Entergy 2011 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 in the United States of America,
all intercompany transactions have been eliminated in the consolidated
financial statements. The Utility operating companies 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 in the
United States of America, the preparation of Entergy Corporation’s
consolidated financial statements 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 proceeding 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 Waterford
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, 2011
and 2010, is shown below (in millions):
Entergy
Wholesale Parent
2011 Entergy Utility Commodities & Other
Production:
Nuclear $ 8,635 $ 5,441 $ 3,194 $–
Other 2,431 2,032 399 –
Transmission 3,344 3,309 35 –
Distribution 6,157 6,157 – –
Other 1,716 1,463 250 3
Construction work in progress 1,780 1,420 359 1
Nuclear fuel 1,546 802 744 –
Property, plant, and
equipment - net $25,609 $20,624 $4,981 $4
Entergy
Wholesale Parent
2010 Entergy Utility Commodities & 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
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