Entergy 2006 Annual Report Download - page 97

ENTERGY CORPORATION AND SUBSIDIARIES 2
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In accordance with ratemaking treatment and as required by SFAS
71, the depreciation provisions for the Registrant Subsidiaries include
a component for removal costs that are not asset retirement obliga-
tions under SFAS 143. In accordance with regulatory accounting
principles, the Registrant Subsidiaries have recorded regulatory assets
(liabilities) in the following amounts to reflect their estimates of the
difference between estimated incurred removal costs and estimated
removal costs recovered in rates previously recorded as a component
of accumulated depreciation (in millions):
December 31, 2006 2005
Entergy Arkansas $45.0 $ 86.2
Entergy Gulf States $ 3.8 $ 17.9
Entergy Louisiana $ 2.3 $(22.8)
Entergy Mississippi $41.2 $ 40.9
Entergy New Orleans $13.9 $ 5.4
System Energy $20.7 $ 17.9
The cumulative decommissioning and retirement cost liabilities
and expenses recorded in 2006 by Entergy were as follows
(in millions):
Liabilities Change in Liabilities
as of Cash Flow as of
Dec. 31, 2005 Accretion Estimate Spending Dec.31, 2006
Utility:
Entergy Arkansas $442.1 $30.7 $ – $ – $472.8
Entergy Gulf States $175.5 $15.5 $ – $ – $191.0
Entergy Louisiana $221.3 $17.2 $ – $ – $238.5
Entergy Mississippi $ 4.0 $ 0.3 $ – $ – $ 4.3
System Energy $318.9 $23.9 $ – $ – $342.8
Non-Utility Nuclear $761.2 $62.9 $(27.0) $(23.8) $773.3
Other $ 0.9 $ 0.1 $ – $ 0.1 $ 1.1
Entergy periodically reviews and updates estimated decommissioning
costs. The actual decommissioning costs may vary from the estimates
because of regulatory requirements, changes in technology, and increased
costs of labor, materials, and equipment. During 2004, 2005, and 2006
Entergy updated decommissioning cost studies for ANO 1 and 2, River
Bend, Grand Gulf, Waterford 3, and certain Non-Utility Nuclear plants.
In the third quarter of 2004, Entergy Gulf States recorded a revi-
sion to its estimated decommissioning cost liability in accordance
with a new decommissioning cost study for River Bend that reflected
an expected life extension for the plant. The revised estimate resulted
in a $166.4 million reduction in decommissioning liability, along
with a $31.3 million reduction in utility plant, a $49.6 million reduc-
tion in non-utility property, a $40.1 million reduction in the related
regulatory asset, and a regulatory liability of $17.7 million. For the
portion of River Bend not subject to cost-based ratemaking, the
revised estimate resulted in the elimination of the asset retirement cost
that had been recorded at the time of adoption of SFAS 143 with the
remainder recorded as miscellaneous other income of $27.7 million
($17 million net-of-tax).
In the third quarter of 2004, Entergy’s Non-Utility Nuclear business
recorded a reduction of $20.3 million in decommissioning liability to
reflect changes in assumptions regarding the timing of when decommis-
sioning of a plant will begin. Entergy considered the assumptions as part
of recent studies evaluating the economic effect of the plant in its region.
The revised estimate resulted in miscellaneous income of $20.3 million
($11.9 million net-of-tax), reflecting the excess of the reduction in the
liability over the amount of undepreciated asset retirement cost recorded
at the time of adoption of SFAS 143.
In the first quarter of 2005, Entergy’s Non-Utility Nuclear business
recorded a reduction of $26.0 million in its decommissioning cost lia-
bility in conjunction with a new decommissioning cost study as a
result of revised decommissioning costs and changes in assumptions
regarding the timing of the decommissioning of a plant. The revised
estimate resulted in miscellaneous income of $26.0 million ($15.8
million net-of-tax), reflecting the excess of the reduction in the liabil-
ity over the amount of undepreciated assets.
In the second quarter of 2005, Entergy Louisiana recorded a revi-
sion to its estimated decommissioning cost liability in accordance
with a new decommissioning cost study for Waterford 3 that reflect-
ed an expected life extension for the plant. The revised estimate
resulted in a $153.6 million reduction in its decommissioning liabili-
ty, along with a $49.2 million reduction in utility plant and a $104.4
million reduction in the related regulatory asset.
In the third quarter of 2005, Entergy Arkansas recorded a revision
to its estimated decommissioning cost liability for ANO 2 in
accordance with the receipt of approval by the NRC of Entergy
Arkansas’ application for a life extension for the unit. The revised
estimate resulted in an $87.2 million reduction in its decommission-
ing liability, along with a corresponding reduction in the related
regulatory asset.
In the third quarter of 2005, System Energy recorded a revision to its
estimated decommissioning cost liability in accordance with a new
decommissioning cost study for Grand Gulf. The revised estimate result-
ed in a $41.4 million reduction in the decommissioning cost liability for
Grand Gulf, along with a $39.7 million reduction in utility plant and a
$1.7 million reduction in the related regulatory asset.
In the third quarter of 2006, Entergy’s Non-Utility Nuclear busi-
ness recorded a reduction of $27.0 million in decommissioning
liability for a plant as a result of a revised decommissioning cost study
and changes in assumptions regarding the timing of when decommis-
sioning of the plant will begin. The revised estimate resulted in
miscellaneous income of $27.0 million ($16.6 million net-of-tax),
reflecting the excess of the reduction in the liability over the amount
of undepreciated asset retirement cost recorded at the time of adop-
tion of SFAS 143.
For the Indian Point 3 and FitzPatrick plants purchased in 2000,
NYPA retained the decommissioning trusts and the decommissioning lia-
bility. NYPA and Entergy executed decommissioning agreements, which
specify their decommissioning obligations. NYPA has the right to require
Entergy to assume the decommissioning liability provided that it assigns
the corresponding decommissioning trust, up to a specified level, to
Entergy. If the decommissioning liability is retained by NYPA, Entergy
will perform the decommissioning of the plants at a price equal to the
lesser of a pre-specified level or the amount in the decommissioning
trusts. Entergy believes that the amounts available to it under either sce-
nario are sufficient to cover the future decommissioning costs without any
additional contributions to the trusts.
Entergy maintains decommissioning trust funds that are commit-
ted to meeting the costs of decommissioning the nuclear power
plants. The fair values of the decommissioning trust funds and asset
retirement obligation-related regulatory assets of Entergy as of
December 31, 2006 are as follows (in millions):
Regulatory
Decommissioning Trust Fair Values Asset
Utility:
ANO 1 and ANO 2 $ 439.4 $119.7
River Bend $ 344.9 $ 3.4
Waterford 3 $ 208.9 $ 57.1
Grand Gulf $ 281.4 $ 98.2
Non-Utility Nuclear $1,583.8 $ –
NOTESto CONSOLIDATED FINANCIAL STATEMENTS continued
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