Entergy 2010 Annual Report Download - page 64

Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the
accounts of Entergy Corporation and its subsidiaries. As required
by generally accepted accounting principles, all intercompany
transactions have been eliminated in the consolidated financial
statements. Entergy’s Registrant Subsidiaries (Entergy Arkansas,
Entergy Gulf States Louisiana, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, Entergy Texas, and System
Energy) also include their separate financial statements in this
Form 10-K. The Registrant Subsidiaries and many other Entergy
subsidiaries maintain accounts in accordance with FERC and
other regulatory guidelines. Certain previously reported amounts
have been reclassified to conform to current classifications,
with no effect on net income or common shareholders’
(or members’) equity.
Use of Estimates in the Preparation of
Financial Statements
In conformity with generally accepted accounting principles,
the preparation of Entergy Corporation’s consolidated financial
statements and the separate financial statements of the Registrant
Subsidiaries requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities,
revenues, and expenses and the disclosure of contingent assets
and liabilities. Adjustments to the reported amounts of assets and
liabilities may be necessary in the future to the extent that future
estimates or actual results are different from the estimates used.
Revenues and Fuel Costs
Entergy Arkansas, Entergy Gulf States Louisiana, Entergy
Louisiana, Entergy Mississippi, and Entergy Texas generate,
transmit, and distribute electric power primarily to retail
customers in Arkansas, Louisiana, Louisiana, Mississippi, and
Texas, respectively. Entergy Gulf States Louisiana also distributes
natural gas to retail customers in and around Baton Rouge,
Louisiana. Entergy New Orleans sells both electric power and
natural gas to retail customers in the City of New Orleans, except
for Algiers, where Entergy Louisiana is the electric power supplier.
The Entergy Wholesale Commodities segment derives almost all
of its revenue from sales of electric power generated by plants
owned by subsidiaries in that segment.
Entergy recognizes revenue from electric power and natural gas
sales when power or gas is delivered to customers. To the extent
that deliveries have occurred but a bill has not been issued,
Entergy’s Utility operating companies accrue an estimate of the
revenues for energy delivered since the latest billings. The Utility
operating companies calculate the estimate based upon several
factors including billings through the last billing cycle in a month,
actual generation in the month, historical line loss factors, and
prices in effect in Entergy’s Utility operating companies’ various
jurisdictions. Changes are made to the inputs in the estimate as
needed to reflect changes in billing practices. Each month the
estimated unbilled revenue amounts are recorded as revenue
and unbilled accounts receivable, and the prior month’s estimate
is reversed. Therefore, changes in price and volume differences
resulting from factors such as weather affect the calculation of
unbilled revenues from one period to the next, and may result in
variability in reported revenues from one period to the next as
prior estimates are reversed and new estimates recorded.
Entergy records revenue from sales under rates implemented
subject to refund less estimated amounts accrued for probable
refunds when Entergy believes it is probable that revenues will be
refunded to customers based upon the status of the rate case as
of the date the financial statements are prepared.
Entergy’s Utility operating companies’ rate schedules include
either fuel adjustment clauses or fixed fuel factors, which allow
either current recovery in billings to customers or deferral
of fuel costs until the costs are billed to customers. Where the
fuel component of revenues is billed based on a pre-determined
fuel cost (fixed fuel factor), the fuel factor remains in effect until
changed as part of a general rate case, fuel reconciliation, or
fixed fuel factor filing. System Energy’s operating revenues are
intended to recover from Entergy Arkansas, Entergy Louisiana,
Entergy Mississippi, and Entergy New Orleans operating expenses
and capital costs attributable to Grand Gulf. The capital costs
are computed by allowing a return on System Energy’s common
equity funds allocable to its net investment in Grand Gulf, plus
System Energy’s effective interest cost for its debt allocable to its
investment in Grand Gulf.
Property, Plant, and Equipment
Property, plant, and equipment is stated at original cost.
Depreciation is computed on the straight-line basis at rates
based on the applicable estimated service lives of the various
classes of property. For the Registrant Subsidiaries, the original
cost of plant retired or removed, less salvage, is charged to
accumulated depreciation. Normal maintenance, repairs, and
minor replacement costs are charged to operating expenses.
Substantially all of the Registrant Subsidiaries’ plant is subject
to mortgage liens.
Electric plant includes the portions of Grand Gulf and Water-
ford 3 that have been sold and leased back. For financial reporting
purposes, these sale and leaseback arrangements are reflected as
financing transactions.
Net property, plant, and equipment for Entergy (including
property under capital lease and associated accumulated
amortization) by business segment and functional category, as of
December 31, 2010 and 2009, is shown below (in millions):
Entergy
Wholesale Parent
2010 Entergy Utility Commodities and Other
Production:
Nuclear $ 8,393 $ 5,378 $3,015 $ –
Other 1,842 1,797 45 –
Transmission 2,986 2,956 30 –
Distribution 5,926 5,926 – –
Other 1,661 1,411 248 2
Construction work in progress 1,662 1,300 361 1
Nuclear fuel 1,378 760 618 –
Property, plant, and
equipment - net $23,848 $19,528 $4,317 $ 3
Entergy
Wholesale Parent
2009 Entergy Utility Commodities and Other
Production:
Nuclear $ 8,105 $ 5,414 $2,691 $ –
Other 1,936 1,724 212 –
Transmission 2,922 2,889 33 –
Distribution 5,948 5,948 – –
Other 1,664 1,398 263 3
Construction work in progress 1,547 1,134 414 (1)
Nuclear fuel (leased and owned) 1,267 747 520 –
Property, plant, and
equipment - net $23,389 $19,254 $4,133 $ 2
62