Entergy 2009 Annual Report Download - page 45

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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In November 2009 the FERC accepted the notices of cancellation and determined that Entergy Arkansas and
Entergy Mississippi are permitted to withdraw from the System Agreement following the 96 month notice period
without payment of a fee or the requirement to otherwise compensate the remaining Utility operating companies as a
result of withdrawal. The FERC stated that it expected Entergy and all interested parties to move forward and
develop details of all needed successor arrangements and encouraged Entergy to file its Section 205 filing for post
2013 arrangements as soon as possible. The LPSC and the City Council have requested rehearing of the FERC's
decision.
The APSC had previously commenced an investigation, in 2004, into whether Entergy Arkansas' continued
participation in the System Agreement is in the best interests of its customers. More than once in the investigation
proceeding Entergy Arkansas and its president, Hugh McDonald, filed testimony with the APSC in response to
requests by the APSC. In addition, Mr. McDonald has appeared before the APSC on more than one occasion at
public hearings for questioning. In December 2007, the APSC ordered Mr. McDonald to file testimony each month
with the APSC detailing progress toward development of successor arrangements, beginning in March 2008, and Mr.
McDonald has done so. In his September 2009 testimony Mr. McDonald reported to the APSC the results of a
related study. According to the study total estimated cost to establish the systems and staff the organizations to
perform the necessary planning and operating functions for a stand-alone Entergy Arkansas operation are estimated
at approximately $23 million, including $18 million to establish generation-related functions and $5 million to modify
transmission-related information systems. Incremental costs for ongoing staffing and systems costs are estimated at
approximately $8 million. Cost and implementation schedule estimates will continue to be re-evaluated and refined
as additional, more detailed analysis is completed. The study did not assess the effect of stand-alone operation on
Entergy Arkansas’ generation resource requirements. Entergy Arkansas expects it would take approximately two
years to implement stand-alone operations for Entergy Arkansas.
In February 2010 the APSC issued an order announcing a refocus of its ongoing investigation of Entergy
Arkansas' post-System Agreement operation. The order describes the APSC's "stated purpose in opening this inquiry
to conduct an investigation regarding the prudence of [Entergy Arkansas] entering into a successor ESA [Entergy
System Agreement] as opposed to becoming a stand-alone utility upon its exit from the ESA, and whether [Entergy
Arkansas], as a standalone utility, should join the SPP RTO. It is the [APSC's] intention to render a decision
regarding the prudence of [Entergy Arkansas] entering into a successor ESA as opposed to becoming a stand-alone
utility upon its exit from the ESA, as well as [Entergy Arkansas'] RTO participation by the end of calendar year
2010. In parallel with this Docket, the [APSC] will be actively involved and will be closely watching to see if any
meaningful enhancement will be made to a new Enhanced Independent Coordinator of Transmission (“E-ICT")
Agreement through the efforts of the ETS [Entergy Transmission System] stakeholders, Entergy, and the newly
formed and federally-recognized E-RSC in 2010." The schedule set by the order includes evidentiary hearings in
March and May 2010. The order directed that the existing docket investigating Entergy Arkansas' participation in
the System Agreement be closed. For a discussion of Entergy's Independent Coordinator of Transmission and the E-
RSC see "Independent Coordinator of Transmission" below.
LPSC and City Council Action Related to the Entergy Arkansas and Entergy Mississippi Notices of Termination
In light of the notices of Entergy Arkansas and Entergy Mississippi to terminate participation in the current
System Agreement, in January 2008 the LPSC unanimously voted to direct the LPSC Staff to begin evaluating the
potential for a new agreement. Likewise, the New Orleans City Council opened a docket to gather information on
progress towards a successor agreement.
June 2009 LPSC Complaint Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC determine that certain of Entergy
Arkansas' sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate
the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate
consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System
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