Entergy 2008 Annual Report Download - page 73

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
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Notes to Consolidated Financial Statements continued
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additional customer benefits as compared to Act 64 traditional
securitization. Entergy Gulf States Louisiana and Entergy Louisiana
also filed an application requesting LPSC approval for ancillary
issues including the mechanism to flow charges and savings to
customers via a Storm Cost Offset rider. On April 3, 2008, the
Louisiana State Bond Commission granted preliminary approval
for the Act 55 financings. On April 8, 2008, the Louisiana Public
Facilities Authority (LPFA), which is the issuer of the bonds
pursuant to the Act 55 financings, approved requests for the Act
55 financings. On April 10, 2008, Entergy Gulf States Louisiana
and Entergy Louisiana and the LPSC Staff filed with the LPSC
an uncontested stipulated settlement that includes Entergy Gulf
States Louisiana and Entergy Louisiana’s proposals under the
Act 55 financings, which includes a commitment to pass on to
customers a minimum of $10 million and $30 million of customer
benefits, respectively, through prospective annual rate reductions
of $2 million and $6 million for five years. On April 16, 2008, the
LPSC approved the settlement and issued two financing orders
and one ratemaking order intended to facilitate implementation
of the Act 55 financings. In May 2008, the Louisiana State Bond
Commission granted final approval of the Act 55 financings.
On July 29, 2008, the LPFA issued $687.7 million in bonds
under the aforementioned Act 55. From the $679 million of bond
proceeds loaned by the LPFA to the LURC, the LURC deposited
$152 million in a restricted escrow account as a storm damage
reserve for Entergy Louisiana and transferred $527 million
directly to Entergy Louisiana. From the bond proceeds received
by Entergy Louisiana from the LURC, Entergy Louisiana invested
$545 million, including $17.8 million that was withdrawn from the
restricted escrow account as approved by the April 16, 2008 LPSC
orders, in exchange for 5,449,861.85 Class A preferred, non-voting,
membership interest units of Entergy Holdings Company LLC, a
company wholly-owned and consolidated by Entergy, that carry a
10% annual distribution rate. Distributions are payable quarterly
commencing on September 15, 2008 and have a liquidation price
of $100 per unit. The preferred membership interests are callable
at the option of Entergy Holdings Company LLC after ten years.
The terms of the membership interests include certain financial
covenants to which Entergy Holdings Company LLC is subject,
including the requirement to maintain a net worth of at least
$1 billion.
On August 26, 2008, the LPFA issued $278.4 million in bonds
under the aforementioned Act 55. From the $274.7 million of bond
proceeds loaned by the LPFA to the LURC, the LURC deposited
$87 million in a restricted escrow account as a storm damage reserve
for Entergy Gulf States Louisiana and transferred $187.7 million
directly to Entergy Gulf States Louisiana. From the bond proceeds
received by Entergy Gulf States Louisiana from the LURC, Entergy
Gulf States Louisiana invested $189.4 million, including $1.7 million
that was withdrawn from the restricted escrow account as approved
by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39
Class A preferred, non-voting, membership interest units of Entergy
Holdings Company LLC, a company wholly-owned and consolidated
by Entergy, that carry a 10% annual distribution rate. Distributions
are payable quarterly commencing on September 15, 2008 and have
a liquidation price of $100 per unit. The preferred membership
interests are callable at the option of Entergy Holdings Company
LLC after ten years. The terms of the membership interests include
certain financial covenants to which Entergy Holdings Company
LLC is subject, including the requirement to maintain a net worth
of at least $1 billion.
Entergy Gulf States Louisiana and Entergy Louisiana do not
report the bonds on their balance sheets because the bonds are the
obligation of the LPFA, and there is no recourse against Entergy,
Entergy Gulf States Louisiana or Entergy Louisiana in the event of
a bond default. To service the bonds, Entergy Gulf States Louisiana
and Entergy Louisiana collect a system restoration charge on behalf
of the LPFA, and remit the collections to the LPFA. By analogy to
and in accordance with Entergy’s accounting policy for collection
of sales taxes, Entergy Gulf States Louisiana and Entergy Louisiana
do not report the collections as revenue because they are merely
acting as the billing and collection agent for the state.
Entergy Mississippi
In March 2006, the Governor of Mississippi signed a law that
established a mechanism by which the MPSC could authorize
and certify an electric utility financing order and the state could
issue bonds to finance the costs of repairing damage caused by
Hurricane Katrina to the systems of investor-owned electric
utilities. In June 2006, the MPSC issued an order certifying
Entergy Mississippi’s Hurricane Katrina restoration costs incurred
through March 31, 2006 of $89 million, net of estimated insurance
proceeds. Two days later, Entergy Mississippi filed a request
with the Mississippi Development Authority for $89 million of
Community Development Block Grant (CDBG) funding for
reimbursement of its Hurricane Katrina infrastructure restoration
costs. Entergy Mississippi also filed a Petition for Financing Order
with the MPSC for authorization of state bond financing of
$169 million for Hurricane Katrina restoration costs and future
storm costs. The $169 million amount included the $89 million
of Hurricane Katrina restoration costs plus $80 million to build
Entergy Mississippi’s storm damage reserve for the future. Entergy
Mississippi’s filing stated that the amount actually financed
through the state bonds would be net of any CDBG funds that
Entergy Mississippi received.
In October 2006, the Mississippi Development Authority
approved for payment and Entergy Mississippi received $81 million
in CDBG funding for Hurricane Katrina costs. The MPSC then
issued a financing order authorizing the issuance of state bonds
to finance $8 million of Entergy Mississippi’s certified Hurricane
Katrina restoration costs and $40 million for an increase in Entergy
Mississippi’s storm damage reserve. $30 million of the storm
damage reserve was set aside in a restricted account. A Mississippi
state entity issued the bonds in May 2007, and Entergy Mississippi
received proceeds of $48 million. Entergy Mississippi does not
report the bonds on its balance sheet because the bonds are the
obligation of the state entity, and there is no recourse against
Entergy Mississippi in the event of a bond default. To service the
bonds, Entergy Mississippi collects a system restoration charge on
behalf of the issuer, and remits the collections to the issuer. By
analogy to and in accordance with Entergy’s accounting policy for
collection of sales taxes, Entergy Mississippi does not report the
collections as revenue because it is merely acting as the billing and
collection agent for the state.
Entergy New Orleans
In December 2005, the U.S. Congress passed the Katrina Relief
Bill, a hurricane aid package that included CDBG funding (for the
states affected by Hurricanes Katrina, Rita, and Wilma) that allowed
state and local leaders to fund individual recovery priorities. In
March 2007, the City Council certified that Entergy New Orleans