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

FORM 10-Q

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.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, (as definedor a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Securities Exchange Act of 1934).Act.

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, Inc., Entergy Louisiana Holdings, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., and System Energy Resources, Inc. separately file this combined Quarterly Report on Form 10-Q. Information contained herein relating to any individual company is filed by such company on its own behalf. Each company reports herein only as to itself and makes no other representations whatsoever as to any other company. This combined Quarterly Report on Form 10-Q supplements and updates the Annual Report on Form 10-K for the calendar year ended December 31, 2004, and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, filed by the individual registrants with the SEC, and should be read in conjunction therewith.

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2005March 31, 2006

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
March 31, 2006

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2005

FORWARD-LOOKING INFORMATION

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 the risk factors in the Form 10-K as well as 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 implementation of new Texas legislation, and other regulatory proceedings, including those related to Entergy's System Agreement and Entergy's utility supply plan
• Entergy's ability to manage its operation and maintenance costs
• 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 hedge, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Non-Utility Nuclear plants, the ability to meet credit support requirements, and the prices and availability of power and fuel Entergy must purchase for its utility customers and operations
• Entergy's ability to develop and execute on a point of view regarding prices of electricity, natural gas, and other energy-related commodities
• 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 fund investments and acquisitions
• actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies' ratings criteria
• changes in inflation, interest rates, and foreign currency exchange rates
• Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms
• 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, 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 nuclear generating facilities, particularly those in the northeastern United States
• 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 the new federal energy legislation, including the repealeffects of PUHCA repeal
• 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, including uncertainties associated with efforts to remediate the effects of Hurricanes Katrina and Rita and recovery of costs associated with restoration including Entergy's ability to obtain financial assistance from governmental authorities in connection with these storms
• advances in technologythe outcome of the Chapter 11 bankruptcy proceeding of Entergy New Orleans, and the impact of this proceeding on other Entergy companies
• the potential effects of threatened or actual terrorism and war
• the effects of Entergy's strategies to reduce 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

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DEFINITIONS

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

DEFINITIONS (Continued)

DEFINITIONS(Concluded)

DEFINITIONS(Concluded)

ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

Entergy operates primarily through two business segments: Utility and Non-Utility Nuclear.

• Utilitygenerates, transmits, distributes, and sells electric power in a four-state service territory that includes portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operates a small natural gas 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 primarily to wholesale customers. This business also provides services to other nuclear power plant owners.

In addition to its two primary, reportable, operating segments, Entergy also operates the Energy Commodity Services segment and the Competitive Retail Services business. Energy Commodity Services includes Entergy-Koch, LP and Entergy's non-nuclear wholesale assets business. Entergy-Koch sold its businesses in the fourth quarter of 2004 and is no longer an operating entity. In April 2006, Entergy sold the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas, and now reports this portion of the business as a discontinued operation. Entergy reports Energy Commodity Services and Competitive Retail Services as part of All Other in its segment disclosures.

Hurricane Katrina and Hurricane Rita

See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which in August and September 2005 caused catastrophic damage to portions of the Utility's service territory in Louisiana, Mississippi, and Texas, including the effect of extensive flooding that resulted from levee breaks in and around the greater New Orleans area. Following are updates to the discussion in the Form 10-K.

As discussed in the Form 10-K, in December 2005 a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstruction and the timing of such decisions is also uncertain. The U.S. Department of Housing and Urban Development has allocated approximately $6.2 billion for Louisiana, $5.1 billion for Mississippi, and $74 million for Texas, and the states, in turn, will administer the grants. Entergy is currently preparing applications to seek CDBG funding. In March 2006, Entergy New Orleans, Entergy Louisiana, and Entergy Gulf States-Louisiana provided justification statements to state and local officials. The statements, which will be reviewed by the Louisiana Recovery Authority, include the estimated costs of Hurricanes Katrina and Rita damage, as well as for Entergy New Orleans a lost customer base component intended to help offset the need for storm-related rate increases. The statements include justification for requests for CDBG funding of $718 million by Entergy New Orleans, $472 million by Entergy Louisiana, and $164 million by Entergy Gulf States-Louisiana.

As discussed more fully in the Form 10-K, Entergy estimates that its net insurance recoveries for the losses caused by Hurricanes Katrina and Rita will be approximately $382 million. Entergy has received $15 million thus far on its insurance claim, as it continues working towards payment of its covered losses.

SeeState and Local Rate Regulationbelow for an update on activity at Entergy Mississippi directed towards recovery of its storm restoration costs.

Entergy New Orleans Bankruptcy

See the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. Following is an update to the discussion in the Form 10-K. In April 2006, the bankruptcy judge extended the exclusivity period for filing a final plan of reorganization by Entergy New Orleans to August 21, 2006, with solicitation of acceptances of the plan scheduled to be complete by October 18, 2006. In addition, the bankruptcy judge had set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans must, with certain exceptions, file their proofs of claim in the bankruptcy case. Almost 500 claims have been filed thus far in Entergy New Orleans' bankruptcy proceeding, and Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed.

Entergy New Orleans has 77,798 shares of $100 par value, 4.75% series preferred stock (4.75% Preferred) issued and outstanding.  If dividends with respect to the 4.75% Preferred are not paid by July 1, 2006, the holders of these shares will have the right to elect a majority of the Entergy New Orleans board of directors.  If the 4.75% Preferred obtain more than 20% of the voting power to vote for the Entergy New Orleans board of directors, Entergy New Orleans will no longer be a member of the Entergy Consolidated Tax Return Group.  If Entergy New Orleans is not a member of the Entergy Consolidated Tax Return Group, Entergy New Orleans is not entitled to benefits under the Entergy Income Tax Allocation Agreement. Entergy New Orleans filed a motion in the bankruptcy court seeking authority to recommence paying dividends to the holders of the 4.75% preferred shares, or asking for other alternative relief. After a hearing on the motion on May 3, 2006, the court granted Entergy New Orleans the authority to declare and pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006. The bankruptcy court also established a procedure to continue to review the matter each quarter thereafter.

As discussed in the Form 10-K, as a result of the Entergy New Orleans bankruptcy proceeding, Entergy deconsolidated Entergy New Orleans retroactive to January 1, 2005. Because Entergy owns all of the common stock of Entergy New Orleans, this change will not affect the amount of net income Entergy records resulting from Entergy New Orleans' operations for any current or prior period, but will result in Entergy New Orleans' net income or loss being presented as "Equity in earnings (loss) of unconsolidated equity affiliates" rather than its results being included in each individual income statement line item, as is the case for periods prior to 2005.

Results of Operations

Entergy's consolidated earnings applicableFollowing are income statement variances for Utility, Non-Utility Nuclear, Parent & Other, and Entergy comparing the first quarter 2006 to common stock for the secondfirst quarter and six months ended June 30, 2005 and 2004 were as follows:showing how much the line item increased or (decreased) in comparison to the prior period:

Entergy's income before taxes is discussed below according to the operating segments listed above. See Note 8 to the consolidated financial statements herein for more information concerning Entergy's operating segments and their financial results in 2005 and 2004.

Refer to "ENTERGY CORPORATION AND SUBSIDIARIES -SELECTED OPERATING RESULTS" for further information with respect to operating statistics.

U.S. UTILITYNet Revenue

The increase in earnings for the U.S. Utility for the second quarter 2005 compared to the second quarter 2004 from $195.0 million to $211.7 million was primarily due to higher net revenue partially offset by higher other operation and maintenance expenses and lower other income.

The decrease in earnings for the U.S. Utility for the six months ended June 30, 2005 compared to the six months ended June 30, 2004 from $310.6 million to $302.2 million was primarily due to higher other operation and maintenance expenses and higher depreciation and amortization expenses, partially offset by higher net revenue and lower interest expenses.

Net Revenue

Second Quarter 2005 Compared to Second Quarter 2004

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, which is Entergy's measure of gross margin, comparing the secondfirst quarter of 20052006 to the secondfirst quarter of 2004.2005.

The price appliedbase revenues and Attala cost deferral variance resulted primarily from increases at Entergy Gulf States due to unbilled salesformula rate plan increases and the inclusion of Perryville-related revenues in the Louisiana jurisdiction and due to the incremental purchased capacity recovery rider that began in December 2005 in the Texas jurisdiction and the transition to competition rider that began in March 2006 in the Texas jurisdiction. In addition, Entergy Mississippi deferred under-recovered Attala power plant costs that will be recovered through the power management rider during the second quarter of 2006. The net income effect of this cost deferral is partially offset in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.

The net wholesale revenue variance resulted from higher volume and higher margins on wholesale contracts.

The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in Entergy Gulf States' Louisiana jurisdiction, partially offset by the Entergy Arkansas energy cost recovery true-up made in the first quarter of 2005.

The rate refund provisions variance resulted primarily from a provision recorded at Entergy Louisiana in the first quarter of 2005 as a result of a settlement with the LPSC staff.

The volume/weather variance resulted primarily from milder weather in the first quarter of 2006 compared to the first quarter of 2005. Billed usage decreased by 208 GWh in the residential sector. The decrease was partially offset by increased usage during the unbilled period.

Non-Utility Nuclear

Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributing to the increase in revenues was increased generation in 2006 due to fewer refueling outages in 2006 and power uprates at certain plants completed in 2005 and 2006. Following are key performance measures for Non-Utility Nuclear for the first quarters of 2006 and 2005:

Other Operation and Maintenance Expenses

Utility

Other operation and maintenance expenses increased from $346 million for the first quarter of 2005 to $359 million for the first quarter of 2006 primarily due to:

• an increase of $5.2 million in storm reserves;
• an increase of $4.2 million in nuclear expenses for contract and labor costs associated with an unplanned outage and timing issues; and
• a credit against bad debt expense of $4.1 million at Entergy Arkansas in the fuel cost component includedfirst quarter of 2005 in accordance with a settlement agreement with the APSC.

Non-Utility Nuclear

Other operation and maintenance expenses increased from $142 million for the first quarter of 2005 to $150 million for the first quarter of 2006 primarily due to the absence of refueling outages in the price applied to unbilled sales. The increasecurrent period. As discussed in the fuel cost component is attributable to an increase in the price of natural gas, the nuclear refueling outage at Waterford 3, and the nuclear maintenance outages at River Bend. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K and Note 1 to the consolidated financial statements in the Form 10-K, for further discussion ofnuclear refueling outage costs are deferred during the accounting for unbilled revenues.outage and amortized over the period to the next outage.

The volume/weather variance isOther Income

Utility

Other income increased from $31 million for the first quarter of 2005 to $43 million for the first quarter of 2006 primarily due to an increase in electricity usage totaling 161 GWh in the residentialinterest and commercial sectors.  Industrial sales volume declined primarilydividend income due to both increased interest income recorded on the loss to cogeneration, which had been expected, of one large customer.

Gross operating revenuesdeferred fuel balance and fuel and purchased power expenses

Gross operating revenues increasedadditional proceeds received from $2.0 billion for the second quarter 2004 to $2.2 billion for the second quarter 2005. The increase includes an increaseradwaste settlement discussed in fuel cost recovery revenues of $81.7 million resulting primarily from increases in the market prices of natural gas and purchased power. As such, this revenue increase is offset by increased fuel and purchased power expenses. The increases in the price applied to unbilled sales and volume/weather variances, discussed above, also contributed to the increase in gross operating revenues.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

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 the six months ended June 30, 2005 to the six months ended June 30, 2004.

The price applied to unbilled sales variance resulted from an increase in the fuel cost component included in the price applied to unbilled sales. The increase in the fuel cost component is attributable to an increase in the price of natural gas, the nuclear refueling outage at Waterford 3, and the nuclear maintenance outages at River Bend. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting EstimatesSignificant Factors and Known Trends - Central States Compact Claim"in the Form 10-K and Note 1 to the consolidated financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues.10-K.

The deferred fuel cost revisions variance is due toa revised estimate of fuel costs filed for recovery at Entergy Arkansas in the March 2004 energy cost recovery rider, which reduced net revenue in the first quarter of 2004 by $11.5 million. The remainder of the variance is due to the 2004 energy cost recovery true-up, made in the first quarter of 2005, which increased net revenue by $4.0 million.

The rate refund provisions variance is due primarily to accruals recorded in 2004 for potential rate action at Entergy New Orleans and Entergy Gulf States. Included in the current period variance are provisions recorded at Entergy Louisiana in 2005 as a result of LPSC-approved settlements in March 2005 and May 2005. The settlements are discussed in Note 2 to the consolidated financial statements.

The volume/weather variance resulted from decreased usage by residential customers and a decrease in usage during the unbilled sales period. Industrial sales volume was relatively unchanged as the loss to cogeneration, which had been expected, of one large customer was offset by an increase in usage by other customers, primarily in the chemical industry.  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K and Note 1 to the consolidated financial statements in the Form 10-K for further discussion of the accounting for unbilled revenues.

Gross operating revenues and fuel and purchased power expenses

Gross operating revenues increased from $3.8 billion for the six months ended June 30, 2004 to $4.0 billion for the six months ended June 30, 2005. The increase includes an increase in fuel cost recovery revenues of $151 million resulting primarily from increases in the market prices of natural gas and purchased power. As such, this revenue increase is offset by increased fuel and purchased power expenses. The increase in the price applied to unbilled sales, discussed above, also contributed to the increase in gross operating revenues.

Other Income Statement Variances

Non-Utility Nuclear

Second Quarter 2005 Compared to Second Quarter 2004

Other operation and maintenance expenses increased from $391.7 million for the second quarter 2004 to $432.6 million for the second quarter 2005 primarily due to:

• an increase of $17.9 million in payroll and benefits costs;
• an increase of $9.1 million in nuclear expenses for contract and material costs associated with maintenance outages and timing of payroll related expenses; and
• an increase of $5.1 million in estimated loss provisions recorded for the bankruptcy of CashPoint, which managed a network of payment agents for the domestic utility companies.

Other income decreased from $30.5 million for the second quarter 2004 to $20.1 million for the second quarter 2005 primarily due to:

• a decrease of $10.1 million at Entergy Gulf States due to a reduction in 2004 in the loss provision for an environmental clean-up site; and
• a decrease of $7.1 million at Entergy Louisiana due to the write-off in June 2005 of a portion of the customer care system investment and the related allowance for equity funds used during construction pursuant to an LPSC-approved settlement.

The decrease was partially offset by an increase of $6.2 million in interest and dividend income primarily due to higher interest on temporary cash investments.

Interest on long-term debt decreased from $97.6 million for the second quarter 2004 to $91.2 million for the second quarter 2005 primarily due to the net retirement of $319 million of long-term debt at the domestic utility companies in 2004. Refer to Note 5 to the consolidated financial statements in the Form 10-K and Note 4 to the consolidated financial statements herein for details of long-term debt.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

Other operation and maintenance expenses increased from $723 million for the six months ended June 30, 2004 to $798 million for the six months ended June 30, 2005 primarily due to:

• an increase of $33.3 million in payroll and benefits costs;
• an increase of $13.2 million in nuclear expenses for contract and material costs associated with maintenance outages and timing of payroll related expenses;
• an increase of $8.1 million in fossil expenses as a result of additional planned off-peak fossil generation maintenance outages; and
• an increase of $5.1 million in estimated loss provisions recorded for the bankruptcy of CashPoint, which managed a network of payment agents for the domestic utility companies.

Depreciation and amortization expenses increased from $385.6 million forthe six months ended June 30,2004 to $398.4 million for the six months ended June 30, 2005 due primarily to an increase in plant in service.

Other income, which was $45.4 million for the six months ended June 30, 2005 and $45.5 million for the six months ended June 30, 2004, includes the following:

• a decrease of $10.1 million at Entergy Gulf States due to a reduction in 2004 in the loss provision for an environmental clean-up site;
• a decrease of $7.1 million at Entergy Louisiana due to the write-off in June 2005 of a portion of the customer care system investment and the related allowance for equity funds used during construction pursuant to an LPSC-approved settlement;
• an increase of $10.6 million in interest and dividend income primarily due to higher interest on temporary cash investments; and
• an increase of $9.8 million in the allowance for equity funds used during construction as a result of higher construction expenditures.

Interest on long-term debt decreased from $199.3 million for the six months ended June 30, 2004 to $184.2 million for the six months ended June 30, 2005 primarily due to the net retirement of $319 million of long-term debt at the domestic utility companies in 2004. Refer to Note 5 to the consolidated financial statements in the Form 10-K and Note 4 to the consolidated financial statements herein for details of long-term debt.

NON-UTILITY NUCLEAR

Following are key performance measures for Non-Utility Nuclear for the second quarter and six months ended June 30, 2005 and 2004:

Second Quarter 2005 Compared to Second Quarter 2004

The decrease in earnings for Non-Utility Nuclear from $63.0 million to $58.3 million was primarily due to higher operation and maintenance expenses resulting primarily from increased benefits costs and the effects of lower generation associated with planned and unplanned refueling and maintenance outages. Partially offsetting the decrease was an increase in revenues due to higher contract pricing.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

The increase in earnings for Non-Utility Nuclear from $131.8 million to $136.2 million was primarily due to miscellaneous income of $15.8$26 million net-of-taxin 2005 resulting from a reduction in the decommissioning liability for a plant as discussed in Note 1 to the consolidated financial statements. Also contributing to the increase in earnings was higher contract pricing. The increase in earnings was partially offset by the effects of lower generation associatedconjunction with planned and unplanned refueling and maintenance outages and higher operation and maintenance expenses resulting primarily from increased benefits costs.

PARENT COMPANY & OTHER BUSINESS SEGMENTS

Second Quarter 2005 Compared to Second Quarter 2004

The increase in earnings for Parent Company & Other Business Segments from $7.2 million to $16.2 million was primarily due to $14.4 million of tax benefits in 2005 from the American Jobs Creation Act of 2004 and an increase of $5.5 million from the non-nuclear wholesale assets business primarily due to lower operation and maintenance expenses and proceeds from the sale of SO₂ allowances. The increase was partially offset by a decrease of $13.9 million due to the absence of earnings from Entergy's investment in Entergy-Koch because of the sale of Entergy-Koch's energy trading and pipeline businesses in the fourth quarter of 2004, as discussed in the Form 10-K.

Six Months Ended June 30, 2005 Compared to Six Months Ended June 30, 2004

The decrease in earnings for Parent Company & Other Business Segments from $29.9 million to $19.7 million was primarily due to a decrease of $30.1 million due to the absence of earnings from Entergy's investment in Entergy-Koch due to the sale of Entergy-Koch's energy trading and pipeline businesses in the fourth quarter of 2004, as discussed in the Form 10-K. Also contributing to the decrease in earnings was the favorable settlement of a tax issue, which increased earnings by $11 million in the first quarter of 2004.new decommissioning cost study. The decrease was partially offset by $14.4 million of tax benefits in 2005 from the American Job Creations Act of 2004 and an increase of $14.1$3.6 million from the non-nuclear wholesale assets businessin interest income.

Interest Charges

Interest charges increased for Parent & Other Business Segments primarily due to lower operationadditional borrowing to fund the significant storm restoration costs associated with Hurricane Katrina and maintenance expenses and proceeds from the sale of SO₂ allowances.Hurricane Rita.

Income Taxes

The effective income tax rates for the secondfirst quarters of 2006 and 2005 were 36.8% and 2004 were 34.8% and 38.0%33.9%, respectively. The effective income tax rates for the six months ended June 30, 2005 and 2004 were 34.8% and 36.0%, respectively. The difference in the effective income tax rate for the second quarter and the six months ended June 30, 2005 versus the federal statutory rate of 35.0% is primarily due to tax benefits from the American Jobs Creation Act of 2004 and investment tax credit amortization, partially offset by state income taxes and regulatory plant differences on utility plant items. Also contributing to the difference for the six months ended June 30, 2005 is a downward revision in the estimate of federal income tax expense related to tax depreciation. The difference in the effective income tax rate for the second quarter and the six months ended June 30, 2004 versus the federal statutory rate of 35.0% is primarily due to state income taxes and regulatory plant differences on utility plant items, partially offset by the favorable settlement of a tax audit issue and investment tax credit amortization.

Liquidity and Capital Resources

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources" in the Form 10-K for a discussion of Entergy's capital structure, capital expenditure plans and other uses of capital, and sources of capital. Following are updates to that discussion.

TheDebtor-in-Possession Credit Agreement

See the Form 10-K reportedfor a discussion of the Entergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. Following is an update to that discussion.

As discussed in the Form 10-K, the bankruptcy court issued its order in December 2005 giving final approval for the $200 million DIP credit facility, and the indenture trustee for Entergy expected to contribute $185.9New Orleans' first mortgage bonds appealed the order. On March 29, 2006 the bankruptcy court approved a settlement among Entergy New Orleans, Entergy Corporation, and the indenture trustee, and the indenture trustee dismissed its appeal. As of March 31, 2006, Entergy New Orleans had $80 million of outstanding borrowings under the DIP credit facility. Since March 31, 2006, Entergy New Orleans repaid a portion of the borrowings outstanding on the DIP credit facility, primarily using its portion of the income tax refund that resulted from application of the Gulf Opportunity Zone Act, which is discussed below in "Operating Activities." As of May 9, 2006, $15 million in 2005 to its pension plans. Entergy has elected to make additional contributions, and now expects to contribute $253.3 million to its pension plans in 2005. Entergy contributed $117.7 million to its pension plans duringborrowings are outstanding on the six months ended June 30, 2005.DIP credit facility.

Capital Structure

Entergy's capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital percentage as of June 30, 2005 is primarily the result of increased debt outstanding due to additional borrowings on Entergy Corporation's revolving credit facility along with a decrease in shareholders' equity, primarily due to repurchases of common stock, both of which are discussed below.

Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, preferred stock with sinking fund, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders' equity, and preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. 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.

In May 2005,As discussed in the Form 10-K, Entergy Corporation terminated itshas in place two separate revolving credit facilities, a $500 million five-year credit facility and a $965 million three-year credit facility. At that time Entergy Corporation entered into a $2 billion,The five-year credit facility which expires in May 2010. As of June 30, 2005, $635 million2010 and the three-year facility expires in borrowings were outstanding on this facility.December 2008. Entergy also has the ability tocan issue letters of credit against the total borrowing capacity of both credit facilities. Following is a summary of the credit facility,borrowings outstanding and letters of credit totaling $83.5 million had been issued against this facility at June 30, 2005. The total unused capacity for this facilityavailable under these facilities as of June 30, 2005 was approximately $1.3 billion. The commitment fee for this facility is currently 0.13% per annum of the unused amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior debt ratings of the domestic utility companies.March 31, 2006:

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi, and Entergy New Orleans each have 364-day credit facilities available as of March 31, 2006 as follows:

In April 2006, Entergy Arkansas renewed its $85 million credit facility through April 2007. Entergy Louisiana has not renewed its $85 million credit facility at this time. Entergy Arkansas' renewed facility is no longer subject to the combined borrowing limit of $85 million. Prior to expiration, it is expected that Entergy Mississippi will renew its credit facility.

In addition, Entergy Louisiana and Entergy New Orleans, which is currently in bankruptcy and is no longer consolidated in Entergy's financial statements, currently have 364-day credit facilities, expiring in May 2006, in the amount of $15 million. The combined amount borrowed by Entergy Louisiana and Entergy New Orleans under these facilities cannot exceed $15 million at any one time. Because Entergy New Orleans' facility is fully drawn, no capacity is available on Entergy Louisiana's facility. Entergy Louisiana does not intend to renew its facility when it expires.

See Note 4 to the consolidated financial statements for additional discussion of Entergy's short-term credit facilities.

Capital Expenditure Plans and Other Uses of Capital

See the table in the Form 10-K under "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital," which sets forth the amounts of Entergy's planned construction and other capital investments by operating segment for 20052006 through 2007.2008.

In March 2005, Entergy Mississippi signed an agreement to purchase for $88 million the Attala power plant, a 480 MW natural gas-fired, combined-cycle generating facility owned by Central Mississippi Generating Company (CMGC). Entergy Mississippi plans to invest approximately $20 million in facility upgrades at the Attala plant plus $3 million in other costs, bringing the total capital cost of the project to approximately $111 million. The Attala plant will be 100 percent owned by Entergy Mississippi, and the acquisition is expected to close in late 2005 or early 2006. The purchase of the plant is contingent upon obtaining necessary approvals from various federal agencies, state permitting agencies, and the MPSC, including MPSC approval of investment cost recovery. In May and June 2005, Entergy Mississippi made filings at the MPSC to commence proceedings for MPSC approval both of the acquisition and of the investment cost recovery for the plant. Entergy Mississippi and CMGC had pre viously executed a purchased power agreement in July 2004 for 100 percent of the plant's output, and this agreement will expire upon the close of the acquisition or in March 2008, whichever occurs earlier. The planned construction and other capital investments table in the Form 10-K includes the estimated cost of the Attala acquisition as a 2006 capital commitment.

Cash Flow Activity

As shown in Entergy's Statements of Cash Flows, cash flows for the sixthree months ended June 30,March 31, 2006 and 2005 and 2004 were as follows:

Operating Activities

Entergy's cash flow provided by operating activities decreasedincreased by $162$515 million for the sixthree months ended June 30, 2005March 31, 2006 compared to the sixthree months ended June 30, 2004March 31, 2005 primarily due to receipt of a decrease$344 million income tax refund, increased collection of deferred fuel costs, and increased net revenue at the U.S. Utility. The U.S. Non-Utility Nuclear, partially offset by storm restoration spending. Following are cash flows from operating activities by segment:

• Utility provided $535$483 million in cash from operating activities in 20052006 compared to providing $669$383 million in 2004. The decrease resulted primarily from an increase of $80 million in pension plan contributions, the $90 million refund to customers in the Louisiana jurisdiction made as a result of the global settlement, an increase of $72 million in income tax payments, and changes in the timing of fuel cost recovery compared to the prior period. These increased uses of cash were partially offset by various items, including the timing of receivable collections and vendor payments compared to the prior period. The 2005.
• Non-Utility Nuclear segment also contributed to the decrease. The Non-Utility Nuclear segment provided $235$213 million in cash from operating activities i n 2005in 2006 compared to providing $265$131 million in 2004. This decrease2005.
• Parent & Other provided $338 million in cash from operating activities in 2006 compared to using $12 million in 2005.

The income tax refund was caused primarilyreceived by nuclear refueling outage costs,Entergy Corporation (including $71 million attributable to Entergy New Orleans) as this business had one more refueling outagea result of net operating loss carry back provisions contained in the first halfGulf Opportunity Zone Act of 2005, thanas discussed in the first halfForm 10-K. In accordance with Entergy's intercompany tax allocation agreement, $273 million of 2004.the refund was distributed to the Utility in April 2006, with most of the remainder distributed to Non-Utility Nuclear.

Investing Activities

InvestingNet cash used in investing activities used $698increased by $300 million of cash for the sixthree months ended June 30, 2005March 31, 2006 compared to using $484 million of cash for the sixthree months ended June 30, 2004March 31, 2005 primarily due to the following activity:

• Construction expenditures were $44$392 million higher in 20052006 than in 2004. The increase is in the U.S. Utility segment, and is2005, primarily due to increases at Entergy Louisiana resulting from an increase in spending on transmission and nuclear projects and an increase of $19.8$426 million in capacity costs that have been deferred and are expected to be recovered over a period greater than twelve months.the Utility business because of storm restoration expenditures.
• The non-nuclear wholesale assets business received $22 million in 2004 from the salepurchase of the Crete480 MW Attala power plant.
• plant by Entergy Louisiana purchased the Perryville plantMississippi in June 2005 for $162.5 million. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources" in the Form 10-K for a discussion of this acquisition. In April 2005, the LPSC approved the acquisition and the long-term cost-of-service purchased power agreement under which Entergy Gulf States will purchase 75 percent of the plant's output.January 2006.

The non-nuclear wholesale assets business received a return of invested capital of $34 million in 2005 from the Top Deer wind power joint venture after Top Deer obtained debt financing.

first quarter 2006.

Financing Activities

Financing activities used $74provided $16 million of cash for the sixthree months ended June 30, 2005March 31, 2006 compared to using $392$73 million of cash for the sixthree months ended June 30, 2004March 31, 2005 primarily due to the following activity:

• Net issuances of long-term debt by the U.S. Utility segment provided $108$73 million duringin the six months ended June 30, 2005first quarter 2006 compared to retirements of long-term debt net of issuances using $253$39 million duringin the six months ended June 30, 2004.first quarter 2005. See Note 4 to the consolidated financial statements for the details of long-term debt activity in 2005.the first quarter of 2006.
• Entergy Corporation repurchased $640$383 million of its common stock during the six months ended June 30, 2005 compared to $271 million during the six months ended June 30, 2004. SeePart II, Item 2 herein and in the First Quarter 2005 Form 10-Q for details regarding Entergy Corporation's common stock repurchases infirst quarter 2005.
• In the first quarter 2006, Entergy Corporation increased the net borrowings on its credit facilityfacilities by $585$20 million, during the six months ended June 30, 2005 compared to $255increasing the net borrowings on its credit facilities by $408 million duringin the six months ended June 30, 2004.first quarter 2005. See Note 4 to the consolidated financial statements for a description of the Entergy Corporation credit facility.facilities.

Significant Factors and Known Trends

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for discussions of rate regulation, federal regulation, market and credit risks, utility restructuring, and nuclear matters. Following are updates to the information provided in the Form 10-K.

State and Local Rate Regulation

See the Form 10-K for the chart summarizing material rate proceedings. Following are updates to that chart.

Entergy Arkansas

In March 2006, the LPSC approved aan uncontested stipulated settlement proposal to resolve various dockets covering a range of issues for Entergy Gulf States and Entergy Louisiana. The settlement resulted in credits totaling $76 million for retail electricity customers in Entergy Gulf States' Louisiana service territory and credits totaling $14 million for retail electricity customers of Entergy Louisiana. The settlement dismissed Entergy Gulf States' fourth, fifth, sixth, seventh, and eighth annual earnings reviews, Entergy Gulf States' ninth post-merger earnings review and revenue requirement analysis, the continuation of a fuel review for Entergy Gulf States, dockets established to consider issues concerning power purchases for Entergy Gulf States and Entergy Louisiana for the summers of 2001, 2002, 2003, and 2004, all prudence issues associated with decisions made through May 2005 related to the nuclear plant uprates at issue in these cases, and an LPSC docket concerning retail i ssues arising under the System Agreement. The settlement does not include the System Agreement case at FERC. In addition, Entergy Gulf States agreed not to seek recovery from customers of $2 million of excess refund amounts associated with the fourth through the eighth annual earnings reviews and Entergy Louisiana agreed to forgo recovery of $3.5 million of deferred 2003 capacity costs associated with certain power purchase agreements. The credits were issued in connection with April 2005 billings. Entergy Gulf States and Entergy Louisiana had reserved for the approximate refund amounts.

The settlement includes the establishment of a three-year formula rate plan for Entergy Gulf States that, among other provisions, establishes an ROE mid-point of 10.65% for the initial three-year term of the plan and permits Entergy Gulf States to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed range of 9.9% to 11.4% will be allocated 60% to customers and 40% to Entergy Gulf States. In addition, there is the potential to extend the formula rate plan beyond the initial three-year effective period by mutual agreement of the LPSC and Entergy Gulf States. Under the settlement, there was no change to Entergy Gulf States' retail rates at that time.

In June 2005, the Alliance for Affordable Energy and an individual plaintiff filed an appeal in the 19^th Judicial District Court for the parish of East Baton Rouge, Louisiana. The plaintiffs allege that neither Entergy Gulf States nor the LPSC published notice that a formula rate plan was to be considered as part of the settlement and that the LPSC order should be set aside as null and void and without effect because the Louisiana Constitution requires that notice be published when a utility files a proposed rate schedule that would result in a change in rates. Management believes the plaintiffs' claim is without merit and expects to intervene in the proceeding to oppose the appeal.

In June 2005, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2004 test year ending December 31, 2004.year. The filing showssettlement includes a net revenue deficiency of $2.58 million indicating that no refund liability exists. The filing also indicates that a prospective raterequirement increase of $23.8$36.8 million is required in orderand calls for Entergy Gulf States to earn the authorized ROE mid-pointapply a refund liability of 10.65%. Subject$744 thousand to capacity deferrals. The refund liability pertained to the consideration of comments expected to be filed by the LPSC staff and intervenors in the third quarter 2005, rate changes associated with the formula rate plan are scheduled to take effect with the first billing cycle in October 2005.  Any disputed issues will be subject to further investigation by the LPSC, with any resolution of such issues being made effective October 2005.

Regarding Entergy Louisiana's January 2004 rate filing, in March 2005, the LPSC staff and Entergy Louisiana filed a proposed settlement that includes an annual base rate increase of approximately $18.3 million that was implemented, subject to refund, effective with May 2005 billings. In May 2005, the LPSC approved a modified settlement which, among other things, reduces depreciation and decommissioning expense due to assuming a life extension of Waterford 3 and results in no change in rates. Subsequently, in June 2005, Entergy Louisiana made a revised compliance filing with the LPSC supporting a revised depreciation rate for Waterford 3, which reflects the removal of interim additions, and a rate increase from the purchase of the Perryville power plant, which results in a net $0.8 million annual rate reduction. Entergy Louisiana reduced rates effective with the first billing cycle in June 2005 and expects to refund excess revenue collected during May 2005, including interest, in the third quarter of 2005.

The May 2005 rate settlement with the LPSC includes the adoption of a three-year formula rate plan for Entergy Louisiana, the terms of which include an ROE mid-point of 10.25% for the initial three-year term of the plan and permit Entergy Louisiana to recover incremental capacity costs outside of a traditional base rate proceeding. Under the formula rate plan, over- and under-earnings outside an allowed regulatory earnings range of 9.45% to 11.05% will be allocated 60% to customers and 40% to Entergy Louisiana. The initial formula rate plan filing will be in May 2006 based on a 2005 test year with rates effective September 2006. In addition, there is the potential to extend the formula rate plan beyond the initial three-year effective period by mutual agreement of the LPSC and Entergy Louisiana.

In July 2004, Entergy Gulf States filed with the LPSC an application for a change in its rates and charges seeking an increase of $9.1 million in gas base rates in order to allow Entergy Gulf States an opportunity to earn a fair and reasonable rate of return. In June 2005, the LPSC unanimously approved Entergy Gulf States' proposed settlement that includes a $5.8 million gas base rate increase effective the first billing cycle of July 2005 and a rate stabilization plan with an ROE mid-point of 10.5%.

Entergy Gulf States filed with the PUCT in July 2005 a request for implementation of an incremental purchased capacity recovery rider, consistent with the recently passed Texas legislation discussed below under "Utility Restructuring." The rider requests $23.1 million annually in incremental revenues on a Texas retail basis which represents the incremental purchased capacity costs, including Entergy Gulf States' obligation to purchase power from Entergy Louisiana's recently acquired Perryville plant, over what is already in Entergy Gulf States' base rates. Entergy Gulf States has reached an agreement with parties with respect to the date upon which cost recovery and cost reconciliation would begin.  The parties have agreed that Entergy Gulf States will implement the rider after approval by the PUCT which could be up to 185 days from the date of filing but will reconcile and recover incremental purchased capacity costs incurred beginn ing September 1, 2005. The September 1, 2005 agreed upon date for the beginning of the cost recovery and cost reconciliationperiods 2004-2005 as well as the requested amount and the processes for implementing the rider are subject to PUCT action and approval. If approved by the PUCT, the rider would be subject to semi-annual modifications and reconciliationinterim period in conjunction with which a $37.8 million revenue increase was in place.

Entergy Gulf States' fuel reconciliation proceedings. Also see "Utility Restructuring" below for discussion of the provisions in the Texas legislation regarding Entergy Gulf States' ability to file a general rate case and for recovery of transition to competition costs.Mississippi

In May 2005, the MPSC approved a joint stipulation entered into between the Mississippi Public Utilities Staff andMarch 2006, Entergy Mississippi regarding Entergy Mississippi's annual formula rate plan filing that provides for no change in rates based on a performance adjusted ROE mid-point of 10.50%, establishing an allowed regulatory earnings range of 9.1% to 11.9%.

In April 2005, Entergy New Orleans made its annual scheduled formula rate plan filingsfiling with the City Council.MPSC.  The filings showfiling was amended by an April 2006 filing.  The amended filing shows that a decreasean increase of $0.2$3.1 million in electric revenues is warranted and an increase of $3.9 million in gas revenues is warranted.  The filings triggeredMPSC Public Utilities Staff indicated in April 2006 that it is still reviewing the prescribed periodfiling.  Provisions in the formula rate plan afford more time for Staff review, byand it is anticipated that the City Council's Advisors and other parties, andreview will be complete during the second quarter 2006.  A formula rate adjustments,plan rate adjustment, if any, could be implemented as soon as SeptemberJuly 2006.

As discussed in the Form 10-K, in December 2005, Entergy Mississippi filed with the MPSC a Notice of Intent to change rates by implementing a Storm Damage Rider to recover storm damage restoration costs associated with Hurricanes Katrina and Rita totaling approximately $84 million as of November 30, 2005.  In February 2006, Entergy Mississippi filed an Application for an Accounting Order seeking certification by the MPSC of Entergy Mississippi's remaining $36 million of storm restoration costs not included in the December 2005 filing. In March 2006, the Governor signed into law the Hurricane Katrina Electric Utility Customer Relief and Electric Utility System Restoration Act that establishes a mechanism by which the MPSC may authorize and certify an electric utility financing order and the state may issue general obligation bonds to pay the costs of repairing damage to the systems of investor-owned electric utilities caused by Hurricane Katrina (commonly referred to as secur itization).  Because of the passage of this act and the possibility of Entergy Mississippi obtaining Community Development Block Grant (CDBG) funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provided for the review of Entergy Mississippi's total storm restoration costs in the Application for an Accounting Order proceeding.  The Stipulation also set out a revised procedural schedule and states that the procedural schedule of the December 2005 Notice of Intent filing should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding and there is resolution regarding CDBG funds and securitization.  A hearing on Entergy Mississippi's Application for an Accounting Order is set for June 7, 2006 and the procedural schedule calls for an order being issued by June 23, 2006.

Entergy New Orleans

In May 2005, Entergy New Orleans filed withApril 2006, the City Council a request for continuation of theagreed to delay Entergy New Orleans' 2005 formula rate plan and generation performance-based rate plan for an additional three years. The filing requests a target equity component of the capital structure of 45%, an increaseto July 2006 from the current target of 42%.originally scheduled May 1, 2006 deadline.

Federal Regulation

System Agreement Litigation

On June 1, 2005, the FERC issued a decision in the System Agreement litigation. The domestic utility companies historically have engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which has been approved by the FERC. The System Agreement litigation proceedings are described in the Form 10-K.

The FERC decision concluded, among other things, that:

• The System Agreement no longer roughly equalizes production costs among the domestic utility companies.
• In order to reach rough production cost equalization, the FERC will impose a bandwidth remedy allowing for a maximum spread of 22 percent (expressed by the FERC as +/- 11%) between the total annual production costs of the highest cost and lowest cost domestic utility companies.
• When calculating the production costs for this purpose, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for that year but will be priced at that year's average MSS-3 price, reducing the amount of Vidalia costs reflected in the comparison of the domestic utility companies' total production costs.
• The remedy ordered by FERC calls for no refunds and would be effective based on the calendar year 2006 production costs with the first potential reallocation payments, if required, expected to be made in 2007.

The FERC's June 2005 order would reallocate production costs of the domestic utility companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth. This would be accomplished by payments from domestic utility companies whose production costs are below Entergy System average production costs to domestic utility companies whose production costs are above Entergy System average production costs. An assessment of the potential effects of the FERC's June 2005 order requires assumptions regarding the future total production cost of each domestic utility company, which assumptions include the mix of solid fuel and gas-fired generation available to each company and the costs of natural gas and purchased power.  Entergy Louisiana and Entergy Gulf States are more dependent upon gas-fired generation than Entergy Arkansas, Entergy Mississippi, or Entergy New Orleans. Of these, Entergy Arkansas is the l east dependent upon gas-fired generation.  Therefore, increases in natural gas prices likely will increase the amount by which Entergy Arkansas' total production costs are below the average production costs of the domestic utility companies.  Considerable uncertainty exists regarding future gas prices. Annual average Henry Hub gas prices have varied significantly over recent years, ranging from $1.72/mmBtu to $5.85/mmBtu for the 1995-2004 period, and averaging $3.43/mmBtu during the ten-year period 1995-2004 and $4.58/mmBtu during the five-year period 2000-2004.  Recent market conditions have resulted in gas prices that have averaged $5.85/mmBtu for the twelve months ended December 2004. During the 12 month period July 1, 2004 to June 30, 2005 forward gas contracts for each of the next four years based on daily NYMEX close averaged $6.68/mmBtu (2006), $6.25/mmBtu (2007), $5.88/mmBtu (2008) and $5.58/mmBtu (2009). If the FERC's June 2005 order becomes final and if these gas prices occur as assumed, the following potential annual production cost reallocations among the domestic utility companies could result during the 2007-2010 period:

If natural gas prices deviate by $1/mmBtu up or down, it is expected that Entergy Arkansas' annual payments will change in the same direction by approximately $60 to $70 million.

Various pending motions for rehearing and clarification of the FERC's June 2005 order were filed by parties to the proceeding, including the LPSC, the APSC, the MPSC, and the City Council, and by Entergy Services, Inc., on behalf of the domestic utility companies. Among other things, the LPSC's motion urged the FERC to "clarify" that the FERC's order requires the payments and receipts, to the extent any are required, to be made in 2006 based on production costs incurred in 2004 and 2005. Entergy does not believe that this request for "clarification" is consistent with the FERC order and submitted a response urging the FERC to reject this interpretation and instead find that the annual remedy order by the FERC would be evaluated based on calendar year 2006 production costs, with the first potential payments/receipts, if any were required, made in 2007.

Management believes that any changes in the allocation of production costs resulting from the FERC's June 2005 order and related retail proceedings should result in similar rate changes for retail customers. The timing of recovery of these costs in rates could be the subject of additional proceedings before Entergy's retail regulators. Although the outcome and timing of the FERC and other proceedings cannot be predicted at this time, Entergy does not believe that the ultimate resolution of these proceedings will have a material effect on its financial condition or results of operations.

See the Form 10-K for discussion of the proceeding that the LPSC commenced before itself regarding the System Agreement. As noted above in "State and Local Rate Regulation," the settlement of various issues involving Entergy Gulf States and Entergy Louisiana that was approved by the LPSC has resolved the System Agreement proceeding before the LPSC, which has been dismissed without prejudice.

Transmission

See the Form 10-K for a discussion of the petition for declaratory order thatSystem Agreement litigation proceedings at the FERC. In April 2006, Entergy filed with the FERC its compliance filing to implement the provisions of the FERC's decision. The filing amends the System Agreement to provide for the calculation of production costs, average production costs, and payments among the domestic utility companies to the extent required to maintain rough production cost equalization pursuant to the FERC's decision, and makes clear that all payments/receipts will be classified as energy costs. The payments would be based on calendar year 2006 production costs, with any payments between the domestic utility companies to be made in January 2005 regarding Entergy's twelve equal monthly installments, commencing in June 2007.

Independent Coordinator of Transmission (ICT) proposal. On March 22, 2005, the FERC issued a declaratory order concluding that: (1) because the Southwest Power Pool (SPP) was the only entity identified as potentially being selected as the ICT and because the SPP is already a "public utility" there was no need to rule on the question of whether the functions of the ICT, alone, would serve to make the ICT a "public utility;" (2) Entergy will continue to be the "transmission provider" for transmission service across its system and that "the presence of SPP as the ICT will not change the existing balance of jurisdiction between [the FERC] and Entergy's retail regulators;" and (3) the FERC "is prepared to grant Entergy's proposed transmission pricing proposal on a two-year experimental basis, subject to certain enhancement and monitoring and reporting co nditions." The enhancements referred to by the FERC involve more fully specifying the responsibilities and duties of the ICT, including defining the ICT's role in the preparation of various transmission expansion plans and the performance of studies related to the granting of transmission or interconnection service. Before Entergy's ICT proposal can be implemented, however, Entergy is required to submit further filings with the FERC regarding the modifications and clarifications to the ICT proposal.

OnIn April 8, 2005 several intervenors filed an Emergency Request for Clarification and Request for Expedited Commission Action seeking to have the FERC: (1) clarify the ICT's role in administering the Available Flowgate Capacity (AFC) methodology; (2) clarify the ICT's role in developing the transmission base plan; (3) clarify what the FERC meant when it required Entergy to provide firm transmission rights to customers that pay for supplemental transmission upgrades; and (4) clarify and confirm following Entergy's filing that the FERC will assess SPP's status as being independent of Entergy.

On April 21, 2005 Entergy filed a request for clarification or rehearing of the FERC's March 22 declaratory order requesting that the FERC clarify the respective role of Entergy and the ICT in developing the inputs or criteria used to create the base plan and in preparing certain studies regarding system expansion. The request for clarification further requests that the FERC clarify that the initial two-year period will commence with the actual start date of ICT operations. In the event that the FERC denies Entergy's request for clarification, then Entergy will seek rehearing on these issues. However, in its request, Entergy requested that FERC not rule on these issues at this time but, instead, that the FERC wait to evaluate these issues until such time as Entergy has filed the more detailed tariff sheets and protocols in its subsequent filing to implement the ICT. Separately, Entergy submitted a letter advising the FERC that it intended to submit on or about May 27, 2005 the filing t o implement the ICT proposal. A joint request for rehearing of the ICT declaratory order was also filed by the City Council, the LPSC, and the MPSC in which the retail regulators expressed their concerns that the findings reached in the declaratory order may result in an expansion of authority of the ICT "that is unnecessary to achieve the [FERC's] goals and is very likely to result in significant increases in the start-up and operational costs of the ICT." The retail regulators request that the FERC not act on their request for rehearing until Entergy has submitted its filing to implement the ICT. The intervenors filed a separate request for rehearing on April 21, 2005 urging the FERC to impose additional conditions on the approval of the ICT and also re-urging the FERC to reject the pricing proposal contained in the ICT proposal.

On May 12, 20052006 the FERC issued an order clarifying certain aspects ofapproving with modification Entergy's ICT proposal filed in May 2005. In its March 22 order. In the May 12 order, the FERC indicated thatFERC: (1) Entergy is to work with the ICT and Entergy's stakeholders to develop procedures by which the ICT will calculate AFCs; (2) Entergy must specifically define the transmission rights that a customer that pays for supplemental upgrades will receive for such payments; (3) the FERC will review the ICT's contract to ensure that the ICT can perform its functions in an independent manner even if SPP is chosen as the ICT; and (4) the initial two-year period will start once the ICT becomes operational.

On May 27, 2005, the domestic utility companies filed the enhanced ICT proposal with the FERC. Entergy believes that the filing is consistent with the FERC guidance received in both the FERC's March 22 and May 12 orders on the ICT. Among other things, the enhanced ICT filing states that the ICT will (1) grant or deny transmission service on the domestic utility companies' transmission system; (2) administer the domestic utility companies' OASIS node for purposes of processing and evaluating transmission service requests and ensuring compliance with the domestic utility companies' obligation to post transmission-related information; (3) develop a base plan for the domestic utility companies' transmission system that will result in the ICT making the determination on whether something should be rolled into the domestic utility companies' transmission rates or directly assigned to the customer requesting or causing an upgrade to be constructed; (4) serve as the reliability coordinator for t he Entergy transmission system; and (5) oversee the operation of the weekly procurement process. The enhanced ICT proposal clarifies the rights that customers receive when they fund a supplemental upgrade and also contains a detailed methodology describing the process by which the ICT will evaluate interconnection-related investments already made on the Entergy System for purposes of determining the future allocation of the uncredited portion of these investments.

On June 3, 2005 a group of generators filed with the FERC a request that the FERC schedule a technical conference on the enhanced ICT proposal in order for Entergy to provide additional information on the enhanced ICT proposal. In response, a stakeholder meeting was held in New Orleans on June 30, 2005. Interventions and comments on the filing are due by August 5, 2005.

In addition, as discussed in the Form 10-K, Entergy Louisiana and Entergy Gulf States have filed an application with the LPSC requesting that the LPSC find that the ICT proposal is a prudent and appropriate course of action. An LPSC hearing on the ICT proposal is currently scheduled for August 2005, however certain intervenors have recently requested that the hearing be delayed until mid-September 2005.

FERC's Supply Margin Assessment

See the Form 10-K for a discussion of the FERC's supply margin assessment and, in particular, the order issued by the FERC in December 2004 pursuant to Section 206 of the Federal Power Act (FPA).  On June 30, 2005, the FERC issued an order addressing Entergy's delivered price test (DPT) analysis.  The FERC found that material questions of fact exist that may affect the results of the DPT submitted by Entergy.  These issues include, for example, whether the entire Entergy control area is the appropriate relevant geographic market or whether there exist binding transmission constraints such that it is more appropriate to define more than one geographic market within the Entergy control area.  Accordingly, the FERC initiated an evidentiary hearing to address the impact of any transmission constraints on the appropriate scope of the relevant market; which information will be required prior to the FERC making a determination on whether Entergy has market power within its con trol area. On July 22, 2005, Entergy notified the FERC that it was withdrawing its request for market-based rate authority for sales within its control area. Instead, the domestic utility companies and their affiliates will transact at cost-based rates for wholesale sales within the Entergy control area. Entergy indicated that it will file the proposed cost-based rate schedules within 60 days.Additionally, Entergy reserves its right to request market-based rate authority for sales within its control area in the future. The FERC ALJ in the proceeding issued an order that cancelled a pre-hearing conference set for July 26, 2005, set a deadline of August 8, 2005 for objections to Entergy's notice of withdrawal, and stated that if no objections were filed by August 8, 2005 Entergy's withdrawal notice will have disposed of all pending issues in the proceeding. The relinquishment of market-based rates for sales within the Entergy control area is not expecte d to have a material effect on the financial results of Entergy.

Additionally, on May 5, 2005, the FERC issued an order addressing the remaining prongs in the market-based rate proceeding: transmission market power, barriers to entry/reciprocal dealing, and affiliate abuse.  The FERC granted rehearing in part and instituted a proceeding under Section 206 of the FPA to investigate whether Entergy satisfies the FERC's transmission market power and affiliate abuse/reciprocal dealing standards for the granting of market-based rate authority, and established a refund effective date pursuant to the provisions of Section 206, for purposes of the additional issues set for hearing.  However, the FERC decided to hold that investigation in abeyance pending the outcomes of the ICT proceeding and the affiliate purchased power agreements proceeding.  The FERC declined to require a hearing on the remaining prong regarding barriers to entry.  On June 6, 2005, Entergy sought rehearing of the May 5 Order and that request for rehearing is pending .

Interconnection Orders

See the Form 10-K for a discussion of the ALJ Initial Decision and FERC order directing Entergy Louisiana to refund, in the form of transmission credits, approximately $15 million in expenses and tax obligations previously paid by a generator. Entergy's request for rehearing was denied by the FERC.

Available Flowgate Capacity Proceedings

See the Form 10-K for a discussion of proceedings at the FERC involving Entergy's Available Flowgate Capacity (AFC) methodology. On March 22, 2005, the FERC issued an order contemporaneously with the ICT declaratory order discussed above that holds the AFC hearing in abeyance pending action on Entergy's upcoming ICT filing. The order holding the hearing in abeyance further indicated that it would cancel the hearing when the ICT begins to perform its functions. On April 8, 2005 several intervenors filed Emergency Motions for Interim Relief and Expedited Commission Action requesting that, during the interim period before the implementation of the ICT, the FERC (1) institute an audit process to examine and modify Entergy's current AFC process; and (2) require SPP to become involved in the AFC stakeholder process and order certain modifications to Entergy's stakeholder process. The audit process being proposed by the intervenors would not involve an independent auditor, but instead wou ld be an investigation performed by a representative from the intervenors, Entergy, and possibly SPP.  On April 25, 2005, Entergy filed its response to the emergency motion urging the FERC to reject the intervenors' request for the "audit" because the type of investigation proposed by the intervenors would be neither independent nor fair and would only distract from the implementation of the ICT.  Instead, Entergy has proposed that the ICT conduct an independent review of the AFC process and procedures as part of its transition to assuming the identified ICT responsibilities, including the calculation of the AFCs.  Entergy further indicated that it would welcome SPP's participation in the current stakeholder process. On April 21, 2005, the intervenors filed a separate request for rehearing arguing that the FERC must allow the AFC hearing to proceed in parallel withapproved the establishment of the ICT. See "Transmission" aboveICT, with modifications; (2) approved Entergy's proposed pricing policy, with modifications; (3) approved the implementation of a weekly procurement process (WPP); and (4) ordered Entergy to submit a compliance filing and an executed contract with the Southwest Power Pool, the approved ICT, within 60 days of the order. Requests for further discussionrehearing of AFC.the FERC order are due May 24, 2006.

Utility Restructuring

Previous developmentsThe proposed modifications include, among other things: (1) Entergy must file with the FERC the criteria used to grant and information relateddeny transmission service, including calculating available flowgate capacity; (2) the FERC extended the initial term of the ICT from two years to electric industry restructuring are presented in Note 2four years; and Entergy is precluded from terminating the ICT prior to the consolidated financial statementsend of the four year period; (3) the establishment of a transmission users group that will provide input directly to the ICT on the effectiveness of the ICT Proposal and also will propose to the FERC an appropriate means by which they could be given access to inputs in the Form 10-K.process and models under the direction of the ICT; (4) With regard to any dispute between the ICT and Entergy concerning transmission service requests, transmission planning, and interconnection requests, the ICT's position will prevail during the pendency of the dispute resolution; (5) The following are updates toWPP must be operational within approximately 14 months of the Form 10-K.

Retail-Texas

In June 2005, a Texas law was enacted which provides that:

• Entergy Gulf States is authorized byFERC order or the legislationFERC may r eevaluate all approvals to proceed with a jurisdictional separation into two vertically integrated utilities, one subject solely to the retail jurisdiction of the LPSC and one subject solely to the retail jurisdiction of the PUCT;
• the portions of all prior PUCT orders requiring Entergy Gulf States to comply with any provisions of Texas law governing transition to retail competition are void;
• Entergy Gulf States must file a plan by January 1, 2006, identifying the power region(s) to be considered for certification and the steps and schedule to achieve certification;
• Entergy Gulf States must file a transition to competition plan no later than January 1, 2007, that would address how Entergy Gulf States intends to mitigate market power and achieve full customer choice, including potential construction of additional transmission facilities, generation auctions, generation capacity divestiture, reinstatement of a customer choice pilot project, establishment of a price to beat, and other measures;
• Entergy Gulf States' rates are subject to cost-of-service regulation until retail customer choice is implemented;
• Entergy Gulf States may not file a general base rate case in Texas before June 30, 2007, with rates effective no earlier than June 30, 2008, but may seek before then the recovery of certain incremental purchased power capacity costs, adjusted for load growth, not in excess of five percent of its annual base rate revenues (as discussed above in "State and Local Regulation," in July 2005 Entergy Gulf States filed a request for implementation of an incremental purchased capacity recovery rider); and
• Entergy Gulf States may recover over a period not to exceed 15 years reasonable and necessary transition to competition costs incurred before the effective date of the legislation and not previously recovered, with appropriate carrying charges.

Retail-LouisianaICT.

In November 2001, the LPSC decided not to move forward with retail open access for any customers at this time. The LPSC instead directed its staff to hold collaborative group meetings concerning open access from time to time, and to have the LPSC staff monitor developments in neighboring states and to report to the LPSC regarding the progress of retail access developments in those states. In September 2004, in response to a study performed by the Louisiana State University Center for Energy Studies that evaluated a limited industrial-only retail choice program, the LPSC asked the LPSC staff to solicit comments and obtain information from utilities, customers, and other interested parties concerning the potential costs and benefits of a limited choice program, the impact of such a program on other customers, as well as issues such asstranded costs and transmission service. Comments from interested parties were filed with the LPSC in Janua ry 2005. A technical conference was held in April 2005 and in May 2005 interested parties filed reply comments to arguments made at the technical conference. Entergy stated that it believes that there is no new information or credible evidence that would justify altering the LPSC's previous conclusion that retail access is not in the public interest.

Federal Legislation

In late July 2005 the U.S. Congress passed broad new energy legislation, the Energy Policy Act of 2005. The legislation contains electricity provisions that, among other things:

• Repeal the Public Utility Holding Company Act of 1935 (PUHCA), effective six months after enactment of the Energy Policy Act. As a registered holding company system, Entergy is subject to PUHCA. Some of the more significant effects of PUHCA are that it limits the operations of a registered holding company system to a single, integrated public utility system; regulates transactions among affiliates within a holding company system; governs the issuance, acquisition, and disposition of securities and assets by registered holding companies and their subsidiaries; limits the entry by registered holding companies and their subsidiaries into businesses other than electric or gas utility businesses; and requires SEC approval for certain utility mergers and acquisitions. Certain consumer protection authorities were transferred to the FERC, including new authority over utility mergers and acquisitions, and to the state or local regulatory commissions.
• Codifies the concept of participant funding, a form of cost allocation for transmission interconnections and upgrades, and allows FERC to apply participant funding in all regions of the country. Participant funding helps ensure that a utility's native load customers only bear the costs that are necessary to provide reliable transmission service to them and not bear costs required by generators who seek to deliver power to other regions.
• Provides financing benefits, including loan guarantees and production tax credits, for new nuclear plant construction, and reauthorizes the Price-Anderson Act, the law that provides an umbrella of insurance protection for the payment of public liability claims in the event of a major nuclear power plant incident.
• Revises current tax law treatment of nuclear decommissioning trust funds by allowing regulated and nonregulated taxpayers to make deductible contributions to fund the entire amount of estimated future decommissioning costs.
• Provides a more rapid tax depreciation schedule for transmission ass ets to encourage investment.
• Creates mandatory electricity reliability guidelines with enforceable penalties to help ensure that the nation's power transmission grid is kept in good repair and that disruptions in the electricity system are minimized.  Entergy already voluntarily complies with National Electricity Reliability Council standards, which are similar.
• Establishes conditions for the elimination of the Public Utility Regulatory Policy Act's (PURPA) mandatory purchase obligation from qualifying facilities.

The President is expected to sign the Energy Policy Act in August 2005. The Energy Power Act requires several rulemakings by the FERC and other government agencies in order to implement its provisions. Therefore, it will be some time before a full assessment of its effect on Entergy and the energy industry can be completed.

Market and Credit Risks

Commodity Price Risk

Power Generation

As discussed more fully in the Form 10-K, somethe sale of electricity from the power generation plants owned by Entergy's Non-Utility Nuclear business and Energy Commodity Services business, unless otherwise contracted, is subject to the fluctuation of market power prices. Following is an updated summary of the amount of the Non-Utility Nuclear business' output that is sold forward as of March 31, 2006 under physical or financial contracts (2006 represents the remaining three quarters of the year):

A sale of power on a unit contingent basis coupled with a guarantee of availability provides for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy's outstanding guarantees of availability provide for dollar limits on Entergy's maximum liability under such guarantees. The Vermont Yankee acquisition included a 10-year PPA under which the former owners will buy the power produced by the plant through the expiration in 2012 of the current operating license for the plant. The PPA includes an adjustment clause under which the prices specified in the PPA will be adjusted downward monthly if power market prices drop below PPA prices.

See the Form 10-K for a discussion of Non-Utility Nuclear's value sharing agreements with NYPA involving energy sales from the Fitzpatrick and Indian Point 3 power plants.

Some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants and the wholesale supply agreements entered into by Entergy's Competitive Retail business contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary maywill be required to provide collateral based upon the difference between the current market and contracted power prices in the regions where the Non-Utility Nuclear and Competitive Retail businesses sellsells power. The primary form of the collateral to satisfy these requirements would be an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At June 30, 2005,March 31, 2006, based on power prices at that time, Entergy had in place as collateral $922.7$1,527 million of Entergy Corporation guarantees $81.0for wholesale transactions, $108 million of which support letters of credit. The assurance requirement associated with Non-Utility Nuclear is estimated to increase by an amount up to $400 million if gas prices increase $1 per MMBtu in both the short- and long - -term markets. In the event of a decrease in Entergy Corpo ration'sCorporation's credit rating to specified levels below investment grade, Entergy maywill be required to replace Entergy Corporation guarantees with cash or letters of credit under some of the agreements.

Central States Compact Claim

The Low-Level Radioactive Waste Policy ActIn addition to selling the power produced by its plants, the Non-Utility Nuclear business sells installed capacity to load-serving distribution companies in order for those companies to meet requirements placed on them by the ISO in their area. Following is a summary of 1980 holds each state responsible for disposal of low-level radioactive waste originating in that state, but allows states to participate in regional compacts to fulfill their responsibilities jointly.  Arkansas and Louisiana participate in the Central Interstate Low-Level Radioactive Waste Compact (Central States Compact or Compact).  Commencing in 1998, Entergy Arkansas, Entergy Gulf States, and Entergy Louisiana made a series of contributions to the Central States Compact to fund the Central States Compact's development of a low-level radioactive waste disposal facility to be located in Boyd County, Nebraska.  In December 1998, Nebraska, the host state for the proposed Central States Compact disposal facility, denied the compact's license application for the proposed disposal facility.  Several parties, including the commission that governs the compact (the Compact Commission), filed a lawsuit against Nebraska seeking damages resulting from Nebraska's denial of the proposed facility's license.  After a trial, the U.S. District Court concluded that Nebraska violated its good faith obligations regarding the proposed waste disposal facility and rendered a judgment against Nebraska in the amount of $151 million.  In August 2004, Nebraska agreed to pay the Compact $141 million in settlement ofNon-Utility Nuclear business' installed capacity that is currently sold forward, and the judgment. In July 2005, the Compact Commission decided to distribute a substantial portion of the proceeds from the settlement to the nuclear power generators that had contributed funding for the Boyd County facility, including Entergy Arkansas, Entergy Gulf States, and Entergy Louisiana. On August 1, 2005, Nebraska paid the fullblended amount of the settlement toNon-Utility Nuclear business' planned generation output and installed capacity that is currently sold forward as of March 31, 2006 (2006 represents the Compact, and the Compact distributed from the settlement proceeds $23.6 million to Entergy Arkansas, $19.9 million to Entergy Gulf States, and $18.4 million to Entergy Louisiana.  Management is still analyzing the accounting treatmentremaining three quarters of the receip ts, but expects that some portionyear):

Following is a summary of the receipts could result in income for Entergy Arkansas, Entergy Gulf States,amount of Energy Commodity Services' output and Entergy Louisiana.installed capacity that is sold forward under physical or financial contracts at fixed prices as of March 31, 2006 (2006 represents the remaining three quarters of the year):

Critical Accounting Estimates

See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy's accounting for nuclear decommissioning costs, unbilled revenue, impairment of long-lived assets, qualified pension and other postretirement benefits, and other contingencies. The followingFollowing is an update to the information provided in the Form 10-K.that discussion.

Nuclear Decommissioning CostsUnbilled Revenue

In the first quarter of 2005, Entergy's Non-Utility Nuclear business recorded a reduction of $26.0 million in its decommissioning cost liability in conjunction with a new decommissioning cost study as a result of revised decommissioning costs and changes in assumptions regarding the timing of when the decommissioning of a plant will begin. The revised estimate resulted in miscellaneous income of $26.0 million ($15.8 million net-of-tax), reflecting the excess of the reduction in the liability over the amount of undepreciated asset retirement cost.

In the second quarter of 2005,Effective January 1, 2006, Entergy Louisiana recorded a revisionand the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to its estimated decommissioning cost liabilitydeferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with a new decommissioning cost study for Waterford 3 that reflected an expected life extension for the plant. The revised estimate resulted in a $153.6 million reduction in its decommissioning liability, along with a $49.2 million reduction in utility plant and a $104.4 million reduction in the related regulatory asset.treatment.

Recently Issued Accounting Pronouncements

In the first quarter 2005, FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143" (FIN 47). FIN 47 requires companies to recognize at fair value a liability for a conditional asset retirement obligation when incurred, which is generally upon an asset's acquisition, construction, development, or through its normal operation. A conditional asset retirement obligation is generally a legal obligation to incur costs to remove an asset or part of an asset, such as an obligation to comply with environmental regulations and requirements. The obligation is conditional because there is currently no legal requirement to retire or remove the facility that the affected asset is a part of. FIN 47 requires that uncertainty about the timing or method of settlement of a conditional asset retirement obligation be factored into the measurement of the liability when sufficient information becomes available. FIN 4 7 will be effective for Entergy no later than December 31, 2005. Entergy does not believe that the adoption of FIN 47 will be material to its financial position or results of operations because it estimates that any conditional asset retirement obligations required to be recognized under FIN 47 would be offset by a regulatory asset because of the expected recovery of these future costs in rates.

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