Entergy 2011 Annual Report Download - page 92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
on an annual aggregate basis. The conventional property insurance
program 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. Entergy also, purchases
$300 million in terrorism insurance coverage for its conventional
property. 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.
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.
GAS SYSTEM REBUILD INSURANCE PROCEEDS
Entergy New Orleans received insurance proceeds for future
construction expenditures associated with rebuilding its gas
system, and the October 2006 City Council resolution approving the
settlement of Entergy New Orleans’s rate and storm-cost recovery
filings requires Entergy New Orleans to record those proceeds
in a designated sub-account of other deferred credits until the
proceeds are spent on the rebuild project. This other deferred credit
is shown as “Gas system rebuild insurance proceeds” on Entergy
New Orleans’s balance sheet.
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, 2011 2010
Entergy Arkansas $(16.4) $(24.0)
Entergy Gulf States Louisiana $(30.3) $(24.9)
Entergy Louisiana $(62.6) $(52.9)
Entergy Mississippi $ 48.5 $ 46.1
Entergy New Orleans $ 16.3 $ 15.4
Entergy Texas $ 4.5 $ 7.3
System Energy $ 11.8 $ 12.2
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