Entergy 2011 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
include certain financial covenants to which Entergy Holdings
Company LLC is subject, including the requirement to maintain a net
worth of at least $1 billion.
In August 2008 the LPFA issued $278.4 million in bonds under the
aforementioned Act 55. From the $274.7 million of bond proceeds
loaned by the LPFA to the LURC, the LURC deposited $87 million in a
restricted escrow account as a storm damage reserve for Entergy Gulf
States Louisiana and transferred $187.7 million directly to Entergy
Gulf States Louisiana. From the bond proceeds received by Entergy
Gulf States Louisiana from the LURC, Entergy Gulf States Louisiana
invested $189.4 million, including $1.7 million that was withdrawn from
the restricted escrow account as approved by the April 16, 2008 LPSC
orders, in exchange for 1,893,918.39 Class A preferred, non-voting,
membership interest units of Entergy Holdings Company LLC that
carry a 10% annual distribution rate. Distributions are payable quarterly
commencing on September 15, 2008 and have a liquidation price of $100
per unit. The preferred membership interests are callable at the option
of Entergy Holdings Company LLC after ten years under the terms of
the LLC agreement. The terms of the membership interests include
certain financial covenants to which Entergy Holdings Company LLC
is subject, including the requirement to maintain a net worth of at
least $1 billion.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do
not report the bonds on their balance sheets because the bonds are
the obligation of the LPFA, and there is no recourse against Entergy,
Entergy Gulf States Louisiana or Entergy Louisiana in the event of
a bond default. To service the bonds, Entergy Gulf States Louisiana
and Entergy Louisiana collect a system restoration charge on behalf
of the LURC, and remit the collections to the bond indenture trustee.
Entergy, Entergy Gulf States Louisiana, and Entergy Louisiana do not
report the collections as revenue because they are merely acting as the
billing and collection agent for the state.
ENTERGY NEW ORLEANS
In December 2005 the U.S. Congress passed the Katrina Relief Bill,
a hurricane aid package that included Community Development
Block Grant (CDBG) funding (for the states affected by Hurricanes
Katrina, Rita, and Wilma) that allowed state and local leaders to fund
individual recovery priorities. In March 2007 the City Council certified
that Entergy New Orleans incurred $205 million in storm-related costs
through December 2006 that are eligible for CDBG funding under the
state action plan. Entergy New Orleans received $180.8 million of
CDBG funds in 2007 and $19.2 million in 2010.
In October 2006, the City Council approved a rate filing settlement
agreement that, among other things, authorized a $75 million storm
reserve for damage from future storms, which will be created over a
ten-year period through a storm reserve rider that began in March 2007.
These storm reserve funds will be held in a restricted escrow account.
ENTERGY TEXAS
Entergy Texas filed an application in April 2009 seeking a determination
that $577.5 million of Hurricane Ike and Hurricane Gustav restoration
costs are recoverable, including estimated costs for work to be
completed. On August 5, 2009, Entergy Texas submitted to the ALJ
an unopposed settlement agreement intended to resolve all issues
in the storm cost recovery case. Under the terms of the agreement
$566.4 million, plus carrying costs, are eligible for recovery. Insurance
proceeds will be credited as an offset to the securitized amount. Of
the $11.1 million difference between Entergy Texas’s request and
the amount agreed to, which is part of the black box agreement
and not directly attributable to any specific individual issues raised,
$6.8 million is operation and maintenance expense for which Entergy
Texas recorded a charge in the second quarter 2009. The remaining
$4.3 million was recorded as utility plant. The PUCT approved the
settlement in August 2009, and in September 2009 the PUCT approved
recovery of the costs, plus carrying costs, by securitization. See Note
5 to the financial statements for a discussion of the November 2009
issuance of the securitization bonds.
New Nuclear Generation Development Costs
Pursuant to the Mississippi Baseload Act and the Mississippi Public
Utilities Act, Entergy Mississippi is developing a project option for
new nuclear generation at Grand Gulf Nuclear Station. This project
is in the early stages, and several issues remain to be addressed over
time before significant additional capital would be committed to this
project. In 2010, Entergy Mississippi paid for and has recognized
on its books $49 million in costs associated with the development
of new nuclear generation at Grand Gulf; these costs previously
had been recorded on the books of Entergy New Nuclear Utility
Development, LLC, a System Energy subsidiary. In October 2010,
Entergy Mississippi filed an application with the MPSC requesting that
the MPSC determine that it is in the public interest to preserve the
option to construct new nuclear generation at Grand Gulf and that
the MPSC approve the deferral of Entergy Mississippi’s costs incurred
to date and in the future related to this project, including the accrual
of AFUDC or similar carrying charges. In October 2011, Entergy
Mississippi and the Mississippi Public Utilities Staff filed with the
MPSC a joint stipulation. The stipulation states that there should be a
deferral of the $57 million of costs incurred through September 2011
in connection with planning, evaluation, monitoring, and other and
related generation resource development activities for new nuclear
generation at Grand Gulf. The costs shall be treated as a regulatory
asset until the proceeding is resolved. The Mississippi Public Utilities
Staff and Entergy Mississippi also agree that the MPSC should conduct
a hearing during 2012 to consider the relief requested by Entergy
Mississippi in its application, including evidence regarding whether
costs incurred in connection with planning, evaluation, monitoring,
and other and related generation resource development activities for
new nuclear generation at Grand Gulf were prudently incurred and
are otherwise allowable. The Mississippi Public Utilities Staff and
Entergy Mississippi further agree that such prudently incurred costs
shall be recoverable in a manner to be determined by the MPSC. In
the Stipulation, the Mississippi Public Utilities Staff and Entergy
Mississippi agree that the development of a nuclear unit project
option is consistent with the Mississippi Baseload Act. The Mississippi
Public Utilities Staff and Entergy Mississippi further agree that the
deferral of costs incurred in connection with planning, evaluation,
monitoring, and other and related generation resource development
activities for new nuclear generation at Grand Gulf also is consistent
with the Mississippi Baseload Act. Entergy Mississippi will not accrue
carrying charges or continue to accrue AFUDC on the costs, pending
the outcome of the proceeding. The MPSC approved the stipulation in
November 2011.
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