Entergy 2012 Annual Report Download - page 77

Entergy Corporation and Subsidiaries 2012
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
New Nuclear Generation Development Costs
ENTERGY GULF STATES LOUISIANA AND ENTERGY LOUISIANA
Entergy Gulf States Louisiana and Entergy Louisiana have been devel-
oping and are preserving a project option for new nuclear genera-
tion at River Bend. In March 2010, Entergy Gulf States Louisiana and
Entergy Louisiana filed with the LPSC seeking approval to continue
the limited development activities necessary to preserve an option to
construct a new unit at River Bend. The testimony and legal briefs of
the LPSC staff generally support the request of Entergy Gulf States
Louisiana and Entergy Louisiana, although other parties filed briefs,
without supporting testimony, in opposition to the request. At an
evidentiary hearing in October 2011, Entergy Gulf States Louisiana,
Entergy Louisiana, and the LPSC staff presented testimony in support
of certification of activities to preserve an option for a new nuclear
plant at River Bend. The ALJ recommended, however, that the LPSC
decline the request of Entergy Gulf States Louisiana and Entergy
Louisiana on the basis that the LPSC’s rule on new nuclear develop-
ment does not apply to activities to preserve an option to develop
and on the further grounds that the companies improperly engaged
in advanced preparation activities prior to certification. There has
been no suggestion that the planning activities or costs incurred were
imprudent. At its June 28, 2012 meeting the LPSC voted to uphold
the ALJ’s decision and directed that Entergy Gulf States Louisiana and
Entergy Louisiana be permitted to seek recovery of these costs in their
anticipated, upcoming rate case filings, fully reserving the LPSC’s right
to determine the recoverability of such costs in rates. On September
10, 2012, Entergy Gulf States Louisiana and Entergy Louisiana filed
a petition for appeal and judicial review of the LPSC’s order with
the Louisiana Nineteenth Judicial District Court. A schedule for the
appeal has not been established. In their rate cases filed in February
2013, Entergy Gulf States Louisiana and Entergy Louisiana request
recovery of their new nuclear generation development costs over a ten-
year amortization period, with the costs included in rate base.
ENTERGY MISSISSIPPI
Pursuant to the Mississippi Baseload Act and the Mississippi Public
Utilities Act, Entergy Mississippi has been developing and is pre-
serving a project option for new nuclear generation at Grand Gulf
Nuclear Station. This project is in the early stages, and several issues
remain to be addressed over time before significant additional capi-
tal would be committed to this project. In October 2010, Entergy
Mississippi filed an application with the MPSC requesting that the
MPSC determine that it is in the public interest to preserve the option
to construct new nuclear generation at Grand Gulf and that the
MPSC approve the deferral of Entergy Mississippi’s costs incurred
to date and in the future related to this project, including the accrual
of AFUDC or similar carrying charges. In October 2011, Entergy
Mississippi and the Mississippi Public Utilities Staff filed with the
MPSC a joint stipulation that the MPSC approved in November
2011. The stipulation states that there should be a deferral of the $57
million of costs incurred through September 2011 in connection with
planning, evaluation, monitoring, and other and related generation
resource development activities for new nuclear generation at Grand
Gulf. The costs shall be treated as a regulatory asset until the pro-
ceeding is resolved. The Mississippi Public Utilities Staff and Entergy
Mississippi also agree that the MPSC should conduct a hearing to
consider the relief requested by Entergy Mississippi in its application,
including evidence regarding whether costs incurred in connection
with planning, evaluation, monitoring, and other and related genera-
tion resource development activities for new nuclear generation at
Grand Gulf were prudently incurred and are otherwise allowable. The
Mississippi Public Utilities Staff and Entergy Mississippi further agree
that such prudently incurred costs shall be recoverable in a manner to
be determined by the MPSC. In the Stipulation, the Mississippi Public
Utilities Staff and Entergy Mississippi agree that the development of a
nuclear unit project option is consistent with the Mississippi Baseload
Act. The Mississippi Public Utilities Staff and Entergy Mississippi
further agree that the deferral of costs incurred in connection with
planning, evaluation, monitoring, and other and related generation
resource development activities for new nuclear generation at Grand
Gulf also is consistent with the Mississippi Baseload Act. Entergy
Mississippi will not accrue carrying charges or continue to accrue
AFUDC on the costs, pending the outcome of the proceeding. Further
proceedings before the MPSC have not been scheduled.
Texas Power Price Lawsuit
In August 2003, a lawsuit was filed in the district court of Cham-
bers County, Texas by Texas residents on behalf of a purported
class of the Texas retail customers of Entergy Gulf States, Inc. who
were billed and paid for electric power from January 1, 1994 to the
present. The named defendants include Entergy Corporation, Entergy
Services, Entergy Power, Entergy Power Marketing Corp., and
Entergy Arkansas. Entergy Gulf States, Inc. was not a named defen-
dant, but was alleged to be a co-conspirator. The court granted the
request of Entergy Gulf States, Inc. to intervene in the lawsuit to
protect its interests.
Plaintiffs allege that the defendants implemented a “price gouging
accounting scheme” to sell to plaintiffs and similarly situated util-
ity customers higher priced power generated by the defendants while
rejecting less expensive power offered from off-system suppliers. In
particular, plaintiffs allege that the defendants manipulated and con-
tinue to manipulate the dispatch of generation so that power is pur-
chased from affiliated expensive resources instead of buying cheaper
off-system power.
Plaintiffs stated in their pleadings that customers in Texas were
charged at least $57 million above prevailing market prices for
power. Plaintiffs seek actual, consequential and exemplary damages,
costs and attorneys’ fees, and disgorgement of profits. The plaintiffs’
experts have tendered a report calculating damages in a large range,
from $153 million to $972 million in present value, under various
scenarios. The Entergy defendants have tendered expert reports
challenging the assumptions, methodologies, and conclusions of the
plaintiffs’ expert reports.
The case is pending in state district court, and in March 2012 the
court found that the case met the requirements to be maintained as a
class action under Texas law. On April 30, 2012, the court entered an
order certifying the class. The defendants have appealed the order to
the Texas Court of Appeals – First District. The appeal is pending and
proceedings in district court are stayed until the appeal is resolved.
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