Entergy 2008 Annual Report Download - page 90

8888
ENTERGY CORPORATION AND SUBSIDIARIES 2008
88
Notes to Consolidated Financial Statements continued
WA T E R F O R D 3 LE A S E OB L I G A T I O N S (EN T E R G Y LO U I S I A N A )
In 1989, in three separate but substantially identical transactions,
Entergy Louisiana sold and leased back undivided interests
in Waterford 3 for the aggregate sum of $353.6 million. The
interests represent approximately 9.3% of Waterford 3. Upon the
occurrence of certain events, Entergy Louisiana may be obligated
to pay amounts sufficient to permit the termination of the lease
transactions and may be required to assume the outstanding bonds
issued to finance, in part, the lessors’ acquisition of the undivided
interests in Waterford 3.
EM P L O Y M E N T A N D LA B O R -RE L A T E D PR O C E E D I N G S
The Registrant Subsidiaries and other Entergy subsidiaries are
responding to various lawsuits in both state and federal courts and
to other labor-related proceedings filed by current and former
employees and third parties not selected for open positions. These
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 benefits
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 LI T I G A T I O N
Numerous lawsuits have been filed in federal and state courts
primarily in Texas and Louisiana, primarily by contractor employees
who worked in the 1940-1980s timeframe, against Entergy Gulf
States Louisiana and Entergy Texas, and to a lesser extent the other
Utility operating companies, as premises owners of power plants,
for damages caused by alleged exposure to asbestos. Many other
defendants are named in these lawsuits as well. Currently, there
are approximately 500 lawsuits involving approximately 6,000
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
so that the ultimate resolution of these matters will not be material,
in the aggregate, to the financial position or results of operation of
the Utility operating 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 insignificant amount of removal costs
associated with non-nuclear power plants is also included in the
decommissioning line item on the balance sheets.
These liabilities are recorded at their fair values (which are the
present values of the estimated future cash outflows) in the period
in which they are incurred, with an accompanying addition to the
recorded cost of the long-lived asset. The asset retirement obligation
is accreted each year through a charge to expense, to reflect the time
value of money for this present value obligation. The accretion will
continue through the completion of the asset retirement activity.
The amounts added to the carrying amounts of the long-lived assets
will be depreciated over the useful lives of the assets. The application
of SFAS 143 is 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 Registrant Subsidiaries
include a component for removal costs that are not asset retirement
obligations under SFAS 143. In accordance with regulatory
accounting principles, the Registrant Subsidiaries have recorded
regulatory assets (liabilities) in the following amounts to reflect their
estimates of the difference between estimated incurred removal
costs and estimated removal costs recovered in rates (in millions):
December 31, 2008 2007
Entergy Arkansas $ 5.9 $ 23.0
Entergy Gulf States Louisiana $ (3.6) $(13.9)
Entergy Louisiana $(43.5) $(64.0)
Entergy Mississippi $ 40.0 $ 35.7
Entergy New Orleans $ 15.4 $ 1.5
Entergy Texas $ 34.7 $ (4.9)
System Energy $ 14.5 $ 16.9
The cumulative decommissioning and retirement cost liabilities
and expenses recorded in 2008 by Entergy were as follows
(in millions):
Change
Liabilities in Cash Liabilities
as of Dec. Flow as of Dec.
31, 2007 Accretion Estimate Spending 31, 2008
Utility:
Entergy Arkansas $ 505.6 $35.1 $ – $ – $ 540.7
Entergy Gulf States
Louisiana $ 204.8 $18.1 $ – $ – $ 222.9
Entergy Louisiana $ 257.1 $19.9 $ (0.2) $ – $ 276.8
Entergy Mississippi $ 4.5 $ 0.3 $ – $ – $ 4.8
Entergy New Orleans $ 2.8 $ 0.2 $ – $ – $ 3.0
Entergy Texas $ 3.1 $ 0.2 $ – $ – $ 3.3
System Energy $ 368.6 $27.6 $ – $ – $ 396.2
Non-Utility Nuclear $1,141.6 $93.6 $13.7 $(20.1) $1,228.7
Other $ 1.1 $ – $ – $ 0.1 $ 1.2
The cumulative decommissioning and retirement cost liabilities
and expenses recorded in 2007 by Entergy were as follows
(in millions):
Change
Liabilities in Cash Liabilities
as of Dec. Flow as of Dec.
31, 2006 Accretion Estimate Spending 31, 2007
Utility:
Entergy Arkansas $472.8 $32.8 $ – $ – $ 505.6
Entergy Gulf States
Louisiana $191.0 $16.9 $ (3.1)(a) $ – $ 204.8
Entergy Louisiana $238.5 $18.6 $ – $ – $ 257.1
Entergy Mississippi $ 4.3 $ 0.2 $ – $ – $ 4.5
Entergy New Orleans $ 2.6 $ 0.2 $ – $ – $ 2.8
Entergy Texas $ 2.9 $ 0.2 $ – $ – $ 3.1
System Energy $342.8 $25.8 $ – $ – $ 368.6
Non-Utility Nuclear(b) $993.0 $78.6 $100.4 $(30.4) $1,141.6
Other $ 1.1 $ – $ – $ – $ 1.1
(a) Represents the $3.1 million allocated to Entergy Texas as part of the
jurisdictional separation.
(b) The Non-Utility Nuclear liability as of December 31, 2006 includes
$219.7 million for the Palisades nuclear plant which was acquired in
April 2007.
Entergy periodically reviews and updates estimated decommissioning
costs. The actual decommissioning costs may vary from the estimates
because of regulatory requirements, changes in technology, and
88
ENTERGY CORPORATION AND SUBSIDIARIES 2008
Notes to Consolidated Financial Statements continued