Entergy 2007 Annual Report Download - page 85

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Entergy Corporation and Subsidiaries 2007
Notes to Consolidated Financial Statements continued
NOTE 8. COMMITMENTS AND CONTINGENCIES
Entergy and its subsidiaries are involved in a number of legal,
regulatory, and tax proceedings before various courts, regulatory
commissions, and governmental agencies in the ordinary course of
business. While management is unable to predict the outcome of such
proceedings, management does not believe that the ultimate resolution
of these matters will have a material adverse eect on Entergy’s results
of operations, cash ows, or nancial condition. Entergy discusses
regulatory proceedings in Note 2 to the nancial statements and
discusses tax proceedings in Note 3 to the nancial statements.
VIDALIA PU R C H A S E D PO W E R AG R E E M E N T
Entergy Louisiana has an agreement extending through the year 2031
to purchase energy generated by a hydroelectric facility known as the
Vidalia project. Entergy Louisiana made payments under the contract
of approximately $130.8 million in 2007, $107.1 million in 2006, and
$115.1 million in 2005. If the maximum percentage (94%) of the energy
is made available to Entergy Louisiana, current production projections
would require estimated payments of approximately $144.5 million
in 2008, and a total of $3.0 billion for the years 2009 through 2031.
Entergy Louisiana currently recovers the costs of the purchased energy
through its fuel adjustment clause. In an LPSC-approved settlement
related to tax benets from the tax treatment of the Vidalia contract,
Entergy Louisiana agreed to credit rates by $11 million each year for
up to ten years, beginning in October 2002. In addition, in accordance
with an LPSC settlement, Entergy Louisiana credited rates in August
2007 by $11.8 million (including interest) as a result of a settlement
with the IRS of the 2001 tax treatment of the Vidalia contract. e
provisions of the settlement also provide that the LPSC shall not
recognize or use Entergy Louisiana’s use of the cash benets from the
tax treatment in setting any of Entergy Louisiana’s rates. erefore, to
the extent Entergy Louisiana’s use of the proceeds would ordinarily
have reduced its rate base, no change in rate base shall be reected for
ratemaking purposes.
NU C L E A R IN S U R A N C E
Third Party Liability Insurance
e Price-Anderson Act provides insurance for the public in the
event of a nuclear power plant accident. e costs of this insurance
are borne by the nuclear power industry. Congress amended and
renewed the Price-Anderson Act in 2005 for a term through 2025. e
Price-Anderson Act requires nuclear power plants to show evidence of
nancial protection in the event of a nuclear accident. is protection
must consist of two levels:
1. e primary level is private insurance underwritten by American
Nuclear Insurers and provides public liability insurance coverage
of $300 million. If this amount is not sucient to cover claims
arising from an accident, the second level, Secondary Financial
Protection, applies.
2. Within the Secondary Financial Protection level, each nuclear
reactor has a contingent obligation to pay a retrospective
premium, equal to its proportionate share of the loss in excess of
the primary level, up to a maximum of $100.6 million per reactor
per incident (Entergy’s maximum total contingent obligation per
incident is $1.1 billion). is consists of a $95.8 million maximum
retrospective premium plus a ve percent surcharge that may be
payable, if needed, at a rate that is presently set at $15 million per
year per nuclear power reactor. ere are no terrorism limitations.
Currently, 104 nuclear reactors are participating in the Secondary
Financial Protection program. e product of the maximum
retrospective premium assessment to the nuclear power industry and
the number of nuclear power reactors provides over $10 billion in
insurance coverage to compensate the public in the event of a nuclear
power reactor accident.
Entergy Arkansas has two licensed reactors and Entergy Gulf
States Louisiana, Entergy Louisiana, and System Energy each have
one licensed reactor (10% of Grand Gulf is owned by a non-aliated
company (SMEPA) that which would share on a pro-rata basis in any
retrospective premium assessment to System Energy under the Price-
Anderson Act). Entergy’s Non-Utility Nuclear business owns and
operates six nuclear power reactors and owns the shutdown Indian
Point 1 reactor.
An additional but temporary contingent liability had existed for all
nuclear power reactor owners because of a previous Nuclear Worker
Tort (long-term bodily injury caused by exposure to nuclear radiation
while employed at a nuclear power plant) insurance program that
was in place from 1988 to 1998. is contingent premium assessment
feature expired on December 31, 2007.
Property Insurance
Entergy’s nuclear owner/licensee subsidiaries are members of certain
mutual insurance companies that provide property damage coverage,
including decontamination and premature decommissioning expense,
to the members’ nuclear generating plants. ese programs are
underwritten by Nuclear Electric Insurance Limited (NEIL). As of
December 31, 2007, Entergy was insured against such losses per the
following structures:
Utility Plants (ANO 1 and 2, Grand Gulf, River Bend, and
Waterford 3)
n฀ Primary Layer (per plant) - $500 million per occurrence
n฀ Excess Layer (per plant) - $750 million per occurrence
n฀ Blanket Layer (shared among the Utility plants) - $350 million per
occurrence
n฀ Total limit - $1.6 billion per occurrence
n฀ Deductibles:
n฀ $2.5 million per occurrence - Turbine/generator damage
n฀฀ $2.5 million per occurrence - Other than turbine/generator
damage
Note: ANO 1 and 2 share in the Primary Layer with one policy in
common for that site because the policy is issued on a per site basis.
Non-Utility Nuclear Plants (Indian Point 2 and 3,
FitzPatrick, Pilgrim, Vermont Yankee, Palisades, and
Big Rock Point)
n฀ Primary Layer (per plant) - $500 million per occurrence
n฀ Excess Layer - $615 million per occurrence
n฀ Total limit - $1.115 billion per occurrence
n฀ Deductibles:
฀ ฀ ฀ ฀n฀ $2.5 million per occurrence - Turbine/generator damage
฀ ฀ ฀ ฀n฀ $2.5 million per occurrence - Other than turbine/generator
damage
Note: Indian Point 2 and 3 share in the Primary Layer with one policy
in common for that site because the policy is issued on a per site basis.
Big Rock Point has its own Primary policy with no excess coverage.