Entergy 2011 Annual Report Download - page 90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the
equity section of the balance sheets of Entergy. Accumulated other
comprehensive income (loss) in the balance sheets included the
following components (in thousands):
December 31, 2011 December 31, 2010
Cash flow hedges net
unrealized gain $ 177,497 $ 106,258
Pension and other
postretirement liabilities (499,556) (276,466)
Net unrealized investment
gains 150,939 129,685
Foreign currency translation 2,668 2,311
Total $(168,452) $ (38,212)
Other comprehensive income and total comprehensive income for
years ended December 31, 2011, 2010, and 2009 are presented in
Entergy’s Statements of Comprehensive Income.
NOTE 8. COMMITMENTS AND CONTINGENCIES
Entergy and the Registrant Subsidiaries are involved in a number of
legal, regulatory, and tax proceedings before various courts, regulatory
commissions, and governmental agencies in the ordinary course
of business. While management is unable to predict the outcome of
such proceedings, management does not believe that the ultimate
resolution of these matters will have a material effect on Entergy’s
results of operations, cash flows, or financial condition. Entergy
discusses regulatory proceedings in Note 2 to the financial statements
and discusses tax proceedings in Note 3 to the financial statements.
Vidalia Purchased Power Agreement
Entergy Louisiana has an agreement extending through the year 2031
to purchase energy generated by a hydroelectric facility known as the
Vidalia project. Entergy Louisiana made payments under the contract
of approximately $185.6 million in 2011, $216.5 million in 2010, and
$204.9 million in 2009. If the maximum percentage (94%) of the energy
is made available to Entergy Louisiana, current production projections
would require estimated payments of approximately $172.1 million in
2012, and a total of $2.5 billion for the years 2013 through 2031. Entergy
Louisiana currently recovers the costs of the purchased energy through
its fuel adjustment clause.
In an LPSC-approved settlement related to tax benefits from the
tax treatment of the Vidalia contract, Entergy Louisiana agreed to
credit rates by $11 million each year for up to ten years, beginning
in October 2002. In addition, in accordance with an LPSC settlement,
Entergy Louisiana credited rates in August 2007 by $11.3 million
(including interest) as a result of a settlement with the IRS of the 2001
tax treatment of the Vidalia contract. As discussed in more detail in
Note 3 to the financial statements, in August 2011, Entergy agreed to
a settlement with the IRS regarding the mark-to-market income tax
treatment of various wholesale electric power purchase and sale
agreements, including the Vidalia agreement. In October 2011, the
LPSC approved a final settlement under which Entergy Louisiana
agreed to share the remaining benefits of this tax accounting election
by crediting customers an additional $20.235 million per year for 15
years beginning January 2012. Entergy Louisiana recorded a $199
million regulatory charge and a corresponding net-of-tax regulatory
liability to reflect this obligation. The provisions of the settlement also
provide that the LPSC shall not recognize or use Entergy Louisiana’s
use of the cash benefits from the tax treatment in setting any of Entergy
Louisiana’s rates. Therefore, to the extent Entergy Louisiana’s use of
the proceeds would ordinarily have reduced its rate base, no change in
rate base shall be reflected for ratemaking purposes.
Nuclear Insurance
THIRD PA RT Y LI AB I LIT Y IN S UR A NC E
The Price-Anderson Act requires that reactor licensees purchase
insurance and participate in a secondary insurance pool that
provides insurance coverage for the public in the event of a nuclear
power plant accident. The costs of this insurance are borne by the
nuclear power industry. Congress amended and renewed the Price-
Anderson Act in 2005 for a term through 2025. The Price-Anderson
Act requires nuclear power plants to show evidence of financial
protection in the event of a nuclear accident. This protection must
consist of two layers of coverage:
1. The primary level is private insurance underwritten by American
Nuclear Insurers (ANI) and provides public liability insurance
coverage of $375 million. If this amount is not sufficient to cover
claims arising from an accident, the second level, Secondary
Financial Protection, applies.
2. Within the Secondary Financial Protection level, each nuclear
reactor has a contingent obligation to pay a retrospective
premium, equal to its proportionate share of the loss in excess
of the primary level, regardless of proximity to the incident or
fault, up to a maximum of $117.5 million per reactor per incident
(Entergy’s maximum total contingent obligation per incident
is $1.3 billion). This consists of a $111.9 million maximum
retrospective premium plus a five percent surcharge, which
equates to $117.5 million, that may be payable, if needed, at a
rate that is currently set at $17.5 million per year per incident per
nuclear power reactor.
3. In the event that one or more acts of terrorism cause a nuclear
power plant accident, which results in third-party damages – off-
site property and environmental damage, off-site bodily injury,
and on-site third-party bodily injury (i.e. contractors); the primary
level provided by ANI combined with the Secondary Financial
Protection would provide $12.6 billion in coverage. The Terrorism
Risk Insurance Reauthorization Act of 2007 created a government
program that provides for up to $100 billion in coverage in excess
of existing coverage for a terrorist event.
Currently, 104 nuclear reactors are participating in the Secondary
Financial Protection program. The product of the maximum
retrospective premium assessment to the nuclear power industry and
the number of nuclear power reactors provides over $12.2 billion in
secondary layer insurance coverage to compensate the public in the
event of a nuclear power reactor accident. The Price-Anderson Act
provides that all potential liability for a nuclear accident is limited to
the amounts of insurance coverage available under the primary and
secondary layers.
Entergy Arkansas has two licensed reactors and Entergy Gulf
States Louisiana, Entergy Louisiana, and System Energy each
have one licensed reactor (10% of Grand Gulf is owned by a non-
affiliated company (SMEPA) that would share on a pro-rata basis in
any retrospective premium assessment to System Energy under the
Price-Anderson Act). The Entergy Wholesale Commodities segment
includes the ownership and operation of six nuclear power reactors
and the ownership of the shutdown Indian Point 1 reactor and Big
Rock Point facility.
88