Entergy 2008 Annual Report Download - page 40

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
Management’s Financial Discussion and Analysis continued
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CA P I T A L EX P E N D I T U R E PL A N S A N D OT H E R US E S O F CA P I T A L
Following are the amounts of Entergy’s planned construction and
other capital investments by operating segment for 2009 through
2011 (in millions):
2009 2010 2011
Maintenance Capital:
Utility $ 738 $ 715 $ 713
Non-Utility Nuclear 90 84 94
Parent & Other 8 8 8
836 807 815
Capital Commitments:
Utility 806 993 1,074
Non-Utility Nuclear 357 277 262
1,163 1,270 1,336
Total $1,999 $2,077 $2,151
Maintenance capital refers to amounts Entergy plans to spend
on routine capital projects that are necessary to support reliability
of its service, equipment, or systems and to support normal
customer growth.
Capital commitments refers to non-routine capital investments
for which Entergy is either contractually obligated, has Board
approval, or otherwise expects to make to satisfy regulatory or
legal requirements. Amounts reflected in this category include
the following:
nThe currently planned construction or purchase of additional
generation supply sources within the Utility’s service territory
through the Utility’s supply plan initiative, including Entergy
Louisiana and Entergy Gulf States Louisiana’s Little Gypsy Unit
3 repowering project, which is discussed below.
nEntergy Louisiana’s Waterford 3 steam generators replacement
project, which is discussed below.
nTransmission improvements and upgrades designed to provide
improved transmission flexibility in the Entergy System.
nInitial development costs for potential new nuclear
development at the Grand Gulf and River Bend sites, including
licensing and design activities. This project is in the early
stages, and several issues remain to be addressed over time
before significant additional capital would be committed to this
project. In addition, Entergy is temporarily suspending reviews
of the two license applications for the sites and will explore
alternative nuclear technologies for this project.
nNuclear dry cask spent fuel storage, license renewal projects,
and a potential approximately 178 MW uprate of the Grand
Gulf nuclear plant that is currently estimated to cost System
Energy $247 million for the 2009-2011 period.
nEnvironmental compliance spending, including approximately
$206 million for the 2009-2011 period for installation of
scrubbers and low NOx burners at Entergy Arkansas’ White
Bluff coal plant, which under current environmental regulations
must be operational by September 2013. The project is still in
the planning stages and has not been designed, but the latest
conceptual cost estimate indicates Entergy Arkansas’ share
of the project could cost approximately $630 million. Entergy
continues to review potential environmental spending needs
and financing alternatives for any such spending, and future
spending estimates could change based on the results of this
continuing analysis.
nNYPA value sharing costs.
The Utility’s generating capacity remains short of customer demand,
and its supply plan initiative will continue to seek to transform its
generation portfolio with new or repowered generation resources.
Opportunities resulting from the supply plan initiative, including new
projects or the exploration of alternative financing sources, could
result in increases or decreases in the capital expenditure estimates
given above. In addition, the planned construction and capital
investments estimates shown above do not include the potentially
significant costs associated with the ultimate decision on Entergy
Texas’ qualified power region proceeding that is discussed in Note
2 to the financial statements. Estimated capital expenditures are also
subject to periodic review and modification and may vary based on
the ongoing effects of business restructuring, regulatory constraints,
environmental regulations, business opportunities, market volatility,
economic trends, and the ability to access capital.
Little Gypsy Repowering Project
In April 2007, Entergy Louisiana announced that it intended to
pursue the solid fuel repowering of a 538 MW unit at its Little
Gypsy plant, and Entergy Gulf States Louisiana filed subsequently
with the LPSC seeking certification to participate in one-third of
the project. Petroleum coke and coal would be the unit’s primary
fuel sources. In July 2007, Entergy Louisiana filed with the LPSC
for approval of the repowering project. In addition to seeking a
finding that the project is in the public interest, the filing with the
LPSC asked that Entergy Louisiana be allowed to recover a portion
of the project’s financing costs during the construction period.
Hearings were held in October 2007, and the LPSC approved
the certification of the project in November 2007 (the Phase I
order), subject to several conditions. One of the conditions is the
development and approval of a construction monitoring plan.
A decision regarding whether to allow Entergy Louisiana to recover
a portion of the project’s financing costs during the construction
period was deferred to Phase II of the proceedings.
The LPSC Phase I order has been appealed to the state district
court in Baton Rouge, Louisiana by a group led by the Sierra Club
and represented by the Tulane Environmental Law Clinic. A status
conference in the Phase I appeal was held December 3, 2008, and
the parties agreed to a procedural schedule that includes oral
argument before the judge on April 9, 2009.
The preconstruction and operating air permits for the Little
Gypsy repowering project were issued by the Louisiana Department
of Environmental Quality (LDEQ) in November 2007 under then-
effective federal and state air regulations, including the EPA’s Clean
Air Mercury Rule that had been issued in 2005 (CAMR 2005).
As discussed in more detail in Part I, Item 1, “Environmental
Regulation, Clean Air Act and Subsequent Amendments, Hazardous
Air Pollutants” in the Form 10-K, in February 2008 the U.S. Court
of Appeals for the D.C. Circuit struck down CAMR 2005. The D.C.
Circuit decision requires utilities that have not yet begun construction
of the facility in question to undergo before beginning construction
a case-by-case Maximum Achievable Control Technology (MACT)
analysis for construction or reconstruction of emission units pursuant
to the Clean Air Act. The Little Gypsy project as currently configured
is expected to meet MACT standards. Little Gypsy received its
construction permit before a formal MACT analysis was required,
however, and Entergy Louisiana sought a MACT determination
from the LDEQ. The LDEQ issued the new air permit in February
2009. Onsite construction of the project was scheduled to begin in
July 2008, but obtaining the MACT determination caused a delay
in the start of construction, which Entergy Louisiana now expects
will not begin before mid-year 2009. Currently, the commercial
operation date of the project is not expected to be before mid-year
2013. Entergy Louisiana continues to make its quarterly monitoring
plan filings with the LPSC. These reports are intended to inform the
LPSC and its staff of the construction status and cost of the project
as well as the ongoing economic viability of the project compared
to other alternatives.
Management’s Financial Discussion and Analysis continued
ENTERGY CORPORATION AND SUBSIDIARIES 2008