Entergy 2006 Annual Report Download - page 96

ENTERGY CORPORATION AND SUBSIDIARIES 2
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Non-Utility Nuclear calculated that nothing was owed to NYPA
under the value sharing agreements for 2005. On November 1, 2006,
NYPA filed a demand for arbitration claiming that $90.5 million was
due to NYPA under these agreements for 2005. Non-Utility Nuclear
has filed a motion in New York State court to determine whether
NYPA’s claim should be decided by a court as opposed to by an arbi-
trator. Regardless of whether a court or an arbitrator decides NYPA’s
claim, Non-Utility Nuclear disagrees with NYPA’s interpretation of
the value sharing agreements, believes it has meritorious defenses to
NYPA’s claims, and intends to litigate those claims vigorously.
CASHPOINT BANKRUPTCY
In 2003, the Utility operating companies entered an agreement with
CashPoint Network Services (CashPoint) under which CashPoint was
to manage a network of payment agents through which Entergy’s util-
ity customers could pay their bills. The payment agent system allows
customers to pay their bills at various commercial or governmental
locations, rather than sending payments by mail. Approximately one-
third of Entergy’s utility customers use payment agents.
On April 19, 2004, CashPoint failed to pay funds due to the Utility
operating companies that had been collected through payment agents.
The Utility operating companies then obtained a temporary restrain-
ing order from the Civil District Court for the Parish of Orleans, State
of Louisiana, enjoining CashPoint from distributing funds belonging
to Entergy, except by paying those funds to Entergy. On April 22,
2004, a petition for involuntary Chapter 7 bankruptcy was filed
against CashPoint by other creditors in the United States Bankruptcy
Court for the Southern District of New York. In response to these
events, the Utility operating companies expanded an existing contract
with another company to manage all of their payment agents. The
Utility operating companies filed proofs of claim in the CashPoint
bankruptcy proceeding in September 2004. Although Entergy cannot
precisely determine at this time the amount that CashPoint owes to
the Utility operating companies that may not be repaid, it has accrued
an estimate of loss based on current information. If no cash is repaid
to the Utility operating companies, an event Entergy does not believe
is likely, the current estimates of maximum exposure to loss are
approximately as follows (in millions):
Entergy Arkansas $1.8
Entergy Gulf States $7.7
Entergy Louisiana $8.8
Entergy Mississippi $4.3
Entergy New Orleans $2.4
HARRISON COUNTY PLANT FIRE
On May 13, 2005, an explosion and fire damaged the non-nuclear
wholesale assets business’ Harrison County power plant. A catastroph-
ic failure and subsequent natural gas escape from a nearby 36-inch
interstate pipeline owned and operated by a third party is believed to
have caused the damage. Repairs to the damaged portions of the plant
have been completed and the plant returned to commercial operations
on May 1, 2006. The total cost of clean-up and repairs were approx-
imately $48 million. The plant’s property insurer has acknowledged
coverage, subject to a $200 thousand deductible and has begun pay-
ing on the claim. Entergy owns approximately 61% of this facility.
Entergy does not expect the damage caused to the Harrison County
plant to have a material effect on its financial position or results
of operations.
EMPLOYMENT LITIGATION
Entergy Corporation and the Registrant Subsidiaries are defendants in
numerous lawsuits and other labor-related proceedings filed by for-
mer employees asserting that they were wrongfully terminated and/or
discriminated against on the basis of age, race, sex, and/or other pro-
tected characteristics. Entergy Corporation and these subsidiaries are
vigorously defending these suits and deny any liability to the plain-
tiffs. Nevertheless, no assurance can be given as to the outcome of
these cases.
ASBESTOS AND HAZARDOUS MATERIAL LITIGATION
Numerous lawsuits have been filed in federal and state courts in Texas,
Louisiana, and Mississippi primarily by contractor employees in the
1950-1980 timeframe against Entergy Gulf States, Entergy Louisiana,
and Entergy New Orleans, and Entergy Mississippi as premises own-
ers of power plants, for damages caused by alleged exposure to
asbestos or other hazardous material. Many other defendants are
named in these lawsuits as well. Presently, there are approximately 600
lawsuits involving approximately 10,000 claims. Management
believes that adequate provisions have been established to cover any
exposure. Additionally, negotiations continue with insurers to recover
more reimbursement. Management believes that loss exposure has
been and will continue to be handled successfully so that the ultimate
resolution of these matters will not be material, in the aggregate, to
the financial position or results of operation of these companies.
NOTE 9. ASSET RETIREMENT OBLIGATIONS
SFAS 143, “Accounting for Asset Retirement Obligations,” which was
implemented effective January 1, 2003, requires the recording of lia-
bilities for all legal obligations associated with the retirement of
long-lived assets that result from the normal operation of those assets.
For Entergy, substantially all of its asset retirement obligations consist
of its liability for decommissioning its nuclear power plants. In addi-
tion, an insignificant amount of removal costs associated with
non-nuclear power plants is also included in the decommissioning
line item on the balance sheets.
These liabilities are recorded at their fair values (which are the pres-
ent values of the estimated future cash outflows) in the period in
which they are incurred, with an accompanying addition to the
recorded cost of the long-lived asset. The asset retirement obligation
is accreted each year through a charge to expense, to reflect the time
value of money for this present value obligation. The accretion will
continue through the completion of the asset retirement activity. The
amounts added to the carrying amounts of the long-lived assets will
be depreciated over the useful lives of the assets. SFAS 143 is expect-
ed to be earnings neutral to the rate-regulated business of the
Registrant Subsidiaries.
NOTESto CONSOLIDATED FINANCIAL STATEMENTS continued