Entergy 2008 Annual Report Download - page 72

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
Notes to Consolidated Financial Statements continued
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clarify its position that 30% of River Bend should not be regulated
by the PUCT. Two parties filed a second motion for rehearing, but
the PUCT declined to address them. The PUCT’s decision has been
appealed to the Travis County District Court.
In January 2008, Entergy Texas made a compliance filing with the
PUCT describing how its 2007 Rough Production Cost Equalization
receipts under the System Agreement were allocated between
Entergy Gulf States, Inc.’s Texas and Louisiana jurisdictions. A
hearing was held at the end of July 2008, and in October 2008 the
ALJ issued a proposal for decision recommending an additional
$18.6 million allocation to Texas retail customers. The PUCT
adopted the ALJ’s proposal for decision in December 2008. Because
the PUCT allocation to Texas retail customers is inconsistent with
the LPSC allocation to Louisiana retail customers, adoption of the
proposal for decision by the PUCT could result in trapped costs
between the Texas and Louisiana jurisdictions with no mechanism
for recovery. The PUCT denied Entergy Texas’ motion for rehearing
and Entergy Texas will now seek alternative relief, including filing
for relief at the FERC.
ST O R M CO S T RE C O V E R Y 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 Arkansas
Entergy Arkansas has experienced extraordinary storm costs in
2008, and requires APSC action to address their effects, because the
APSC’s June 2007 order in Entergy Arkansas’ base rate proceeding,
which is discussed below, has eliminated storm reserve accounting
for Entergy Arkansas. Therefore, on October 15, 2008, Entergy
Arkansas filed a petition for an accounting order authorizing a
regulatory asset and storm damage rider. In the petition, Entergy
Arkansas requested the deferral of $26 million in a regulatory asset
that represents extraordinary storm restoration costs for the year
2008 that are in excess of the $14.4 million included in base rates.
The regulatory asset would be recovered through a surcharge over
a 12-month period beginning in January 2009.
On December 19, 2008, the APSC approved Entergy Arkansas’
request to defer 2008 extraordinary storm restoration costs for
recovery via a storm damage rider in 2009. The APSC reduced
Entergy Arkansas’ request by $4 million to allow for standard
variation in storm costs from the normalized level in base rates.
Entergy Arkansas is permitted to recover the retail portion of
$22.3 million, subject to adjustments arising from storm cost audit,
earnings review, and other items consistent with past regulatory
practice. Entergy Arkansas also plans to file an update of storm
restoration expenses incurred through December 31, 2008, and
true-up any accrued expenses at that time, with a revised rider to
take effect July 2009 for any necessary changes.
Entergy Arkansas January 2009 Ice Storm
In January 2009 a severe ice storm caused significant damage to
Entergy Arkansas’ transmission and distribution lines, equipment,
poles, and other facilities. The preliminary cost estimate for the
damage caused by the ice storm is approximately $165 million to
$200 million, of which approximately $80 million to $100 million
is estimated to be operating and maintenance type costs and
the remainder is estimated to be capital investment. On January
30, 2009, the APSC issued an order inviting and encouraging
electric public utilities to file specific proposals for the recovery of
extraordinary storm restoration expenses associated with the ice
storm. Although Entergy Arkansas has not yet filed a proposal for
the recovery of its costs, on February 16, 2009, it did file a request
with the APSC requesting an accounting order authorizing
deferral of the operating and maintenance cost portion of Entergy
Arkansas’ ice storm restoration costs pending their recovery.
Entergy Texas
In July 2006, Entergy Texas filed an application with the PUCT
with respect to its Hurricane Rita reconstruction costs incurred
through March 2006. The filing 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. After
netting expected insurance proceeds, the amount is $353 million.
In April 2007, the PUCT issued its financing order authorizing
the issuance of securitization bonds to recover the $353 million of
hurricane reconstruction costs and up to $6 million of transaction
costs, offset by $32 million of related deferred income tax benefits.
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
sufficient to service the securitization bonds. Entergy Texas will use
the proceeds to refinance 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 financial 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 filed a supplemental and amending application by
which they sought 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 quantification 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 staff, and most other
parties in the proceeding was read into the record. The stipulation
quantified the balance of storm restoration costs for recovery as
$545 million for Entergy Louisiana and $187 million for Entergy
Gulf States Louisiana, and set the storm reserve amounts at $152
million for Entergy Louisiana and $87 million for Entergy Gulf
States Louisiana. The stipulation also called 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 financing.
In March 2008, Entergy Gulf States Louisiana, Entergy
Louisiana, and the Louisiana Utilities Restoration Corporation
(LURC), an instrumentality of the State of Louisiana, filed at the
LPSC an application requesting that the LPSC grant financing
orders authorizing the financing of Entergy Gulf States Louisiana
and Entergy Louisiana storm costs, storm reserves, and issuance
costs pursuant to Act 55 of the Louisiana Legislature (Act 55
financings). The Act 55 financings are expected to produce