XML 83 R24.htm IDEA: XBRL DOCUMENT v2.3.0.15
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2011
Summary of Significant Accounting Policies [Abstract] 
Principles of Consolidation
Prior to April 30, 2011, Cleco reported its investment in Cajun on the equity method of accounting.  In conjunction with the disposition of Acadia Unit 2 to Entergy Louisiana, APH received 100% ownership in Acadia in exchange for its 50% ownership interest in Cajun, and Acadia became a consolidated subsidiary of APH.  Following the disposition, Acadia’s assets, liabilities, revenues, expenses, and cash flows are presented on the corresponding line items of Cleco’s Condensed Consolidated Financial Statements, prospectively.  For additional information on the Acadia Unit 2 transaction, see Note 15 — “Acadia Transactions — Acadia Unit 2.”
Cleco and Cleco Power report the investment in Oxbow on the equity method of accounting.  Under the equity method, the assets and liabilities of this entity are reported as equity investment in investees on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets.  The revenue and expenses of this entity are netted and reported as equity income or loss from investees on Cleco and Cleco Power’s Condensed Consolidated Statements of Income.  
Property, Plant and Equipment
Property, plant and equipment consist primarily of regulated utility generation and energy transmission assets.  Regulated assets, utilized primarily for retail operations and electric transmission and distribution, are stated at the cost of construction, which includes certain materials, labor, payroll taxes and benefits, administrative and general costs, and the estimated cost of funds used during construction.  Jointly owned assets are reflected in property, plant and equipment at Cleco Power’s share of the cost to construct or purchase the assets.  
Restricted CashVarious agreements to which Cleco is subject contain covenants that restrict its use of cash.  As certain provisions under these agreements are met, cash is transferred out of related escrow accounts and becomes available for its intended purposes and/or general corporate purposes. 
Fair Value Measurements and DisclosuresVarious accounting pronouncements require certain assets and liabilities to be measured at their fair values.  Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or debt issuance.  Cleco and Cleco Power are required to disclose the fair value of certain assets and liabilities by one of three levels when required for recognition purposes under GAAP.  Other financial assets and liabilities, such as long-term debt, are reported at their carrying values at their date of issuance on the condensed consolidated balance sheets with their fair values disclosed without regard to the three levels.  
Risk Management
Market risk inherent in Cleco Power’s market risk-sensitive instruments and positions includes potential changes arising from changes in interest rates and the commodity market prices of power and natural gas on different energy exchanges.  
 
Commodity Market Price Risk
Cleco’s Energy Market Risk Management Policy authorizes the use of various derivative instruments, including exchange traded futures and option contracts, forward purchase and sales contracts, and swap transactions to reduce exposure to fluctuations in the price of power and natural gas.  Cleco applies the authoritative guidance as it relates to derivatives and hedging to determine whether the market risk-sensitive instruments and positions are required to be marked-to-market.  Generally, Cleco Power’s market risk-sensitive instruments and positions qualify for the normal-purchase, normal-sale exception to mark-to-market accounting because Cleco Power takes physical delivery and the instruments and positions are used to satisfy customer requirements.  Cleco Power entered into certain financial transactions it considered economic hedges to mitigate the risk associated with a contract for fixed-price power provided to a wholesale customer through December 2010.  These transactions were marked-to-market with the resulting gain or loss recorded on the income statement as a component of operating revenue.  
Cleco Power has entered into other positions to mitigate the volatility in customer fuel costs.  These positions are marked-to-market with the resulting gain or loss recorded on the balance sheet as a component of energy risk management assets or liabilities.  Such gain or loss is deferred as a component of deferred fuel assets or liabilities.  When these positions close, actual gains or losses will be included in the fuel adjustment clause and reflected on customers’ bills as a component of the fuel cost adjustment. 
Cleco and Cleco Power maintain a master netting agreement policy and monitor credit risk exposure through review of counterparty credit quality, counterparty credit exposure, and counterparty concentration levels.  Cleco manages these risks by establishing appropriate credit and concentration limits on transactions with counterparties and by requiring contractual guarantees, cash deposits, or letters of credit from counterparties or their affiliates, as deemed necessary.  Cleco Power has agreements in place with various counterparties that authorize the netting of financial buys and sells and contract payments to mitigate credit risk for transactions entered into for risk management purposes.  
Interest Rate Risk
In August 2011, Cleco Power entered into a treasury rate lock contract in order to mitigate the interest rate exposure on coupon payments related to a forecasted debt issuance.