Entergy 2005 Annual Report Download - page 87

ENTERGY CORPORATION AND SUBSIDIARIES 2005
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NOTES to CONSOLIDATED FINANCIAL STATEMENTS continuedNOTES to CONSOLIDATED FINANCIAL STATEMENTS continued
Property Insurance
Entergy’s nuclear owner/licensee subsidiaries are members of
certain mutual insurance companies that provide property damage
coverage, including decontamination and premature decommissioning
expense, to the members’ nuclear generating plants. These programs
are underwritten by Nuclear Electric Insurance Limited (NEIL).
As of December 31, 2005, Entergy was insured against such losses
per the following structures:
U.S. 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) – $100 million per occurrence
■Blanket Layer (shared among the U.S. Utility plants) –
$1.0 billion per occurrence
■Total limit – $1.6 billion per occurrence
■Deductibles:
■$5.0 million per occurrence – Turbine/generator damage
■$5.0 million per occurrence – Other than turbine/
generator damage
Note: ANO 1 and 2 share in the Primary Layer with one policy
in common.
Non-Utility Nuclear Plants (Indian Point 2 and 3, FitzPatrick,
Pilgrim, and Vermont Yankee)
■Primary Layer (per plant) – $500 million per occurrence
■Blanket Layer (shared among all plants) – $615 million
per occurrence
■Total limit – $1.115 billion per occurrence
■Deductibles:
■$2.5 million per occurrence – Turbine/generator damage
■$2.5 million per occurrence – Other than turbine/
generator damage
Note: Indian Point 2 and 3 share in the Primary Layer with one
policy in common.
In addition, the Non-Utility Nuclear plants are also covered
under NEIL’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. The following summarizes this coverage as
of December 31, 2005:
Indian Point 2 and 3
■$4.5 million weekly indemnity
■$490 million maximum indemnity
■Deductible: 12 week waiting period
FitzPatrick and Pilgrim (each plant has an individual policy
with the noted parameters)
■$4.0 million weekly indemnity
■$490 million maximum indemnity
■Deductible: 12 week waiting period
Vermont Yankee
■$4.0 million weekly indemnity
■$435 million maximum indemnity
■Deductible: 12 week waiting period
Entergy’s U.S. Utility nuclear plants have significantly less or no
accidental outage coverage. Under the property damage and acci-
dental outage insurance programs, Entergy nuclear plants could be
subject to assessments should losses exceed the accumulated funds
available from NEIL. As of December 31, 2005, the maximum
amounts of such possible assessments per occurrence were $52.5
million for the U.S. Utility plants and $66.7 million for the Non-
Utility Nuclear plants.
Entergy maintains property insurance for its nuclear units in
excess of the Nuclear Regulatory Commission’s (NRC’s) minimum
requirement of $1.06 billion per site for nuclear power plant
licensees. NRC regulations provide that the proceeds of this insur-
ance must be used, first, to render the reactor safe and stable, and
second, to complete decontamination operations. Only after pro-
ceeds 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 domestically-sponsored
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 reinsur-
ance, indemnity, and any other sources applicable to such losses.
There is no aggregate limit involving one or more acts of foreign-
sponsored terrorism.
NON-NUCLEAR PROPERTY INSURANCE
Entergy’s non-nuclear property insurance program provides cover-
age up to $400 million on an Entergy system-wide basis, subject to
a $20 million per occurrence self-insured retention, for all risks cov-
erage for direct physical loss or damage, including boiler and
machinery breakdown. 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
property program (excess of the deductible) is placed through Oil
Insurance Limited ($250 million layer) with the excess program
($150 million layer) placed on a quota share basis through under-
writers at Lloyds (50%) and Hartford Steam Boiler Inspection and
Insurance Company (50%). There is an aggregation limit of $1 billion
for all parties insured by OIL for any one occurrence. Coverage
is in place for Entergy Corporation, Entergy Arkansas, Entergy
Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy
New Orleans.
In addition to the OIL program, Entergy has purchased additional
coverage for some of its non-regulated, non-generation assets
through Zurich American. This policy serves to buy-down the
$20 million deductible and is placed on a scheduled location basis.
The applicable deductibles are $100,000 or $250,000 as per the
schedule provided to underwriters.
NUCLEAR DECOMMISSIONING AND
OTHER RETIREMENT COSTS
SFAS 143, “Accounting for Asset Retirement Obligations,” which
was implemented effective January 1, 2003, requires 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, these asset retirement obligations consist of its
liability for decommissioning its nuclear power plants.