Entergy 2009 Annual Report Download - page 33

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
29
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. 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. On February 16, 2009, Entergy Arkansas filed a request with the APSC for
an accounting order authorizing deferral of the operating and maintenance cost portion of Entergy Arkansas' ice
storm restoration costs pending their recovery. The APSC issued such an order in March 2009 subject to certain
conditions, including that if Entergy Arkansas seeks to recover the deferred costs, those costs will be subject to
investigation for whether they are incremental, prudent, and reasonable. A law was enacted in April 2009 in
Arkansas that authorizes securitization of storm damage restoration costs. On February 1, 2010, Entergy Arkansas
requested a financing order to issue approximately $127.5 million in storm recovery bonds, which included carrying
costs of $11.7 million and $4.6 million of up-front financing costs to pay for ice storm restoration because Entergy
Arkansas' analysis demonstrates retail customers will benefit from lower costs using securitization. The APSC has
established a procedural schedule that includes a hearing in April 2010 and states that the APSC will issue its final
order by June 15, 2010. Entergy Arkansas' September 2009 general rate filing also requested recovery of the
January 2009 ice storm costs over 10 years if it was expected that securitization would not produce lower costs for
customers, and Entergy Arkansas will remove this request if the APSC approves securitization.
Hurricane Katrina and Hurricane Rita
In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to large portions
of the Utility's service territories in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that
resulted from levee breaks in and around the greater New Orleans area. The storms and flooding resulted in
widespread power outages, significant damage to electric distribution, transmission, and generation and gas
infrastructure, and the loss of sales and customers due to mandatory evacuations and the destruction of homes and
businesses. Entergy pursued a broad range of initiatives to recover storm restoration and business continuity costs,
including obtaining reimbursement of certain costs covered by insurance and pursuing recovery through existing or
new rate mechanisms regulated by the FERC and local regulatory bodies, including the issuance of securitization
bonds.
Insurance Claims
Entergy has received a total of $317 million as of December 31, 2009 on its Hurricane Katrina and
Hurricane Rita insurance claims, including the settlements of its Hurricane Katrina claims with each of its two excess
insurers. Entergy has substantially completed its insurance recoveries related to Hurricane Katrina and Hurricane
Rita.
Storm Cost Financings
Louisiana
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 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
31