Entergy 2012 Annual Report Download - page 88

Entergy Corporation and Subsidiaries 2012
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
storm surge, earthquake, flood, and tsunami; and a $20 million self-
insured retention per occurrence for operational perils and all other
natural perils not previously stated, which includes tornado and ice
storm, but excludes named windstorm and associated storm surge,
earthquake, tsunami, and flood.
Covered property generally includes power plants, substations
over $5 million in value, facilities, inventories, and gas distribution-
related properties. Excluded property generally includes above-
ground transmission and distribution lines, poles, and towers. This
coverage is in place for Entergy Corporation, the Registrant Subsid-
iaries, 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 pro-
vides 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 occur-
rence) for some of its non-regulated, non-generation assets. This pol-
icy 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. Four nuclear locations have a $2.5 mil-
lion deductible, which coincides with the nuclear property insurance
deductible at each respective nuclear site.
GAS SYSTEM REBUILD INSURANCE PROCEEDS
(ENTERGY NEW ORLEANS)
Entergy New Orleans received insurance proceeds for future con-
struction 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 employ-
ees, recognized bargaining representatives, and third parties not
selected for open positions or providing services directly or indirectly
to one or more of the Registrant Subsidiaries and other Entergy sub-
sidiaries. Generally, the amount of damages being sought is not speci-
fied in these proceedings. 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 coun-
terparts; claims of race, gender, age, and disability discrimination;
disputes arising under collective bargaining agreements; unfair labor
practice proceedings and other administrative proceedings before the
National Labor Relations Board or concerning the National Labor
Relations Act; claims of retaliation; and claims for or regarding ben-
efits under various Entergy Corporation-sponsored plans. Entergy
and the Registrant Subsidiaries are responding to these lawsuits 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, sub-
stantially all of its asset retirement obligations consist of its liability
for decommissioning its nuclear power plants. In addition, an insig-
nificant amount of removal costs associated with non-nuclear power
plants is also included in the decommissioning line item on the bal-
ance sheets.
These liabilities are recorded at their fair values (which are the pres-
ent 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 stan-
dards 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 follow-
ing amounts to reflect their estimates of the difference between esti-
mated incurred removal costs and estimated removal costs recovered
in rates (in millions):
December 31, 2012 2011
Entergy Arkansas $(12.2) $(16.4)
Entergy Gulf States Louisiana $(22.0) $(30.3)
Entergy Louisiana $ (9.2) $(62.6)
Entergy Mississippi $ 57.4 $ 48.5
Entergy New Orleans $ 29.9 $ 16.3
Entergy Texas $ 11.5 $ 4.5
System Energy $ 56.8 $ 11.8
The cumulative decommissioning and retirement cost liabilities and
expenses recorded in 2012 by Entergy were as follows (in millions):
Change
Liabilities in Cash Liabilities
as of Dec. Flow as of Dec.
31, 2011 Accretion Estimate Spending 31, 2012
Utility:
Entergy Arkansas $ 640.2 $ 40.5 $ – $ – $ 680.7
Entergy Gulf States
Louisiana $ 359.8 $ 21.0 $ – $ – $ 380.8
Entergy Louisiana $ 345.8 $ 23.4 $ 48.9 $ – $ 418.1
Entergy Mississippi $ 5.7 $ 0.3 $ – $ – $ 6.0
Entergy
New Orleans $ 2.9 $ 0.2 $ – $ (0.9) $ 2.2
Entergy Texas $ 3.9 $ 0.2 $ – $ – $ 4.1
System Energy $ 445.4 $ 33.0 $ – $ – $ 478.4
Entergy Wholesale
Commodities $1,492.9 $119.4 $(58.5) $(10.5) $1,543.3
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