Entergy 2012 Annual Report Download - page 63

Entergy Corporation and Subsidiaries 2012
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Entergy’s Accounting Policy group, which reports to the Chief
Accounting Officer, was primarily responsible for determining the
valuation of the Vermont Yankee plant and related assets, in con-
sultation with external advisors. Accounting Policy obtained and
reviewed information from other Entergy departments with expertise
on the various inputs and assumptions that were necessary to calcu-
late the fair value of the asset group.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents
the incremental difference imputed by the LPSC between the AFUDC
actually recorded by Entergy Gulf States Louisiana on a net-of-tax
basis during the construction of River Bend and what the AFUDC
would have been on a pre-tax basis. The imputed amount was only
calculated on that portion of River Bend that the LPSC allowed in
rate base and is being amortized through August 2025.
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy’s
Utility operating companies and System Energy (except that portion allo-
cable to the deregulated operations of Entergy Gulf States Louisiana) are
included in regulatory assets and are being amortized over the life of the
related new issuances, or over the life of the original debt issuance if the
debt is not refinanced, in accordance with ratemaking treatment.
Taxes Imposed on Revenue-Producing Transactions
Governmental authorities assess taxes that are both imposed on and
concurrent with a specific revenue-producing transaction between a
seller and a customer, including, but not limited to, sales, use, value
added, and some excise taxes. Entergy presents these taxes on a net
basis, excluding them from revenues, unless required to report them
differently by a regulatory authority.
Presentation of Preferred Stock without Sinking Fund
Accounting standards regarding non-controlling interests and the
classification and measurement of redeemable securities require the
classification of preferred securities between liabilities and share-
holders’ equity on the balance sheet if the holders of those securities
have protective rights that allow them to gain control of the board of
directors in certain circumstances. These rights would have the effect
of giving the holders the ability to potentially redeem their securi-
ties, even if the likelihood of occurrence of these circumstances is
considered remote. The Entergy Arkansas, Entergy Mississippi, and
Entergy New Orleans articles of incorporation provide, generally,
that the holders of each company’s preferred securities may elect a
majority of the respective company’s board of directors if dividends
are not paid for a year, until such time as the dividends in arrears are
paid. Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy
New Orleans present their preferred securities outstanding between
liabilities and shareholders’ equity on the balance sheet. Entergy Gulf
States Louisiana and Entergy Louisiana, both organized as limited
liability companies, have outstanding preferred securities with similar
protective rights with respect to unpaid dividends, but provide for the
election of board members that would not constitute a majority of
the board; and their preferred securities are therefore classified for all
periods presented as a component of members’ equity.
The outstanding preferred securities of Entergy Arkansas, Entergy
Mississippi, Entergy New Orleans, and Entergy Asset Management
(whose preferred holders also had protective rights until the securities
were repurchased in December 2011), are similarly presented between
liabilities and equity on Entergy’s consolidated balance sheets and
the outstanding preferred securities of Entergy Gulf States Louisiana
and Entergy Louisiana are presented within total equity in Entergy’s
consolidated balance sheets. The preferred dividends or distributions
paid by all subsidiaries are reflected for all periods presented outside
of consolidated net income.
New Accounting Pronouncements
The accounting standard-setting process, including projects between
the FASB and the International Accounting Standards Board (IASB)
to converge U.S. GAAP and International Financial Reporting Stan-
dards, is ongoing and the FASB and the IASB are each currently
working on several projects that have not yet resulted in final pro-
nouncements. Final pronouncements that result from these projects
could have a material effect on Entergy’s future net income, financial
position, or cash flows.
NOTE 2. RATE AND REGULATORY MATTERS
Regulatory Assets
OTHER REGULATORY ASSETS
Regulatory assets represent probable future revenues associated with
costs that are expected to be recovered from customers through the
regulatory ratemaking process affecting the Utility business. In addi-
tion to the regulatory assets that are specifically disclosed on the
face of the balance sheets, the tables below provide detail of “Other
regulatory assets” that are included on Entergy’s balance sheets as of
December 31, 2012 and 2011 (in millions):
2012 2011
Asset retirement obligation - recovery dependent
upon timing of decommissioning (Note 9)(b) $ 422.6 $ 395.9
Deferred capacity - (Note 2 - Retail Rate
Proceedings - Filings with the LPSC) 6.8 –
Grand Gulf fuel - non-current and power
management rider - recovered through rate
riders when rates are redetermined periodically
(Note 2 - Fuel and purchased power cost recovery) 35.1 12.4
New nuclear generation development costs
(Note 2) 56.8 56.8
Gas hedging costs - recovered through fuel rates 8.3 30.3
Pension & postretirement costs
(Note 11 - Qualified Pension Plans,
Other Postretirement Benefits, and
Non-Qualified Pension Plans)(b) 2,866.3 2,542.0
Postretirement benefits - recovered through 2012
(Note 11 - Other Postretirement Benefits)(b) – 2.4
Provision for storm damages, including hurricane
costs - recovered through securitization,
insurance proceeds, and retail rates (Note 2 -
Hurricane Isacc and Storm Cost Recovery Filings
with Retail Regulators) 970.8 996.4
Removal costs - recovered through depreciation rates
(Note 9)(b) 155.7 81.2
River Bend AFUDC - recovered through August 2025
(Note 1 - River Bend AFUDC) 22.4 24.3
Spindletop gas storage facility - recovered through
December 2032(a) 29.4 31.0
Transition to competition costs - recovered over a
15-year period through February 2021 82.1 89.2
Little Gypsy cost - recovered
through securitiazation (Note 5 - Entergy Louisiana
Securitization Bonds - Little Gypsy) 177.6 198.4
Incremental ice storm costs - recovered through 2032 10.0 10.5
Michoud plant maintenance - recovered over a
7-year period through September 2018 11.0 12.9
Unamortized loss on reacquired debt -
recovered over term of debt 95.9 108.8
Other 75.1 44.4
Total $5,025.9 $4,636.9
(a) The jurisdictional split order assigned the regulatory asset to Entergy Texas.
The regulatory asset, however, is being recovered and amortized at Entergy
Gulf States Louisiana. As a result, a billing occurs monthly over the same term
as the recovery and receipts will be submitted to Entergy Texas. Entergy Texas
has recorded a receivable from Entergy Gulf States Louisiana and Entergy Gulf
States Louisiana has recorded a corresponding payable.
(b) Does not earn a return on investment, but is offset by related liabilities.
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