Entergy 2007 Annual Report Download - page 67

65
Entergy Corporation and Subsidiaries 2007
Notes to Consolidated Financial Statements continued
NOTE 2. RATE AND REGULATORY MATTERS
RE G U L AT O R Y AS S E T S
Other Regulatory Assets
e Utility business is subject to the provisions of SFAS 71, “Accounting
for the Eects of Certain Types of Regulation.” Regulatory assets
represent probable future revenues associated with certain costs that
are expected to be recovered from customers through the ratemaking
process. In addition to the regulatory assets that are specically
disclosed on the face of the balance sheets, the table below provides
detail of “Other regulatory assets” that are included on Entergy’s
balance sheets and the Registrant Subsidiaries’ balance sheets as of
December 31, 2007 and 2006 (in millions):
Entergy
2007 2006
Asset Retirement Obligation - recovery dependent
upon timing of decommissioning (Note 9)(b) $ 334.9 $ 303.2
Deferred capacity - recovery timing will be
determined by the LPSC in the formula
rate plan lings (Note 2 - Retail Rate Proceedings -
Filings with the LPSC) 86.4 127.5
Deferred fuel - non-current - recovered through
rate riders when rates are redetermined periodically
(Note 2 - Fuel and purchased power cost recovery) 32.8 43.4
Depreciation re-direct - recovery begins at start of
retail open access (Note 1 - Transition to Competition
Liabilities)(b) – 79.1
DOE Decommissioning and Decontamination Fees -
recovered through fuel rates until December 2007 (Note 9) – 9.1
Gas hedging costs - recovered through fuel rates 9.7 47.6
Pension & postretirement costs
(Note 11 - Qualied Pension Plans and
Non-Qualied Pension Plans)(b) 675.1 700.7
Postretirement benets - recovered through 2012
(Note 11 - Other Postretirement Benets)(b) 12.0 14.4
Provision for storm damages, including Hurricanes
Katrina and Rita costs - recovered through securitization,
insurance proceeds, and retail rates (Note 2 - Storm
Cost Recovery Filings with Retail Regulators)(a) 1,339.8 827.4
Removal costs - recovered through depreciation rates
(Note 9)(b) – 113.2
River Bend AFUDC - recovered through August 2025
(Note 1 – River Bend AFUDC) 31.8 33.7
Sale-leaseback deferral - recovered through June 2014
(Note 10 – Sale and Leaseback Transactions –
Grand Gulf Lease Obligations)(c) 103.9 114.0
Spindletop gas storage facility - recovered through
December 2032(c) 37.4 39.0
Transition to competition - recovered through
February 2021 (Note 2 – Retail Rate Proceedings -
Filings with the PUCT and Texas Cities) 112.9 117.8
Unamortized loss on reacquired debt -
recovered over term of debt 137.1 150.1
Other 57.6 48.2
Total $2,971.4 $2,768.4
(a) As a result of Hurricane Katrina and Hurricane Rita that hit Entergy’s
Utility service territories in August and September 2005, the Utility
operating companies recorded accruals for the estimated storm restora-
tion costs and originally recorded some of these costs as regulatory assets
because management believes that recovery of these prudently incurred
costs through some form of regulatory mechanism is probable. Entergy is
pursuing a broad range of initiatives to recover storm restoration costs.
Initiatives include obtaining reimbursement of certain costs covered by
insurance, obtaining assistance through federal legislation for Hurricanes
Katrina and Rita including Community Development Block Grants
(CDBG), pursuing recovery through existing or new rate mechanisms
regulated by the FERC and local regulatory bodies, and securitization.
Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi,
Entergy New Orleans, and Entergy Texas have received approval
from state regulators for recovery of a portion of the storm restoration
costs. In addition, these companies have received insurance proceeds
and Entergy New Orleans has received $180.8 million of CDBG
funding in 2007. The cost recovery mechanisms and approvals are
discussed below. In 2007, Entergy Gulf States Louisiana reclassified
$81 million and Entergy Louisiana reclassified $364 million of storm-
related capital expenditures to a regulatory asset based on the outcome
of regulatory proceedings.
(b) Does not earn a return on investment, but is offset by related liabilities.
(c) Does not earn a return on investment at this time.
Fuel and Purchased Power Cost Recovery
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana,
Entergy Mississippi, Entergy New Orleans, and Entergy Texas are
allowed to recover certain fuel and purchased power costs through fuel
mechanisms included in electric and gas rates that are recorded as fuel
cost recovery revenues. e dierence between revenues collected and
the current fuel and purchased power costs is recorded as “Deferred
fuel costs” on the Utility operating companies’ nancial statements. e
table below shows the amount of deferred fuel costs as of December 31,
2007 and 2006 that Entergy expects to recover or (refund) through fuel
mechanisms, subject to subsequent regulatory review (in millions):
2007 2006
Entergy Arkansas $114.8 $ 2.2
Entergy Gulf States Louisiana(a) $105.8 $ 73.9
Entergy Louisiana(a) $ 19.2 $114.3
Entergy Mississippi $( 76.6) $(95.2)
Entergy New Orleans(b) $ 17.3 $ 19.0
Entergy Texas $ (67.3) $(45.7)
(a) 2007 and 2006 include $100.1 million for Entergy Gulf States
Louisiana and $68 million for Entergy Louisiana of fuel, purchased
power, and capacity costs that are expected to be recovered over a
period greater than twelve months.
(b) Not included in “Deferred Fuel Costs” on Entergy’s consolidated
financial statements in 2006 due to the deconsolidation of Entergy
New Orleans effective in 2005. Entergy reconsolidated Entergy New
Orleans in 2007.
Entergy Arkansas
Production Cost Allocation Rider
In its June 2007 decision on Entergy Arkansas’ August 2006 rate ling,
discussed below in “Retail Rate Proceedings”, the APSC approved a
production cost allocation rider for recovery from customers of the
retail portion of the costs allocated to Entergy Arkansas as a result
of the System Agreement proceedings, but set a termination date of
December 31, 2008 for the rider. ese costs are the primary reason for
the increase in Entergy Arkansas’ deferred fuel cost balance in 2007,
because Entergy Arkansas pays them over seven months but collects
them from customers over twelve months. In December 2007, the
APSC issued a subsequent order stating the production cost allocation
rider will remain in eect, and any future termination of the rider
will be subject to eighteen months advance notice by the APSC,
which would occur following notice and hearing. See Entergy
Corporation and Subsidiaries’ “Management’s Financial Discussion
And Analysis - Signicant Factors and Known Trends - Federal
Regulation - System Agreement Proceedings” for a discussion of the
System Agreement proceedings.