Entergy 2007 Annual Report Download - page 33

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Entergy Corporation and Subsidiaries 2007
Refer to “Selected Financial Data - Five-Year Comparison Of
Entergy Corporation And Subsidiaries” which accompanies Entergy
Corporation’s nancial statements in this report for further information
with respect to operating statistics.
Earnings were negatively aected in the fourth quarter 2007
by expenses of $52 million ($32 million net-of-tax) recorded in
connection with a nuclear operations eet alignment. is process
was undertaken with the goals of eliminating redundancies, capturing
economies of scale, and clearly establishing organizational governance.
Most of the expenses related to the voluntary severance program
oered to employees. Approximately 200 employees from the Non-
Utility Nuclear business and 150 employees in the Utility business
accepted the voluntary severance program oers.
As discussed above, Entergy New Orleans has been reconsolidated
retroactive to January 1, 2007 and its results are included in each
individual income statement line item for 2007. e variance
explanations for the Utility for 2007 compared to 2006 in “Results
Of Operations” reect the 2006 results of operations of Entergy New
Orleans as if it were reconsolidated in 2006, consistent with the 2007
presentation including the results in each individual income statement
line item. Entergy’s as-reported results for 2006, which had Entergy
New Orleans deconsolidated, and the amounts needed to reconsolidate
Entergy New Orleans, which include intercompany items, are set forth
in the table below (in thousands):
For the Year Ended December 31, 2006
Entergy
Corporation Entergy
and Subsidiaries New Orleans
(as-reported) adjustment*
Operating revenues $10,932,158 $305,077
Operating expenses:
Fuel, fuel-related expenses, and gas purchased
for resale and purchased power 5,282,310 113,888
Other operation and maintenance 2,335,364 100,094
Taxes other than income taxes 428,561 34,953
Depreciation and amortization 887,792 31,465
Other regulatory charges (credits) – net (122,680) 4,160
Other operating expenses 315,451 169
Total operating expenses $ 9,126,798 $284,729
Other income $ 348,587 $ (8,244)
Interest and other charges $ 577,805 $ 7,053
Income from continuing operations
before income taxes $ 1,576,142 $ 5,051
Income taxes $ 443,044 $ 5,051
Consolidated Net Income $ 1,132,602 $ –
* Reflects the adjustment needed to reconsolidate Entergy New Orleans
for 2006. The adjustment includes intercompany eliminations.
Net Revenue
Utility
Following is an analysis of the change in net revenue, which is
Entergy’s measure of gross margin, comparing 2006 to 2007
(in millions):
2006 Net Revenue (includes $187 million for
Entergy New Orleans) $4,458.1
Volume/weather 89.4
Base revenues 85.3
Fuel recovery 51.6
Transmission revenue 38.4
Purchased power capacity (90.4)
Net wholesale revenue (58.6)
Other 44.0
2007 Net Revenue $4,617.8
e volume/weather variance resulted primarily from increased
electricity usage in the residential and commercial sectors, including
increased usage during the unbilled sales period. Billed retail
electricity usage increased by a total of 1,591 GWh, an increase of
1.6%. See “Management’s Financial Discussion And Analysis - Critical
Accounting Estimates” herein and Note 1 to the nancial statements
for a discussion of the accounting for unbilled revenues.
e base revenues variance resulted from rate increases primarily
at Entergy Louisiana eective September 2006 for the 2005 formula
rate plan ling to recover Louisiana Public Service Commission
(LPSC)-approved incremental deferred and ongoing purchased power
capacity costs. e formula rate plan ling is discussed in Note 2 to the
nancial statements.
e fuel recovery variance is primarily due to the inclusion of
Grand Gulf costs in Entergy New Orleans’ fuel recoveries eective
July 1, 2006. In June 2006, the City Council approved the recovery
of Grand Gulf costs through the fuel adjustment clause, without a
corresponding change in base rates (a signicant portion of Grand
Gulf costs was previously recovered through base rates). e increase
is also due to purchased power costs deferred at Entergy Louisiana and
Entergy New Orleans as a result of the re-pricing, retroactive to 2003,
of purchased power agreements among Entergy system companies as
directed by the FERC.
e transmission revenue variance is due to higher rates and the
addition of new transmission customers in late-2006.
e purchased power capacity variance is due to higher capacity
charges and new purchased power contracts that began in mid-2006.
A portion of the variance is due to the amortization of deferred
capacity costs and is oset in base revenues due to base rate increases
implemented to recover incremental deferred and ongoing purchased
power capacity charges at Entergy Louisiana, as discussed above.
e net wholesale revenue variance is due primarily to 1) more
energy available for resale at Entergy New Orleans in 2006 due to the
decrease in retail usage caused by customer losses following Hurricane
Katrina and 2) the inclusion in 2006 revenue of sales into the wholesale
market of Entergy New Orleans’ share of the output of Grand Gulf,
pursuant to City Council approval of measures proposed by Entergy
New Orleans to address the reduction in Entergy New Orleans’ retail
customer usage caused by Hurricane Katrina and to provide revenue
support for the costs of Entergy New Orleans’ share of Grand Gulf. e
net wholesale revenue variance is partially oset by the eect of lower
wholesale revenues in the third quarter 2006 due to an October 2006
FERC order requiring Entergy Arkansas to make a refund to a coal
plant co-owner resulting from a contract dispute.
Non-Utility Nuclear
Net revenue increased for Non-Utility Nuclear from $1,388 million for
2006 to $1,839 million for 2007 primarily due to higher pricing in its
contracts to sell power and additional production available resulting
from the acquisition of the Palisades plant in April 2007. Amortization
of the Palisades purchased power agreement liability, which is
discussed in Note 15 to the nancial statements, also contributed to
the increase. e increase was partially oset by the eect on revenues
of four refueling outages in 2007 compared to two in 2006. Following
are key performance measures for Non-Utility Nuclear for 2007
and 2006:
2007 2006
Net MW in operation at December 31 4,998 4,200
Average realized price per MWh $52.69 $44.33
Gwh billed 37,570 34,847
Capacity factor 89% 95%
Management’s Financial Discussion and Analysis conti nued