Entergy 2006 Annual Report Download - page 80

ENTERGY CORPORATION AND SUBSIDIARIES 2
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amount of reasonable and necessary hurricane reconstruction costs
eligible for securitization and recovery, approve the recovery of carry-
ing costs, and approve the manner in which Entergy Gulf States
allocates those costs among its Texas retail customer classes. This was
the first of two filings authorized by a law passed earlier in 2006 in a
special session of the Texas Legislature. In December 2006, the PUCT
approved $381 million of reasonable and necessary hurricane recon-
struction costs incurred through March 31, 2006, plus carrying costs,
as eligible for recovery. After netting expected insurance proceeds, the
amount is $353 million. In February 2007, the PUCT voted to
approve securitization of the $353 million in storm cost recovery
expenses, but it also offset the securitization amount by $31.6 million,
which the PUCT Commissioners determined was the net present
value of the accumulated deferred income tax benefits related to the
storm costs. The PUCT also voted to impose certain caps on the
amount of qualified transaction costs that can be included in the total
securitization amount. The PUCT is expected to issue a financing
order authorizing the issuance of securitization bonds by early-March
2007, and Entergy Gulf States intends to implement rates to recover
revenues to pay the securitization bonds by mid-2007. Entergy Gulf
States will file a semi-annual report with the PUCT to reflect any
additional insurance proceeds or other government grant money
received, which would be applied against the storm cost recovery balance.
Entergy Gulf States – Louisiana and Entergy Louisiana
In May 2006, Entergy Gulf States completed the $6 million interim
recovery of storm costs through the fuel adjustment clause pursuant
to an LPSC order. Beginning in September 2006, Entergy Gulf States’
interim storm cost recovery of $0.85 million per month was institut-
ed via the formula rate plan. Interim recovery will continue until a
final decision is reached by the LPSC with respect to Entergy Gulf
States’ supplemental and amending storm cost recovery application,
which is discussed below.
In April 2006, Entergy Louisiana completed the $14 million inter-
im recovery of storm costs through the fuel adjustment clause
pursuant to an LPSC order. Beginning in September 2006, Entergy
Louisiana’s interim storm cost recovery of $2 million per month was
instituted via the formula rate plan. Interim recovery will continue
until a final decision is reached by the LPSC with respect to Entergy
Louisiana’s supplemental and amending storm cost recovery applica-
tion, which is discussed below.
On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed
a supplemental and amending storm cost recovery application with
the LPSC, in which Entergy Louisiana and Entergy Gulf States
requested that the LPSC (1) review Entergy Louisiana’s and Entergy
Gulf States’ testimony and exhibits relating to the costs associated
with Hurricanes Katrina and Rita, and declare that those verified,
actual storm-related costs through May 31, 2006 are $466.8 million
for Entergy Louisiana and $200.3 million for Entergy Gulf States in
the Louisiana jurisdiction and that those costs were prudently
incurred; (2) declare that the annual revenue requirements associated
with the recovery of those costs, including carrying costs, based on a
ten-year levelized rate, are $54.4 million for Entergy Louisiana and
$26.2 million for Entergy Gulf States; (3) authorize Entergy
Louisiana and Entergy Gulf States to recover the costs through
Securitized Storm Cost Recovery Riders (SSCRRs) proposed by
Entergy Louisiana and Entergy Gulf States; (4) declare that the storm
costs incurred subsequent to May 31, 2006 are to be filed by Entergy
Louisiana and Entergy Gulf States with the LPSC on an annual basis
in connection with their annual formula rate plan (FRP) filings, and
that the SSCRRs be adjusted annually (or semi-annually if needed) to
reflect such costs and any insurance proceeds or CDBG funds actual-
ly received, with the adjusted amounts to be collected through the
SSCRRs to take effect contemporaneous with the effective date of rate
changes under the FRP; (5) declare that the storm-related costs
incurred by Entergy Louisiana and Entergy Gulf States meet the con-
ditions set forth in the FRP for exclusion from the sharing provisions
in those FRPs and authorize the permanent recovery of storm costs
outside of the FRPs adopted by the LPSC for Entergy Louisiana and
Entergy Gulf States; and (6) authorize the funding of a storm reserve
through securitization sufficient to fund a storm cost reserve of
$132 million for Entergy Louisiana and $81 million for Entergy
Gulf States.
On February 28, 2007, Entergy Louisiana and Entergy Gulf States
filed rebuttal testimony and filed a second supplemental and amend-
ing application by which they seek authority from the LPSC to
securitize their storm cost recovery and storm reserve amounts,
together with certain debt retirement costs and upfront and ongoing
costs of the securitized debt issued. The filing updates actual storm-
related costs through January 2007 and estimated future costs,
declaring that Entergy Louisiana’s costs are $561 million and Entergy
Gulf States' costs are $219 million. The filing also updates the
requested storm reserve amounts, requesting $141 million for Entergy
Louisiana and $87 million for Entergy Gulf States. Securitization is
authorized by a law signed by the Governor of Louisiana in May
2006. Hearings are scheduled for April 2007.
Entergy Mississippi
In March 2006, the Governor of Mississippi signed a law that estab-
lished 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 pro-
vided for a review of Entergy Mississippi’s total storm restoration costs
in an Application for an Accounting Order proceeding. The
Stipulation stated that the procedural schedule of Entergy
Mississippi’s December 2005 filing seeking recovery of hurricane costs
through an existing Entergy Mississippi storm damage rider should be
suspended until the MPSC issues a final order in the 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 reim-
bursement 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 $48 million of
state bonds, with $8 million for the remainder of Entergy Mississippi’s
certified Hurricane Katrina restoration costs and $40 million for the
increase in Entergy Mississippi’s storm damage reserve. $30 million of
the storm reserve will be set aside in a restricted account. Entergy
Mississippi forwarded the financing order to the state bond commis-
sion, as per the March 2006 law, and expects to receive the proceeds
from the state bond issuance in the second quarter of 2007.
NOTESto CONSOLIDATED FINANCIAL STATEMENTS continued