Entergy 2012 Annual Report Download - page 27

Entergy Corporation and Subsidiaries 2012
mark-to-market income tax treatment of power purchase contracts,
which resulted in a reduction in income tax expense. The net income
effect was partially offset by a regulatory charge, which reduced net
revenue in 2011, because Entergy Louisiana is sharing the benefits
with customers. See Notes 3 and 8 to the financial statements for
additional discussion of the tax settlement and benefit sharing.
NET REVENUE
Utility
Following is an analysis of the change in net revenue, comparing
2012 to 2011 (in millions):
2011 Net Revenue $4,904
Mark-to-market tax settlement sharing 200
Retail electric price 81
Grand Gulf recovery 71
Net wholesale revenue (28)
Purchased power capacity (29)
Volume/weather (80)
Louisiana Act 55 financing savings obligation (161)
Other 11
2012 Net Revenue $4,969
The mark-to-market tax settlement sharing variance results from
a regulatory charge recorded in September 2011 because Entergy
Louisiana is sharing the benefits of a settlement with the IRS related
to the mark-to-market income tax treatment of power purchase con-
tracts with customers. See Notes 3 and 8 to the financial statements
for additional discussion of the tax settlement and benefit sharing.
The retail electric price variance is primarily due to:
n an increase in the storm cost recovery rider at Entergy Mississippi,
as approved by the MPSC for a five-month period effective August
2012. This increase is offset by costs included in other operation
and maintenance expenses and has no effect on net income;
n an increase in the energy efficiency rider at Entergy Arkansas, as
approved by the APSC, effective July 2012. This increase is offset
by costs included in other operation and maintenance expenses
and has no effect on net income;
n a special formula rate plan rate increase at Entergy Louisiana
effective May 2011 in accordance with a previous LPSC order
relating to the acquisition of Unit 2 of the Acadia Energy Center.
See Note 2 to the financial statements for a discussion of the
formula rate plan increase; and
n base rate increases at Entergy Texas beginning May 2011 as a
result of the settlement of the December 2009 rate case and
effective July 2012 as a result of the PUCT’s order in the
December 2011 rate case. See Note 2 to the financial statements
for further discussion of the rate cases.
These increases were partially offset by formula rate plan decreases
at Entergy New Orleans effective October 2011 and at Entergy Gulf
States Louisiana effective September 2012. See Note 2 to the financial
statements for further discussion of the formula rate plan decreases.
The Grand Gulf recovery variance is primarily due to increased
recovery of higher costs resulting from the Grand Gulf uprate.
The net wholesale revenue variance is primarily due to decreased
sales volume to municipal and co-op customers and lower prices.
The purchased power capacity variance is primarily due to price
increases for ongoing purchased power capacity and additional
capacity purchases.
The volume/weather variance is primarily due to decreased elec-
tricity usage, including the effect of milder weather as compared to
the prior period on residential and commercial sales. Hurricane Isaac,
which hit the Utility’s service area in August 2012, also contributed
to the decrease in electricity usage. Billed electricity usage decreased a
total of 1,684 GWh, or 2%, across all customer classes.
The Louisiana Act 55 financing savings obligation variance results
from a regulatory charge recorded in 2012 because Entergy Gulf
States Louisiana and Entergy Louisiana are sharing the savings from
an IRS settlement related to the uncertain tax position regarding the
Hurricane Katrina and Hurricane Rita Louisiana Act 55 financing
with customers. See Note 3 to the financial statements for additional
discussion of the tax settlement and savings obligation.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing 2012
to 2011 (in millions):
2011 Net Revenue $2,045
Nuclear realized price changes (194)
Nuclear volume (33)
Other 36
2012 Net Revenue $1,854
As shown in the table above, net revenue for Entergy Wholesale
Commodities decreased by $191 million, or 9%, in 2012 compared
to 2011 primarily due to lower pricing in its contracts to sell power
and lower volume in its nuclear fleet resulting from more unplanned
and refueling outage days in 2012 as compared to 2011 which was
partially offset by the exercise of resupply options provided for in
purchase power agreements whereby Entergy Wholesale Commodities
may elect to supply power from another source when the plant is not run-
ning. Amounts related to the exercise of resupply options are included
in the GWh billed in the table below. Partially offsetting the lower net
revenue from the nuclear fleet was higher net revenue from the Rhode
Island State Energy Center, which was acquired in December 2011.
Following are key performance measures for Entergy Wholesale
Commodities for 2012 and 2011:
2012 2011
Owned capacity 6,612 6,599
GWh billed 46,178 43,497
Average realized price per MWh $50.02 $54.50
Entergy Wholesale Commodities Nuclear Fleet
Capacity factor 89% 93%
GWh billed 41,042 40,918
Average realized revenue per MWh $50.29 $54.73
Refueling outage days:
FitzPatrick 34 –
Indian Point 2 28 –
Indian Point 3 – 30
Palisades 34 –
Pilgrim – 25
Vermont Yankee – 25
Realized Revenue per MWh for Entergy Wholesale
Commodities Nuclear Plants
The recent economic downturn and negative trends in the energy
commodity markets have resulted in lower natural gas prices and
lower market prices for electricity in the New York and New England
power regions, which is where five of the six Entergy Wholesale
Commodities nuclear power plants are located. Entergy Wholesale
Commodities’ nuclear business experienced a decrease in realized
price per MWh to $50.29 in 2012 from $54.73 in 2011 and $59.16
in 2010, and is likely to experience a decrease again in 2013 because,
as shown in the contracted sale of energy table in “Market and Credit
Risk Sensitive Instruments,” Entergy Wholesale Commodities has sold
forward 85% of its planned nuclear energy output for 2013 for an
expected average contracted energy price of $46 per MWh based on
market prices at December 31, 2012. In addition, Entergy Wholesale
Commodities has sold forward 73% of its planned nuclear energy
output for 2014 for an expected average contracted energy price
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS continued
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