Entergy 2006 Annual Report Download - page 95

ENTERGY CORPORATION AND SUBSIDIARIES 2
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In addition, Waterford 3, Grand Gulf, and 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, 2006:
Waterford 3
■$2.95 million weekly indemnity
■$413 million maximum indemnity
■Deductible: 26 week waiting period
Grand Gulf
■$100,000 weekly indemnity
■$14 million maximum indemnity
■Deductible: 26 week waiting period
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
Under the property damage and accidental outage insurance
programs, Entergy nuclear plants could be subject to assessments
should losses exceed the accumulated funds available from NEIL. As
of December 31, 2006, the maximum amounts of such possible
assessments per occurrence were as follows (in millions):
Utility:
Entergy Arkansas $16.6
Entergy Gulf States $13.3
Entergy Louisiana $15.5
Entergy Mississippi $0.10
Entergy New Orleans $0.10
System Energy $11.6
Non-Utility Nuclear $65.6
Entergy maintains property insurance for its nuclear units in excess
of the NRC’s minimum requirement of $1.06 billion per site for
nuclear power plant licensees. NRC regulations provide that the
proceeds of this insurance must be used, first, to render the reactor
safe and stable, and second, to complete decontamination operations.
Only after proceeds 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 terror-
ism 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 reinsurance, indem-
nity, 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 coverage
up to $400 million on an Entergy system-wide basis, subject to a $20
million per occurrence self-insured retention, for all risks coverage for
direct physical loss or damage, including boiler and machinery break-
down. 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
(OIL) ($250 million layer) with the excess program ($150 million
layer) placed on a quota share basis through underwriters at Lloyds
(50%) and Hartford Steam Boiler Inspection and Insurance
Company (50%). There is an aggregation limit of $500 million for all
parties insured by OIL for any one occurrence. Coverage is in place
for Entergy Corporation, Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, Entergy Gulf States, and Entergy New Orleans.
Most of Entergy’s non-nuclear excess property insurance coverage
includes a $75 million drop-down feature in the event of an OIL
aggregation loss to which an Entergy loss contributes.
In addition to the OIL program, Entergy has purchased additional cov-
erage 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.
There was an aggregation limit of $1 billion for all parties insured by
OIL for any one occurrence at the time of the Hurricane Katrina and
Rita losses, and Entergy has been notified by OIL that it expects claims
for Hurricanes Katrina and Rita to materially exceed this limit. Entergy
is currently evaluating the amount of the covered losses for Entergy and
each of the affected Utility operating companies, working with insurance
adjusters, and preparing proofs of loss for Hurricanes Katrina and Rita.
The Utility operating companies have received $51.5 million through
December 31, 2006 on their insurance claims. Entergy currently esti-
mates that its remaining net insurance recoveries for the losses caused by
the hurricanes, including the effect of the OIL aggregation limit being
exceeded, will be approximately $350 million, including $84 million for
Entergy Gulf States, $30 million for Entergy Louisiana, and $228 mil-
lion for Entergy New Orleans.
NYPA VALUE SHARING AGREEMENTS
Non-Utility Nuclear’s purchase of the FitzPatrick and Indian Point 3
plants from NYPA included value sharing agreements with NYPA.
Under the value sharing agreements, to the extent that the average
annual price of the energy sales from each of the two plants exceeds
specified strike prices, the Non-Utility Nuclear business will pay 50%
of the amount exceeding the strike prices to NYPA. These payments,
if required, will be recorded as adjustments to the purchase price of
the plants. The annual energy sales subject to the value sharing agree-
ments are limited to the lesser of actual generation or generation
assuming an 85% capacity factor based on the plants’ capacities at the
time of the purchase. The value sharing agreements are effective
through 2014. The strike prices for FitzPatrick range from
$37.51/MWh in 2005 increasing by approximately 3.5% each year to
$51.30/MWh in 2014, and the strike prices for Indian Point 3 range
from $42.26/MWh in 2005 increasing by approximately 3.5% each
year to $57.77/MWh in 2014.
NOTESto CONSOLIDATED FINANCIAL STATEMENTS continued
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