Entergy 2003 Annual Report Download - page 50

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ENTERGY CORPORATION AND SUBSIDIARIES 2003
OTHER CONTINGENCIES
Entergy, as a company with multi-state domestic utility
operations, and which also had investments in international
projects, is subject to a number of federal, state, and inter-
national 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 regula-
tions 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:
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 period-
ically 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 9 to the consolidated
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 unpre-
dictable 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.
Sales Warranty and Tax Reserves
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 from these matters.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS concluded