Entergy 2012 Annual Report Download - page 33

Entergy Corporation and Subsidiaries 2012
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS continued
Consummation of the Separation is subject to the satisfaction of the
conditions applicable to Entergy and ITC contained in the Separation
Agreement and the Merger Agreement, including that the sum of
the principal amount of TransCo Securities issued to Entergy and
the principal amount of the bridge facility entered into by TransCo’s
subsidiaries is approximately $1.775 billion, subject to adjustment
pursuant to the Merger Agreement and the Separation Agreement.
Filings with Retail Regulators
In conjunction with ITC, each of the Utility operating companies
has filed applications with their respective retail regulators seeking
approval for the proposal to spin off and merge the Transmission
Business with ITC, including approval for change of control of the
transmission assets and transaction-related steps in the spin-off and
merger. An application was filed with the LPSC on September 5,
2012, with the City Council on September 12, 2012, with the APSC
on September 28, 2012, with the MPSC on October 5, 2012, and
with the PUCT on February 19, 2013. Also, on February 22, 2013,
Entergy Texas filed with the PUCT its transmission cost recovery rider
application seeking to recover its 2014 ITC transmission charges and
MISO administrative costs. Entergy Arkansas and ITC also filed a
joint application with the Missouri Public Service Commission on
February 14, 2013 to obtain approval for the transfer of limited
transmission facilities located in Missouri.
The ALJ in the LPSC proceeding has established a procedural
schedule with staff testimony due March 14, 2013 and a hearing set
to commence on June 24, 2013. LPSC consideration is anticipated in
September 2013. The City Council has established a procedural sched-
ule with a hearing scheduled to commence on July 23, 2013, with certi-
fication of the record to the City Council no later than August 6, 2013.
The APSC established a procedural schedule with staff testimony due
in April 2013 and a hearing commencing in July 2013. The MPSC
has established a procedural schedule with staff testimony due in June
2013, a hearing commencing in August 2013, and a final order issued
on or before September 15, 2013. The PUCT is required to issue an
order within 180 days of Entergy Texas’s filing.
Filings with the FERC
On September 24, 2012, Entergy, ITC, and certain of their subsid-
iaries submitted a series of filings with the FERC to obtain regula-
tory approvals related to the proposed transfer to ITC subsidiaries
of the transmission assets owned by the Utility operating companies.
These filings include a joint application for authorization of the
acquisition and disposition of jurisdictional transmission facilities,
approval of transmission service formula rates and certain jurisdic-
tional agreements, and a petition for declaratory order on the appli-
cation of Federal Power Act section 305(a). The application seeks
approval under Federal Power Act section 205 of formula rates under
Attachment O of the MISO Tariff for each of the new ITC Operating
Companies (which will become Transmission Owner members of
MISO) and of related jurisdictional pro forma agreements. In a sepa-
rate filing, MISO sought approval of an amendment to the MISO
Tariff pursuant to Federal Power Act section 205 to enable the inte-
gration of the new ITC Operating Companies’ transmission facilities
into MISO prior to the Utility operating companies becoming market
participants in MISO. On September 26, 2012, Entergy Services sub-
mitted an application under Federal Power Act section 205 request-
ing FERC authorization to cancel System Agreement Service Schedule
MSS-2 (Transmission Equalization) effective upon closing of the
transaction. In October 2012, Entergy, ITC, and certain subsidiar-
ies submitted filings with the FERC to obtain regulatory approvals
under Federal Power Act section 204 for the various financings being
undertaken as part of the transaction.
Various parties have submitted comments and protests to the
FERC regarding these filings. The comments filed at the FERC include
various matters related to the proposed transaction itself, including
concerns about hold harmless commitments, whether the benefits of
the transaction outweigh rate effects, and whether the transaction
is consistent with the public interest, as well as issues related to the
Utility operating companies’ proposal to join MISO. Commenters
have also challenged, among other things, aspects of the transmission
rates proposed by the ITC applicants, including for example the pro-
posed return on common equity, debt/equity ratio, and the number
of transmission pricing zones. Entergy and ITC are in the process of
responding to the comments and protests filed as of a January 22,
2013 comment deadline established by the FERC. FERC rules call
for a decision 180 days from the date of a completed application
provided that the matter is not set for hearing or is not otherwise
extended for up to an additional 180 days. If a matter is set for hear-
ing, a procedural schedule will be established.
Other Filings
In July 2012, Entergy Corporation submitted a request to the Internal
Revenue Service seeking a private letter ruling substantially to the effect
that certain requirements for the tax-free treatment of the distribu-
tion of the transmission business are met. In September 2012, Entergy
submitted an application to the NRC for approval of certain nuclear
plant license transfers and amendments as part of the steps to complete
the spin-off and merger. In December 2012, Entergy submitted a pre-
merger notification under the Hart-Scott-Rodino Act (HSR Act) with
the Federal Trade Commission and the Department of Justice and the
applicable waiting period under the HSR Act has expired.
ENTERGY WHOLESALE COMMODITIES AUTHORIZATIONS
TO OPERATE ITS NUCLEAR POWER PLANTS
In March 2011 and May 2012 the NRC renewed the operating
licenses of Vermont Yankee and Pilgrim, respectively, for an addi-
tional 20 years, as a result of which each license now expires in 2032.
For additional discussion regarding the continued operation of the
Vermont Yankee plant, see “Impairment of Long-Lived Assets” in
Note 1 to the financial statements. In the Vermont Yankee license
renewal case, the Vermont Department of Public Service and the New
England Coalition appealed the NRC’s renewal of Vermont Yankee’s
license to the D.C. Circuit. In June 2012 the D.C. Circuit denied that
appeal. The time for seeking further judicial review of the NRC’s
issuance of Vermont Yankee’s renewed operating license has expired.
In the Pilgrim license renewal case, three contentions remained pend-
ing before the ASLB at the time the license was issued. Two of those
contentions were subsequently denied by the ASLB and not appealed
within the applicable time. A third remaining contention (alleging
failure of the Pilgrim Environmental Impact Statement to address
adequately an endangered species) was denied by the ASLB and then
appealed to the NRC, which denied the appeal on December 6, 2012.
No appeal of the NRC’s decision was filed within the time allowed
for such appeals. The NRC has indicated that should the appeal of
a contention result in voiding of the renewed license, Pilgrim could
operate under the “timely renewal” doctrine in reliance on the
prior, and now superseded, license until proceedings concerning the
renewed license are final. Massachusetts appealed the NRC’s renewal
of Pilgrim’s license to the United States Court of Appeals for the First
Circuit. Entergy intervened in that appeal. Briefing was completed
and oral argument was held December 5, 2012. On February 25,
2013, the United States Court of Appeals for the First Circuit denied
Massachusetts’s appeal.
The NRC operating licenses for Indian Point 2 and Indian Point
3 expire in September 2013 and December 2015, respectively, and
NRC license renewal applications are in process for these plants.
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