Entergy 2005 Annual Report Download - page 89

ENTERGY CORPORATION AND SUBSIDIARIES 2005
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NOTES to CONSOLIDATED FINANCIAL STATEMENTS continuedNOTES to CONSOLIDATED FINANCIAL STATEMENTS continued
increasing utility plant by $2.7 million, increasing accumulated
depreciation by $1.8 million, and recording the related regulatory
assets of $27.9 million. The implementation of FIN 47 for portions
of Entergy Gulf States not subject to cost-based ratemaking
decreased earnings by $0.9 million net-of-tax. If Entergy had
applied FIN 47 during prior periods, the following impacts would
have resulted:
December 31, 2004 December 31, 2003
Asset retirement obligations
actually recorded $2,066,277 $2,215,490
Pro forma effect of FIN 47 $ 29,399 $ 27,708
Asset retirement obligations – pro forma $2,095,676 $2,243,198
The impact on net income for each of the years ended December
31, 2004 and 2003 would have been immaterial.
For the Indian Point 3 and FitzPatrick plants purchased in 2000,
NYPA retained the decommissioning trusts and the decommissioning
liability. NYPA and Entergy executed decommissioning agreements,
which specify their decommissioning obligations. NYPA has the
right to require Entergy to assume the decommissioning liability
provided that it assigns the corresponding decommissioning trust,
up to a specified level, to Entergy. If the decommissioning liability
is retained by NYPA, Entergy 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 believes that the
amounts available to it under either scenario are sufficient to cover
the future decommissioning costs without any additional contribu-
tions to the trusts.
Entergy maintains decommissioning trust funds that are commit-
ted to meeting the costs of decommissioning the nuclear power
plants. The fair values of the decommissioning trust funds and asset
retirement obligation-related regulatory assets of Entergy as of
December 31, 2005 are as follows (in millions):
Regulatory
Decommissioning Trust Asset
U. S. Utility $1,136.0 $271.7
Non-Utility Nuclear $1,470.8 $ –
The Energy Policy Act of 1992 contains a provision that assesses
domestic nuclear utilities with fees for the decontamination and
decommissioning (D&D) of the DOE’s past uranium enrichment
operations. Annual assessments in 2005 were $4.5 million for
Entergy Arkansas, $1.1 million for Entergy Gulf States, $1.7 million
for Entergy Louisiana, and $1.9 million for System Energy. The
Energy Policy Act calls for cessation of annual D&D assessments
not later than October 24, 2007. At December 31, 2005, one year of
assessments was remaining. D&D fees are included in other current
liabilities and other non-current liabilities and, as of December 31,
2005, recorded liabilities were $4.5 million for Entergy Arkansas,
$1.1 million for Entergy Gulf States, $1.7 million for Entergy
Louisiana, and $1.7 million for System Energy. Regulatory assets in
the financial statements offset these liabilities, with the exception of
Entergy Gulf States’ 30% non-regulated portion. These assess-
ments are recovered through rates in the same manner as fuel costs.
CASHPOINT BANKRUPTCY
In 2003 the domestic utility companies entered an agreement with
CashPoint Network Services (CashPoint) under which CashPoint
was to manage a network of payment agents through which
Entergy’s utility customers could pay their bills. The payment agent
system allows customers to pay their bills at various commercial
or governmental locations, rather than sending payments by
mail. Approximately one-third of Entergy’s utility customers use
payment agents.
On April 19, 2004, CashPoint failed to pay funds due to the
domestic utility companies that had been collected through payment
agents. The domestic utility companies then obtained a temporary
restraining order from the Civil District Court for the Parish of
Orleans, State of Louisiana, enjoining CashPoint from distributing
funds belonging to Entergy, except by paying those funds to
Entergy. On April 22, 2004, a petition for involuntary Chapter 7
bankruptcy was filed against CashPoint by other creditors in the
United States Bankruptcy Court for the Southern District of New
York. In response to these events, the domestic utility companies
expanded an existing contract with another company to manage all
of their payment agents. The domestic utility companies filed proofs
of claim in the CashPoint bankruptcy proceeding in September
2004. Although Entergy cannot precisely determine at this time the
amount that CashPoint owes to the domestic utility companies that
may not be repaid, it has accrued an estimate of loss based on
current information. If no cash is repaid to the domestic utility
companies, an event Entergy does not believe is likely, the current
estimate of maximum exposure to loss is approximately $25 million.
HARRISON COUNTY PLANT FIRE
On May 13, 2005, an explosion and fire damaged the non-nuclear
wholesale assets business’ Harrison County power plant. A cata-
strophic failure and subsequent natural gas escape from a nearby
36-inch interstate pipeline owned and operated by a third party is
believed to have caused the damage. Current estimates are that the
cost to clean-up the site and reconstruct the damaged portions of
the plant will be approximately $52 million and take until the sec-
ond quarter 2006 to be completed. The plant’s property insurer has
acknowledged coverage, subject to a $200 thousand deductible.
Entergy owns approximately 61% of this facility. Entergy does not
expect the damage caused to the Harrison County plant to have a
material effect on its financial position or results of operations.
EMPLOYMENT LITIGATION
Entergy Corporation and certain subsidiaries are defendants in
numerous lawsuits filed by former employees asserting that they
were wrongfully terminated and/or discriminated against on the
basis of age, race, sex, and/or other protected characteristics.
Entergy Corporation and these subsidiaries are vigorously defend-
ing these suits and deny any liability to the plaintiffs. Nevertheless,
no assurance can be given as to the outcome of these cases.