Entergy 2010 Annual Report Download - page 38

Management’s Financial Discussion and Analysis continued
The recovery of 2008 extraordinary storm costs is discussed
in Note 2 to the financial statements;
n an increase in the capacity acquisition rider related to the
Ouachita plant acquisition at Entergy Arkansas. The net
income effect of the Ouachita plant cost recovery is limited to
a portion representing an allowed return on equity with the
remainder offset by Ouachita plant costs in other operation
and maintenance expenses, depreciation expenses and taxes
other than income taxes;
n an increase in the formula rate plan rider at Entergy
Mississippi in July 2009;
n an Energy Efficiency rider at Entergy Texas, which was
effective December 31, 2008, that is substantially offset in
other operation and maintenance expenses; and
n an increase in the Attala power plant costs recovered through
the power management rider by Entergy Mississippi. The
net income effect of this recovery is limited to a portion
representing an allowed return on equity with the remainder
offset by Attala power plant costs in other operation and
maintenance expenses, depreciation expenses, and taxes
other than income taxes.
The retail electric price increase was partially offset by:
n a credit passed on to Louisiana retail customers as a result
of the Act 55 storm cost financings that began in the third
quarter of 2008;
n a formula rate plan refund of $16.6 million to customers in
November 2009 in accordance with a settlement approved by
the LPSC. See Note 2 to the financial statements for further
discussion of the settlement; and
n a net decrease in the formula rate plans effective August 2008
at Entergy Louisiana and Entergy Gulf States Louisiana to
remove interim storm cost recovery upon the Act 55 financing
of storm costs as well as the storm damage accrual. A portion
of the decrease is offset in other operation and maintenance
expenses. See Note 2 to the financial statements for further
discussion of the formula rate plans.
The fuel recovery variance resulted primarily from an
adjustment to deferred fuel costs in the fourth quarter 2009
relating to unrecovered nuclear fuel costs incurred since January
2008 that will now be recovered after a revision to the fuel
adjustment clause methodology.
The provision for regulatory proceedings variance is primarily
due to provisions recorded in 2009 at Entergy Arkansas. See
Note 2 to the financial statements for a discussion of regulatory
proceedings affecting Entergy Arkansas.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing
2009 to 2008 (in millions):
2008 Net Revenue $2,371
Nuclear volume (53)
Palisades purchased power amortization (23)
Nuclear realized price changes 67
Other 2
2009 Net Revenue $2,364
As shown in the table above, net revenue for Entergy Wholesale
Commodities decreased slightly by $7 million, or 0.3%, in 2009
compared to 2008 primarily due to results from its nuclear
operations. Higher pricing in its contracts to sell nuclear power
was partially offset by lower nuclear volume resulting from
more refueling outage days in 2009 compared to 2008. Included
in net revenue is $53 million and $76 million of amortization of
the Palisades purchased power agreement in 2009 and 2008,
respectively, which is non-cash revenue and is discussed in Note
15 to the financial statements. Following are key performance
measures for Entergy Wholesale Commodities’ nuclear plants for
2009 and 2008:
2009 2008
Net MW in operation at December 31 4,998 4,998
Average realized price per MWh $61.07 $59.51
GWh billed 40,981 41,710
Capacity factor 93% 95%
Refueling outage days:
FitzPatrick – 26
Indian Point 2 – 26
Indian Point 3 36 –
Palisades 41 –
Pilgrim 31 –
Vermont Yankee – 22
Overall, including its non-nuclear plants, Entergy Wholesale
Commodities billed 43,969 GWh in 2009 and 44,747 GWh in 2008,
with average realized revenue per MWh of $60.46 in 2009 and
$60.73 in 2008.
OTHER INCOME STATEMENT ITEMS
Utility
Other operation and maintenance expenses decreased from
$1,867 million for 2008 to $1,837 million for 2009. The variance
includes the following:
n a decrease due to the write-off in the fourth quarter 2008
of $52 million of costs previously accumulated in Entergy
Arkansas’s storm reserve and $16 million of removal costs
associated with the termination of a lease, both in connection
with the December 2008 Arkansas Court of Appeals decision
in Entergy Arkansas’s base rate case. The base rate case is
discussed in more detail in Note 2 to the financial statements;
n a decrease due to the capitalization of Ouachita plant service
charges of $12.5 million previously expensed;
n a decrease of $22 million in loss reserves in 2009, including
a decrease in storm damage reserves as a result of the
completion of the Act 55 storm cost financing at Entergy Gulf
States Louisiana and Entergy Louisiana;
n a decrease of $16 million in payroll-related and benefits costs;
n prior year storm damage charges as a result of several storms
hitting Entergy Arkansas’s service territory in 2008, including
Hurricane Gustav and Hurricane Ike in the third quarter 2008.
Entergy Arkansas discontinued regulatory storm reserve
accounting beginning July 2007 as a result of the APSC order
issued in Entergy Arkansas’s rate case. As a result, non-
capital storm expenses of $41 million were charged to other
operation and maintenance expenses. In December 2008,
$19.4 million of these storm expenses were deferred per an
APSC order and were recovered through revenues in 2009;
n an increase of $35 million in fossil expenses primarily due to
higher plant maintenance costs and plant outages;
n an increase of $22 million in nuclear expenses primarily due
to increased nuclear labor and contract costs;
n an increase of $14 million due to the reinstatement of
storm reserve accounting at Entergy Arkansas effective
January 2009;
n an increase of $14 million due to the Hurricane Ike and
Hurricane Gustav storm cost recovery settlement agreement,
as discussed below under “Liquidity and Capital Resources -
36