Entergy 2005 Annual Report Download - page 71

ENTERGY CORPORATION AND SUBSIDIARIES 2005
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NOTE 2. RATE AND REGULATORY MATTERS
REGULATORY ASSETS
Other Regulatory Assets
The domestic utility companies and System Energy are subject to
the provisions of SFAS 71, “Accounting for the Effects of Certain
Types of Regulation.” Regulatory assets represent probable future
revenues associated with certain costs that are expected to be recov-
ered from customers through the ratemaking process. 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 the balance sheets as of December 31,
2005 and 2004 (in millions):
2005 2004
Asset Retirement Obligation –
recovery dependent upon
timing of decommissioning (Note 8) $ 271.7 $ 380.1
Deferred fuel – non-current –
recovered through rate riders when rates
are redetermined periodically (Note 2) 6.1 21.9
Depreciation re-direct –
recovery begins at start of
retail open access (Note 1) 79.1 79.1
U.S. Department of Energy (DOE)
Decommissioning
and Decontamination Fees –
recovered through fuel rates
until December 2006 (Note 8) 17.5 25.3
Low-level radwaste – 19.4
Pension costs (Note 10) 396.1 207.3
Postretirement benefits –
recovered through 2012 (Note 10) 16.8 19.1
Provision for storm damages –
recovered through cost of service(a) 695.8 124.5
Removal costs –
recovered through depreciation rates (Note 8) 140.4 53.2
Deferred capacity – recovery timing
will be determined by the LPSC in the formula
rate plan filings (Note 2) 93.8 25.4
River Bend AFUDC –
recovered through August 2025 (Note 1) 35.6 37.5
Sale-leaseback deferral –
recovered through June 2014 (Note 9) 121.4 127.3
Spindletop gas storage facility -
recovered through December 2032 40.6 42.3
Unamortized loss on reacquired debt –
recovered over term of debt 165.1 169.9
Other – various 53.7 97.0
Total $2,133.7 $1,429.3
(a) As a result of Hurricane Katrina and Hurricane Rita that hit Entergy’s service
territory in August and September 2005, Entergy has recorded accruals for the
estimated storm restoration costs. Entergy recorded some of these costs as regulatory
assets because management believes that recovery of these prudently incurred costs
through some form of regulatory mechanism is probable. Entergy is pursuing a
broad range of initiatives to recover storm restoration costs. Initiatives include
obtaining reimbursement of certain costs covered by insurance, obtaining assistance
through federal legislation for Hurricanes Katrina and Rita, and pursuing recovery
through existing or new rate mechanisms regulated by the FERC and local
regulatory bodies.
In December 2005, Entergy Mississippi filed with the MPSC a
Notice of Intent to change rates by implementing a Storm Damage
Rider to recover storm damage restoration costs associated with
Hurricanes Katrina and Rita totaling approximately $84 million
as of November 30, 2005. The notice proposes recovery of
approximately $14.7 million, including carrying charges, annually
over a five-year period. A hearing on this matter is expected in April
2006. Entergy Mississippi plans to make a second filing in late
spring of 2006 to recover additional restoration costs associated with
the hurricanes incurred after November 30, 2005 and to reflect
receipt of insurance and federal aid.
In December 2005, Entergy Gulf States filed with the LPSC for
interim recovery of $141 million of storm costs. The filing proposes
implementing an $18.7 million annual interim surcharge, including
carrying charges and subject to refund, effective March 2006 based
on a ten-year recovery period. The filing includes provisions for
updating the surcharge to reflect actual costs incurred as well as the
receipt of insurance or federal aid. Hearings occurred in February
2006. The LPSC ordered that Entergy Gulf States recover
$850,000 per month as interim storm cost recovery. For the period
March 2006 to September 2006, Entergy Gulf States’ interim storm
cost recovery shall be through its fuel adjustment clause, with the
total recovery for that time period capped at $6 million. The mech-
anism for the fuel adjustment clause recovery is a retention by
Entergy Gulf States of 15% of the difference between the February
2006 fuel adjustment clause and the fuel adjustment clause in those
successive months in which the fuel adjustment clause is lower than
it was in the February 2006 fuel adjustment clause, until the $6 mil-
lion cap is reached. Beginning in September 2006, Entergy Gulf
States’ interim storm cost recovery of $850,000 per month shall be
through base rates. In addition, all excess earnings that Entergy Gulf
States may earn under its 2005 formula rate plan, and any ensuing
period in which interim relief is being collected, will be used as an
offset to any prospective storm restoration recovery.
In December 2005, Entergy Louisiana filed with the LPSC for
interim recovery of $355 million of storm costs. The filing proposes
implementing a $41.8 million annual interim surcharge, including
carrying charges and subject to refund, effective March 2006 based
on a ten-year recovery period. The filing includes provisions for
updating the surcharge to reflect actual costs incurred as well as the
receipt of insurance or federal aid. Hearings occurred in February
2006. The LPSC ordered that Entergy Louisiana recover $2 mil-
lion per month as interim storm cost recovery. For the period
March 2006 to September 2006, Entergy Louisiana’s interim storm
cost recovery shall be through its fuel adjustment clause, with the
total recovery for that time period capped at $14 million. The
mechanism for the fuel adjustment clause recovery is a retention by
Entergy Louisiana of 15% of the difference between the February
2006 fuel adjustment clause and the fuel adjustment clause in those
successive months in which the fuel adjustment clause is lower than
it was in the February 2006 fuel adjustment clause, until the $14
million cap is reached. Beginning in September 2006, Entergy
Louisiana’s interim storm cost recovery of $2 million per month
shall be through base rates. In addition, all excess earnings that
Entergy Louisiana may earn under its 2005 formula rate plan, and
any ensuing period in which interim relief is being collected, will be
used as an offset to any prospective storm restoration recovery.
Deferred Fuel Costs
The domestic utility companies 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 rev-
enues. The difference between revenues collected and the current
fuel and purchased power costs is recorded as “Deferred fuel costs”
on the domestic utility companies’ financial statements. The table
below shows the amount of deferred fuel costs as of December 31,
2005 and 2004 that Entergy expects to recover or (refund) through
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued