Entergy 2010 Annual Report Download - page 79

ENTERGY CORPORATION AND SUBSIDIARIES 2010
Notes to Consolidated Financial Statements continued
payments will be made over seven months, rather than 12. In
April 2007, the FERC denied various requests for rehearing, with
one exception regarding the issue of retrospective refunds. That
issue will be addressed subsequent to the remanded proceeding
involving the interruptible load decision discussed further below
in this section under “Interruptible Load Proceeding.”
CALENDAR YEAR 2010 PRODUCTION COSTS
The liabilities and assets for the preliminary estimate of the
payments and receipts required to implement the FERC’s remedy
based on calendar year 2010 production costs were recorded
in December 2010, based on certain year-to-date information.
The preliminary estimate was recorded based on the following
estimate of the payments/receipts among the Utility operating
companies for 2011 (in millions):
Payments or (Receipts)
Entergy Arkansas $ 52
Entergy Gulf States Louisiana $ –
Entergy Louisiana $ –
Entergy Mississippi $(37)
Entergy New Orleans $(15)
Entergy Texas $ –
The actual payments/receipts for 2011, based on calendar year
2010 production costs, will not be calculated until the Utility
operating companies’ FERC Form 1s have been filed. Once the
calculation is completed, it will be filed at the FERC. The level of
any payments and receipts is significantly affected by a number of
factors, including, among others, weather, the price of alternative
fuels, the operating characteristics of the Entergy System
generating fleet, and multiple factors affecting the calculation of
the non-fuel related revenue requirement components of the total
production costs, such as plant investment.
ROUGH PRODUCTION COST EQUALIZATION RATES
Each May since 2007 Entergy has filed with the FERC the rates
to implement the FERC’s orders in the System Agreement
proceeding. These filings show the following payments/receipts
among the Utility operating companies are necessary to achieve
rough production cost equalization as defined by the FERC’s
orders (in millions):
2007 Payments 2008 Payments 2009 Payments 2010 Payments
or or or or
(Receipts) Based (Receipts) Based (Receipts) Based (Receipts) Based
on 2006 Costs on 2007 Costs on 2008 Costs on 2009 Costs
Entergy
Arkansas $ 252 $ 252 $ 390 $ 41
Entergy Gulf
States
Louisiana $(120) $(124) $(107) $ –
Entergy
Louisiana $ (91) $ (36) $(140) $(22)
Entergy
Mississippi $ (41) $ (20) $ (24) $(19)
Entergy
New Orleans $ – $ (7) $ – $ –
Entergy Texas $ (30) $ (65) $(119) $ –
The APSC has approved a production cost allocation rider for
recovery from customers of the retail portion of the costs allocated
to Entergy Arkansas. Management believes that any changes in the
allocation of production costs resulting from the FERC’s decision
and related retail proceedings should result in similar rate
changes for retail customers, subject to specific circumstances
that have caused trapped costs. See “Fuel and purchased power
cost recovery, Entergy Texas,” above for discussion of a PUCT
decision that resulted in $18.6 million of trapped costs between
Entergy’s Texas and Louisiana jurisdictions. See “2007 Rate Filing
Based on Calendar Year 2006 Production Costs” below for a
discussion of a FERC decision that could result in $14.5 million of
trapped costs at Entergy Arkansas.
Based on the FERC’s April 27, 2007 order on rehearing that is
discussed above, in the second quarter 2007 Entergy Arkansas
recorded accounts payable and Entergy Gulf States Louisiana,
Entergy Louisiana, Entergy Mississippi, and Entergy Texas
recorded accounts receivable to reflect the rough production
cost equalization payments and receipts required to implement
the FERC’s remedy based on calendar year 2006 production costs.
Entergy Arkansas recorded a corresponding regulatory asset for
its right to collect the payments from its customers, and Entergy
Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and
Entergy Texas recorded corresponding regulatory liabilities for
their obligations to pass the receipts on to their customers. The
companies have followed this same accounting practice each
year since then. The regulatory asset and liabilities are shown
as “System Agreement cost equalization” on the respective
balance sheets.
2007 Rate Filing Based on Calendar Year 2006
Production Costs
Several parties intervened in the 2007 rate proceeding at the
FERC, including the APSC, the MPSC, the Council, and the LPSC,
which have also filed protests. The PUCT also intervened.
Intervenor testimony was filed in which the intervenors
and also the FERC Staff advocated a number of positions on
issues that affect the level of production costs the individual
Utility operating companies are permitted to reflect in the
bandwidth calculation, including the level of depreciation and
decommissioning expense for nuclear facilities. The effect of
the various positions would be to reallocate costs among the
Utility operating companies. The Utility operating companies
filed rebuttal testimony explaining why the bandwidth payments
are properly recoverable under the AmerenUE contract, and
explaining why the positions of FERC Staff and intervenors on
the other issues should be rejected. A hearing in this proceeding
concluded in July 2008, and the ALJ issued an initial decision
in September 2008. The ALJ’s initial decision concludes, among
other things, that: (1) the decisions to not exercise Entergy
Arkansas’s option to purchase the Independence plant in 1996
and 1997 were prudent; (2) Entergy Arkansas properly flowed
a portion of the bandwidth payments through to AmerenUE in
accordance with the wholesale power contract; and (3) the level
of nuclear depreciation and decommissioning expense reflected
in the bandwidth calculation should be calculated based on NRC-
authorized license life, rather than the nuclear depreciation and
decommissioning expense authorized by the retail regulators for
purposes of retail ratemaking. Following briefing by the parties,
the matter was submitted to the FERC for decision. On January 11,
2010, the FERC issued its decision both affirming and overturning
certain of the ALJ’s rulings, including overturning the decision
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