exercising any stock option granted on or after January 1, 2003, must retain at least 75% of the after-tax net profit from such stock option exercise in the form of Entergy Corporation common stock. The equit y ownership plans prohibit the repricing of “underwater” stock options without shareholder approval.
Entergy Corporation has not adopted a formal policy regarding the granting of options at times when it is in possession of material non-public information. However, Entergy Corporation generally grants options to Named Executive Officers only during the month of January in connection with its annual executive compensation decisions. On occasion, it may grant options to newly hired employees or existing employees for retention or other limited purposes.
Restricted units granted under the 2007 Equity Ownership Plan represent phantom shares of Entergy Corporation common stock (i.e., non-stock interests that have an economic value equivalent to a share of Entergy Corporation common stock). Entergy Corporation occasionally grants restricted units for retention purposes, to offset forfeited compensation from a previous employer or for other limited purposes. If all conditions of the grant are satisfied, restrictions on the restricted units lift at the end of the restricted period, and a cash equivalent value of the restricted units is paid. The settlement price is equal to the number of restricted units multiplied by the closing price of Entergy Corporation common stock on the date restrictions lift. Restricted units are not entitled to dividends or voting rights. Restricted units are generally time-based awards for which restrictions lift, subject to continued employment, over a two- to five-year period.
In December 2009, the Committee granted Mr. Leonard, Entergy’s Chief Executive Officer, 100,000 restricted units. The Committee granted Mr. Leonard these restricted units in recognition of the importance of his continued exemplary leadership as Chairman and Chief Executive Officer and to encourage the retention of his leadership in light of the numerous strategic challenges facing the Company, including the challenges associated with the completion of the Spin Transaction. The Committee also took into account the competitive market for chief executive officers. In determining the size of the grant, the Committee consulted its independent consultant to confirm that the grant was consistent with market practices. The Committee also noted, based on the advice of its independent consultant, that such grants are a commonly used market technique for retention purposes.
The restricted units will vest in two equal installments of 50,000 units each on December 3, 2011 and December 3, 2012. On each vesting date, Entergy will pay to Mr. Leonard, subject to payment of withholding taxes, a cash amount equal to the closing price of a share of Entergy’s common stock on that date. Under certain conditions, including a termination of employment without cause, death or disability, Mr. Leonard’s restricted stock units may vest on an earlier date.
No other Named Executive Officers received restricted units during 2009.
2009 Significant Achievements
In assessing individual and management performance (with respect to the overall compensation of the Named Executive Officers), the Committee noted the following significant achievements:
· | Achieved the safest year in Entergy’s history; |
· | Achieved the highest generation ever from our entire nuclear fleet; |
· | Reported the highest earnings in our history; |
· | Named to “2010 All-America Executive Team” according to rankings compiled by the prestigious Institutional Investors magazine; our Chief Executive Officer and Chief Financial Officer ranked as the top CEO and CFOs in the power industry; Entergy was also ranked as the top electric utility in the country and among the top nine companies in the nation, making it one of the “Most Honored Companies;” |
· | Successfully completed Entergy New Orleans storm cost audits for Hurricanes Katrina, Rita, Gustav and Ike and reached agreement with the Louisiana Public Service Commission staff on recoverable Hurricane Gustav and Ike storm costs; |
· | Issued securitized debt for Entergy Texas 2008 storm costs; |
· | Implemented storm reserve accounting at Entergy Arkansas; |
· | Settled rate actions at Entergy Mississippi (annual formula rate plan), Entergy Texas (rate case) and renewed Entergy Gulf States Louisiana and Entergy Louisiana formula rate plans for three years; |
· | Completed the Board approved and previously announced $1.5 billion and $0.5 billion stock buyback programs; |
· | Named for the eighth consecutive year to the Dow Jones Sustainability World Index, an index that tracks the performance of companies that lead their field in terms of corporate sustainability on a global basis; |
· | Recognized for corporate governance practices where in 2009, we received a 100 percent rating for corporate governance in the RiskMetrics Group’s (formerly Institutional Shareholder Services) utility rankings; and |
· | Received multiple awards and recognition, including 11th EEI Emergency Assistance Recovery Award and Platts Global Energy Awards recognizing Entergy New Orleans gas rebuild project as the Global Infrastructure Project of the Year.
|
Benefits, Perquisites, Agreements and Post-Termination Plans
· | Pension Plan, Pension Equalization Plan and System Executive Retirement Plan |
The Named Executive Officers are eligible to participate in the Pension Plan, Pension Equalization Plan and System Executive Retirement Plan. The Committee believes that these plans are an important part of the Named Executive Officers' compensation program. These plans are important in the recruitment of top talent in the competitive market, as these types of supplemental plans are typically found in companies of similar size to Entergy. These plans serve a critically important role in the retention of the senior executives, as benefits from these plans generally increase for each year that these executives remain employed by an Entergy system company. The plans thereby encourage the most senior executives to remain employed by Entergy and continue their work on behalf of Entergy’s sh areholders.
The Named Executive Officers participate in an Entergy Corporation-sponsored pension plan that covers a broad group of employees. This pension plan is a funded, tax-qualified, noncontributory defined benefit pension plan. Benefits under the pension plan are based upon an employee's years of service with an Entergy system company and the employee's average monthly rate of “Eligible Earnings” (which generally includes the employee’s salary and eligible incentive awards, other than incentive awards paid under the Executive Incentive Plan) for the highest consecutive 60 months during the 120 months preceding termination of employment. Benefits under the tax-qualified plan are payable monthly after separation from an Entergy system company.company . The amount of annual earnings that may be considered in calculating benefits under the tax-qualified pension plan is limited by federal law.
Benefits under the tax-qualified pension plan in which the Named Executive Officer participates are calculated as an annuity equal to 1.5% of a participant's Eligible Earnings multiplied by years of service. Years of service under the pension plan formula cannot exceed 40. Contributions to the pension plan are made entirely by the employer and are paid into a trust fund from which the benefits of participants will be paid.
Entergy Corporation sponsors a Pension Equalization Plan, which is available to a select group of management and highly compensated employees, including the Named Executive Officers (other than ourEntergy’s Chief Executive Officer). The Pension Equalization Plan is a non-qualified unfunded supplemental retirement plan that provides for the payment to participants from an Entergy System employer's general assets a single lump sum cash distribution upon separation from service generally equal to the actuarial present value of the difference between the amount that would have been payable as an annuity under the tax-qualified pension plan, but for Internal Revenue Code limitations on pension benefits and earnings that may be considered in calculating tax-qualified pension benefits, and the amount actually payable as an annuityannu ity under the tax-qualified pension plan. The Pension Equalization Plan also takes into account as “Eligible Earnings” any incentive awards paid under the Executive Incentive Plan.
Entergy Corporation also sponsors a System Executive Retirement Plan, which is available to the Company's approximately 60 officers, including the Named Executive Officers (other than Entergy’s Chief Executive Officer). Participation in the System Executive Retirement Plan requires individual approval by the plan administrator. An employee participating in both the System Executive Retirement Plan and the Pension Equalization Plan is eligible to receive only the greater of the two single-sum benefits computed in accordance with the terms and conditions of each plan.
Like the Pension Equalization Plan, the System Executive Retirement Plan is designed to provide for the payment to participants from an Entergy System employer’s general assets a single-sum cash distribution upon separation from service. The single-sum benefit is generally equal to the actuarial present value of a specified percentage of the participant’s “Final Average Monthly Compensation” (which is generally 1/36th of the sum of the participant's annual rate of base salary and Executive Incentive Plan award for the 3 highest years during the last 10 years preceding termination of employment), after first being reduced by the value of the participant’s tax-qualified Pension Plan benefit and typically any prior employer pension benefit available to the participant.
While the System Executive Retirement Plan has a replacement schedule from one year of service to the maximum of 30 years of service, the table below offers a sample ratio at 20 and 30 years of service.
Years of Service | Executives at Management Level 1 | Executives at Management Level 3 & above - includes the remaining 4 Named Executive Officers | Executives at Management Level 4 | Executives at Management Level 1 | Executives at Management Level 3 and above | Executives at Management Level 4 |
20 years | 55.0% | 50.0% | 45.0% | 55.0% | 50.0% | 45.0% |
30 years | 65.0% | 60.0% | 55.0% | 65.0% | 60.0% | 55.0% |
Mr. Leonard's retention agreement (as further discussed below) provides that, in lieu of his participation in the Pension Equalization Plan and the System Executive Retirement Plan, upon the termination of his employment (unless such termination is for Cause, as defined in the agreement), he will be entitled to receive a benefit equal to 60% of his Final Average Compensation (as described in the description of the System Executive Retirement Plan above) calculated as a single life annuity and payable as an actuarial equivalent lump sum. This benefit will be reduced by other benefits to which he is entitled from any Entergy Corporation-sponsored pension plan or prior employer pension plans. The terms of Mr. Leonard's Supplemental Retirement Benefit were negotiated at the time of his employment with Entergy Corporation and werewe re designed to, among other things, offset the loss of benefits resulting from Mr. Leonard's resignation from his prior employer. At the time that Entergy Corporation recruited Mr. Leonard, he had accumulated twenty-five years of seniority with his prior employer and had served as an executive officer for that employer for over ten years and in an officer-level capacity for over fifteen years.
The Committee believes that the Pension Plan, Pension Equalization Plan and System Executive Retirement Plan are an important part of the Named Executive Officers' compensation program. These plans are important in the recruitment of top talent in the competitive market, as these types of supplemental plans are typically found in companies of similar size to Entergy Corporation. These plans serve a critically important role in the retention of senior executives, as benefits from these plans generally increase for each year that these executives remain employed by an Entergy system company. The plans thereby encourage the most senior executives to remain employed within the Entergy system and continue their work on behalf of Entergy Corporation's shareholders.
The Entergy System company employer of Ms. Conley, Mr. Smith and Mr. Denault has agreed to provide service credit to each of them under either the Pension Equalization Plan or the System Executive Retirement Plan. Entergy System company employers typically offer these service credit benefits as one element of the total compensation package offered to new mid-level or senior executives that are recruited from other companies. By offering these executives "credited service," Entergy Corporation is able to compete more effectively to hire these employees by mitigating the potential loss of their pension benefits resulting from accepting employment within the Entergy system.
See the 20092010 Pension Benefits table for additional information regarding the operation of the plans described under this caption.
The Named Executive Officers are eligible to participate in an Entergy Corporation-sponsored Savings Plan that covers a broad group of employees. This is a tax-qualified retirement savings plan, wherein total combined before-tax and after-tax contributions may not exceed 30 percent of a participant's base salary up to certain contribution limits defined by law. In addition, under the Savings Plan, the participant's employer matches an amount equal to seventy cents for each dollar contributed by participating employees, including the Named Executive Officers, on the first six percent of their Earnings (as defined in the Savings Plan) for that pay period. Entergy Corporation
maintains the Savings Plan for employees of participating Entergy System companies, including the Named Executive Officers, because it wishes to encourage employees to save some percentage of their cash compensation for their eventual retirement. The Savings Plan permits employees to make such savings in a manner that is relatively tax efficient. This type of savings plan is also a critical element in attracting and retaining talent in a competitive market.
· | Executive Deferred Compensation |
The Named Executive Officers are eligible to defer up to 100% of their Executive Incentive Plan award into either or both the following into the Entergy Corporation-sponsoredEntergy-sponsored Executive Deferred Compensation Plan:
· | Executive Incentive Plan Bonus |
· | Performance Unit Program Awards |
The Named Executive Officers alsoPlan and the equity plan. In addition, they are eligible to defer up to 100% of the following paymentstheir base salary into the 2007 Equity Ownership Plan:
· | Executive Incentive Plan Bonus |
· | Performance Unit Program Awards |
Amounts deferred under the Executive Deferred Compensation PlanPlan.
Entergy provides these benefits because the Committee believes it is standard market practice to permit officers to defer the cash portion of their compensation. The Committee believes that providing this benefit is important as a retention and 2007 Equity Ownership Plan are subjectrecruitment tool as many, if not all, of the companies with which they compete for executive talent provide a similar arrangement to limitations prescribed by law and the respective plan.
Additionally, Mr. Leonard currently has deferred account balances under a frozen Defined Contribution Restoration Plan. These amounts are deemed invested in the options available under this Defined Contribution Plan. The Defined Contribution Plan, until it was frozen in 2005, credited eligible employees deferral accounts with employer contributions to the extent contributions were limited under the qualified savings plan in which the employee participated were subject to limitations imposed by the Internal Revenue Code.their senior employees.
All deferral amounts represent an unfunded liability of the employer. Amounts deferred into the 2007 Equity Ownership Planequity plan are deemed invested in phantom shares of Entergy Corporation common stock. Amounts deferred under the Executive Deferred Compensation Plan are deemed invested in one or more of the available investment options (generally mutual funds) offered under the Savings Plan. Within the Executive Deferred Compensation Plan, the Named Executive Officer may move funds from one deemed investment option to another.
The employerEntergy does not "match" amounts that are deferred by employees pursuant to the Executive Deferred Compensation Plan or 2007 Equity Ownership Plan.equity plan. With the exception of allowing for the deferral of federal and state taxes, Entergy Corporation provides no additional benefitbenefits are provided to the Named Executive Officer for deferring any of the above payments. Any increase in value of the deferred amounts results solely from the increase in value of the investment options selected (phantom Entergy Corporation common stock or mutual funds available under the Savings Plan). Deferred
Additionally, Mr. Leonard currently has deferred account balances under a frozen Defined Contribution Restoration Plan. These amounts are credited with earnings or losses based ondeemed invested in the rate of return of deemed investment options or Entergy Corporation common stock, as selected by the participants.
Entergy Corporation providesavailable under this benefit because the Committee believes it is standard market practice to permit officers to defer the cash portion of their compensation. The Executive Deferred Compensation Plan and 2007 Equity Ownership Plan permit them to do this while also receiving gains or losses on deemed investments, as described above. Entergy
Corporation believes that providing this benefit is important as a retention and recruitment tool as many, if not all, of the companies with which Entergy Corporation and the Subsidiaries compete for executive talent provide a similar arrangement to their senior employees.plan.
· | Health & Welfare Benefits |
The Named Executive Officers are eligible to participate in various health and welfare benefits available to a broad group of employees. These benefits include medical, dental and vision coverage, life and accidental death & dismemberment insurance and long-term disability insurance. Eligibility, coverage levels, potential employee contributions and other plan design features are the same for the Named Executive Officers as for the broad employee population.
· | Executive Long-Term Disability Program |
All executive officers, including the Named Executive Officers, are eligible to participate in the Entergy Corporation-sponsored Executive Long-Term Disability program. Individuals who elect to participate in this plan and become disabled under the terms of the plan are eligible for 65 percent of the difference between their base salary and $275,000 (i.e. the base salary that produces the maximum $15,000 monthly disability payment under the Entergy Corporation's general long-term disability plan).
Entergy Corporation provides the Named Executive Officers with certain perquisites and other personal benefits as part of providing a competitive executive compensation program and for employee retention. However,The Personnel Committee reviews all perquisites, are notincluding the use of corporate aircraft, on an annual basis. As a material partresult of the 2010 review, beginning in 2011, Entergy will not provide personal financial counseling, club dues for members of the Office of Chief Executive and tax gross up payments on perquisites, except for relocation. The Named Executive Officers did not receive any additional compensation program for the Named Executive Officers. lost value of these discontinued perquisites.
In 2009,2010, Entergy Corporation offered to the Named Executive Officers limited benefits such as the following: corporate aircraft usage, personal financial counseling, club dues, relocation and housing benefits and annual physical exams (which are mandatory for Entergy’s named executive officers). For security and business reasons, Entergy Corporation permits its Chief Executive Officer to use its corporate aircraft at Entergy Corporationits expense for personal use. The other Named Executive Officers may use corporate aircraft for personal travel subject to the approval of Entergy Corporation's Chief Executive Officer. The Personnel Committee reviews all perquisites, including the use of corporate aircraft, on an annual basis. For additional information regarding perquisites, see the "All Other Compensation" column in the Summary Compensation table.Table.
· | Retention Agreements and other Compensation Arrangements |
The Committee believes that retention and transitional compensation arrangements are an important part of overall compensation. The Committee believes that these arrangements help to secure the continued employment and dedication of the Named Executive Officers, notwithstanding any concern that they might have at the time of a change in control regarding their own continued employment. In addition, the Committee believes that these arrangements are important as recruitment and retention devices, as all or nearly all of the companies with which Entergy Corporation and the Subsidiaries compete for executive talent have similar arrangements in place for their senior employees.
To achieve these objectives, Entergy Corporation has established a System Executive Continuity Plan under which each of the Named Executive Officers (other than Entergy’s Chief Executive Officer and Chief Financial Officer) is entitled to receive "change in control" payments and benefits if such officer's employment is involuntarily terminatedterminated. To allow incentive payments under the Executive Incentive Plan to continue to be considered performance-based under Section 162(m), severance payments under the System Executive Continuity Plan are based on a multiple of the sum of an executive officer’s annual base salary plus his or her average Executive Incentive Plan award at target for similar qualifying eventsthe two fiscal years immediately preceding the fiscal year in which the termination of employment occurs. Under no circums tances can this multiple exceed 2.99 the sum of (a) annual base salary plus (b) the higher of: (i) the annual incentive award actually awarded to the executive office under the Executive Incentive Plan for the fiscal year immediately preceding the fiscal year in which the termination of employment occurs or circumstances. Based on(ii) the market data provided by its independent compensation consultant,average Executive Incentive Plan award for the Committee believestwo fiscal years immediately preceding the fiscal year in which the termination of employment occurs. Entergy Corporation has strived to ensure that the benefits and payment levels under the System Executive Continuity Plan are consistent with market practices. Recognizing that market practices have changed, in December 2010, in connection with its review of the compensation practices and policies, the Personnel Committee modified the System Continuity Plan to eliminate tax gross up payments on any severance benefits received under this plan.
In certain cases, the Committee may approve the execution of a retention agreement with an individual executive officer. These decisions are made on a case by case basis to reflect specific retention needs or other factors, including market practice. If a retention agreement is entered into with an individual officer, the Committee considers the economic value associated with that agreement in making overall compensation decisions for the affected officer. As mentioned above, Entergy Corporation has voluntarily adopted a policy that any severance arrangements providing benefits in excess of 2.99 times an officer's annual base salary and bonus must be approved by its shareholders.
Severance payments under the System Executive Retirement Plan are based on the sum of an executive officer’s base salary plus awards granted under the Executive Incentive Plan. Revenue Ruling 2008-13 provides that compensation will not be treated as performance-based under Section 162(m) if it is payable regardless of actual performance in the event of termination by a company without “cause,” by the executive with “good reason” or an executive’s retirement. Effective January 1, 2010, Entergy amended the System Executive Continuity Plan to allow incentive payments under the Executive Incentive Plan to continue to be considered performance-based under Section 162(m). With this amendment, severance payments will be calculated based on the sum of (a) base salary plus (b) the higher of: (i) the annual incentive award actually awarded to the executive office under the Executive Incentive Plan for the fiscal year immediately preceding the fiscal year in which the termination of employment occurs or (ii) the average Executive Incentive Plan award for the two fiscal years immediately preceding the fiscal year in which the termination of employment occurs.
At present, Entergy Corporation has entered into a retention agreementagreements with two of the Named Executive Officers, Mr. Leonard, Entergy’s Chief Executive Officer, and Mr. Denault.Denault, Entergy’s Chief Financial Officer. In general, these retention agreements provide for "change in control" payments and other benefits in lieu of to those provided under the System Executive Continuity Plan. The retention agreements entered into with Mr. Leonard and Mr. Denault reflect, among other things, the competition for chief executive officer and chief financial officer talent in the market place and the Committee's assessment of the critical role of these officers in executing Entergy Corporation's long-term financial and other strategic objectives. Effective January 1, 2010, Entergy made amendments similar to those made to the System Executive ContinuityCont inuity Plan to Mr. Denault’s and Mr. Leonard’s retention agreements to allow incentive payments under the Executive Incentive Plan to continue to be considered performance based under Section 162(m). Based on market data provided by its independent compensation consultant, the Personnel Committee believes the benefits and payment levels under these retention agreements are consistent with market practices. Again to align with best practices, in December 2010, both Mr. Leonard’s and Mr. Denault’s agreements were amended to eliminate tax gross up payments on any severance benefits they may receive under these agreements.
OnIn December 18, 2009, Entergy Corporation entered into a retention agreement with Richard J. Smith, its President, and Chief Operating Officer. ThisEntergy Wholesale Commodity Business, in order to retain his services should the Spin Transaction not occur. On April 5, 2010, Entergy Corporation announced that it would not proceed with the Spin Transaction. Under this agreement, provides for Mr. Smith’s continued employment and the payment of certain compensation to Mr. Smith in the event the planned Spin Transaction does not occur. The agreement provides that in such event, Mr. Smith will continue to beremains employed by an Entergy System Company at a management level and with a salary no less than Mr. Smith’s current management level and salary and that his duties will include, among other things, coordinating the orderly unwindingas of the preparations for the contemplated Spin Transaction.December 18, 2009. In addition, the agreement provides that Mr. Smith will beis entitled to receive a lump sum cash payment equal to 1.5 times his base salary as of the date of separation from Entergy if either he (i) he remains continuously employed in such capacity for 24 months after any publicApril 5, 2010 (the date of the publ ic announcement that the Spin Transaction will not occuroccur) or (ii) he remains continuously employed in such capacity for at least six (6) months after any such public announcementApril 5, 2010 and thereafter retires with the consent of Entergy’s Chief Executive Officer prior to reaching such 24 months of service. Entergy entered into this agreement with Mr. Smith in light of Mr. Smith’s leadership role in the preparations for the Spin Transaction and the critical role that Mr. Smith would have in dismantling these preparations shouldif the Spin Transaction did not occur. In determining the type and size of the amount of payment under this agreement, the Personnel Committee consulted with its independent compensation consultant to confirm that the economic value of this arrangement was consistent with market practices.
For additional information regarding the System Executive Continuity Plan and Mr. Leonard’s and Mr. Denault’sthe retention agreementagreements described above, see "Potential Payments upon Termination or Change in Control."
Compensation Program Administration
Executive Compensation Governance
Entergy Corporation periodically reviews the compensation philosophy and makes adjustments that are believed to be in the in best interest of Entergy and its shareholders. Some of the actions taken include the following:
| 1. | Entergy’s ultimate objective is to deliver long-term value to shareholders as well as other stakeholders such as customers and employees. Entergy continually reviews and adjusts the pay programs so that the primary focus is on long-term success. Executives understand that successful long-term decision making will allow them to be paid their target compensation. Short term decisions that impair the long term value will reduce an executive’s compensation over the long term. To further this objective, in 2011, Entergy increased the portion of long-term compensation that will be derived from performance units from 50% to 60% and decreased the portion that will be derived from other equity awards to 40%. Entergy added restricted stock awards to the long-term compensation program because it believes the use of restricted stock enhances retention, mitig ates the burn rate and assists in building ownership of its common stock. |
| 2. | The Entergy Board of Directors adopted the Entergy Corporation Policy Regarding Recoupment of Certain Compensation in December 2010. This policy covers executive officers who are subject to Section 16 of the Exchange Act. Under the policy, the Committee will require reimbursement of incentives paid these executives where: |
· | the payment was predicated upon the achievement of certain financial results with respect to the applicable performance period that were subsequently the subject of a material restatement other than a restatement due to changes in accounting policy or a material miscalculation of a performance award occurs whether or not the financial statements were restated; |
· | in the Board of Directors’ view, the elected officer engaged in fraud that caused or partially caused the need for the restatement or caused a material miscalculation of a performance award whether or not the financial statements were restated; and |
· | a lower payment would have been made to the elected officer based upon the restated financial results or miscalculation. |
The amount the Committee requires to be reimbursed is equal to the excess of the gross incentive payment made over the gross payment that would have been made if the original payment had been determined based on the restated financial results or correct calculation. Further, following a material restatement of its financial statements, Entergy Corporation will seek to recover any compensation received by the Chief Executive Officer and Chief Financial Officer that is required to be reimbursed under Section 304 of the Sarbanes-Oxley Act of 2002
| 3. | The Committee has formalized the timing and process for reviewing the executive compensation consultant services and fees. Annually, the Committee reviews the relationship with its compensation consultant including services provided, quality of those services and fees associated with services during the fiscal year to ensure executive compensation consultant independence is maintained. To ensure the independence of the Committee’s compensation consultant, in January 2011, Entergy’s Board adopted a policy that any consultant (including its affiliates) retained by the Board of Directors or any Committee of the Board of Directors to provide advice or recommendations on the amount or form of executive and director compensation should not be retained by Entergy Corporation or any of its affiliates to provide other services in an aggregate amount that exceeds $120,000 in any fiscal ye ar. |
| 4. | In 2010, Entergy also adopted an anti-hedging policy which prohibits officers, directors and employees from entering into hedging or monetization transactions involving Entergy Corporation common stock. Prohibited transactions include, without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivatives that are directly linked to the Entergy’s stock or transactions involving “short-sales” of Entergy’s stock. The Entergy Board adopted this policy to require officers, directors and employees to continue to own Entergy Corporation common stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with Entergy’s other shareholders. |
Reviewing the Executive Compensation Programs and Establishing Compensation Levels.
Role of Personnel Committee
The Personnel Committee has overall responsibility for approving the compensation program for the Named Executive Officers and makes all final compensation decisions regarding Entergy Corporation'sEntergy’s named executive officers. The Committee works with the executive management to ensure that the compensation policies and practices are consistent with Entergy’s values and support the successful recruitment, development and retention of executive talent so it can achieve the business objectives and optimize the long-term financial returns. The Committee evaluates executive pay each year to ensure that the compensation policies and practices are consistent with Entergy’s philosophy. The Personnel Committee is responsible for, among its other duties, the following actions related to Entergy Corporation's named executive officers:
· | developing and implementing compensation policies and programs for the executive officers, including any employment agreement with an executive officer; |
· | evaluating the performance of Entergy Corporation's Chairman and Chief Executive Officer; and |
· | reporting, at least annually, to the Board on succession planning, including succession planning for Entergy Corporation's Chief Executive Officer. |
The Personnel Committee has authorized, in limited circumstances, the delegation of its authority to grant stock options under Entergy plans to Entergy Corporation's Chairman and Chief Executive Officer and Senior Vice President of Human Resources and Administration subject to the following conditions:
· | No grant may exceed an aggregate value of $1 million per grantee; |
· | All awards must be issued in accordance with the terms of Entergy Corporation's plans, including the requirement that all options be issued for an exercise price not less than the fair market value of the stock on date the option is granted; |
· | No awards may be granted to any employee of Entergy Corporation subject to Section 16 of the Securities Exchange Act of 1934; and |
· | The Personnel Committee must be advised on at least a quarterly basis of the grants made under the exercise of this delegated authority. |
Certain aspects of the compensation of officers who are not Entergy named executive officers, Mr. Bunting, Ms. Conley, Mr. Domino, Mr. Fisackerly, Mr. McDonald, Mr. Mohl and Mr. McDonaldRice are not directly determined by the Personnel Committee. While the Committee does determine the number of performance units to be granted to these Named Executive Officers, the Committee does not determine the actual annual incentive target for these Named Executive Officers. Rather, the Committee establishes an overall available annual incentive pool for these officers and establishes the specific goal targets and ranges, the officers’ respective supervisor determines the actual incentive payment, in each case, subject to the ultimate approval of Entergy’s Chief Executive Officer. Further, Entergy’s Chief Executive Officer and the officer’s supervisor have ultimate responsibility for adjusting the salary of these Named Executive Officers as deemed appropriate. The officer’s supervisor and Entergy’s Chief Executive Officer also determine how many stock option awards are to be allocated to the Named Executive Officers from an available pool established by the Personnel Committee for similarly situated officers, though the Personnel Committee ultimately approves the options granted.
Role of Chief Executive Officer
The Personnel Committee solicits recommendations from Mr. Leonard, Entergy Corporation's Chief Executive Officer, with respect to compensation decisions for Mr. Denault and Mr. Smith. Mr. Leonard'sThe Personnel Committee also relies on the recommendations of the senior human resources executives with respect to compensation decisions, policies and practices. Entergy’s Chief Executive Officer’s role is limited to:
· | providing the Committee with an assessment of the performance of Mr. Denault and Mr. Smith; and |
· | recommending base salary, annual merit increases, stock option, restricted stock and annual cash incentive plan compensation amounts for these officers. |
In addition, the Committee may request that Mr. Leonard provide management feedback and recommendations on changes in the design of compensation programs, such as special retention plans or changes in structure of bonus programs. Mr. Leonard does not play any role with respect to any matter affecting his own compensation nor does he have any role determining or recommending the amount, or form, of director compensation.
As noted above, under “Role of Personnel Committee,” Mr. Leonard also plays a role in determining the Subsidiary Named Executive Officers’ base salary, their annual incentive target and the number of stock options they receive.
Mr. Leonard may attend committee meetings of the Personnel Committee only at the invitation of the chair of the Personnel Committee and cannot call a meeting of the Committee. However, he is not in attendance at any meeting when the Committee determines and approves the compensation to be paid to the Named Executive Officers. Since he is not a member of the Committee, he has no vote on matters submitted to the Committee. During 2009,2010, Mr. Leonard attended five6 meetings of the Personnel Committee.
In 2009, the Committee's compensation consultant met at the request of the Personnel Committee with Mr. Leonard to review market trends in executive and management compensation and to discuss Entergy Corporation and its Subsidiaries’ overall compensation philosophy, such as the optimum balance between base and incentive compensation. In addition, the Committee requested that its independent compensation consultant interview Mr. Leonard to obtain management feedback on the impact of compensation programs on employees and information regarding the roles and responsibilities of the Named Executive Officers.
Role of the Compensation Consultant
In dischargingThe Personnel Committee has the sole authority from the Entergy Board of Directors for the appointment, compensation and oversight of its duties,outside compensation consultant. Prior to the engagement of Pay Governance LLC, the Committee’s current independent compensation consultant, in October 2010, the Personnel Committee has retained Towers Watson formerly Towers Perrin, as its independent compensation consultant to assist it in, among other things, evaluating different compensation programs and developing market data to assess the compensation programs. Under the terms of its engagement, Towers Watson reportsreported directly to the Personnel Committee, which hashad the right to retain or dismiss the consultant without the consent of Entergy Corporation'sEntergy’s management. In addition, the consent of the Personnel Committee mustwas required to be obtainedobta ined before Towers Watson cancould accept any material engagements from Entergy Corporation’srecommended by Entergy’s management.
In considering the appointment of Towers Watson, the Personnel Committee took into account that Towers Watson providesprovided from time to time general consulting services to Entergy Corporation'sEntergy’s management with respect to non-executive compensation matters. In this connection the Committee reviewed the fees and compensation received by Towers Watson for these services over a historical period. After considering the nature and scope of these engagements and the fee arrangements involved, the Personnel Committee determined that the engagements did not create a conflict of interest. The Committee reviewssubsequently reviewed on an ongoing basis the fees and compensation received by Towers Watson for non-executive compensation matters on an annual basis to monitor its independence.
During the first nine months of 2010, the Committee retained the consulting firm of Towers Watson as its consultant to assist the Committee with its responsibilities related to the Entergy Corporation’s compensation programs for its executives. Specifically, the Committee directed Towers Watson to: (i) regularly attend meetings of the Committee, (ii) conduct studies of competitive compensation practices, (iii) identify Entergy’s survey and proxy peer group, (iv) review base salary, annual incentives and long-term incentive compensation opportunities relative to competitive practices, and (v) develop conclusions and recommendations related to the executive compensation plan of Entergy for consideration by the Committee. A senior consultant from Towers Watson generally attended most Personnel Commi ttee meetings. In 2009,its role as advisor to the Committee, Towers Watson presented annual reports to the committee on executive and director compensation. In 2010, Entergy incurred in the aggregate fees of $234,668$259,286 from Towers Watson for determining or recommending the amount or form of executive and director compensation and $1,363,128$946,326 for otherothers services, $1,141,054$877,331 of which was for services related to the Spin Transaction.
Pay Governance LLC was engaged by the Committee as its executive compensation consultant for the remainder of 2010. Pay Governance is not affiliated with Towers Watson. Pay Governance reviewed Entergy’s compensation practices and made recommendations regarding its 2011 executive compensation program. Pay Governance did not provide any other services to Entergy.
Tax and Accounting Considerations
Section 162(m) of the Internal Revenue Code limits the tax deductibility by a publicly held corporation of compensation in excess of $1 million paid to a Chief Executive Officer or any of its other Named Executive Officers (other than the chief financial officer), unless that compensation is "performance-based compensation" within the meaning of Section 162(m). The Personnel Committee considers deductibility under Section 162(m) as it structures the compensation packages that are provided to Entergy’s Named Executive Officers. However, the Personnel Committee and the Board believe that it is in the best interest of Entergy Corporation that the Personnel Committee retains the flexibility and discretion to make compensation awards, whether or not deductible. This flexibility is necessary to foster achievement of performance goals established by the Personnel Committee as well as other corporate goals that the Committee deems important to Entergy Corporation and the Subsidiaries' success, such as encouraging employee retention and rewarding achievement.
Likewise, the Personnel Committee considers financial accounting consequences as it structures the compensation packages that are provided to Entergy’s Named Executive Officers. However, the Personnel Committee and the Entergy Board of Directors believe that it is in the best interest of Entergy that the Personnel Committee retains the flexibility and discretion to make compensation awards regardless of their financial accounting consequences.
PERSONNEL COMMITTEE REPORT
The "Personnel Committee Report" included in the Entergy Corporation Proxy Statement is incorporated by reference, but will not be deemed to be "filed" in this Annual Report on Form 10-K. None of the Subsidiaries has a compensation committee, or other board committee performing equivalent functions. The board of directors of each of the Subsidiaries is comprised of individuals who are officers or employees of Entergy Corporation or one of the Subsidiaries. These boards do not make determinations regarding the compensation paid to executive officers of the Subsidiaries.
EXECUTIVE COMPENSATION TABLES
20092010 Summary Compensation Table
The following table summarizes the total compensation paid or earned by each of the Named Executive Officers for the fiscal years ended December 31, 2010, 2009 2008 and 2007.2008. For information on the principal positions held by each of the Named Executive Officers, see Item 10, "Directors“Directors and Executive Officers of the Registrants."” The compensation set forth in the table represents the aggregate compensation paid by all Entergy System companies. None of the Entergy System companies has entered into any employment agreements with any of the Named Executive Officers (other than the retention agreements described in "Potential“Potential Payments upon Termination or Change in Control"Control”). For additional information regarding the material terms of the awards reported in the following tables, including a general description of the formula or criteria to be applied in determining the amounts payable, see "Compensation“Compensation Discussion and Analysis."”
(a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
Name and Principal Position | | Year | | Salary (1) | | Bonus (2) | | Stock Awards (3) | | Option Awards (4) | | Non-Equity Incentive Plan Compensation (5) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings (6) | | All Other Compensation (7) | | Total | | Year | | Salary (1) | | Bonus (2) | | Stock Awards (3) | | Option Awards (4) | | Non-Equity Incentive Plan Compensation (5) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings (6) | | All Other Compensation (7) | | Total |
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Theodore H. Bunting, Jr. | | 2009 | | $361,388 | | $ - | | $155,060 | | $143,280 | | $335,000 | | $535,700 | | $23,065 | | $1,553,493 | | 2010 | | $350,448 | | $ - | | $237,864 | | $194,155 | | $525,000 | | $392,300 | | $22,609 | | $1,722,376 |
Acting principal financial | | 2008 | | $336,948 | | $ - | | $151,480 | | $289,350 | | $400,023 | | $225,000 | | $61,294 | | $1,464,095 | | 2009 | | $361,388 | | $ - | | $174,380 | | $143,280 | | $335,000 | | $535,700 | | $23,065 | | $1,572,813 |
officer – Entergy Arkansas, | | | | | | | | | | | | | | | | | | | | 2008 | | $336,948 | | $ - | | $201,964 | | $289,350 | | $400,023 | | $225,000 | | $61,294 | | $1,514,579 |
Entergy Gulf States Louisiana, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Entergy Louisiana, Entergy | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mississippi, Entergy New | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Orleans, Entergy Texas | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E. Renae Conley | | 2009 | | $423,360 | | $15,000 | | $155,060 | | $149,250 | | $307,000 | | $406,000 | | $42,899 | | $1,498,569 | | 2010 | | $417,006 | | $ - | | $237,864 | | $170,053 | | $438,600 | | $313,100 | | $62,871 | | $1,639,494 |
CEO-Entergy Louisiana and | | 2008 | | $403,096 | | $ - | | $151,480 | | $250,770 | | $415,000 | | $107,700 | | $90,525 | | $1,418,571 | |
CEO-Entergy Gulf States | | 2007 | | $388,250 | | $ - | | $192,822 | | $314,500 | | $320,000 | | $276,700 | | $79,392 | | $1,571,664 | |
Louisiana | | | | | | | | | | | | | | | | | | | |
Former CEO-Entergy Louisiana | | | 2009 | | $423,360 | | $15,000 | | $174,380 | | $149,250 | | $307,000 | | $406,000 | | $42,899 | | $1,517,889 |
and Former CEO-Entergy Gulf | | | 2008 | | $403,096 | | $ - | | $201,964 | | $250,770 | | $415,000 | | $107,700 | | $90,525 | | $1,469,055 |
States Louisiana | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Leo P. Denault | | 2009 | | $654,231 | | $ - | | $372,144 | | $537,300 | | $507,150 | | $837,200 | | $60,688 | | $2,968,713 | | 2010 | | $630,000 | | $ - | | $573,036 | | $669,500 | | $758,520 | | $528,600 | | $52,276 | | $3,211,932 |
Executive Vice President and | | 2008 | | $621,231 | | $ - | | $2,973,900 | | $803,750 | | $617,400 | | $250,500 | | $150,285 | | $5,417,066 | | 2009 | | $654,231 | | $ - | | $418,512 | | $537,300 | | $507,150 | | $837,200 | | $60,688 | | $3,015,081 |
CFO – Entergy Corp. | | 2007 | | $584,422 | | $ - | | $413,190 | | $943,500 | | $516,600 | | $535,000 | | $128,933 | | $3,121,645 | | 2008 | | $621,231 | | $ - | | $3,114,534 | | $803,750 | | $617,400 | | $250,500 | | $150,285 | | $5,557,700 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Joseph F. Domino | | 2009 | | $329,976 | | $10,000 | | $69,777 | | $53,730 | | $111,373 | | $322,100 | | $45,396 | | $942,352 | | 2010 | | $317,754 | | $ - | | $108,120 | | $61,594 | | $317,754 | | $224,500 | | $33,476 | | $1,063,198 |
CEO - Entergy Texas | | 2008 | | $314,610 | | $ - | | $75,740 | | $112,525 | | $230,000 | | $92,800 | | $62,873 | | $888,548 | | 2009 | | $329,976 | | $10,000 | | $78,471 | | $53,730 | | $111,373 | | $322,100 | | $45,396 | | $951,046 |
| | 2007 | | $304,122 | | $ - | | $91,820 | | $188,700 | | $135,000 | | $515,900 | | $62,089 | | $1,297,631 | | 2008 | | $314,610 | | $ - | | $100,982 | | $112,525 | | $230,000 | | $92,800 | | $62,873 | | $913,790 |
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Haley R. Fisackerly | | 2009 | | $274,999 | | $8,250 | | $69,777 | | $45,372 | | $138,000 | | $168,300 | | $35,675 | | $740,373 | | 2010 | | $274,999 | | $ - | | $108,120 | | $120,510 | | $192,500 | | $190,000 | | $39,370 | | $925,499 |
CEO – Entergy Mississippi | | 2008 | | $248,346 | | $41,000 | | $63,081 | | $64,550 | | $125,700 | | $143,500 | | $14,531 | | $700,708 | | 2009 | | $274,999 | | $8,250 | | $78,471 | | $45,372 | | $138,000 | | $168,300 | | $35,675 | | $749,067 |
| | | | | | | | | | | | | | | | | | | | 2008 | | $248,346 | | $41,000 | | $84,104 | | $64,550 | | $125,700 | | $143,500 | | $14,531 | | $721,731 |
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J. Wayne Leonard | | | 2010 | | $1,291,500 | | $ - | | $2,411,076 | | $1,807,650 | | $2,665,656 | | $ - | | $104,185 | | $8,280,067 |
Chairman of the Board and | | | 2009 | | $1,341,174 | | $ - | | $10,067,775 | | $1,492,500 | | $1,782,270 | | $499,800 | | $200,040 | | $15,383,559 |
CEO - Entergy Corp. | | | 2008 | | $1,273,523 | | $ - | | $2,380,290 | | $2,813,125 | | $2,169,720 | | $313,200 | | $759,739 | | $9,709,597 |
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Hugh T. McDonald | | | 2010 | | $322,132 | | $ - | | $108,120 | | $61,594 | | $297,972 | | $205,000 | | $54,990 | | $1,049,808 |
CEO-Entergy Arkansas | | | 2009 | | $324,610 | | $10,000 | | $78,471 | | $53,730 | | $128,066 | | $252,500 | | $67,221 | | $914,598 |
| | | 2008 | | $319,286 | | $ - | | $100,982 | | $112,525 | | $160,500 | | $42,700 | | $74,830 | | $810,823 |
(a) | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
Name and Principal Position | Year | | Salary (1) | | Bonus (2) | | Stock Awards (3) | | Option Awards (4) | | Non-Equity Incentive Plan Compensation (5) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings (6) | | All Other Compensation (7) | | Total |
| | | | | | | | | | | | | | | | | |
J. Wayne Leonard | 2009 | | $1,341,174 | | $ - | | $9,850,425 | | $1,492,500 | | $1,782,270 | | $499,800 | | $200,040 | | $15,166,209 |
Chairman of the Board and | 2008 | | $1,273,523 | | $ - | | $1,785,300 | | $2,813,125 | | $2,169,720 | | $313,200 | | $759,739 | | $9,114,607 |
CEO - Entergy Corp. | 2007 | | $1,216,443 | | $ - | | $2,185,316 | | $4,009,875 | | $1,815,480 | | $4,879,200 | | $613,661 | | $14,719,975 |
| | | | | | | | | | | | | | | | | |
Hugh T. McDonald | 2009 | | $324,610 | | $10,000 | | $69,777 | | $53,730 | | $128,066 | | $252,500 | | $67,221 | | $905,904 |
CEO-Entergy Arkansas | 2008 | | $319,286 | | $ - | | $75,740 | | $112,525 | | $160,500 | | $42,700 | | $74,830 | | $785,581 |
| 2007 | | $309,088 | | $ - | | $91,820 | | $188,700 | | $120,000 | | $182,800 | | $61,851 | | $954,259 |
| | | | | | | | | | | | | | | | | |
Richard J. Smith | 2009 | | $669,807 | | $ - | | $372,144 | | $417,900 | | $519,225 | | $755,900 | | $140,779 | | $2,875,755 |
President and Chief Operating | 2008 | | $638,394 | | $ - | | $421,980 | | $562,625 | | $632,100 | | $391,400 | | $220,708 | | $2,867,207 |
Officer - Entergy Corp. | 2007 | | $599,612 | | $ - | | $413,190 | | $943,500 | | $535,886 | | $743,700 | | $153,733 | | $3,389,621 |
| | | | | | | | | | | | | | | | | |
Roderick K. West | 2009 | | $327,115 | | $15,000 | | $69,777 | | $59,700 | | $158,000 | | $191,200 | | $40,883 | | $861,675 |
CEO-Entergy New Orleans | 2008 | | $300,474 | | $ - | | $1,755,590 | | $128,600 | | $252,000 | | $164,200 | | $54,465 | | $2,655,329 |
| 2007 | | $270,752 | | $ - | | $91,820 | | $188,700 | | $155,000 | | $16,800 | | $43,543 | | $766,615 |
(a) | | (b) | | (c) | | (d) | | (e) | | (f) | | (g) | | (h) | | (i) | | (j) |
Name and Principal Position | | Year | | Salary (1) | | Bonus (2) | | Stock Awards (3) | | Option Awards (4) | | Non-Equity Incentive Plan Compensation (5) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings (6) | | All Other Compensation (7) | | Total |
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William M. Mohl | | 2010 | | $299,193 | | $ - | | $216,240 | | $120,510 | | $380,250 | | $166,718 | | $148,767 | | $1,331,678 |
CEO-Entergy Louisiana and | | | | | | | | | | | | | | | | | | |
CEO-Entergy Gulf States | | | | | | | | | | | | | | | | | | |
Louisiana | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Charles L. Rice, Jr. | | 2010 | | $203,879 | | $9,962 | | $90,064 | | $ - | | $192,000 | | $30,944 | | $18,708 | | $545,557 |
CEO-Entergy New Orleans | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Richard J. Smith | | 2010 | | $645,000 | | $ - | | $573,036 | | $535,600 | | $776,580 | | $607,000 | | $242,032 | | $3,379,248 |
President, Entergy Wholesale | | 2009 | | $669,807 | | $ - | | $418,512 | | $417,900 | | $519,225 | | $755,900 | | $140,779 | | $2,922,123 |
Commodity Business | | 2008 | | $638,394 | | $ - | | $562,614 | | $562,625 | | $632,100 | | $391,400 | | $220,708 | | $3,007,841 |
| | | | | | | | | | | | | | | | | | |
Roderick K. West | | 2010 | | $441,539 | | $ - | | $495,514 | | $93,730 | | $662,200 | | $207,000 | | $46,915 | | $1,946,898 |
Former CEO-Entergy | | 2009 | | $327,115 | | $15,000 | | $78,471 | | $59,700 | | $158,000 | | $191,200 | | $40,883 | | $870,369 |
New Orleans | | 2008 | | $300,474 | | $ - | | $1,780,832 | | $128,600 | | $252,000 | | $164,200 | | $54,465 | | $2,680,571 |
(1) | The amounts in column (c) represent the actual base salary paid to the Named Executive Officer. Changes in base salary were effective in April of the years shown and the base salary disclosed above is a combination of the two rates in effect during the year. The Named Executive Officers are paid on a bi-weekly basis and there was an extra pay period during calendar year 2009. |
(2) | The amountsamount in column (d) for 2009 reflect2010 for Mr. Rice represents his cash payment received under the cash bonuses paid toOperational Incentive Plan. In 2009, Ms. Conley, Mr. Domino, Mr. Fisackerly, Mr. McDonald and Mr. West received a cash bonus in lieu of an increase in their base salary. In 2008, Mr. Fisackerly received a cash bonus to compensate him for his discontinued participation in the Nuclear Retention Plan. |
(3) | The amounts in column (e) represent the aggregate grant date fair value of performance units granted under the 2009 – 2011 Performance Unit Program of the 2007 Equity Ownership Plan calculated in accordance with accounting standards. For Mr. Leonard, it also includes theFASB ASC Topic 718, without taking into account estimated forfeitures. The grant date fair value of restrictedperformance units granted to him in December 2009 calculated in accordance with accounting standards. The amounts included in column (e) for the 2009 – 2011 Plan are calculatedis based on the probable satisfactionoutcome of the applicable performance conditions.conditions, measured using a Monte Carlo simulation valuation model. The simulation model applies a risk-free interest rate and an expected volatility assumption. The risk-free rate is assumed to equal the yield on a three-year treasury bond on the grant date. Volatility is based on historical volatility for the 36-month period preceding the grant date. If the highest achievement level of performance is achieved,attained, the maximummax imum amounts that will be received under the planwith respect to these performance units are as follows: Mr. Bunting, $387,650;$424,050; Ms. Conley, $387,650;$424,050; Mr. Denault, $930,360;$1,021,575; Mr. Domino, $174,443;$192,750; Mr. Fisackerly, $174,443;$192,750; Mr. Leonard, $4,361,063;$4,298,325; Mr. McDonald, $174,443;$192,750; Mr. Mohl, $385,500; Mr. Rice, $160,599; Mr. Smith, $930,360;$1,021,575; and Mr. West, $174,443. For$883,412. Amounts shown in this column for 2008 and 2009 vary from amounts shown in prior years due to a discussion ofchange in the relevant assumptionsmethod used in valuing these awards, see Note 12 to value performance units. Amounts presented for those prior years have been recalculated using the Financial Statements.valuation method currently used. |
(4) | The amounts in column (f) represent the aggregate grant date fair value of stock options granted under the 2007 Equity Ownership Plan calculated in accordance with accounting standards.FASB ASC Topic 718. For a discussion of the relevant assumptions used in valuing these awards, see Note 12 to the Financial Statements. |
(5) | The amounts in column (g) represent cash payments made under the Executive Incentive Plan. |
(6) | The amounts in column (h) include the annual actuarial increase in the present value of the Named Executive Officer'sOfficer’s benefits under all pension plans established by Entergy Corporation using interest rate and mortality rate assumptions consistent with those used in Entergy Corporation'sCorporation’s financial statements and includes amounts which the Named Executive Officers may not currently be entitled to receive because such amounts are not vested (see “2009“2010 Pension Benefits”). None of the increase is attributable to above-market or preferential earnings on nonqualifiednon-qualified deferred compensation (see “2009 Nonqualified“2010 Non-qualified Deferred Compensation”). For 2010 the aggregate change in the actuarial present value of Mr. Leonard’s pension benefits was a decrease of $539,200. |
(7) | The amounts set forth in column (i) for 20092010 include (a) matching contributions by Entergy Corporation to each of the Named Executive Officers; (b) life insurance premiums; (c) tax gross up payments relating to perquisites; (d) dividends paid on stock awards and (e) perquisites and other compensation. The amounts are listed in the following table: |
Named Executive Officer | Company Contribution – Savings Plan | Life Insurance Premium | Tax Gross Up Payments | Dividends Paid on Stock Awards | Perquisites and Other Compensation | Total | Company Contribution – Savings Plan | Life Insurance Premium | Tax Gross Up Payments | Perquisites and Other Compensation | Total |
Theodore H. Bunting, Jr. | $9,750 | $3,708 | $768 | $8,839 | $ - | $23,065 | $10,830 | $3,732 | $ - | $8,047 | $22,609 |
Renae E. Conley | $10,054 | $988 | $7,021 | $10,230 | $14,606 | $42,899 | $10,526 | $1,012 | $14,110 | $37,223 | $62,871 |
Leo P. Denault | $9,750 | $3,944 | $9,212 | $22,015 | $15,767 | $60,688 | $10,403 | $4,002 | $10,453 | $27,418 | $52,276 |
Joseph F. Domino | $9,750 | $5,900 | $8,886 | $4,910 | $15,950 | $45,396 | $10,830 | $5,900 | $6,285 | $10,461 | $33,476 |
Haley R. Fisackerly | $7,377 | $270 | $10,138 | $2,455 | $15,435 | $35,675 | $6,884 | $405 | $12,529 | $19,552 | $39,370 |
J. Wayne Leonard | $9,750 | $7,482 | $15,871 | $116,376 | $50,561 | $200,040 | $10,830 | $11,484 | $25,739 | $56,132 | $104,185 |
Hugh T. McDonald | $8,226 | $3,420 | $22,014 | $4,910 | $28,651 | $67,221 | $7,898 | $3,420 | $14,517 | $29,155 | $54,990 |
William M. Mohl | | $10,290 | $3,142 | $34,546 | $100,789 | $148,767 |
Charles L. Rice, Jr. | | $8,175 | $2,619 | $2,421 | $5,493 | $18,708 |
Richard J. Smith | $9,750 | $3,070 | $49,656 | $22,015 | $56,288 | $140,779 | $10,830 | $3,070 | $130,221 | $97,911 | $242,032 |
Roderick K. West | $10,290 | $696 | $11,201 | $4,910 | $13,786 | $40,883 | $10,290 | $978 | $7,463 | $28,184 | $46,915 |
Perquisites and Other Compensation
The amounts set forth in column (i) include perquisites and other personal benefits that Entergy Corporation provides to the Named Executive Officers as part of providing a competitive executive compensation program and for employee retention. The following perquisites and other compensation were provided by Entergy Corporation in 20092010 to the Named Executive Officers:
Named Executive Officer | Financial Counseling | Club Dues | Personal Use of Corporate Aircraft | Relocation | Executive Physicals |
Theodore H. Bunting, Jr. | | | x | | |
E. Renae Conley | x | | x | x | x |
Leo P. Denault | x | | x | | x |
Joseph F. Domino | x | x | | | x |
Haley R. Fisackerly | x | x | | | |
J. Wayne Leonard | x | | x | | x |
Hugh T. McDonald | x | x | | | x |
William M. Mohl | x | | | x | |
Charles L. Rice, Jr. | | x | | | |
Richard J. Smith | x | | x | x | x |
Roderick K West | x | x | x | | x |
For security and business reasons, Entergy Corporation permits Mr. Leonard to use its corporate aircraft for personal use at the expense of Entergy Corporation. The other Named Executive Officers may use the corporate aircraft for personal travel subject to the approval of Entergy Corporation'sCorporation’s Chief Executive Officer. The aggregate incremental aircraft usage cost associated with Mr. Leonard'sLeonard’s personal use of the corporate aircraft, including the costs associated with travel to outside board meetings, was $26,869$30,381 for fiscal year 2009.2010. These amounts are reflected in column (i) and the total above. The incremental cost to Entergy Corporation for use of the corporate aircraft is based on the variable operational costs of each flight, including fuel, maintenance, flight crewcr ew travel expense, catering, communications and fees, including flight planning, ground handling and landing permits.
In addition, in accordance with Entergy Corporation’s relocation policies, Entergy Corporation paid to relocate Ms. Conley, Mr. Mohl and Mr. Smith. The cost of their relocations was as follows: $21,301 for Ms. Conley; $90,086 for Mr. Mohl and $71,944 for Mr. Smith. These amounts reflect payments made to the relocation service provider and temporary living expenses.
None of the other individual perquisites items exceeded $25,000 for any of the Named Executive Officers.
Beginning in 2011, Entergy Corporation will not provide personal financial counseling, club dues for the members of the Office of Chief Executive or tax gross up payments on any perquisites, except for relocation. Entergy Corporation did not replace the value of these discontinued perquisites in the executive’s compensation.
20092010 Grants of Plan-Based Awards
The following table summarizes award grants during 20092010 to the Named Executive Officers.
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | | | | | | | |
Name (a) | | Grant Date (b) | | Thresh-old ($) (c) | | Target ($) (d) | | Maximum ($) (e) | | Threshold (#) (f) | | Target (#) (g) | | Maximum (#) (h) | | All Other Stock Awards: Number of Shares of Stock or Units (#) (3) (i) | | All Other Option Awards: Number of Securities Under-lying Options (#) (4) (j) | | Exercise or Base Price of Option Awards ($/Sh) (k) | | Grant Date Fair Value of Stock and Option Awards (5) (l) | |
(a) Name | | | (b) Grant Date | | (c) Thresh- old ($) | | (d) Target ($) | | (e) Maximum ($) | | (f) Threshold (#) | | (g) Target (#) | | (h) Maximum (#) | | (i) All Other Stock Awards: Number of Shares of Stock or Units (#) | | (j) All Other Option Awards: Number of Securities Under- lying Options (#) (3) | | (k) Exercise or Base Price of Option Awards ($/Sh) | | (l) Grant Date Fair Value of Stock and Option Awards (4) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Theodore H. Bunting, Jr. | | 1/29/09 | | - | | $210,268 | | $420,536 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $210,268 | | $420,536 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 200 | | 2,000 | | 5,000 | | | | | | | | $387,650 | | 1/28/10 | | | | | | | | 220 | | 2,200 | | 5,500 | | | | | | | | $237,864 |
| | 1/29/09 | | | | | | | | | | | | | | | | 12,000 | | $77.53 | | $143,280 | | 1/28/10 | | | | | | | | | | | | | | | | 14,500 | | $77.10 | | $194,155 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E. Renae Conley | | 1/29/09 | | - | | $244,608 | | $489,216 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $255,000 | | $510,000 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 200 | | 2,000 | | 5,000 | | | | | | | | $387,650 | | 1/28/10 | | | | | | | | 220 | | 2,200 | | 5,500 | | | | | | | | $237,864 |
| | 1/29/09 | | | | | | | | | | | | | | | | 12,500 | | $77.53 | | $149,250 | | 1/28/10 | | | | | | | | | | | | | | | | 12,700 | | $77.10 | | $170,053 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Leo P. Denault | | 1/29/09 | | - | | $441,000 | | $882,000 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $441,000 | | $882,000 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 480 | | 4,800 | | 12,000 | | | | | | | | $930,360 | | 1/28/10 | | | | | | | | 530 | | 5,300 | | 13,250 | | | | | | | | $573,036 |
| | 1/29/09 | | | | | | | | | | | | | | | | 45,000 | | $77.53 | | $537,300 | | 1/28/10 | | | | | | | | | | | | | | | | 50,000 | | $77.10 | | $669,500 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Joseph F. Domino | | 1/29/09 | | - | | $158,877 | | $317,754 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $158,877 | | $317,754 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 90 | | 900 | | 2,250 | | | | | | | | $174,443 | | 1/28/10 | | | | | | | | 100 | | 1,000 | | 2,500 | | | | | | | | $108,120 |
| | 1/29/09 | | | | | | | | | | | | | | | | 4,500 | | $77.53 | | $53,730 | | 1/28/10 | | | | | | | | | | | | | | | | 4,600 | | $77.10 | | $61,594 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Haley R. Fisackerly | | 1/29/09 | | - | | $110,000 | | $220,000 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $110,000 | | $220,000 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 90 | | 900 | | 2,250 | | | | | | | | $174,443 | | 1/28/10 | | | | | | | | 100 | | 1,000 | | 2,500 | | | | | | | | $108,120 |
| | 1/29/09 | | | | | | | | | | | | | | | | 3,800 | | $77.53 | | $45,372 | | 1/28/10 | | | | | | | | | | | | | | | | 9,000 | | $77.10 | | $120,510 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
J. Wayne Leonard | | 1/29/09 | | - | | $1,549,800 | | $3,099,600 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $1,549,800 | | $3,099,600 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 2,250 | | 22,500 | | 56,250 | | | | | | | | $4,361,063 | | 1/28/10 | | | | | | | | 2,230 | | 22,300 | | 55,750 | | | | | | | | $2,411,076 |
| | 1/29/09 | | | | | | | | | | | | | | | | 125,000 | | $77.53 | | $1,492,500 | | 1/28/10 | | | | | | | | | | | | | | | | 135,000 | | $77.10 | | $1,807,650 |
| | 12/3/09 | | | | | | | | | | | | | | 100,000 | | | | | | $8,106,000 | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
Hugh T. McDonald | | 1/29/09 | | - | | $161,066 | | $322,132 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $161,066 | | $322,132 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 90 | | 900 | | 2,250 | | | | | | | | $174,443 | | 1/28/10 | | | | | | | | 100 | | 1,000 | | 2,500 | | | | | | | | $108,120 |
| | | 1/28/10 | | | | | | | | | | | | | | | | 4,600 | | $77.10 | | $61,594 |
| | | | | | | | | | | | | | | | | | | | | | | |
William M. Mohl | | | 1/28/10 | | - | | $195,000 | | $390,000 | | | | | | | | | | | | | | |
| | | 1/28/10 | | | | | | | | 200 | | 2,000 | | 5,000 | | | | | | | | $216,240 |
| | | 1/28/10 | | | | | | | | | | | | | | | | 9,000 | | $77.10 | | $120,510 |
| | | | | | | | | | | | | | | | | | | | | | | |
Charles L. Rice, Jr. | | | 1/28/10 | | - | | $96,000 | | $192,000 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | | | | | | | | | 4,500 | | $77.53 | | $53,730 | | 1/28/10 | | | | | | | | 83 | | 833 | | 2,083 | | | | | | | | $90,064 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Richard J. Smith | | 1/29/09 | | - | | $451,500 | | $903,000 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $451,500 | | $903,000 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 480 | | 4,800 | | 12,000 | | | | | | | | $930,360 | | 1/28/10 | | | | | | | | 530 | | 5,300 | | 13,250 | | | | | | | | $573,036 |
| | 1/29/09 | | | | | | | | | | | | | | | | 35,000 | | $77.53 | | $417,900 | | 1/28/10 | | | | | | | | | | | | | | | | 40,000 | | $77.10 | | $535,600 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Roderick K. West | | 1/29/09 | | - | | $126,000 | | $252,000 | | | | | | | | | | | | | | | | 1/28/10 | | - | | $385,000 | | $770,000 | | | | | | | | | | | | | | |
| | 1/29/09 | | | | | | | | 90 | | 900 | | 2,250 | | | | | | | | $174,443 | | 1/28/10 | | | | | | | | 458 | | 4,583 | | 11,458 | | | | | | | | $495,514 |
| | 1/29/09 | | | | | | | | | | | | | | | | 5,000 | | $77.53 | | $59,700 | | 1/28/10 | | | | | | | | | | | | | | | | 7,000 | | $77.10 | | $93,730 |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
(1) | The amounts in columns (c), (d) and (e) represent minimum, target and maximum payment levels under the Executive Incentive Plan. The actual amounts awarded are reported in column (g) of the Summary Compensation Table. |
(2) | The amounts in columns (f), (g) and (h) represent the minimum, target and maximum payment levels under the Performance Unit Program. Performance under the program is measured by Entergy Corporation'sCorporation’s total shareholder return relative to the total shareholder returns of the companies included in the Philadelphia UtilitiesUtility Index. If Entergy Corporation'sCorporation’s total shareholder return is not at least 25% of that for the Philadelphia UtilitiesUtility Index, there is no payout. Subject to achievement of performance targets, each unit will be converted into the cash equivalent of one share of Entergy Corporation'sCorporation’s common stock on the last day of the performance period (December 31, 2011.2012.) |
(3) | In December 2009, the Personnel Committee granted 100,000 restricted units to Mr. Leonard. The restricted units vest in two equal installments of 50,000 units each on December 3, 2011 and December 3, 2012. The restricted units were granted under the 2007 Equity Ownership Plan. |
(4) | The amounts in column (j) represent options to purchase shares of Entergy Corporation'sCorporation’s common stock. The options vest one-third on each of the first through third anniversaries of the grant date. The options have a ten-year term from the date of grant. The options were granted under the 2007 Equity Ownership Plan. |
(5)(4) | The amounts included in column (l) are valued based on the aggregate grant date fair value of the award calculated in accordance with accounting standards assumingFASB ASC Topic 718 and, in the highest levelcase of the performance is achieved.units, are based on the probable outcome of the applicable performance conditions. See Note 12Notes 2 and 3 to the Financial StatementsSummary Compensation Table for a discussion of the relevant assumptions used in calculating the grant date fair value. |
20092010 Outstanding Equity Awards at Fiscal Year-End
The following table summarizes unexercised options, stock that has not vested and equity incentive plan awards for each Named Executive Officer outstanding as of the end of 2009.2010.
| | Option Awards | | Stock Awards | | Option Awards | | Stock Awards |
(a) Name | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Theodore H. | | - | | 12,000(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | | |
Bunting, Jr. | | 6,000 | | 12,000(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | | |
Theodore H. Bunting, Jr. | | | - | | 14,500(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | | 4,000 | | 8,000(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | | 12,000 | | 6,000(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 6,666 | | 3,334(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | | | 10,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 5,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | 5,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 2,200 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | 2,200 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 1,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | 1,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | | | | | | | | | | | | | | | 200(4) | | $16,368 | | | | | | | | | | | | | | | | 220(4) | | $15,583 |
| | | | | | | | | | | | | | | | 1,400(5) | | $114,576 | | | | | | | | | | | | | | | | 200(5) | | $14,166 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
E. Renae Conley | | - | | 12,500(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | - | | 12,700(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | | 4,166 | | 8,334(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 5,200 | | 10,400(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | | | 10,400 | | 5,200(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 6,667 | | 3,333(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | | | 10,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 7,050 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | 7,050 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 7,500 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | 7,500 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 9,200 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | 9,200 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 12,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | | | 12,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | | | | | | | | | | | | | | | 200(4) | | $16,368 | | | | | | | | | | | | | | | | 220(4) | | $15,583 |
| | | | | | | | | | | | | | | | 1,400(5) | | $114,576 | | | | | | | | | | | | | | | | 200(5) | | $14,166 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Leo P. Denault | | - | | 45,000(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | - | | 50,000(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | 16,666 | | 33,334(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | | | 15,000 | | 30,000(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 40,000 | | 20,000(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | | | 33,333 | | 16,667(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 50,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | 60,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 35,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | 50,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 40,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | | 35,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 676 | | - | | | | $52.40 | | 2/11/2012 | | | | | | | | | | 40,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 7,720 | | - | | | | $52.40 | | 1/25/2011 | | | | | | | | | | 676 | | - | | | | $52.40 | | 2/11/2012 | | | | | | | | |
| | 9,800 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | | | 9,800 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | 19,656 | | - | | | | $41.69 | | 2/11/2012 | | | | | | | | | | 19,656 | | - | | | | $41.69 | | 2/11/2012 | | | | | | | | |
| | 5,434 | | - | | | | $37.00 | | 1/25/2011 | | | | | | | | | | | | | | | | | | | | | | | | 530(4) | | $37,540 |
| | | | | | | | | | | | | | | | 480(4) | | $39,283 | | | | | | | | | | | | | | | | 480(5) | | $33,998 |
| | | | | | | | | | | | | | | | 3,900(5) | | $319,176 | | | | | | | | | | | | 24,000(6) | | $1,699,920 | | | | |
| | | | | | | | | | | | 24,000(6) | | $1,964,160 | | | | | |
| | | | | | | | | | | | | | | | | | | |
Joseph F. Domino | | - | | 4,500(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | | |
| | 2,333 | | 4,667(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | | |
| | 8,000 | | 4,000(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | | |
| | 7,500 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | |
| | 10,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | |
| | 10,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | | |
| | 10,500 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | | |
| | | | | | | | | | | | | | | | 90(4) | | $7,366 | |
| | | | | | | | | | | | | | | | 700(5) | | $57,288 | |
| | Option Awards | | Stock Awards |
(a) Name | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
Haley R. Fisackerly | | - | | 3,800(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 1,666 | | 3,334(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 1,666 | | 834(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 1,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | | | | | | | | | | | | | | | 90(4) | | $7,366 |
| | | | | | | | | | | | | | | | 583(5) | | $47,713 |
| | | | | | | | | | | | | | | | | | |
J. Wayne Leonard | | - | | 125,000(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 58,333 | | 116,667(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 170,000 | | 85,000(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 210,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 165,200 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 220,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 195,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | 330,600 | | - | | | | $41.69 | | 2/11/2012 | | | | | | | | |
| | 330,600 | | - | | | | $37.00 | | 1/25/2011 | | | | | | | | |
| | | | | | | | | | | | | | | | 2,250(4) | | $184,140 |
| | | | | | | | | | | | | | | | 16,500(5) | | $1,350,360 |
| | | | | | | | | | | | 100,000(7) | | $8,184,000 | | | | |
| | | | | | | | | | | | | | | | | | |
Hugh T. McDonald | | - | | 4,500(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 2,333 | | 4,667(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 8,000 | | 4,000(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 7,500 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 12,522 | | - | | | | $73.25 | | 2/11/2012 | | | | | | | | |
| | 10,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 10,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 12,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | | | | | | | | | | | | | | | 90(4) | | $7,366 |
| | | | | | | | | | | | | | | | 700(5) | | $57,288 |
| | | | | | | | | | | | | | | | | | |
Richard J. Smith | | - | | 35,000(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 11,666 | | 23,334(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 40,000 | | 20,000(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 50,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 40,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 63,600 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 7,640 | | - | | | | $51.50 | | 1/25/2011 | | | | | | | | |
| | 50,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | 70,000 | | - | | | | $41.69 | | 2/11/2012 | | | | | | | | |
| | 39,428 | | - | | | | $37.00 | | 1/25/2011 | | | | | | | | |
| | | | | | | | | | | | | | | | 480(4) | | $39,283 |
| | | | | | | | | | | | | | | | 3,900(5) | | $319,176 |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards |
(a) Name | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| | | | | | | | | | | | | | | | | | |
Joseph F. Domino | | - | | 4,600(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | 1,500 | | 3,000(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 4,666 | | 2,334(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 12,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 7,500 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 10,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 10,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 10,500 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | | | | | | | | | | | | | | | 100(4) | | $7,083 |
| | | | | | | | | | | | | | | | 90(5) | | $6,375 |
| | | | | | | | | | | | | | | | | | |
Haley R. Fisackerly | | - | | 9,000(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | 1,266 | | 2,534(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 3,333 | | 1,667(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 2,500 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 1,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | | | | | | | | | | | | | | | 100(4) | | $7,083 |
| | | | | | | | | | | | | | | | 90(5) | | $6,375 |
| | | | | | | | | | | | | | | | | | |
J. Wayne Leonard | | - | | 135,000(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | 41,666 | | 83,334(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 116,666 | | 58,334(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 255,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 210,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 165,200 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 220,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 195,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | 330,600 | | - | | | | $41.69 | | 2/11/2012 | | | | | | | | |
| | | | | | | | | | | | | | | | 2,230(4) | | $157,951 |
| | | | | | | | | | | | | | | | 2,250(5) | | $159,368 |
| | | | | | | | | | | | 100,000(7) | | $7,083,000 | | | | |
| | | | | | | | | | | | | | | | | | |
Hugh T. McDonald | | - | | 4,600(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | 1,500 | | 3,000(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 4,666 | | 2,334(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 12,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 7,500 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | 12,522 | | - | | | | $73.25 | | 2/11/2012 | | | | | | | | |
| | 10,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | 10,000 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | 12,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | | | | | | | | | | | | | | | 100(4) | | $7,083 |
| | | | | | | | | | | | | | | | 90(5) | | $6,375 |
| | Option Awards | | Stock Awards | | Option Awards | | Stock Awards |
(a) Name | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | | (b) Number of Securities Underlying Unexercised Options (#) Exercisable | | (c) Number of Securities Underlying Unexercised Options (#) Unexercisable | | (d) Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | | (e) Option Exercise Price ($) | | (f) Option Expiration Date | | (g) Number of Shares or Units of Stock That Have Not Vested (#) | | (h) Market Value of Shares or Units of Stock That Have Not Vested ($) | | (i) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | | (j) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) |
| | | | | | | | | | | | | | | | | | | |
William M. Mohl | | | - | | 9,000(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | | 2,500 | | 5,000(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | | 6,200 | | 3,100 (3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | | 3,500 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | | 5,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | | 3,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | | | | | | | | | | | | | | | | 200(4) | | $14,166 |
| | | | | | | | | | | | | | | | | 145(5) | | $10,270 |
| | | | | | | | | | | | | | | | | | | |
Charles L. Rice, Jr. | | | | | | | | | | | | | | | | | 83(4) | | $5,879 |
| | | | | | | | | | | | | | | | | 45(5) | | $3,187 |
| | | | | | | | | | | | | | | | | | | |
Richard J. Smith | | | - | | 40,000(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | | 11,666 | | 23,334(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | | 23,333 | | 11,667(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | | 60,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | | 50,000 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | | 40,000 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | | 63,600 | | - | | | | $58.60 | | 3/02/2014 | | | | | | | | |
| | | 50,000 | | - | | | | $44.45 | | 1/30/2013 | | | | | | | | |
| | | 70,000 | | - | | | | $41.69 | | 2/11/2012 | | | | | | | | |
| | | | | | | | | | | | | | | | | 530(4) | | $37,540 |
| | | | | | | | | | | | | | | | | 480(5) | | $33,998 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Roderick K. West | | - | | 5,000(1) | | | | $77.53 | | 1/29/2019 | | | | | | | | | | - | | 7,000(1) | | | | $77.10 | | 1/28/2020 | | | | | | | | |
| | 2,666 | | 5,334(2) | | | | $108.20 | | 1/24/2018 | | | | | | | | | | 1,666 | | 3,334(2) | | | | $77.53 | | 1/29/2019 | | | | | | | | |
| | 8,000 | | 4,000(3) | | | | $91.82 | | 1/25/2017 | | | | | | | | | | 5,333 | | 2,667(3) | | | | $108.20 | | 1/24/2018 | | | | | | | | |
| | 1,334 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | | | 12,000 | | - | | | | $91.82 | | 1/25/2017 | | | | | | | | |
| | 667 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | | | 1,334 | | - | | | | $68.89 | | 1/26/2016 | | | | | | | | |
| | | | | | | | | | | | | | | | 90(4) | | $7,366 | | 667 | | - | | | | $69.47 | | 1/27/2015 | | | | | | | | |
| | | | | | | | | | | | | | | | 700(5) | | $57,288 | | | | | | | | | | | | | | | | 458(4) | | $32,440 |
| | | | | | | | | | | | 15,000(8) | | $1,227,600 | | | | | | | | | | | | | | | | | | | | 285(5) | | $20,187 |
| | | | | | | | | | | | | 15,000(8) | | $1,062,450 | | | | |
(1) | Consists of options that vested or will vest as follows: 1/3 of the options granted vest on each of 1/29/2010,28/2011, 1/29/201128/2012 and 1/29/2012.28/2013. |
(2) | Consists of options that vested or will vest as follows: 1/2 of the remaining unexercisable options vest on each of 1/24/201029/2011 and 1/24/2011.29/2012. |
(3) | The remaining unexercisable options vested on 1/24/2011. |
(4) | Consists of performance units that will vest on 1/25/2010.December 31, 2012 only if, and to the extent that, Entergy Corporation attains achievement level as described under “Long-Term Compensation – Performance Unit Program” in Compensation Discussion and Analysis. |
(4)(5) | Consists of performance units that will vest on December 31, 2011 only if, and to the extent that, Entergy Corporation satisfies performance conditionsattains achievement level as described under "Long-Term“Long-Term Compensation – Performance Unit Program" in Compensation Discussion and Analysis. |
(5) | Consists of performance units that will vest on December 31, 2010 only if, and to the extent that, Entergy Corporation satisfies performance conditions as described under "Long-Term Compensation – Performance Unit Program"Program” in Compensation Discussion and Analysis. |
(6) | Consists of restricted units granted under the 2007 Equity Ownership Plan. 8,000 units will vest on each of January 25, 2011, 2012 and 2013. |
(7) | Consists of restricted units granted under the 2007 Equity Ownership Plan 50,000 of which will vest on December 3, 2011 and the remaining 50,000 will visitvest on December 3, 2012. |
(8) | Consists of restricted units granted under the 2007 Equity Ownership Plan which will vest on April 8, 2013. |
20092010 Option Exercises and Stock Vested
The following table provides information concerning each exercise of stock options and each vesting of stock during 20092010 for the Named Executive Officers.
| | Options Awards | | Stock Awards | | Options Awards | | Stock Awards |
(a) Name | | (b) Number of Shares Acquired on Exercise (#) | | (c) Value Realized on Exercise ($) | | (d) Number of Shares Acquired on Vesting (#) (1) | | (e) Value Realized on Vesting ($) | | (b) Number of Shares Acquired on Exercise (#) | | (c) Value Realized on Exercise ($) | | (d) Number of Shares Acquired on Vesting (#) (1) | | (e) Value Realized on Vesting ($) |
| | | | | | | | | | | | | | | | |
Theodore H. Bunting, Jr. | | - | | - | | 1,139 | | $93,216 | | - | | - | | 140 | | $11,210 |
| | | | | | | | | | | | | | | | |
E. Renae Conley | | 4,546 | | $124,347 | | 1,322 | | $108,192 | | - | | - | | 140 | | $11,210 |
| | | | | | | | | | | | | | | | |
Leo P. Denault | | 12,404 | | $322,969 | | 2,834 | | $231,935 | | 13,154 | | $418,646 | | 390 | | $31,227 |
| | | | | | | | | | | | | | | | |
Joseph F. Domino | | - | | - | | 630 | | $51,559 | | - | | - | | 70 | | $5,605 |
| | | | | | | | | | | | | | | | |
Haley R. Fisackerly | | - | | - | | 315 | | $25,780 | | - | | - | | 58 | | $4,644 |
| | | | | | | | | | | | | | | | |
J. Wayne Leonard | | 330,600 | | $18,723,928 | | 64,988(2) | | $5,275,618 | | 330,600 | | $13,922,296 | | 1,650 | | $132,116 |
| | | | | | | | | | | | | | | | |
Hugh T. McDonald | | 9,199 | | $311,553 | | 630 | | $51,559 | | - | | - | | 70 | | $5,605 |
| | | | | | | | | | | | | | | | |
William M. Mohl | | | - | | - | | 82 | | $6,566 |
| | | | | | | | | |
Charles L. Rice, Jr. | | | - | | - | | - | | - |
| | | | | | | | | |
Richard J. Smith | | 40,137 | | $1,091,955 | | 2,834 | | $231,935 | | 47,068 | | $1,869,543 | | 390 | | $31,227 |
| | | | | | | | | | | | | | | | |
Roderick K. West | | - | | - | | 630 | | $51,559 | | - | | - | | 123 | | $9,849 |
(1) | Represents the vesting of performance units for the 20072008 - 20092010 performance periodcycle (payable solely in cash based on the closing stock price of Entergy Corporation on the datelast day of vesting)the performance period) under the Performance Unit Program. |
(2) | Amount includes the August 3, 2009 cash settlement of 50,000 restricted units granted under the 2007 Equity Ownership Plan. |
20092010 Pension Benefits
The following table shows the present value as of December 31, 2009,2010, of accumulated benefits payable to each of the Named Executive Officers, including the number of years of service credited to each Named Executive Officer, under the retirement plans sponsored by Entergy Corporation, determined using interest rate and mortality rate assumptions set forth in Note 11 to the Financial Statements. Information regarding these retirement plans is included in Compensation Discussion & Analysis under the heading, "Benefits,“Benefits, Perquisites, Agreements and Post-Retirement Plans - - Pension Plan, Pension Equalization Plan, and System Executive Retirement Plan."” In addition, this section includes information regarding early retirement options under the plans.
Name | Name | | Plan Name | | Number of Years Credited Service | | Present Value of Accumulated Benefit | | Payments During 2009 | | | Plan Name | | Number of Years Credited Service | | Present Value of Accumulated Benefit | | Payments During 2010 |
Theodore H. Bunting, Jr. (1) | Theodore H. Bunting, Jr. (1) | | Non-qualified System Executive Retirement Plan | | 21.86 | | $1,479,700 | | $ - | | Theodore H. Bunting, Jr. (1) | | Non-qualified System Executive Retirement Plan | | 22.86 | | $1,773,400 | | $ - |
| | | Qualified defined benefit plan | | 21.11 | | $320,100 | | $ - | | | Qualified defined benefit plan | | 22.86 | | $418,700 | | $ - |
| | | | | | | | | | | | | | | | | | |
E. Renae Conley (2) | E. Renae Conley (2) | | Non-qualified Pension Equalization Plan | | 27.35 | | $1,325,300 | | $ - | | E. Renae Conley (2) | | Non-qualified System Executive Retirement Plan | | 11.83 | | $1,575,800 | | $ - |
| | | Qualified defined benefit plan | | 10.83 | | $197,700 | | $ - | | | Qualified defined benefit plan | | 11.83 | | $260,300 | | $ - |
| | | | | | | | | | | | | | | | | | |
Leo P. Denault (3)(1) | Leo P. Denault (3)(1) | | Non-qualified System Executive Retirement Plan | | 25.83 | | $3,239,300 | | $ - | | Leo P. Denault (3)(1) | | Non-qualified System Executive Retirement Plan | | 26.83 | | $3,717,200 | | $ - |
| | | Qualified defined benefit plan | | 10.83 | | $155,900 | | $ - | | | Qualified defined benefit plan | | 11.83 | | $206,600 | | $ - |
| | | | | | | | | | | | | | | | | | |
Joseph F. Domino (1)(2) | Joseph F. Domino (1)(2) | | Non-qualified System Executive Retirement Plan | | 39.56 | | $1,615,100 | | $ - | | Joseph F. Domino (1)(2) | | Non-qualified System Executive Retirement Plan | | 40.56 | | $1,657,100 | | $ - |
| | | Qualified defined benefit plan | | 36.13 | | $997,500 | | $ - | | | Qualified defined benefit plan | | 37.13 | | $1,180,000 | | $ - |
| | | | | | | | | | | | | | | | | | |
Haley R. Fisackerly | Haley R. Fisackerly | | Non-qualified System Executive Retirement Plan | | 14.08 | | $284,400 | | $ - | | | Non-qualified System Executive Retirement Plan | | 15.08 | | $425,000 | | $ - |
| | | Qualified defined benefit plan | | 14.08 | | $149,300 | | $ - | | | Qualified defined benefit plan | | 15.08 | | $198,700 | | $ - |
| | | | | | | | | | | | | | | | | | |
J. Wayne Leonard (4)(3) | J. Wayne Leonard (4)(3) | | Non-qualified supplemental retirement plan benefit | | 11.68 | | $24,323,900 | | $ - | | J. Wayne Leonard (4)(3) | | Non-qualified supplemental retirement plan benefit | | 12.68 | | $23,709,800 | | $ - |
| | | Qualified defined benefit plan | | 11.68 | | $285,900 | | $ - | | | Qualified defined benefit plan | | 12.68 | | $360,800 | | $ - |
| | | | | | | | | | | | | | | | | | |
Hugh T. McDonald (1)(2) | Hugh T. McDonald (1)(2) | | Non-qualified System Executive Retirement Plan | | 27.93 | | $918,800 | | $ - | | Hugh T. McDonald (1)(2) | | Non-qualified System Executive Retirement Plan | | 28.93 | | $1,020,800 | | $ - |
| | | Qualified defined benefit plan | | 26.44 | | $411,300 | | $ - | | | Qualified defined benefit plan | | 27.44 | | $514,300 | | $ - |
| | | | | | | | | | | | | | | | | | |
Richard J. Smith (5) | | Non-qualified Pension Equalization Plan | | 33.25 | | $3,701,700 | | $ - | | |
William M. Mohl | | | Non-qualified System Executive Retirement Plan | | 8.44 | | $435,100 | | $ - |
| | | Qualified defined benefit plan | | 8.44 | | $148,600 | | $ - |
| | | | | | | | | |
Charles L. Rice, Jr. | | | Non-qualified System Executive Retirement Plan | | 1.47 | | $15,900 | | $ - |
| | | Qualified defined benefit plan | | 1.47 | | $18,800 | | $ - |
| | | | | | | | | |
Richard J. Smith (4) | | | Non-qualified Pension Equalization Plan | | 34.30 | | $4,241,200 | | $ - |
| | | Qualified defined benefit plan | | 10.33 | | $241,300 | | $ - | | | Qualified defined benefit plan | | 11.34 | | $308,800 | | $ - |
| | | | | | | | | | | | | | | | | | |
Roderick K. West | Roderick K. West | | Non-qualified System Executive Retirement Plan | | 10.75 | | $334,600 | | $ - | | | Non-qualified System Executive Retirement Plan | | 11.75 | | $504,000 | | $ - |
| | | Qualified defined benefit plan | | 10.75 | | $90,600 | | $ - | | | Qualified defined benefit plan | | 11.75 | | $128,200 | | $ - |
(1) | Service under the non-qualified System Executive Retirement Plan is granted from date of hire. Qualified plan benefit service is granted from the later of date of hire or plan participation date. | |
(2) | Ms. Conley entered into an agreement granting 16.52 additional years of service under the non-qualified Pension Equalization Plan increasing the present value of the accumulated benefit by $26,000 over the benefit she would receive under the non-qualified System Executive Retirement Plan. | |
(3) | During 2006, Mr. Denault entered into an agreement granting an additional 15 years of service under the non-qualified System Executive Retirement Plan if he continues to work for an Entergy System company employer until age 55. The additional 15 years of service increases the present value of his benefit by $1,431,700. | |
(4)(1) | During 2006, Mr. Denault entered into an agreement granting an additional 15 years of service under the non-qualified System Executive Retirement Plan if he continues to work for an Entergy System company employer until age 55. The additional 15 years of service increases the present value of his benefit by $1,483,800. |
(2) | Service under the non-qualified System Executive Retirement Plan is granted from date of hire. Qualified plan benefit service is granted from the later of date of hire or plan participation date. |
(3) | Pursuant to his retention agreement, Mr. Leonard is entitled to a non-qualified supplemental retirement benefit in lieu of participation in Entergy Corporation'sCorporation’s non-qualified supplemental retirement plans such as the System Executive Retirement Plan or the Pension Equalization Plan. Mr. Leonard may separate from employment without a reduction in his non-qualified supplemental retirement benefit. |
(5)(4) | Mr. Smith entered into an agreement granting 22.92 additional years of service under the non-qualified Pension Equalization Plan providing an additional $999,300$1,031,400 above the accumulated benefit he would receive under the non-qualified System Executive Retirement Plan. |
Qualified Retirement Benefits
The qualified retirement plan is a funded defined benefit pension plan that provides benefits to most of the non-bargaining unit employees of Entergy System companies. All Named Executive Officers are participants in this plan. The pension plan provides a monthly benefit payable for the participant'sparticipant’s lifetime beginning at age 65 and equal to 1.5% of the participant'sparticipant’s five-year final average monthly eligible earnings times such participant'sparticipant’s years of service. Participants are 100% vested in their benefit upon completing 5 years of vesting service.
Normal retirement under the plan is age 65. Employees who terminate employment prior to age 55 may receive a reduced deferred vested retirement benefit payable as early as age 55 that is actuarially equivalent to the normal retirement benefit (i.e., reduced by 7% per year for the first 5 years preceding age 65, and reduced by 6% for each additional year thereafter). Employees who are at least age 55 with 10 years of vesting service upon termination from employment are entitled to a subsidized early retirement benefit beginning as early as age 55. The subsidized early retirement benefit is equal to the normal retirement benefit reduced by 2% per year for each year that early retirement precedes age 65.
Mr. Domino, Mr. Leonard and Mr. Smith are eligible for subsidized early retirement benefits.
NonqualifiedNon-qualified Retirement Benefits
The Named Executive Officers are eligible to participate in certain nonqualifiednon-qualified retirement benefit plans that provide retirement income, including the Pension Equalization Plan and the System Executive Retirement Plan. Each of these plans is an unfunded nonqualifiednon-qualified defined benefit pension plan that provides benefits to key management employees. In these plans, each described below and in Compensation Discussion and Analysis, an executive is typically enrolled in one or more plans but only paid the amount due under the plan that provides the highest benefit. In general, upon disability, participants in the Pension Equalization Plan and the System Executive Retirement Plan remain eligible for continued service credits until recovery or retirement. Generally, spouses of participants who die before commencement of benefits may be eligible for a portion of the participant'sparticipant’s accrued benefit.
The Pension Equalization Plan
All of the Named Executive Officers (with the exception of Mr. Leonard) are participants in the Pension Equalization Plan. The benefit provisions are substantially the same as the qualified retirement plan but provide two additional benefits: (a) "restorative benefits"“restorative benefits” intended to offset limitations on certain earnings that may be considered in connection with the qualified retirement plan and (b) supplemental credited service (if granted to an individual participant). The benefits under this plan are offset by benefits payable from the qualified retirement plan and may be offset by prior employer benefits. Participants receive their Pension Equalization Plan benefit in the form of a single sum cash distribution. The Pension Equalization Plan benefit attributable to supplemental credited service is not vested until age 65. Subject to the approval of the Entergy System company employer, an employee who terminates employment prior to age 65 may be vested in his or her benefit, with payment of the lump sum benefit generally at separation from service unless delayed six months under Internal Revenue Code Section 409A. Benefits payable prior to age 65 are subject to the same reductions as qualified plan benefits.
The System Executive Retirement Plan
All Named Executive Officers (except Mr. Leonard) are participants in the System Executive Retirement Plan. The System Executive Retirement Plan provides for a single sum payment at age 65, as further described in Compensation Discussion and Analysis. The System Executive Retirement Plan benefit is not vested until age 65. Subject to the approval of the Entergy System company employer, an employee who terminates his or her employment prior to age 65 may be vested in the System Executive Retirement Plan benefit, with payment of the lump sum benefit generally at separation from service unless delayed six months under Internal Revenue Code Section 409A. Benefits payable prior to age 65 are subject to the same reductions as qualified plan benefits. Further, in the event of a change in control, participants whose employment is terminated without “Cause” or for “Good Reason,” as defined in the Plan are also eligible for a subsidized lump sum benefit payment, even if they do not currently meet the age or service requirements for early retirement under that plan or have company permission to separate from employment. Such lump sum benefit is payable generally at separation from service unless delayed 6 months under Internal Revenue Code Section 409A.
Mr. Leonard's NonqualifiedLeonard’s Non-qualified Supplemental Retirement Benefit
Mr. Leonard'sLeonard’s retention agreement provides that if his employment with the Company is terminated for any reason other than for cause (as defined below under “Potential Payments Upon Termination or Change in Control”), he will be entitled to a non-qualified supplemental retirement benefit in lieu of participation in Entergy Corporation'sCorporation’s non-qualified supplemental retirement plans such as the System Executive Retirement Plan or the Pension Equalization Plan. Mr. Leonard'sLeonard’s non-qualified supplemental retirement benefit is calculated as a single life annuity equal to 60% of his final three-year average compensation (as described in the description of the System Executive Retirement Plan included in the Compensation Discussion and Analysis), reduced to account for benefits payable to Mr. Leonard underund er Entergy Corporation'sCorporation’s and a former employer'semployer’s qualified pension plans. The benefit is payable in a single lump sum. Because Mr. Leonard has already attained the age of 55, he is currently entitled under his retention agreement to his non-qualified supplemental retirement benefit if he were to leave Entergy System company employment other than as the result of a termination for cause.
Additional Information
For a description of the material terms and conditions of payments and benefits available under the retirement plans, including each plan'splan’s normal retirement payment and benefit, benefit formula and eligibility standards, specific elements of compensation included in applying the payment and benefit formula, and Entergy Corporation'sCorporation’s policies with regard to granting extra years of credited service, see "Compensation“Compensation Discussion and Analysis -- Benefits, Perquisites, Agreements and Post-Termination Plans -- Pension Plan, Pension Equalization Plan and System Executive Retirement Plan."” For a discussion of the relevant assumptions used in valuing these liabilities, see Note 11 to the Financial Statements.
2009 Nonqualified2010 Non-qualified Deferred Compensation
The following tables provide information regarding the Executive Deferred Compensation Plan, the Amended and Restated 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries (the 1998 Equity Ownership Plan) and the 2007 Equity Ownership Plan, which allow for the deferral of compensation for the Named Executive Officers. As of December 31, 2009 none of the Named Executive Officers had a deferred compensation balance remaining in the Equity Ownership Plan. For additional information, see "Benefits,“Benefits, Perquisites, Agreements and Post-Termination Plans - Executive Deferred Compensation"Compensation” in Compensation Discussion and Analysis. All Named Executive Officers are eligible to participate in the deferral programs.
Additionally, someas of the Named Executive Officers haveDecember 31, 2010, Mr. Leonard had a deferred account balancesbalance under a frozen Defined Contribution Restoration Plan. These amounts are deemed invested, as chosen by the participant, in certain of the optionsT. Rowe Price investment funds also available to participants under this Defined Contribution Restorationthe qualified Savings Plan. The Defined Contribution Restoration Plan, until it was frozen in 2005, credited eligible employees'employees’ deferral accounts with employer contributions to the extent contributions under the qualified savings plan in which the employee participated were subject to limitations imposed by the Internal Revenue Code.
All deferrals are credited to the applicable Entergy System company employer'semployer’s non-funded liability account. Depending on the plan under which the deferral is made, the Named Executive Officers may elect investment in either phantom Entergy Corporation common stock or one or more of several investment options available under the Savings Plan. Within limitations of the program, participating Named Executive Officers may move funds from one deemed investment option to another. The participating Named Executive Officers do not have the ability to withdraw funds from the deemed investment accounts except within the terms provided in their deferral elections. Within the limitations prescribed by law as well as the program,plan, participating NamedNam ed Executive Officers with deferrals under the Executive Deferred Compensation Plan and/or the equity plans have the option to make a successive deferral of these funds. Assuming a Named Executive Officer does not elect a successive deferral, the Entergy System company employer of the participant is obligated to pay the amount credited to the participant'sparticipant’s account at the earlier of deferral receipt date or separation from service. These payments are paid out of the general assets of the employer and are payable in a lump sum.
FICA and Medicare taxes are paid on all deferred amounts prior to their deferral. Applicable federal and state taxes are paid at the time the deferred amounts are paid to the participant. Employees are not eligible for a "match" of amounts that are deferred by them pursuant to the deferred compensation programs. With the exception of allowing for the deferral of federal and state taxes, the Entergy System company employer provides no additional benefit to the Named Executive Officers in connection with amounts deferred under the Executive Deferred Compensation Plan. The deemed investment options available to participating Named Executive Officers are limited to certain deemed investment options available to all non-officer employees under the Savings Plan. Deferred amounts are deemed credited with earnings or losses based on the rate of return of deemed investment options (under the Executive Deferred Compensation Plan) or Entergy Corporation common stock (under the Equity Ownership Plan or 2007 Equity Plan). In 2006, the Personnel Committee approved a number of recommendations to simplify the deferral programs and reduce the number of options available to the Named Executive Officers.
Executive Deferred Compensation Plan
Name (a) | | Executive Contributions in 2009 (b) | | Registrant Contributions in 2009 (c) | | Aggregate Earnings in 2009 (1) (d) | | Aggregate Withdrawals/ Distributions (e) | | Aggregate Balance at December 31, 2009 (2) (f) |
| | | | | | | | | | |
E. Renae Conley | | $ - | | $ - | | $7,105 | | ($574,905) | | $ - |
| | | | | | | | | | |
Joseph F. Domino | | $ - | | $ - | | $130 | | ($239,857) | | $ - |
| | | | | | | | | | |
J. Wayne Leonard | | $ - | | $ - | | $8,272 | | ($175,235) | | $203,900 |
| | | | | | | | | | |
Hugh T. McDonald | | $ - | | $ - | | $356 | | ($1,211,343) | | $ - |
| | | | | | | | | | |
Richard J. Smith | | $ - | | $ - | | $5,581 | | ($843,075) | | $ - |
| | | | | | | | | | |
(1) | Amounts in this column are not included in the Summary Compensation Table. |
(2) | For Mr. Leonard, approximately $183,000 of the amount reported in this column has previously been reported in the Summary Compensation Table. |
Equity Ownership Plan
Name (a) | | Executive Contributions in 2009 (b) | | Registrant Contributions in 2009 (c) | | Aggregate Earnings in 2009 (1) (d) | | Aggregate Withdrawals/ Distributions (e) | | Aggregate Balance at December 31, 2009 (f) | | Executive Contributions in 2010 (b) | | Registrant Contributions in 2010 (c) | | Aggregate Earnings in 2010 (1) (d) | | Aggregate Withdrawals/ Distributions (e) | | Aggregate Balance at December 31, 2010 (2) (f) |
| | | | | | | | | | | | | | | | | | | | |
E. Renae Conley | | $ - | | $ - | | $10,203 | | ($1,064,918) | | $ - | |
| | | | | | | | | | | |
J. Wayne Leonard | | $ - | | $ - | | $89,463 | | ($9,337,269) | | $ - | | $ - | | $ - | | $106 | | ($204,006) | | $ - |
| | | | | | | | | | | |
Hugh T. McDonald | | $ - | | $ - | | $14,690 | | ($1,533,205) | | $ - | |
| | | | | | | | | | | |
(1) | Amounts in this column are not included in the Summary Compensation Table. |
Defined Contribution Restoration Plan
Name (a) | | Executive Contributions in 2009 (b) | | Registrant Contributions in 2009 (c) | | Aggregate Earnings in 2009 (1) (d) | | Aggregate Withdrawals/ Distributions (e) | | Aggregate Balance at December 31, 2009 (f) |
| | | | | | | | | | |
Theodore H. Bunting, Jr. | | $ - | | $ - | | $104 | | ($10,791) | | $ - |
| | | | | | | | | | |
E. Renae Conley | | $ - | | $ - | | $821 | | ($85,644) | | $ - |
| | | | | | | | | | |
Leo P. Denault | | $ - | | $ - | | $606 | | ($63,276) | | $ - |
| | | | | | | | | | |
Joseph F. Domino | | $ - | | $ - | | $339 | | ($32,811) | | $ - |
| | | | | | | | | | |
J. Wayne Leonard | | $ - | | $ - | | $5,520 | | $ - | | $232,665 |
| | | | | | | | | | |
Hugh T. McDonald | | $ - | | $ - | | $233 | | ($24,233) | | $ - |
| | | | | | | | | | |
Richard J. Smith | | $ - | | $ - | | $1,458 | | ($152,193) | | $ - |
| | | | | | | | | | |
Name (a) | | Executive Contributions in 2010 (b) | | Registrant Contributions in 2010 (c) | | Aggregate Earnings in 2010 (1) (d) | | Aggregate Withdrawals/ Distributions (e) | | Aggregate Balance at December 31, 2010 (f) |
| | | | | | | | | | |
J. Wayne Leonard | | $ - | | $ - | | ($22,567) | | $ - | | $210,098 |
(1) | Amounts in this column are not included in the Summary Compensation Table. |
Potential Payments upon Termination or Change in Control
Estimated Payments
The tables below reflect the amount of compensation each named executive officer would receive upon the occurrence of the specified separation triggering events, based on available programs and specific agreements with each executive. The tables assume the separation was effective on December 31, 2009,2010, the last business day of the last fiscal year, and the stock price of Entergy Corporation common stock is $81.84,$70.83, which was the closing market price on such date.
Theodore H. Bunting, Jr
Senior Vice President, Chief Accounting Officer
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the Senior Vice President, Chief Accounting Officer would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2009:2010:
Benefits and Payments Upon Termination (1) | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (7) | | Termination Related to a Change in Control |
| | | | | | | | | | | | | | | | |
Severance Payment | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $1,121,434 |
Performance Units: | (3) | | | | | | | | | | | | | | | |
2009-2011 Performance Unit Program | | --- | | --- | | --- | | --- | | $94,440 | | $94,440 | | $141,660 | | $141,660 |
2010-2012 Performance Unit Program | | --- | | --- | | --- | | --- | | $51,942 | | $51,942 | | $155,826 | | $155,826 |
Unvested Stock Options | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $23,730 |
280G Tax Gross-up | (8) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (6) | Disability | Death (7) | Change in Control (8) | Termination Related to a Change in Control |
Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $1,121,434 |
Performance Units:(3) | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | --- | --- | $76,384 | $76,384 | $114,576 | $114,576 |
2009-2011 Performance Unit Program | --- | --- | --- | --- | $54,560 | $54,560 | $163,680 | $163,680 |
Unvested Stock Options(4) | --- | --- | --- | --- | $51,720 | $51,720(7) | $51,720 | $51,720 |
Medical and Dental Benefits (5) | --- | --- | --- | --- | --- | --- | --- | $23,730 |
280G Tax Gross-up | --- | --- | --- | --- | --- | --- | --- | $1,354,235 |
1(1) | In addition to the payments and benefits in the table, Mr. Bunting also would have been entitled to receive his vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see "2009 Pension Benefits." Ifif Mr. Bunting's employment were terminated under certain conditions relating to a change in control, heMr. Bunting also would also behave been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits which are described in "2009see "2010 Pension Benefits." If Mr. Bunting's employment were terminated "forfor cause," he would forfeit his benefit under the System Executive Retirement Plan supplemental benefits.Plan. |
2(2) | In the event of a termination related to a change in control, Mr. Bunting would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to two times the sum of his base salary plus annual incentive, calculated atusing the average annual target opportunity.opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 60% target opportunity and a base salary of $350,448 was assumed. |
3(3) | In the event of a termination related to a change in control, Mr. Bunting would have been entitled to receive pursuant to the System Executive Continuity2007 Equity Ownership Plan a lump sum payment relating to his performance units.units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance unitunits were achieved at target level. For purposes of the table, the value of Mr. Bunting's awards have beenwere calculated as follows: 2008 - 2010 Plan - 1,400 performance units at target, assuming a stock price of $81.84
2009 - 2011 Plan -– 2,000 performance units at target, assuming a stock price of $81.84$70.83 2010 - 2012 Plan – 2,200 performance units at target, assuming a stock price of $70.83 For scenarios other than a termination related to a change in control, the award is not enhanced or accelerated by the termination event. With respect to death or disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
|
4(4) | In the event of disability or a termination related to a change in control, all of Mr. Bunting's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Bunting exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. Bunting’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. Bunting’s stock options. |
5(5) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Bunting would be eligible to receive Company- subsidized medical and dentalCOBRA benefits for a period up to 18 months. |
6(6) | As of December 31, 2009,2010, compensation and benefits available to Mr. Bunting under this scenario are substantially the same as available with a voluntary resignation. |
7 | Under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007), in the event of a plan participant's death, all unvested stock options would become immediately exercisable. |
8(7) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control inof the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: · All unvested stock options would become immediately exercisable.exercisable; and · AllSeverance benefits in place of performance units become vested (based onpayable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(8) | In December 2010, the assumption that all performance goals were achieved at target).System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
E. Renae Conley
Executive Vice President, and CEO, Entergy Gulf States Louisiana and Entergy LouisianaHuman Resources & Administration
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the Executive Vice President, Human Resources & CEO, Entergy Gulf States Louisiana and Entergy LouisianaAdministration would have been entitled to receive as a result of a termination of her employment under various scenarios as of December 31, 2009:2010:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (6) | Disability | Death (7) | Change in Control (8) | Termination Related to a Change in Control | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (7) | | Termination Related to a Change in Control |
| |
Severance Payment(2) | --- | --- | --- | --- | --- | --- | --- | $1,304,575 | |
| | | | | | | | | | | | | | | | | |
Severance Payment | | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $1,360,000 |
Performance Units:(3) | | | | | | | | | (3) | | | | | | | | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | --- | --- | $76,384 | $76,384 | $114,576 | $114,576 | |
2009-2011 Performance Unit Program | --- | --- | --- | --- | $54,560 | $54,560 | $163,680 | $163,680 | | --- | | --- | | --- | | --- | | $94,440 | | $94,440 | | $141,660 | | $141,660 |
2010-2012 Performance Unit Program | | | --- | | --- | | --- | | --- | | $51,942 | | $51,942 | | $155,826 | | $155,826 |
Unvested Stock Options(4) | --- | --- | --- | --- | $53,875 | $53,875(7) | $53,875 | $53,875 | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits (5) | --- | --- | --- | --- | --- | --- | --- | $7,896 | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $7,896 |
280G Tax Gross-up | --- | --- | --- | --- | --- | --- | --- | --- | (8) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, Ms. Conley also would have been entitled to receive her vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see "2009 Pension Benefits." Ifif Ms. Conley's employment were terminated under certain conditions relating to a change in control, sheMs. Conley also would also behave been entitled to receive her vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits which are described in "2009see "2010 Pension Benefits." If Ms. Conley'sConley’s employment were terminated "forfor cause," she would forfeit her supplemental credited service andbenefit under the System Executive Retirement Plan supplemental benefits.Plan. |
2(2) | In the event of a termination related to a change in control, Ms. Conley would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to two times the sum of her base salary plus annual incentive, calculated atusing the average annual target opportunity.opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 60% target opportunity and a base salary of $425,000 was assumed. |
3(3) | In the event of a termination related to a change in control, Ms. Conley would have been entitled to receive pursuant to the System Executive Continuity2007 Equity Ownership Plan a lump sum payment relating to her performance units.units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance unitunits were achieved at target level. For purposes of the table, the value of Ms. Conley'sConley’s awards have beenwere calculated as follows: 2008 - 2010 Plan - 1,400 performance units at target, assuming a stock price of $81.84
2009 - 2011 Plan -– 2,000 performance units at target, assuming a stock price of $81.84$70.83 2010 - 2012 Plan – 2,200 performance units at target, assuming a stock price of $70.83 For scenarios other than a termination related to a change in control, the award is not enhanced or accelerated by the termination event. With respect to death or disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
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4(4) | In the event of death, disability or a termination related to a change in control, all of Ms. Conley's unvested stock options would immediately vest. In addition, she would be entitled to exercise her stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Ms. Conley exercised her options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Ms. Conley’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Ms. Conley’s stock options. |
5(5) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Ms. Conley would be eligible to receive Company- subsidized medical and dentalCOBRA benefits for a period up to 18 months. |
6(6) | As of December 31, 2009,2010, compensation and benefits available to Ms. Conley under this scenario are substantially the same as available with a voluntary resignation. |
7 | Under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007), in the event of a plan participant's death, all unvested stock options would become immediately exercisable. |
8(7) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control inof the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: · All unvested stock options would become immediately exercisable.exercisable; and · AllSeverance benefits in place of performance units become vested (based onpayable as described in footnote 3 above The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(8) | In December 2010, the assumption that all performance goals were achieved at target).System Executive Continuity Plan was amended to eliminate excise tax gross-ups. |
Leo P. Denault
Executive Vice President and Chief Financial Officer
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the Executive Vice President and Chief Financial Officer would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2009:2010:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement(8) | Disability | Death (9) | Change in Control(10) | Termination Related to a Change in Control | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (8) | | Disability | | Death | | Change in Control (9) | | Termination Related to a Change in Control |
| | |
Severance Payment(2) | --- | --- | $3,202,290 | --- | --- | $3,202,290 | |
| | | | | | | | | | | | | | | | | |
Severance Payment | | (2) | --- | | --- | | $3,202,290 | | --- | | --- | | --- | | --- | | $3,202,290 |
Performance Units:(3) | | | | | | | (3) | | | | | | | | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | $319,176 | --- | $319,176 | $319,176 | |
2009-2011 Performance Unit Program | --- | --- | $392,832 | --- | $392,832 | $392,832 | | --- | | --- | | $371,858 | | --- | | $371,858 | | $371,858 | | --- | | $371,858 |
2010-2012 Performance Unit Program | | | --- | | --- | | $371,858 | | --- | | $371,858 | | $371,858 | | --- | | $371,858 |
Unvested Stock Options(4) | --- | --- | $193,950 | --- | $193,950 | $193,950 (9) | $193,950 | $193,950 | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Unvested Restricted Units(5) | --- | --- | $1,995,120 | --- | $1,995,120 | $1,995,120 | (5) | --- | | --- | | $1,699,920 | | --- | | $1,699,920 | | $1,699,920 | | --- | | $1,699,920 |
COBRA Benefits(6) | --- | --- | $13,962 | --- | --- | --- | (6) | --- | | --- | | $13,962 | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits(7) | --- | --- | --- | --- | --- | $13,962 | (7) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $13,962 |
280G Tax Gross-up | --- | --- | --- | --- | --- | $3,457,221 | (10) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, Mr. Denault also would have been entitled to receive his vested pension benefits. If Mr. Denault’s employment were terminated under certain conditions relating to a change in control, he would also be eligible for early retirement benefits. For a description of these benefits, see “2009“2010 Pension Benefits.” In addition, Mr. Denault is subject to the following provisions: ·Retention Agreement. Mr. Denault’s retention agreement provides that, unless his employment is terminated for cause, he will be granted an additional 15 years of service under the System Executive Retirement Plan if he continues to work for an Entergy System company employer until age 55. Because Mr. Denault had not reached age 55 as of December 31, 2009,2010, he is only entitled to this supplemental credited service and System Executive Retirement Plan supplemental benefits in the event of his death or disability.
·System Executive Retirement Plan. If Mr. Denault’s employment were terminated for cause, he would forfeit his benefit under the System Executive Retirement Plan. In the event of a termination related to a change in control, pursuant to the terms of the System Executive Retirement Plan, Mr. Denault would be eligible for subsidized retirement (but not the additional 15 years of service) upon his separation of service even if he does not then meet the age or service requirements for early retirement under the System Executive Retirement Plan or have company permission to separate from employment.
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2(2) | In the event of a termination related(not due to a change in controldeath or a terminationdisability) by Mr. Denault for good reason or by Entergythe Company not for cause (regardless of whether there is a change in control), Mr. Denault would be entitled to receive, pursuant to his retention agreement, a lump sum severance payment equal to 2.99 times the sum ofof: his annual base salary plus the greater of his annual incentive calculated ataward under the Executive Incentive Plan for the calendar year immediately preceding the calendar year in which Mr. Denault’s termination date occurs or (ii) Mr. Denault’s Executive Incentive Plan target opportunity.award for the calendar year in which the effective date of the Agreement occurred (i.e., 2006). For purposes of this table, we have calculated the award at a 70% target opportunity and assumed a base salary of $630,000.$630,000 and target award o f 70% are assumed. |
3(3) | In the event of a termination relateddue to death or disability, by Mr. Denault for good reason, or by the Company not for cause (in all cases, regardless of whether there is a change in control,control), Mr. Denault would have forfeited his performance units for all open performance periods and would have been entitled to receive a single-sum severance payment pursuant to his retention agreement that would not be based on any outstanding performance periods. The payment would be calculated using the average annual number of performance units he would have been entitled to receive under the Performance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Denault's severance payment was calculated by taking an average of the target performance units from the 2006-2008 Performance Unit Program (6,000 units) and the 2007-2009 Performance Unit Program (4,500 units). This average number of units (5,250 units) multiplied by the closing price of Entergy stock on December 31, 2010 ($70.83) would equal a severance payment of $371,858 for the forfeited performance programs. |
(4) | In the event of his death, disability, termination by Mr. Denault for good reason or a termination by Entergy other thanthe Company not for cause disability or death, Mr. Denault would have been entitled to receive under the terms(regardless of his retention agreement a lump sum payment relating to his performance units. The paymentwhether there is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, we have calculated the value of Mr. Denault’s awards as follows: 2008 - 2010 Plan – 3,900 performance units at target, assuming a stock price of $81.84
2009 - 2012 Plan – 4,800 performance units at target, assuming a stock price of $81.84
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4 | In the event of disability or a termination related to a change in control,control), all of Mr. Denault’s unvested stock options would immediately vest. In addition, he would be entitled to exercise any unexercised options during a ten-year term extending from the grant date of the options. Further, pursuant to Mr. Denault’s retention agreement, in the event of a termination for good reason or other than for cause, all of Mr. Denault’s unvested stock options granted under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007) would immediately vest. For purposes of this table, weit was assumed that Mr. Denault exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. Denault’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table wit h respect to the accelerated vesting of Mr. Denault’s stock options. |
5
6 (5) | Mr. Denault’s 24,000 restricted units vest 1/3 inon January 25, 2011, 1/3 inon January 25, 2012 and 1/3 in 2013.on January 25, 2013, provided he remains a full-time System Company employee through each such vesting date. Pursuant to his restricted unit agreement, any unvested restricted units will vest immediately in the event of change in control, termination related to a change in control, aMr. Denault’s death or disability, or termination of employment by Mr. Denault for good reason or a termination by Entergy other thanthe Company not for cause disability or death. (regardless of whether there is a change in control). |
(6) | Pursuant to his retention agreement, in the event of a termination by Entergy other than cause or by Mr. Denault for good reason or by the Company not for cause, Mr. Denault would be eligible to receive company-subsidizedCompany-subsidized COBRA benefits for a period of 18 months. |
7(7) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Denault would be eligible to receive subsidizedCompany-subsidized medical and dental benefits for a period up to 18 months. |
8(8) | As of December 31, 2009, compensation and benefits available to2010, Mr. Denault under this scenario are substantially the same as available under a voluntary resignation.is not eligible for retirement. |
9(9) | Under theThe 2007 Equity Ownership Plan was amended in the event of a plan participant’s death, all unvested stock options would become immediately exercisable |
10 | Under the 2007 Equity Ownership Plan, plan participants are entitledDecember 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to receive an acceleration of certain benefits based solelyaccelerate vesting or trigger severance payments upon a change in control in the Company without regardcontrol.
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(10) | In December of 2010, Mr. Denault voluntarily agreed to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:amend his retention agreement to eliminate excise tax gross up payments. |
Under the terms of Mr. Denault’s retention agreement, Entergy may terminate his employment for cause upon Mr. Denault’s:
· | continuing failure to substantially perform his duties (other than because of physical or mental illness or after he has given notice of termination for good reason) that remains uncured for 30 days after receiving a written notice from the Personnel Committee; |
· | willfully engaging in conduct that is demonstrably and materially injurious to Entergy; |
· | conviction of or entrance of a plea of guilty or nolo contendere to a felony or other crime that has or may have a material adverse effect on his ability to carry out his duties or upon Entergy’s reputation; |
· | material violation of any agreement that he has entered into with Entergy; or |
· | unauthorized disclosure of Entergy’s confidential information. |
Mr. Denault may terminate his employment for good reason upon:
· | the substantial reduction in the nature or status of his duties or responsibilities; |
· | a reduction of 5% or more in his base salary as in effect on the date of the retention agreement; |
· | the relocation of his principal place of employment to a location other than the corporate headquarters; |
· | the failure to continue to allow him to participate in programs or plans providing opportunities for equity awards, stock options, restricted stock, stock appreciation rights, incentive compensation, bonus and other plans on a basis not materially less favorable than enjoyed at the time of the retention agreement (other than changes similarly affecting all senior executives); |
· | the failure to continue to allow him to participate in programs or plans with opportunities for benefits not materially less favorable than those enjoyed by him under any of ourthe pension, savings, life insurance, medical, health and accident, disability or vacation plans at the time of the retention agreement (other than changes similarly affecting all senior executives); or |
· | any purported termination of his employment not taken in accordance with his retention agreement. |
Mr. Denault may terminate his employment for good reason in the event of a change in control upon:
· | the substantial reduction or alteration in the nature or status of his duties or responsibilities; |
· | a reduction in his annual base salary; |
· | the relocation of his principal place of employment to a location more than 20 miles from his current place of employment; |
· | the failure to pay any portion of his compensation within seven days of its due date; |
· | the failure to continue in effect any compensation plan in which he participates and which is material to his total compensation, unless other equitable arrangements are made; |
· | the failure to continue to provide benefits substantially similar to those that he currently enjoys under any of the pension, savings, life insurance, medical, health and accident or disability plans, or Entergy taking of any other action which materially reduces any of those benefits or deprives him of any material fringe benefits that he currently enjoys; |
· | the failure to provide him with the number of paid vacation days to which he is entitled in accordance with the normal vacation policy; or |
· | any purported termination of his employment not taken in accordance with his retention agreement |
Joseph F. Domino
President & CEO - Entergy Texas
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and CEO – Entergy TXTexas would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2009:2010:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (6) | Disability | Death (7) | Change in Control (8) | Termination Related to a Change in Control | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (7) | | Termination Related to a Change in Control |
| |
Severance Payment(2) | --- | --- | --- | --- | --- | --- | $476,631 | |
| | | | | | | | | | | | | | | | | |
Severance Payment | | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $476,631 |
Performance Units:(3) | | | | | | | | (3) | | | | | | | | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | --- | $38,192 | $38,192 | $38,192 | $57,288 | $57,288 | |
2009-2011 Performance Unit Program | --- | --- | --- | $24,552 | $24,552 | $24,552 | $73,656 | $73,656 | | --- | | --- | | --- | | $42,498 | | $42,498 | | $42,498 | | $63,747 | | $63,747 |
2010-2012 Performance Unit Program | | | --- | | --- | | --- | | $23,610 | | $23,610 | | $23,610 | | $70,830 | | $70,830 |
Unvested Stock Options(4) | --- | --- | --- | $19,395 | $19,375 | $19,395(7) | $19,375 | $19,395 | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits (5) | --- | --- | --- | --- | --- | --- | --- | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
280G Tax Gross-up | --- | --- | --- | --- | --- | --- | --- | (8) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, Mr. Domino would have been eligible to retire and entitled to receive his vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see "2009"2010 Pension Benefits." If Mr. Domino's employment were terminated under certain conditions relatingIn the event of a termination related to a change in control, he would also be eligible for early retirement benefits, which are described in "2009 Pension Benefits." If Mr. Domino's employment were terminated "for cause," he would forfeit hispursuant to the terms of the System Executive Retirement Plan, and other similar supplemental benefits. Mr. Domino would be eligible for subsidized early retirement even if he does not have company permission to separate from employment. If Mr. Domino’s employment were terminated for cause, he would not receive a benefit under the System Executive Retirement Plan. |
2(2) | In the event of a termination related to a change in control, Mr. Domino would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to one time the sum of his base salary plus annual incentive, calculated atusing the average annual target opportunity. opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 50% target opportunity and a base salary of $317,754 was assumed. |
3(3) | In the event of a termination related to a change in control, Mr. Domino would have been entitled to receive pursuant to the System Executive Continuity2007 Equity Ownership Plan a lump sum payment relating to his performance units.units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance unitunits were achieved at target level. For purposes of the table, the value of Mr. Domino'sDomino’s awards waswere calculated as follows: 2008 - 2010 Plan – 700 performance units at target, assuming a stock price of $81.84
2009 - 20122011 Plan – 900 performance units at target, assuming a stock price of $81.84$70.83 2010 - 2012 Plan – 1,000 performance units at target, assuming a stock price of $70.83 For scenarios other than a termination related to a change in control, the award is not enhanced or accelerated by the termination event. With respect to death disability or retirement (as Mr. Domino is eligible for retirement),disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
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4(4) | In the event of retirement, death, disability or a termination related to a change in control, all of Mr. Domino's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Domino exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. Domino’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. Domino’s stock options. |
5(5) | Upon retirement Mr. Domino would be eligible for retiree medical and dental benefits.benefits, the same as all other retirees. Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Domino would not be eligible to receive additionalEntergy subsidized medical and dental benefits similar to those provided to a retiree.COBRA benefits. |
6(6) | As of December 31, 2009,2010, compensation and benefits available to Mr. Domino under this scenario are substantially the same as available with a voluntary resignation. For information regarding these vested benefits, see the Pension Benefits table included in this Form 10-K. |
7 | Under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007), in the event of a plan participant's death, all unvested stock options would become immediately exercisable. |
8(7) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control inof the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: · All unvested stock options would become immediately exercisable.exercisable; and · AllSeverance benefits in place of performance units become vested (based onpayable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(8) | In December 2010, the assumption that all performance goals were achieved at target).System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
Haley R. Fisackerly
President & CEO - Entergy Mississippi
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and CEO - Entergy Mississippi would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2009:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (6) | Disability | Death (7) | Change in Control (8) | Termination Related to a Change in Control | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (7) | | Termination Related to a Change in Control |
| |
Severance Payment(2) | --- | --- | --- | --- | --- | --- | $385,000 | |
| | | | | | | | | | | | | | | | | |
Severance Payment | | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $385,000 |
Performance Units:(3) | | | | | | | | (3) | | | | | | | | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | --- | --- | $31,808 | $31,808 | $47,713 | $47,713 | |
2009-2011 Performance Unit Program | --- | --- | --- | --- | $24,552 | $24,552 | $73,656 | $73,656 | | --- | | --- | | --- | | --- | | $42,498 | | $42,498 | | $63,747 | | $63,747 |
2010-2012 Performance Unit Program | | | --- | | --- | | --- | | --- | | $23,610 | | $23,610 | | $70,830 | | $70,830 |
Unvested Stock Options(4) | --- | --- | --- | --- | $16,378 | $16,378(7) | $16,378 | $16,378 | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits (5) | --- | --- | --- | --- | --- | --- | $15,820 | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $15,820 |
280G Tax Gross-up | --- | --- | --- | --- | --- | --- | --- | (8) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, Mr. Fisackerly also would have been entitled to receive his vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see "2009 Pension Benefits." Ifif Mr. Fisackerly's employment were terminated under certain conditions relating to a change in control, heMr. Fisackerly also would also behave been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits which are described in "2009see "2010 Pension Benefits." If Mr. Fisackerly's employment were terminated "forfor cause," he would forfeit his benefit under the System Executive Retirement Plan and other similar supplemental benefits.Plan. |
2(2) | In the event of a termination related to a change in control, Mr. Fisackerly would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to one time the sum of his base salary plus annual incentive, calculated atusing the average annual target opportunity.opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 40% target opportunity and a base salary of $275,000 was assumed. |
3(3) | In the event of a termination related to a change in control, Mr. Fisackerly would have been entitled to receive pursuant to the System Executive Continuity2007 Equity Ownership Plan a lump sum payment relating to his performance units.units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance unitunits were achieved at target level. For purposes of the table, the value of Mr. Fisackerly's awards waswere calculated as follows: 2008 - 2010 Plan – 583 performance units at target, assuming a stock price of $81.84
2009 - 20122011 Plan – 900 performance units at target, assuming a stock price of $81.84$70.83 2010 - 2012 Plan – 1,000 performance units at target, assuming a stock price of $70.83 For scenarios other than a termination related to a change in control, the award is not enhanced or accelerated by the termination event. With respect to death or disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
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4(4) | In the event of death, disability or a termination related to a change in control, all of Mr. Fisackerly's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Fisackerly exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. Fisackerly’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. Fisackerly’s stock options. |
5(5) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Fisackerly would be eligible to receive Entergy- subsidized medical and dentalCOBRA benefits for a period up to 12 months. |
6(6) | As of December 31, 2009,2010, compensation and benefits available to Mr. Fisackerly under this scenario are substantially the same as available with a voluntary resignation. |
7 | Under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007), in the event of a plan participant's death, all unvested stock options would become immediately exercisable. |
8(7) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control inof the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: · All unvested stock options would become immediately exercisable.exercisable; and · AllSeverance benefits in place of performance units become vested (based onpayable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(8) | In December 2010, the assumption that all performance goals were achieved at target).System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
J. Wayne Leonard
Chairman and Chief Executive Officer
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which Entergy's Chairman and Chief Executive Officer would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2009:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (8) | Disability | Death(9) | Change in Control(10) | Termination Related to a Change in Control |
| |
Annual Incentive Payment(2) | --- | --- | --- | --- | --- | --- | --- | $3,099,600 |
Severance Payment(3) | --- | --- | --- | --- | --- | --- | | $8,495,487 |
Performance Units:(4) | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | --- | $900,240 | $900,240 | $900,240 | $1,350,360 | $1,350,360 |
2009-2011 Performance Unit Program | --- | --- | --- | $613,800 | $613,800 | $613,800 | $1,841,400 | $1,841,400 |
Unvested Stock Options(5) | --- | --- | --- | $538,750 | $538,750 | $538,750 (9) | $538,750 | $538,750 |
Unvested Restricted Units(6) | --- | --- | $8,184,000 | --- | $8,184,000 | $8,184,000 | --- | $8,184,000 |
Medical and Dental Benefits(7) | --- | --- | --- | --- | --- | --- | --- | --- |
280G Tax Gross-up | --- | --- | --- | --- | --- | --- | --- | --- |
2010:
Benefits and Payments Upon Termination (1) | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (8) | | Disability | | Death | | Change in Control (9) | | Termination Related to a Change in Control |
| | | | | | | | | | | | | | | | |
Annual Incentive Payment | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $3,099,600 |
Severance Payment | (3) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $8,495,487 |
Performance Units: | (4) | | | | | | | | | | | | | | | |
2009-2011 Performance Unit Program | | --- | | --- | | --- | | $1,062,450 | | $1,062,450 | | $1,062,450 | | --- | | $2,029,280 |
2010-2012 Performance Unit Program | | --- | | --- | | --- | | $526,503 | | $526,503 | | $526,503 | | --- | | $2,029,280 |
Unvested Stock Options | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Unvested Restricted Units | (6) | --- | | --- | | $7,083,000 | | --- | | $7,083,000 | | $7,083,000 | | --- | | $7,083,000 |
Medical and Dental Benefits | (7) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
280G Tax Gross-up | (10) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, Mr. Leonard would have been eligible to retire and entitled to receive his vested pension benefits. However, a termination “for cause” would have resulted in forfeiture of Mr. Leonard’s supplemental retirement benefit. Mr. Leonard is not entitled to additional pension benefits inupon the eventoccurrence of a change in control.control without termination of employment. For additional information regarding these vested benefits and awards, see “2009“2010 Pension Benefits.” |
2(2) | In the event of a termination related to a change in control, Mr. Leonard would have been entitled under his retention agreement to receive a lump sum severance payment equal to the product of his cash annual incentive bonus under the Annual Incentive Plan calculated atMr. Leonard’s average maximum annual bonus opportunity.opportunity under the Executive Incentive Plan for the Company’s two calendar years immediately preceding the calendar year in which his termination occurs. For purposes of this table, we have calculated the award was calculated at 200% of target opportunity and assumed a base salary of $1,291,500. |
3(3) | In the event of a termination related to a change in control, Mr. Leonard would have been entitled to receive pursuant to his retention agreement a lump sum severance payment equal to the sum of 2.99 times the sum of his (a) base salary plus (b) average Executive Incentive Plan award at target annual incentive (calculated at 120% of his base salary).for the two calendar years immediately preceding the calendar year in which the termination occurs. |
4(4) | In the event of a termination related to a change in control, including a termination by Mr. Leonard for good reason, by Entergythe Company other than for cause, disability or death, Mr. Leonard would have forfeited his performance units for all open performance periods and would have been entitled to receive a single sum severance payment pursuant to his retention agreement that would not be based on any outstanding performance periods. The payment would have been calculated using the average annual number of performance units he would have been entitled to receive under the terms ofPerformance Unit Program with respect to the two most recent performance periods preceding the calendar year in which his retention agreement a lump sum payment relating to his performance units. The payment is calculated as iftermination occurs assuming all performance goals relating to the performance unit were achieved at target level.target. For purposes of the table, we have calculated the value of Mr. Leonard’s awards as follows:Leo nard's severance payment was calculated by taking an average of the target performance units from the 2006-2008 Performance Unit Program (33,500 units) and the 2007-2009 Performance Unit Program (23,800 units). This average number of units (28,650 units) multiplied by the closing price of Entergy stock on December 31, 2010 ($70.83) would equal a severance payment of $2,029,280 for the forfeited performance unit programs. 2008 - 2010 Plan – 16,500 performance units at target, assuming a stock price of $81.84
2009 - 2011 Plan – 22,500 performance units at target, assuming a stock price of $81.84
For scenarios other than a termination related to a change in control, the award is not enhanced or accelerated by the termination event. With respect to death, disability or disability,retirement the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
2009 - 2011 Plan – 22,500 performance units at target, assuming a stock price of $70.83 2010 - 2012 Plan – 22,300 performance units at target, assuming a stock price of $70.83 |
5(5) | In the event of retirement, death, disability or a termination related to a change in control, all of Mr. Leonard’s unvested stock options would immediately vest. In addition, Mr. Leonard would be entitled to exercise any outstanding options during a ten-year term extending from the grant date of the options. For purposes of this table, weit was assumed that Mr. Leonard exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the exercise price of each option share. AS of December 31, 2010, the exercise price for all of Mr. Leonard’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. Leonard’s stock option s. |
6(6) | Mr. Leonard’s 100,000 restricted units vest in two installments on December 3, 2011 and December 3, 2012. Pursuant to his restricted unit agreement, any unvested restricted units will vest immediately in the event of a termination related to a change in control, in the event of the termination of his employment by Mr. Leonard for good reason, by the Company other than for cause, or by reason of his death or disability. |
7(7) | Upon retirement Mr. Leonard would be eligible for retiree medical and dental benefits, the same as all other retirees. Pursuant to Mr. Leonard’shis retention agreement, in the event of a termination related to a change in control, Mr. Leonard iswould not be eligible to receive additional medical and dentalsubsidized COBRA benefits. Upon retirement Mr. Leonard would be eligible for retiree medical and dental benefits similar to those provided to Entergy retirees. |
8(8) | As of December 31, 2009,2010, Mr. Leonard is retirement eligible and would retire rather than voluntarily resign. Given this scenario, the compensation and benefits available to Mr. Leonard under retirement are substantially the same as available with a voluntary resignation. |
9(9) | Under theThe 2007 Equity Ownership Plan (applicablewas amended in December 2010 so that awards granted after December 30, 2010 require an involuntary termination in order to grants of equity awards made after January 1, 2007), in the event of a plan participant’s death, all unvested stock options would become immediately exercisable. |
10 | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solelyaccelerate vesting or trigger severance payments upon a change in control in the Company without regardcontrol.
|
(10) | In December of 2010, amend Mr. Leonard voluntarily agreed to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows:• All unvested stock options would become immediately exercisable; and
• All performance units become vested (based on the assumption that all performance goals were achieved at target). modify his retention agreement to eliminate excise tax gross up. |
Under the terms of Mr. Leonard's retention agreement, we may terminate his employment for cause upon Mr. Leonard's:
· | willful and continued failure to substantially perform his duties (other than because of physical or mental illness or after he has given notice of termination for good reason) that remains uncured for 30 days after receiving a written notice from the Board; or |
· | willfully engaging in conduct that is demonstrably and materially injurious to us and which results in a conviction of or entrance of a plea of guilty or nolo contendere (essentially a form of plea in which the accused refuses to contest the charges) to a felony. |
In the event of a change in control, Mr. Leonard may terminate his employment for good reason upon:
· | the substantial reduction or alteration in the nature or status of his duties or responsibilities; |
· | a reduction in his annual base salary; |
· | the relocation of his principal place of employment to a location more than 20 miles from his current place of employment; |
· | the failure to pay any portion of his compensation within seven days of its due date; |
· | the failure to continue in effect any compensation plan in which he participates and which is material to his total compensation, unless other equitable arrangements are made; |
· | the failure to continue to provide benefits substantially similar to those that he currently enjoys under any of the pension, savings, life insurance, medical, health and accident or disability plans, or the taking of any other action which materially reduces any of those benefits or deprives him of any material fringe benefits that he currently enjoys; |
· | the failure to provide him with the number of paid vacation days to which he is entitled in accordance with the normal vacation policy; or |
· | any purported termination of his employment not taken in accordance with his retention agreement. |
Hugh T. McDonald
President & CEO, Entergy Arkansas
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President & CEO, Entergy Arkansas would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2009:2010:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (6) | Disability | Death (7) | Change in Control (8) | Termination Related to a Change in Control | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (7) | | Termination Related to a Change in Control |
| |
Severance Payment(2) | --- | --- | --- | --- | --- | --- | $483,198 | |
| | | | | | | | | | | | | | | | | |
Severance Payment | | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $483,198 |
Performance Units:(3) | | | | | | | | (3) | | | | | | | | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | --- | --- | $38,192 | $38,192 | $57,288 | $57,288 | |
2009-2011 Performance Unit Program | --- | --- | --- | --- | $24,552 | $24,552 | $73,656 | $73,656 | | --- | | --- | | --- | | --- | | $42,498 | | $42,498 | | $63,747 | | $63,747 |
2010-2012 Performance Unit Program | | | --- | | --- | | --- | | --- | | $23,610 | | $23,610 | | $70,830 | | $70,830 |
Unvested Stock Options(4) | --- | --- | --- | --- | $19,395 | $19,395(7) | $19,395 | $19,395 | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits (5) | --- | --- | --- | --- | --- | --- | $15,820 | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $15,820 |
280G Tax Gross-up | --- | --- | --- | --- | --- | --- | --- | (8) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, Mr. McDonald also would have been entitled to receive his vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see "2009 Pension Benefits." Ifif Mr. McDonald's employment were terminated under certain conditions relating to a change in control, heMr. McDonald also would also behave been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits which are described in "2009see "2010 Pension Benefits." If Mr. McDonald's employment were terminated "forfor cause," he would forfeit his Supplementalbenefit under the System Executive Retirement Plan and other similar supplemental benefits.Plan. |
2(2) | In the event of a termination related to a change in control, Mr. McDonald would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to one time the sum of his base salary plus annual incentive, calculated atusing the average annual target opportunity.opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 50% target opportunity and a base salary of $322,132 was assumed. |
3(3) | In the event of a termination related to a change in control, Mr. McDonald would have been entitled to receive pursuant to the System Executive Continuity2007 Equity Ownership Plan a lump sum payment relating to his performance units.units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance unitunits were achieved at target level. For purposes of the table, the value of Mr. McDonald'sMcDonald’s awards has beenwere calculated as follows: 2008 - 2010 Plan – 700 performance units at target, assuming a stock price of $81.84
2009 - 2011 Plan – 900 performance units at target, assuming a stock price of $81.84$70.83 2010 - 2012 Plan – 1,000 performance units at target, assuming a stock price of $70.83 For scenarios other than a termination related to a change in control, the award is not enhanced or accelerated by the termination event. With respect to death or disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
|
4(4) | In the event of death, disability or a termination related to a change in control, all of Mr. McDonald's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. McDonald exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. McDonald’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. McDonaldR 17;s stock options. |
5(5) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. McDonald would be eligible to receive Company- subsidized medical and dentalCOBRA benefits for a period up to 12 months. |
6(6) | As of December 31, 2009,2010, compensation and benefits available to Mr. McDonald under this scenario are substantially the same as available with a voluntary resignation. |
7 | Under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007), in the event of a plan participant's death, all unvested stock options would become immediately exercisable. |
8(7) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control inof the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: · All unvested stock options would become immediately exercisable.exercisable; and · AllSeverance benefits in place of performance units become vested (based onpayable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(8) | In December 2010, the assumption that all performance goals were achieved at target).System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
Richard J. SmithWilliam M. Mohl
President and Chief Operating OfficerCEO, Entergy Louisiana
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and Chief Operating OfficerCEO, Entergy Louisiana would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2009:2010:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (6) | Disability | Death (7) | Change in Control (8) | Termination Related to a Change in Control | | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (7) | | Disability | | Death | | Change in Control (8) | | Termination Related to a Change in Control |
| |
| | | | | | | | | | | | | | | | | |
Severance Payment(2) | --- | --- | --- | --- | $3,278,535 | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $910,000 |
Performance Units:(3) | | | | | | (3) | | | | | | | | | | | | | | | |
2008-2010 Performance Unit Program | --- | --- | --- | $212,784 | $319,176 | $319,176 | |
2009-2011 Performance Unit Program | --- | --- | --- | $130,944 | $392,832 | $392,832 | | --- | | --- | | --- | | --- | | $68,469 | | $68,469 | | $102,704 | | $102,704 |
2010-2012 Performance Unit Program | | | --- | | --- | | --- | | --- | | $47,220 | | $47,220 | | $141,660 | | $141,660 |
Unvested Stock Options(4) | --- | --- | --- | $150,850 | $150,850 (7) | $150,850 | $150,850 | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits(5) | --- | --- | --- | --- | --- | |
Unvested Restricted Units | | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $127,494 |
Medical and Dental Benefits | | (6) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $17,659 |
280G Tax Gross-up | --- | --- | --- | --- | --- | (9) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, if Mr. SmithMohl's employment were terminated under certain conditions relating to a change in control, Mr. Mohl also would have been eligible to retire and entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits available to Named Executive Officers, see "2009"2010 Pension Benefits." In the event of a termination related to a change in control, pursuant to the terms of the Pension Equalization Plan, Mr. Smith would be eligible for subsidized early retirement even if he does not have company permission to separate from employment. If Mr. Smith'sMohl's employment were terminated for cause, he would not receive aforfeit his benefit under the Pension EqualizationSystem Executive Retirement Plan. |
2(2) | In the event of a termination related to a change in control, Mr. SmithMohl would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to 2.99two times the sum of his base salary plus annual incentive, calculated atusing the average annual target opportunity.opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 40% target opportunity and a base salary of $325,000 was assumed. |
3(3) | In the event of a termination related to a change in control, Mr. SmithMohl would have been entitled to receive pursuant to the System Executive Continuity2007 Equity Ownership Plan a lump sum payment relating to his performance units.units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Smith'sMohl's awards were calculated as follows: 20082009 - 20102011 Plan – 3,9001,450 performance units at target, assuming a stock price of $81.84$70.83
20092010 - 2012 Plan – 4,8002,000 performance units at target, assuming a stock price of $81.84
$70.83 With respect to death or disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. |
4(4) | In the event of death, disability or a change in control, all of Mr. Mohl's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Mohl exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. Mohl’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. Mohl’s stock options. |
(5) | Mr. Mohl’s 3,000 restricted units vest 40% in 2009 and 60% in 2011. Pursuant to his restricted unit agreement, any unvested restricted units will vest immediately in the event of termination related to a change in control. |
(6) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Mohl would be eligible to receive Company- subsidized COBRA benefits for 18 months. |
(7) | As of December 31, 2010, compensation and benefits available to Mr. Mohl under this scenario are substantially the same as available with a voluntary resignation. |
(8) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: ·All unvested stock options would become immediately exercisable; and ·Severance benefits in place of performance units become payable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(9) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
Charles L. Rice, Jr.
President & CEO - Entergy New Orleans
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President and CEO - Entergy New Orleans would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2010:
Benefits and Payments Upon Termination (1) | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (7) | | Termination Related to a Change in Control |
| | | | | | | | | | | | | | | | |
Severance Payment | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $300,000 |
Performance Units: | (3) | | | | | | | | | | | | | | | |
2009-2011 Performance Unit Program | | --- | | --- | | --- | | --- | | $21,249 | | $21,249 | | $31,874 | | $31,874 |
2010-2012 Performance Unit Program | | --- | | --- | | --- | | --- | | $19,667 | | $19,667 | | $59,001 | | $59,001 |
Unvested Stock Options | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $880 |
280G Tax Gross-up | (8) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
(1) | In addition to the payments and benefits in the table, if Mr. Rice's employment were terminated under certain conditions relating to a change in control, Mr. Rice also would have been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits see "2010 Pension Benefits." If Mr. Rice's employment were terminated for cause, he would forfeit his benefit under the System Executive Retirement Plan. |
(2) | In the event of a termination related to a change in control, Mr. Rice would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to one time the sum of his base salary plus annual incentive, calculated using the average annual target opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 25% target opportunity and a base salary of $240,000 was assumed. |
(3) | In the event of a termination related to a change in control, Mr. Rice would have been entitled to receive pursuant to the 2007 Equity Ownership Plan a lump sum payment relating to his performance units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Rice’s awards were calculated as follows: 2009 - 2011 Plan – 450 performance units at target, assuming a stock price of $70.83 2010 - 2012 Plan – 833 performance units at target, assuming a stock price of $70.83 With respect to death or disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. |
(4) | In the event of death, disability or a change in control, all of Mr. Rice's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Rice exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. Rice’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. Rice’s stock options. |
(5) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Rice would be eligible to receive Company- subsidized COBRA benefits for 12 months. |
(6) | As of December 31, 2010, compensation and benefits available to Mr. Rice under this scenario are substantially the same as available with a voluntary resignation. |
(7) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control of the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: ·All unvested stock options would become immediately exercisable; and ·Severance benefits in place of performance units become payable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(8) | In December 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
Richard J. Smith
President, Entergy Wholesale Commodity Business
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the President, Entergy Wholesale Commodity Business would have been entitled to receive as a result of a termination of his employment under various scenarios as of December 31, 2010:
Benefits and Payments Upon Termination (1) | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (7) | | Termination Related to a Change in Control |
| | | | | | | | | | | | | | | | |
Severance Payment | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $3,278,535 |
Performance Units: | (3) | | | | | | | | | | | | | | | |
2009-2011 Performance Unit Program | | --- | | --- | | --- | | $226,656 | | $226,656 | | $226,656 | | $339,984 | | $339,984 |
2010-2012 Performance Unit Program | | --- | | --- | | --- | | $125,133 | | $125,133 | | $125,133 | | $375,399 | | $375,399 |
Unvested Stock Options | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Medical and Dental Benefits | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
280G Tax Gross-up | (8) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Retention Agreement | (9) | --- | | --- | | --- | | $967,500 | | --- | | --- | | --- | | --- |
(1) | In addition to the payments and benefits in the table, Mr. Smith would have been eligible to retire and entitled to receive his vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see "2010 Pension Benefits." In the event of a termination related to a change in control, pursuant to the terms of the Pension Equalization Plan, Mr. Smith would be eligible for subsidized early retirement even if he does not have company permission to separate from employment. If Mr. Smith's employment were terminated for cause, he would not receive a benefit under the Pension Equalization Plan. |
(2) | In the event of a termination related to a change in control, Mr. Smith would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to 2.99 times the sum of his base salary plus annual incentive, calculated using the average annual target opportunity derived under the Executive Incentive Plan for two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 70% target opportunity and a base salary of $645,000 was assumed. |
(3) | In the event of a termination related to a change in control, Mr. Smith would have been entitled to receive pursuant to the 2007 Equity Ownership Plan a lump sum payment relating to his performance units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance units were achieved at target level. For purposes of the table, the value of Mr. Smith's awards were calculated as follows: 2009 - 2011 Plan – 4,800 performance units at target, assuming a stock price of $70.83 2010 - 2012 Plan – 5,300 performance units at target, assuming a stock price of $70.83 With respect to death, disability or retirement the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. |
(4) | In the event of retirement, death, disability or a change in control, all of Mr. Smith's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for the remainder of the ten-year term extending from the grant date of the options. For purposes of this table, it is assumed that Mr. Smith exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. Smith’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. Smith’s stock options. |
5(5) | Upon retirement Mr. Smith would be eligible for retiree medical and dental benefits.benefits, the same as all other retirees. Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Smith would not be eligible to receive additional subsidized medical and dental benefits similar to those provided to Entergy retirees.COBRA benefits. |
6(6) | As of December 31, 2009,2010, Mr. Smith is retirement eligible and would retire rather than voluntarily resign. Given that scenario, the compensation and benefits available to Mr. Smith under retirement are substantially the same as available with a voluntary resignation. |
7 | Under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007), in the event of a plan participant's death, all unvested stock options would become immediately exercisable. |
8(7) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control inof the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: · All unvested stock options would become immediately exercisable.exercisable; and · AllSeverance benefits in place of performance units become vested (basedpayable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(8) | In December of 2010, the System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
(9) | In December 2009, the Company entered into an agreement with Mr. Smith. The agreement provides that Mr. Smith is entitled to receive a lump sum cash payment equal to 1.5 times his base salary as of the date of separation from Entergy if either he (i) remains continuously employed at a management level for 24 months after the date of the public announcement that the Spin Transaction will not occur or (ii) he remains continuously employed in such capacity for at least six (6) months after such date and thereafter retires with the consent of Entergy Corporation’s Chief Executive Officer prior to reaching such 24 months of service. The “no spin” announcement occurred on the assumption that all performance goals were achieved at target)April 5, 2010. If he retired on December 31, 2010 with permission from Entergy’s Chief Executive Officer, he wou ld have been eligible to receive 1.5 times his base salary. See “Compensation Discussion and Analysis” for a complete description of Mr. Smith’s agreement. |
The information in this table does not reflect the agreement entered into with Mr. Smith in December 2009. In order to receive any payments contemplated by the agreement, the planned Spin Transaction must not occur and (i) Mr. Smith must remain employed for 24 months after a public announcement that the Spin Transaction will not occur or (ii) he must remain continuously employed in such capacity for at least six (6) months after any such public announcement and thereafter retire with the consent of Entergy’s Chief Executive Officer. Neither event occurred between the date of this agreement and December 31, 2009. If these events occur, Mr. Smith will be entitled to receive a lump sum cash payment equal to 1.5 times his base salary as of the date of separation from Entergy. See “Compensation Discussion and Analysis” for a complete description of Mr. Smith’s agreement.
Roderick K. West
Executive Vice President & CEO, Entergy New OrleansChief Administrative Officer
The following table shows certain payments and benefits, excluding vested or earned awards and benefits, which the Executive Vice President & CEO, Entergy New OrleansChief Administrative Officer would have been entitled to receive as a result of a termination of her employment under various scenarios as of December 31, 2009:2010:
Benefits and Payments Upon Termination(1) | Voluntary Resignation | For Cause | Termination for Good Reason or Not for Cause | Retirement (6) | Disability | Death (7) | Change in Control (9) | Termination Related to a Change in Control | | Voluntary Resignation | | For Cause | | Termination for Good Reason or Not for Cause | | Retirement (6) | | Disability | | Death | | Change in Control (8) | | Termination Related to a Change in Control |
| |
Severance Payment(2) | --- | --- | --- | --- | --- | --- | $441,000 | |
| | | | | | | | | | | | | | | | | |
Severance Payment | | (2) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $2,302,300 |
Performance Units:(3) | | | | | | | | (3) | | | | | | | | | | | | | | | |
2007-2009 Performance Unit Program | --- | --- | --- | | $38,192 | $57,288 | $57,288 | |
2008-2010 Performance Unit Program | --- | --- | --- | --- | $24,552 | $73,656 | $73,656 | |
2009-2011 Performance Unit Program | | | --- | | --- | | --- | | --- | | $134,577 | | $134,577 | | $201,866 | | $201,866 |
2010-2012 Performance Unit Program | | | --- | | --- | | --- | | --- | | $108,205 | | $108,205 | | $324,614 | | $324,614 |
Unvested Stock Options(4) | --- | --- | --- | --- | $21,550 | $21,550(7) | $21,550 | $21,550 | (4) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
Unvested Restricted Units(8) | --- | --- | $1,227,600 | --- | --- | $1,227,600 | $1,227,600 | (7) | --- | | --- | | $1,062,450 | | --- | | --- | | --- | | $1,062,450 | | $1,062,450 |
Medical and Dental Benefits(5) | --- | --- | --- | --- | --- | --- | $15,820 | (5) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | $23,730 |
280G Tax Gross-up | --- | --- | --- | --- | --- | --- | $710,829 | (9) | --- | | --- | | --- | | --- | | --- | | --- | | --- | | --- |
1(1) | In addition to the payments and benefits in the table, Mr. West also would have been entitled to receive his vested pension benefits. For a description of the pension benefits available to Named Executive Officers, see "2009 Pension Benefits." Ifif Mr. West's employment were terminated under certain conditions relating to a change in control, heMr. West also would also behave been entitled to receive his vested pension benefits and would have been eligible for early retirement benefits. For a description of the pension benefits which are described in "2009see "2010 Pension Benefits." If Mr. West's employment were terminated "forfor cause," he would forfeit his benefit under the System Executive Retirement Plan and other similar supplemental benefits.Plan. |
2(2) | In the event of a termination related to a change in control, Mr. West would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to one time2.99 times the sum of his base salary plus annual incentive, calculated atusing the average annual target opportunity.opportunity derived under the Executive Incentive Plan for the two calendar years immediately preceding the calendar year in which the participant’s termination occurs. For purposes of this table, a 40% target opportunity and a base salary of $550,000 was assumed. |
3(3) | In the event of a termination related to a change in control, Mr. West would have been entitled to receive pursuant to the System Executive Continuity2007 Equity Ownership Plan a lump sum payment relating to his performance units.units under the Performance Unit Program. The payment is calculated as if all performance goals relating to the performance unitunits were achieved at target level. For purposes of the table, the value of Mr. West'sWest’s awards have beenwere calculated as follows: 20082009 - 20102011 Plan – 7002,850 performance units at target, assuming a stock price of $81.84$70.83
20092010 - 2012 Plan – 9004,583 performance units at target, assuming a stock price of $81.84$70.83
For scenarios other than a termination related to a change in control, the award is not enhanced or accelerated by the termination event. With respect to death or disability, the award is pro-rated based on the number of months of participation in each Performance Unit Program performance cycle. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period.
|
4(4) | In the event of death, disability or a termination related to a change in control, all of Mr. West's unvested stock options would immediately vest. In addition, he would be entitled to exercise his stock options for a ten-year term extending from the grant date of the options. For purposes of this table, it is assumed that Mr. West exercised his options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 31, 2009,2010, and the applicable exercise price of each option share. As of December 31, 2010, the exercise price for all of Mr. West’s unvested options exceeded the closing stock price and accordingly, no amounts are reported in the table with respect to the accelerated vesting of Mr. West’s stock options. |
5(5) | Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. West would be eligible to receive Company- subsidized medical and dentalCOBRA benefits for period up to 1218 months. |
6(6) | As of December 31, 2009,2010, compensation and benefits available to Mr. West under this scenario are substantially the same as available with a voluntary resignation. |
7 | Under the 2007 Equity Ownership Plan (applicable to grants of equity awards made after January 1, 2007), in the event of a plan participant's death, all unvested stock options would become immediately exercisable. |
8(7) | Mr. West's 15,000 restricted unit vest 100% in 2013. Pursuant to his restricted unit agreement, any unvested restricted units will vest immediately in the event of termination for good reason or not for cause and a change in control. |
9(8) | Under the 2007 Equity Ownership Plan, plan participants are entitled to receive an acceleration of certain benefits based solely upon a change in control inof the Company and without regard to whether their employment is terminated as a result of a change in control. The accelerated benefits in the event of a change in control are as follows: · All unvested stock options would become immediately exercisable.exercisable; and · AllSeverance benefits in place of performance units become vested (based onpayable as described in footnote 3 above. The 2007 Equity Ownership Plan was amended in December 2010 so that Awards granted after December 30, 2010 require an involuntary termination in order to accelerate vesting or trigger severance payments. |
(9) | In December 2010, the assumption that all performance goals were achieved at target).System Executive Continuity Plan was amended to eliminate excise tax gross-up payments. |
In the following sections, additional information is provided regarding certain of the scenarios described in the tables above:
Termination Related to a Change in Control
Under the System Executive Continuity Plan, the Named Executive Officers will be entitled to the benefits described in the tables above in the event of a termination related to a change in control if their employment is terminated other than for cause or if they terminate their employment for good reason, in each case within a period commencing 90 days prior to and ending 24 months following a change in control.
A change in control includes the following events:
· | The purchase of 25%30% or more of either the common stock or the combined voting power of the voting securities, the merger or consolidation of Entergy Corporation (unless Entergy Corporation's board members constitute at least a majority of the board members of the surviving entity); |
· | the merger or consolidation of Entergy Corporation (unless Entergy Corporation's board members constitute at least a majority of the board members of the surviving entity;entity); |
· | the liquidation, dissolution or sale of all or substantially all of Entergy Corporation's assets; or |
· | a change in the composition of Entergy Corporation's board such that, during any two-year period, the individuals serving at the beginning of the period no longer constitute a majority of Entergy Corporation's board at the end of the period. |
The proposed separation of the non-utility nuclear business in a tax-free spin-off to Entergy Corporation's shareholders does not constitute a "Change in Control" for purposes of the System Executive Continuity Plan.
Entergy Corporation may terminate a Named Executive Officer's employment for cause under the System Executive Continuity Plan if he or she:
· | fails to substantially perform his duties for a period of 30 days after receiving notice from the board; |
· | engages in conduct that is injurious to Entergy Corporation or any of its subsidiaries; |
· | is convicted or pleads guilty to a felony or other crime that materially and adversely affects his or her ability to perform his or her duties or Entergy Corporation's reputation; |
· | violates any agreement with Entergy Corporation or any of its subsidiaries; or |
· | discloses any of Entergy Corporation's confidential information without authorization. |
A Named Executive Officer may terminate employment with Entergy Corporation for good reason under the System Executive Continuity Plan if, without the Named Executive Officer's consent:
· | the nature or status of his or her duties and responsibilities is substantially altered or reduced compared to the period prior to the change in control; |
· | his or her salary is reduced by 5% or more; |
· | he or she is required to be based outside of the continental United States at somewhere other than the primary work location prior to the change in control; |
· | any of his or her compensation plans are discontinued without an equitable replacement; |
· | his or her benefits or number of vacation days are substantially reduced; or |
· | his or her employment is purported to be terminated other than in accordance with the System Executive Continuity Plan. |
In addition to participation in the System Executive Continuity Plan, upon the completion of a transaction resulting in a change in control of Entergy Corporation, benefits already accrued under the System Executive Retirement Plan and Pension Equalization Plan, if any, will become fully vested if the executive is involuntarily terminated without cause or terminates employment for good reason. Any awards granted under the Equity Ownership Plan will become fully vested upon a Change in Control without regard to whether the executive is involuntarily terminated without cause or terminates employment for good reason.
Under certain circumstances, the payments and benefits received by a Named Executive Officer pursuant to the System Executive Continuity Plan may be forfeited and, in certain cases, subject to repayment. Benefits are no longer payable under the System Executive Continuity Plan, and unvested performance units under the Performance Unit Program are subject to forfeiture, if the executive:
· | accepts employment with Entergy Corporation or any of its subsidiaries; |
· | elects to receive the benefits of another severance or separation program; |
· | removes, copies or fails to return any property belonging to Entergy Corporation or any of its subsidiaries; |
· | discloses non-public data or information concerning Entergy Corporation or any of its subsidiaries; or |
· | violates their non-competition provision, which generally runs for two years but extends to three years if permissible under applicable law. |
Furthermore, if the executive discloses non-public data or information concerning Entergy Corporation or any of its subsidiaries or violates their non-competition provision, he or she will be required to repay any benefits previously received under the System Executive Continuity Plan.
Termination for Cause
If a Named Executive Officer's employment is terminated for "cause" (as defined in the System Executive Continuity Plans and described above under "Termination Related to a Change in Control"), he or she is generally entitled to the same compensation and separation benefits described below under "Voluntary Resignation."Resignation" except that all options may no longer be exercisable.
Voluntary Resignation
If a Named Executive Officer voluntarily resigns from an Entergy System company employer, he or she is entitled to all accrued benefits and compensation as of the separation date, including qualified pension benefits (if any) and other post-employment benefits on terms consistent with those generally available to other salaried employees. In the case of voluntary resignation, the officer would forfeit all unvested stock options and restricted units as well as any perquisites to which he or she is entitled as an officer. In addition, the officer would forfeit, except as described below, his or her right to receive incentive payments under the Performance Unit Program or the Executive Incentive Plan. If the officer resigns after the completion of an Executive Incentive Plan or Performance Unit Program performancepe rformance period, he or she could receive a payout under the Performance Unit Program based on the outcome of the performance cycle and could, at the Entergy Corporation's discretion, receive an annual incentive payment under the Executive Incentive Plan. Any vested stock options held by the officer as of the separation date will expire the earlier of ten years from date of grant or 90 days from the last day of active employment.
Retirement
Under Entergy Corporation's retirement plans, a Named Executive Officer's eligibility for retirement benefits is based on a combination of age and years of service. Normal retirement is defined as age 65. Early retirement is defined under the qualified retirement plan as minimum age 55 with 10 years of service and in the case of the System Executive Retirement Plan and the supplemental credited service under the Pension Equalization Plan, the consent of Entergy System company employer.
Upon a Named Executive Officer's retirement, he or she is generally entitled to all accrued benefits and compensation as of the separation date, including qualified pension benefits and other post-employment benefits consistent with those generally available to salaried employees. The annual incentive payment under the Executive Incentive Plan is pro-rated based on the actual number of days employed during the performance year in which the retirement date occurs. Similarly, payments under the Performance Unit Program for those retiring with a minimum of 12 months of participation are pro-rated based on the actual number of days employed, in each outstanding performance cycle, in which the retirement date occurs. In each case, payments are delivered at the conclusion of each annual or performance cycle, consistent with the timing of payments to active participants in the Executive Incentive Plan and the Performance Unit Program, respectively.
Unvested stock options issued under the Equity Ownership Plan vest on the retirement date and expire ten years from the grant date of the options. Any restricted units held (other than those issued under the Performance Unit Program) by the executive upon his or her retirement are forfeited, and perquisites (other than short-term financial counseling services) are not available following the separation date.
Disability
If a Named Executive Officer's employment is terminated due to disability, he or she generally is entitled to the same compensation and separation benefits described above under "Retirement," except that restricted units may be subject to specific disability benefits (as noted, where applicable, in the tables above).
Death
If a Named Executive Officer dies while actively employed by an Entergy System company employer, he or she generally is entitled to the same compensation and separation benefits described above under "Retirement," except that:
· | all unvested stock options granted prior to January 1, 2007 are forfeited; |
· | vested stock options will expire the earlier of ten years from the grant date or three years following the executive's death; |
· | restricted units may be subject to specific death benefits (as noted, where applicable, in the tables above). |
Compensation of Directors
For information regarding compensation of the directors of Entergy Corporation, see the Proxy Statement under the heading "Director Compensation"“Director Compensation”, which information is incorporated herein by reference. The Boards of Directors of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans and Entergy Texas are comprised solely of employee directors who receive no compensation for service as directors.
Entergy Corporation owns 100% of the outstanding common stock of registrants Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans and Entergy Texas. The information with respect to persons known by Entergy Corporation to be beneficial owners of more than 5% of Entergy Corporation'sCorporation’s outstanding common stock is included under the heading "Stockholders“Stockholders Who Own at Least Five Percent"Percent” in the Proxy Statement, which information is incorporated herein by reference. The registrants know of no contractual arrangements that may, at a subsequent date, result in a change in control of any of the registrants.
The following table sets forth the beneficial ownership of Common Stock of Entergy Corporation and stock-based units as of December 31, 20092010 for all directors and Named Executive Officers. Unless otherwise noted, each person had sole voting and investment power over the number of shares of Common Stock and stock-based units of Entergy Corporation set forth across from his or her name.
Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) |
| | | | | | | | | | | | |
Entergy Corporation | | | | | | | | | | | | |
Maureen S. Bateman* | | 6,700 | | - | | 7,200 | | 3,700 | | - | | 8,000 |
W. Frank Blount* | | 12,234 | | - | | 17,600 | | 12,834 | | - | | 18,400 |
Leo P. Denault** | | 7,543 | | 276,619 | | - | | 10,884 | | 311,799 | | - |
Gary W. Edwards* | | 800 | | - | | 4,831 | | 900 | | - | | 6,231 |
Alexis Herman* | | 3,900 | | - | | 4,800 | | 4,500 | | - | | 5,600 |
Donald C. Hintz* | | 7,755 | | 260,000 | | 5,200 | | 8,091 | | 260,000 | | 6,000 |
J. Wayne Leonard***(3) | | 257,875 | | 1,864,733 | | 2,842 | | 360,710 | | 1,679,133 | | 2,966 |
Stuart L. Levenick* | | 2,600 | | - | | 3,031 | | 3,200 | | - | | 3,831 |
Blanche L. Lincoln* | | | - | | - | | - |
Stewart C. Myers* | | 138 | | - | | - | | 738 | | - | | 583 |
James R. Nichols* (3) | | 9,894 | | - | | 18,626 | | 8,889 | | - | | 19,426 |
William A. Percy, II* | | 2,650 | | - | | 10,754 | | 2,650 | | - | | 12,154 |
Mark T. Savoff** | | 831 | | 144,800 | | 240 | | 1,010 | | 173,800 | | 251 |
Richard J. Smith** | | 29,381 | | 415,668 | | - | | 42,272 | | 405,266 | | - |
W. J. Tauzin* | | 2,500 | | - | | 2,893 | | 3,100 | | - | | 3,693 |
Gary J. Taylor** | | 1,394 | | 279,833 | | - | | 1,454 | | 314,833 | | - |
Steven V. Wilkinson* | | 3,655 | | - | | 4,427 | | 4,255 | | - | | 5,227 |
All directors and executive | | | | | | | | | | | | |
officers as a group (21 persons) | | 354,139 | | 3,831,922 | | 82,444 | |
officers as a group (23 persons) | | | 489,778 | | 3,619,048 | | 92,362 |
| | | | | | | |
Entergy Arkansas | | | | | | | |
Theodore H. Bunting, Jr.** | | | 786 | | 49,033 | | - |
Leo P. Denault*** | | | 10,884 | | 311,799 | | - |
J. Wayne Leonard** | | | 360,710 | | 1,679,133 | | 2,966 |
Hugh T. McDonald*** | | | 8,672 | | 75,555 | | - |
Mark T. Savoff* | | | 1,010 | | 173,800 | | 251 |
Richard J. Smith** | | | 42,272 | | 405,266 | | - |
Gary J. Taylor* | | | 1,454 | | 314,833 | | - |
All directors and executive | | | | | | | |
officers as a group (12 persons) | | | 445,593 | | 3,434,603 | | 3,217 |
Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) |
| | | | | | |
Entergy Arkansas | | | | | | |
Theodore H. Bunting, Jr.** | | 658 | | 34,200 | | - |
Leo P. Denault*** | | 7,543 | | 276,619 | | - |
J. Wayne Leonard** | | 257,875 | | 1,864,733 | | 2,842 |
Hugh T. McDonald*** | | 8,304 | | 70,189 | | - |
Mark T. Savoff* | | 831 | | 144,800 | | 240 |
Richard J. Smith** | | 29,381 | | 415,668 | | - |
Gary J. Taylor* | | 1,394 | | 279,833 | | - |
All directors and executive | | | | | | |
officers as a group (11 persons) | | 309,617 | | 3,642,111 | | 3,082 |
| | | | | | |
Entergy Gulf States Louisiana | | | | | | |
Theodore H. Bunting, Jr.** | | 658 | | 34,200 | | - |
E. Renae Conley*** | | 12,388 | | 60,317 | | - |
Leo P. Denault*** | | 7,543 | | 276,619 | | - |
J. Wayne Leonard** | | 257,875 | | 1,864,733 | | 2,842 |
Mark T. Savoff* | | 831 | | 144,800 | | 240 |
Richard J. Smith** | | 29,381 | | 415,668 | | - |
Gary J. Taylor* | | 1,394 | | 279,833 | | - |
All directors and executive | | | | | | |
officers as a group (11 persons) | | 313,701 | | 3,632,239 | | 3,082 |
| | | | | | |
Entergy Louisiana | | | | | | |
Theodore H. Bunting, Jr.** | | 658 | | 34,200 | | - |
E. Renae Conley*** | | 12,388 | | 60,317 | | - |
Leo P. Denault*** | | 7,543 | | 276,619 | | - |
J. Wayne Leonard** | | 257,875 | | 1,864,733 | | 2,842 |
Mark T. Savoff* | | 831 | | 144,800 | | 240 |
Richard J. Smith** | | 29,381 | | 415,668 | | - |
Gary J. Taylor* | | 1,394 | | 279,833 | | - |
All directors and executive | | | | | | |
officers as a group (11 persons) | | 313,701 | | 3,632,239 | | 3,082 |
| | | | | | |
Entergy Mississippi | | | | | | |
Theodore H. Bunting, Jr.** | | 658 | | 34,200 | | - |
Leo P. Denault*** | | 7,543 | | 276,619 | | - |
Haley R. Fisackerly*** | | 1,645 | | 8,100 | | - |
J. Wayne Leonard** | | 257,875 | | 1,864,733 | | 2,842 |
Mark T. Savoff* | | 831 | | 144,800 | | 240 |
Richard J. Smith** | | 29,381 | | 415,668 | | - |
Gary J. Taylor* | | 1,394 | | 279,833 | | - |
All directors and executive | | | | | | |
officers as a group (11 persons) | | 302,958 | | 3,580,022 | | 3,082 |
Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) |
| | | | | | |
Entergy Gulf States Louisiana | | | | | | |
Theodore H. Bunting, Jr.** | | 786 | | 49,033 | | - |
Leo P. Denault*** | | 10,884 | | 311,799 | | - |
J. Wayne Leonard** | | 360,710 | | 1,679,133 | | 2,966 |
William M. Mohl*** | | - | | 28,800 | | - |
Mark T. Savoff* | | 1,010 | | 173,800 | | 251 |
Richard J. Smith** | | 42,272 | | 405,266 | | - |
Gary J. Taylor* | | 1,454 | | 314,833 | | - |
All directors and executive | | | | | | |
officers as a group (12 persons) | | 436,921 | | 3,387,848 | | 3,217 |
| | | | | | |
Entergy Louisiana | | | | | | |
Theodore H. Bunting, Jr.** | | 786 | | 49,033 | | - |
Leo P. Denault*** | | 10,884 | | 311,799 | | - |
J. Wayne Leonard** | | 360,710 | | 1,679,133 | | 2,966 |
William M. Mohl*** | | - | | 28,800 | | - |
Mark T. Savoff* | | 1,010 | | 173,800 | | 251 |
Richard J. Smith** | | 42,272 | | 405,266 | | - |
Gary J. Taylor* | | 1,454 | | 314,833 | | - |
All directors and executive | | | | | | |
officers as a group (12 persons) | | 436,921 | | 3,387,848 | | 3,217 |
| | | | | | |
Entergy Mississippi | | | | | | |
Theodore H. Bunting, Jr.** | | 786 | | 49,033 | | - |
Leo P. Denault*** | | 10,884 | | 311,799 | | - |
Haley R. Fisackerly*** | | 1,715 | | 14,033 | | - |
J. Wayne Leonard** | | 360,710 | | 1,679,133 | | 2,966 |
Mark T. Savoff* | | 1,010 | | 173,800 | | 251 |
Richard J. Smith** | | 42,272 | | 405,266 | | - |
Gary J. Taylor* | | 1,454 | | 314,833 | | - |
All directors and executive | | | | | | |
officers as a group (12 persons) | | 438,636 | | 3,373,081 | | 3,217 |
| | | | | | |
Entergy New Orleans | | | | | | |
Theodore H. Bunting, Jr.** | | 786 | | 49,033 | | - |
Leo P. Denault** | | 10,884 | | 311,799 | | - |
J. Wayne Leonard** | | 360,710 | | 1,679,133 | | 2,966 |
Charles L. Rice, Jr.*** | | 394 | | - | | - |
Richard J. Smith** | | 42,272 | | 405,266 | | - |
Gary J. Taylor* | | 1,454 | | 314,833 | | - |
Roderick K. West* | | 1,949 | | 27,667 | | - |
All directors and executive | | | | | | |
officers as a group (12 persons) | | 437,315 | | 3,359,048 | | 3,217 |
Name | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) | | Shares (1) | | Options Exercisable Within 60 Days | | Stock Units (2) |
| | | | | | | |
Entergy New Orleans | | | | | | | |
Theodore H. Bunting, Jr.** | | 658 | | 34,200 | | - | |
Leo P. Denault** | | 7,543 | | 276,619 | | - | |
J. Wayne Leonard** | | 257,875 | | 1,864,733 | | 2,842 | |
Richard J. Smith** | | 29,381 | | 415,668 | | - | |
Gary J. Taylor* | | 1,394 | | 279,833 | | - | |
Roderick K. West*** | | 1,607 | | 21,001 | | - | |
Sherri Winslow* | | 198 | | 4,167 | | - | |
All directors and executive | | | | | | | |
officers as a group (12 persons) | | 303,118 | | 3,597,090 | | 3,082 | |
| | | | | | | | | | | | |
Entergy Texas | | | | | | | | | | | | |
Theodore H. Bunting, Jr.** | | 658 | | 34,200 | | - | | 786 | | 49,033 | | - |
Leo P. Denault*** | | 7,543 | | 276,619 | | - | | 10,884 | | 311,799 | | - |
Joseph F. Domino*** | | 4,652 | | 56,167 | | - | | - | | 61,533 | | - |
J. Wayne Leonard** | | 257,875 | | 1,864,733 | | 2,842 | | 360,710 | | 1,679,133 | | 2,966 |
Mark T. Savoff* | | 831 | | 144,800 | | 240 | | 1,010 | | 173,800 | | 251 |
Richard J. Smith** | | 29,381 | | 415,668 | | - | | 42,272 | | 405,266 | | - |
Gary J. Taylor* | | 1,394 | | 279,833 | | - | | 1,454 | | 314,833 | | - |
All directors and executive | | | | | | | | | | | | |
officers as a group (11 persons) | | 305,965 | | 3,628,089 | | 3,082 | |
| | | | | | | |
officers as a group (12 persons) | | | 436,921 | | 3,420,581 | | 3,217 |
* | Director of the respective Company |
** | Named Executive Officer of the respective Company |
*** | Director and Named Executive Officer of the respective Company |
(1) | The number of shares of Entergy Corporation common stock owned by each individual and by all directors and executive officers as a group does not exceed one percent of the outstanding Entergy Corporation common stock. |
(2) | Represents the balances of phantom units each executive holds under the defined contribution restoration plan and the deferral provisions of the Equity Ownership Plan. These units will be paid out in either Entergy Corporation Common Stock or cash equivalent to the value of one share of Entergy Corporation Common Stock per unit on the date of payout, including accrued dividends. The deferral period is determined by the individual and is at least two years from the award of the bonus. For directors of Entergy Corporation the phantom units are issued under the Service Recognition Program for Outside Directors. All non-employee directors are credited with units for each year of service on the Board. In addition, Messrs. Edwards, Hintz and Percy are deferring receipt of their quarterlyquarter ly stock grants. The deferred shares will be settled in units at the end of the deferral period. |
(3) | Excludes 4,059 shares that are owned by a charitable foundation that Mr. Nichols controls. |
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Equity Compensation Plan Information
The following table summarizes the equity compensation plan information as of December 31, 2009.2010. Information is included for equity compensation plans approved by the stockholders and equity compensation plans not approved by the stockholders.
Plan | | Number of Securities to be Issued Upon Exercise of Outstanding Options (a) | | Weighted Average Exercise Price (b) | | Number of Securities Remaining Available for Future Issuance (excluding securities reflected in column (a)) (c) | | Number of Securities to be Issued Upon Exercise of Outstanding Options (a) | | Weighted Average Exercise Price (b) | | Number of Securities Remaining Available for Future Issuance (excluding securities reflected in column (a)) (c) |
| | | | | | | | | | | | |
Equity compensation plans approved by security holders (1) | | 9,665,002 | | $74.68 | | 3,276,876 | | 9,911,940 | | $76.56 | | 2,258,812 |
Equity compensation plans not approved by security holders(2) | | 1,656,069 | | $40.22 | | - | | 1,313,785 | | $41.40 | | - |
Total | | 11,321,071 | | $69.64 | | 3,276,876 | | 11,225,725 | | $72.45 | | 2,258,812 |
(1) | Includes the Equity Ownership Plan, which was approved by the shareholders on May 15, 1998. The1998 and the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries ("2007 Plan"),which was approved by Entergy Corporation shareholders on May 12, 2006. 7,000,000 shares of Entergy Corporation common stock can be issued from the 2007 Plan, with no more than 2,000,000 shares available for non-option grants. The Equity Ownership Plan and the 2007 Plan (the "Plans"“Plans”) are administered by the Personnel Committee of the Board of Directors (other than with respect to awards granted to non-employee directors, which awards are administered by the entire Board of Directors). Eligibility under the Plans is limited to the non-employee directors and to the officers and employees of an Entergy System employer and any corporation 80% or more of whose stock (based(bas ed on voting power) or value is owned, directly or indirectly, by the Company. The Plans provide for the issuance of stock options, restricted shares, equity awards (units whose value is related to the value of shares of the Common Stock but do not represent actual shares of Common Stock), performance awards (performance shares or units valued by reference to shares of Common Stock or performance units valued by reference to financial measures or property other than Common Stock) and other stock-based awards. |
(2) | Entergy has a Board-approved stock-based compensation plan. However, effective May 9, 2003, the Board has directed that no further awards be issued under that plan. |
For information regarding certain relationships, related transactions and director independence of Entergy Corporation, see the Proxy Statement under the headings "Corporate“Corporate Governance - Director Independence"Independence” and "Transactions“Transactions with Related Persons,"” which information is incorporated herein by reference.
Since December 31, 2007,2009, none of the Subsidiaries or any of their affiliates has participated in any transaction involving an amount in excess of $120,000 in which any director or executive officer of any of the Subsidiaries, any nominee for director, or any immediate family member of the foregoing had a material interest as contemplated by Item 404(a) of Regulation S-K ("(“Related Party Transactions"Transactions”).
Entergy Corporation'sCorporation’s Board of Directors has adopted written policies and procedures for the review, approval or ratification of Related Party Transactions. Under these policies and procedures, the Corporate Governance Committee, or a subcommittee of the Board of Directors of Entergy Corporation comprisedcomposed of independent directors, reviews the transaction and either approves or rejects the transaction after taking into account the following factors:
· | Whether the proposed transaction is on terms at least as favorable to Entergy Corporation or the subsidiary as those achievable with an unaffiliated third party; |
· | Size of transaction and amount of consideration; |
· | Nature of the interest; |
· | Whether the transaction involves a conflict of interest; |
· | Whether the transaction involves services available from unaffiliated third parties; and |
· | Any other factors that the Corporate Governance Committee or subcommittee deems relevant. |
The policy does not apply to (a) compensation and Related Party Transactions involving a director or an executive officer solely resulting from that person'sperson’s service as a director or employment with the Company so long as the compensation is reported in the Company's filings with the SEC,approved by Entergy’s Board of Directors, (b) transactions involving the rendering of services as a public utility at rates or charges fixed in conformity with law or governmental authority or (c) any other categories of transactions currently or in the future excluded from the reporting requirements of Item 404(a) of Regulation SK.
None of the Subsidiaries are listed issuers. As previously noted, the Boards of Directors of the Subsidiaries are comprisedcomposed solely of employee directors. None of the Boards of Directors of any of the Subsidiaries has any committees.
Aggregate fees billed to Entergy Corporation (consolidated), Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy for the years ended December 31, 20092010 and 20082009 by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, "Deloitte & Touche"), which includes Deloitte Consulting were as follows:
| | 2009 | | 2008 | | 2010 | | 2009 |
Entergy Corporation (consolidated) | | | | | | | | |
Audit Fees | | $9,175,534 | | $10,587,151 | | $8,376,900 | | $9,175,534 |
Audit-Related Fees (a) | | 892,150 | | 778,689 | | 1,235,000 | | 892,150 |
| | | | | | | | |
Total audit and audit-related fees | | 10,067,684 | | 11,365,840 | | 9,611,900 | | 10,067,684 |
Tax Fees (b) | | - | | - | | 43,812 | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $10,067,684 | | $11,365,840 | | $9,655,712 | | $10,067,684 |
| | | | | | | | |
Entergy Arkansas | | | | | | | | |
Audit Fees | | $924,277 | | $885,674 | | $956,592 | | $924,277 |
Audit-Related Fees (a) | | - | | - | | 200,000 | | - |
| | | | | | | | |
Total audit and audit-related fees | | 924,277 | | 885,674 | | 1,156,592 | | 924,277 |
Tax Fees | | - | | - | | - | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $924,277 | | $885,674 | | $1,156,592 | | $924,277 |
| | | | | | | | |
Entergy Gulf States Louisiana | | | | | | | | |
Audit Fees | | $871,277 | | $1,232,594 | | $876,592 | | $871,277 |
Audit-Related Fees (a) | | 95,000 | | 200,000 | | 315,000 | | 95,000 |
| | | | | | | | |
Total audit and audit-related fees | | 966,277 | | 1,432,594 | | 1,191,592 | | 966,277 |
Tax Fees | | - | | - | | - | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $966,277 | | $1,432,594 | | $1,191,592 | | $966,277 |
| | | | | | | | |
Entergy Louisiana | | | | | | | | |
Audit Fees | | $881,277 | | $1,091,094 | | $946,592 | | $881,277 |
Audit-Related Fees (a) | | 95,000 | | 190,000 | | 315,000 | | 95,000 |
| | | | | | | | |
Total audit and audit-related fees | | 976,277 | | 1,281,094 | | 1,261,592 | | 976,277 |
Tax Fees | | - | | - | | - | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $976,277 | | $1,281,094 | | $1,261,592 | | $976,277 |
| | 2009 | | 2008 | | 2010 | | 2009 |
Entergy Mississippi | | | | | | | | |
Audit Fees | | $881,277 | | $880,674 | | $838,092 | | $881,277 |
Audit-Related Fees (a) | | - | | - | | - | | - |
| | | | | | | | |
Total audit and audit-related fees | | 881,277 | | 880,674 | | 838,092 | | 881,277 |
Tax Fees | | - | | - | | - | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $881,277 | | $880,674 | | $838,092 | | $881,277 |
| | | | | | | | |
Entergy New Orleans | | | | | | | | |
Audit Fees | | $777,218 | | $806,658 | | $838,092 | | $777,218 |
Audit-Related Fees (a) | | - | | - | | - | | - |
| | | | | | | | |
Total audit and audit-related fees | | 777,218 | | 806,658 | | 838,092 | | 777,218 |
Tax Fees | | - | | - | | - | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $777,218 | | $806,658 | | $838,092 | | $777,218 |
| | | | | | | | |
Entergy Texas | | | | | | | | |
Audit Fees | | $1,896,277 | | $1,129,174 | | $998,092 | | $1,896,277 |
Audit-Related Fees (a) | | 200,000 | | - | | - | | 200,000 |
| | | | | | | | |
Total audit and audit-related fees | | 2,096,277 | | 1,129,174 | | 998,092 | | 2,096,277 |
Tax Fees | | - | | - | | - | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $2,096,277 | | $1,129,174 | | $998,092 | | $2,096,277 |
| | | | | | | | |
System Energy | | | | | | | | |
Audit Fees | | $826,828 | | $836,231 | | $803,092 | | $826,828 |
Audit-Related Fees (a) | | 103,230 | | - | | - | | 103,230 |
| | | | | | | | |
Total audit and audit-related fees | | 930,058 | | 836,231 | | 803,092 | | 930,058 |
Tax Fees | | - | | - | | - | | - |
All Other Fees | | - | | - | | - | | - |
| | | | | | | | |
Total Fees (c) | | $930,058 | | $836,231 | | $803,092 | | $930,058 |
(a) | Includes fees for employee benefit plan audits, consultation on financial accounting and reporting, and other attestation services. |
(b) | Includes fees for tax return review and tax compliance assistance.advisory services. |
(c) | 100% of fees paid in 20092010 and 20082009 were pre-approved by the Entergy Corporation Audit Committee. |
Entergy Audit Committee Guidelines for Pre-approval of Independent Auditor Services
The Audit Committee has adopted the following guidelines regarding the engagement of Entergy'sEntergy’s independent auditor to perform services for Entergy:
1. | The independent auditor will provide the Audit Committee, for approval, an annual engagement letter outlining the scope of services proposed to be performed during the fiscal year, including audit services and other permissible non-audit services (e.g. audit-related services, tax services, and all other services). |
2. | For other permissible services not included in the engagement letter, Entergy management will submit a description of the proposed service, including a budget estimate, to the Audit Committee for pre-approval. Management and the independent auditor must agree that the requested service is consistent with the SEC'sSEC’s rules on auditor independence prior to submission to the Audit Committee. The Audit Committee, at its discretion, will pre-approve permissible services and has established the following additional guidelines for permissible non-audit services provided by the independent auditor: · Aggregate non-audit service fees are targeted at fifty percent or less of the approved audit service fee. · All other services should only be provided by the independent auditor if it is the only qualified provider of that service or if the Audit Committee specifically requests the service. |
3. | The Audit Committee will be informed quarterly as to the status of pre-approved services actually provided by the independent auditor. |
4. | To ensure prompt handling of unexpected matters, the Audit Committee delegates to the Audit Committee Chair or its designee the authority to approve permissible services and fees. The Audit Committee Chair or designee will report action taken to the Audit Committee at the next scheduled Audit Committee meeting. |
5. | The Vice President and General Auditor will be responsible for tracking all independent auditor fees and will report quarterly to the Audit Committee. |
PART IV
(a)1. | Financial Statements and Independent Auditors'Auditors’ Reports for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are listed in the Table of Contents. |
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(a)2. | Financial Statement Schedules Report of Independent Registered Public Accounting Firm (see page 489)474) Financial Statement Schedules are listed in the Index to Financial Statement Schedules (see page S-1) |
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(a)3. | Exhibits Exhibits for Entergy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are listed in the Exhibit Index (see page E-1). Each management contract or compensatory plan or arrangement required to be filed as an exhibit hereto is identified as such by footnote in the Exhibit Index. |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
ENTERGY CORPORATION By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | February 24, 201025, 2011 |
J. Wayne Leonard (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Leo P. Denault (Executive Vice President and Chief Financial Officer; Principal Financial Officer); Maureen S. Bateman, W. Frank Blount, Gary W. Edwards, Alexis M. Herman, Donald C. Hintz, Stuart L. Levenick, Stewart C. Myers, James R. Nichols, William A. Percy, II, W. J. Tauzin, and Steven V. Wilkinson (Directors).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
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ENTERGY ARKANSAS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
ENTERGY ARKANSAS, INC. By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer) | February 24, 201025, 2011 |
Hugh T. McDonald (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault, Mark T. Savoff, and Gary J. Taylor (Directors).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
ENTERGY GULF STATES LOUISIANA, L.L.C.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
ENTERGY GULF STATES LOUISIANA, L.L.C. By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer) | February 24, 201025, 2011 |
E. Renae Conley (ChairWilliam M. Mohl (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault, Mark T. Savoff, and Gary J. Taylor (Directors).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
ENTERGY LOUISIANA, LLC
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
ENTERGY LOUISIANA, LLC By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer) | February 24, 201025, 2011 |
E. Renae Conley (ChairWilliam M. Mohl (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault, Mark T. Savoff, and Gary J. Taylor (Directors).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
ENTERGY MISSISSIPPI, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
ENTERGY MISSISSIPPI, INC. By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer) | February 24, 201025, 2011 |
Haley R. Fisackerly (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault, Mark T. Savoff, and Gary J. Taylor (Directors).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
ENTERGY NEW ORLEANS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
ENTERGY NEW ORLEANS, INC. By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer) | February 24, 201025, 2011 |
Roderick K. West (Chairman, President,Charles L. Rice, Jr. (President, Chief Executive Officer, and Director; Principal Executive Officer); Roderick K. West (Chairman of the Board and Director); Gary J. Taylor and Sherri Winslow (Directors)(Director).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
ENTERGY TEXAS, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
ENTERGY TEXAS, INC. By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer and acting Principal Financial Officer) | February 24, 201025, 2011 |
Joseph F. Domino (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Leo P. Denault, Mark T. Savoff, and Gary J. Taylor (Directors).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
SYSTEM ENERGY RESOURCES, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.
SYSTEM ENERGY RESOURCES, INC. By /s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. Senior Vice President and Chief Accounting Officer Date: February 24, 201025, 2011 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.
Signature | Title | Date |
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/s/ Theodore H. Bunting, Jr. Theodore H. Bunting, Jr. | Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) | February 24, 201025, 2011 |
John T. Herron (Chairman, President, Chief Executive Officer, and Director; Principal Executive Officer); Wanda C. Curry (Vice President, Chief Financial Officer - Nuclear Operations; Principal Financial Officer); Leo P. Denault and Steven C. McNeal (Directors).
By: /s/ Theodore H. Bunting, Jr. (Theodore H. Bunting, Jr., Attorney-in-fact) | February 24, 201025, 2011 |
EXHIBIT 23(a)
CONSENTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
We consent to the incorporation by reference in Post-EffectivePost -Effective Amendments No.Nos. 3 and 5A on Form S-8 and their related prospectuses to Registration Statement No. 33-54298 on Form S-4, in Registration Statement No. 333-169315 on Form S-3, and in Registration Statements Nos. 333-55692, 333-68950, 333-75097, 333-90914, 333-98179, 333-140183, 333-142055, and 333-142055333-168664 on Form S-8 of our reports dated February 24, 2010,25, 2011, relating to the consolidated financial statements and financial statement schedule of Entergy Corporation and Subsidiaries, (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the adoption of a new accounting standard regarding non-controlling interests), consolidated financial statement schedule, and the effectiveness of Entergy Corporation and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Corporation and Subsidiaries for the year ended December 31, 2009.2010.
We consent to the incorporation by reference in Post-Effective Amendment No. 1 on Form S-3 and its related prospectus to Registration Statement No. 333-159157333-169315-03 on Form S-3 of our reports dated February 24, 2010,25, 2011, relating to the consolidated financial statements and financial statement schedule of Entergy Arkansas, Inc., and Subsidiaries, and the effectiveness of Entergy Arkansas, Inc.’s and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Arkansas, Inc. and Subsidiaries for the year ended December 31, 2009.2010.
We consent to the incorporation by reference in Registration StatementPost-Effective Amendment No. 333-1564351 on Form S-3 and its related prospectus to Registration Statement No. 333-153623333-169315-02 on Form S-4S-3 of our reports dated February 24, 2010,25, 2011, relating to the financial statements and financial statement schedule of Entergy Gulf States Louisiana, L.L.C. (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the effects of the distribution of certain assets and liabilities to Entergy Texas, Inc. and Subsidiaries as part of a jurisdictional separation plan), financial statement schedule, and the effectiveness of Entergy Gulf States Louisiana, L.L.C.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Gulf States Louisiana, L.L.C. for the year ended December 31, 2009.2010.
We consent to the incorporation by reference in Post-Effective Amendment No. 1 on Form S-3 and its related prospectus to Registration Statement No. 333-159158333-169315-01 on Form S-3 of our reports dated February 24, 2010,25, 2011, relating to the financial statements and financial statement schedule of Entergy Louisiana, LLC, and the effectiveness of Entergy Louisiana, LLC’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Louisiana, LLC for the year ended December 31, 2009.2010.
We consent to the incorporation by reference in Registration StatementsStatement No. 333-159164 on Form S-3 of our reports dated February 24, 2010,25, 2011, relating to the financial statements and financial statement schedule of Entergy Mississippi, Inc., and the effectiveness of Entergy Mississippi, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Mississippi, Inc. for the year ended December 31, 2009.2010.
We consent to the incorporation by reference in Registration Statement No. 333-155584 on Form S-3 of our reports dated February 24, 2010,25, 2011, relating to the financial statements and financial statement schedule of Entergy New Orleans, Inc., and the effectiveness of Entergy New Orleans, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy New Orleans, Inc. for the year ended December 31, 2009.2010.
We consent to the incorporation by reference in Registration Statement No. 333-153442 on Form S-3 of our reports dated February 24, 2010,25, 2011, relating to the consolidated financial statements and financial statement schedule of Entergy Texas, Inc. and Subsidiaries, (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the effects of distribution of certain assets and liabilities from Entergy Gulf States, Inc. to Entergy Texas, Inc. and Subsidiaries as part of the jurisdictional separation plan), financial statement schedule, and the effectiveness of Entergy Texas, Inc. and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Texas, Inc. and Subsidiaries for the year ended December 31, 2009.2010.
We consent to the incorporation by reference in Registration Statement No. 333-156718 on Form S-3 of our reports dated February 24, 2010,25, 2011, relating to the financial statements of System Energy Resources, Inc., and the effectiveness of System Energy Resources, Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of System Energy Resources, Inc. for the year ended December 31, 2009.2010.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
To the Board of Directors and Shareholders of
Entergy Corporation and Subsidiaries
Entergy Arkansas, Inc. and Subsidiaries
Entergy Mississippi, Inc.
Entergy New Orleans, Inc.
Entergy Texas, Inc. and Subsidiaries
To the Board of Directors and Members of
Entergy Gulf States Louisiana, L.L.C.
Entergy Louisiana, LLC
We have audited the consolidated financial statements of Entergy Corporation and Subsidiaries (the “Corporation”), Entergy Arkansas, Inc. and Subsidiaries (“EAI”), and Entergy Texas, Inc. and Subsidiaries (“ETI”), and we have also audited the financial statements of Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C., Entergy Louisiana, LLC, Entergy Mississippi, Inc., and Entergy New Orleans, Inc. (collectively,(collectively the “Companies”) as of December 31, 20092010 and 2008,2009, and for each of the three years in the period ended December 31, 2009,2010, and the Corporation’s, ETI's,EAI’s, ETI’s, and the respective Companies’ internal control over financial reporting as of December 31, 2009,2010, and have issued our reports thereon dated February 24, 2010;25, 2011; such reports are included elsewhereel sewhere in this Form 10-K. Our report on the consolidated financial statements of the Corporation expressed an unqualified opinion and included an explanatory paragraph relating to the adoption of a new accounting standard regarding non-controlling interests. Our report on the financial statements of Entergy Gulf States Louisiana, L.L.C. expressed an unqualified opinion and included an explanatory paragraph regarding the effects of the distribution of certain assets and liabilities to ETI as part of a jurisdictional separation plan. Our report on the consolidated financial statements of ETI expressed an unqualified opinion and included an explanatory paragraph regarding the effects of the distribution of certain assets and liabilities from Entergy Gulf States, Inc. to ETI as part of a jurisdictional separation plan. Our audits also included the financial statement schedules of the Corporation, EAI, ETI, and the respective Companies listed in Item 15. These financial statement schedules are the responsibility of the Corporation’s, EAI’s, ETI’s, and the respective Companies’ management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
February 24, 201025, 2011
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Schedule | | Page |
| | |
II | Valuation and Qualifying Accounts 2010, 2009 2008 and 2007:2008: | |
| Entergy Corporation and Subsidiaries | S-2 |
| Entergy Arkansas, Inc. and Subsidiaries | S-3 |
| Entergy Gulf States Louisiana, L.L.C. | S-4 |
| Entergy Louisiana, LLC | S-5 |
| Entergy Mississippi, Inc. | S-6 |
| Entergy New Orleans, Inc. | S-7 |
| Entergy Texas, Inc. and Subsidiaries | S-8 |
Schedules other than those listed above are omitted because they are not required, not applicable, or the required information is shown in the financial statements or notes thereto.
Columns have been omitted from schedules filed because the information is not applicable.
ENTERGY CORPORATION AND SUBSIDIARIES | |
| |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2010, 2009, and 2008 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | | | | Deductions | | | | |
| | Balance at | | | | | | from | | | Balance | |
| | Beginning | | | Charged to Income | | | Provisions | | | at End | |
Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | |
Year ended December 31, 2010 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 27,631 | | | $ | 1,569 | | | $ | (2,577 | ) | | $ | 31,777 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 141,315 | | | $ | 333,371 | | | $ | 79,436 | | | $ | 395,250 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 25,610 | | | $ | 2,021 | | | $ | - | | | $ | 27,631 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 147,452 | | | $ | 52,050 | | | $ | 58,187 | | | $ | 141,315 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 25,789 | | | $ | (179 | ) | | $ | - | | | $ | 25,610 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 133,406 | | | $ | 56,826 | | | $ | 42,780 | | | $ | 147,452 | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, and environmental items. | |
| | | | | | | | | | | | | | | | |
(3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | |
| | | | | | | | | | | | | | | | |
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | |
| |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2010, 2009, and 2008 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | | | | Deductions | | | | |
| | Balance at | | | | | | from | | | Balance | |
| | Beginning | | | Charged to Income | | | Provisions | | | at End | |
Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | |
Year ended December 31, 2010 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 21,853 | | | $ | 2,549 | | | $ | - | | | $ | 24,402 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 13,217 | | | $ | 21,088 | | | $ | 26,335 | | | $ | 7,970 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 19,882 | | | $ | 1,971 | | | $ | - | | | $ | 21,853 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 15,925 | | | $ | 17,076 | | | $ | 19,784 | | | $ | 13,217 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 16,649 | | | $ | 3,233 | | | $ | - | | | $ | 19,882 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 14,414 | | | $ | 1,397 | | | $ | (114 | ) | | $ | 15,925 | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, and environmental items. | |
| | | | | | | | | | | | | | | | |
(3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | |
| | | | | | | | | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
| |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2010, 2009, and 2008 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | | | | Deductions | | | | |
| | Balance at | | | | | | from | | | Balance | |
| | Beginning | | | Charged to Income | | | Provisions | | | at End | |
Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | |
Year ended December 31, 2010 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,235 | | | $ | (413 | ) | | $ | (484 | ) | | $ | 1,306 | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Not Deducted from Assets (2) | | $ | 14,669 | | | $ | 92,647 | | | $ | 9,636 | | | $ | 97,680 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,230 | | | $ | 5 | | | $ | - | | | $ | 1,235 | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Not Deducted from Assets (3) | | $ | 13,896 | | | $ | 7,660 | | | $ | 6,887 | | | $ | 14,669 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 979 | | | $ | 251 | | | $ | - | | | $ | 1,230 | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Not Deducted from Assets (3) | | $ | 11,887 | | | $ | 20,059 | | | $ | 18,050 | | | $ | 13,896 | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, and environmental items. | |
| | | | | | | | | | | | | | | | |
(3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | |
| | | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
| |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2010, 2009, and 2008 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | | | | Deductions | | | | |
| | Balance at | | | | | | from | | | Balance | |
| | Beginning | | | Charged to Income | | | Provisions | | | at End | |
Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | |
| | | | | | | | | | | | | |
Year ended December 31, 2010 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,312 | | | $ | (112 | ) | | $ | (761 | ) | | $ | 1,961 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 20,301 | | | $ | 206,832 | | | $ | 3,577 | | | $ | 223,556 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,698 | | | $ | (386 | ) | | $ | - | | | $ | 1,312 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 19,916 | | | $ | 7,851 | | | $ | 7,466 | | | $ | 20,301 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,988 | | | $ | (290 | ) | | $ | - | | | $ | 1,698 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 18,405 | | | $ | 17,450 | | | $ | 15,939 | | | $ | 19,916 | |
| | | | | | | | | | | | | | | | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, and environmental items. | |
| | | | | | | | | | | | | | | | |
(3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | |
| | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES | | |
ENTERGY MISSISSIPPI, INC. | | ENTERGY MISSISSIPPI, INC. | |
| | | | | | | | | | | | | | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2009, 2008, and 2007 | | |
Years Ended December 31, 2010, 2009, and 2008 | | Years Ended December 31, 2010, 2009, and 2008 | |
(In Thousands) | (In Thousands) | | (In Thousands) | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | | | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | | | | | | Additions | | | Changes | | | | |
| | | | | Charged to | | | Deductions | | | | | | | | | | | | Deductions | | | | |
| | Balance at | | | Income or | | | from | | | Balance | | | Balance at | | | | | | from | | | Balance | |
| | Beginning | | | Regulatory | | | Provisions | | | at End | | | Beginning | | | Charged to Income | | | Provisions | | | at End | |
Description | | of Period | | | Assets | | | | (1) | | | of Period | | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | |
Year ended December 31, 2009 | | | | | | | | | | | | | | |
Year ended December 31, 2010 | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 25,610 | | | $ | 2,021 | | | $ | - | | | $ | 27,631 | | | $ | 1,018 | | | $ | (33 | ) | | $ | - | | | $ | 985 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 147,452 | | | $ | 52,050 | | | $ | 58,187 | | | $ | 141,315 | | | $ | 41,403 | | | $ | 3,176 | | | $ | 5,113 | | | $ | 39,466 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | | |
Doubtful Accounts | | | $ | 687 | | | $ | 331 | | | $ | - | | | $ | 1,018 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | | $ | 36,957 | | | $ | 11,411 | | | $ | 6,965 | | | $ | 41,403 | |
| | | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 25,789 | | | $ | (179 | ) | | $ | - | | | $ | 25,610 | | | $ | 615 | | | $ | 72 | | | $ | - | | | $ | 687 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 133,406 | | | $ | 56,826 | | | $ | 42,780 | | | $ | 147,452 | | |
Deducted from Assets (3) | | | $ | 50,264 | | | $ | 10,175 | | | $ | 23,482 | | | $ | 36,957 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended December 31, 2007 | | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 29,911 | | | $ | (4,122 | ) | | $ | - | | | $ | 25,789 | | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 97,287 | | | $ | 63,262 | | | $ | 27,143 | | | $ | 133,406 | | |
___________ | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | | |
created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | | |
of amounts previously written off. | | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | | (1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for property insurance, injuries and damages, environmental, | | |
and pension related items. | | | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, and environmental items. | | (2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, and environmental items. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | | (3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | |
| | | | | | | | | | | | | | | | | |
ENTERGY ARKANSAS, INC. | |
| | | | | | | | | | | | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2009, 2008, and 2007 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | Charged to | | | Deductions | | | | |
| | Balance at | | | Income or | | | from | | | Balance | |
| | Beginning | | | Regulatory | | | Provisions | | | at End | |
Description | | of Period | | | Assets | | | | (1) | | | of Period | |
Year ended December 31, 2009 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 19,882 | | | $ | 1,971 | | | $ | - | | | $ | 21,853 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 15,925 | | | $ | 17,076 | | | $ | 19,784 | | | $ | 13,217 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 16,649 | | | $ | 3,233 | | | $ | - | | | $ | 19,882 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 14,414 | | | $ | 1,397 | | | $ | (114 | ) | | $ | 15,925 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2007 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 15,257 | | | $ | 1,392 | | | $ | - | | | $ | 16,649 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 14,539 | | | $ | 5,219 | | | $ | 5,344 | | | $ | 14,414 | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | |
created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | |
of amounts previously written off. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for property insurance, injuries and damages, environmental, | |
and pension related items. | | | | | | | | | | | | | | | | |
ENTERGY GULF STATES LOUISIANA, L.L.C. | |
| | | | | | | | | | | | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2009, 2008, and 2007 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | Charged to | | | Deductions | | | | |
| | Balance at | | | Income or | | | from | | | Balance | |
| | Beginning | | | Regulatory | | | Provisions | | | at End | |
Description | | of Period | | | Assets | | | | (1) | | | of Period | |
Year ended December 31, 2009 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,230 | | | $ | 5 | | | $ | - | | | $ | 1,235 | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Not Deducted from Assets (2) | | $ | 13,896 | | | $ | 7,660 | | | $ | 6,887 | | | $ | 14,669 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 979 | | | $ | 251 | | | $ | - | | | $ | 1,230 | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Not Deducted from Assets (2) | | $ | 11,887 | | | $ | 20,059 | | | $ | 18,050 | | | $ | 13,896 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2007 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 759 | | | $ | 220 | | | $ | - | | | $ | 979 | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Not Deducted from Assets (2) | | $ | 21,245 | | | $ | 21,183 | | | $ | 30,541 | | | $ | 11,887 | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | |
created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | |
of amounts previously written off. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for property insurance, injuries and damages, environmental, | |
and pension related items. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC | |
| | | | | | | | | | | | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2009, 2008, and 2007 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | Charged to | | | Deductions | | | | |
| | Balance at | | | Income or | | | from | | | Balance | |
| | Beginning | | | Regulatory | | | Provisions | | | at End | |
Description | | of Period | | | Assets | | | | (1) | | | of Period | |
| | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,698 | | | $ | (386 | ) | | $ | - | | | $ | 1,312 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 19,916 | | | $ | 7,851 | | | $ | 7,466 | | | $ | 20,301 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,988 | | | $ | (290 | ) | | $ | - | | | $ | 1,698 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 18,405 | | | $ | 17,450 | | | $ | 15,939 | | | $ | 19,916 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2007 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,856 | | | $ | 132 | | | $ | - | | | $ | 1,988 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 23,798 | | | $ | 22,910 | | | $ | 28,303 | | | $ | 18,405 | |
| | | | | | | | | | | | | | | | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | |
created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | |
of amounts previously written off. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for property insurance, injuries and damages, environmental, | |
and pension related items. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, INC. | |
| | | | | | | | | | | | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2009, 2008, and 2007 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | Charged to | | | Deductions | | | | |
| | Balance at | | | Income or | | | from | | | Balance | |
| | Beginning | | | Regulatory | | | Provisions | | | at End | |
Description | | of Period | | | Assets | | | | (1) | | | of Period | |
Year ended December 31, 2009 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 687 | | | $ | 331 | | | $ | - | | | $ | 1,018 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 36,957 | | | $ | 11,411 | | | $ | 6,965 | | | $ | 41,403 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 615 | | | $ | 72 | | | $ | - | | | $ | 687 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 50,264 | | | $ | 10,175 | | | $ | 23,482 | | | $ | 36,957 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2007 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 615 | | | $ | - | | | $ | - | | | $ | 615 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 10,036 | | | $ | 2,519 | | | $ | (37,709 | ) | | $ | 50,264 | |
| | | | | | | | | | | | | | | | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | |
created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | |
of amounts previously written off. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for property insurance, injuries and damages, environmental, | |
and pension related items. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
| |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2010, 2009, and 2008 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | | | | Deductions | | | | |
| | Balance at | | | | | | from | | | Balance | |
| | Beginning | | | Charged to Income | | | Provisions | | | at End | |
Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | |
Year ended December 31, 2010 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,166 | | | $ | (491 | ) | | $ | (59 | ) | | $ | 734 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 15,991 | | | $ | 7,766 | | | $ | 12,551 | | | $ | 11,206 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | �� | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,112 | | | $ | 54 | | | $ | - | | | $ | 1,166 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 10,609 | | | $ | 2,187 | | | $ | (3,195 | ) | | $ | 15,991 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 4,639 | | | $ | (3,527 | ) | | $ | - | | | $ | 1,112 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 14,329 | | | $ | 1,507 | | | $ | 5,227 | | | $ | 10,609 | |
| | | | | | | | | | | | | | | | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, and environmental items. | |
| | | | | | | | | | | | | | | | |
(3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | |
| | | | | | | | | | | | | | | | |
ENTERGY NEW ORLEANS, INC. | |
| | | | | | | | | | | | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2009, 2008, and 2007 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | Charged to | | | Deductions | | | | |
| | Balance at | | | Income or | | | from | | | Balance | |
| | Beginning | | | Regulatory | | | Provisions | | | at End | |
Description | | of Period | | | Assets | | | | (1) | | | of Period | |
Year ended December 31, 2009 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,112 | | | $ | 54 | | | $ | - | | | $ | 1,166 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 10,609 | | | $ | 2,187 | | | $ | (3,195 | ) | | $ | 15,991 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 4,639 | | | $ | (3,527 | ) | | $ | - | | | $ | 1,112 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 14,329 | | | $ | 1,507 | | | $ | 5,227 | | | $ | 10,609 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2007 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 10,563 | | | $ | (5,924 | ) | | $ | - | | | $ | 4,639 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 8,385 | | | $ | 1,062 | | | $ | (4,882 | ) | | $ | 14,329 | |
| | | | | | | | | | | | | | | | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | |
created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | |
of amounts previously written off. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for property insurance, injuries and damages, environmental, | |
and pension related items. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
| | | | | | | | | | | | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2009, 2008, and 2007 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | Charged to | | | Deductions | | | | |
| | Balance at | | | Income or | | | from | | | Balance | |
| | Beginning | | | Regulatory | | | Provisions | | | at End | |
Description | | of Period | | | Assets | | | | (1) | | | of Period | |
Year ended December 31, 2009 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,001 | | | $ | (157 | ) | | $ | - | | | $ | 844 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 12,936 | | | $ | 4,944 | | | $ | 9,170 | | | $ | 8,710 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 918 | | | $ | 83 | | | $ | - | | | $ | 1,001 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 8,863 | | | $ | 4,885 | | | $ | 812 | | | $ | 12,936 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2007 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 859 | | | $ | 59 | | | $ | - | | | $ | 918 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 9,431 | | | $ | 5,311 | | | $ | 5,879 | | | $ | 8,863 | |
| | | | | | | | | | | | | | | | |
___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were | | | | | |
created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries | | | | | |
of amounts previously written off. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
(2) Accumulated provisions not deducted from assets includes provisions for property insurance, injuries and damages, environmental, | |
and pension related items. | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
S-8
ENTERGY TEXAS, INC. AND SUBSIDIARIES | |
| |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS | |
Years Ended December 31, 2010, 2009, and 2008 | |
(In Thousands) | |
| | | | | | | | | | | | |
Column A | | Column B | | | Column C | | | Column D | | | Column E | |
| | | | | | | | Other | | | | |
| | | | | Additions | | | Changes | | | | |
| | | | | | | | Deductions | | | | |
| | Balance at | | | | | | from | | | Balance | |
| | Beginning | | | Charged to Income | | | Provisions | | | at End | |
Description | | of Period | | | or Regulatory Assets | | | | (1) | | | of Period | |
Year ended December 31, 2010 | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 844 | | | $ | 69 | | | $ | (1,272 | ) | | $ | 2,185 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (2) | | $ | 8,710 | | | $ | 1,629 | | | $ | 5,019 | | | $ | 5,320 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2009 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 1,001 | | | $ | (157 | ) | | $ | - | | | $ | 844 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 12,936 | | | $ | 4,944 | | | $ | 9,170 | | | $ | 8,710 | |
| | | | | | | | | | | | | | | | |
Year ended December 31, 2008 | | | | | | | | | | | | | | | | |
Accumulated Provisions | | | | | | | | | | | | | | | | |
Deducted from Assets-- | | | | | | | | | | | | | | | | |
Doubtful Accounts | | $ | 918 | | | $ | 83 | | | $ | - | | | $ | 1,001 | |
Accumulated Provisions Not | | | | | | | | | | | | | | | | |
Deducted from Assets (3) | | $ | 8,863 | | | $ | 4,885 | | | $ | 812 | | | $ | 12,936 | |
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___________ | | | | | | | | | | | | | | | | |
Notes: | | | | | | | | | | | | | | | | |
(1) Deductions from provisions represent losses or expenses for which the respective provisions were created. In the case of the provision for doubtful accounts, such deductions are reduced by recoveries of amounts previously written off. | | | | | |
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(2) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages and environmental items. | |
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(3) Accumulated provisions not deducted from assets includes provisions for storm damage, property insurance, injuries and damages, environmental, and pension related items. | |
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The following exhibits indicated by an asterisk preceding the exhibit number are filed herewith. The balance of the exhibits have heretofore been filed with the SEC as the exhibits and in the file numbers indicated and are incorporated herein by reference. The exhibits marked with a (+) are management contracts or compensatory plans or arrangements required to be filed herewith and required to be identified as such by Item 15 of Form 10-K. Reference is made to a duplicate list of exhibits being filed as a part of this Form 10-K, which list, prepared in accordance with Item 102 of Regulation S-T of the SEC, immediately precedes the exhibits being physically filed with this Form 10-K.
Some of the agreements included or incorporated by reference as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from the standard of “materiality” under the applicable securities laws; and (iv) were made only as ofo f the date of the applicable agreement or such other date or dates as may be specified in the agreement.
Entergy acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading.
| (2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession |
| Entergy Gulf States Louisiana |
(a) -- | Plan of Merger of Entergy Gulf States, Inc. effective December 31, 2007 (2(ii) to Form 8-K15D5 datedfiled January 7, 2008 in 333-148557). |
| (3) Articles of Incorporation and By-laws |
Entergy Corporation
(a) 1 -- | Restated Certificate of Incorporation of Entergy Corporation dated October 10, 2006 (3(a) to Form 10-Q for the quarter ended September 30, 2006). |
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(a) 2 -- | By-Laws of Entergy Corporation as amended February 12, 2007, and as presently in effect (3(ii) to Form 8-K datedfiled February 16, 2007 in 1-11299). |
(b) 1 -- | Amended and Restated Articles of Incorporation of System Energy and amendments thereto through April 28, 1989 (A-1(a) to Form U-1 in 70-5399). |
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(b) 2 -- | By-Laws of System Energy effective July 6, 1998, and as presently in effect (3(f) to Form 10-Q for the quarter ended June 30, 1998 in 1-9067). |
(c) 1 -- | Second Amended and Restated Articles of Incorporation of Entergy Arkansas, effective August 19, 2009 (3 to Form 8-K datedfiled August 24, 2009 in 1-10764). |
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(c) 2 -- | By-Laws of Entergy Arkansas effective November 26, 1999, and as presently in effect (3(ii)(c) to Form 10-K for the year ended December 31, 1999 in 1-10764). |
| Entergy Gulf States Louisiana |
(d) 1 -- | Articles of Organization of Entergy Gulf States Louisiana effective December 31, 2007 (3(i) to Form 8-K15D5 datedfiled January 7, 2008 in 333-148557). |
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(d) 2 -- | Operating Agreement of Entergy Gulf States Louisiana, effective as of December 31, 2007 (3(ii) to Form 8-K15D5 datedfiled January 7, 2008 in 333-148557). |
(e) 1 -- | Articles of Organization of Entergy Louisiana effective December 31, 2005 (3(c) to Form 8-K datedfiled January 6, 2006 in 1-32718). |
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(e) 2 -- | Regulations of Entergy Louisiana effective December 31, 2005, and as presently in effect (3(d) to Form 8-K datedfiled January 6, 2006 in 1-32718). |
(f) 1 -- | Second Amended and Restated Articles of Incorporation of Entergy Mississippi, effective July 21, 2009 (99.1 to Form 8-K datedfiled July 27, 2009 in 1-31508). |
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(f) 2 -- | By-Laws of Entergy Mississippi effective November 26, 1999, and as presently in effect (3(ii)(f) to Form 10-K for the year ended December 31, 1999 in 0-320). |
(g) 1 -- | Amended and Restated Articles of Incorporation of Entergy New Orleans, as amendedeffective May 8, 2007 (3(a) to Form 10-Q for the quarter ended March 31, 2007 in 0-5807). |
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(g) 2 -- | Amended By-Laws of Entergy New Orleans as amendedeffective May 8, 2007, and as presently in effect (3(b) to Form 10-Q for the quarter ended March 31, 2007 in 0-5807). |
(h) 1 -- | Certificate of Formation of Entergy Texas, effective December 31, 2007 (3(i) to Form 10 datedfiled March 14, 2008 in 000-53134). |
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(h) 2 -- | By-Laws of Entergy Texas effective December 31, 2007 (3(ii) to Form 10 datedfiled March 14, 2008 in 000-53134). |
| (4) | Instruments Defining Rights of Security Holders, Including Indentures |
(a) 1 -- | See (4)(b) through (4)(h) below for instruments defining the rights of holders of long-term debt of System Energy, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas. |
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(a) 2 -- | Amendment dated as of September 21, 2005, to the Amended and Restated Credit Agreement, dated as of June 30, 2005, among Entergy Corporation, as Borrower, Bayerische Hypo- und Vereinsbank AG, New York Branch, as Bank, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Administrative Agent (4(b) to Form 8-K dated September 28, 2005 in 1-11299). |
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(a) 3 -- | Amended and Restated Credit Agreement, dated as of June 30, 2005, among Entergy Corporation, as Borrower, Bayerische Hypo- und Vereinsbank AG, New York Branch, as Bank, and Bayerische Hypo-und Vereinsbank AG, New York Branch, as Administrative Agent (4(g) to Form 10-Q for the quarter ended June 30, 2005 in 1-11299). |
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(a) 4 -- | Credit Agreement ($3,500,000,000), dated as of August 2, 2007, among Entergy Corporation, the Banks (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), J. P. Morgan Chase Bank, N.A., KeyBank National Association, Lehman Brothers Bank (FSB), Mizuho Corporate Bank, Ltd., Morgan Stanley Bank, Regions Bank, Societe Generale, The Bank of New York, The Bank of Nova Scotia, The Bank of Toyko-Mitsubishi UFJ, Ltd. (New York Branch), The Royal Bank of Scotland plc, Union Bank of California, N.A., Wachovia Bank, National Association and William Street Commitment Corporation), Citibank, N.A., as Administrative Agent and LC Issuing Bank, and ABN AMRO Bank, N.V., as LC Issuing Bank (10(a) to Form 10-Q for the quarter ended June 30, 2007 in 1-11299). |
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(a) 53 -- | Indenture, dated as of December 1, 2002, between Entergy Corporation and Deutsche Bank Trust Company Americas, as Trustee (4(a)4 to Form 10-K for the year ended December 31, 2002 in 1-11299). |
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(a) 64 -- | Supplemental No. 1, dated as of December 20, 2005, between Entergy Corporation and Deutsche Bank Trust Company Americas, as Trustee (4(a)11 to Form 10-K for the year ended December 31, 2005 in 1-11299). |
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(a) 7 -- | Officer'sOfficer’s Certificate for Entergy Corporation relating to 7.06% Senior Notes due March 15, 2011 (4(d) to Form 10-Q for the quarter ended March 31, 2003 in 1-11299). |
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(a) 85 -- | Officer's Certificate forIndenture (For Unsecured Debt Securities), dated as of September 1, 2010, between Entergy Corporation relating to 6.58% Senior Notes due May 15, 2010 (4(d)and Wells Fargo Bank, National Association (4.01 to Form 10-Q for the quarter ended June 30, 20038-K filed September 16, 2010 in 1-11299). |
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(a) 96 -- | Officer'sOfficer’s Certificate for Entergy Corporation relating to 6.90%3.625% Senior Notes due NovemberSeptember 15, 2010 (4(a)102015 (4.02(a) to Form 10-K8-K filed September 16, 2010 in 1-11299). |
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(a) 7 -- | Officer’s Certificate for the year ended December 31, 2003Entergy Corporation relating to 5.125% Senior Notes due September 15, 2020 (4.02(b) to Form 8-K filed September 16, 2010 in 1-11299). |
(b) 1 -- | Mortgage and Deed of Trust, dated as of June 15, 1977, as amended by twenty-three Supplemental Indentures (A-1 in 70-5890 (Mortgage); B and C to Rule 24 Certificate in 70-5890 (First); B to Rule 24 Certificate in 70-6259 (Second); 20(a)-5 to Form 10-Q for the quarter ended June 30, 1981 in 1-3517 (Third); A-1(e)-1 to Rule 24 Certificate in 70-6985 (Fourth); B to Rule 24 Certificate in 70-7021 (Fifth); B to Rule 24 Certificate in 70-7021 (Sixth); A-3(b) to Rule 24 Certificate in 70-7026 (Seventh); A-3(b) to Rule 24 Certificate in 70-7158 (Eighth); B to Rule 24 Certificate in 70-7123 (Ninth); B-1 to Rule 24 Certificate in 70-7272 (Tenth); B-2 to Rule 24 Certificate in 70-7272 (Eleventh); B-3 to Rule 24 Certificate in 70-7272 (Twelfth); B-1 to Rule 24 Certificate in 70-7382 (Thirteenth)(Thir teenth); B-2 to Rule 24 Certificate in 70-7382 (Fourteenth); A-2(c) to Rule 24 Certificate in 70-7946 (Fifteenth); A-2(c) to Rule 24 Certificate in 70-7946 (Sixteenth); A-2(d) to Rule 24 Certificate in 70-7946 (Seventeenth); A-2(e) to Rule 24 Certificate dated May 4, 1993 in 70-7946 (Eighteenth); A-2(g) to Rule 24 Certificate dated May 6, 1994 in 70-7946 (Nineteenth); A-2(a)(1) to Rule 24 Certificate dated August 8, 1996 in 70-8511 (Twentieth); A-2(a)(2) to Rule 24 Certificate dated August 8, 1996 in 70-8511 (Twenty-first); A-2(a) to Rule 24 Certificate datedfiled October 4, 2002 in 70-9753 (Twenty-second); and 4(b) to Form 10-Q for the quarter ended September 30, 2007 in 1-9067 (Twenty-third)). |
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(b) 2 -- | Facility Lease No. 1, dated as of December 1, 1988, between Meridian Trust Company and Stephen M. Carta (Steven Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-3(d) to Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-3(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). |
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(b) 3 -- | Facility Lease No. 2, dated as of December 1, 1988 between Meridian Trust Company and Stephen M. Carta (Steven Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-4(d) Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-4(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). |
(c) 1 -- | Mortgage and Deed of Trust, dated as of October 1, 1944, as amended by sixty-eightseventy Supplemental Indentures (7(d) in 2-5463 (Mortgage); 7(b) in 2-7121 (First); 7(c) in 2-7605 (Second); 7(d) in 2-8100 (Third); 7(a)-4 in 2-8482 (Fourth); 7(a)-5 in 2-9149 (Fifth); 4(a)-6 in 2-9789 (Sixth); 4(a)-7 in 2-10261 (Seventh); 4(a)-8 in 2-11043 (Eighth); 2(b)-9 in 2-11468 (Ninth); 2(b)-10 in 2-15767 (Tenth); D in 70-3952 (Eleventh); D in 70-4099 (Twelfth); 4(d) in 2-23185 (Thirteenth); 2(c) in 2-24414 (Fourteenth); 2(c) in 2-25913 (Fifteenth); 2(c) in 2-28869 (Sixteenth); 2(d) in 2-28869 (Seventeenth); 2(c) in 2-35107 (Eighteenth); 2(d) in 2-36646 (Nineteenth); 2(c) in 2-39253 (Twentieth); 2(c) in 2-41080 (Twenty-first); C-1 to Rule 24 Certificate in 70-5151 (Twenty-second); C-1 to Rule 24 Certificate in 70-5257 (Twenty-third); C to Rule 24;24 Certificate in 70-5343 (Twenty-fourth); C-1 to Rule 24 Certificate in 70-5404 (Twenty-fifth); C to Rule 24 Certificate in 70-5502 (Twenty-sixth); C-1 to Rule 24 Certificate in 70-5556 (Twenty-seventh); C-1 to Rule 24 Certificate in 70-5693 (Twenty-eighth); C-1 to Rule 24 Certificate in 70-6078 (Twenty-ninth); C-1 to Rule 24 Certificate in 70-6174 (Thirtieth); C-1 to Rule 24 Certificate in 70-6246 (Thirty-first); C-1 to Rule 24 Certificate in 70-6498 (Thirty-second); A-4b-2 to Rule 24 Certificate in 70-6326 (Thirty-third); C-1 to Rule 24 Certificate in 70-6607 (Thirty-fourth); C-1 to Rule 24 Certificate in 70-6650 (Thirty-fifth); C-1 to Rule 24 Certificate dated December 1, 1982 in 70-6774 (Thirty-sixth); C-1 to Rule 24 Certificate dated February 17, 1983 in 70-6774 (Thirty-seventh); A-2(a) to Rule 24 Certificate dated December 5, 1984 in 70-6858 (Thirty-eighth); A-3(a) to Rule 24 Certificate in 70-7127 (Thirty-ninth);(Thirty-ninth ); A-7 to Rule 24 Certificate in 70-7068 (Fortieth); A-8(b) to Rule 24 Certificate dated July 6, 1989 in 70-7346 (Forty-first); A-8(c) to Rule 24 Certificate dated February 1, 1990 in 70-7346 (Forty-second); 4 to Form 10-Q for the quarter ended September 30, 1990 in 1-10764 (Forty-third); A-2(a) to Rule 24 Certificate dated November 30, 1990 in 70-7802 (Forty-fourth); A-2(b) to Rule 24 Certificate dated January 24, 1991 in 70-7802 (Forty-fifth); 4(d)(2) in 33-54298 (Forty-sixth); 4(c)(2) to Form 10-K for the year ended December 31, 1992 in 1-10764 (Forty-seventh); 4(b) to Form 10-Q for the quarter ended June 30, 1993 in 1-10764 (Forty-eighth); 4(c) to Form 10-Q for the quarter ended June 30, 1993 in 1-10764 (Forty-ninth); 4(b) to Form 10-Q for the quarter ended September 30, 1993 in 1-10764 (Fiftieth); 4(c) to Form 10-Q for the quarter ended September 30, 1993 in 1-10764 (Fifty-first); 4(a) to Form 10-Q for the quarter ended June 30, 1994 in 1-10764 (Fifty-second); C-2 to FormF orm U5S for the year ended December 31, 1995 (Fifty-third); C-2(a) to Form U5S for the year ended December 31, 1996 (Fifty-fourth); 4(a) to Form 10-Q for the quarter ended March 31, 2000 in 1-10764 (Fifty-fifth); 4(a) to Form 10-Q for the quarter ended September 30, 2001 in 1-10764 (Fifty-sixth); C-2(a) to Form U5S for the year ended December 31, 2001 (Fifty-seventh); 4(c)1 to Form 10-K for the year December 31, 2002 in 1-10764 (Fifty-eighth); 4(a) to Form 10-Q for the quarter ended June 30, 2003 in 1-10764 (Fifty-ninth); 4(f) to Form 10-Q for the quarter ended June 30, 2003 in 1-10764 (Sixtieth); 4(h) to Form 10-Q for the quarter ended June 30, 2003 in 1-10764 (Sixty-first); 4(e) to Form 10-Q for the quarter ended September 30, 2004 in 1-10764 (Sixty-second); 4(c)1 to Form 10-K for the year December 31, 2004 in 1-10764 (Sixty-third); C-2(a) to Form U5S for the year ended December 31, 2004 (Sixty-fourth); 4(c) to Form 10-Q for the quarter ended June 30, 2005 in 1-10764 (Sixty-fifth); 4(a)4(a ) to Form 10-Q for the quarter ended June 30, 20052006 in 1-10764 (Sixty-sixth); 4(b) to Form 10-Q for the quarter ended June 30, 2008 in 1-10764 (Sixty-seventh); and 4(c)1 to Form 10-K for the year ended December 31, 2008 in 1-10764 (Sixty-eighth); 4.06 to Form 8-K dated October 8, 2010 in 1-10764 (Sixty-ninth); and 4.06 to Form 8-K dated November 12, 2010 in 1-10764 (Seventieth)). |
| Entergy Gulf States Louisiana |
(d) 1 -- | Indenture of Mortgage, dated September 1, 1926, as amended by certain Supplemental Indentures (B-a-I-1 in Registration No. 2-2449 (Mortgage); 7-A-9 in Registration No. 2-6893 (Seventh); B to Form 8-K dated September 1, 1959 (Eighteenth); B to Form 8-K dated February 1, 1966 (Twenty-second); B to Form 8-K dated March 1, 1967 (Twenty-third); C to Form 8-K dated March 1, 1968 (Twenty-fourth); B to Form 8-K dated November 1, 1968 (Twenty-fifth); B to Form 8-K dated April 1, 1969 (Twenty-sixth); 2-A-8 in Registration No. 2-66612 (Thirty-eighth); 4-2 to Form 10-K for the year ended December 31, 1984 in 1-27031 (Forty-eighth); 4-2 to Form 10-K for the year ended December 31, 1988 in 1-27031 (Fifty-second); 4 to Form 10-K for the year ended December 31, 1991 in 1-27031 (Fifty-third); 4 to Form 8-K dated July 29, 1992 in 1-27031 (Fifth-fourth); 4 to Form 10-K dated December 31, 1992 in 1-27031 (Fifty-fifth); 4 to Form 10-Q for the quarter ended March 31, 1993 in 1-27031 (Fifty-sixth); 4-2 to Amendment No. 9 to Registration No. 2-76551 (Fifty-seventh); 4(b) to Form 10-Q for the quarter ended March 31,1999 in 1-27031 (Fifty-eighth); A-2(a) to Rule 24 Certificate dated June 23, 2000 in 70-8721 (Fifty-ninth); A-2(a) to Rule 24 Certificate dated September 10, 2001 in 70-9751 (Sixtieth); A-2(b) to Rule 24 Certificate dated November 18, 2002 in 70-9751 (Sixty-first); A-2(c) to Rule 24 Certificate dated December 6, 2002 in 70-9751 (Sixty-second); A-2(d) to Rule 24 Certificate dated June 16, 2003 in 70-9751 (Sixty-third); A-2(e) to Rule 24 Certificate dated June 27, 2003 in 70-9751 (Sixty-fourth); A-2(f) to Rule 24 Certificate dated July 11, 2003 in 70-9751 (Sixty-fifth); A-2(g) to Rule 24 Certificate dated July 28, 2003 in 70-9751 (Sixty-sixth); A-3(i) to Rule 24 Certificate dated November 4, 2004 in 70-10158 (Sixty-seventh); A-3(ii) to Rule 24 Certificate dated November 23, 2004 in 70-10158 (Sixty-eighth); A-3(iii) to Rule 24 Certificate dated February 16, 2005 in 70-10158 (Sixty-ninth); A-3(iv) to Rule 24 Certificate dated June 2, 2005 in 70-10158 (Seventieth); A-3(v) to Rule 24 Certificate dated July 21, 2005 in 70-10158 (Seventy-first); A-3(vi) to Rule 24 Certificate dated October 7, 2005 in 70-10158 (Seventy-second); A-3(vii) to Rule 24 Certificate dated December 19, 2005 in 70-10158 (Seventy-third); 4(a) to Form 10-Q for the quarter ended March 31, 2006 in 1-27031 (Seventy-fourth); 4(iv) to Form 8-K15D5 dated January 7, 2008 in 333-148557 (Seventy-fifth); 4(a) to Form 10-Q for the quarter ended June 30, 2008 in 333-148557 (Seventy-sixth); and 4(a) to Form 10-Q for the quarter ended September 30, 2009 in 0-20371 (Seventy-seventh); 4.07 to Form 8-K dated October 1, 2010 in 0-20371 (Seventy-eighth); 4(c) to Form 8-K filed October 12, 2010 in 0-20371 (Seventy-ninth); and 4(f) to Form 8-K filed October 12, 2010 in 0-20371 (Eightieth)). |
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(d) 2 -- | Indenture, dated March 21, 1939, accepting resignation of The Chase National Bank of the City of New York as trustee and appointing Central Hanover Bank and Trust Company as successor trustee (B-a-1-6 in Registration No. 2-4076). |
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(d) 3 -- | Agreement of Resignation, Appointment and Acceptance, dated as of October 3, 2007, among Entergy Gulf States, Inc., JPMorgan Chase Bank, National Association, as resigning trustee, and The Bank of New York, as successor trustee (4(a) to Form 10-Q for the quarter ended September 30, 2007 in 1-27031). |
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(d) 4 -- | Credit Agreement ($200,000,000), dated as of August 2, 2007, among Entergy Gulf States, Inc., the Banks (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), JPMorgan Chase Bank, N.A., KeyBank National Association, Mizuho Corporate Bank, Ltd., Morgan Stanley Bank, The Bank of New York, The Royal Bank of Scotland plc, and Wachovia Bank, National Association), Citibank, N.A., as Administrative Agent, and the LC Issuing Banks (10(c) to Form 10-Q for the quarter ended June 30, 2007 in 1-27031). |
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(d) 5 -- | Assumption Agreement, dated as of May 30, 2008, among Entergy Texas, Inc., Entergy Gulf States Louisiana, L.L.C. and Citibank, N.A., as administrative agent (10(a) to Form 10-Q for the quarter ended March 31, 2008 in 0-53134). |
*(e) 1 -- | Mortgage and Deed of Trust, dated as of April 1, 1944, as amended by sixty-sixseventy Supplemental Indentures (7(d) in 2-5317 (Mortgage); 7(b) in 2-7408 (First); 7(c) in 2-8636 (Second); 4(b)-3 in 2-10412 (Third); 4(b)-4 in 2-12264 (Fourth); 2(b)-5 in 2-12936 (Fifth); D in 70-3862 (Sixth); 2(b)-7 in 2-22340 (Seventh); 2(c) in 2-24429 (Eighth); 4(c)-9 in 2-25801 (Ninth); 4(c)-10 in 2-26911 (Tenth); 2(c) in 2-28123 (Eleventh); 2(c) in 2-34659 (Twelfth); C to Rule 24 Certificate in 70-4793 (Thirteenth); 2(b)-2 in 2-38378 (Fourteenth); 2(b)-2 in 2-39437 (Fifteenth); 2(b)-2 in 2-42523 (Sixteenth); C to Rule 24 Certificate in 70-5242 (Seventeenth); C to Rule 24 Certificate in 70-5330 (Eighteenth); C-1 to Rule 24 Certificate in 70-5449 (Nineteenth); C-1 to Rule 24 Certificate in 70-5550 (Twentieth); A-6(a) to Rule 24 Certificate in 70-5598 (Twenty-first); C-1 to Rule 24 Certificate in 70-5711 (Twenty-second); C-1 to Rule 24 Certificate in 70-5919 (Twenty-third); C-1 to Rule 24 Certificate in 70-6102 (Twenty-fourth); C-1 to Rule 24 Certificate in 70-6169 (Twenty-fifth); C-1 to Rule 24 Certificate in 70-6278 (Twenty-sixth); C-1 to Rule 24 Certificate in 70-6355 (Twenty-seventh); C-1 to Rule 24 Certificate in 70-6508 (Twenty-eighth); C-1 to Rule 24 Certificate in 70-6556 (Twenty-ninth); C-1 to Rule 24 Certificate in 70-6635 (Thirtieth); C-1 to Rule 24 Certificate in 70-6834 (Thirty-first); C-1 to Rule 24 Certificate in 70-6886 (Thirty-second); C-1 to Rule 24 Certificate in 70-6993 (Thirty-third); C-2 to Rule 24 Certificate in 70-6993 (Thirty-fourth); C-3 to Rule 24 Certificate in 70-6993 (Thirty-fifth); A-2(a) to Rule 24 Certificate in 70-7166 (Thirty-sixth); A-2(a) in 70-7226 (Thirty-seventh); C-1 to Rule 24 Certificate in 70-727070-72 70 (Thirty-eighth); 4(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1988 in 1-8474 (Thirty-ninth); A-2(b) to Rule 24 Certificate in 70-7553 (Fortieth); A-2(d) to Rule 24 Certificate in 70-7553 (Forty-first); A-3(a) to Rule 24 Certificate in 70-7822 (Forty-second); A-3(b) to Rule 24 Certificate in 70-7822 (Forty-third); A-2(b) to Rule 24 Certificate in 70-7822 (Forty-fourth); A-3(c) to Rule 24 Certificate in 70-7822 (Forty-fifth); A-2(c) to Rule 24 Certificate dated April 7, 1993 in 70-7822 (Forty-sixth); A-3(d) to Rule 24 Certificate dated June 4, 1993 in 70-7822 (Forth-seventh); A-3(e) to Rule 24 Certificate dated December 21, 1993 in 70-7822 (Forty-eighth); A-3(f) to Rule 24 Certificate dated August 1, 1994 in 70-7822 (Forty-ninth); A-4(c) to Rule 24 Certificate dated September 28, 1994 in 70-7653 (Fiftieth); A-2(a) to Rule 24 Certificate dated April 4, 1996 in 70-8487 (Fifty-first); A-2(a) to Rule 24 Certificate dated April 3, 1998 in 70-9141 (Fifty-second); A-2(b) to Rule 24 Certificate dated April 9, 1999 in 70-9141 (Fifty-third); A-3(a) to Rule 24 Certificate dated July 6, 1999 in 70-9141 (Fifty-fourth); A-2(c) to Rule 24 Certificate dated June 2, 2000 in 70-9141 (Fifty-fifth); A-2(d) to Rule 24 Certificate dated April 4, 2002 in 70-9141 (Fifty-sixth); A-3(a) to Rule 24 Certificate dated March 30, 2004 in 70-10086 (Fifty-seventh); A-3(b) to Rule 24 Certificate dated October 15, 2004 in 70-10086 (Fifty-eighth); A-3(c) to Rule 24 Certificate dated October 26, 2004 in 70-10086 (Fifty-ninth); A-3(d) to Rule 24 Certificate dated May 18, 2005 in 70-10086 (Sixtieth); A-3(e) to Rule 24 Certificate dated August 25, 2005 in 70-10086 (Sixty-first); A-3(f) to Rule 24 Certificate dated October 31, 2005 in 70-10086 (Sixty-second); B-4(i) to Rule 24 Certificate dated January 10, 2006 in 70-10324 (Sixty-third); B-4(ii) to Rule 24 Certificate dated January 10, 2006 in 70-10324 (Sixty-fourth); 4(a) to Form 10-Q for the quarter ended September 30, 2008 in 1-32718 (Sixty-fifth); 4(e)1 to Form 10-K for the year ended December 31, 2009 in 1-132718 (Sixty-sixth); 4(a) to Form 10-Q for the quarter ended March 31, 2010 in 1-32718 (Sixty-seventh); 4.08 to Form 8-K dated September 24, 2010 in 1-32718 (Sixty-eighth); 4(c) to Form 8-K filed October 12, 2010 in 1-32718 (Sixty-ninth); and (Sixty-sixth)4.08 to Form 8-K dated November 23, 2010 in 1-32718 (Seventieth)). |
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(e) 2 -- | Facility Lease No. 1, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-1 in Registration No. 33-30660), as supplemented by Lease Supplement No. 1 dated as of July 1, 1997 (attached to Refunding Agreement No. 1, dated as of June 27, 1997, with such Refunding Agreement filed as Exhibit 2 to Current Report on Form 8-K, dated July 14, 1997 in 1-8474). |
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(e) 3 -- | Facility Lease No. 2, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-2 in Registration No. 33-30660), as supplemented by Lease Supplemental No. 1 dated as of July 1, 1997 (attached to Refunding Agreement No. 2, dated as of June 27, 1997, with such Refunding Agreement filed as Exhibit 3 to Current Report on Form 8-K, dated July 14, 1997 in 1-8474). |
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(e) 4 -- | Facility Lease No. 3, dated as of September 1, 1989, between First National Bank of Commerce, as Owner Trustee, and Entergy Louisiana (4(c)-3 in Registration No. 33-30660), as supplemented by Lease Supplemental No. 1 dated as of July 1, 1997 (attached to Refunding Agreement No. 3, dated as of June 27, 1997, with such Refunding Agreement filed as Exhibit 4 to Current Report on Form 8-K, dated July 14, 1997 in 1-8474). |
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(e) 5 -- | Credit Agreement ($200,000,000), dated as of August 2, 2007, among Entergy Louisiana, the Banks (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), JPMorgan Chase Bank, N.A., KeyBank National Association, Mizuho Corporate Bank, Ltd., Morgan Stanley Bank, The Bank of New York, The Royal Bank of Scotland plc, and Wachovia Bank, National Association), Citibank, N.A., as Administrative Agent, and the LC Issuing Banks (10(b) to Form 10-Q for the quarter ended June 30, 2007 in 1-11299). |
(f) 1 -- | Mortgage and Deed of Trust, dated as of February 1, 1988, as amended by twenty-sixtwenty-seven Supplemental Indentures (A-2(a)-2 to Rule 24 Certificate in 70-7461 (Mortgage); A-2(b)-2 in 70-7461 (First); A-5(b) to Rule 24 Certificate in 70-7419 (Second); A-4(b) to Rule 24 Certificate in 70-7554 (Third); A-1(b)-1 to Rule 24 Certificate in 70-7737 (Fourth); A-2(b) to Rule 24 Certificate dated November 24, 1992 in 70-7914 (Fifth); A-2(e) to Rule 24 Certificate dated January 22, 1993 in 70-7914 (Sixth); A-2(g) to Form U-1 in 70-7914 (Seventh); A-2(i) to Rule 24 Certificate dated November 10, 1993 in 70-7914 (Eighth); A-2(j) to Rule 24 Certificate dated July 22, 1994 in 70-7914 (Ninth); (A-2(l) to Rule 24 Certificate dated April 21, 1995 in 70-7914 (Tenth); A-2(a) to Rule 24 Certificate dated June 27, 1997 in 70-8719 (Eleventh); A-2(b) to Rule 24 Certificate dated April 16, 1998 in 70-8719 (Twelfth); A-2(c) to Rule 24 Certificate dated May 12, 1999 in 70-8719 (Thirteenth); A-3(a) to Rule 24 Certificate dated June 8, 1999 in 70-8719 (Fourteenth); A-2(d) to Rule 24 Certificate dated February 24, 2000 in 70-8719 (Fifteenth); A-2(a) to Rule 24 Certificate dated February 9, 2001 in 70-9757 (Sixteenth); A-2(b) to Rule 24 Certificate dated October 31, 2002 in 70-9757 (Seventeenth); A-2(c) to Rule 24 Certificate dated December 2, 2002 in 70-9757 (Eighteenth); A-2(d) to Rule 24 Certificate dated February 6, 2003 in 70-9757 (Nineteenth); A-2(e) to Rule 24 Certificate dated April 4, 2003 in 70-9757 (Twentieth); A-2(f) to Rule 24 Certificate dated June 6, 2003 in 70-9757 (Twenty-first); A-3(a) to Rule 24 Certificate dated April 8, 2004 in 70-10157 (Twenty-second); A-3(b) to Rule 24 Certificate dated April 29, 2004 in 70-10157 (Twenty-third); A-3(c) to Rule 24 Certificate dated October 4, 2004 in 70-10157 (Twenty-fourth); A-3(d) to Rule 24 Certificate dated January 27, 2006 in 70-10157 (Twenty-fifth); and 4(b) to Form 10-Q for the quarter ended June 30, 2009 in 1-31508 (Twenty-sixth); and 4(b) to Form 10-Q for the quarter ended March 31, 2010 in 1-31508 (Twenty-seventh)). |
(g) 1 -- | Mortgage and Deed of Trust, dated as of May 1, 1987, as amended by fourteenfifteen Supplemental Indentures (A-2(c) to Rule 24 Certificate in 70-7350 (Mortgage); A-5(b) to Rule 24 Certificate in 70-7350 (First); A-4(b) to Rule 24 Certificate in 70-7448 (Second); 4(f)4 to Form 10-K for the year ended December 31, 1992 in 0-5807 (Third); 4(a) to Form 10-Q for the quarter ended September 30, 1993 in 0-5807 (Fourth); 4(a) to Form 8-K dated April 26, 1995 in 0-5807 (Fifth); 4(a) to Form 8-K dated March 22, 1996 in 0-5807 (Sixth); 4(b) to Form 10-Q for the quarter ended June 30, 1998 in 0-5807 (Seventh); 4(d) to Form 10-Q for the quarter ended June 30, 2000 in 0-5807 (Eighth); C-5(a) to Form U5S for the year ended December 31, 2000 (Ninth); 4(b) to Form 10-Q for the quarter ended September 30, 2002 in 0-5807 (Tenth); 4(k) to Form 10-Q for the quarter ended June 30, 2003 in 0-5807 (Eleventh); 4(a) to Form 10-Q for the quarter ended September 30, 2004 in 0-5807 (Twelfth); 4(b) to Form 10-Q for the quarter ended September 30, 2004 in 0-5807 (Thirteenth); and 4(e) to Form 10-Q for the quarter ended June 30, 2005 in 0-5807 (Fourteenth); and 4.02 to Form 8-K dated November 23, 2010 in 0-5807 (Fifteenth)). |
(h) 1 -- | Credit Agreement ($200,000,000), dated as of August 2, 2007, among Entergy Gulf States, Inc. the Banks (Citibank, N.A., ABN AMRO Bank N.V., Barclays Bank PLC, BNP Paribas, Calyon New York Branch, Credit Suisse (Cayman Islands Branch), J. P. Morgan Chase Bank, N.A., KeyBank National Association, Mizuho Corporate Bank, Ltd., Morgan Stanley Bank, The Bank of New York, The Royal Bank of Scotland plc, and Wachovia Bank, National Association), Citibank, N.A., as Administrative Agent and LC Issuing Bank (10(c) to Form 10-Q for the quarter ended June 30, 2007 in 1-11299). |
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(h) 2 -- | Assumption Agreement, dated as of May 30, 2008, among Entergy Texas, Inc., Entergy Gulf States Louisiana, L.L.C. and Citibank, N.A., as administrative agent (10(a) to Form 10-Q for the quarter ended March 31, 2008 in 0-53134). |
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(h) 3 -- | Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(h)2 to Form 10-K for the year ended December 31, 2008 in 0-53134). |
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(h) 4 -- | Officer'sOfficer’s Certificate No. 1-B-1 dated January 27, 2009, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(h)3 to Form 10-K for the year ended December 31, 2008 in 0-53134). |
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(h) 5 -- | Officer'sOfficer’s Certificate No. 2-B-2 dated May 14, 2009, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(a) to Form 10-Q for the quarter ended June 30, 2009 in 1-34360). |
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(h) 6 -- | Officer’s Certificate No. 3-B-3 dated May 18, 2010, supplemental to Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008, between Entergy Texas, Inc. and The Bank of New York Mellon, as trustee (4(a) to Form 10-Q for the quarter ended June 30, 2010 in 1-34360). |
(a) 1 -- | Agreement, dated April 23, 1982, among certain System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
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(a) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-11299). |
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(a) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). |
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(a) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)5 in 2-41080). |
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(a) 5 -- | Amendment, dated April 27, 1984, to Service Agreement with Entergy Services (10(a)7 to Form 10-K for the year ended December 31, 1984 in 1-3517). |
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(a) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(a)12 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
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*(a) 7 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(a)7 to Form 10-K for the year ended December 31, 2009 in 1-11299). |
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(a) 8 -- | Availability Agreement, dated June 21, 1974, among System Energy and certain other System companies (B to Rule 24 Certificate dated June 24, 1974 in 70-5399). |
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(a) 9 -- | First Amendment to Availability Agreement, dated as of June 30, 1977 (B to Rule 24 Certificate dated June 24, 1977 in 70-5399). |
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(a) 10 -- | Second Amendment to Availability Agreement, dated as of June 15, 1981 (E to Rule 24 Certificate dated July 1, 1981 in 70-6592). |
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(a) 11 -- | Third Amendment to Availability Agreement, dated as of June 28, 1984 (B-13(a) to Rule 24 Certificate dated July 6, 1984 in 70-6985). |
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(a) 12 -- | Fourth Amendment to Availability Agreement, dated as of June 1, 1989 (A to Rule 24 Certificate dated June 8, 1989 in 70-5399). |
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(a) 13 -- | Eighteenth Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (C-2 to Rule 24 Certificate dated October 1, 1986 in 70-7272). |
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(a) 14 -- | Nineteenth Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (C-3 to Rule 24 Certificate dated October 1, 1986 in 70-7272). |
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(a) 15 -- | Twenty-sixth Assignment of Availability Agreement, Consent and Agreement, dated as of October 1, 1992, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-2(c) to Rule 24 Certificate dated November 2, 1992 in 70-7946). |
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(a) 16 -- | Twenty-seventh Assignment of Availability Agreement, Consent and Agreement, dated as of April 1, 1993, with United States Trust Company of New York and Gerard F. Ganey as Trustees (B-2(d) to Rule 24 Certificate dated May 4, 1993 in 70-7946). |
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(a) 17 -- | Twenty-ninth Assignment of Availability Agreement, Consent and Agreement, dated as of April 1, 1994, with United States Trust Company of New York and Gerard F. Ganey as Trustees (B-2(f) to Rule 24 Certificate dated May 6, 1994 in 70-7946). |
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(a) 18 -- | Thirtieth Assignment of Availability Agreement, Consent and Agreement, dated as of August 1, 1996, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans, and United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-2(a) to Rule 24 Certificate dated August 8, 1996 in 70-8511). |
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(a) 19 -- | Thirty-first Assignment of Availability Agreement, Consent and Agreement, dated as of August 1, 1996, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-2(b) to Rule 24 Certificate dated August 8, 1996 in 70-8511). |
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(a) 20 -- | Thirty-fourth Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 2002, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, The Bank of New York and Douglas J. MacInnes (B-2(a)(1) to Rule 24 Certificate dated October 4, 2001 in 70-9753). |
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(a) 21 -- | Amendment to the Thirty-fourth Assignment of Availability Agreement, Consent and Agreement, dated as of December 15, 2005 (B-5(i) to Rule 24 Certificate dated January 10, 2006 in 70-10324). |
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(a) 22 -- | Thirty-fifth Assignment of Availability Agreement, Consent and Agreement, dated as of December 22, 2003, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and Union Bank of California, N.A (10(a)25 to Form 10-K for the year ended December 31, 2003 in 1-11299). |
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(a) 2314 -- | First Amendment to Thirty-fifth Assignment of Availability Agreement, Consent and Agreement, dated as of December 17, 2004 (10(a)24 to Form 10-K for the year ended December 31, 2004 in 1-11299). |
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(a) 2415 -- | Thirty-sixth Assignment of Availability Agreement, Consent and Agreement, dated as of September 1, 2007, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, and The Bank of New York and Douglas J. MacInnes, as trustees (10(a)24 to Form 10-K for the year ended December 31, 2007 in 1-11299). |
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(a) 2516 -- | Capital Funds Agreement, dated June 21, 1974, between Entergy Corporation and System Energy (C to Rule 24 Certificate dated June 24, 1974 in 70-5399). |
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(a) 2617 -- | First Amendment to Capital Funds Agreement, dated as of June 1, 1989 (B to Rule 24 Certificate dated June 8, 1989 in 70-5399). |
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(a) 27 -- | Eighteenth Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (D-2 to Rule 24 Certificate dated October 1, 1986 in 70-7272). |
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(a) 28 -- | Nineteenth Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 1986, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (D-3 to Rule 24 Certificate dated October 1, 1986 in 70-7272). |
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(a) 29 -- | Twenty-sixth Supplementary Capital Funds Agreement and Assignment, dated as of October 1, 1992, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-3(c) to Rule 24 Certificate dated November 2, 1992 in 70-7946). |
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(a) 30 -- | Twenty-seventh Supplementary Capital Funds Agreement and Assignment, dated as of April 1, 1993, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-3(d) to Rule 24 Certificate dated May 4, 1993 in 70-7946). |
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(a) 31 -- | Twenty-ninth Supplementary Capital Funds Agreement and Assignment, dated as of April 1, 1994, with United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-3(f) to Rule 24 Certificate dated May 6, 1994 in 70-7946). |
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(a) 32 -- | Thirtieth Supplementary Capital Funds Agreement and Assignment, dated as of August 1, 1996, among Entergy Corporation, System Energy and United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-3(a) to Rule 24 Certificate dated August 8, 1996 in 70-8511). |
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(a) 33 -- | Thirty-first Supplementary Capital Funds Agreement and Assignment, dated as of August 1, 1996, among Entergy Corporation, System Energy and United States Trust Company of New York and Gerard F. Ganey, as Trustees (B-3(b) to Rule 24 Certificate dated August 8, 1996 in 70-8511). |
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(a) 34 -- | Thirty-fourth Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 2002, among Entergy Corporation, System Energy, The Bank of New York and Douglas J. MacInnes (B-3(a)(1) to Rule 24 Certificate dated October 4, 2002 in 70-9753). |
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(a) 3518 -- | Thirty-fifth Supplementary Capital Funds Agreement and Assignment, dated as of December 22, 2003, among Entergy Corporation, System Energy, and Union Bank of California, N.A (10(a)38 to Form 10-K for the year ended December 31, 2003 in 1-11299). |
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(a) 3619 -- | Thirty-sixth Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 2007, among Entergy Corporation, System Energy and The Bank of New York and Douglas J. MacInnes, as Trustees (10(a)36 to Form 10-K for the year ended December 31, 2007 in 1-11299). |
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(a) 3720 -- | First Amendment to Supplementary Capital Funds Agreements and Assignments, dated as of June 1, 1989, by and between Entergy Corporation, System Energy, Deposit Guaranty National Bank, United States Trust Company of New York and Gerard F. Ganey (C to Rule 24 Certificate dated June 8, 1989 in 70-7026). |
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(a) 3821 -- | First Amendment to Supplementary Capital Funds Agreements and Assignments, dated as of June 1, 1989, by and between Entergy Corporation, System Energy, United States Trust Company of New York and Gerard F. Ganey (C to Rule 24 Certificate dated June 8, 1989 in 70-7123). |
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(a) 3922 -- | First Amendment to Supplementary Capital Funds Agreement and Assignment, dated as of June 1, 1989, by and between Entergy Corporation, System Energy and Chemical Bank (C to Rule 24 Certificate dated June 8, 1989 in 70-7561). |
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(a) 4023 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). |
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(a) 4124 -- | Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B-1(a) in 70-6337), as amended by Amendment No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and Amendment No. 2, dated as of October 31, 1980 (1 to Rule 24 Certificate dated October 30, 1981 in 70-6337). |
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(a) 4225 -- | Operating Agreement dated as of May 1, 1980, between System Energy and SMEPA (B(2)(a) in 70-6337). |
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(a) 4326 -- | Assignment, Assumption and Further Agreement No. 1, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561). |
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(a) 4427 -- | Assignment, Assumption and Further Agreement No. 2, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561). |
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(a) 4528 -- | Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B(3)(a) in 70-6337). |
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(a) 4629 -- | Grand Gulf Unit No. 2 Supplementary Agreement, dated as of February 7, 1986, between System Energy and SMEPA (10(aaa) in 33-4033). |
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(a) 4730 -- | Compromise and Settlement Agreement, dated June 4, 1982, between Texaco, Inc. and Entergy Louisiana (28(a) to Form 8-K dated June 4, 1982 in 1-3517). |
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(a) 4831 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
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(a) 4932 -- | First Amendment to Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). |
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(a) 5033 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). |
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(a) 5134 -- | Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). |
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(a) 5235 -- | First Amendment, dated January 1, 1990, to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). |
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(a) 5336 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). |
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(a) 5437 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). |
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(a) 5538 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
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*(a) 5639 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement.Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299). |
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(a) 5740 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-11299). |
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(a) 41 -- | Guaranty Agreement between Entergy Corporation and Entergy Arkansas, dated as of September 20, 1990 (B-1(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). |
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(a) 5842 -- | Guarantee Agreement between Entergy Corporation and Entergy Louisiana, dated as of September 20, 1990 (B-2(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). |
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(a) 5943 -- | Guarantee Agreement between Entergy Corporation and System Energy, dated as of September 20, 1990 (B-3(a) to Rule 24 Certificate dated September 27, 1990 in 70- 7757). |
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(a) 6044 -- | Loan Agreement between Entergy Operations and Entergy Corporation, dated as of September 20, 1990 (B-12(b) to Rule 24 Certificate dated June 15, 1990 in 70-7679). |
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(a) 6145 -- | Loan Agreement between Entergy Corporation and Entergy Systems and Service, Inc., dated as of December 29, 1992 (A-4(b) to Rule 24 Certificate in 70-7947). |
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+(a) 6246 -- | Executive Financial Counseling Program of Entergy Corporation and Subsidiaries (10(a)64 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
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+(a) 63 -- | Amended and Restated Executive Annual Incentive Plan of Entergy Corporation and Subsidiaries, effective January 1, 2003 (10(b) to Form 10-Q for the quarter ended March 31, 2003 in 1-11299). |
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+(a) 6447 -- | Equity Ownership Plan of Entergy Corporation and Subsidiaries (A-4(a) to Rule 24 Certificate dated May 24, 1991 in 70-7831). |
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+(a) 6548 -- | Amendment No. 1 to the Equity Ownership Plan of Entergy Corporation and Subsidiaries (10(a)71 to Form 10-K for the year ended December 31, 1992 in 1-3517). |
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+(a) 6649 -- | 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (Effective for Grants and Elections On or After January 1, 2007) (Appendix B to Entergy Corporation'sCorporation’s definitive proxy statement for its annual meeting of stockholders held on May 12, 2006 in 1-11299) |
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*+(a) 6750 -- | First Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries effective October 26, 2006. |
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*+(a) 51 -- | Second Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries effective January 1, 2009. |
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*+(a) 52 -- | Third Amendment of the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries effective December 30, 2010. |
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+(a) 53 -- | Amended and Restated 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries (Effective for Grants and Elections After February 13, 2003) (10(a) to Form 10-Q for the quarter ended March 31, 2003 in 1-11299). |
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*+(a) 6854 -- | First Amendment of the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries, effective January 1, 2005. |
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*+(a) 55 -- | Second Amendment of the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries, effective October 26, 2006. |
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*+(a) 56 -- | Third Amendment of the 1998 Equity Ownership Plan of Entergy Corporation and Subsidiaries, effective January 1, 2009. |
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*+(a) 57 -- | Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2000 (10(a)70 to Form 10-K for the year ended December 31, 2001 in 1-11299).2009. |
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*+(a) 6958 -- | First Amendment effective December 28, 2001, toof the Supplemental Retirement Plan of Entergy Corporation and Subsidiaries, (10(a)71 to Form 10-K for the year endedeffective December 31, 2001 in 1-11299).30, 2010. |
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*+(a) 7059 -- | Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2000 (10(a)72 to Form 10-K for the year ended December 31, 2001 in 1-11299).2009. |
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*+(a) 7160 -- | First Amendment effective December 28, 2001, toof the Defined Contribution Restoration Plan of Entergy Corporation and Subsidiaries (10(a)73 to Form 10-K for the year endedeffective December 31, 2001 in 1-11299).30, 2010. |
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+(a) 7261 -- | Executive Disability Plan of Entergy Corporation and Subsidiaries (10(a)74 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
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*+(a) 7362 -- | Amended and Restated Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries, dated June 10, 2003 (10(d) to Form 10-Q for the quarter ended June 30, 2003 in 1-11299).as amended and restated effective January 1, 2009. |
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*+(a) 63 -- | First Amendment of the Executive Deferred Compensation Plan of Entergy Corporation and Subsidiaries effective December 30, 2010. |
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+(a) 7464 -- | Equity Awards Plan of Entergy Corporation and Subsidiaries, effective as of August 31, 2000 (10(a)77 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
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+(a) 7565 -- | Amendment, effective December 7, 2001, to the Equity Awards Plan of Entergy Corporation and Subsidiaries (10(a)78 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
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+(a) 7666 -- | Amendment, effective December 10, 2001, to the Equity Awards Plan of Entergy Corporation and Subsidiaries (10(b) to Form 10-Q for the quarter ended March 31, 2002 in 1-11299). |
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*+(a) 7767 -- | System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective as of January 1, 2009.2009 (10(a)77 to Form 10-K for the year ended December 31, 2009 in 1-11299). |
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*+(a) 78--68-- | First Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective January 1, 2010 (10(a)78 to Form 10-K for the year ended December 31, 2009 in 1-11299). |
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*+(a) 69 -- | Second Amendment of the System Executive Continuity Plan of Entergy Corporation and Subsidiaries, effective December 30, 2010. |
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+(a) 7970 -- | System Executive Continuity Plan II of Entergy Corporation and Subsidiaries, effective March 8, 2004 (10(e) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). |
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+(a) 8071 -- | First Amendment of the System Executive Continuity Plan II of Entergy Corporation and Subsidiaries, effective December 29, 2004 (10(a)78 to Form 10-K for the year ended December 31, 2004 in 1-11299). |
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+(a) 8172 -- | Post-Retirement Plan of Entergy Corporation and Subsidiaries, as amended effective January 1, 2000 (10(a)80 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
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+(a) 8273 -- | Amendment, effective December 28, 2001, to the Post-Retirement Plan of Entergy Corporation and Subsidiaries (10(a)81 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
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*+(a) 8374 -- | Pension Equalization Plan of Entergy Corporation and Subsidiaries, as amended and restated effective January 1, 2000 (10(a)82 to Form 10-K for the year ended December 31, 2001 in 1-11299).2009. |
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*+(a) 8475 -- | First Amendment effective December 28, 2001, toof the Pension Equalization Plan of Entergy Corporation and Subsidiaries, (10(a)83 to Form 10-K for the year endedeffective December 31, 2001 in 1-11299).30, 2010. |
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+(a) 8576 -- | Service Recognition Program for Non-Employee Outside Directors of Entergy Corporation and Subsidiaries, effective January 1, 2009 (10(a) to Form 10-Q for the quarter ended June 30, 2008 in 1-11299). |
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+(a) 8677 -- | Executive Income Security Plan of Gulf States Utilities Company, as amended effective March 1, 1991 (10(a)86 to Form 10-K for the year ended December 31, 2001 in 1-11299). |
| |
*+(a) 8778 -- | System Executive Retirement Plan of Entergy Corporation and Subsidiaries, effective January 1, 2000 (10(a)87 to Form 10-K for the year ended December 31, 2001 in 1-11299).2009. |
| |
*+(a) 8879 -- | First Amendment effective December 28, 2001, toof the System Executive Retirement Plan of Entergy Corporation and Subsidiaries, (10(a)88 to Form 10-K for the year endedeffective December 31, 2001 in 1-11299).30, 2010. |
| |
+(a) 8980 -- | Retention Agreement effective October 27, 2000 between J. Wayne Leonard and Entergy Corporation (10(a)81 to Form 10-K for the year ended December 31, 2000 in 1-11299). |
| |
+(a) 9081 -- | Amendment to Retention Agreement effective March 8, 2004 between J. Wayne Leonard and Entergy Corporation (10(c) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). |
| |
+(a) 9182 -- | Amendment to Retention Agreement effective December 30, 2005 between J. Wayne Leonard and Entergy Corporation (10(a)91 to Form 10-K for the year ended December 31, 2005 in 1-11299). |
| |
*+(a) 9283 -- | Amendment to Retention Agreement effective December 17,January 1, 2009 between J. Wayne Leonard and Entergy Corporation. |
| |
+(a) 84 -- | Amendment to Retention Agreement effective January 1, 2010 between J. Wayne Leonard and Entergy Corporation (10(a)92 to Form 10-K for the year ended December 31, 2009 in 1-11299). |
| |
*+(a) 93-85 -- | Restricted UnitAmendment to Retention Agreement effective December 30, 2010 between J. Wayne Leonard and Entergy Corporation. |
| |
+(a) 94--86 -- | EmploymentRestricted Unit Agreement effective August 7, 2001 between Curt L. HebertJ. Wayne Leonard and Entergy Corporation (10(a)9793 to Form 10-K for the year ended December 31, 20012009 in 1-11299). |
| |
(a) 95--87 -- | Agreement of Limited Partnership of Entergy-Koch, LP among EKLP, LLC, EK Holding I, LLC, EK Holding II, LLC and Koch Energy, Inc. dated January 31, 2001 (10(a)94 to Form 10-K/A for the year ended December 31, 2000 in 1-11299). |
| |
+(a) 96--88 -- | Employment Agreement effective April 15, 2003 between Robert D. Sloan and Entergy Services (10(c) to Form 10-Q for the quarter ended June 30, 2003 in 1-11299). |
| |
+(a) 9789 -- | Employment Agreement effective November 24, 2003 between Mark T. Savoff and Entergy Services (10(a)99 to Form 10-K for the year ended December 31, 2003 in 1-11299). |
| |
+(a) 9890 -- | Employment Agreement effective February 9, 1999 between Leo P. Denault and Entergy Services (10(a) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). |
| |
+(a) 9991 -- | Amendment to Employment Agreement effective March 5, 2004 between Leo P. Denault and Entergy Corporation (10(b) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). |
| |
+(a) 10092 -- | Retention Agreement effective August 3, 2006 between Leo P. Denault and Entergy Corporation (10(b) to Form 10-Q for the quarter ended June 30, 2006 in 1-11299). |
| |
*+(a) 10193 -- | Amendment to Retention Agreement effective December 16,January 1, 2009 between Leo P. Denault and Entergy Corporation. |
| |
+(a) 10294 -- | Amendment to Retention Agreement effective January 1, 2010 between Leo P. Denault and Entergy Corporation (10(a)101 to Form 10-K for the year ended December 31, 2009 in 1-11299). |
| |
*+(a) 95 -- | Amendment to Retention Agreement effective December 30, 2010 between Leo P. Denault and Entergy Corporation. |
| |
+(a) 96 -- | Shareholder Approval of Future Severance Agreements Policy, effective March 8, 2004 (10(f) to Form 10-Q for the quarter ended March 31, 2004 in 1-11299). |
| |
(a) 103 -- | Consulting Agreement effective May 4, 2004 between Hintz & Associates, LLC and Entergy Services, Inc. (10(d) to Form 10-Q for the quarter ended June 30, 2004 in 1-11299). |
| |
+(a) 104 -- | Form of Stock Option Grant Agreement Letter, as of December 31, 2004 (99.1 to Form 8-K dated January 26, 2005 in 1-11299). |
| |
+(a) 105 -- | Form of Long Term Incentive Plan Performance Unit Grant Letter, as of December 31, 2004 (99.2 to Form 8-K dated January 26, 2005 in 1-11299). |
| |
+(a) 10697 -- | Entergy Corporation Outside Director Stock Program Established under the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation and Subsidiaries (Amended and Restated effective January 1, 2009) (10(b) to Form 10-Q for the quarter ended June 30, 2008 in 1-11299). |
| |
+(a) 10798 -- | First Amendment to Entergy Corporation Outside Director Stock Program Established under the 2007 Equity Ownership and Long Term Cash Incentive Plan of Entergy Corporation Subsidiaries (10(a)105 to Form 10-K for the year ended December 31, 2008 in 1-11299). |
| |
+(a) 10899 -- | Rescission Agreement effective July 26, 2007 between Richard J. Smith and Entergy Services, Inc. (10(d) to Form 10-Q for the quarter ended June 30, 2007 in 1-11299). |
| |
(a) 109100 -- | Entergy Nuclear Retention Plan, as amended and restated January 1, 2007 (10(a)107 to Form 10-K for the year ended December 31, 2007 in 1-11299). |
| |
+(a) 110 -- | Form of Stock Option Grant Agreement Letter (10(a)108 to Form 10-K for the year ended December 31, 2007 in 1-11299). |
| |
+(a) 111101 -- | Restricted Unit Agreement between Leo P. Denault and Entergy Corporation (10(a) to Form 10-Q for the quarter ended March 31, 2008 in 1-11299). |
| |
*+(a) 112102 -- | Retention Agreement effective December 16, 2009 between Richard J. Smith and Entergy Corporation.Corporation (10(a)112 to Form 10-K for the year ended December 31, 2009 in 1-11299). |
| |
+(a) 103 -- | Executive Annual Incentive Plan of Entergy Corporation and Subsidiaries as amended and restated effective January 1, 2010 (Annex A to Entergy Corporation’s definitive proxy statement for its annual meeting of stockholders held on May 7, 2010). |
| |
*+(a) 104 -- | Form of Stock Option Grant Letter, as of January 27, 2011. |
| |
*+(a) 105 -- | Form of Long Term Incentive Program Performance Unit Grant Letter, as of January 27, 2011. |
| |
*+(a) 106 -- | Form of Restricted Stock Grant Letter, as of January 27, 2011. |
(b) 1 through (b) 178 -- See 10(a)8 through 10(a)2415 above. |
|
(b) 189 through (b) 3215 -- See 10(a)2516 through 10(a)3922 above. |
|
(b) 3316 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). |
| |
(b) 3417 -- | Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B-1(a) in 70-6337), as amended by Amendment No. 1, dated as of May 1, 1980 (B-1(c) in 70-6337) and Amendment No. 2, dated as of October 31, 1980 (1 to Rule 24 Certificate dated October 30, 1981 in 70-6337). |
| |
(b) 3518 -- | Operating Agreement, dated as of May 1, 1980, between System Energy and SMEPA (B(2)(a) in 70-6337). |
| |
(b) 3619 -- | Amended and Restated Installment Sale Agreement, dated as of February 15, 1996, between System Energy and Claiborne County, Mississippi (B-6(a) to Rule 24 Certificate dated March 4, 1996 in 70-8511). |
| |
(b) 3720 -- | Loan Agreement, dated as of October 15, 1998, between System Energy and Mississippi Business Finance Corporation (B-6(b) to Rule 24 Certificate dated November 12, 1998 in 70-8511). |
| |
(b) 3821 -- | Loan Agreement, dated as of May 15, 1999, between System Energy and Mississippi Business Finance Corporation (B-6(c) to Rule 24 Certificate dated June 8, 1999 in 70-8511). |
| |
(b) 3922 -- | Facility Lease No. 1, dated as of December 1, 1988, between Meridian Trust Company and Stephen M. Carta (Stephen J. Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (1) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-3(d) to Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-3(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). |
| |
(b) 4023 -- | Facility Lease No. 2, dated as of December 1, 1988 between Meridian Trust Company and Stephen M. Carta (Stephen J. Kaba, successor), as Owner Trustees, and System Energy (B-2(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561), as supplemented by Lease Supplement No. 1 dated as of April 1, 1989 (B-22(b) (2) to Rule 24 Certificate dated April 21, 1989 in 70-7561), Lease Supplement No. 2 dated as of January 1, 1994 (B-4(d) Rule 24 Certificate dated January 31, 1994 in 70-8215), and Lease Supplement No. 3 dated as of May 1, 2004 (B-4(d) to Rule 24 Certificate dated June 4, 2004 in 70-10182). |
| |
(b) 4124 -- | Assignment, Assumption and Further Agreement No. 1, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(1) to Rule 24 Certificate dated January 9, 1989 in 70-7561). |
| |
(b) 4225 -- | Assignment, Assumption and Further Agreement No. 2, dated as of December 1, 1988, among System Energy, Meridian Trust Company and Stephen M. Carta, and SMEPA (B-7(c)(2) to Rule 24 Certificate dated January 9, 1989 in 70-7561). |
| |
(b) 4326 -- | Collateral Trust Indenture, dated as of May 1, 2004, among GG1C Funding Corporation, System Energy, and Deutsche Bank Trust Company Americas, as Trustee (A-3(a) to Rule 24 Certificate dated June 4, 2004 in 70-10182), as supplemented by Supplemental Indenture No. 1 dated May 1, 2004, (A-4(a) to Rule 24 Certificate dated June 4, 2004 in 70-10182). |
| |
(b) 4427 -- | Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B(3)(a) in 70-6337). |
| |
(b) 4528 -- | Grand Gulf Unit No. 2 Supplementary Agreement, dated as of February 7, 1986, between System Energy and SMEPA (10(aaa) in 33-4033). |
| |
(b) 4629 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
| |
(b) 4730 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). |
| |
(b) 4831 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). |
| |
(b) 4932 -- | Fuel Lease, dated as of February 24, 1989, between River Fuel Funding Company #3, Inc. and System Energy (B-1(b) to Rule 24 Certificate dated March 3, 1989 in 70-7604). |
| |
(b) 5033 -- | System Energy'sEnergy’s Consent, dated January 31, 1995, pursuant to Fuel Lease, dated as of February 24, 1989, between River Fuel Funding Company #3, Inc. and System Energy (B-1(c) to Rule 24 Certificate dated February 13, 1995 in 70-7604). |
| |
(b) 5134 -- | Sales Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (D to Rule 24 Certificate dated June 26, 1974 in 70-5399). |
| |
(b) 5235 -- | Service Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (E to Rule 24 Certificate dated June 26, 1974 in 70-5399). |
| |
(b) 5336 -- | Partial Termination Agreement, dated as of December 1, 1986, between System Energy and Entergy Mississippi (A-2 to Rule 24 Certificate dated January 8, 1987 in 70-5399). |
| |
(b) 5437 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). |
| |
(b) 5538 -- | First Amendment, dated January 1, 1990 to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). |
| |
(b) 5639 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). |
| |
(b) 5740 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). |
| |
(b) 5841 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
| |
(b) 5942 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299)1-9067). |
| |
(b) 6043 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-9067). |
| |
(b) 44 -- | Service Agreement with Entergy Services, dated as of July 16, 1974, as amended (10(b)43 to Form 10-K for the year ended December 31, 1988 in 1-9067). |
| |
(b) 6145 -- | Amendment, dated January 1, 2004, to Service Agreement with Entergy Services (10(b)57 to Form 10-K for the year ended December 31, 2004 in 1-9067). |
| |
*(b) 6246 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(b)62 to Form 10-K for the year ended December 31, 2009 in 1-9067). |
| |
(b) 6347 -- | Operating Agreement between Entergy Operations and System Energy, dated as of June 6, 1990 (B-3(b) to Rule 24 Certificate dated June 15, 1990 in 70-7679). |
| |
(b) 6448 -- | Guarantee Agreement between Entergy Corporation and System Energy, dated as of September 20, 1990 (B-3(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). |
| |
(b) 6549 -- | Letter of Credit and Reimbursement Agreement, dated as of December 22, 2003, among System Energy Resources, Inc., Union Bank of California, N.A., as administrating bank and funding bank, Keybank National Association, as syndication agent, Banc One Capital Markets, Inc., as documentation agent, and the Banks named therein, as Participating Banks (10(b)63 to Form 10-K for the year ended December 31, 2003 in 1-9067). |
| |
(b) 6650 -- | Amendment to Letter of Credit and Reimbursement Agreement, dated as of December 22, 2003 (10(b)62 to Form 10-K for the year ended December 31, 2004 in 1-9067). |
| |
(b) 6751 -- | First Amendment and Consent, dated as of May 3, 2004, to Letter of Credit and Reimbursement Agreement (10(b)63 to Form 10-K for the year ended December 31, 2004 in 1-9067). |
| |
(b) 6852 -- | Second Amendment and Consent, dated as of December 17, 2004, to Letter of Credit and Reimbursement Agreement (99 to Form 8-K dated December 22, 2004 in 1-9067). |
| |
*(b) 6953 -- | Third Amendment and Consent, dated as of May 14, 2009, to Letter of Credit and Reimbursement Agreement.Agreement (10(b)69 to Form 10-K for the year ended December 31, 2009 in 1-9067). |
| |
(b) 54 -- | Fourth Amendment and Consent, dated as of April 15, 2010, to Letter of Credit and Reimbursement Agreement (10(a) to Form 10-Q for the quarter ended March 31, 2010 in 1-9067). |
(c) 1 -- | Agreement, dated April 23, 1982, among Entergy Arkansas and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a) 1 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
| |
(c) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-10764). |
| |
(c) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). |
| |
(c) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)5 in 2-41080). |
| |
(c) 5 -- | Amendment, dated April 27, 1984, to Service Agreement, with Entergy Services (10(a)7 to Form 10-K for the year ended December 31, 1984 in 1-3517). |
| |
(c) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(a)12 to Form 10-K for the year ended December 31, 2002 in 1-10764). |
| |
*(c) 7 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(c)7 to Form 10-K for the year ended December 31, 2009 in 1-10764). |
| |
(c) 8 through (c) 2415 -- See 10(a)8 through 10(a)2415 above. |
|
(c) 2516 -- | Agreement, dated August 20, 1954, between Entergy Arkansas and the United States of America (SPA)(13(h) in 2-11467). |
| |
(c) 2617 -- | Amendment, dated April 19, 1955, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)2 in 2-41080). |
| |
(c) 2718 -- | Amendment, dated January 3, 1964, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)3 in 2-41080). |
| |
(c) 2819 -- | Amendment, dated September 5, 1968, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)4 in 2-41080). |
| |
(c) 2920 -- | Amendment, dated November 19, 1970, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)5 in 2-41080). |
| |
(c) 3021 -- | Amendment, dated July 18, 1961, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)6 in 2-41080). |
| |
(c) 3122 -- | Amendment, dated December 27, 1961, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)7 in 2-41080). |
| |
(c) 3223 -- | Amendment, dated January 25, 1968, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)8 in 2-41080). |
| |
(c) 3324 -- | Amendment, dated October 14, 1971, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)9 in 2-43175). |
| |
(c) 3425 -- | Amendment, dated January 10, 1977, to the United States of America (SPA) Contract, dated August 20, 1954 (5(d)10 in 2-60233). |
| |
(c) 3526 -- | Agreement, dated May 14, 1971, between Entergy Arkansas and the United States of America (SPA) (5(e) in 2-41080). |
| |
(c) 3627 -- | Amendment, dated January 10, 1977, to the United States of America (SPA) Contract, dated May 14, 1971 (5(e)1 in 2-60233). |
| |
(c) 3728 -- | Contract, dated May 28, 1943, Amendment to Contract, dated July 21, 1949, and Supplement to Amendment to Contract, dated December 30, 1949, between Entergy Arkansas and McKamie Gas Cleaning Company; Agreements, dated as of September 30, 1965, between Entergy Arkansas and former stockholders of McKamie Gas Cleaning Company; and Letter Agreement, dated June 22, 1966, by Humble Oil & Refining Company accepted by Entergy Arkansas on June 24, 1966 (5(k)7 in 2-41080). |
| |
(c) 3829 -- | Fuel Lease, dated as of December 22, 1988, between River Fuel Trust #1 and Entergy Arkansas (B-1(b) to Rule 24 Certificate in 70-7571). |
| |
(c) 3930 -- | White Bluff Operating Agreement, dated June 27, 1977, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas (B-2(a) to Rule 24 Certificate dated June 30, 1977 in 70-6009). |
| |
(c) 4031 -- | White Bluff Ownership Agreement, dated June 27, 1977, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas (B-1(a) to Rule 24 Certificate dated June 30, 1977 in 70-6009). |
| |
(c) 4132 -- | Agreement, dated June 29, 1979, between Entergy Arkansas and City of Conway, Arkansas (5(r)3 in 2-66235). |
| |
(c) 4233 -- | Transmission Agreement, dated August 2, 1977, between Entergy Arkansas and City Water and Light Plant of the City of Jonesboro, Arkansas (5(r)3 in 2-60233). |
| |
(c) 4334 -- | Power Coordination, Interchange and Transmission Service Agreement, dated as of June 27, 1977, between Arkansas Electric Cooperative Corporation and Entergy Arkansas (5(r)4 in 2-60233). |
| |
(c) 4435 -- | Independence Steam Electric Station Operating Agreement, dated July 31, 1979, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas and City of Conway, Arkansas (5(r)6 in 2-66235). |
| |
(c) 4536 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Operating Agreement (10(c)51 to Form 10-K for the year ended December 31, 1984 in 1-10764). |
| |
(c) 4637 -- | Independence Steam Electric Station Ownership Agreement, dated July 31, 1979, among Entergy Arkansas and Arkansas Electric Cooperative Corporation and City Water and Light Plant of the City of Jonesboro, Arkansas and City of Conway, Arkansas (5(r)7 in 2-66235). |
| |
(c) 4738 -- | Amendment, dated December 28, 1979, to the Independence Steam Electric Station Ownership Agreement (5(r)7(a) in 2-66235). |
| |
(c) 4839 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Ownership Agreement (10(c)54 to Form 10-K for the year ended December 31, 1984 in 1-10764). |
| |
(c) 4940 -- | Owner'sOwner’s Agreement, dated November 28, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station (10(c)55 to Form 10-K for the year ended December 31, 1984 in 1-10764). |
| |
(c) 5041 -- | Consent, Agreement and Assumption, dated December 4, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station and United States Trust Company of New York, as Trustee (10(c)56 to Form 10-K for the year ended December 31, 1984 in 1-10764). |
| |
(c) 5142 -- | Power Coordination, Interchange and Transmission Service Agreement, dated as of July 31, 1979, between Entergy Arkansas and City Water and Light Plant of the City of Jonesboro, Arkansas (5(r)8 in 2-66235). |
| |
(c) 5243 -- | Power Coordination, Interchange and Transmission Agreement, dated as of June 29, 1979, between City of Conway, Arkansas and Entergy Arkansas (5(r)9 in 2-66235). |
| |
(c) 5344 -- | Agreement, dated June 21, 1979, between Entergy Arkansas and Reeves E. Ritchie (10(b)90 to Form 10-K for the year ended December 31, 1980 in 1-10764). |
| |
(c) 5445 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). |
| |
(c) 5546 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
| |
(c) 5647 -- | First Amendment to Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). |
| |
(c) 5748 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). |
| |
(c) 5849 -- | Contract For Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, dated June 30, 1983, among the DOE, System Fuels and Entergy Arkansas (10(b)57 to Form 10-K for the year ended December 31, 1983 in 1-10764). |
| |
(c) 5950 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). |
| |
(c) 6051 -- | First Amendment, dated January 1, 1990, to the Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). |
| |
(c) 6152 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). |
| |
(c) 6253 -- | Third Amendment dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). |
| |
(c) 6354 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
| |
(c) 6455 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299)1-10764). |
| |
(c) 56 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 1-10764). |
| |
(c) 6557 -- | Assignment of Coal Supply Agreement, dated December 1, 1987, between System Fuels and Entergy Arkansas (B to Rule 24 letter filing dated November 10, 1987 in 70-5964). |
| |
(c) 6658 -- | Coal Supply Agreement, dated December 22, 1976, between System Fuels and Antelope Coal Company (B-1 in 70-5964), as amended by First Amendment (A to Rule 24 Certificate in 70-5964); Second Amendment (A to Rule 24 letter filing dated December 16, 1983 in 70-5964); and Third Amendment (A to Rule 24 letter filing dated November 10, 1987 in 70-5964). |
| |
(c) 6759 -- | Operating Agreement between Entergy Operations and Entergy Arkansas, dated as of June 6, 1990 (B-1(b) to Rule 24 Certificate dated June 15, 1990 in 70-7679). |
| |
(c) 6860 -- | Guaranty Agreement between Entergy Corporation and Entergy Arkansas, dated as of September 20, 1990 (B-1(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). |
| |
(c) 6961 -- | Agreement for Purchase and Sale of Independence Unit 2 between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-3(c) to Rule 24 Certificate dated September 6, 1990 in 70-7684). |
| |
(c) 7062 -- | Agreement for Purchase and Sale of Ritchie Unit 2 between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-4(d) to Rule 24 Certificate dated September 6, 1990 in 70-7684). |
| |
(c) 7163 -- | Ritchie Steam Electric Station Unit No. 2 Operating Agreement between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-5(a) to Rule 24 Certificate dated September 6, 1990 in 70-7684). |
| |
(c) 7264 -- | Ritchie Steam Electric Station Unit No. 2 Ownership Agreement between Entergy Arkansas and Entergy Power, dated as of August 28, 1990 (B-6(a) to Rule 24 Certificate dated September 6, 1990 in 70-7684). |
| |
(c) 7365 -- | Power Coordination, Interchange and Transmission Service Agreement between Entergy Power and Entergy Arkansas, dated as of August 28, 1990 (10(c)71 to Form 10-K for the year ended December 31, 1990 in 1-10764). |
| |
(c) 74 -- | Loan Agreement dated June 15, 1993, between Entergy Arkansas and Independence Country, Arkansas (B-1(a) to Rule 24 Certificate dated July 9, 1993 in 70-8171). |
| |
(c) 75 -- | Loan Agreement dated June 15, 1994, between Entergy Arkansas and Jefferson County, Arkansas (B-1(a) to Rule 24 Certificate dated June 30, 1994 in 70-8405). |
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(c) 76 -- | Loan Agreement dated June 15, 1994, between Entergy Arkansas and Pope County, Arkansas (B-1(b) to Rule 24 Certificate in 70-8405). |
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(c) 77 -- | Loan Agreement dated November 15, 1995, between Entergy Arkansas and Pope County, Arkansas (10(c)96 to Form 10-K for the year ended December 31, 1995 in 1-10764). |
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(c) 78 -- | Loan Agreement dated December 1, 1997, between Entergy Arkansas and Jefferson County, Arkansas (10(c)100 to Form 10-K for the year ended December 31, 1997 in 1-10764). |
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(c) 79 -- | Refunding Agreement, dated December 1, 2001, between Entergy Arkansas and Pope Country, Arkansas (10(c)81 to Form 10-K for the year ended December 31, 2001 in 1-10764). |
| Entergy Gulf States Louisiana |
(d) 1 -- | Guaranty Agreement, dated August 1, 1992, between Entergy Gulf States, Inc. and Hibernia National Bank, relating to Pollution Control Revenue Refunding Bonds of the Industrial Development Board of the Parish of Calcasieu, Inc. (Louisiana) (10-1 to Form 10-K for the year ended December 31, 1992 in 1-27031). |
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(d) 2 -- | Guaranty Agreement, dated January 1, 1993, between Entergy Gulf States, Inc. and Hancock Bank of Louisiana, relating to Pollution Control Revenue Refunding Bonds of the Parish of Pointe Coupee (Louisiana) (10-2 to Form 10-K for the year ended December 31, 1992 in 1-27031). |
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(d) 3 -- | Agreement effective February 1, 1964, between Sabine River Authority, State of Louisiana, and Sabine River Authority of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Company, Inc., and Louisiana Power & Light Company, as supplemented (B to Form 8-K dated May 6, 1964, A to Form 8-K dated October 5, 1967, A to Form 8-K dated May 5, 1969, and A to Form 8-K dated December 1, 1969 in 1-27031). |
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(d) 4 -- | Joint Ownership Participation and Operating Agreement regarding River Bend Unit 1 Nuclear Plant, dated August 20, 1979, between Entergy Gulf States, Inc., Cajun, and SRG&T; Power Interconnection Agreement with Cajun, dated June 26, 1978, and approved by the REA on August 16, 1979, between Entergy Gulf States, Inc. and Cajun; and Letter Agreement regarding CEPCO buybacks, dated August 28, 1979, between Entergy Gulf States, Inc. and Cajun (2, 3, and 4, respectively, to Form 8-K dated September 7, 1979 in 1-27031). |
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(d) 5 -- | Lease Agreement, dated September 18, 1980, between BLC Corporation and Entergy Gulf States, Inc. (1 to Form 8-K dated October 6, 1980 in 1-27031). |
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(d) 6 -- | Joint Ownership Participation and Operating Agreement for Big Cajun, between Entergy Gulf States, Inc., Cajun Electric Power Cooperative, Inc., and Sam Rayburn G&T, Inc, dated November 14, 1980 (6 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 1, dated December 12, 1980 (7 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 2, dated December 29, 1980 (8 to Form 8-K dated January 29, 1981 in 1-27031). |
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(d) 7 -- | Agreement of Joint Ownership Participation between SRMPA, SRG&T and Entergy Gulf States, Inc., dated June 6, 1980, for Nelson Station, Coal Unit #6, as amended (8 to Form 8-K dated June 11, 1980, A-2-b to Form 10-Q for the quarter ended June 30, 1982; and 10-1 to Form 8-K dated February 19, 1988 in 1-27031). |
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(d) 8 -- | Agreements between Southern Company and Entergy Gulf States, Inc., dated February 25, 1982, which cover the construction of a 140-mile transmission line to connect the two systems, purchase of power and use of transmission facilities (10-31 to Form 10-K for the year ended December 31, 1981 in 1-27031). |
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(d) 9 -- | Transmission Facilities Agreement between Entergy Gulf States, Inc. and Mississippi Power Company, dated February 28, 1982, and Amendment, dated May 12, 1982 (A-2-c to Form 10-Q for the quarter ended March 31, 1982 in 1-27031) and Amendment, dated December 6, 1983 (10-43 to Form 10-K for the year ended December 31, 1983 in 1-27031). |
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(d) 10 -- | First Amended Power Sales Agreement, dated December 1, 1985 between Sabine River Authority, State of Louisiana, and Sabine River Authority, State of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Co., Inc., and Louisiana Power and Light Company (10-72 to Form 10-K for the year ended December 31, 1985 in 1-27031). |
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+(d) 11 -- | Deferred Compensation Plan for Directors of Entergy Gulf States, Inc. and Varibus Corporation, as amended January 8, 1987, and effective January 1, 1987 (10-77 to Form 10-K for the year ended December 31, 1986 in 1-27031). Amendment dated December 4, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). |
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+(d) 12 -- | Trust Agreement for Deferred Payments to be made by Entergy Gulf States, Inc. pursuant to the Executive Income Security Plan, by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective November 1, 1986 (10-78 to Form 10-K for the year ended December 31, 1986 in 1-27031). |
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+(d) 13 -- | Trust Agreement for Deferred Installments under Entergy Gulf States, Inc. Management Incentive Compensation Plan and Administrative Guidelines by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective June 1, 1986 (10-79 to Form 10-K for the year ended December 31, 1986 in 1-27031). |
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+(d) 14 -- | Nonqualified Deferred Compensation Plan for Officers, Nonemployee Directors and Designated Key Employees, effective December 1, 1985, as amended, continued and completely restated effective as of March 1, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). |
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+(d) 15 -- | Trust Agreement for Entergy Gulf States, Inc. Nonqualified Directors and Designated Key Employees by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective July 1, 1991 (10-4 to Form 10-K for the year ended December 31, 1992 in 1-27031). |
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(d) 16 -- | Nuclear Fuel Lease Agreement between Entergy Gulf States, Inc. and River Bend Fuel Services, Inc. to lease the fuel for River Bend Unit 1, dated February 7, 1989 (10-64 to Form 10-K for the year ended December 31, 1988 in 1-27031). |
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(d) 17 -- | Trust and Investment Management Agreement between Entergy Gulf States, Inc. and Morgan Guaranty and Trust Company of New York (the “Decommissioning Trust Agreement"Agreement”) with respect to decommissioning funds authorized to be collected by Entergy Gulf States, Inc., dated March 15, 1989 (10-66 to Form 10-K for the year ended December 31, 1988 in 1-27031). |
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(d) 18 -- | Amendment No. 2 dated November 1, 1995 between Entergy Gulf States, Inc. and Mellon Bank to Decommissioning Trust Agreement (10(d)31 to Form 10-K for the year ended December 31, 1995 in 1-27031). |
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(d) 19 -- | Amendment No. 3 dated March 5, 1998 between Entergy Gulf States, Inc. and Mellon Bank to Decommissioning Trust Agreement (10(d)23 to Form 10-K for the year ended December 31, 2004 in 1-27031). |
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(d) 20 -- | Amendment No. 4 dated December 17, 2003 between Entergy Gulf States, Inc. and Mellon Bank to Decommissioning Trust Agreement (10(d)24 to Form 10-K for the year ended December 31, 2004 in 1-27031). |
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(d) 21 -- | Amendment No. 5 dated December 31, 2007 between Entergy Gulf States Louisiana, L.L.C. and Mellon Bank. N.A. to Decommissioning Trust Agreement (10(d)21 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 22 -- | Partnership Agreement by and among Conoco Inc., and Entergy Gulf States, Inc., CITGO Petroleum Corporation and Vista Chemical Company, dated April 28, 1988 (10-67 to Form 10-K for the year ended December 31, 1988 in 1-27031). |
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+(d) 23 -- | Gulf States Utilities Company Executive Continuity Plan, dated January 18, 1991 (10-6 to Form 10-K for the year ended December 31, 1990 in 1-27031). |
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+(d) 24 -- | Trust Agreement for Entergy Gulf States, Inc. Executive Continuity Plan, by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective May 20, 1991 (10-5 to Form 10-K for the year ended December 31, 1992 in 1-27031). |
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+(d) 25 -- | Gulf States Utilities Board of Directors'Directors’ Retirement Plan, dated February 15, 1991 (10-8 to Form 10-K for the year ended December 31, 1990 in 1-27031). |
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(d) 26 -- | Third Amendment, dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). |
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(d) 27 -- | Fourth Amendment, dated April 1, 1997, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
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(d) 28 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299)0-20371). |
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(d) 29 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 0-20371). |
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(d) 30 -- | Refunding Agreement dated as of May 1, 1998 between Entergy Gulf States, Inc. and Parish of Iberville, State of Louisiana (B-3(a) to Rule 24 Certificate dated May 29, 1998 in 70-8721). |
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(d) 3031 -- | Amendment No. 1 effective as of October 31, 2007, to Refunding Agreement dated as of May 1, 1998 between Entergy Gulf States, Inc. and Parish of Iberville, State of Louisiana (10(d)29 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 31 -- | Refunding Agreement dated as of May 1, 1998 between Entergy Gulf States, Inc. and Industrial Development Board of the Parish of Calcasieu, Inc. (B-3(b) to Rule 24 Certificate dated January 29, 1999 in 70-8721). |
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(d) 32 -- | Amendment No. 1 effective as of October 31, 2007, to Refunding Agreement dated as of May 1, 1998 between Entergy Gulf States, Inc. and Industrial Development Board of the Parish of Calcasieu, Inc (10(d)31 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 33 -- | Refunding Agreement (Series 1999-A) dated as of September 1, 1999 between Entergy Gulf States, Inc. and Parish of West Feliciana, State of Louisiana (B-3(c) to Rule 24 Certificate dated October 8, 1999 in 70-8721). |
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(d) 34 -- | Amendment No. 1 effective as of October 31, 2007, to Refunding Agreement (Series 1999-A) dated as of September 1, 1999 between Entergy Gulf States, Inc. and Parish of West Feliciana, State of Louisiana (10(d)33 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 35 -- | Refunding Agreement (Series 1999-B) dated as of September 1, 1999 between Entergy Gulf States, Inc. and Parish of West Feliciana, State of Louisiana (B-3(d) to Rule 24 Certificate dated October 8, 1999 in 70-8721). |
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(d) 36 -- | Amendment No. 1 effective as of October 31, 2007, to Refunding Agreement (Series 1999-B) dated as of September 1, 1999 between Entergy Gulf States, Inc. and Parish of West Feliciana, State of Louisiana (10(d)35 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 37 -- | Debt Assumption Agreement, dated as of December 31, 2007, between Entergy Texas and Entergy Gulf States Louisiana (4(i) to Form 8-K15D5 dated January 7, 2008 in 333-148557). |
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(d) 38 -- | Instrument of Correction dated March 20, 2008, to Debt Assumption Agreement, dated as of December 31, 2007, between Entergy Gulf States Louisiana and Entergy Texas (4(a) to Form 10-Q for the quarter ended March 31, 2008 in 333-148557). |
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(d) 39 -- | Mortgage and Security Agreement, dated as of December 31, 2007 (4(ii) to Form 8-K15D5 dated January 7, 2008 in 333-148557). |
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(d) 40 -- | Act of Correction to Mortgage and Security Agreement, dated March 20, 2008, between Entergy Gulf States Louisiana and Entergy Texas (4(b) to Form 10-Q for the quarter ended March 31, 2008 in 333-148557). |
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(d) 41 -- | Mortgage, Deed of Trust and Security Agreement, dated as of December 31, 2007 (4(iii) - 4(iii)(r) to Form 8-K15D5 dated January 7, 2008 in 333-148557). |
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(d) 42 -- | First Amendment to Mortgage, Deed of Trust and Security Agreement, dated March 20, 2008, among Entergy Gulf States Louisiana, Entergy Texas, and Mark G. Otts, as Trustee (4(c) to Form 10-Q for the quarter ended March 31, 2008 in 333-148557). |
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(d) 43 -- | Operating Agreement dated as of January 1, 2008, between Entergy Operations, Inc. and Entergy Gulf States Louisiana (10(d)39 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 4433 -- | Service Agreement dated as of January 1, 2008, between Entergy Services, Inc. and Entergy Gulf States Louisiana (10(d)40 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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*(d) 4534 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(d)45 to Form 10-K for the year ended December 31, 2009 in 0-20371). |
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(d) 4635 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 4736 -- | Decommissioning Trust Agreement, dated as of December 22, 1997, by and between Cajun Electric Power Cooperative, Inc. and Mellon Bank, N.A. with respect to decommissioning funds authorized to be collected by Cajun Electric Power Cooperative, Inc. and related Settlement Term Sheet (10(d)42 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 4837 -- | First Amendment to Decommissioning Trust Agreement, dated as of December 23, 2003, by and among Cajun Electric Power Cooperative, Inc., Mellon Bank, N.A., Entergy Gulf States, Inc., and the Rural Utilities Services of the United States Department of Agriculture (10(d)43 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 4938 -- | Second Amendment to Decommissioning Trust Agreement, dated December 31, 2007, by and among Cajun Electric Power Cooperative, Inc., Mellon Bank, N.A., Entergy Gulf States Louisiana, L.L.C., and the Rural Utilities Services of the United States Department of Agriculture (10(d)44 to Form 10-K for the year ended December 31, 2007 in 333-148557). |
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(d) 5039 -- | Second Amended and Restated Limited Liability Company Agreement of Entergy Holdings Company LLC dated as of July 29, 200822, 2010 (10(a) to Form 10-Q for the quarter ended SeptemberJune 30, 2008)2010). |
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(d) 40 -- | Loan Agreement, dated as of October 1, 2010, between the Louisiana Public Facilities Authority and Entergy Gulf States Louisiana, L.L.C. relating to Revenue Bonds (Entergy Gulf States Louisiana, L.L.C. Project) Series 2010A (4(b) to Form 8-K filed October 12, 2010 in 0-20371). |
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(d) 41 -- | Loan Agreement, dated as of October 1, 2010, between the Louisiana Public Facilities Authority and Entergy Gulf States Louisiana, L.L.C. relating to Revenue Bonds (Entergy Gulf States Louisiana, L.L.C. Project) Series 2010B (4(e) to Form 8-K filed October 12, 2010 in 0-20371). |
(e) 1 -- | Agreement, dated April 23, 1982, among Entergy Louisiana and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982, in 1-3517). |
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(e) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-32718). |
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(e) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). |
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(e) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (5(a)5 in 2-42523). |
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(e) 5 -- | Amendment, dated as of April 27, 1984, to Service Agreement with Entergy Services (10(a)7 to Form 10-K for the year ended December 31, 1984 in 1-3517). |
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(e) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(e)12 to Form 10-K for the year ended December 31, 2002 in 1-8474). |
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*(e) 7 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(e)7 to Form 10-K for the year ended December 31, 2009 in 1-32718). |
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(e) 8 through (e) 2415 -- See 10(a)8 through 10(a)2415 above. |
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(e) 2516 -- | Fuel Lease, dated as of January 31, 1989, between River Fuel Company #2, Inc., and Entergy Louisiana (B-1(b) to Rule 24 Certificate in 70-7580). |
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(e) 2617 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). |
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(e) 2718 -- | Compromise and Settlement Agreement, dated June 4, 1982, between Texaco, Inc. and Entergy Louisiana (28(a) to Form 8-K dated June 4, 1982 in 1-8474). |
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(e) 2819 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
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(e) 2920 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). |
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(e) 3021 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). |
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(e) 3122 -- | Contract for Disposal of Spent Nuclear Fuel and/or High-Level Radioactive Waste, dated February 2, 1984, among DOE, System Fuels and Entergy Louisiana (10(d)33 to Form 10-K for the year ended December 31, 1984 in 1-8474). |
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(e) 32--23-- | Operating Agreement between Entergy Operations and Entergy Louisiana, dated as of June 6, 1990 (B-2(c) to Rule 24 Certificate dated June 15, 1990 in 70-7679). |
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(e) 3324 -- | Guarantee Agreement between Entergy Corporation and Entergy Louisiana, dated as of September 20, 1990 (B-2(a) to Rule 24 Certificate dated September 27, 1990 in 70-7757). |
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(e) 3425 -- | Refunding Agreement (Series 1999-A), dated as of June 1, 1999, between Entergy Louisiana and Parish of St. Charles, State of Louisiana (B-6(a) to Rule 24 Certificate dated July 6, 1999 in 70-9141). |
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(e) 35 -- | Amendment No. 1 to Refunding Agreement (Series 1999-A), dated as of December 15, 2005 (B-8(i) to Rule 24 Certificate dated January 10, 2006 in 70-10324). |
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(e) 36 -- | Refunding Agreement (Series 1999-B), dated as of June 1, 1999, between Entergy Louisiana and Parish of St. Charles, State of Louisiana (B-6(b) to Rule 24 Certificate dated July 6, 1999 in 70-9141). |
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(e) 37 -- | Amendment No. 1 to Refunding Agreement (Series 1999-B), dated as of December 16, 2005 (B-8(ii) to Rule 24 Certificate dated January 10, 2006 in 70-10324). |
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(e) 38 -- | Refunding Agreement (Series 1999-C), dated as of October 1, 1999, between Entergy Louisiana and Parish of St. Charles, State of Louisiana (B-11(a) to Rule 24 Certificate dated October 15, 1999 in 70-9141). |
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(e) 39 -- | Amendment No. 1 to Refunding Agreement (Series 1999-C), dated as of December 15, 2005 (B-8(iii) to Rule 24 Certificate dated January 10, 2006 in 70-10324). |
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(e) 40 -- | Second Amended and Restated Limited Liability Company Agreement of Entergy Holdings Company LLC dated as of July 29, 200822, 2010 (10(a) to Form 10-Q for the quarter ended June 30, 2010). |
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(e) 26 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-32718). |
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(e) 27 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2008)2010 in 1-32718). |
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(e) 28 -- | Loan Agreement, dated as of October 1, 2010, between the Louisiana Public Facilities Authority and Entergy Louisiana, LLC relating to Revenue Bonds (Entergy Louisiana, LLC Project) Series 2010 (4(b) to Form 8-K filed October 12, 2010 in 1-32718). |
(f) 1 -- | Agreement dated April 23, 1982, among Entergy Mississippi and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
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(f) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 1-31508). |
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(f) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). |
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(f) 4 -- | Service Agreement with Entergy Services, dated as of April 1, 1963 (D in 37-63). |
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(f) 5 -- | Amendment, dated April 27, 1984, to Service Agreement with Entergy Services (10(a)7 to Form 10-K for the year ended December 31, 1984 in 1-3517). |
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(f) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(f)12 to Form 10-K for the year ended December 31, 2002 in 1-31508). |
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*(f) 7 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(f)7 to Form 10-K for the year ended December 31, 2009 in 1-31508). |
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(f) 8 through (f) 2415 -- See 10(a)8 through 10(a)2415 above. |
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(f) 2516 -- | Loan Agreement, dated as of September 1, 2004, between Entergy Mississippi and Mississippi Business Finance Corporation (B-3(a) to Rule 24 Certificate dated October 4, 2004 in 70-10157). |
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(f) 2617 -- | Refunding Agreement, dated as of May 1, 1999, between Entergy Mississippi and Independence County, Arkansas (B-6(a) to Rule 24 Certificate dated June 8, 1999 in 70-8719). |
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(f) 2718 -- | Substitute Power Agreement, dated as of May 1, 1980, among Entergy Mississippi, System Energy and SMEPA (B-3(a) in 70-6337). |
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(f) 2819 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Operating Agreement (10(c)51 to Form 10-K for the year ended December 31, 1984 in 0-375). |
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(f) 2920 -- | Amendment, dated December 4, 1984, to the Independence Steam Electric Station Ownership Agreement (10(c)54 to Form 10-K for the year ended December 31, 1984 in 0-375). |
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(f) 3021 -- | Owners Agreement, dated November 28, 1984, among Entergy Arkansas, Entergy Mississippi and other co-owners of the Independence Station (10(c)55 to Form 10-K for the year ended December 31, 1984 in 0-375). |
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(f) 3122 -- | Consent, Agreement and Assumption, dated December 4, 1984, among Entergy Arkansas, Entergy Mississippi, other co-owners of the Independence Station and United States Trust Company of New York, as Trustee (10(c)56 to Form 10-K for the year ended December 31, 1984 in 0-375). |
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(f) 3223 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). |
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+(f) 3324 -- | Post-Retirement Plan (10(d)24 to Form 10-K for the year ended December 31, 1983 in 0-320). |
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(f) 3425 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
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(f) 3526 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). |
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(f) 3627 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). |
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(f) 3728 -- | Sales Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (D to Rule 24 Certificate dated June 26, 1974 in 70-5399). |
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(f) 3829 -- | Service Agreement, dated as of June 21, 1974, between System Energy and Entergy Mississippi (E to Rule 24 Certificate dated June 26, 1974 in 70-5399). |
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(f) 3930 -- | Partial Termination Agreement, dated as of December 1, 1986, between System Energy and Entergy Mississippi (A-2 to Rule 24 Certificate dated January 8, 1987 in 70-5399). |
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(f) 4031 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). |
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(f) 4132 -- | First Amendment dated January 1, 1990 to the Middle South Utilities Inc. and Subsidiary Companies Intercompany Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). |
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(f) 4233 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). |
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(f) 4334 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). |
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(f) 4435 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
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(f) 4536 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299)1-31508). |
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+(f) 4637 -- | EmploymentSixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement effective July 24, 2003 between Carolyn C. Shanks and Entergy Mississippi (10(f)48(10(a) to Form 10-K10-Q for the yearquarter ended December 31, 2003September 30, 2010 in 1-31508). |
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(f) 4738 -- | Purchase and Sale Agreement by and between Central Mississippi Generating Company, LLC and Entergy Mississippi, Inc., dated as of March 16, 2005 (10(b) to Form 10-Q for the quarter ended March 31, 2005 in 1-31508). |
(g) 1 -- | Agreement, dated April 23, 1982, among Entergy New Orleans and certain other System companies, relating to System Planning and Development and Intra-System Transactions (10(a)1 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
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(g) 2 -- | Second Amended and Restated Entergy System Agency Agreement, dated as of January 1, 2008 (10(a)2 to Form 10-K for the year ended December 31, 2007 in 0-5807). |
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(g) 3 -- | Middle South Utilities System Agency Coordination Agreement, dated December 11, 1970 (5(a)3 in 2-41080). |
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(g) 4 -- | Service Agreement with Entergy Services dated as of April 1, 1963 (5(a)5 in 2-42523). |
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(g) 5 -- | Amendment, dated as of April 27, 1984, to Service Agreement with Entergy Services (10(a)7 to Form 10-K for the year ended December 31, 1984 in 1-3517). |
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(g) 6 -- | Amendment, dated January 1, 2000, to Service Agreement with Entergy Services (10(g)12 to Form 10-K for the year ended December 31, 2002 in 0-5807). |
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*(g) 7 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(g)7 to Form 10-K for the year ended December 31, 2009 in 0-5807). |
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(g) 8 through (g) 2415 -- See 10(a)8 through 10(a)2415 above. |
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(g) 2516 -- | Reallocation Agreement, dated as of July 28, 1981, among System Energy and certain other System companies (B-1(a) in 70-6624). |
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(g) 2617 -- | Unit Power Sales Agreement, dated as of June 10, 1982, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (10(a)39 to Form 10-K for the year ended December 31, 1982 in 1-3517). |
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(g) 2718 -- | First Amendment to the Unit Power Sales Agreement, dated as of June 28, 1984, between System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi and Entergy New Orleans (19 to Form 10-Q for the quarter ended September 30, 1984 in 1-3517). |
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(g) 2819 -- | Revised Unit Power Sales Agreement (10(ss) in 33-4033). |
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(g) 2920 -- | Transfer Agreement, dated as of June 28, 1983, among the City of New Orleans, Entergy New Orleans and Regional Transit Authority (2(a) to Form 8-K dated June 24, 1983 in 1-1319). |
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(g) 3021 -- | Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement, dated April 28, 1988 (D-1 to Form U5S for the year ended December 31, 1987). |
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(g) 3122 -- | First Amendment, dated January 1, 1990, to the Middle South Utilities, Inc. and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-2 to Form U5S for the year ended December 31, 1989). |
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(g) 3223 -- | Second Amendment dated January 1, 1992, to the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3 to Form U5S for the year ended December 31, 1992). |
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(g) 3324 -- | Third Amendment dated January 1, 1994 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). |
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(g) 3425 -- | Fourth Amendment dated April 1, 1997 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
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(g) 3526 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299)0-5807). |
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(g) 27 -- | Sixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a) to Form 10-Q for the quarter ended September 30, 2010 in 0-5807). |
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(g) 3628 -- | Chapter 11 Plan of Reorganization of Entergy New Orleans, Inc., as modified, dated May 2, 2007, confirmed by bankruptcy court order dated May 7, 2007 (2(a) to Form 10-Q for the quarter ended March 31, 2007 in 0-5807). |
(h) 1 -- | Agreement effective February 1, 1964, between Sabine River Authority, State of Louisiana, and Sabine River Authority of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Company, Inc., and Louisiana Power & Light Company, as supplemented (B to Form 8-K dated May 6, 1964, A to Form 8-K dated October 5, 1967, A to Form 8-K dated May 5, 1969, and A to Form 8-K dated December 1, 1969 in 1-27031). |
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(h) 2 -- | Ground Lease, dated August 15, 1980, between Statmont Associates Limited Partnership (Statmont) and Entergy Gulf States, Inc., as amended (3 to Form 8-K dated August 19, 1980 and A-3-b to Form 10-Q for the quarter ended September 30, 1983 in 1-27031). |
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(h) 3 -- | Lease and Sublease Agreement, dated August 15, 1980, between Statmont and Entergy Gulf States, Inc., as amended (4 to Form 8-K dated August 19, 1980 and A-3-c to Form 10-Q for the quarter ended September 30, 1983 in 1-27031). |
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(h) 4 -- | Lease Agreement, dated September 18, 1980, between BLC Corporation and Entergy Gulf States, Inc. (1 to Form 8-K dated October 6, 1980 in 1-27031). |
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(h) 5 -- | Joint Ownership Participation and Operating Agreement for Big Cajun, between Entergy Gulf States, Inc., Cajun Electric Power Cooperative, Inc., and Sam Rayburn G&T, Inc, dated November 14, 1980 (6 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 1, dated December 12, 1980 (7 to Form 8-K dated January 29, 1981 in 1-27031); Amendment No. 2, dated December 29, 1980 (8 to Form 8-K dated January 29, 1981 in 1-27031). |
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(h) 6 -- | Agreement of Joint Ownership Participation between SRMPA, SRG&T and Entergy Gulf States, Inc., dated June 6, 1980, for Nelson Station, Coal Unit #6, as amended (8 to Form 8-K dated June 11, 1980, A-2-b to Form 10-Q for the quarter ended June 30, 1982; and 10-1 to Form 8-K dated February 19, 1988 in 1-27031). |
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(h) 7 -- | First Amended Power Sales Agreement, dated December 1, 1985 between Sabine River Authority, State of Louisiana, and Sabine River Authority, State of Texas, and Entergy Gulf States, Inc., Central Louisiana Electric Co., Inc., and Louisiana Power and Light Company (10-72 to Form 10-K for the year ended December 31, 1985 in 1-27031). |
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+(h) 8 -- | Deferred Compensation Plan for Directors of Entergy Gulf States, Inc. and Varibus Corporation, as amended January 8, 1987, and effective January 1, 1987 (10-77 to Form 10-K for the year ended December 31, 1986 in 1-27031). Amendment dated December 4, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). |
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+(h) 9 -- | Trust Agreement for Deferred Payments to be made by Entergy Gulf States, Inc. pursuant to the Executive Income Security Plan, by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective November 1, 1986 (10-78 to Form 10-K for the year ended December 31, 1986 in 1-27031). |
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+(h) 10 -- | Trust Agreement for Deferred Installments under Entergy Gulf States, Inc. Management Incentive Compensation Plan and Administrative Guidelines by and between Entergy Gulf States, Inc. and Bankers Trust Company, effective June 1, 1986 (10-79 to Form 10-K for the year ended December 31, 1986 in 1-27031). |
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+(h) 11 -- | Nonqualified Deferred Compensation Plan for Officers, Nonemployee Directors and Designated Key Employees, effective December 1, 1985, as amended, continued and completely restated effective as of March 1, 1991 (10-3 to Amendment No. 8 in Registration No. 2-76551). |
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+(h) 12 -- | Trust Agreement for Entergy Gulf States, Inc. Nonqualified Directors and Designated Key Employees by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective July 1, 1991 (10-4 to Form 10-K for the year ended December 31, 1992 in 1-27031). |
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(h) 13 -- | Lease Agreement, dated as of June 29, 1987, among GSG&T, Inc., and Entergy Gulf States, Inc. related to the leaseback of the Lewis Creek generating station (10-83 to Form 10-K for the year ended December 31, 1988 in 1-27031). |
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+(h) 14 -- | Gulf States Utilities Company Executive Continuity Plan, dated January 18, 1991 (10-6 to Form 10-K for the year ended December 31, 1990 in 1-27031). |
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+(h) 15 -- | Trust Agreement for Entergy Gulf States, Inc. Executive Continuity Plan, by and between Entergy Gulf States, Inc. and First City Bank, Texas-Beaumont, N.A. (now Texas Commerce Bank), effective May 20, 1991 (10-5 to Form 10-K for the year ended December 31, 1992 in 1-27031). |
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+(h) 16 -- | Gulf States Utilities Board of Directors'Directors’ Retirement Plan, dated February 15, 1991 (10-8 to Form 10-K for the year ended December 31, 1990 in 1-27031). |
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(h) 17 -- | Third Amendment, dated January 1, 1994, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-3(a) to Form U5S for the year ended December 31, 1993). |
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(h) 18 -- | Fourth Amendment, dated April 1, 1997, to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (D-5 to Form U5S for the year ended December 31, 1996). |
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(h) 19 -- | Fifth Amendment dated November 20, 2009 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement (10(a)56 to Form 10-K for the year ended December 31, 2009 in 1-11299)1-34360). |
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(h) 20 -- | Debt AssumptionSixth Amendment dated October 11, 2010 to Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement dated as of December 31, 2007, between Entergy Texas and Entergy Gulf States Louisiana (4(i)(10(a) to Form 8-K dated January 7, 200810-Q for the quarter ended September 30, 2010 in 333-148557)1-34360). |
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(h) 21 -- | Instrument of Correction dated March 20, 2008, to Debt Assumption Agreement, dated as of December 31, 2007, between Entergy Texas and Entergy Gulf States Louisiana (4(a) to Form 10-Q for the quarter ended March 31, 2008 in 333-148557). |
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(h) 22 -- | Mortgage and Security Agreement, dated as of December 31, 2007 (4(ii) to Form 8-K dated January 7, 2008 in 333-148557). |
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(h) 23 -- | Act of Correction to Mortgage and Security Agreement, dated March 20, 2008, between Entergy Texas and Entergy Gulf States Louisiana (4(b) to Form 10-Q for the quarter ended March 31, 2008 in 333-148557). |
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(h) 24 -- | Mortgage, Deed of Trust and Security Agreement, dated as of December 31, 2007 (4(iii) - 4(iii)(r) to Form 8-K dated January 7, 2008 in 333-148557). |
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(h) 25 -- | First Amendment to Mortgage, Deed of Trust and Security Agreement, dated March 20, 2008, among Entergy Texas, Entergy Gulf States, and Mark G. Otts, as Trustee (4(c) to Form 10-Q for the quarter ended March 31, 2008 in 333-148557). |
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(h) 26 -- | Service Agreement dated as of January 1, 2008, between Entergy Services, Inc. and Entergy Texas (10(h)25 to Form 10-K for the year ended December 31, 2008 in 3-53134). |
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*(h) 2722 -- | Amendment, dated June 1, 2009, to Service Agreement with Entergy Services.Services (10(h)27 to Form 10-K for the year ended December 31, 2009 in 1-34360). |
| (12) Statement Re Computation of Ratios |
*(a) | Entergy Arkansas'Arkansas’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined. |
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*(b) | Entergy Gulf States Louisiana'sLouisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Distributions, as defined. |
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*(c) | Entergy Louisiana'sLouisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Distributions, as defined. |
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*(d) | Entergy Mississippi'sMississippi’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined. |
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*(e) | Entergy New Orleans'Orleans’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Fixed Charges and Preferred Dividends, as defined. |
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*(f) | Entergy Texas'Texas’s Computation of Ratios of Earnings to Fixed Charges, as defined. |
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*(g) | System Energy'sEnergy’s Computation of Ratios of Earnings to Fixed Charges, as defined. |
| *(21) Subsidiaries of the Registrants |
(23) Consents of Experts and Counsel |
*(a) | The consent of Deloitte & Touche LLP is contained herein at page 487.473. |
| (31) Rule 13a-14(a)/15d-14(a) Certifications |
*(a) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
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*(b) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
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*(c) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
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*(d) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
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*(e) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana. |
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*(f) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Gulf States Louisiana. |
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*(g) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
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*(h) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
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*(i) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
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*(j) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
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*(k) | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
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*(l) | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
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*(m) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
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*(n) | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
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*(o) | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
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*(p) | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
| (32) Section 1350 Certifications |
*(a) | Section 1350 Certification for Entergy Corporation. |
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*(b) | Section 1350 Certification for Entergy Corporation. |
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*(c) | Section 1350 Certification for Entergy Arkansas. |
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*(d) | Section 1350 Certification for Entergy Arkansas. |
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*(e) | Section 1350 Certification for Entergy Gulf States Louisiana. |
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*(f) | Section 1350 Certification for Entergy Gulf States Louisiana. |
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*(g) | Section 1350 Certification for Entergy Louisiana. |
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*(h) | Section 1350 Certification for Entergy Louisiana. |
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*(i) | Section 1350 Certification for Entergy Mississippi. |
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*(j) | Section 1350 Certification for Entergy Mississippi. |
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*(k) | Section 1350 Certification for Entergy New Orleans. |
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*(l) | Section 1350 Certification for Entergy New Orleans. |
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*(m) | Section 1350 Certification for Entergy Texas. |
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*(n) | Section 1350 Certification for Entergy Texas. |
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*(o) | Section 1350 Certification for System Energy. |
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*(p) | Section 1350 Certification for System Energy. |
*INS - | XBRL Instance Document. |
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*SCH - | XBRL Taxonomy Extension Schema Document. |
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*CAL - | XBRL Taxonomy Extension Calculation Linkbase Document. |
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*DEF - | XBRL Taxonomy Extension Definition Linkbase Document. |
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*LAB - | XBRL Taxonomy Extension Label Linkbase Document. |
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*PRE - | XBRL Taxonomy Extension Presentation Linkbase Document. |
| + Management contracts or compensatory plans or arrangements. |