Entergy 2010 Annual Report Download - page 92

Notes to Consolidated Financial Statements continued
$125 million for certain other natural perils (direct physical loss or
damage due to a named windstorm or storm surge) on an annual
aggregate basis. The conventional property insurance program
only provides up to $50 million in coverage for the Entergy
New Orleans gas distribution system on an annual aggregate
basis. The coverage is subject to a $20 million self-insured
retention per occurrence for operational perils and a $35 million
self-insured retention per occurrence for natural perils and for
the Entergy New Orleans gas distribution system.
Covered property generally includes power plants, substations,
facilities, inventories, and gas distribution-related properties.
Excluded property generally includes above-ground transmission
and distribution lines, poles, and towers. The primary layer
consists of a $65 million layer in excess of the self-insured
retention and the excess layer consists of a $335 million layer in
excess of the $65 million primary layer. Both layers are placed
on a quota share basis through several insurers. This coverage
is in place for Entergy Corporation, the Registrant Subsidiaries,
and certain other Entergy subsidiaries, including the owners
of the nuclear power plants in the Entergy Wholesale
Commodities segment.
In addition to the conventional property insurance program,
Entergy has purchased additional coverage ($20 million per
occurrence) for some of its non-regulated, non-generation assets.
This policy serves to buy-down the $20 million deductible and is
placed on a scheduled location basis. The applicable deductibles
are $100,000 to $250,000, except for properties that are damaged
by flooding and properties whose values are greater than $20
million; these properties have a $500,000 deductible.
Employment and Labor-related Proceedings
The Registrant Subsidiaries and other Entergy subsidiaries are
responding to various lawsuits in both state and federal courts
and to other labor-related proceedings filed by current and former
employees and third parties not selected for open positions. These
actions include, but are not limited to, allegations of wrongful
employment actions; wage disputes and other claims under
the Fair Labor Standards Act or its state counterparts; claims
of race, gender and disability discrimination; disputes arising
under collective bargaining agreements; unfair labor practice
proceedings and other administrative proceedings before the
National Labor Relations Board; claims of retaliation; and claims
for or regarding benefits under various Entergy Corporation
sponsored plans. Entergy and the Registrant Subsidiaries are
responding to these suits and proceedings and deny liability to
the claimants. Management believes that loss exposure has been
and will continue to be handled so that the ultimate resolution
of these matters will not be material, in the aggregate, to the
financial position, results of operation, or cash flows of Entergy
or the Utility operating companies.
Note 9. Asset Retirement Obligations
Accounting standards require the recording of liabilities for
all legal obligations associated with the retirement of long-
lived assets that result from the normal operation of those
assets. For Entergy, substantially all of its asset retirement
obligations consist of its liability for decommissioning its nuclear
power plants. In addition, an insignificant amount of removal
costs associated with non-nuclear power plants is also included
in the decommissioning line item on the balance sheets.
These liabilities are recorded at their fair values (which are
the present values of the estimated future cash outflows) in the
period in which they are incurred, with an accompanying addition
to the recorded cost of the long-lived asset. The asset retirement
obligation is accreted each year through a charge to expense, to
reflect the time value of money for this present value obligation.
The accretion will continue through the completion of the asset
retirement activity. The amounts added to the carrying amounts
of the long-lived assets will be depreciated over the useful lives
of the assets. The application of accounting standards related
to asset retirement obligations is earnings neutral to the rate-
regulated business of the Registrant Subsidiaries.
In accordance with ratemaking treatment and as required by
regulatory accounting standards, the depreciation provisions
for the Registrant Subsidiaries include a component for removal
costs that are not asset retirement obligations under accounting
standards. In accordance with regulatory accounting principles,
the Registrant Subsidiaries have recorded regulatory assets
(liabilities) in the following amounts to reflect their estimates
of the difference between estimated incurred removal costs and
estimated removal costs recovered in rates (in millions):
December 31, 2010 2009
Entergy Arkansas $(24.0) $ (7.3)
Entergy Gulf States Louisiana $(24.9) $ (7.5)
Entergy Louisiana $(52.9) $(21.7)
Entergy Mississippi $ 46.1 $ 44.5
Entergy New Orleans $ 15.4 $ 15.2
Entergy Texas $ 7.3 $ 7.2
System Energy $ 12.2 $ 13.9
The cumulative decommissioning and retirement cost liabilities
and expenses recorded in 2010 by Entergy were as follows
(in millions):
Change
Liabilities in Cash Liabilities
as of Dec. Flow as of Dec.
31, 2009 Accretion Estimate Spending 31, 2010
Utility:
Entergy Arkansas $ 566.4 $ 35.8 $ – $ – $ 602.2
Entergy Gulf States
Louisiana $ 321.2 $ 18.7 $ – $ – $ 339.9
Entergy Louisiana $ 298.2 $ 23.0 $ – $ – $ 321.2
Entergy Mississippi $ 5.1 $ 0.3 $ – $ – $ 5.4
Entergy
New Orleans $ 3.2 $ 0.2 $ – $ – $ 3.4
Entergy Texas $ 3.4 $ 0.2 $ – $ – $ 3.6
System Energy $ 421.4 $ 31.4 $ – $ – $ 452.8
Entergy Wholesale
Commodities $1,320.6 $107.6 $ – $(8.2) $1,420.0
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