Entergy 2009 Annual Report Download - page 30

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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head and control element drive mechanisms will be replaced at the same time, utilizing the same reactor building
construction opening that is necessary for the steam generator replacement.
In June 2008, Entergy Louisiana filed with the LPSC for approval of the project, including full cost
recovery. Following discovery and the filing of testimony by the LPSC staff and an intervenor, the parties entered
into a stipulated settlement of the proceeding. The LPSC unanimously approved the settlement in November 2008.
The settlement resolved the following issues: 1) the accelerated degradation of the steam generators is not the result
of any imprudence on the part of Entergy Louisiana; 2) the decision to undertake the replacement project at the
current estimated cost of $511 million is in the public interest, is prudent, and would serve the public convenience
and necessity; 3) the scope of the replacement project is in the public interest; 4) undertaking the replacement project
at the target installation date during the 2011 refueling outage is in the public interest; and 5) the jurisdictional costs
determined to be prudent in a future prudence review are eligible for cost recovery, either in an extension or renewal
of the formula rate plan or in a full base rate case including necessary pro forma adjustments. Upon completion of
the replacement project, the LPSC will undertake a prudence review with regard to the following aspects of the
replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of
the replacement project; and 5) the outage length and replacement power costs.
In July 2009, the LPSC granted Entergy Louisiana's motion to dismiss, without prejudice, its application
seeking recovery of cash earnings on construction work in progress (CWIP) for the steam generator replacement
project, acknowledging Entergy Louisiana's right, at any time, to seek cash earnings on CWIP if Entergy Louisiana
believes that circumstances or projected circumstances are such that a request for cash earnings on CWIP is merited.
The cash earnings on CWIP application had been consolidated with a similar request for the Little Gypsy repowering
project, which was also dismissed in response to the same motion.
Entergy Louisiana estimates that it will spend approximately $511 million on this project, including
$299 million over the 2010-2011 period.
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.
On March 11, 2009, the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily
suspend the repowering project and, based upon an analysis of the project's economic viability, to make a
recommendation regarding whether to proceed with the project. This action was based upon a number of factors
including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon
legislation and changes in the capital/financial markets. On April 1, 2009, Entergy Louisiana complied with the
LPSC's directive and recommended that the project be suspended for an extended period of time of three years or
more. Entergy Louisiana estimated that its total costs for the project, if suspended, including actual spending to date
and estimated contract cancellation costs, would be approximately $300 million. Entergy Louisiana had obtained all
major environmental permits required to begin construction. A longer-term suspension places these permits at risk
and may adversely affect the project's economics and technological feasibility. On May 22, 2009, the LPSC issued
an order declaring that Entergy Louisiana's decision to place the Little Gypsy project into a longer-term suspension of
three years or more is in the public interest and prudent. In October 2009, Entergy Louisiana made a filing with the
LPSC seeking permission to cancel the project and seeking recovery over a five-year period of the project costs. The
parties to the proceeding agreed to a procedural schedule that results in a hearing in October 2010. Entergy
Louisiana currently estimates that its total costs for the project, if canceled, will be approximately $215 million, of
which approximately $193 million was incurred through December 31, 2009.
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