Entergy 2009 Annual Report Download - page 111

Entergy Corporation and Subsidiaries
Notes to Financial Statements
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Vidalia Purchased Power Agreement
Entergy Louisiana has an agreement extending through the year 2031 to purchase energy generated by a
hydroelectric facility known as the Vidalia project. Entergy Louisiana made payments under the contract of
approximately $215.6 million in 2009, $167.7 million in 2008, and $130.8 million in 2007. If the maximum
percentage (94%) of the energy is made available to Entergy Louisiana, current production projections would require
estimated payments of approximately $169.8 million in 2010, and a total of $2.81 billion for the years 2011 through
2031. Entergy Louisiana currently recovers the costs of the purchased energy through its fuel adjustment clause. In
an LPSC-approved settlement related to tax benefits from the tax treatment of the Vidalia contract, Entergy
Louisiana agreed to credit rates by $11 million each year for up to ten years, beginning in October 2002. In addition,
in accordance with an LPSC settlement, Entergy Louisiana credited rates in August 2007 by $11.8 million (including
interest) as a result of a settlement with the IRS of the 2001 tax treatment of the Vidalia contract. The provisions of
the settlement also provide that the LPSC shall not recognize or use Entergy Louisiana's use of the cash benefits from
the tax treatment in setting any of Entergy Louisiana's rates. Therefore, to the extent Entergy Louisiana's use of the
proceeds would ordinarily have reduced its rate base, no change in rate base shall be reflected for ratemaking
purposes.
Nuclear Insurance
Third Party Liability Insurance
The Price-Anderson Act requires that reactor licensees purchase insurance and participate in a secondary
insurance pool that provides insurance coverage for the public in the event of a nuclear power plant accident. The
costs of this insurance are borne by the nuclear power industry. Congress amended and renewed the Price-Anderson
Act in 2005 for a term through 2025. The Price-Anderson Act requires nuclear power plants to show evidence of
financial protection in the event of a nuclear accident. This protection must consist of two layers of coverage:
1. The primary level is private insurance underwritten by American Nuclear Insurers and provides public
liability insurance coverage of $375 million. If this amount is not sufficient to cover claims arising from an
accident, the second level, Secondary Financial Protection, applies.
2. Within the Secondary Financial Protection level, each nuclear reactor has a contingent obligation to pay a
retrospective premium, equal to its proportionate share of the loss in excess of the primary level, regardless
of proximity to the incident or fault, up to a maximum of $117.5 million per reactor per incident (Entergy's
maximum total contingent obligation per incident is $1.3 billion). This consists of a $111.9 million
maximum retrospective premium plus a five percent surcharge, which equates to $117.5 million, that may be
payable, if needed, at a rate that is currently set at $17.5 million per year per nuclear power reactor. A $300
million industry-wide aggregate limit exists for domestically-sponsored terrorist acts. There is no aggregate
limitation for foreign-sponsored terrorist acts.
Currently, 104 nuclear reactors are participating in the Secondary Financial Protection program. The
product of the maximum retrospective premium assessment to the nuclear power industry and the number of nuclear
power reactors provides over $12.2 billion in secondary layer insurance coverage to compensate the public in the
event of a nuclear power reactor accident. The Price-Anderson Act provides that all potential liability for a nuclear
accident is limited to the amounts of insurance coverage available under the primary and secondary layers.
Entergy Arkansas has two licensed reactors and Entergy Gulf States Louisiana, Entergy Louisiana, and
System Energy each have one licensed reactor (10% of Grand Gulf is owned by a non-affiliated company (SMEPA)
that would share on a pro-rata basis in any retrospective premium assessment to System Energy under the Price-
Anderson Act). Entergy's Non-Utility Nuclear business owns and operates six nuclear power reactors and owns the
shutdown Indian Point 1 reactor and Big Rock Point facility.
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