Entergy 2007 Annual Report Download - page 87

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Entergy Corporation and Subsidiaries 2007
Notes to Consolidated Financial Statements continued
net insurance recoveries for the losses caused by the hurricanes,
including the eects of the primary insurance aggregation limit
being exceeded and the litigation against the excess insurer, will be
approximately $270 million, including $31 million for Entergy Gulf
States Louisiana, $27 million for Entergy Louisiana, $151 million for
Entergy New Orleans and $51 million for Entergy Texas.
To the extent that Entergy New Orleans receives insurance proceeds
for future construction expenditures associated with rebuilding its
gas system, the October 2006 City Council resolution approving the
settlement of Entergy New Orleans’ rate and storm-cost recovery
lings requires Entergy New Orleans to record those proceeds in a
designated sub-account of other deferred credits. is other deferred
credit is shown as “Gas system rebuild insurance proceeds” on Entergy
New Orleans’ balance sheet.
NYPA VA L U E SH A R I N G AG R E E M E N T S
Non-Utility Nuclear’s purchase of the FitzPatrick and Indian Point 3
plants from NYPA included value sharing agreements with NYPA. In
October 2007, Non-Utility Nuclear and NYPA amended and restated
the value sharing agreements to clarify and amend certain provisions
of the original terms. Under the amended value sharing agreements,
Non-Utility Nuclear will make annual payments to NYPA based on
the generation output of the Indian Point 3 and FitzPatrick plants from
January 2007 through December 2014. Non-Utility Nuclear will pay
NYPA $6.59 per MWh for power sold from Indian Point 3, up to an
annual cap of $48 million, and $3.91 per MWh for power sold from
FitzPatrick, up to an annual cap of $24 million. e annual payment
for each year is due by January 15 of the following year, with the
payment for year 2007 output due on January 15, 2008. If Entergy or
an Entergy aliate ceases to own the plants, then, aer January 2009,
the annual payment obligation terminates for generation aer the date
that Entergy ownership ceases.
Non-Utility Nuclear will record its liability for payments to NYPA
as power is generated and sold by Indian Point 3 and FitzPatrick. Non-
Utility Nuclear recorded a $72 million liability for generation through
December 31, 2007. An amount equal to the liability will be recorded
to the plant asset account as contingent purchase price consideration
for the plants. is amount will be depreciated over the expected
remaining useful life of the plants.
Non-Utility Nuclear had previously calculated that $0 was owed
to NYPA under the value sharing agreements for generation output
in 2005 and 2006. In November 2006, NYPA led a demand for
arbitration claiming that $90.5 million was due to NYPA for 2005
under these agreements, and NYPA led in April 2007 an amended
demand for arbitration claiming that an additional $54 million was
due to NYPA for 2006 under the value sharing agreements. As part of
their agreement to amend the value sharing agreements, Non-Utility
Nuclear and NYPA waived all present and future claims under the
previous value sharing terms, including the claims for 2005 and 2006
pending before the arbitrator.
EM P L O Y M E N T A N D LA B O R -R E L AT E D PR O C E E D I N G S
e Registrant Subsidiaries and other Entergy subsidiaries are
responding to various lawsuits in both state and federal courts and
to other labor-related proceedings led by current and former
employees. ese actions include, but are not limited to, allegations of
wrongful employment actions; wage disputes and other claims under
the Fair Labor Standards Act or its state counterparts; claims of race,
gender and disability discrimination; disputes arising under collective
bargaining agreements; unfair labor practice proceedings and other
administrative proceedings before the National Labor Relations
Board; claims of retaliation; and claims for or regarding benets
under various Entergy Corporation sponsored plans. Entergy and the
Registrant Subsidiaries are responding to these suits and proceedings
and deny liability to the claimants.
AS B E S T O S A N D HA Z A R D O U S MAT E R I A L LITIGATION
Numerous lawsuits have been led in federal and state courts in
Texas, Louisiana, and Mississippi primarily by contractor employees
in the 1950-1980 timeframe against Entergy Gulf States, Inc., Entergy
Louisiana, Entergy New Orleans, and Entergy Mississippi as premises
owners of power plants, for damages caused by alleged exposure to
asbestos or other hazardous material. Many other defendants are
named in these lawsuits as well. Presently, there are approximately
600 lawsuits involving approximately 8,000 claimants. Management
believes that adequate provisions have been established to cover any
exposure. Additionally, negotiations continue with insurers to recover
reimbursements. Management believes that loss exposure has been and
will continue to be handled successfully so that the ultimate resolution
of these matters will not be material, in the aggregate, to the nancial
position or results of operation of these companies.
NOTE 9. ASSET RETIREMENT OBLIGATIONS
SFAS 143, “Accounting for Asset Retirement Obligations,” requires
the recording of liabilities for all legal obligations associated with the
retirement of long-lived assets that result from the normal operation
of those assets. For Entergy, substantially all of its asset retirement
obligations consist of its liability for decommissioning its nuclear
power plants. In addition, an insignicant amount of removal costs
associated with non-nuclear power plants is also included in the
decommissioning line item on the balance sheets.
ese liabilities are recorded at their fair values (which are the
present values of the estimated future cash outows) in the period
in which they are incurred, with an accompanying addition to the
recorded cost of the long-lived asset. e asset retirement obligation
is accreted each year through a charge to expense, to reect the time
value of money for this present value obligation. e accretion will
continue through the completion of the asset retirement activity. e
amounts added to the carrying amounts of the long-lived assets will be
depreciated over the useful lives of the assets. e application of SFAS
143 is expected to be earnings neutral to the rate-regulated business of
the Registrant Subsidiaries.
In accordance with ratemaking treatment and as required by SFAS
71, the depreciation provisions for the Utility operating companies and
System Energy include a component for removal costs that are not asset
retirement obligations under SFAS 143. In accordance with regulatory
accounting principles, the Utility operating companies and System
Energy have recorded regulatory assets (liabilities) in the following
amounts to reect their estimates of the dierence between estimated
incurred removal costs and estimated removal costs recovered in rates
(in millions):
December 31, 2007 2006
Entergy Arkansas $ 23.0 $45.0
Entergy Gulf States Louisiana $(13.9) $ 5.6
Entergy Louisiana $(64.0) $ 2.3
Entergy Mississippi $ 35.7 $41.2
Entergy New Orleans $ 1.5 $13.9
Entergy Texas $ (4.9) $ (1.8)
System Energy $ 16.9 $20.7