Entergy 2007 Annual Report Download - page 70

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Entergy Corporation and Subsidiaries 2007
Notes to Consolidated Financial Statements continued
ST O R M CO S T RE C O V E RY FI L I N G S W I T H RE T A I L RE G U L A T O R S
Entergy Texas
In July 2006, Entergy Texas led an application with the PUCT with
respect to its Hurricane Rita reconstruction costs incurred through
March 2006. e ling asked the PUCT to determine the amount of
reasonable and necessary hurricane reconstruction costs eligible for
securitization and recovery, approve the recovery of carrying costs, and
approve the manner in which Entergy Texas allocates those costs among
its retail customer classes. In December 2006, the PUCT approved
$381 million of reasonable and necessary hurricane reconstruction
costs incurred through March 31, 2006, plus carrying costs, as eligible
for recovery. Aer netting expected insurance proceeds, the amount
is $353 million.
In April 2007, the PUCT issued its nancing order authorizing the
issuance of securitization bonds to recover the $353 million of hurricane
reconstruction costs and up to $6 million of transaction costs, oset
by $32 million of related deferred income tax benets. In June 2007,
Entergy Gulf States Reconstruction Funding I, LLC (Entergy Gulf States
Reconstruction Funding), a company wholly-owned and consolidated
by Entergy Texas, issued $329.5 million of senior secured transition
bonds (securitization bonds). With the proceeds, Entergy Gulf States
Reconstruction Funding purchased from Entergy Texas the transition
property, which is the right to recover from customers through a
transition charge amounts sucient to service the securitization
bonds. Entergy Texas will use the proceeds to renance or retire debt
and to reduce equity. In February 2008, Entergy Texas returned $150
million of capital to Entergy Corporation. Entergy Texas began cost
recovery through the transition charge in July 2007, and the transition
charge is expected to remain in place over a 15-year period. See Note
5 to the nancial statements for additional information regarding the
securitization bonds.
Entergy Gulf States Louisiana and Entergy Louisiana
In February 2007, Entergy Louisiana and Entergy Gulf States Louisiana
led a supplemental and amending application by which they seek
authority from the LPSC to securitize their Hurricane Katrina and
Hurricane Rita storm cost recovery and storm reserve amounts,
together with certain debt retirement costs and upfront and ongoing
costs of the securitized debt issued. Securitization is authorized by a
law signed by the Governor of Louisiana in May 2006. Hearings on the
quantication of the amounts eligible for securitization began in late-
April 2007. At the start of the hearing, a stipulation among Entergy
Gulf States Louisiana, Entergy Louisiana, the LPSC sta, and most
other parties in the proceeding was read into the record. e stipulation
quanties the balance of storm restoration costs for recovery as $545
million for Entergy Louisiana and $187 million for Entergy Gulf States
Louisiana, and sets the storm reserve amounts at $152 million for
Entergy Louisiana and $87 million for Entergy Gulf States Louisiana.
e stipulation also calls for securitization of the storm restoration
costs and storm reserves in those same amounts. In August 2007, the
LPSC issued orders approving recovery of the stipulated storm cost
recovery and storm reserve amounts plus certain debt retirement and
upfront and ongoing costs through securitization nancing. Entergy
Louisiana and Entergy Gulf States Louisiana are currently exploring
their securitization options.
In May 2006, Entergy Gulf States Louisiana completed the interim
recovery of $6 million of storm costs through the fuel adjustment
clause pursuant to an LPSC order. Beginning in September 2006,
Entergy Gulf States Louisiana’s interim storm cost recovery of $0.85
million per month was instituted via the formula rate plan. Interim
recovery and carrying charges will continue until the securitization
process is complete.
In April 2006, Entergy Louisiana completed the interim recovery of
$14 million of storm costs through the fuel adjustment clause pursuant
to an LPSC order. Beginning in September 2006, Entergy Louisiana’s
interim storm cost recovery of $2 million per month was instituted
via the formula rate plan. Interim recovery and carrying charges will
continue until the securitization process is complete.
Entergy Mississippi
In March 2006, the Governor of Mississippi signed a law that
established a mechanism by which the MPSC could authorize and
certify an electric utility nancing order and the state could issue
bonds to nance the costs of repairing damage caused by Hurricane
Katrina to the systems of investor-owned electric utilities. Because
of the passage of this law and the possibility of Entergy Mississippi
obtaining CDBG funds for Hurricane Katrina storm restoration
costs, in March 2006, the MPSC issued an order approving a Joint
Stipulation between Entergy Mississippi and the Mississippi Public
Utilities Sta that provided for a review of Entergy Mississippi’s total
storm restoration costs in an Application for an Accounting Order
proceeding. In June 2006, the MPSC issued an order certifying
Entergy Mississippi’s Hurricane Katrina restoration costs incurred
through March 31, 2006 of $89 million, net of estimated insurance
proceeds. Two days later, Entergy Mississippi led a request with the
Mississippi Development Authority for $89 million of CDBG funding
for reimbursement of its Hurricane Katrina infrastructure restoration
costs. Entergy Mississippi also led a Petition for Financing Order with
the MPSC for authorization of state bond nancing of $169 million
for Hurricane Katrina restoration costs and future storm costs. e
$169 million amount included the $89 million of Hurricane Katrina
restoration costs plus $80 million to build Entergy Mississippi’s storm
damage reserve for the future. Entergy Mississippi’s ling stated that
the amount actually nanced through the state bonds would be net of
any CDBG funds that Entergy Mississippi received.
In October 2006, the Mississippi Development Authority approved
for payment and Entergy Mississippi received $81 million in CDBG
funding for Hurricane Katrina costs. e MPSC then issued a nancing
order authorizing the issuance of state bonds to nance $8 million of
Entergy Mississippi’s certied Hurricane Katrina restoration costs and
$40 million for an increase in Entergy Mississippi’s storm damage
reserve. $30 million of the storm damage reserve was set aside in a
restricted account. A Mississippi state entity issued the bonds in
May 2007, and Entergy Mississippi received proceeds of $48 million.
Entergy Mississippi will not report the bonds on its balance sheet
because the bonds are the obligation of the state entity, and there is
no recourse against Entergy Mississippi in the event of a bond default.
To service the bonds, Entergy Mississippi is collecting a system
restoration charge on behalf of the state, and remitting the collections
to the state. By analogy to and in accordance with Entergy’s accounting
policy for collection of sales taxes, Entergy Mississippi will not report
the collections as revenue because it is merely acting as the billing and
collection agent for the state.
Entergy New Orleans
In March 2006, Entergy New Orleans provided a justication statement
to state and local ocials in connection with its pursuit of CDBG
funds to mitigate Hurricane Katrina restoration costs that otherwise
would be borne by customers. e statement included all the estimated
costs of Hurricane Katrina damage, as well as a lost customer base
component intended to help oset the need for storm-related rate
increases. In October 2006, the Louisiana Recovery Authority Board
endorsed a resolution proposing to allocate $200 million in CDBG
funds to Entergy New Orleans to defray gas and electric utility system