UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YesÖ No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants' knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [Ö ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

The aggregate market value of Entergy Corporation Common Stock, $0.01 Par Value, held by non-affiliates as of the end of the second quarter of 2003,2004, was $12.0$12.7 billion based on the reported last sale price of $52.78$56.01 per share for such stock on the New York Stock Exchange on June 30, 2003.2004. Entergy Corporation is the sole holder of the common stock of Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders, to be held May 14, 2004,13, 2005, are incorporated by reference into Parts I and III hereof.

TABLE OF CONTENTS

This combined Form 10-K is separately filed by Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana, Inc., Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company makes representations only as to itself and makes no other representations whatsoever as to any other company.

The report should be read in its entirety as it pertains to each respective registrant. No one section of the report deals with all aspects of the subject matter. Separate Item 6, 7, and 8 sections are provided for each registrant, except for the Notes to the financial statements. The Entergy Corporation Notes to the financial statements are separately presented, but the Notes to the financial statements for the other registrants are combined. These two sets of Notes are marked by headers. All other Items are combined for the registrants.

FORWARD-LOOKING INFORMATION

From            In this filing and from time to time, Entergy makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Although Entergy believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-looking statements involve a number of risks and uncertainties, and there are factors that could cause actual results to differ materially from those expressed or implied in the statements. Some of those factors (in addition to others described elsewhere in this report and in subsequent securities filings) include:

• resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, and other regulatory decisions,proceedings, including those related to Entergy's System Agreement and Entergy's utility supply plan
• Entergy's ability to reducemanage its operation and maintenance costs, particularly at its Non-Utility Nuclear generating facilities including the uncertainty of negotiations with unions to agree to such reductions
• the performance of Entergy's generating plants, and particularly the capacity factors at its nuclear generating facilities
• prices for power generated by Entergy's unregulated generating facilities, the ability to extend or replace the existing purchased power agreements for those facilities, including the Non-Utility Nuclear plants, and the prices and availability of power Entergy must purchase for its utility customers
• Entergy's ability to develop and execute on a point of view regarding prices of electricity, natural gas, and other energy-related commodities
• Entergy-Koch's profitability in trading physical and financial natural gas and power as well as other energy and weather-related contracts
• changes in the number of participants in the energy trading market, and in their creditworthiness and risk profile
• changes in the financial markets, particularly those affecting the availability of capital and Entergy's ability to refinance existing debt, execute its share repurchase program, and to fund investments and acquisitions
• actions of rating agencies, including changes in the ratings of debt and preferred stock, and changes in the rating agencies' ratings criteria
• changes in inflation and interest rates
• Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms
• changes in ownership of joint ventures
• volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities
• changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the establishment of a regional transmission organization that includes Entergy's utility service territory, and the application of market power criteria by the FERC
• changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of Indian Point or other nuclear generating facilities
• uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel storage and disposal
• resolution of pending or future applications for license extensions or modifications of nuclear generating facilities
• changes in law resulting from proposed energy legislation
• changes in environmental, tax, and other laws, including requirements for reduced emissions of sulfur, nitrogen, carbon, mercury, and other substances
• the economic climate, and particularly growth in Entergy's service territory
• variations in weather and the occurrence of hurricanes and other storms and disasters
• advances in technology
• the potential impactseffects of threatened or actual terrorism and war
• the successeffects of Entergy's strategies to reduce current tax payments
• the effects of litigation and government investigations
• changes in accounting standards, corporate governance, and securities law requirements
• Entergy's ability to attract and retain talented management and directors.directors

DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:

DEFINITIONS (Continued)

DEFINITIONS (Continued)

DEFINITIONS (Concluded)

DEFINITIONS (Concluded)

ENTERGY'S BUSINESS

Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail electric distribution operations, energy marketing and trading, and gas transportation.operations. Entergy owns and operates power plants with approximately 30,000 MW of electric generating capacity, and it is the second-largest nuclear power generator in the United States. Entergy delivers electricity to 2.62.7 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. Through Entergy-Koch, Entergy is a leading provider of wholesale energy marketing and trading services, as well as an operator of natural gas pipeline and storage facilities. Entergy generated annual revenues of over $9$10 billion in 20032004 and had approximately 14,80014,400 employees as of December 31, 2003.

Entergy Corporation is an integrated energy company engaged primarily in electric power production, retail electric distribution operations, energy marketing and trading, and gas transportation. Entergy owns and operates power plants with approximately 30,000 MW of electric generating capacity, and it is the second-largest nuclear power generator in the United States. Entergy delivers electricity to 2.6 million utility customers in Arkansas, Louisiana, Mississippi, and Texas. Through Entergy-Koch, Entergy is a leading provider of wholesale energy marketing and trading services, as well as an operator of natural gas pipeline and storage facilities. Entergy generated annual revenues of over $9 billion in 2003 and had approximately 14,800 employees as of December 31, 2003.2004.

Entergy operates primarily through three business segments: U.S. Utility, Non-Utility Nuclear, and Energy Commodity Services.

• U.S. Utilitygenerates, transmits, distributes, and sells electric power within a four-state service territory that includes portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small amount of natural gas distribution.distribution business.
• Non-Utility Nuclearowns and operates five nuclear power plants located in the northeastern United States and sells the electric power produced by those plants to wholesale customers. This business also provides services to other nuclear power plant owners.
• Energy Commodity ServicesprovidesServicesincludes Entergy-Koch and Entergy's non-nuclear wholesale assets business. Entergy-Koch engaged in two major businesses: energy commodity marketing and trading through Entergy-Koch Trading, and gas transportation and storage services through Gulf South Pipeline. Entergy-Koch LP. Energy Commodity Services also includes Entergy'ssold both of these businesses in the fourth quarter of 2004, and Entergy-Koch is no longer an operating entity. The non-nuclear wholesale assets business which sells to wholesale customers the electric power produced by those assets to wholesale customerspower plants that it owns while it focuses on selling the majority of those assets.

improving performance and exploring sales or restructuring opportunities for its power plants. Such opportunities are evaluated consistent with Entergy's market-based point-of-view. The non-nuclear wholesale assets business operates primarily through its regulated utility subsidiaries in a four-state service territory that includes portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans. Entergy has reshaped its non-utility business through the sale in 1998 of its international electric distribution businesses located in the UK and Australia; the growth of its Non-Utility Nuclear business in the northeastern United States beginning in 1999; and the termination ofterminated new greenfield power development activity in 2002. With the start of the Entergy-Koch joint venture in early 2001, Entergy expanded its business opportunities into new areas. The trading activities of Entergy-Koch extend to various parts of the United States, as well as the United Kingdom, Western Europe, and Canada. Entergy-Koch's Gulf South Pipeline system covers the Gulf Coast region of the United States. Entergy's financial interest in the Entergy-Koch venture allows it to appoint fou r of the eight members of the general partner's board of directors. Operating decisions for Entergy-Koch are made by Entergy-Koch management.

(a) In addition to the 3 operating segments presented here, Entergy Consolidated also includes Entergy Corporation (parent company), other business activity, and intercompany eliminations.

The following shows the principal subsidiaries and affiliates within Entergy's business segments. Companies that file reports and other information with the SEC under the Securities Exchange Act of 1934 are identified in bold-faced type.

In addition to its three primary operating segments, Entergy's Competitive Retail Services business markets and sells electricity, thermal energy, and related services in competitive markets, primarily the ERCOT region in Texas, where it has over 60,000105,000 customers. This business is also preparing to operate as Entergy's affiliated competitive retailer when retail open access commences in Entergy Gulf States' service territory in Texas. Competitive Retail Services contributed approximately 5% of Entergy's revenue in 2004, but does not currently have materialsignificant levels of revenue, net income or loss, or total assets;assets, and Entergy reports this business as part of All Other in its segment disclosures.

Strategy

Entergy aspires to achieve industry leading total shareholder returns by leveraging the scale and expertise inherent in its core nuclear and utility operations. Entergy's strategy is to create value by focusingscope includes electricity generation, transmission and distribution as well as natural gas transportation and distribution. Entergy focuses on asset management and strong operational execution,excellence with a particularan emphasis on service reliability and excellence in nuclear operations.  Entergy continually evaluates its business position, with a view toward enhancing the company's scale, scope, and skill advantages. It applies a well-developed point of view of the marketplace and strong risk management to manage its asset portfolio and customer relationships. Entergy benchmarks its operational performance against industry and competitor standards on measures such as safety, reliability, customer service, sustainability, cost efficiency and cost efficiency.

risk management. Entergy also focuses on portfolio management to make periodic buy, build, hold, or sell decisions based upon its analytically-derived points of view which are continuously updated as market conditions evolve.

Availability of SEC filings and other information on Entergy's website

Entergy's internet address is www.entergy.com. Entergy's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to any of these reports, are available free of charge through Entergy's website as soon as reasonably practicable after filing with the SEC. Financial presentations and news releases are also available through Entergy's website. Additionally, Entergy's Corporate Governance Guidelines, Board Committee Charters for the Corporate Governance, Audit, and Personnel Committees, and Entergy's Codes of Conduct are posted on Entergy's website. This information is also available in print to any investor that requests it.

In June 2004, Entergy's chief executive officer certified to the New York Stock Exchange that he was not aware of any violation by Entergy of the New York Stock Exchange corporate governance listing standards.

Part I, Item 1 is continued on page 104.105.

ENTERGY CORPORATION AND SUBSIDIARIES

REPORT OF MANAGEMENT

Management of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial statements and related financial information included herein. The financial statements are based on accounting principles generally accepted in the United States of America. Financial information included elsewhere in this report is consistent with the financial statements.

document. To meet their responsibilities with respect to financial information,this responsibility, management maintainsestablishes and enforcesmaintains a system of internal accounting controlscontrol designed to provide reasonable assurance on a cost-effective basis, as toregarding the integrity, objectivity,preparation and reliabilityfair presentation of the financial records, and as to the protection of assets.statements in accordance with generally accepted accounting principles. This system includes communication through written policies and procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility and the training of personnel. This system is also tested by a comprehensive internal audit program.

Entergy management assesses the effectiveness of its internal control over financial reporting on an annual basis. In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and presentation.

TheAs a supplement to management's assessment, Entergy's independent auditors conduct an objective assessment of the degree to which management meets its responsibility for fairness of financial reporting and issue an attestation report on the adequacy of management's assessment. They evaluate Entergy's internal control over financial reporting and perform such tests and other procedures as they deem necessary to reach and express an opinion on the fairness of the financial statements.

In addition, the Audit Committee of the Board of Directors, composed solely of independent Directors, meets with the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal accounting controls, and auditing and financial reporting matters. The Audit Committee appoints the independent auditors annually, and reviews with the independent auditors the scope and results of the audit effort. The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management, providing free access to the Committee.

Independent public accountants regularly evaluate the systemBased on management's assessment of internal accounting controls and perform such tests and other proceduresusing the COSO criteria, management believes that Entergy maintained effective internal control over financial reporting as they deem necessary to reach and express an opinion onof December 31, 2004. Management further believes that this assessment, combined with the fairness of the financial statements. They also provide the Audit Committee their judgments about the quality of accounting policies and disclosures.

Management believes that these policies and procedures noted above provide reasonable assurance that its operationsEntergy's financial statements are carried outfairly and accurately presented in accordance with a high standard of business conduct.generally accepted accounting principles.

ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

Entergy Corporation is an investor-owned public utility holding company that operates primarily through three business segments.

• U.S. Utility generates,Utilitygenerates, transmits, distributes, and sells electric power within a four-state service territory that includes portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small amount of natural gas distribution.distribution business.
• Non-Utility Nuclearowns and operates five nuclear power plants located in the northeastern United States and sells the electric power produced by those plants to wholesale customers. This business also provides services to other nuclear power plant owners.
• Energy Commodity ServicesprovidesServicesincludes Entergy-Koch and Entergy's non-nuclear wholesale assets business. Entergy-Koch engaged in two major businesses: energy commodity marketing and trading through Entergy-Koch Trading, and gas transportation and storage services through Gulf South Pipeline. Entergy-Koch LP. Energy Commodity Services also includes Entergy'ssold both of these businesses in the fourth quarter of 2004, and Entergy-Koch is no longer an operating entity. The non-nuclear wholesale assets business which sells to wholesale customers the electric power produced by those assets to wholesale customerspower plants that it owns while it focuses on selling the majority of those assets.improving performance and exploring sales or restructuring opportunities for its power plants. Such opportunities are evaluated consistent with Entergy's market-based point-of-view. The non-nuclear wholesale assets business terminated new greenfield power development activity in 2002.

Following are the percentages of Entergy's consolidated revenues and net income generated by these segments and the percentage of total assets held by them:

Results of Operations

Earnings applicable to common stock for the years ended December 31, 2004, 2003, 2002, and 20012002 by operating segment are as follows:

Following is a discussion of Entergy's income before taxes is discussed according to the business segments listed above. Earnings for 2004 include a $97 million tax benefit that resulted from the sale of preferred stock and less than 1% of the common stock in a subsidiary in the non-nuclear wholesale assets business; and a $36 million net-of-tax impairment charge in the non-nuclear wholesale assets business, both of which are discussed below.

Earnings for 2003 include the $137.1 million net-of-tax cumulative effect of changes in accounting principle that increased earnings in the first quarter of 2003, almost entirely resulting from the implementation of SFAS 143. Earnings were negatively affected in the fourth quarter of 2003 by voluntary severance program expenses of $122.8 million net-of-tax. As part of an initiative to achieve productivity improvements with a goal of reducing costs, primarily in the Non-Utility Nuclear and U.S. Utility businesses, in the second half of 2003 Entergy offered a voluntary severance program to employees in various departments. Approximately 1,100 employees, including 650 employees in nuclear operations from the Non-Utility Nuclear and U.S. Utility businesses, accepted the offers.

Earnings for 2002 were negatively affected by net charges ($238.3 million after-tax)net-of-tax) reflecting the effect of Entergy's decision to discontinue additional greenfield power plant development and asset impairments resulting from the deteriorating economics of wholesale power markets principally in the United States and the United Kingdom. The net charges are discussed more fully below in the Energy Commodity Services discussion. See Note 1211 to the consolidated financial statements for further discussion of Entergy's business segments and their financial results in 2004, 2003, 2002, and 2001.

2002.

Refer to"SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES" which accompanies Entergy Corporation's consolidated financial statements in this report for further information with respect to operating statistics.

U.S. UTILITY

The increase in earnings for the U.S. Utility for 2004 from $469 million to $643 million was primarily due to the following:

• the $107.7 million ($65.6 million net-of-tax) accrual in 2003 of the loss that would be associated with a final, non-appealable decision disallowing abeyed River Bend plant costs. Refer to Note 2 to the consolidated financial statements for more details regarding the River Bend abeyed plant costs;
• lower other operation and maintenance expenses primarily due to $99.8 million ($70.1 million net-of-tax) of charges recorded in 2003 in connection with the voluntary severance program;
• the $21.3 million net-of-tax cumulative effect of a change in accounting principle that reduced earnings at Entergy Gulf States in the first quarter of 2003 upon implementation of SFAS 143. See "Critical Accounting Estimates - SFAS 143" below for discussion of the implementation of SFAS 143;
• miscellaneous other income of $27.7 million (pre-tax) in 2004 resulting from a revision of the decommissioning liability for River Bend, as discussed in Note 8 to the consolidated financial statements;
• higher net revenue; and
• lower interest charges.

The decrease in earnings for the U.S. Utility for 2003 from $583 million to $469 million was primarily due to ato:

• the $107.7 million ($65.6 million net-of-tax) accrual in 2003 of the loss that would be associated with a final, non-appealable decision disallowing abeyed River Bend plant costs; $99.8
• $99.8 million ($70.1 million net-of-tax) of charges recorded in 2003 in connection with the voluntary severance program; and
• the $21.3 million net-of-tax cumulative effect of a change in accounting principle that reduced earnings at Entergy Gulf States in the first quarter of 2003 upon implementation of SFAS 143. See "Critical Accounting Estimates - SFAS 143" below for discussion of the implementation of SFAS 143.

Partially offsetting the decrease in earnings in 2003 were decreasedhigher net revenue and lower interest charges.

Net Revenue

2004 Compared to 2003

Net revenue, which is Entergy's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory credits. Following is an analysis of the change in net revenue comparing 2004 to 2003.

The volume/weather variance resulted primarily from increased usage, partially offset by the effect of milder weather on sales during 2004 compared to 2003. Billed usage increased a total of 2,261 GWh in the industrial and commercial sectors.

The summer capacity charges variance was due to the amortization in 2003 at Entergy Gulf States and Entergy Louisiana of deferred capacity charges for the summer of 2001. Entergy Gulf States' amortization began in June 2002 and ended in May 2003. Entergy Louisiana's amortization began in August 2002 and ended in July 2003.

Base rates increased net revenue.revenue due to a base rate increase at Entergy New Orleans that became effective in June 2003.

The deferred fuel cost revisions variance resulted primarily from a revision in 2003 to an unbilled sales pricing estimate to more closely align the fuel component of that pricing with expected recoverable fuel costs at Entergy Louisiana. Deferred fuel cost revisions also decreased net revenue due to a revision in 2004 to the estimate of fuel costs filed for recovery at Entergy Arkansas in the March 2004 energy cost recovery rider.

The price applied to unbilled sales variance resulted from a decrease in fuel price in 2004 caused primarily by the effect of nuclear plant outages in 2003 on average fuel costs.

Gross operating revenues and regulatory credits

Gross operating revenues include an increase in earnings for the U.S. Utility for 2002 from $550fuel cost recovery revenues of $475 million to $583and $18 million wasin electric and gas sales, respectively, primarily due to anhigher fuel rates in 2004 resulting from increases in the market prices of purchased power and natural gas. As such, this revenue increase in net revenue and a decrease in interest charges, partiallyis offset by increasesincreased fuel and purchased power expenses.

Other regulatory credits increased primarily due to the following:

• cessation of the Grand Gulf Accelerated Recovery Tariff that was suspended in depreciationJuly 2003;
• the amortization in 2003 of deferred capacity charges for summer 2001 power purchases at Entergy Gulf States and amortization expensesEntergy Louisiana;
• the deferral in 2004 of $14.3 million of capacity charges related to generation resource planning as allowed by the LPSC;
• the deferral in 2004 by Entergy Louisiana of $11.4 million related to the voluntary severance program, in accordance with a proposed stipulation entered into with the LPSC staff; and other operation
• the deferral in August 2004 of $7.5 million of fossil plant maintenance and maintenance expenses.
  voluntary severance program costs at Entergy New Orleans as a result of a stipulation approved by the City Council.

Net Revenue

2003 Compared to 2002

Net revenue, which is Entergy's measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related, and purchased power expenses and 2) other regulatory credits. Following is an analysis of the change in net revenue comparing 2003 to 2002.

Base rates increased net revenue due to base rate increases at Entergy Mississippi and Entergy New Orleans that became effective in January 2003 and June 2003, respectively. Entergy Gulf States implemented base rate decreases in its Louisiana jurisdiction effective June 2002 and January 2003. The January 2003 base rate decrease of $22.1 million hashad a minimal impact on net income due to a corresponding reduction in nuclear depreciation and decommissioning expenses associated with the change in accounting estimate to reflect an assumed extension of River Bend's useful life.

The deferred fuel pricecost revisions variance iswas due to a revised unbilled sales pricing estimate made in December 2002 of the fuel cost component of the price applied to unbilled sales and further revision of that estimate in the first quarter of 2003.

2003 to more closely align the fuel component of that pricing with expected recoverable fuel costs at Entergy Louisiana.

The asset retirement obligation variance iswas due to the implementation of SFAS 143, "Accounting for Asset Retirement Obligations," adopted in January 2003. See"Critical Accounting Estimates" - - Nuclear Decommissioning Costs" for more details on SFAS 143. The increase iswas offset by increased depreciation and decommissioning expenses and has nohad an insignificant effect on net income.

The increase in net wholesale revenue iswas primarily due to an increase in sales volume to municipal and cooperative customers.

The March 2002 settlement agreement variance reflects the absence in 2003 of the effect of recording the ice storm settlement approved by the APSC in 2002. This settlement resulted in previously deferred revenues at Entergy Arkansas per the transition cost account mechanism being recorded in net revenue in the second quarter of 2002. The decrease iswas offset by a corresponding decrease in other operation and maintenance expenses and hashad a minimal effect on net income.

Gross operating revenues and regulatory credits

Gross operating revenues include an increase in fuel cost recovery revenues of $682 million and $53 million in electric and gas sales, respectively, primarily due to higher fuel rates in 2003 resulting from increases in the market prices of purchased power and natural gas. As such, this revenue increase iswas offset by increased fuel and purchased power expenses.

Other regulatory credits decreased primarily due to the APSC-approved March 2002 settlement agreement mentioned above, which increased other regulatory credits in 2002 to offset other operation and maintenance expenses of $159.9 million related to the December 2000 ice storms. The decrease was partially offset by the asset retirement obligation mentioned above, which increased other regulatory credits in 2003 to offset the increases in depreciation and decommissioning expenses.

Other Income Statement Variances

20022004 Compared to 20012003

Following is an analysisOther operation and maintenance expenses decreased from $1.613 billion in 2003 to $1.569 billion in 2004 primarily due to voluntary severance program accruals of the change$99.8 million in net revenue comparing 2002 to 2001.

The March 2002 settlement agreement is discussed above and is2003 partially offset by an increase of $30.5 million as a result of higher customer service support costs in other operation2004 and maintenance expenses. The effect on net incomean increase of approximately $33 million as a result of higher benefits costs in 2002 is a decrease2004. Entergy expects benefit costs to continue to increase in 2005. See"Critical Accounting Estimates - - Pension and Other Retirement Benefits" and Note 10 to the consolidated financial statements for further discussion of $2.2 million.benefit costs.

The volume/weather variance isDepreciation and amortization expenses increased from $797.6 million in 2003 to $823.7 million in 2004 primarily due to increased electricity usagehigher depreciation of Grand Gulf due to a higher scheduled sale-leaseback principal payment in the service territories. Billed usage increased a total of 2,149 GWh in the residential and commercial sectors.

The fuel price variance is dueaddition to an increase in the price appliedplant in service.

Other income (deductions) changed from ($36.0 million) in 2003 to unbilled sales partially offset by a revised estimate made$108.9 million in December 20022004 primarily due to the fuel cost component of that price.following:

The effect of

• the System Energy refund resulted from System Energy's application to FERC in May 1995 for a rate increase, which it implemented in December 1995, subject to refund. The request sought changes to System Energy's rate schedule, including increases$107.7 million accrual in the revenue requirementsecond quarter of 2003 for the loss that would be associated with decommissioning costs, the depreciation rate, and the rate of return on common equity. In July 2000, FERC approved a lower rate of return than the rate sought by System Energy. Upon receipt of a final, FERC order in July 2001, Entergy Arkansas and Entergy Louisiana recorded entries to spread the impacts of FERC's order to the various revenue, expense, asset, and liability accounts affected, as if the order had been in place since commencement of the case in 1995. The accounting entries necessary to record the effects of the order reduced purchased power expenses in 2001, which resulted in a corresponding increase in net revenue in 2001. The System Energy refund proceeding is discusse d innon-appealable decision disallowing abeyed River Bend plant costs. See Note 2 to the consolidated financial statements.

  Gross operating revenues

  Gross operating revenues include statements for more details regarding the River Bend abeyed plant costs;

• a decreasereduction in fuelcost recovery revenue of $897.4the decommissioning liability for River Bend in 2004, as discussed in Note 8 to the consolidated financial statements; and
• a $10 million and $60.5reduction in the loss provision for an environmental clean-up site.

Interest on long-term debt decreased from $433.5 million relatedin 2003 to electric sales and gas sales, respectively,$390.7 million in 2004 primarily due to lower fuel recovery factors resulting from decreasesthe net retirement and refinancing of long-term debt in 2003 and the market pricesfirst six months of natural gas and purchased power in 2002. As such, this revenue decrease is offset by decreased fuel and purchased power expenses.

2004. See Note 5 to the consolidated financial statements for details on long-term debt.

Other Income Statement Variances

2003 Compared to 2002

Other operation and maintenance expenses decreased from $1.679 billion in 2002 to $1.613 billion in 2003 primarily due to decreased expenses at Entergy Arkansas. The March 2002 settlement agreement that became final in the second quarter of 2002, allowing Entergy Arkansas to recover a large majority of 2000 and 2001 ice storm repair expenses through the previously-collected transition cost account amounts, increased Entergy Arkansas' expenses by $159.9 million in 2002. This increase in expenses in 2002 was offset by a regulatory credit resulting in no effect on net income. The decrease was partially offset by an increase of $99.8 million in benefit costs as a result of voluntary severance program accruals in 2003.

Decommissioning expense increased from $30.5 million in 2002 to $92.5 million in 2003 primarily due to the implementation of SFAS 143, "Accounting for Asset Retirement Obligations." The increase in decommissioning expense iswas offset by increases in other regulatory credits and interest and dividend income and hashad an insignificant effect on net income.

Depreciation and amortization expenses increased from $769.8 million in 2002 to $797.6 million in 2003 primarily due to an increase in plant in service. The increase was also due to the implementation of SFAS 143. The increase in depreciation and amortization expense due to SFAS 143 implementation iswas offset by increases in other regulatory credits and interest and dividend income and has an insignificant effect on net income.

Other income decreased(deductions) changed from $47.6 million in 2002 to ($36.0 million) in 2003 primarily due to a decrease in "miscellaneous - - net" as a result of a $107.7 million accrual in the second quarter of 2003 for the loss that would be associated with a final, non-appealable decision disallowing abeyed River Bend plant costs. See Note 2 to the consolidated financial statements for more details regarding the River Bend abeyed plant costs. The decrease was partially offset by an increase in interest and dividend income as a result of the implementation of SFAS 143.

Interest chargeson long-term debt decreased primarily due to a decrease of $28.5from $462.0 million in interest on long-term debt2002 to $433.5 million in 2003 primarily due to the redemption and refinancing of long-term debt. Refer to Note 5 to the consolidated financial statements for detail of long-term debt outstanding as of December 31, 2003 and 2002.

Following are key performance measures for Non-Utility Nuclear:

2004 Compared to 2003

• lower operation and maintenance expenses, which decreased from $681.8 million in 2003 to $595.7 million in 2004, primarily resulting from charges recorded in 2003 in connection with the voluntary severance program;
• higher revenues, which increased from $1.275 billion in 2003 to $1.342 billion in 2004, primarily resulting from higher contract pricing. The addition of a support services contract for the Cooper Nuclear Station and increased generation in 2004 due to power uprates completed in 2003 and fewer planned and unplanned outages in 2004 also contributed to the higher revenues; and
• miscellaneous income resulting from a reduction in the decommissioning liability for a plant, as discussed in Note 8 to the consolidated financial statements.

Partially offsetting this increase were the following:

• higher income taxes, which increased from $88.6 million in 2003 to $142.6 million in 2004; and
• higher depreciation expense, which increased from $34.3 million in 2003 to $48.9 million in 2004, due to additions to plant in service.

2003 Compared to 2002

The increase in earnings for Non-Utility Nuclear from $200.5 million to $300.8 million was primarily due to the $154.5 million net-of-tax cumulative effect of a change in accounting principle recognized in the first quarter of 2003 upon implementation of SFAS 143. See "Critical Accounting Estimates - - SFAS 143" below for discussion of the implementation of SFAS 143. Income before the cumulative effect of accounting change decreased by $54.2 million. The decrease was primarily due to $83.0 million ($50.6 million net-of-tax) of charges recorded in connection with the voluntary severance program. Except for the effect of the voluntary severance program, operation and maintenance expenses in 2003 per MWh of generation were in line with 2002 operation and maintenance expenses.

ENERGY COMMODITY SERVICES

Sales of Entergy-Koch Businesses

In the fourth quarter of 2004, Entergy-Koch sold its energy trading and pipeline businesses to third parties. The sales came after a review of strategic alternatives for enhancing the value of Entergy-Koch, LP. Entergy received $862 million of cash distributions in 2004 from Entergy-Koch after the business sales, and Entergy ultimately expects to receive total net cash distributions exceeding $1 billion, comprised of the after-tax cash from the distributions of the sales proceeds and the eventual liquidation of Entergy-Koch. Entergy currently expects that it will receive the remaining cash distributions in 2006, and expects that the net cash distributions will exceed its equity investment in Entergy-Koch. Entergy expects to record a $60 million net-of-tax gain when the remainder of the proceeds are received in 2006.

In the purchase agreements for the energy trading and the pipeline business sales, Entergy-Koch has agreed to indemnify the respective purchasers for certain potential losses relating to any breaches of the sellers' representations, warranties, and obligations under each of the purchase agreements. Entergy Corporation has guaranteed up to 50% of Entergy-Koch's indemnification obligations to the purchasers. Entergy does not expect any material claims under these indemnification obligations, but to the extent that any are asserted and paid, the gain that Entergy expects to record in 2006 may be reduced.

Results of Operations

20022004 Compared to 2001

2003

The increasedecrease in earnings for Non-Utility NuclearEnergy Commodity Services from $127.9$180.5 million to $200.5$3.5 million was primarily due to the acquisitions of Indian Point 2, which was purchased in September 2001, and Vermont Yankee, which was purchased in July 2002. Also contributing to the increase in to:

• earnings was higher pricing under certain purchase power contracts.

  Energy Commodity Services

  Earnings for Energy Commodity Services in 2003 were primarily driven byfrom Entergy's investment in Entergy-Koch. Following are key performance measuresEntergy-Koch were $254 million lower in 2004, primarily as a result of Entergy-Koch's trading business reporting a loss from its operations in 2004; and

• Entergy recorded a charge in 2004 of approximately $55 million ($36 million net-of-tax) as a result of an impairment of the value of the Warren Power plant, which is owned in the non-nuclear wholesale assets business. Entergy concluded that the plant is impaired based on valuation studies prepared in connection with the Entergy Asset Management stock sale discussed below.

Partially offsetting the decrease in earnings is a tax benefit resulting from the sale of preferred stock and less than 1% of the common stock of Entergy Asset Management, an Entergy subsidiary. In December 2004, an Entergy subsidiary sold the stock to a third party for Entergy-Koch's operations$29.75 million. The sale resulted in a capital loss for 2003, 2002, and 2001:

tax purposes of $370 million, producing a net tax benefit of $97 million that Entergy recorded in the fourth quarter of 2004.

2003 Compared to 2002

The increase in earnings for Energy Commodity Services in 2003 from a $145.8 million loss to $180.5 million in earnings was primarily due to $428.5 million ($238.3 million net-of-tax) ofnet charges recorded to operating expenses in 2002, as discussed in the 2002 to 2001 comparison below. Higher earnings from Entergy's investment in Entergy-Koch also contributed to the increase in earnings. The income from Entergy's investment in Entergy-Koch was $73 million higher in 2003 primarily as a result of higher earnings at Entergy-Koch Trading (EKT). Volatility was slightly up andin its trading earnings reflected solid point-of-view trading results. business.

In addition, EKT's physical optimization business continued to contribute earnings, and its European business earnings increased as trading activities continued to expand beyond the United Kingdom.Earnings at Gulf South Pipeline were lower due to lower throughput and higher production costs. The decreased throughput was due to shifting gas flow patterns in a sustained high gas price environment that led to higher fuel costs. Production costs were higher as the result of incremental legal and consultant expenses incurred primarily in connection with Gulf South's defense of a lawsuit which it believes has no merit.

2002, Entergy accounts for its 50% share in Entergy-Koch under the equity method of accounting. Earnings from Entergy-Koch are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. Certain terms of the partnership arrangement allocated income from various sources, and the taxes on that income, on a significantly disproportionate basis through 2003. Losses and distributions from operations are allocated to the partners equally. Substantially all of Entergy-Koch's profits were allocated to Entergy in 2003, 2002, and 2001. Effective January 1, 2004, a revaluation of Entergy-Koch's assets for legal capital account purposes occurred, and future profit allocations changed after the revaluation. The profit allocations other than for weather trading and international trading became equal. Profit allocations for weather trading and international trading remain disproportionate to the ownership interests. The weather trading and international trading alloca tions are unequal only within a specified range, such that the overall earnings allocation should not materially differ from 50/50. Earnings allocated under the terms of the partnership agreement constitute equity, not subject to reallocation, for the partners.

2002 Compared to 2001

The decrease in earnings for Energy Commodity Services in 2002 from $105.9 million to a $145.8 million loss was primarily due to therecorded charges to reflect the effect of Entergy's decision to discontinue additional greenfield power plant development and to reflect asset impairments resulting from the deteriorating economics of wholesale power markets principally in the United States and the United Kingdom. Entergy recordedThe net charges of $428.5 million ($238.3 million net-of-tax) to operating expenses. The net charges consistconsisted of the following:

• The power development business obtained contracts in October 1999 to acquire 36 turbines from General Electric. Entergy's rights and obligations under the contracts for 22 of the turbines were sold to an independent special-purpose entity in May 2001. $178.0 million of the charges, including an offsetting net-of-tax benefit of $18.5 million related to the subsequent sale of four turbines to a third party, iswas a provision for the net costs resulting from cancellation or sale of the turbines subject to purchase commitments with the special-purpose entity;
• $204.4 million of the charges resultsresulted from the write-off of Entergy Power Development Corporation's equity investment in the Damhead Creek project and the impairment of the values of its Warren Power power plant and its Crete and RS Cogen projects. This portion of the charges reflectsreflected Entergy's estimate of the effects of reduced spark spreads in the United States and the United Kingdom. Damhead Creek was sold in December 2002, resulting in net income of $31.4 million;
• $39.1 million of the charges relatesrelated to the restructuring of the non-nuclear wholesale assets business, which iswas comprised of $22.5 million of impairments of administrative fixed assets, $10.7 million of estimated sublease losses, and $5.9 million of employee-related costs;
• $32.7 million of the charges resultsresulted from the write-off of capitalized project development costs for projects that willwould not be completed; and
• a gain of $25.7 million ($15.9 million net-of-tax) realized on the sale in August 2002 of an interest in projects under development in Spain.

PARENT & OTHER

2004 Compared to 2003

Also, in the first quarter of 2002, Energy Commodity Services sold its interests in projects in Argentina, Chile, and Peru for net proceeds of $135.5 million. After impairment provisions recorded for theseLatin Americaninterests in 2001, the net loss realized on the sale in 2002 was insignificant.

Revenues and fuel and purchased power expenses decreased for Energy Commodity Services by $1,075.8 million and $876.9 million, respectively, in 2002 primarily due to:

• a decrease of $542.9 million in revenues and $539.6 million in fuel and purchased power expenses resulting from the sale of Highland Energy in the fourth quarter of 2001;
• a decrease of $161.7 million in revenues resulting from the sale of the Saltend plant in August 2001; and
• a decrease of $139.1 million in revenues and $133.5 million in purchased power expenses due to the contribution of substantially all of Entergy's power marketing and trading business to Entergy-Koch in February 2001. Earnings from Entergy-Koch are reported as equity in earnings of unconsolidated equity affiliates in the financial statements. The net income effect of the lower revenues was more than offset by the income from Entergy's investment in Entergy-Koch. The income from Entergy's investment in Entergy-Koch was $31.9 million higher in 2002 primarily as a result of earnings at Entergy-Koch Trading (EKT) and higher earnings at Gulf South Pipeline due to more favorable transportation contract pricing. Although the gain/loss days ratio reported above declined in 2002, EKT made relatively more money on the gain days than the loss days, and thus had an increase in earnings for the year.

Parent & Other from a $23.4 million loss to $17.6 million in earnings was primarily due to the following:

• realization of $16.7 million of tax benefits related to the Entergy-Koch investment; and
• Entergy's competitive retail business earned a very small profit in 2004 compared to reporting a $14.4 million loss in 2003.

2003 Compared to 2002

The loss from Parent & Other decreased in 2003 from $38.6 million to $23.4 million primarily due to lower income tax expense.

The loss from Parent & Other decreased in 2002 from $57.9 million to $38.6 million primarily due to:

• a decrease in income tax expense of $12.1 million resulting from the allocation of intercompany tax benefits; and
• a decrease in interest charges of $6.0 million.

Income Taxes

The effective income tax rates for 2004, 2003, and 2002 and 2001 were 28.2%, 37.9%, 32.1%, and 38.3%32.1%, respectively. See Note 3 to the consolidated financial statements for a reconciliation of the federal statutory rate of 35.0% to the effective income tax rates.

The lower effective income tax rate in 2004 is primarily due to the tax benefits resulting from the Entergy Asset Management stock sale discussed above.

Liquidity and Capital Resources

This section discusses Entergy's capital structure, capital spending plans and other uses of capital, sources of capital, and the cash flow activity presented in the cash flow statement.

Capital Structure

Entergy's capitalization is balanced between equity and debt, as shown in the following table. The reduction in the debt to capital percentage forfrom 2002 to 2003 is the result of reduced debt outstanding in the U.S. Utility and Non-Utility Nuclear businesses, and an increase in shareholders' equity, primarily due to increased retained earnings. The reduction in the percentage for 2002 is primarily the result of the sale of Damhead Creek in December 2002. Debt outstanding on the Damhead Creek facility was $458 million as of December 31, 2001.

Net debt consists of gross debt less cash and cash equivalents. Gross debtDebt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Net capitalCapital consists of net debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. The preferred stock with sinking fund is included in gross debt pursuant to SFAS 150, which Entergy implemented in the third quarter of 2003. The 2002 and 2001 ratios doratio does not reflect that type of security as debt, but dodoes include it in net capital, which is how Entergy presented those securities prior to implementation of SFAS 150. Entergy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy's financial condition.

Long-term debt, including the currently maturing portion, makes up over 90% of Entergy's total debt outstanding. Following are Entergy's long-term debt principal maturities as of December 31, 2003 and 20022004 by operating segment. A significant factor in the change from 2002 to 2003 is over $2 billion of debt refinancing or retirement activity in the U.S. Utility business in 2003. The figures below include principal payments on the Entergy Louisiana and System Energy sale-leaseback transactions, which are included in long-term debt on the balance sheet.