Entergy 2011 Annual Report Download - page 109

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Entergy Corporation and Subsidiaries 2011
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The following tables set forth, by level within the fair value
hierarchy, Entergy’s assets and liabilities that are accounted for at
fair value on a recurring basis as of December 31, 2011 and December
31, 2010. The assessment of the significance of a particular input to
a fair value measurement requires judgment and may affect their
placement within the fair value hierarchy levels (in millions):
2011 Level 1 Level 2 Level 3 Total
Assets:
Temporary cash investments $ 613 $ – $ – $ 613
Decommissioning trust funds:(a)
Equity securities 397 1,732 – 2,129
Debt securities 639 1,020 – 1,659
Power contracts – – 312 312
Securitization recovery trust account 50 – – 50
Storm reserve escrow account 335 – – 335
$2,034 $2,752 $312 $5,098
Liabilities:
Gas hedge contracts $ 30 $ – $ – $ 30
2010 Level 1 Level 2 Level 3 Total
Assets:
Temporary cash investments $1,218 $ – $ – $1,218
Decommissioning trust funds:(a)
Equity securities 387 1,689 – 2,076
Debt securities 497 1,023 – 1,520
Power contracts – – 214 214
Securitization recovery trust account 43 – – 43
Storm reserve escrow account 329 – – 329
$2,474 $2,712 $214 $5,400
Liabilities:
Power contracts $ – $ – $ 17 $ 17
Gas hedge contracts $ 2 $ – $ – $ 2
$ 2 $ – $ 17 $ 19
(a) The decommissioning trust funds hold equity and fixed income securities.
Equity securities are invested to approximate the returns of major
market indices. Fixed income securities are held in various governmental
and corporate securities. See Note 17 for additional information on the
investment portfolios.
The following table sets forth a reconciliation of changes in the
net assets (liabilities) for the fair value of derivatives classified as
Level 3 in the fair value hierarchy for the years ended December 31,
2011, 2010, and 2009 (in millions):
2011 2010 2009
Balance as of January 1, $ 197 $ 200 $ 207
Unrealized gains from price changes 268 221 310
Unrealized gains/(losses) on originations 15 (4) 5
Realized gains on settlements (168) (220) (322)
Balance as of December 31, $312 $197 $200
NOTE 17. DECOMMISSIONING TRUST FUNDS
Entergy holds debt and equity securities, classified as available-
for-sale, in nuclear decommissioning trust accounts. The NRC
requires Entergy subsidiaries to maintain trusts to fund the costs of
decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand
Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades
(NYPA currently retains the decommissioning trusts and liabilities
for Indian Point 3 and FitzPatrick). The funds are invested primarily
in equity securities; fixed-rate, fixed-income securities; and cash and
cash equivalents.
Entergy records decommissioning trust funds on the balance
sheet at their fair value. Because of the ability of the Registrant
Subsidiaries to recover decommissioning costs in rates and in
accordance with the regulatory treatment for decommissioning
trust funds, the Registrant Subsidiaries have recorded an offsetting
amount of unrealized gains/(losses) on investment securities in
other regulatory liabilities/assets. For the nonregulated portion of
River Bend, Entergy Gulf States Louisiana has recorded an offsetting
amount of unrealized gains/(losses) in other deferred credits.
Decommissioning trust funds for Pilgrim, Indian Point 2, Vermont
Yankee, and Palisades do not meet the criteria for regulatory
accounting treatment. Accordingly, unrealized gains recorded on the
assets in these trust funds are recognized in the accumulated other
comprehensive income component of shareholders’ equity because
these assets are classified as available for sale. Unrealized losses
(where cost exceeds fair market value) on the assets in these trust
funds are also recorded in the accumulated other comprehensive
income component of shareholders’ equity unless the unrealized
loss is other than temporary and therefore recorded in earnings.
Generally, Entergy records realized gains and losses on its debt
and equity securities using the specific identification method to
determine the cost basis of its securities.
The securities held as of December 31, 2011 and 2010 are
summarized as follows (in millions):
Total Total
Fair Unrealized Unrealized
Value Gains Losses
2011
Equity securities $ 2,129 $ 423 $ 14
Debt securities 1,659 115 5
Total $3,788 $538 $19
2010
Equity securities $ 2,076 $ 436 $ 9
Debt securities 1,520 67 12
Total $3,596 $503 $21
107