Entergy 2008 Annual Report Download - page 33

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
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Management’s Financial Discussion and Analysis continued
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With confirmation of the plan of reorganization, Entergy
reconsolidated Entergy New Orleans in the second quarter 2007,
retroactive to January 1, 2007. Because Entergy owns all of the
common stock of Entergy New Orleans, reconsolidation does not
affect the amount of net income that Entergy recorded from Entergy
New Orleans’ operations for the current or prior periods, but does
result in Entergy New Orleans’ financial results being included in
each individual income statement line item in 2007, rather than
only its net income being presented as “Equity in earnings of
unconsolidated equity affiliates,” as remains the case for 2006.
RESULTS OF OPERATIONS
2008 CO M P A R E D T O 2007
Following are income statement variances for Utility, Non-
Utility Nuclear, Parent & Other business segments, and Entergy
comparing 2008 to 2007 showing how much the line item increased
or (decreased) in comparison to the prior period (in thousands):
Non-Utility Parent &
Utility Nuclear Other Entergy
2007 Consolidated
Net Income (Loss) $682,707 $539,200 $ (87,058) $1,134,849
Net revenue (operating
revenue less fuel expense,
purchased power, and
other regulatory
charges/credits) (29,234) 495,199 (8,717) 457,248
Other operation and
maintenance expenses 10,877 13,289 68,942 93,108
Taxes other than
income taxes 1,544 9,137 (2,787) 7,894
Depreciation and
amortization 38,898 27,351 899 67,148
Other income (2,871) (40,896) (42,001) (85,768)
Interest charges (1,544) 19,188 (50,911) (33,267)
Other (including
discontinued operations) 23,734 38,558 7 62,299
Income taxes (10,744) 88,700 10,625 88,581
2008 Consolidated
Net Income (Loss) $587,837 $797,280 $(164,551) $1,220,566
Refer To “Selected Financial Data - Five-Year Comparison Of
Entergy Corporation And Subsidiaries” which accompanies
Entergy Corporation’s financial statements in this report for
further information with respect to operating statistics.
Earnings were negatively affected in the fourth quarter 2007
by expenses of $52 million ($32 million net-of-tax) recorded in
connection with a nuclear operations fleet alignment. This 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 offered to employees. Approximately
200 employees from the Non-Utility Nuclear business and 150
employees in the Utility business accepted the voluntary severance
program offers.
Net Revenue
Utility
Following is an analysis of the change in net revenue, comparing
2008 to 2007 (in millions):
2007 Net Revenue $4,618
Purchased power capacity (25)
Volume/weather (14)
Retail electric price 9
Other 1
2008 Net Revenue $4,589
The purchased power capacity variance is primarily due to
higher capacity charges. A portion of the variance is due to the
amortization of deferred capacity costs and is offset in base revenues
due to base rate increases implemented to recover incremental
deferred and ongoing purchased power capacity charges.
The volume/weather variance is primarily due to the effect of
less favorable weather compared to the same period in 2007 and
decreased electricity usage primarily during the unbilled sales
period. Hurricane Gustav and Hurricane Ike, which hit the Utility’s
service territories in September 2008, contributed an estimated
$46 million to the decrease in electricity usage. Industrial sales
were also depressed by the continuing effects of the hurricanes
and, especially in the latter part of the year, because of the overall
decline of the economy, in the latter part of the year leading to
lower usage affecting both the large customer industrial segment
as well as small and mid-sized industrial customers. The decreases
in electricity usage were partially offset by an increase in residential
and commercial customer electricity usage that occurred during
the periods of the year not affected by the hurricanes.
The retail electric price variance is primarily due to:
n an increase in the Attala power plant costs recovered through
the power management rider by Entergy Mississippi. The
net income effect of this recovery is limited to a portion
representing an allowed return on equity with the remainder
offset by Attala power plant costs in other operation and
maintenance expenses, depreciation expenses, and taxes other
than income taxes;
n a storm damage rider that became effective in October 2007 at
Entergy Mississippi; and
n an Energy Efficiency rider that became effective in November
2007 at Entergy Arkansas.
The establishment of the storm damage rider and the Energy
Efficiency rider results in an increase in rider revenue and a
corresponding increase in other operation and maintenance
expense with no impact on net income. The retail electric price
variance was partially offset by:
n the absence of interim storm recoveries through the formula
rate plans at Entergy Louisiana and Entergy Gulf States
Louisiana which ceased upon the Act 55 financing of storm
costs in the third quarter 2008; and
n a credit passed on to customers as a result of the Act 55 storm
cost financings.
Refer to “Liquidity and Capital Resources - Hurricane Katrina and
Hurricane Rita” below and Note 2 to the financial statements for
a discussion of the interim recovery of storm costs and the Act 55
storm cost financings.
Non-Utility Nuclear
Following is an analysis of the change in net revenue comparing
2008 to 2007 (in millions):
2007 Net Revenue $1,839
Realized price changes 309
Palisades acquisition 98
Volume variance (other than Palisades) 73
Fuel expenses (other than Palisades) (19)
Other 34
2008 Net Revenue $2,334