Entergy 2009 Annual Report Download - page 54

Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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General Assembly approval of Non-Utility Nuclear's request is required for the request to be granted. On February
24, 2010, a bill to approve the continued operation of Vermont Yankee was advanced to a vote by the Vermont
Senate leadership and defeated by a margin of 26 to 4. This vote does not preclude the Vermont Senate from voting
again on a similar bill in the future. At the current time, Entergy management believes that it will ultimately receive
all necessary approvals to operate Vermont Yankee beyond its current license expiration. If those approvals are
ultimately not received, it could result in an impairment of part or all of the carrying value of the plant, including any
capitalized asset retirement cost associated with the recording of the decommissioning liability as further described in
Note 9 to the financial statements.
Effective January 1, 2009, Entergy adopted an accounting pronouncement providing guidance regarding
recognition and presentation of other-than-temporary impairments related to investments in debt securities. The
assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on
whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery
of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt
security, an other-than-temporary-impairment is considered to have occurred and it is measured by the present value
of cash flows expected to be collected less the amortized cost basis (credit loss). For debt securities held as of
January 1, 2009 for which an other-than-temporary impairment had previously been recognized but for which
assessment under the new guidance indicates this impairment is temporary, Entergy recorded an adjustment to its
opening balance of retained earnings of $11.3 million ($6.4 million net-of-tax). Entergy did not have any material
other than temporary impairments relating to credit losses on debt securities in 2009. The assessment of whether an
investment in an equity security has suffered an other than temporary impairment continues to be based on a number
of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the
duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within
a reasonable period of time. Entergy's trusts are managed by third parties who operate in accordance with
agreements that define investment guidelines and place restrictions on the purchases and sales of investments. As
disclosed in Note 1 to the financial statements, unrealized losses that are not considered temporarily impaired are
recorded in earnings for Non-Utility Nuclear. Non-Utility Nuclear recorded charges to other income of $86 million
in 2009, $50 million in 2008, and $5 million in 2007 resulting from the recognition of impairments of certain
securities held in its decommissioning trust funds that are not considered temporary. Additional impairments could
be recorded in 2010 to the extent that then current market conditions change the evaluation of recoverability of
unrealized losses.
Qualified Pension and Other Postretirement Benefits
Entergy sponsors qualified, defined benefit pension plans which cover substantially all employees.
Additionally, Entergy currently provides postretirement health care and life insurance benefits for substantially all
employees who reach retirement age while still working for Entergy. Entergy's reported costs of providing these
benefits, as described in Note 11 to the financial statements, are impacted by numerous factors including the
provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and
accounting mechanisms. Because of the complexity of these calculations, the long-term nature of these obligations,
and the importance of the assumptions utilized, Entergy's estimate of these costs is a critical accounting estimate for
the Utility and Non-Utility Nuclear segments.
Assumptions
Key actuarial assumptions utilized in determining these costs include:
Discount rates used in determining the future benefit obligations;
Projected health care cost trend rates;
Expected long-term rate of return on plan assets; and
Rate of increase in future compensation levels.
Entergy reviews these assumptions on an annual basis and adjusts them as necessary. The falling interest
rate environment and worse-than-expected performance of the financial equity markets in recent years have impacted
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