Other regulatory charges (credits) include the following significant activity:

Depreciation and amortization expensesInterest expense increased primarily due to additions to plant in service, including the Union Power Station purchasedissuance in March 2016, partially offset2019 of $525 million of 4.20% Series mortgage bonds by Entergy Louisiana and the effectsissuance in March 2019 of recording the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement$350 million of approximately $11 million in 2016 of spent nuclear fuel storage costs previously recorded as depreciation.4.20% Series mortgage bonds by Entergy Arkansas. See Note 85 to the financial statements for a discussion of long-term debt.

Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of the amortization in 2019 of higher costs associated with refueling outages and increases in decommissioning expenses in 2016 primarily due to revised decommissioning cost studies in 2015 for Grand Gulf and Waterford 3.

See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35%21% to the effective income tax rates, and for additional discussion regarding income taxes.

The effective income tax rate for 20162018 was 59.1%595%. The difference in the effective income tax rate versus the statutory rate of 35% for 201621% was primarily due to a change inamortization of excess accumulated deferred income taxes, the tax classificationeffects of a legal entity that ownedrestructuring within the Utility, and a restructuring of the investment holdings in one of the Entergy Wholesale CommoditiesCommodities’ nuclear power plantsplant decommissioning trusts for which additional tax basis is now recoverable. See Notes 2 and 3 to the reversal offinancial statements for a portiondiscussion of the provision for uncertain tax positions as a result ofeffects and regulatory activity regarding the settlement of the 2010-2011 IRS audit, partially offset by state income taxesTax Cuts and certain book and tax differences related to utility plant items.Jobs Act. See Note 3 to the financial statements for additionala discussion of the changerestructuring.

Income Tax Legislation

On December 22, 2017, President Trump signed into law H.R. 1, also known as the Tax Cuts and Jobs Act (the Act). As a result of the Act, Entergy and the Registrant Subsidiaries re-measured their deferred tax assets and liabilities in December 2017 to reflect the reduction in the federal corporate income tax rate from 35% to 21% that iswas effective January 1, 2018. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017, 2018, and 2019 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses the regulatory proceedings commenced or other responses by Entergy’s regulators tothat have considered the effects of the Act.

On a going forward basis, after going through the appropriate regulatory processes Entergy expects the Act to reduce itsEntergy’s operating cash flows becausehave been and will be reduced by the lower federal corporate income tax rate will result in lower income tax expense collected in revenues and asAct, most significantly over the time that the Registrant Subsidiaries are returning unprotected excess deferred income taxes are returned to customers. In general, rateRate base is expected to increase over time as a consequence of the Act as the excess deferred income taxes are returned to customers. Entergy expects to financefinanced its incremental cash requirements as a consequence of these changesthe Act through a combination of Registrant Subsidiary debt and Entergy Corporation debt and equity. In June 2018, Entergy Corporation expectsmarketed an equity offering of 15.3 million shares of common stock. In lieu of issuing equity at the equitytime of the offering, Entergy entered into forward sale agreements with several counterparties. In December 2018, Entergy physically settled a portion of this financingits obligations under the forward sale agreements by delivering 6.8 million shares of its common stock in exchange for cash proceeds of $500 million. In May 2019, Entergy physically settled its remaining obligations under the forward sale agreements by delivering 8.5 million shares of common stock in exchange for cash proceeds of $608 million. See Note 7 to be approximately $1 billion, and currently expects to issue all of this equity before the end of 2019. It is expected that certain credit metrics that incorporate operating cash flows or debt outstanding will be adversely affected by the effectsfinancial statements for further discussion of the Act.forward sale agreements.

Entergy Wholesale Commodities includes the ownership of the following nuclear reactors:

Entergy Wholesale Commodities also includes the ownership of two non-operating nuclear facilities, Big Rock Point in Michigan and Indian Point 1 in New York that were acquired when Entergy purchased the Palisades and Indian Point 2 nuclear plants, respectively. These facilities are in various stages of the decommissioning process. Big Rock Point is under contract to be sold with the Palisades plant and Indian Point 1 is under contract to be sold with the Indian Point 2 and Indian Point 3 plants. In addition, Entergy Wholesale Commodities provides operations and management services, including decommissioningdecommissioning-related services, to nuclear power plants owned by other utilitiesnon-affiliated entities in the United States. A relatively minor portion of the Entergy Wholesale Commodities business is the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

Entergy Nuclear Vermont Yankee hashad an outstanding credit facility with borrowing capacity of $145 millionthat was used to pay for dry fuel storage costs. This credit facility iswas guaranteed by Entergy Corporation. At or before closing, aA subsidiary of Entergy will assumeassumed the obligations under the existing credit facility or enter into a new credit facility, and Entergy will guarantee the credit facility. At the closing of the sale transaction, NorthStar will pay $1,000 for the membership interests incaused Entergy Nuclear Vermont Yankee, andrenamed NorthStar will cause Entergy Nuclear Vermont Yankee, to issue a $139 million promissory note to anthe Entergy affiliate.subsidiary that assumed the credit facility obligations. The amount of the promissory note issued will be equal toincludes the amount drawn underbalance outstanding on the credit facility, or the amount drawn under the new credit facility, plusas well as borrowing fees and costs incurred by Entergy in connection with suchthe credit facility. The principal amount drawn under

With the outstanding credit facility was $104 millionreceipt of the NRC and Vermont Public Utility Commission approvals and the resolution among the parties of the significant conditions of the sale, Entergy concluded that as of December 31, 2017, and the net book value of Entergy Nuclear2018 Vermont Yankee including unrealized gains on the decommissioning trust fund, as of December 31, 2017, was approximately $123 million.

In October 2015, Entergy determined that it would close the FitzPatrick plant. The original expectation was to shut down the FitzPatrick plant at the end of its fuel cycle in January 2017. See Note 14 to the financial statements for discussion of the impairment charges associated with the decision to cease operations earlier than expected.

In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. When Entergy purchased Indian Point 3 and FitzPatrick in 2000 from NYPA, NYPA retained the decommissioning trust funds and the decommissioning liabilities.  NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations. NYPA had the right to require the Entergy subsidiaries to assume each of the decommissioning liabilities provided that it assigned the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. Under the original agreements, if the decommissioning liabilities were retained by NYPA, the Entergy subsidiaries would perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trust funds.  At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies.  The asset was increased by monthly accretion based on the applicable discount rate necessary to ultimately provide for the estimated future value of the decommissioning contract. The monthly accretion was recorded as interest income. As a result of the agreement with NYPA, in the third quarter 2016, Entergy removed the contract asset from its balance sheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and asset retirement obligations for the decommissioning liabilities. The asset retirement obligations are accreted monthly through a charge to decommissioning expense. The decommissioning trust funds for the Indian Point 3 and FitzPatrick plants were transferred to Entergy by NYPA in January 2017. See Note 9 to the financial statements for further discussion of Indian Point 3 and FitzPatrick’s decommissioning liabilities and see Note 16 to the financial statements for further discussion of the receivables for the beneficial interests in Indian Point 3 and FitzPatrick’s decommissioning trust funds as of December 31, 2016.

In October 2015, Entergy determined that it would close the Pilgrim plant. The decision came after management’s extensive analysis of the economics and operating life of the plant following the NRC’s decision in September 2015 to place the plant in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix. TheIn January 2019 the NRC found that the Pilgrim plant is expectedhad completed the corrective actions required to ceaseaddress the concerns that led to the plant’s placement in Column 4 and had demonstrated sustained improvement. Pilgrim ceased operations onin May 31, 2019, at the end of its current fuel cycle.2019. See Note 14 to the financial statements for discussion of the impairment charges associated with the decision to cease operations earlier than expectedexpected.

On July 30, 2018, Entergy entered into a purchase and see Note 8sale agreement with Holtec International to sell to a Holtec subsidiary 100% of the equity interests in Entergy Nuclear Generation Company, LLC, the owner of Pilgrim, for further discussion$1,000 (subject to adjustments for net liabilities and other amounts). On August 22, 2019 the NRC approved the transfer of Pilgrim’s facility licenses to Holtec. At that time, hearing requests filed by the Commonwealth of Massachusetts and Pilgrim Watch challenging Holtec’s financial qualifications and the sufficiency of the NRC’s review of the associated environmental impacts of the license transfer were pending with the NRC Commissioners. The NRC approval order included a condition acknowledging the NRC’s longstanding authority to modify, condition, or rescind

The sale of Entergy Nuclear Generation Company, LLC to Holtec included the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. The transaction resulted in a loss of $190 million ($156 million net-of-tax) in 2019. See Note 14 to the financial statements for discussion of the closing of the Pilgrim in Column 4.transaction.

Most of the Palisades output is sold under a power purchase agreement (PPA) with Consumers Energy, entered into when the plant was acquired in 2007, that is scheduled to expire in 2022. The PPA prices currently exceed market prices and escalate each year, up to $61.50/MWh in 2022. In December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the Michigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle.

In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendment transaction, but only granting Consumers Energy recovery of $136.6 million of the $172 million requested early termination payment. As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continuecontinues to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades nuclear power plant permanently onno later than May 31, 2022. As a result of the changeincrease in the expected operating life of the plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceeded the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets incurred at Palisades after September 30, 2017 are no longer charged to expense as incurred, but recorded as

Subject to the above conditions, the Palisades transaction is expected to close by the end of 2022. As of December 31, 2019, Entergy’s adjusted net investment in Palisades was $60 million. The primary variables in the ultimate loss or gain that Entergy will incur on the transaction are the values of the nuclear decommissioning trust and the asset retirement obligations at closing, the financial results from plant operations earlier than expected.until the closing, and the level of any unrealized deferred tax balances at closing.

Entergy incurred approximately $91 million in costs in 2019, $139 million in costs in 2018, and $113 million in costs in 2017 and $95 million in costs in 2016 associated with management’s strategy to reduce the size ofexit the Entergy Wholesale Commodities’Commodities merchant fleet,power business, primarily employee retention and severance expenses and other benefits-related costs, and contracted economic development contributions. Entergy expects to incur employee retention and severance expenses of approximately $165$75 million in 2018,2020, and a total of approximately $205$55 million from 20192021 through mid-20222022 associated with these strategic transactions.the exit from the merchant power business. See Note 13 to the financial statements for further discussion of these costs.

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.

Entergy’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table. The increasedecrease in the debt to capital ratio for Entergy as of December 31, 2017 is primarily due to an increasethe settlement of equity forwards in commercial paper outstanding2019, partially offset by the issuance of long-term debt in 2017 as compared2019. See Note 7 to 2016.the financial statements for a discussion of the equity forward sale agreements and Note 5 to the financial statements for a discussion of long-term debt.