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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. Yesþ Noo

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

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

Entergy Corporation, Entergy Arkansas, Inc., Entergy Gulf States, 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, 2005,2006, and the Quarterly ReportsReport on Form 10-Q for the quartersquarter ended March 31, 2006 and June 30, 20062007, 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
SeptemberJune 30, 20062007

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
SeptemberJune 30, 20062007

FORWARD-LOOKING INFORMATION

In this filingcombined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant 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. Words such as "believes," "intends," "plans," "predicts," "estimates," and similar expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although Entergyeach of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, Entergy undertakesthese reg istrants undertake 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 thereuncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the statements. Some offorward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management's Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to the risk factors in the Form 10-K as well as others described elsewhere in this combined 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 Texas legislation, and other regulatory proceedings, including those related to Entergy's System Agreement, and Entergy's utility supply plan, recovery of storm costs, and recovery of fuel and purchased power costs
• Entergy's and its subsidiaries' ability to manage itstheir 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 establishmentoperations of a regionalthe independent coordinator of 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 federal energy legislation, including the effects 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
• the outcomeperformance of Entergy's generating plants, and particularly the capacity factors at its nuclear generating facilities
• 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 and interest rates
• Entergy's ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities
• Entergy's ability to purchase and sell assets at attractive prices and on other attractive terms
• 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, and the prices and availability of fuel and power Entergy must purchase for its utility customers, and Entergy's ability to meet credit support requirements for fuel and power supply contracts
• volatility and changes in markets for electricity, natural gas, uranium, and other energy-related commodities
• changes in regulation of nuclear generating facilities and nuclear materials and fuel, including possible shutdown of nuclear generating facilities, particularly those in the Non-Utility Nuclear business
• uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel storage and disposal

FORWARD-LOOKING INFORMATION (Concluded)

• resolution of pending or future applications for license extensions or modifications of nuclear generating facilities
• changes in law resulting from federal energy legislation, including the effects of PUHCA repeal and the adoption of the Chapter 11 bankruptcy proceedingFERC reliability requirements
• changes in environmental, tax, and other laws, including requirements for reduced emissions of Entergy New Orleans,sulfur, nitrogen, carbon, mercury, and the effect of this proceeding on other Entergy companiessubstances
• advances in technology
• 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 and 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:

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DEFINITIONS (Continued)

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DEFINITIONS(Continued)

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DEFINITIONS(Concluded)

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DEFINITIONS(Concluded)

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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 fivesix nuclear power plants located in the northeasternnorthern 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 soldThe non-nuclear wholesale assets business sells to wholesale customers the electric power produced by power plants that it owns while it focuses on improving performance and exploring sales or restructuring opportunities for its businesses in the fourth quarter of 2004 and is no longer an operating entity. Due to the November 2006 expiration of contingencies on the sale of Entergy-Koch's trading business, and the corresponding release to Entergy-Koch of sales proceeds held in escrow, Entergy expects to record a gain related to this investment of approximately $60 million, net-of-tax, in the fourth quarter of 2006. 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.power plants.

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 updatesSee Note 2 to the financial statements herein for a discussion of updates in Entergy Gulf States', Entergy Louisiana's, and Entergy Mississippi's storm cost recovery proceedings.

Entergy reached an agreement with one of its excess insurers under which Entergy received $69.5 million in the second quarter 2007 in settlement of its Hurricane Katrina claim with that insurer. Entergy has received a total of $134.5 million as of June 30, 2007 on its Hurricanes Katrina and Rita insurance claims, including $83.1 million in 2007. Refer to Note 8 to the financial statements in the Form 10-K.10-K for a description of Entergy's non-nuclear property insurance coverage.

Community Development Block GrantsGrant (CDBG)

As discussed inSee the Form 10-K for a federaldiscussion of the Katrina Relief Bill, a hurricane aid package became law that includes funding for$11.5 billion in Community Development Block Grants (CDBG)(for the states affected by Hurricanes Katrina, Rita, and Wilma) that allows state and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. The U.S. Department of Housing and Urban Development has allocated approximately $10.4 billion for Louisiana, $5.5 billion for Mississippi, and $0.5 billion for Texas. The states, in turn, will administer the grants.

In March 2007, the City Council certified that Entergy New Orleans has incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy Louisiana, and Entergy Gulf States-Louisiana provided justification statements to state and local officials in March 2006 and presented revised justification statements to the Louisiana Recovery Authority in September 2006. The statements include theNew Orleans' estimated costs of Hurricanes Katrina and Rita damage, as well as$465 million for the gas system rebuild. In April 2007, Entergy New Orleans a lost customer base component intendedexecuted an agreement with the Louisiana Office of Community Development under which $200 million of CDBG funds will be made available to help offset the need for storm-related rate increases. The statements include justification for CDBG funding of $592 million forEntergy New Orleans. Entergy New Orleans $539submitted the agreement to the bankruptcy court, which approved it on April 25, 2007. Entergy New Orleans has received $176.8 million for Entergy Louisiana,of the funds as of June 30, 2007, and $183 million for Entergy Gulf States-Louisiana.

In October 2006, the Louisiana Recovery Authority Board endorsed a resolution proposing to allocate $200 million in CDBG fundsremainder will be paid to Entergy New Orleans to defray gasas it incurs and electric utility system repair costs in an effort to provide rate relief for Entergy New Orleans customers. The proposal will now be developed as an action plan amendment and published for public comment. Once public input is reviewed and considered, the final plan will come before the Louisiana Recovery Authority Board, the Governor, and the Louisiana Legislature for approval before submission of the plan to the U.S. Department of Housing and Urban Development for its approval. The City Council will certify Entergy New Orleans' repair costs before they are submitted for funding. The Louisiana Recovery Authority Board has not allocated any CDBG funds to Entergy Louisiana and Entergy Gulf States-Louisiana at this time.submits additional eligible costs.

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As discussed further below, Entergy Mississippi filed a request with the Mississippi Development Authority for CDBG funding for reimbursement of its Hurricane Katrina infrastructure restoration costs and received $81 million in October 2006.

Storm Costs Recovery Filings with Retail Regulators

On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed a supplemental and amending storm cost recovery application with the LPSC, in which Entergy Louisiana and Entergy Gulf States requested that the LPSC (1) review Entergy Louisiana's and Entergy Gulf States' testimony and exhibits relating to the costs associated with Hurricanes Katrina and Rita, and declare that those verified, actual storm-related costs through May 31, 2006 are $466.8 million for Entergy Louisiana and $200.3 million for Entergy Gulf States in the Louisiana jurisdiction and that those costs were prudently incurred; (2) declare that the annual revenue requirements associated with the recovery of those costs, including carrying costs, based on a ten-year levelized rate are $54.4 million for Entergy Louisiana and $26.2 million for Entergy Gulf States; (3) authorize Entergy Louisiana and Entergy Gulf States to recover the costs through Storm Cost Recovery Riders (SCRRs) proposed by Entergy Louisiana and Entergy Gulf States; (4) declare that the storm costs incurred subsequent to May 31, 2006 are to be filed by Entergy Louisiana and Entergy Gulf States with the LPSC on an annual basis in connection with their annual formula rate plan (FRP) filings, and that the SCRRs be adjusted annually to reflect such costs and any insurance proceeds or CDBG funds actually received, with the adjusted amounts to be collected through the SCRRs to take effect contemporaneous with the effective date of rate changes under the FRP; (5) declare that the storm-related costs incurred by Entergy Louisiana and Entergy Gulf States meet the conditions set forth in the FRP for exclusion from the sharing provisions in those FRPs and authorize the permanent recovery of storm costs outside of the FRPs adopted by the LPSC for Entergy Louisiana and Entergy Gulf States; and (6) authorize the funding of a storm reserve through securitization sufficient to fund a storm cost reserve of $132 million for Entergy Louisiana and $81 million for Ent ergy Gulf States. Hearings are scheduled for March 2007. Entergy Gulf States and Entergy Louisiana also intend to pursue securitization options for the storm cost recovery as well, which is authorized by a law signed by the Governor of Louisiana in May 2006.

In July 2006, Entergy Gulf States filed an application with the PUCT with respect to the $393.2 million of Hurricane Rita reconstruction costs incurred in its Texas retail jurisdiction through March 31, 2006. The filing asks the PUCT to determine that $393.2 million is the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Gulf States allocates those costs among its Texas retail customer classes.  If approved, Entergy Gulf States' application will ultimately affect all its retail customers in Texas. Entergy Gulf States' filing does not request recovery of costs through a specific rider on customer bills or through any other means at this time. This is the first of two filings authorized by a law passed earlier this year in a special session of the Texas Legislature. A hearing before the PUCT on the filing was scheduled for November 1-3, 2006, but at the commencement of the hearing all of the parties in attendance announced that they had reached a unanimous agreement in principle to settle the issues in the proceeding. The parties are developing the documentation to formalize the settlement. The parties intend to submit the settlement documents to the PUCT prior to Thanksgiving 2006 so that the PUCT can approve them by early December 2006. A second filing will request securitization and recovery of the costs eligible for securitization through retail rates and tariffs. Entergy Gulf States expects to make the second filing following the conclusion of the reconstruction cost case.

In March 2006, the Governor of Mississippi signed a law that established a mechanism by which the MPSC could authorize and certify an electric utility financing order and the state could issue general obligation bonds to finance the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities.  Because of the passage of this law and the possibility of Entergy Mississippi obtaining CDBG funds for Hurricane Katrina storm restoration costs, in March 2006, the MPSC issued an order approving a Joint Stipulation between Entergy Mississippi

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and the Mississippi Public Utilities Staff that provided for a review of Entergy Mississippi's total storm restoration costs in an Application for an Accounting Order proceeding.  The Stipulation stated that the procedural schedule of Entergy Mississippi's December 2005 filing seeking recovery of hurricane costs through an existing Entergy Mississippi storm damage rider should be suspended until the MPSC issues a final order in the Application for an Accounting Order proceeding. 

In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later, Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its Hurricane Katrina infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state general obligation bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount included the $89 million of Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. Entergy Mississippi's filing stated that the amount actually financed through the state bonds would be net of any CDBG funds that Entergy Mississippi received.

In October 2006, the Mississippi Development Authority approved for payment and Entergy Mississippi received $81 million in CDBG funding for Hurricane Katrina costs. The MPSC then issued a financing order authorizing the issuance of $48 million of state general obligation bonds, with $8 million for the remainder of Entergy Mississippi's certified Hurricane Katrina restoration costs and $40 million for the increase in Entergy Mississippi's storm damage reserve. $30 million of the storm reserve will be set aside in a restricted account. Entergy Mississippi expects to forward the financing order to the state bond commission, as per the March 2006 law, and expects to receive the proceeds from the state general obligation bond issuance in the first quarter of 2007.

See State and Local Rate Regulationbelow for a discussion of Entergy New Orleans' filings with the City Council directed at recovery of its storm costs.

Insurance Recovery

As discussed more fully in the Form 10-K, the domestic utility companies affected by Hurricanes Katrina and Rita are pursuing insurance recoveries for their covered losses caused by Hurricanes Katrina and Rita. The domestic utility companies have received $37 million thus far on their insurance claims. Entergy currently expects to receive payment for the majority of its estimated insurance recoveries related to Hurricanes Katrina and Rita through 2009.

Entergy New Orleans Bankruptcy

On October 23, 2006See the Form 10-K for a discussion of the Entergy New Orleans filed abankruptcy proceeding. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With the receipt of CDBG funds, and the agreement on insurance recovery with one of its excess insurers, Entergy New Orleans waived the conditions precedent in its plan of reorganization, and a disclosure statement with the bankruptcy court. Objections to the disclosure statement must be filed by November 29, 2006, and a hearing regarding its adequacy is scheduled for December 7, 2006. The period within which plan became effective on May 8, 2007.

Following are significant terms in Entergy New Orleans' plan of reorganization:

• Entergy New Orleans haspaid in full, in cash, the exclusive right to solicit acceptance of its plan of reorganization will expire on December 22, 2006, unless it is further extended by the bankruptcy court.

  The bankruptcy court also extended the time within whichallowed third-party prepetition accounts payable (approximately $29 million, including interest). Entergy New Orleans has an exclusive right to file a planpaid interest from September 23, 2005 at the Louisiana judicial rate of reorganization until November 15, 2006. Financial Guaranty Insurance Company (FGIC)interest for 2005 (6%) and 2006 (8%), and at the insurerLouisiana judicial rate of two series totaling $75 millioninterest plus 1% for 2007. The Louisiana judicial rate of Entergy New Orleans' first mortgage bonds, filed a motion to terminate the exclusive period within which Entergy New Orleans has an exclusive right to file and solicit acceptances of a plan of reorganization. FGIC asks the court to allow itself or other stakeholders the right to file an alternative and competing plan of reorganization and to solicit acceptancesinterest for such a proposed plan. FGIC's motion to terminate exclusivity2007 is set for hearing on November 15, 2006.

  The plan of reorganization reflects Entergy New Orleans' continuing effort to work with federal, state, and local authorities to resolve the bankruptcy in a manner that allows Entergy New Orleans' customers to be served by a financially viable entity as required by law. The plan of reorganization also provides full compensation to Entergy New Orleans' creditors whose claims are allowed by the bankruptcy court. Conditions precedent proposed in the plan of reorganization, as currently filed, before it can become effective include:

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  • A final confirmation order from the bankruptcy court approving the plan of reorganization;
  • Implementation of a City Council resolution that is satisfactory to Entergy New Orleans regarding its formula rate plan gas and electric filings and its proposed storm cost recovery and storm reserve riders;
  • Receipt by Entergy New Orleans of insurance proceeds of at least $250 million or assurance of such receipt, or alternatively, assurance that regulatory mechanisms will be put in place to cover any shortfall in insurance proceeds;
  • Receipt by Entergy New Orleans of $200 million in CDBG funding and assurance that at a minimum an additional $200 million in CDBG funding will be available for future gas system rebuild or assurance from the City Council that an appropriate rate mechanism is in place to allow Entergy New Orleans to recover the costs thereof;
  • No material adverse change shall have occurred from and after the confirmation date of the plan of reorganization; and9.5%.
  • Entergy New Orleans receives a final order from the FERC authorizing issuanceissued notes due in three years in satisfaction of short-term debt securities under credit agreements,its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool, and unilateral arrangements with Entergy Corporation.

  In addition, key factors that will continue to influence the timing and outcome of Entergy New Orleans' recovery efforts include the level of economic recovery of New Orleans and the number of customers that return to New Orleans, including the timing of their return.pool. Entergy New Orleans currently estimates that approximately 85,000 electric customersincluded in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 65,000 gas customers have returned2006 (8%), and are taking service. Prior to Hurricane Katrina,at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. The Louisiana judicial rate of interest is 9.5% for 2007. Entergy New Orleans had approximately 190,000 electric customers and 145,000 gas customers.

  The bankruptcy judge set awill pay interest on the notes from their date of April 19, 2006 by which creditors with prepetition claims against issuance at the Louisiana judicial rate of interest plus 1%.

• Entergy New Orleans with certain exceptions, hadrepaid to file their proofs of claim in the bankruptcy case. Approximately 550 claims, including amending claims, have been filed thus far in Entergy New Orleans' bankruptcy proceeding. Entergy New Orleans is currently analyzing the accuracy and validity of the claims filed, and has begun seeking withdrawal or modification of claims or objecting to claims with which it disagrees. Several of the filed claims have been withdrawn. Entergy New Orleans currently estimates that the pre-petition claims that will be allowed in the bankruptcy case will approximate the pre-petition liabilities that have been classified as liabilities subject to compromise in Entergy New Orleans' Balance Sheet as of September 30, 2006. The plan of reorganization proposes to pay the third party pre-petition accounts payableCorporation, in full, in cash, to issue two-year notes in satisfaction of the affiliate pre-petition accounts payable, and proposes thatoutstanding borrowings under the debtor-in-possession (DIP) credit agreement (approximately $67 million).
• Entergy New Orleans' first mortgage bonds will remain outstanding with their current maturity dates and interest terms. The planPursuant to an agreement with the first mortgage bondholders, Entergy New Orleans paid the first mortgage bondholders an amount equal to the one year of reorganization proposesinterest from the bankruptcy petition date that the bondholders had waived previously in the bankruptcy proceeding (approximately $12 million).
• Entergy New Orleans' preferred stock will also remain outstanding on its current dividend terms.

  Municipalization is one potential outcome of Entergy New Orleans' recovery effort that may be pursued by a stakeholder or stakeholders, either in the reorganization process or afterterms, and Entergy New Orleans exits from bankruptcy. In June 2006, the Louisiana Legislature passed a law that establishes a governance structure for a public power authority,paid its unpaid preferred dividends in arrears (approximately $1 million).

• Litigation claims will generally be unaltered, and will generally proceed as if municipalization of Entergy New Orleans' utility business is pursued. Entergy New Orleans' settlement of its formula rate plan and storm cost and reserve rider proceedings, discussed further below, provides that Entergy New Orleans will work with the City Council to seek an exception to the Stafford Act that will afford Stafford Act protections to Entergy New Orleans if another catastrophic event affects Entergy New Orleans. The Stafford Act provides for restoration funding from the federal government for municipal utilities, but does not allow such funding for investor-owned utilities like Entergy New Orleans.

  Since the filing of the bankruptcy proceedings, Entergy New Orleans had not been able to declare and pay dividends on its 4.75% preferred stockfiled for three quarters. As discussed further inbankruptcy protection, with exceptions for certain claims.

With confirmation of the Form 10-K, if dividends with respect to the 4.75% preferred stock are not paid for four quarters, the holdersplan of these shares have the right to elect a majority of thereorganization, Entergy has reconsolidated Entergy New Orleans board of directors.  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. After a hearing on the motion on

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 May 3, 2006, the court granted Entergy New Orleans the authority to pay dividends to the holders of the 4.75% preferred shares, beginning with the dividend due on July 1, 2006, and thereafter, unless objections are filed by creditors forty-five days in advance of a dividend payment date. If any objections are filed, the matter would be heard by the bankruptcy court. Entergy New Orleans declared and paid the dividends due on July 1 and October 1, 2006, and intends to declare and pay the dividends on the 4.75% preferred shares eachsecond quarter pending resolution of its plan of reorganization.

As discussed in the Form 10-K, as a result of the Entergy New Orleans bankruptcy proceeding, Entergy deconsolidated Entergy New Orleans for financial reporting purposes2007, retroactive to January 1, 2005.2007. Because Entergy owns all of the common stock of Entergy New Orleans, this change willreconsolidation does not affect the amount of net income that Entergy records resultingrecorded from Entergy New Orleans' operations for anythe current or prior period, but willdoes result in Entergy New Orleans' net income or loss being presented as "Equity in earnings of unconsolidated equity affiliates" rather than itsfinancial results being included in each individual income statement line item in 2007, rather than only its net income being presented as is"Equity in earnings (loss) of unconsolidated equity affiliates," as will remain the case for periods prior to 2005.2005 and 2006.

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Results of Operations

ThirdSecond Quarter 20062007 Compared to ThirdSecond Quarter 20052006

Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other, business segments, and Entergy comparing the thirdsecond quarter 20062007 to the thirdsecond quarter 20052006 showing how much the line item increased or (decreased) in comparison to the prior period:

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

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As discussed above, Entergy New Orleans has been reconsolidated retroactive to January 1, 2007 and its results are included in each individual income statement line item for 2007. The variance explanations for the Utility for the second quarter 2007 compared to the second quarter 2006 in "Results of Operations" below reflect the 2006 results of operations of Entergy New Orleans as if it were reconsolidated in 2006, consistent with the 2007 presentation including the results in each individual income statement line item. Entergy's as-reported results for 2006, which had Entergy New Orleans deconsolidated, and the amounts needed to reconsolidate Entergy New Orleans, which include inter-company items, are set forth in the table below.

Net Revenue

Utility

Following is an analysis of the change in net revenue which is Entergy's measure of gross margin, comparing the thirdsecond quarter of 20062007 to the thirdsecond quarter of 2005.2006.

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The base revenues variance resulted from rate increases primarily from increasesat Entergy Louisiana effective October 2005 in the Louisiana jurisdiction of Entergy Gulf StatesSeptember 2006 for the 20042005 formula rate plan filing to recover LPSC-approved incremental deferred and ongoing purchased power capacity costs and for the annual revenue requirement relatedinterim recovery of storm costs. The formula rate plan filing is discussed in Note 2 to the purchase of power from the Perryville generating station, and increasesfinancial statements in the Texas jurisdiction of Entergy Gulf States related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006. The Attala cost deferral variance resulted from deferred under-recovered Attala power plant costs at Entergy Mississippi that will be recovered through the power management rider. The net income effect of the Attala cost deferral is partially offset by Attala costs in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.Form 10-K.

The price applied to unbilled electric salesfuel recovery variance is due to higherthe inclusion of Grand Gulf costs in Entergy New Orleans' fuel recoveries effective July 1, 2006. In June 2006, the City Council approved the recovery of Grand Gulf costs through the fuel adjustment clause, without a corresponding change in base rates and the exclusion in 2006(a significant portion of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation at Entergy Louisiana and the Louisiana jurisdiction at EntergyGrand Gulf States, which is in accordance with regulatory treatment. Entergy expects that the effect of this factor will be a decrease in net revenue of approximately $30 million for its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" herein.

costs was previously recovered through base rates).

The volume/weathertransmission revenue variance resulted primarily fromis due to an increase in electricity usage, including increased usage duringrates effective June 2006 and the unbilled sales period. Billed usage increased a totaladdition of 3% compared to the third quarter of 2005.new transmission customers in 2006.

The pass-through rider revenue variance is due to a change in 2006 in the accounting for city franchise tax revenues in Arkansas as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes, resulting in no effect on net income.

The purchased power capacity variance is primarily due to higher capacity charges and new purchased power contracts in 2006.charges. A portion of the increasevariance is due to the amortization of deferred capacity costs and is offset in base revenues due to base rate increases implemented to recover incremental deferred and ongoing purchased power capacity charges at Entergy Louisiana, as discussed above.

The net wholesale revenue variance is primarily due to an Octobermore energy available for resale at Entergy New Orleans in 2006 FERC order requiring Entergy Arkansas to make arefund to a coal plant co-owner as a result of a contract dispute. Refer to Note 2due to the consolidateddecrease in retail usage caused by customer losses following Hurricane Katrina. In addition, 2006 revenue includes the sales into the wholesale market of Entergy New Orleans' share of the output of Grand Gulf, pursuant to City Council approval of measures proposed by Entergy New Orleans to address the reduction in Entergy New Orleans' retail customer usage caused by Hurricane Katrina and to provide revenue support for the costs of Entergy New Orleans' share of Grand Gulf.

The volume/weather variance resulted primarily from less favorable weather compared to the same period in 2006 in the residential and commercial sectors and decreased usage during the unbilled sales period, partially offset by an increase in billed usage after adjusting for the effects of weather. See Note 1 to the financial statements in the Form 10-K for furthera discussion of the FERC's decision.

9accounting for unbilled revenues.

Non-Utility Nuclear

Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributing topower and additional production available resulting from the acquisition of the Palisades plant in April 2007. The increase was partially offset by the effect on revenues of two refueling outages in revenues was increased generation in 2006 due to a power uprate completed since the thirdsecond quarter of 20052007 and fewer outages.an extended unplanned outage at a plant compared to one refueling outage in the second quarter of 2006. Following are key performance measures for Non-Utility Nuclear for the thirdsecond quarters of 20062007 and 2005:2006:

Net revenue decreased for Parent & Other primarily due to the $14.1 million gain ($8.6 million net-of-tax) realized on the sale of the non-nuclear wholesale asset business's remaining interest in a power development project in the second quarter of 2006. Also contributing to the decrease were higher natural gas prices in the second quarter of 2007 compared to the same period in 2006 as well as lower production as a result of an additional plant outage in the second quarter 2007 compared to the same period in 2006. A substantial portion of the effect on net income of this decline is offset by a related decrease in other operation and maintenance expenses.

Other Operation and Maintenance Expenses

Utility

Other operation and maintenance expenses increased from $419 million for the Utility from $326second quarter of 2006 to $461 million in 2005 to $420 million in 2006for the second quarter of 2007 primarily due to the following:to:

• an increase of $29$13 million in payrolldistribution expenses, including higher labor and benefits costs;
• contract costs, ongoing as well as timing increases in vegetation maintenance costs, and the receiptreturn to normal operations work in 20052007 versus storm restoration activities in 2006 as a result of proceeds of $16 million from a settlement, which is discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Central States Compact Claim" in the Form 10-K;hurricanes;
• an increase of $14$12 million in nuclear expenses due to the expensing of plant maintenancenon-refueling outages, refueling outage preparation costs, increased nuclear labor and distributioncontract costs, in 2006 versus the deferral or capitalization of storm costs in 2005;and higher NRC fees;
• an increase of $6$7 million in nuclear costs as a resulttransmission expenses, including transmission line and substation maintenance and independent coordinator of higher NRC fees, security costs, and labor-related costs;
• an increase of $6 million related to loss reserves, primarily storm reserves. The increase in storm reserves does not include costs associated with Hurricanes Katrina and Rita;transmission expenses; and
• an increase of $4$7 million in customer service support costsfossil plant expenses due to the return to normal operations work in 2007 versus storm restoration activities in 2006 as a result of Hurricanes Katrina and Rita and differing maintenance outage schedules and scopes from 2006 to 2007.

Non-Utility Nuclear

Other operation and maintenance expenses increased from $155 million for the second quarter of 2006 to $175 million for the second quarter of 2007 primarily due to an increasethe acquisition of the Palisades plant in contract costs.

April 2007.

Taxes Other Than Income Taxes

Taxes other than income taxes increased for the Utility from $82$84 million for the thirdsecond quarter of 20052006 to $118$97 million for the thirdsecond quarter of 20062007 primarily due to an increase of $9 million in city franchise taxes in Arkansas due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income.Also contributing to the increase was higher franchise tax expense at Entergy Gulf States as a result of higher gross revenues.

Other IncomeInterest Charges

Other incomeInterest charges increased for Non-Utility NuclearParent & Other primarily due to miscellaneous income of $27.0 million ($16.6 million net-of-tax) resulting from a reduction in the decommissioning liability for a plant as a result of revised decommissioning costs and changes in assumptions regarding the timing of when decommissioning of a plant will begin.additional borrowings on Entergy Corporation's revolving credit facilities.

Income Taxes

The effective income tax rates for the thirdsecond quarters of 2007 and 2006 were 28.0% and 2005 were 33.8% and 37.9%31.0%, respectively. The differencereduction in the effective income tax rate versus the statutory rate of 35% for the second quarter of 2007 is primarily due to the resolution of tax audit issues in the 2002-2003 audit cycle, book and tax differences related to the allowance for equity funds used during construction, and the amortization of investment tax credits. These factors were partially offset by book and tax differences for utility plant items and state income taxes. The reduction in the effective income tax rate for the thirdsecond quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to the flow-throughrecognition of a pension iteman income tax benefit related to ANO 1 steam generator removal cost and the favorable resolution of a tax audit issue, partially offset by state income taxes. The difference in the effective income tax rate for the third quarter of 2005 versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant items, partially offset by investment tax credit amortization.

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9

Nine

Six Months Ended SeptemberJune 30, 20062007 Compared to NineSix Months Ended SeptemberJune 30, 20052006

Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other, business segments, and Entergy comparing the ninesix months ended SeptemberJune 30, 20062007 to the ninesix months ended SeptemberJune 30, 20052006 showing how much the line item increased or (decreased) in comparison to the prior period:

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

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The variance explanations for the Utility for the six months ended June 30, 2007 compared to the six months ended June 30, 2006 in "Results of Operations" below reflect the 2006 results of operations of Entergy New Orleans as if it were reconsolidated in 2006, consistent with the 2007 presentation including the results in each individual income statement line item. Entergy's as-reported results for 2006, which had Entergy New Orleans deconsolidated, and the amounts needed to reconsolidate Entergy New Orleans, which include inter-company items, are set forth in the table below.

Net Revenue

Utility

Following is an analysis of the change in net revenue which is Entergy's measure of gross margin, comparing the ninesix months ended SeptemberJune 30, 20062007 to the ninesix months ended SeptemberJune 30, 2005.2006.

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The base revenues variance resulted primarily from increases effective October 2005 in the Louisiana jurisdiction of Entergy Gulf States for the 2004 formula rate plan filing and the annual revenue requirement related to the purchase of power from the Perryville generating station, and increases in the Texas jurisdiction of Entergy Gulf States related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006. The Attala cost deferral variance resulted from deferred under-recovered Attala power plant costs at Entergy Mississippi that will be recovered through the power management rider. The net income effect of the Attala cost deferral is partially offset by Attala costs in other operation and maintenance expenses, depreciation expense, and taxes other than income taxes.

The volume/weather variance resulted primarily from increased electricity usage, including the effect of more favorable weather on billed sales, compared to the same period in 2005 and an increase inincreased usage during the unbilled sales period. Billed usage increased by a total of 1,041 GWh, an increase of 2%. See Note 1 to the financial statements in the residentialForm 10-K for a discussion of the accounting for unbilled revenues.

The base revenues variance resulted from rate increases primarily at Entergy Louisiana effective September 2006 for the 2005 formula rate plan filing to recover LPSC-approved incremental deferred and commercial sectors.ongoing purchased power capacity costs and for the interim recovery of storm costs. The formula rate plan filing is discussed in Note 2 to the financial statements in the Form 10-K.

The pass-through rider revenue variance is due primarily to a change in 2006 in the accounting for city franchise tax revenues in Arkansas as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes, resulting in no effect on net income.

The transmission revenue variance is due to an increase in rates effective June 2006 and the addition of new transmission customers in 2006.

The fuel recovery variance resulted primarily fromis due to the inclusion of Grand Gulf costs in Entergy New Orleans' fuel recoveries effective July 1, 2006. In June 2006, the City Council approved the recovery of Grand Gulf costs through the fuel adjustment clause, without a corresponding change in base rates (a significant portion of Grand Gulf costs was previously recovered through base rates). The fuel recovery variance is partially offset by adjustments of fuel clause recoveries in the first quarter of 2006 in Entergy Gulf States' Louisiana jurisdiction the under-recovery in 2005 of fuel costs from retail customers, and increased recovery in 2006 of fuel costs. The increase was partially offset by the Entergy Arkansas energy cost recovery true-up madea reserve for potential rate refunds in the first quarter of 2005.2007 in Entergy Gulf States' Texas jurisdiction as a result of a PUCT ruling related to the application of past PUCT rulings addressing transition to competition in Texas, both of which have unfavorable effects on net revenue for the six months ended June 30, 2007.

The transmissionnet wholesale revenue variance is due primarily to 1) more energy available for resale at Entergy New Orleans in 2006 due to new transmission customersthe decrease in 2006. Also contributingretail usage caused by customer losses following Hurricane Katrina, 2) the inclusion in 2006 revenue of sales into the wholesale market of Entergy New Orleans' share of the output of Grand Gulf, pursuant to City Council approval of measures proposed by Entergy New Orleans to address the increase was an increasereduction in rates effective June 2006.Entergy New Orleans' retail customer usage caused by Hurricane Katrina and to provide revenue support for the costs of Entergy New Orleans' share of Grand Gulf, and 3) decreased results from wholesale contracts and lower wholesale prices.

The storm cost recoverypurchased power capacity variance is due to higher capacity charges and new purchased power contracts that began in mid-2006. A portion of the variance is due to the return earned on the interim recoveryamortization of storm-relateddeferred capacity costs and is offset in base revenues due to base rate increases implemented to recover incremental deferred and ongoing purchased power capacity charges at Entergy Louisiana, and the Louisiana jurisdiction of Entergy Gulf States in early-2006 as allowed by the LPSC.

The price applied to unbilled sales variance is due to the exclusion in 2006 of the fuel cost component in the calculation of the price applied to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculation at Entergy Louisiana and the Louisiana jurisdiction at Entergy Gulf States, which is in accordance with regulatory treatment. Entergy expects that the effect of this factor will be a decrease in net revenue of approximately $30 million for its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" herein.

The net wholesale variance is primarily due to an October 2006 FERC order requiring Entergy Arkansas to make a refund to a coal plant co-owner as a result of a contract dispute. Refer to Note 2 to the consolidated financial statements for further discussion of the FERC's decision.discussed above.

Non-Utility Nuclear

Net revenue increased for Non-Utility Nuclear primarily due to higher pricing in its contracts to sell power. Also contributingpower and additional production available resulting from the acquisition of the Palisades plant in April 2007. The increase was partially offset by the effect on 2007 revenues of three refueling outages and an extended unplanned outage at a plant compared to one refueling outage in the increase in revenues was increased generation in 2006 due to power uprates at certain plants completed in 2005 and 2006 and fewer refueling outagessame period in 2006. Following are key performance measures for Non-Utility Nuclear for the ninesix months ended SeptemberJune 30, 20062007 and 2005:2006:

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Parent & Other

Net revenue increaseddecreased for Parent & Other primarily due to the $14.1 million gain ($8.6 million net-of-tax) realized on the sale of the non-nuclear wholesale asset business' remaining interest in a power development project.project in the second quarter of 2006. Also contributing to the decrease were higher natural gas prices in 2007 compared to the same period in 2006 as well as lower production as a result of an additional plant outage in 2007 compared to the same period in 2006. A substantial portion of the effect on net income of this decline is offset by a related decrease in other operation and maintenance expenses.

Other Operation and Maintenance Expenses

Utility

Other operation and maintenance expenses increased from $793 million for the Utility from $1.1 billion in 2005six months ended June 30, 2006 to $1.2 billion in 2006$870 million for the six months ended June 30, 2007 primarily due to the following:to:

• an increase of $23$25 million in payrolldistribution expenses, including higher labor and benefits costs;
• contract costs, ongoing as well as timing increases in vegetation maintenance costs, and the receiptreturn to normal operations work in 20052007 versus storm restoration activities in 2006 as a result of proceeds of $16 million from a settlement, which is discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS - Central States Compact Claim" in the Form 10-K;hurricanes;
• an increase of $14$16 million due to the expensing of plantin transmission expenses, including transmission line and substation maintenance and distribution costs in 2006 versus the deferral or capitalizationindependent coordinator of storm costs in 2005;transmission expenses;
• an increase of $12$15 million relatedin nuclear expenses primarily due to storm reserves. This increase does not includenon-refueling outages, refueling outage preparation costs, associated with Hurricanes Katrinaincreased nuclear labor and Rita;contract costs, and higher NRC fees;
• an increase of $12$6 million in nuclear costsfossil plant expenses due to the return to normal operations work in 2007 versus storm restoration activities in 2006 as a result of Hurricanes Katrina and Rita and differing outage schedules and scopes from 2006 to 2007; and
• an increase of $5 million as a result of higher NRC fees, security costs, labor-related costs, and a non-refueling plant outage at Entergy Gulf States in February 2006;
• an increase of $11 million in customer service support costsinsurance premiums due to an increaseamending coverage in contract costs and an increasemid-2006 in customer write-offs; and
• an increase of $10 million in fossil costs due to the purchase of the Attala plant in January 2006 and the Perryville generating station coming online in July 2005.

Other operation and maintenance expenses increased for Non-Utility Nuclear from $438 million in 2005 to $469 million in 2006 primarily dueaddition to the timing of refueling outages, and increased benefit and insurance costs.

Other Income Statement Items

Taxes Other Than Income Taxes

Utility

Taxes other than income taxes increased from $178 million for the Utility from $240six months ended June 30, 2006 to $199 million in 2005 to $280 million in 2006for the six months ended June 30, 2007 primarily due to an increase of $15 million in city franchise taxes in Arkansas due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income. Also contributing

Depreciation and amortization expenses increased from $399 million for the six months ended June 30, 2006 to $423 million for the six months ended June 30, 2007 primarily due to an increase was higher franchise tax expense at Entergy Gulf States asin plant in service and a resultrevision made in the first quarter of higher gross revenues.2006 of estimated depreciable lives involving certain intangible assets.

Other income increased from $64 million for the six months ended June 30, 2006 to $83 million for the six months ended June 30, 2007 primarily due to carrying charges on storm costs.

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Interest Charges

Utility

Interest and other charges increased from $188.6 million for the six months ended June 30, 2006 to $203.8 million for the six months ended June 30, 2007 primarily due to the following:

• interest on first mortgage bonds primarily at Entergy New Orleans. On September 23, 2006, when the one-year interest moratorium agreed to by the bondholders expired, Entergy New Orleans resumed interest accruals on its outstanding first mortgage bonds;
• interest on Entergy New Orleans' third-party accounts payable pursuant to its plan of reorganization, as discussed above under "Hurricanes Katrina and Rita"; and
• interest of $6.7 million recorded on advances from independent power producers per a FERC order.

Parent & Other

Interest charges increased for the Utility and Parent & Other primarily due to additional borrowing to fund the significant storm restoration costs associated with Hurricanes Katrina and Rita.

Discontinued Operations

Income from discontinued operations increased primarily due to the $17.1 million gain (net-of-tax) on the sale of the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas.

borrowings under Entergy Corporation's revolving credit facilities.

Income Taxes

The effective income tax rates for the ninesix monthsended SeptemberJune 30, 2007 and 2006 were 33.9% and 2005 were 33.6% and 35.7%33.5%, respectively. The differencereduction in the effective income tax rate versus the statutory rate of 35% for the six months ended June 30, 2007 is primarily due to the resolution of tax audit issues in the 2002-2003 audit cycle, book and tax differences related to the allowance for equity funds used during construction, and the amortization of investment tax credits. These factors were partially offset by book and tax differences for utility plant items and state income taxes. The reduction in the effective income tax rate for the ninesix months ended SeptemberJune 30, 2006 versus the federal statutory rate of 35.0% is primarily due to the flow-through of a pension item, the recognition of an income tax benefit related to ANO 1 steam generator removal cost and the favorable resolution of a tax audit issue, partially offset by state income taxes. The difference in the effective income tax rate for the nine months ended September 30, 2005

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 versus the federal statutory rate of 35.0% is primarily due to state income taxes and book and tax differences related to utility plant items, partially offset by tax benefits from the American Jobs Creation Act of 2004, investment tax credit amortization, and a downward revision in the estimate of federal income tax expense related to tax depreciation.

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.

Debtor-in-Possession Credit Facility

See the Form 10-K for 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 New 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 September 30, 2006, Entergy New Orleans had approximately $32 million of outstanding borrowings under the DIP credit facility.

As discussed in the Form 10-K, borrowings under the DIP credit facility are due in full, and the agreement will terminate, at the earliest of several times or events, which included August 23, 2006. Entergy Corporation and Entergy New Orleans have agreed to an amendment to the DIP credit agreement that extends the August 23, 2006 maturity date to August 23, 2007, and the bankruptcy court approved this amendment.

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 from 2006 to 2007 is primarily the result of additional borrowings under Entergy Corporation's revolving credit facilities, along with a decrease in shareholders' equity primarily due to repurchases of common stock.

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.

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As discussed in the Form 10-K, Entergy Corporation hashad in place as of June 30, 2007, two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility expires in May 2010 and the three-year facility expires in December 2008. Entergy canCorporation also has the ability to issue letters of credit against the total borrowing capacity of both the three-year and the five-year credit facilities. Following is a summary of the borrowings outstanding and capacity available under these facilities as of SeptemberJune 30, 2006:2007:

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On August 2, 2007, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana,Corporation entered into a new, $3.5 billion credit facility, and Entergy Mississippi each hasterminated the two previously existing facilities. See Part II, Item 5 herein for additional information on the new credit facilities availablefacility, including the amounts of the borrowings and letters of credit outstanding as of September 30, 2006 as follows:August 8, 2007.

See Note 4 to the consolidated financial statements for additional discussion of Entergy's 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 planned construction and other capital investments by operating segment for 20062007 through 2008. Following are updates to that discussion:2009.

In July 2006,April 2007, Entergy's Non-Utility Nuclear business reached an agreement to purchase Consumers Energy Company'spurchased the 798 MW Palisades nuclear energy plant located near South Haven, Michigan from Consumers Energy Company for $380a net cash payment of $336 million. Entergy received the plant, nuclear fuel, inventories, and other assets. The liability to decommission the plant, as well as related decommissioning trust funds, was also transferred to Entergy's Non-Utility Nuclear business. Entergy's Non-Utility Nuclear business will acquire the plant, nuclear fuel, and other assets. In the near-term, Entergy intends to finance the acquisition through borrowings from Entergy Corporation's revolving credit facilities. As part of the purchase, Entergy's Non-Utility Nuclear business also executed a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant's output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. In the first quarter 2007, the NRC renewed Palisades' operating license until 2031. Also as part of the transaction, Entergy's Non-Utility Nuclear business will assume responsibility for eventual decommissioning of the plant. Consumers Energy will retain $200 million of the current $566 million Palisades decommissioning trust fund balance, and Entergy may return approximately $100 million more of the trust fund to Consumers Energy depending upon a pending tax ruling. Also as pa rt of the transaction, Consumers Energy will pay Entergy's Non-Utility Nuclear business $30 million to acceptassumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan.  ManagementPalisades' financial results since April 2007 are included in Entergy's Non-Utility Nuclear business segment. See Note 5 to the financial statements herein for a discussion of the purchase price allocation and the amortization to revenue of the below-market PPA.

In April 2007, Entergy Louisiana announced that it plans to pursue the self-build solid fuel repowering of a 538 MW unit at its Little Gypsy plant.  Petroleum coke will be the unit's primary fuel source.  In July 2007, Entergy Louisiana filed with the LPSC for approval of the repowering project, and stated that it expects to closespend $1.55 billion on the transactionproject. In addition to seeking a finding that the project is in the second quarter 2007, pendingpublic interest, the approvalsfiling with the LPSC asks that Entergy Louisiana be allowed to recover a portion of the NRC,project's financing costs during the FERC,construction period. Entergy Louisiana expects the Michigan Public Service Commission, and other regulatory agencies.

project to be completed in 2011-2012.The planned capital investment estimate in the Form 10-K included capital required for a project of this type, although Entergy is developing its capital plan for 2007Louisiana now expects to spend approximately $100 million more through 2009 and currently anticipates making $5.2 billionthan the amounts included in capital investments during that period, including approximately $2.5 billion ($2.3 billionthe Form 10-K for Utility and $0.2 billion for Non-Utility Nuclear) for maintenance of Entergy's existing assets. The remaining $2.7 billion ($1.9 billion for Utility and $0.8 billion for Non-Utility Nuclear) is associated with specific investments such as the pending Palisades acquisition, transmission upgrades, dry cask storage and license renewal projects at certain nuclear sites, environmental compliance spending, NYPA value sharing costs and other investments, such as potential opportunities through the Utility's supply plan initiatives that support its ability to meet load growth.project.

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In July 2007, Entergy Arkansas signed an agreement to purchase for $210 million the Ouachita Power Facility, a 789 MW natural gas-fired, combined-cycle, load-following generating facility located in north Louisiana and owned by Ouachita Power, LLC. Entergy Arkansas and Entergy Louisiana plan to invest a total of approximately $75 million in reliability upgrades. The Pension Protection ActOuachita plant will be 100 percent owned by Entergy Arkansas, and the acquisition is expected to close in 2008. Entergy Arkansas expects to sell to Entergy Gulf States, under a separate agreement, approximately one-third of 2006the output of the Ouachita plant on a long-term basis. The purchase of the plant is contingent upon obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. The planned capital investments estimate in the Form 10-K included $190 million in 2008 for the estimated cost of an acquisition of this type.

The Pension Protection ActEntergy now expects to spend $73 million more through 2008 than the amount included in the Form 10-K planned capital investment estimate for initial development costs for potential new nuclear development at the Grand Gulf and River Bend sites, including licensing and design activities.

Dividends

On July 30, 2007, the Board declared a quarterly dividend per Entergy Corporation common share of 2006 was signed by$0.75, which is an increase from the Presidentprior quarterly dividend per share of $0.54. Declarations of dividends on August 17, 2006. The intentEntergy's common stock are made at the discretion of the legislation is to require companies to fund 100%Board. Among other things, the Board evaluates the level of their pension liability;Entergy's common stock dividends based upon Entergy's earnings, financial strength, and then for companies to fund, on a going-forward basis, an amount generally estimated to be the amount that the pension liability increases each year due to an additional year of service by the employees eligible for pension benefits. The legislation requires that funding shortfalls be eliminated by companies over a seven-year period, beginning in 2008.future investment opportunities.

Debtor-in-Possession Credit Agreement

The Pension Protection Act also extendedSee the provisionsForm 10-K for a discussion of the Pension Funding Equity Act that would have expiredEntergy New Orleans debtor-in-possession (DIP) credit facility between Entergy New Orleans as borrower and Entergy Corporation as lender. Pursuant to the terms of its plan of reorganization, which became effective in 2006 had the Pension Protection Act not been enacted, which increased the allowed discount rate used to calculate the pension funding liability.May 2007, Entergy is in the process of evaluating the effects of the new legislation, but expects that the implementation of the Pension Protection Act will not result in annual pension contributions going-forward that are materially higher than the levels required in 2005 and 2006.New Orleans fully repaid its DIP credit facility borrowings.

Cash Flow Activity

As shown in Entergy's Statements of Cash Flows, cash flows for the ninesix months ended SeptemberJune 30, 20062007 and 20052006 were as follows:

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Operating Activities

Entergy's cash flow provided by operating activities increaseddecreased by $1,150$516 million for the ninesix months ended SeptemberJune 30, 20062007 compared to the ninesix months ended SeptemberJune 30, 2005 primarily due to the following activity:2006. Following are cash flows from operating activities by segment:

• Utility provided $1,683$764 million in cash from operating activities in 20062007 compared to providing $821$1,088 million in 20052006, primarily due to increased recoverydecreased collection of fuel costs, the catch-up in receivable collections in 2006 due to delays caused by the hurricanes in 2005, the receipt of an income tax refund (discussed below), and the effect in 2005 of a $90 million refund paid to customers in Louisiana, partially offset by storm restoration spending and an increase of $146 million in pension funding payments.
• Non-Utility Nuclear provided $648 million in cash from operating activities in 2006 compared to providing $394 million in 2005 primarily due to an increase in net revenue and an increase in income tax refunds received.

payments being made in 2007, partially offset by the receipt of $177 million of Community Development Block Grant funds by Entergy Corporation received aNew Orleans in 2007 and significant storm restoration spending in 2006. A $344 million income tax refund was received by Entergy Corporation in 2006 (including $71 million attributable to Entergy New Orleans) as a result of net operating loss carrybackcarry back provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in the Form 10-K.2005. In accordance with Entergy's intercompany tax allocation agreement, $273 million of the refund was distributed to the Utility (including Entergy New Orleans)business in April 2006, with most of the remainder distributed primarily to Non-Utility Nuclear.

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Investing Activities

Net cash used in investing activities increaseddecreased by $191$38 million for the ninesix months ended SeptemberJune 30, 20062007 compared to the ninesix months ended SeptemberJune 30, 2005 primarily due2006. The following activity is notable in comparing the six months ended June 30, 2007 to the following activity:six months ended June 30, 2006:

• Construction expenditures were $356$235 million higherlower in 20062007 than in 2005,2006, primarily due to an increasestorm restoration expenditures in the Utility business because of storm restoration expenditures.in 2006.
• Liquidation of other temporary investments net of investments provided $188 million duringNon-Utility Nuclear purchased the nine months ended September 30, 2005. Entergy had no activityPalisades power plant in other temporary investments during the nine months ended September 30, 2006.April 2007.
• Entergy Mississippi purchased the 480 MW Attala power plant in January 2006 for $88 million.

The increase was partially offset by:

• Entergy Louisiana purchased the 718 MW Perryville power plant in June 2005 for $162 million.2006.
• The Utility used $240Insurance proceeds received increased by $72 million in 2005 for other regulatory investments as a result2007 because of fuel cost under-recovery. See Note 1 to the consolidated financial statements in the Form 10-K for discussion of the accounting treatment of these fuel cost under-recoveries.payments received on Hurricanes Katrina and Rita claims.
• TheIn 2006 Entergy received proceeds from the sale of the retail electric portion of the Competitive Retail Services business operating in the ERCOT region of Texas and the sale of the non-nuclear wholesale asset business' remaining interest in a power development project.

Financing Activities

NetFinancing activities provided $339 million of cash used in financing activities was $699 million for the ninesix months ended SeptemberJune 30, 20062007 compared to netusing $279 million of cash flow provided by financing activities of $84 million for the ninesix months ended SeptemberJune 30, 2005. Following2006. The following activity is notable in comparing the six months ended June 30, 2007 to the six months ended June 30, 2006:

• Entergy Corporation increased the net borrowings under its credit facilities by $1,150 million in 2007, compared to increasing the net borrowings under its credit facilities by $20 million in 2006. See Note 4 to the financial statements for a description of the significant financing activity occurring duringEntergy Corporation credit facilities.
• A subsidiary of Entergy Gulf States issued $329.5 million of securitization bonds in June 2007. See Note 4 to the financial statements for additional information regarding the securitization bonds.
• Entergy Mississippi redeemed $100 million of first nine monthsmortgage bonds in 2007 and issued $100 million of 2006first mortgage bonds in 2006.
• Entergy Corporation repurchased $825 million of its common stock in 2007, and 2005:
  did not repurchase any shares of its common stock in 2006.
  • Entergy Louisiana Holdings, Inc. redeemed all $100.5 million of its outstanding preferred stock in June 2006.
  • Entergy Corporation decreased the net borrowings on its credit facilities by $290 million during the nine months ended September 30, 2006 compared to increasing the net borrowings by $1.02 billion during the nine months ended September 30, 2005. See Note 4 to the consolidated financial statements for a description of the Entergy Corporation credit facilities.
  • Net issuances of long-term debt by the Utility provided $50 million during the nine months ended September 30, 2006 compared to $165 million during the nine months ended September 30, 2005. See Note 4 to the consolidated financial statements for the details of long-term debt activity in 2006.
  • Entergy Corporation repurchased $878 million of its common stock during the nine months ended September 30, 2005.

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  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, and market and credit risks, utility restructuring, and nuclear matters.risk sensitive instruments. Following are updates to the information provided in the Form 10-K.

  State and Local Rate Regulation

  See the Form 10-K for thea chart summarizing material rate proceedings. Following are updates to that chart. See alsoHurricanes Katrina and Ritaabove for updates regarding storm cost recovery proceedings.

  Entergy Arkansas

  In March 2006, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 2006 through March 2007. The filed energy cost rate of $0.02827 per kWh was proposed to replace the interim rate of $0.01900 per kWh that had been in place since October 2005. The interim energy cost rate is discussed in Note 2 to the financial statements in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily dueherein for updates to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to railroad delivery problems.

  On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation did not identify new issues in addition to the four issues listed in the Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that ordered Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.

  In June 2006, Entergy Arkansas filed a motion with the APSC seeking again to implement the redetermined energy cost rate of $0.02827 per kWh. After a hearing, the APSC approved Entergy Arkansas' request and the redetermined rate was implemented in July 2006, subject to refund pending the outcome of the APSC energy cost recovery investigation. Because of the delay in implementing the redetermined energy cost rate, Entergy Arkansas estimated in its motion that $46 million of energy costs would remain under-recovered at December 31, 2006.

  On June 7, 2006, Entergy Arkansas filed a cost of service study and testimony supporting the redetermined energy cost rate and testimony addressing the prospective elimination of the energy cost recovery rider as ordered by the APSC. A hearing was held in the APSC energy cost recovery investigation on October 12, 2006 and post-hearing briefs were filed by Entergy Arkansas, the APSC General Staff, the Arkansas Attorney General, and the Arkansas Electric Energy Consumers. No party recommended termination of the energy cost recovery rider in the fuel cost investigation proceeding. The timing of a decision in this proceeding is uncertain.

  In August 2006, Entergy Arkansas filed with the APSC a request for a change in base rates. Entergy Arkansas requested a general base rate increase of $150 million (using an ROE of 11.25%), as well as recovery of FERC-allocated costs pursuant to the FERC decision on the System Agreement. Entergy Arkansas also requested a capacity management rider to recover incremental capacity costs. A procedural schedule has been established with hearings expected to begin in April 2007.

  See "System Agreement Litigation" herein for a discussion of Entergy's compliance filingdiscussed in that proceeding. If the FERC approves the compliance

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  tariff as filed, then payments under that tariff will be classified as energy costs, which would then be included in setting the retail energy cost rate as part of the normal working of the energy cost recovery rider.  As noted above, the APSC has given notice that it is considering the prospective elimination of the energy cost recovery rider.  Therefore, Entergy Arkansas proposed in the August 2006 base rate case an alternative to the energy cost recovery rider for recovery of the costs allocated to it as a result of the System Agreement litigation should the energy cost recovery rider be lawfully terminated by the APSC.  A separate exact recovery rider, similar to the energy cost recovery rider, would ensure that Entergy Arkansas customers pay only the amount allocated by the FERC.

  Entergy Gulf States-Louisiana

  In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff.

  In March 2006, the LPSC approved an uncontested stipulated settlement in Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increase of $36.8 million and calls for Entergy Gulf States to apply a refund liability of $0.7 million to capacity deferrals. The refund liability pertained to the periods 2004-2005 as well as the interim period in which a $37.2 million revenue increase was in place.

  In May 2006, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Gulf States modified the filing in August 2006 to reflect an 11.1% return on equity which is within the allowed bandwidth. The modified filing includes a formula rate plan increase of $17.2 million which provides for interim recovery of storm costs from Hurricanes Katrina and Rita and recovery of LPSC-approved incremental deferred and ongoing capacity costs. The increase was implemented, subject to refund, with the first billing cycle of September 2006.

  Entergy Gulf States -Texas

  As discussed in Note 2 to the consolidated financial statements in the Form 10-K, in August 2005, Entergy Gulf States filed with the PUCT an application for recovery of its transition to competition costs. Entergy Gulf States requested recovery of $189 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999 through June 17, 2005 in preparing for competition in its Texas service area, including attendant AFUDC, and all carrying costs projected to be incurred on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxes or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Enterg y Gulf States to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The PUCT approved the settlement agreement in June 2006.

  Entergy Louisiana

  In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Louisiana modified the filing in August 2006 to reflect a 9.45% return on equity which is within the allowed bandwidth. The modified filing includes an increase of $24 million for interim recovery of storm costs from Hurricanes Katrina and Rita and a $120 million rate increase to recover LPSC-approved incremental deferred and ongoing capacity costs. The filing requested recovery of approximately $50 million for the amortization of capacity deferrals over a three-year period, including carrying charges, and approximately $70 million for ongoing capacity costs. The increase was implemented, subject to refund, with the first billing cycle of September 2006. Comments were provided by the LPSC Staff, which Entergy Louisiana is currently reviewing. Entergy Louisiana subsequently updated its formula rate plan rider to reflect adjustments proposed by the LPSC Staff with which it agrees. The adjusted return on equity of 9.56% remains within the allowed bandwidth. Ongoing and deferred incremental capacity costs were reduced to $119 million. The updated formula rate plan rider was implemented, subject to refund, with the first billing cycle of October 2006.

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  Entergy Mississippi

  In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing showed that an increase of $3.1 million in electric revenues is warranted.  The MPSC has approved a settlement providing for a $1.8 million rate increase, which was implemented in August 2006.

  Entergy New Orleans

  In June 2006, Entergy New Orleans made its annual formula rate plan filings with the City Council.  The filings presented various alternatives to reflect the effect of Entergy New Orleans' lost customers and decreased revenue. Entergy New Orleans' recommended alternative adjusts for lost customers and assumes that the City Council's June 2006 decision to allow recovery of all Grand Gulf costs through the fuel adjustment clause stays in place during the rate-effective period (a significant portion of Grand Gulf costs was previously recovered through base rates).

  At the same time as it made its formula rate plan filings, Entergy New Orleans also filed with the City Council a request to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the rider for additional restoration spending and also to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establish a storm reserve to provide for the risk of another storm.

  In October 2006 the City Council approved a settlement agreement that resolves Entergy New Orleans' rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respect to storm restoration costs the anticipated receipt of CDBG funding as recommended by the Louisiana Recovery Authority. The settlement provides for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause will continue. Gas base rates will increase by $4.75 million in November 2006, an additional $1.5 million in March 2007, and an additional $4.75 million in November 2007. The settlement calls for Entergy New Orleans to file a base rate case by July 31, 2008. Any storm costs in excess of CDBG funding and insurance proceeds will be addressed in that base rate case. A storm cost recovery rider is authorized but initially set at $0 because of the anticipated receipt of CDBG funding. The settlement also authorizes a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.chart.

  Federal Regulation

  System Agreement Litigation

  See the Form 10-K for a discussion of the federal regulatory proceedings. Following are updates to that discussion.

  System Agreement litigation proceedings at the FERC. Proceedings

  In April 2006,May 2007 Entergy filed with the FERC its compliance filingthe rates to implement the provisions of the FERC's decision. The filing amendsorders in the System Agreement to provide forproceeding that are discussed in the calculation of production costs, average production costs, andForm 10-K.The filing shows the following payments/receipts among the domestic utilityUtility operating 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/receipts would befor 2007, based on calendar year 2006 production costs, with any payments/receipts among the domestic utility companies to be made in twelve equal monthly installments, commencing for service in June 2007.

  Motions2007, are necessary to intervene without protest were filed by the City of New Orleans, the MPSC, the Louisiana Energy Users Group, and Occidental Chemical Corporation. Protests to the compliance filing were filed by the APSC, the LPSC, Arkansas Electric Energy Consumers, Inc. (AEEC), and the Arkansas Attorney General (Arkansas AG). Among other things, the LPSC urged the FERC: (1) to require any payments/receipts to

  20

   commence in January 2007, rather than June 2007, and to require such payments to be made in a single lump sum payment, rather than in twelve equal monthly installments, or in the alternative to require a paying utility company to complete all payments within the calendar year following the year in which the disparity occurred; (2) to find that the bandwidth remedy is analogous to a "cost-of-service tariff with deferred billing," as opposed to a prospective remedy, so that a utility company could be required to make a payment based on a previous year's production costs even if such utility company has exited the System Agreement and so that interest would be due on the amount of any payment; and (3) to order interest on any payments to the extent they are not made in a single lump sum amount. In addition to the above issues, the LPSC and the other parties filing protests urged the FERC to require the bandwidth calculation to be set forth in a separate service schedule within the Syst em Agreement, rather than the existing Service Schedule MSS-3 as proposed by Entergy. The APSC's protest urged the FERC to require that the bandwidth formula include all bandwidth payments as aachieve rough production cost of the paying utility company for the year in which the payment is made, instead of excluding such costs as proposed in the compliance filing. The AEEC, among other things, urges the FERC to segregate the capacity and energy cost components of any bandwidth payments/receipts. The domestic utility companies responded to the issues raised in the protests and urged the FERC to approve the compliance filing as submitted by Entergy. The LPSC filed a reply to Entergy's response reasserting its previous positions and alleging, among other things, that Entergy was trying to delay the bandwidth payment in an effort to protect purported excess profits at Entergy Arkansas.

  Separately, in July 2006 the LPSC filed with the FERC a Motion for Summary Disposition on the same issues that the LPSC had raised in its protests to the compliance filing. The domestic utility companies filed an answer urging the FERC to reject the LPSC's Motion for Summary Disposition and asking the FERC for summary disposition of several issues in favor of the domestic utility companies' positions.

  The FERC's decision in the System Agreement proceeding is currently pending before the United States Court of Appeals for the D.C. Circuit. The parties to the proceeding reached agreement on a proposed briefing schedule that would result in the completion of briefing during the first half of 2007. The proposed briefing schedule has been submitted to the Court of Appeals.

  The FERC's decision would reallocate total 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 more than 11% below Entergy System average production costs to domestic utility companies whose production costs are more than the Entergy System average production cost, with payments going first to those domestic utility companies whose total production costs are farthest above the Entergy System average. For purposes of the August 2006 Entergy Arkansas general base rate case filing discussed above in "State and Local Rate Regulation", an assessment of the potential effects ofequalization under the FERC's June 2005 order, as amended by its December 2005 order on rehearing, was calculated on the basis of a 2006 test year, using a 2006 gas price that consisted of a non-we ighted average of twelve months of gas prices calculated as follows: January through May 2006 were actual, volume-weighted monthly averages of day-ahead cash prices as reported byEnergy Intelligence Natural Gas Week; the June 2006 price was the First of the Month Index price as reported byPlatts Inside FERC's Gas Market Report; the July 2006 price was the 5/31/06 NYMEX Henry Hub settlement price; and August through December 2006 were 30 calendar-day rolling averages as of May 31, 2006 of forward NYMEX Henry Hub gas contracts.  For example, the August 2006 price was an average of all the daily NYMEX settlement prices for the August 2006 contract for each trading day from the period 5/2/06 - - 5/31/06 inclusive.  A similar calculation was made using the daily settlements of the September 2006 through December 2006 NYMEX contracts to arrive at those monthly prices. This resulted in an average annual gas price of $7.49/mmBtu. If the FERC's June 2005 order, as amended by its December 2005 order on rehearing, becomes final and if an annual average gas price of $7.49/mmBtu occurs for 2006 as assumed, the following potential annual production cost reallocation among the domestic utility companies could result:

  21orders:

  	Annual Payments or or (Receipts)
  	(In Millions)
  Entergy Arkansas	$284252
  Entergy Gulf States	($197)120)
  Entergy Louisiana	($59)91)
  Entergy Mississippi	($28)41)
  Entergy New Orleans	$0

  If the actual, annual, average natural gas price deviates by $1/mmBtu up or down from the price assumed above, it is expected that Entergy Arkansas' annual payments will change

  Several parties intervened in the same direction by approximately $70proceeding at the FERC, including the APSC, the MPSC, the Council, and the LPSC, which have also filed protests. The APSC, the MPSC, and the Council asked the FERC to $80 million.

  In calculatingconfirm that the FERC did not intend to preempt a retail regulator from undertaking an independent prudence review of the production costs in setting retail rates, or ask the FERC to set the rough production cost equalization payments/receipts for this purpose underhearing to allow the retail regulators the opportunity to evaluate the prudence of the underlying production costs. In July 2007, the FERC accepted the proposed rates for filing, allowed them to go into effect as of June 1, 2007, subject to refund, and set the filing, including the calculation and underlying production costs, for hearing and settlement procedures. Additionally, the Utility operating companies had filed with the FERC proposing certain modifications to the rough production cost equalization calculation. The FERC rejected certain o f the proposed modifications, accepted certain of the proposed modifications without further proceedings, and set two of the proposed modifications for hearing and settlement proceedings.

  Entergy Arkansas will pay $36 million per month for seven months, and began making the payments in June 2007. As discussed in Note 2 to the financial statements, the APSC has approved through December 31, 2008 a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas.

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  On April 27, 2007, the FERC denied the requests for rehearing filed regarding the Utility operating companies' compliance filing to implement the System Agreement decision, with one exception regarding the issue of retrospective refunds. That issue will be addressed subsequent to the remanded proceeding involving the interruptible load decision discussed in the paragraph below. The period for appeal of the April 27 decision expired in June 2007. The LPSC appealed to the D.C. Circuit Court of Appeals the denial of rehearing, and the Utility operating companies and the APSC intervened in that appeal.

  Based on the FERC's April 27 order outputon rehearing, Entergy Arkansas recorded accounts payable and Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi recorded accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC's remedy for calendar year 2006 production costs that FERC accepted for filing and allowed to go into effect in June 2007. Entergy Arkansas recorded a corresponding regulatory asset for its right to collect the payments from its customers and Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi recorded corresponding regulatory liabilities for their obligations to give the receipts to their customers. The regulatory asset and liabilities are shown as "System Agreement cost equalization" on the respective balance sheets. The liabilities and assets for the payments and receipts that may be required to implement the FERC's remedy for calendar year 2007 production costs will be recorded af ter additional information becomes available during the second half of 2007. The FERC's remedy is based on annual production costs which cannot be accurately estimated at this time.  The level of any payments and receipts is significantly affected by a number of factors, including, among others, weather, the price of alternative fuels, the operating characteristics of the System's generating fleet, and multiple factors affecting the calculation of the non-fuel related revenue requirement components of the total production costs, such as plant investment.

  On April 3, 2007, the LPSC filed a complaint with the FERC in which it sought to have the FERC order the following modifications to Entergy's rough production costs equalization calculation: (1) elimination of interruptible loads from the methodology used to allocate demand-related capacity costs; and (2) change of the method used to re-price energy from the Vidalia hydroelectric power plant does not reflectproject for purposes of calculating production cost disparities. Entergy filed an intervention and protest in this proceeding. In May 2007 the actual Vidalia price forFERC denied the year but is priced at that year's average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflectedLPSC's complaint. The LPSC has requested rehearing.

  As discussed in the comparison of the domestic utility companies' total production costs.

  APSC Complaint at the FERC

  InForm 10-K, in June 2006 the APSC filed a complaint withat the FERC against Entergy Services as the representative of Entergy Corporation and the domestic utility companies, pursuant to Sections 205, 206 and 207 of the Federal Power Act. The APSC complaintthat states, "the purpose of the complaint is to institute an investigation into the prudence of Entergy's practices affecting the wholesale rates that flow through its System Agreement." In June 2007 the FERC denied the APSC's complaint on the basis that it was premature. The complaint requests, among other things,FERC found that the annual rough production cost equalization filing is the appropriate proceeding for the retail regulators to raise prudence issues. Regarding transmission, the FERC found that it has recently implemented reforms related to transmission. If those reforms are inadequate to address the APSC's concerns, then it can renew its complaint. The APSC, the MPSC, and the Council have asked for rehearing or clarification of this order to confirm that the FERC disallow any costs founddid not intend to be imprudent, withpreempt a refund effective date to be set at the earliest possible time. Specific areas of requested investigation include:

  • The domestic utility companies' transmission expansion and planning process, including the construction, or lack thereof, of economic transmission upgrades;
  • The domestic utility companies' wholesale purchasing practices, including the potential savings due to integration ofretail regulator from undertaking an independent power producers into their economic dispatch;
  • The domestic utility companies' alleged failure to retire their aging, inefficient gas- and oil-fired generation; and
  • The alleged failure to construct or acquire coal capacity for the generation portfolio of Entergy Louisiana.

  The complaint also requests that the FERC exercise its authority under Section 207 of the FPA to investigate the adequacy of Entergy's transmission system and direct it to make all necessary upgrades to ensure that its transmission facilities provide reliable, adequate and economic service.

  In July 2006, the domestic utility companies submitted their answer to the APSC complaint. In their answer, the domestic utility companies acknowledge that while the FERC is the appropriate forum to consider the issues raised in the APSC's complaint, the APSC has provided no probative evidence supporting its allegations and has not met the standards under the Federal Power Act (FPA) to have a matter set for hearing. Under the FPA standards, the APSC must create "serious doubt" as to the propriety of the challenged actions. As indicated in the domestic utility companies' answer, the APSC complaint does not raise a "serious doubt" but instead largely relies on unsupported assertions, many of which have been investigated in other proceedings. In those limited instances when the APSC complaint references "evidence" in an attempt to support its request for a hearing, the "evidence" to which it refers in fact does nothing to support its position but, rather, shows that Entergy has acted prud ently. As further indicated in the domestic utility companies' answer, following the issuance of the FERC's System Agreement decision, allprudence review of the production costs in setting retail rates.

  As discussed in the Form 10-K, on December 18, 2006, the LPSC filed a complaint requesting the FERC "immediately institute a proceeding to determine whether, and on what terms, [Entergy Arkansas] may withdraw" from the System Agreement. In June 2007 the FERC denied the LPSC's complaint on the basis that it was premature. The FERC's order indicates that the FERC will evaluate at the time of Entergy Arkansas' departure whether "the System Agreement will remain just and reasonable for the remaining members .... and likewise that any new Entergy Arkansas jurisdictional wholesale arrangements will be just and reasonable." The FERC Order goes on to state that "in light of the domestic utility companies are now inputs to a formula rate that will result in bandwidth payments amonghistory and nature of the domestic utility companies in order to roughly equalize production costs. The domestic utility companies' answer further explains that based on well-established

  22

  Supreme Court precedent, the FERC has exclusive jurisdiction over all inputs that will be included inexisting members' planning and operation of their facilities under the System Agreement, bandwidth formula rates filed in compliance with the FERC's System Agreement decision and retail regulators are preempted from taking any action that disturbs the FERC's findings with respectit is possible it may ultimately be appropriate to these production cost inputs and the FERC-determined allocation of production costs among the domestic utility companies. The domestic utility companies believe that their conduct with respectrequire transition measures or other conditions to these issues has been prudent and will vigorously defend such conduct.

  Several parties have intervened in the proceeding, including the MPSC, the LPSC, and the City Council. The LPSC's answer and comments in response to the APSC complaint ask the FERC to investigate whether Entergy Arkansas' withdrawal from the System Agreement is fair,ensure just and reasonable. In September 2006,reasonable wholesale rates and services" upon the domestic utility companies, the APSC, and other intervenors in the proceeding filed responses to the answers and comments submitted by the various intervenors in July 2006. In their responses, the APSC and the LPSC, among others, argue that the FERC need not address at this time its jurisdiction over the matters raised by the complaint and further that the retail regulators are not preempted from exercising jurisdiction over those same production costs that are being considered in the proceeding. In October 2006, the domestic utility companies filed an answer to the other parties' September 2006 comments. In the October 2006 answer, the domestic utility companies explain, among other things, that the FERC must address the jurisdictional issues raised by the parties to the proceeding and that the LPSC's and APSC's view concerning jurisdiction and preemption are inconsistent with federal law and regulation.

  APSC System Agreement Investigation

  In 2004, the APSC commenced an investigation into whethertermination of Entergy Arkansas' continued participation in the System Agreement is in the best interests of its customers. Citing its concerns that the benefits of its continued participation in the current form of the System Agreement have been seriously eroded, in December 2005, Entergy Arkansas submitted its notice that it will terminate its participation in the current System Agreement effective 96 months from December 19,Agreement.

  On April 3, 2007, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC's appeal of the FERC's March 2004 and April 2005 or such earlier date as authorized by the FERC. Entergy Arkansas indicated, however, that a properly structured replacement agreement could be a viable alternative. In June 2006 the APSC issued an order in its investigation requiring Entergy Arkansas President Hugh McDonald to file testimony in response to several questions involving details of what action Entergy Arkansas or Entergy has taken to insure that Entergy Arkansas' customers are protected from additional costs including thoseorders related to the following area s: construction of new generating plants located outside of Arkansas, coststreatment under the System Agreement of the Entergy New Orleans bankruptcy, and costs associated with restoration of facilities damaged by Hurricanes Katrina and Rita. Mr. McDonald was also directed to describe actions taken since December 19, 2005 to encourage or persuadeUtility operating companies' interruptible loads.  In its opinion, the D.C. Circuit concluded that the FERC (1) acted arbitrarily and capriciously by allowing the Utility operating companies to authorizephase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time.  The D.C. Circuit remanded the matter to the FERC for a more considered determination on the issue of refunds.

  19

  In conjunction with the recent application of Entergy ArkansasGulf States and Calcasieu Power, LLC seeking FERC approval of Entergy Gulf States' acquisition of the Calcasieu Generating Facility, the Utility operating companies filed a Petition for Declaratory Order requesting that the FERC find either (1) that in those circumstances where a resource to exitbe acquired or constructed has been determined by Entergy's Operating Committee to be a resource devoted to serving Entergy System load and has been approved by the applicable retail regulator, the cost of such resource shall be reflected in the rough production cost equalization calculation; or (2) that Entergy Gulf States' acquisition of the Calcasieu facility is prudent and the costs are properly reflected in the rough production cost equalization calculation.  The APSC, LPSC, MPSC, City Council, and several other parties intervened in the proceeding, with the APSC, LPSC, and City Council filing protests.  In July 2007 the FERC deni ed the application for a declaratory order. The FERC concluded that (1) the circumstances surrounding resource acquisition on the Entergy System Agreement sooner than 96 months,were not of sufficient "local interest" to warrant the FERC deferring to the findings of the applicable regulator; and (2) with respect to describe current and future actions related to developmentthe alternative request for relief, consistent with its prior precedent, the FERC would not "entertain the issue of the prudence of a replacement system agreement. Responsive testimony was filed withpurchase until such time as the APSC in July and August 2006. A public hearing forpurchaser passes on the purpose of cross-examination of Mr. McDonald on his testimony and for questioning by the APSC was also conducted in July 2006. There is no further procedural schedule set in this investigation at this time.

  MPSC System Agreement Inquiry

  In response to an inquiry from the MPSC, Entergy Mississippi advised the MPSC of its view that it would be premature to decide at this time whether to terminate Entergy Mississippi's participation in the current System Agreement. Entergy Mississippi indicated that it would report to the MPSC during the first quarter of 2007 regarding its continuing evaluationcost of the issues concerning Entergy Mississippi's participation in the current System Agreement.purchase to its customers."

  Independent Coordinator of Transmission (ICT)

  In April 2006May 2007 the FERC issued an order approving with modification Entergy's ICT proposal filed in May 2005. In its order,denied the FERC: (1) approved the establishment of the ICT, 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 (SPP), the approved ICT, within 60 days of the order. Several parties filed requests for rehearing of its October 2006 order. In June 2007, the Utility operating companies made their compliance filing pursuant to the FERC's order denying rehearing.

  As discussed in the Form 10-K, in the FERC's April 2006 order approving Entergy's ICT proposal, the FERC order.

  23

  The proposed modifications include, among other things: (1) Entergy must file withstated that the FERC the criteria used to grant and deny transmission service, including calculating available flowgate capacity; (2) the FERC extended the initial term of the ICT from two years to four years; and Entergy is precluded from terminating the ICT prior to the end 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 theweekly procurement 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; and (5) the WPP(WPP) must be operational within approximately 14 months of the FERC order, or June 24, 2007, or the FERC m aymay reevaluate all approvals to proceed with the ICT.  In September 2006, the FERC issued orders that generally denied the requests for rehearing relating toThe Utility operating companies have been working with the ICT Proposal and related matters ata software vendor to develop the FERC.software and systems necessary to implement the WPP. The domestic utilityUtility operating companies also filed a request for clarification of two discrete issues arising from the FERC order on rehearing related to the ICT Proposal.

  Entergy's domestic utility companies made their compliance filing with the FERC on MayApril 24, 2006, including2007 a request to make certain corrections and limited modifications to the executed ICT agreementcurrent WPP tariff provisions. On June 8, 2007, the Utility operating companies filed a status report with SPP. The domestic utility companies informedthe FERC notifying the FERC that, assuming they have received all required approvals,due to unexpected issues with the domestic utilitydevelopment of the WPP software and testing, the WPP would not be operational by June 24, but instead is currently expected to be operational no later than September 24, 2007. The Utility operating companies intendc ommitted to install SPP asnotify the FERC of the actual implementation date at least one week prior to commencing WPP operations.

  As discussed in the Form 10-K, in October 2006 the Utility operating companies had filed revisions to their Open Access Transmission Tariff ("OATT") to establish a mechanism to recover from their wholesale transmission customers the (1) costs incurred to develop or join a regional transmission organization and to develop the ICT; and (2) the on-going costs that will be incurred under the ICT within 30 days of FERC approval of the ICT agreement. Several parties filed protests regarding the domestic utility companies' compliance filing. On October 18,agreements. In December 2006 the FERC accepted the domestic utility companies' complianceproposed provisions for filing and set them for hearing and settlement procedures. In June 2007 the Utility operating companies reached a settlement-in-principle with modification, and directed the domestic utility companies to install SPP as the ICT within 30 days of the order. The required changesparties to the compliance filing include, among others, the elimination of provisions that would have, in certain limited instances, allowed the ICT to be terminated during the initial four-year term. The domestic utility companies were also orderedproceeding and expect to file certain additional informationthe settlement with the FERC and to sub mit the required changes to the compliance filing. The domestic utility companies anticipate installing the ICT within 30 days of the FERC order as directed by the FERC.

  The LPSC voted to approve the ICT proposal in July 2006.

  August 2007.

  Available Flowgate Capacity (AFC) Proceeding

  SeeIn accordance with the Form 10-K for a discussionprovisions of previous activitythe FERC order approving the ICT, during the first and second quarters of 2007 the Utility operating companies notified the FERC, the ICT, and the stakeholders that certain instances had been identified in this proceeding.which software errors related to the AFC process had resulted in the reporting of inaccurate data.  Following the notificationreporting of the potential loss by the domestic utility companies of AFC data, a separate, non-public investigation was initiated byinitial errors, certain market participants urged the FERC to reviewmove forward with the domestic utility companies' record retention policies and practices.AFC hearing process in light of those errors.  In October 2006,April 2007, the FERC Office of Enforcement issued an audit report addressingorder terminating the domestic utility companies' compliance with the FERC's records retention regulations. The audit report notes the following: (i) one instance where the domestic utility companies' treatment of a contract failed to comply with a FERC-imposed record retention period and notification requirement; (ii) one instance where the domestic utility companies temporarily lost an individual record but were subsequently able to reproduce it; (iii) four instances where records were retained for the full period required by the FERC, but may haveAFC hearing, now that Entergy's ICT has been inadvertently lost prior to a retention period requir ed by a different agency or the domestic utility companies' internal retention requirements; and (iv) a limited number of instances where the domestic utility companies' internal policies could be improved. The findings and recommendations in the audit report, which were agreed to by the domestic utility companies, represent a consensual resolution of the audit. Although these findings are not indicative of any significant areas of non-compliance, the domestic utility companies believe that the audit staff's recommendations will improve the records retention program and therefore agreed to implement the audit staff's recommendations. Additionally, as previously reportedinstalled.

  20

  Market-based Rate Authority

  As discussed in the Form 10-K, during SPP's independent auditin May 2005, the FERC instituted a proceeding under Section 206 of the AFC process limited instances were identifiedFPA 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.  The FERC decided to hold that investigation in which transmission service either was granted whenabeyance, however, pending the outcomes of the ICT proceedings and Entergy's affiliate purchased power agreements proceeding. In June 2005, Entergy sought rehearing of the May order instituting the proceeding. The FERC terminated the Section 206 proceeding in May 2007 and dismissed Entergy's request for rehearing as moot. The FERC found that there was insufficient transmission capacity or was not granted when there was sufficient transmission capacity. These instances were self-reported tono further need for the FERC enforcement staff. As a result of the domestic utility companies' further review of these transactions on a more detailed basis and after identifying another issue related to the design of the AFC computer software program, the domestic utility companies identified additional instances of incorrectly granting or rejecting transmission service requests. The identified instances now involve less than 1.8% of the total transmission service requests acted on during the period at issue.

  24

   The domestic utility companies also self-reported these additional instances to the FERC enforcement staff.  Although it has not evidenced its intent to do so, among the remedies available to the FERC is the ability to levy fines for these instances. The domestic utility companies are working with FERC enforcement staff to provide additional information related to these instances.proceeding.

  Market and Credit RisksRisk Sensitive Instruments

  Commodity Price Risk

  Power Generation

  As discussed more fully in the Form 10-K, the 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 fluctuationvariability of market power prices. Following is an updated summary of the amount of the Non-Utility Nuclear business'Nuclear's output that is sold forward as of June 30, 2007 under physical or financial contracts (2006(2007 represents the remaining quartertwo quarters of the year):

  			2006		2007		2008		2009		2010
  Non-Utility Nuclear:
  Percent of planned generation sold forward:
  	Unit-contingent		34%		36%		28%		24%		10%
  	Unit-contingent with guarantee of availability (1)		52%		42%		34%		17%		11%
  	Firm liquidated damages		4%		7%		4%		0%		0%
  	Palisades assuming second quarter 2007 closing		0%		10%		17%		15%		16%
  	Total		90%		95%		83%		56%		37%
  Planned generation (TWh) (including pending Palisades acquisition)			9		38		41		41		41
  Average contracted price per MWh (including pending Palisades acquisition)			$41		$49		$53		$56		$50
  Average contracted price per MWh (excluding pending Palisades acquisition)			$41		$49		$55		$60		$54

  			2007		2008		2009		2010		2011
  Non-Utility Nuclear (including Palisades   acquisition):
  Percent of planned generation sold forward:
  	Unit-contingent		43%		48%		42%		31%		29%
  	Unit-contingent with availability guarantees (1)		46%		36%		28%		22%		7%
  	Firm liquidated damages		7%		4%		0%		0%		0%
  	Total		96%		88%		70%		53%		36%
  Planned generation (TWh)			21		41		41		41		42
  Average contract price per MWh			$48		$54		$58		$56		$51

  (1)

  A sale of power on a unit contingentunit-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.

  ExcludingThe Vermont Yankee acquisition included a 10-year PPA under which the generation associated withformer owners will buy the pending Palisades acquisition, Non-Utility Nuclear's total percentpower produced by the plant through the expiration in 2012 of planned generation sold forwardthe 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, which has not happened thus far and is 94%not expected in 2007, 79% in 2008, 48% in 2009, and 25% in 2010.the foreseeable future.

  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 and a discussion of the Vermont Yankee PPA price adjustment clause. Non-Utility Nuclear's calculation under the NYPA value sharing agreement shows thatplants. Non-Utility Nuclear owescalculated that $0 was owed to NYPA $0for 2005 under that agreement for 2005. NYPA's calculation, under its interpretation of the agreement, shows that $90.5 million is due for 2005. Non-Utility Nuclear believes that its interpretation is correct, and has refused NYPA's demand for $90.5 million. As called for by the value sharing agreement,agreements. In November 2006 NYPA has filed a demand for arbitration against theclaiming that $90.5 million was due to NYPA for 2005 under these agreements. Non-Utility Nuclear subsidiaries that own Fitzpatrick and Indian Point 3filed a motion in New York state court to determine whether NYPA's claim should be decided by a court as opposed to an arbitrator. In February 2007, the amountcourt issued an order denying Non-Utility Nuclear's request, and NYPA's claim is now in arbitration. Non-Utility Nuclear has also calculated that $0 was owed if any,to NYPA for 2005.2006 under the value sharing agreements. In April 2007 NYPA filed an amended demand for arbitration claiming that an additional $54 million was due to NYPA for 2006 under the value sharing agreements. With respect to both of these claims, Non-Util ity Nuclear disagrees with NYPA's interpretation of the value sharing agreements, believes it has meritorious defenses to NYPA's claims, and intends to defend against those claims vigorously. Arbitration hearings were held in July 2007, and the arbitrator's decision is pending.

  21

  Some of the agreements to sell the power produced by Entergy's Non-Utility Nuclear power plants contain provisions that require an Entergy subsidiary to provide collateral to secure its obligations under the agreements. The Entergy subsidiary will beis required to provide collateral based upon the difference between the current market and contracted power prices in the regions where Non-Utility Nuclear sells power. The primary

  25

  form of collateral to satisfy these requirements would beis an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of collateral.  At SeptemberJune 30, 2006,2007, based on power prices at that time, Entergy had in place as collateral $905$808 million of Entergy Corporation guarantees for wholesale transactions, including $85$73 million of guarantees that support letters of credit.Thecredit. The assurance requirement associated with Non-Utility Nuclear is estimated to increase by an amount of up to $410$343 million if gas prices increase $1 per MMBtu in both the short-short - - and long-term markets. In the event of a decrease in Entergy Corporation's credit rating to below investment grade, Entergy will be required to replace Entergy Corporation guarantees with cash or letters of credit under some of the agreements.

  In 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 the amount of the Non-Utility Nuclear business' installed capacity that is currently sold forward, and the blended amount of the Non-Utility Nuclear business' planned generation output and installed capacity that is currently sold forward (2006as of June 30, 2007 (2007 represents the remaining quartertwo quarters of the year):

  			2006		2007		2008		2009		2010			2007		2008		2009		2010		2011
  Non-Utility Nuclear:
  Non-Utility Nuclear (including Palisades acquisition):												Non-Utility Nuclear (including Palisades acquisition):
  Percent of capacity sold forward:	Percent of capacity sold forward:											Percent of capacity sold forward:
  	Bundled capacity and energy contracts		13%		11%		11%		11%		11%	Bundled capacity and energy contracts		21%		27%		27%		27%		26%
  	Capacity contracts		82%		64%		35%		26%		9%	Capacity contracts		66%		39%		26%		9%		3%
  	Palisades assuming second quarter 2007 closing		0%		10%		16%		16%		16%	Total		87%		66%		53%		36%		29%
  	Total		95%		85%		62%		53%		36%
  Planned net MW in operation (average including pending Palisades acquisition)			4,200		4,666		4,998		4,998		4,998
  Planned net MW in operation												Planned net MW in operation		4,998		4,998		4,998		4,998		4,998
  Average capacity contract price per kW per month	Average capacity contract price per kW per month		$1.1		$1.6		$1.2		$1.3		$1.7	Average capacity contract price per kW per month		$1.7		$1.4		$1.3		$1.7		$2.0
  Blended Capacity and Energy (based on revenues)	Blended Capacity and Energy (based on revenues)											Blended Capacity and Energy (based on revenues)
  % of planned generation and capacity sold forward	% of planned generation and capacity sold forward		87%		92%		77%		51%		30%	% of planned generation and capacity sold forward		94%		83%		64%		45%		27%
  Average contract revenue per MWh (including pending Palisades acquisition)			$42		$50		$53		$57		$51
  Average contract revenue per MWh (excluding pending Palisades acquisition)			$42		$51		$56		$61		$55
  Average contract revenue per MWh												Average contract revenue per MWh		$50		$54		$59		$56		$51

  ExcludingAs of June 30, 2007, approximately 97% of Non-Utility Nuclear's counterparty exposure from energy and capacity contracts is with counterparties with investment grade credit ratings.

  Non-Utility Nuclear NRC Filing

  On July 30, 2007, Entergy Nuclear Operations, Inc., the capacity associatedoperator of the six nuclear power plants included in Entergy's Non-Utility Nuclear business, filed an application with the pending Palisades acquisition,NRC requesting that the NRC approve an "indirect transfer of control" of the plants to an Entergy subsidiary holding company.  The proposed transfer of control will not result in any change in the role of Entergy Nuclear Operations as the licensed operator of the plants or changes in the officers, personnel or day-to-day operation of the plants.  If approved, the new holding company structure could facilitate the Non-Utility Nuclear's total percentNuclear business' ability to pursue debt financing based upon its own balance sheet and financial results. In its NRC filing, Entergy Nuclear Operations contemplates that the Non-Utility Nuclear business could borrow up to $5.5 billion in debt. Potential uses of planned capacity sold forwardthe proceeds could include repayment of Entergy Corporation indebtedness, share repurchases, additional investmen ts, or other corporate purposes. In addition, the new structure could facilitate other transactions, such as a joint venture, carve out, spin off, or other structures.  No decisions have been made on any possible transaction, however, including both financing and other alternatives, nor has any decision been made regarding the potential use of financing proceeds. The proposed restructuring is 84% in 2007, 54% in 2008, 44% in 2009, and 23% in 2010. Excluding the generation and capacity associated with the pending Palisades acquisition, Non-Utility Nuclear's blended capacity and energy sold forward (based on revenues) is 91% in 2007, 74% in 2008, 45% in 2009, and 21% in 2010.also subject to certain state regulatory approvals.

  22

  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. Following is an update to that discussion.

  Unbilled Revenue

  As discussed in Note 10 to the consolidated financial statements, effective January 1, 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States reclassified the fuel component of unbilled accounts receivable to deferred fuel and will no longer include the fuel component in their unbilled revenue calculations, which is in accordance with regulatory treatment.

  26

  Recently IssuedNew Accounting Pronouncements

  The FASB Interpretationissued Statement of Financial Accounting Standards No. 48, "Accounting159, "The Fair Value Option for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006Financial Assets and is effective for Entergy inFinancial Liabilities" (SFAS 159) during the first quarter of 2007. SFAS 159 provides an option for companies to select certain financial assets and liabilities to be accounted for at fair value with changes in the fair value of those assets or liabilities being reported through earnings. The FASB's objective in issuing this interpretationintent of the standard is to increase comparability amongmitigate volatility in reported earnings caused by the application of the more complicated fair value hedging accounting rules. Under SFAS 159, companies in financial reportingcan select existing assets or liabilities for this fair value option concurrent with the effective date of income taxes. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefitJanuary 1, 2008 for companies with fiscal years ending December 31 or can be recognizedselect future assets or liabilities as they are acquired or entered into. Entergy is in the financial statements. If a tax deduction is taken on a tax return, but does not meetprocess of evaluating the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy does not expect that the adoptionpotential effect of FIN 48 will materially affect its financial position, results of operations, or cash flows.making this accounting election.

  In SeptemberJune 2006, FASB issued SFAS 158, "Employers' Accounting for Defined Benefit Pensionthe EITF reached a consensus on EITF Issue 06-3 "How Taxes Collected from Customers and Other Postretirement Plans,Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)" (EITF 06-3). The scope of this issue includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and some excise taxes. Under EITF 06-3, the presentation of taxes within the scope of this issue on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) is an amendmentaccounting policy decision that should be disclosed. For any such taxes reported on a gross basis, the amounts of FASB Statements Nos. 87, 88, 106those taxes in interim and 132(R)," to be effective December 31, 2006. SFAS 158 requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its balance sheet with the offset recorded to other comprehensive income. Entergy has previously disclosed its funded status in Note 10 to the consolidatedannual financial statements, in the Form 10-K. SFAS 158 also requires that changes in that funded statusfor each period for which an income statement is presented, should be recorded in other comprehensive income in the period in which the changes occur.disclosed if those amounts are significant. Entergy's Utility business, with the exception of the Louisiana jurisdictions which provide for recovery of other postretirement benefit costspol icy is to present such taxes on a pay as you gonet basis, is generally allowedunless required to recover pension and other postretirement benefit costs each period based upon costs calculated under S FAS 87 and SFAS 106. Entergy's analysis, including the regulatory accounting requirements to support recording the majority of the effect of adoption of SFAS 158 asreport differently by a regulatory asset, isauthority. EITF 06-3 did not yet complete.  Entergy does not expect the implementation of this standard, however, to materially affect Entergy's financial position or results of operations.statements.

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  ENTERGY CORPORATION AND SUBSIDIARIES	ENTERGY CORPORATION AND SUBSIDIARIES								ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF INCOME	CONSOLIDATED STATEMENTS OF INCOME								CONSOLIDATED STATEMENTS OF INCOME
  For the Three and Nine Months Ended September 30, 2006 and 2005
  For the Three and Six Months Ended June 30, 2007 and 2006									For the Three and Six Months Ended June 30, 2007 and 2006
  (Unaudited)	(Unaudited)								(Unaudited)
  		Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
  		2006		2005		2006		2005		2007		2006		2007		2006
  		(In Thousands, Except Share Data)								(In Thousands, Except Share Data)
  OPERATING REVENUES
  Domestic electric		$2,761,124		$2,490,265		$7,031,771		$6,236,949
  Electric										$2,194,644		$2,177,710		$4,306,104		$4,270,646
  Natural gas		12,495		12,343		63,522		51,729		42,909		13,612		127,861		51,027
  Competitive businesses		481,100		395,650		1,355,961		1,165,153		531,799		437,180		1,029,446		874,864
  TOTAL		3,254,719		2,898,258		8,451,254		7,453,831		2,769,352		2,628,502		5,463,411		5,196,537
  OPERATING EXPENSES
  Operating and Maintenance:
  Fuel, fuel-related expenses, and
  gas purchased for resale		987,558		607,307		2,489,347		1,525,652		595,602		661,619		1,383,014		1,501,791
  Purchased power		607,777		748,552		1,646,555		1,788,736		601,000		577,408		1,045,239		1,038,778
  Nuclear refueling outage expenses		43,045		41,432		127,584		120,393		44,614		42,546		87,589		84,540
  Other operation and maintenance		590,992		490,483		1,693,657		1,552,858		639,670		573,234		1,204,046		1,102,664
  Decommissioning		36,933		35,056		108,787		108,579		42,080		36,258		79,910		71,854
  Taxes other than income taxes		133,527		98,717		327,995		284,349		116,348		91,130		239,031		194,468
  Depreciation and amortization		232,042		217,215		655,374		637,156		238,653		217,943		471,063		423,332
  Other regulatory charges (credits) - net		(21,563)		5,156		(124,509)		(44,814)		13,345		(58,929)		36,885		(102,946)
  TOTAL		2,610,311		2,243,918		6,924,790		5,972,909		2,291,312		2,141,209		4,546,777		4,314,481
  OPERATING INCOME		644,408		654,340		1,526,464		1,480,922		478,040		487,293		916,634		882,056
  OTHER INCOME
  Allowance for equity funds used during construction		7,721		5,894		32,088		29,414		7,459		8,908		24,717		24,367
  Interest and dividend income		37,720		50,564		116,689		115,621		53,948		35,139		111,058		78,968
  Equity in earnings of unconsolidated equity affiliates		14,772		8,419		26,843		22,012		477		8,483		2,101		12,070
  Miscellaneous - net		30,964		(10,377)		16,793		4,599		(6,459)		(7,965)		(11,778)		(14,170)
  TOTAL		91,177		54,500		192,413		171,646		55,425		44,565		126,098		101,235
  INTEREST AND OTHER CHARGES
  Interest on long-term debt		125,907		111,101		369,058		324,149		124,057		122,670		247,156		243,151
  Other interest - net		15,035		18,679		47,532		43,436		33,553		15,235		65,768		32,495
  Allowance for borrowed funds used during construction		(4,538)		(6,516)		(18,989)		(19,790)		(4,386)		(5,405)		(14,915)		(14,450)
  Preferred dividend requirements and other										6,188		7,774		12,409		15,812
  TOTAL		136,404		123,264		397,601		347,795		159,412		140,274		310,418		277,008
  INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		599,181		585,576		1,321,276		1,304,773		374,053		391,584		732,314		706,283
  Income taxes		202,437		222,080		444,170		466,172		106,451		122,901		252,517		241,732
  INCOME FROM CONTINUING OPERATIONS		396,744		363,496		877,106		838,601		267,602		268,683		479,797		464,551
  INCOME (LOSS) FROM DISCONTINUED OPERATIONS (net of income tax
  expense (benefit) of ($563), ($3,823), $5,423 and ($6,057) , respectively)		(1,050)		(7,108)		9,830		(11,286)
  INCOME FROM DISCONTINUED OPERATIONS (net of income tax
  expense of $7,190 and $5,986, respectively)										-		13,119		-		10,880
  CONSOLIDATED NET INCOME		395,694		356,388		886,936		827,315		$267,602		$281,802		$479,797		$475,431
  Preferred dividend requirements and other		6,811		6,436		22,622		19,217
  EARNINGS APPLICABLE TO
  COMMON STOCK		$388,883		$349,952		$864,314		$808,098
  Basic earnings (loss) per average common share:
  Basic earnings per average common share:
  Continuing operations		$1.87		$1.71		$4.11		$3.88		$1.36		$1.29		$2.41		$2.24
  Discontinued operations		-		($0.03)		$0.05		($0.05)		-		$0.06		-		0.05
  Basic earnings per average common share		$1.87		$1.68		$4.16		$3.83		$1.36		$1.35		$2.41		$2.29
  Diluted earnings (loss) per average common share:
  Diluted earnings per average common share:
  Continuing operations		$1.83		$1.68		$4.03		$3.80		$1.32		$1.27		$2.34		$2.20
  Discontinued operations		-		($0.03)		$0.05		($0.05)		-		$0.06		-		0.05
  Diluted earnings per average common share		$1.83		$1.65		$4.08		$3.75		$1.32		$1.33		$2.34		$2.25
  Dividends declared per common share		$0.54		$0.54		$1.62		$1.62		$0.54		$0.54		$1.08		$1.08
  Basic average number of common shares outstanding		208,382,863		207,906,762		208,034,946		211,033,629		196,979,140		207,982,485		198,754,673		207,858,104
  Diluted average number of common shares outstanding		212,404,770		212,335,619		211,782,858		215,540,185		203,423,646		211,557,985		204,785,090		211,467,674
  See Notes to Consolidated Financial Statements.
  See Notes to Financial Statements.

  29

  25

   

  ENTERGY CORPORATION AND SUBSIDIARIES	ENTERGY CORPORATION AND SUBSIDIARIES				ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS				CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Nine Months Ended September 30, 2006 and 2005
  For the Six Months Ended June 30, 2007 and 2006					For the Six Months Ended June 30, 2007 and 2006
  (Unaudited)	(Unaudited)				(Unaudited)
  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  OPERATING ACTIVITIES
  Consolidated net income		$886,936		$827,315		$479,797		$475,431
  Adjustments to reconcile consolidated net income to net cash flow
  provided by operating activities:
  Reserve for regulatory adjustments		43,960		(85,212)		8,038		41,683
  Other regulatory credits - net		(124,509)		(44,814)
  Other regulatory charges (credits) - net						36,885		(102,946)
  Depreciation, amortization, and decommissioning		765,627		747,397		550,973		496,632
  Deferred income taxes and investment tax credits		(90,439)		204,297
  Deferred income taxes, investment tax credits, and non-current taxes accrued						507,929		427,272
  Equity in earnings of unconsolidated equity affiliates - net of dividends		(24,669)		(16,712)		(2,101)		(9,896)
  Changes in working capital:
  Receivables		210,311		(675,927)		(123,088)		318,480
  Fuel inventory		3,652		(10,407)		(10,533)		(13,650)
  Accounts payable		(390,804)		508,648		(137,102)		(285,750)
  Taxes accrued		768,251		186,803		(189,410)		23,941
  Interest accrued		3,190		15,231		(29,093)		(21,754)
  Deferred fuel		436,663		(267,441)		37,705		272,835
  Other working capital accounts		111,491		(64,075)		(169,775)		103,790
  Provision for estimated losses and reserves		27,595		5,755		56,241		25,037
  Changes in other regulatory assets		(193,323)		(316,327)		132,989		(165,527)
  Other		(176,575)		92,417		(185,323)		(105,035)
  Net cash flow provided by operating activities		2,257,357		1,106,948		964,132		1,480,543
  INVESTING ACTIVITIES
  Construction/capital expenditures		(1,233,505)		(877,165)		(717,115)		(952,432)
  Allowance for equity funds used during construction		32,088		29,414		24,717		24,367
  Nuclear fuel purchases		(260,759)		(260,587)		(219,328)		(124,250)
  Proceeds from sale/leaseback of nuclear fuel		135,079		174,140		124,185		41,109
  Proceeds from sale of assets and businesses		77,159		-		13,063		77,159
  Payment for purchase of plant		(88,199)		(162,075)		(336,211)		(88,199)
  Insurance proceeds received for property damages						82,081		10,330
  Decrease in other investments		56,501		19,698		73,969		50,070
  Purchases of other temporary investments		-		(1,591,025)
  Liquidation of other temporary investments		-		1,778,975
  Proceeds from nuclear decommissioning trust fund sales		580,745		711,494		1,013,414		523,806
  Investment in nuclear decommissioning trust funds		(655,788)		(786,635)		(1,075,084)		(573,921)
  Other regulatory investments		(38,506)		(240,232)		-		(42,479)
  Net cash flow used in investing activities		(1,395,185)		(1,203,998)		(1,016,309)		(1,054,440)
  See Notes to Consolidated Financial Statements.
  See Notes to Financial Statements.
  30
  26					26
  ENTERGY CORPORATION AND SUBSIDIARIES	ENTERGY CORPORATION AND SUBSIDIARIES				ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS	CONSOLIDATED STATEMENTS OF CASH FLOWS				CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Nine Months Ended September 30, 2006 and 2005
  For the Six Months Ended June 30, 2007 and 2006					For the Six Months Ended June 30, 2007 and 2006
  (Unaudited)	(Unaudited)				(Unaudited)
  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  FINANCING ACTIVITIES
  Proceeds from the issuance of:
  Long-term debt		1,377,701		2,538,976		2,042,123		1,237,865
  Preferred stock		73,354		29,998		-		73,354
  Common stock and treasury stock		32,072		114,552		53,706		15,372
  Retirement of long-term debt		(1,598,425)		(1,366,909)		(699,906)		(1,143,746)
  Repurchase of common stock		-		(878,188)		(825,460)		-
  Redemption of preferred stock		(183,881)		(33,719)		(2,250)		(181,060)
  Changes in credit line borrowings - net		(40,000)		39,850		-		(40,000)
  Dividends paid:
  Common stock		(337,104)		(341,437)		(215,472)		(224,458)
  Preferred stock		(22,861)		(19,087)		(13,344)		(16,760)
  Net cash flow provided by (used in) financing activities		(699,144)		84,036		339,397		(279,433)
  Effect of exchange rates on cash and cash equivalents		(820)		(787)		(243)		(556)
  Net increase (decrease) in cash and cash equivalents		162,208		(13,801)
  Net increase in cash and cash equivalents						286,977		146,114
  Cash and cash equivalents at beginning of period		582,820		619,786		1,016,152		582,820
  Effect of the deconsolidation of Entergy New Orleans on cash and cash equivalents		-		(7,954)
  Effect of the reconsolidation of Entergy New Orleans on cash and cash equivalents						17,093		-
  Cash and cash equivalents at end of period		$745,028		$598,031		$1,320,222		$728,934
  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid (received) during the period for:
  Cash paid/(received) during the period for:
  Interest - net of amount capitalized		$390,059		$332,056		$297,229		$282,454
  Income taxes		($197,560)		$118,989		$228,750		($231,325)
  Noncash financing activities:
  Proceeds from long-term debt issued for the purpose
  of refunding other long-term debt						-		$54,700
  See Notes to Consolidated Financial Statements.
  See Notes to Financial Statements.
  27					27

  ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  ASSETS
  June 30, 2007 and December 31, 2006
  (Unaudited)
  		2007		2006
  		(In Thousands)
  CURRENT ASSETS
  Cash and cash equivalents:
  Cash		$104,004		$117,379
  Temporary cash investments - at cost,
  which approximates market		1,216,218		898,773
  Total cash and cash equivalents		1,320,222		1,016,152
  Note receivable - Entergy New Orleans DIP loan		-		51,934
  Notes receivable		490		699
  Accounts receivable:
  Customer		463,960		410,512
  Allowance for doubtful accounts		(27,231)		(19,348)
  Other		466,307		487,264
  Accrued unbilled revenues		333,477		249,165
  Total receivables		1,236,513		1,127,593
  Accumulated deferred income taxes		-		11,680
  Fuel inventory - at average cost		208,672		193,098
  Materials and supplies - at average cost		665,964		604,998
  Deferred nuclear refueling outage costs		216,444		147,521
  System agreement cost equalization		215,800		-
  Prepayments and other		172,733		171,759
  TOTAL		4,036,838		3,325,434
  OTHER PROPERTY AND INVESTMENTS
  Investment in affiliates - at equity		79,063		229,089
  Decommissioning trust funds		3,223,901		2,858,523
  Non-utility property - at cost (less accumulated depreciation)		210,848		212,726
  Other		72,845		47,115
  TOTAL		3,586,657		3,347,453
  PROPERTY, PLANT AND EQUIPMENT
  Electric		32,728,200		30,713,284
  Property under capital lease		728,683		730,182
  Natural gas		294,595		92,787
  Construction work in progress		855,149		786,147
  Nuclear fuel under capital lease		190,640		269,485
  Nuclear fuel		727,488		561,291
  TOTAL PROPERTY, PLANT AND EQUIPMENT		35,524,755		33,153,176
  Less - accumulated depreciation and amortization		14,690,254		13,715,099
  PROPERTY, PLANT AND EQUIPMENT - NET		20,834,501		19,438,077
  DEFERRED DEBITS AND OTHER ASSETS
  Regulatory assets:
  SFAS 109 regulatory asset - net		655,642		740,110
  Other regulatory assets		2,774,223		2,768,352
  Deferred fuel costs		168,122		168,122
  Long-term receivables		17,293		19,349
  Goodwill		377,172		377,172
  Other		964,279		898,662
  TOTAL		4,956,731		4,971,767
  TOTAL ASSETS		$33,414,727		$31,082,731
  See Notes to Financial Statements.
  28
  ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  LIABILITIES AND SHAREHOLDERS' EQUITY
  June 30, 2007 and December 31, 2006
  (Unaudited)
  		2007		2006
  		(In Thousands)
  CURRENT LIABILITIES
  Currently maturing long-term debt		$271,942		$181,576
  Notes payable		25,039		25,039
  Accounts payable		997,247		1,122,596
  Customer deposits		277,438		248,031
  Taxes accrued		-		187,324
  Accumulated deferred income taxes		18,545		-
  Interest accrued		149,741		160,831
  Deferred fuel costs		91,740		73,031
  Obligations under capital leases		152,682		153,246
  Pension and other postretirement liabilities		32,338		41,912
  System agreement cost equalization		215,800		-
  Other		257,541		271,544
  TOTAL		2,490,053		2,465,130
  NON-CURRENT LIABILITIES
  Accumulated deferred income taxes and taxes accrued		6,170,259		5,820,700
  Accumulated deferred investment tax credits		352,634		358,550
  Obligations under capital leases		185,980		188,033
  Other regulatory liabilities		524,047		449,237
  Decommissioning and asset retirement cost liabilities		2,316,081		2,023,846
  Transition to competition		79,098		79,098
  Accumulated provisions		130,522		88,902
  Pension and other postretirement liabilities		1,463,720		1,410,433
  Long-term debt		10,291,695		8,798,087
  Preferred stock with sinking fund		8,250		10,500
  Other		1,250,405		847,415
  TOTAL		22,772,691		20,074,801
  Commitments and Contingencies
  Preferred stock without sinking fund		364,474		344,913
  SHAREHOLDERS' EQUITY
  Common stock, $.01 par value, authorized 500,000,000
  shares; issued 248,174,087 shares in 2007 and in 2006		2,482		2,482
  Paid-in capital		4,841,059		4,827,265
  Retained earnings		6,372,687		6,113,042
  Accumulated other comprehensive loss		(41,769)		(100,512)
  Less - treasury stock, at cost (52,114,693 shares in 2007 and
  45,506,311 shares in 2006)		3,386,950		2,644,390
  TOTAL		7,787,509		8,197,887
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$33,414,727		$31,082,731
  See Notes to Financial Statements.
  29

  ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
  For the Three Months Ended June 30, 2007 and 2006
  (Unaudited)
  				2007				2006
  				(In Thousands)
  RETAINED EARNINGS
  Retained Earnings - Beginning of period				$6,211,617				$5,515,421
  Add: Consolidated net income				267,602		$267,602		281,802		$281,802
  Deduct:
  Dividends declared on common stock				106,532				112,295
  Capital stock and other expenses				-				3,310
  Total				106,532				115,605
  Retained Earnings - End of period				$6,372,687				$5,681,618
  ACCUMULATED OTHER COMPREHENSIVE LOSS
  Balance at beginning of period:
  Accumulated derivative instrument fair value changes				($64,111)				($201,301)
  Pension and other postretirement liabilities				(105,431)				-
  Net unrealized investment gains				108,547				71,250
  Foreign currency translation				6,435				3,390
  Minimum pension liability				-				(22,345)
  Total				(54,560)				(149,006)
  Net derivative instrument fair value changes
  arising during the period (net of tax expense of $1,851 and $11,151)				4,549		4,549		6,672		6,672
  Pension and other postretirement liabilities (net of tax expense of $1,092)				(339)		(339)		-		-
  Net unrealized investment gains (net of tax expense (benefit) of $4,317 and ($10,117))				8,350		8,350		(11,874)		(11,874)
  Foreign currency translation (net of tax expense of $124 and $206)				231		231		383		383
  Balance at end of period:
  Accumulated derivative instrument fair value changes				(59,562)				(194,629)
  Pension and other postretirement liabilities				(105,770)				-
  Net unrealized investment gains				116,897				59,376
  Foreign currency translation				6,666				3,773
  Minimum pension liability				-				(22,345)
  Total				($41,769)				($153,825)
  Comprehensive Income						$280,393				$276,983
  PAID-IN CAPITAL
  Paid-in Capital - Beginning of period				$4,831,803				$4,816,037
  Add:
  Common stock issuances related to stock plans				9,256				1,591
  				��
  Paid-in Capital - End of period				$4,841,059				$4,817,628
  See Notes to Financial Statements.

  30

  ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
  For the Six Months Ended June 30, 2007 and 2006
  (Unaudited)
  				2007				2006
  				(In Thousands)
  RETAINED EARNINGS
  Retained Earnings - Beginning of period				$6,113,042				$5,433,931
  Add:
  Consolidated net income				479,797		$479,797		475,431		$475,431
  Adjustment related to FIN 48 implementation				(4,600)				-
  Total				475,197				475,431
  Deduct:
  Dividends declared on common stock				215,552				224,434
  Capital stock and other expenses				-				3,310
  Total				215,552				227,744
  Retained Earnings - End of period				$6,372,687				$5,681,618
  ACCUMULATED OTHER COMPREHENSIVE LOSS
  Balance at beginning of period:
  Accumulated derivative instrument fair value changes				($105,578)				($392,614)
  Pension and other postretirement liabilities				(105,909)				-
  Net unrealized investment gains				104,551				67,923
  Foreign currency translation				6,424				3,217
  Minimum pension liability				-				(22,345)
  Total				(100,512)				(343,819)
  Net derivative instrument fair value changes
  arising during the period (net of tax expense of $30,176 and $131,543)				46,016		46,016		197,985		197,985
  Pension and other postretirement liabilities (net of tax expense of $1,366)				139		139		-		-
  Net unrealized investment gains (net of tax expense (benefit) of $7,107 and ($7,802))				12,346		12,346		(8,547)		(8,547)
  Foreign currency translation (net of tax expense of $130 and $299)				242		242		556		556
  Balance at end of period:
  Accumulated derivative instrument fair value changes				(59,562)				(194,629)
  Pension and other postretirement liabilities				(105,770)				-
  Net unrealized investment gains				116,897				59,376
  Foreign currency translation				6,666				3,773
  Minimum pension liability				-				(22,345)
  Total				($41,769)				($153,825)
  Comprehensive Income						$538,540				$665,425
  PAID-IN CAPITAL
  Paid-in Capital - Beginning of period				$4,827,265				$4,817,637
  Add (Deduct):
  Common stock issuances related to stock plans				13,794				(9)
  Paid-in Capital - End of period				$4,841,059				$4,817,628
  See Notes to Financial Statements.

   

  31

   

  ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  ASSETS
  September 30, 2006 and December 31, 2005
  (Unaudited)
  		2006		2005
  		(In Thousands)
  CURRENT ASSETS
  Cash and cash equivalents:
  Cash		$136,421		$221,773
  Temporary cash investments - at cost,
  which approximates market		608,607		361,047
  Total cash and cash equivalents		745,028		582,820
  Note receivable - Entergy New Orleans DIP loan		31,841		90,000
  Notes receivable		1,127		3,227
  Accounts receivable:
  Customer		631,983		629,717
  Allowance for doubtful accounts		(19,553)		(30,805)
  Other		438,359		459,152
  Accrued unbilled revenues		292,612		477,570
  Total receivables		1,343,401		1,535,634
  Deferred fuel costs		73,722		543,927
  Fuel inventory - at average cost		202,543		206,195
  Materials and supplies - at average cost		594,870		610,932
  Deferred nuclear refueling outage costs		104,511		157,764
  Prepayments and other		89,291		325,795
  TOTAL		3,186,334		4,056,294
  OTHER PROPERTY AND INVESTMENTS
  Investment in affiliates - at equity		323,007		296,784
  Decommissioning trust funds		2,748,771		2,606,765
  Non-utility property - at cost (less accumulated depreciation)		213,179		228,833
  Other		40,630		81,535
  TOTAL		3,325,587		3,213,917
  PROPERTY, PLANT AND EQUIPMENT
  Electric		30,429,958		29,161,027
  Property under capital lease		723,614		727,565
  Natural gas		89,685		86,794
  Construction work in progress		815,266		1,524,085
  Nuclear fuel under capital lease		248,506		271,615
  Nuclear fuel		462,338		436,646
  TOTAL PROPERTY, PLANT AND EQUIPMENT		32,769,367		32,207,732
  Less - accumulated depreciation and amortization		13,413,896		13,010,687
  PROPERTY, PLANT AND EQUIPMENT - NET		19,355,471		19,197,045
  DEFERRED DEBITS AND OTHER ASSETS
  Regulatory assets:
  SFAS 109 regulatory asset - net		777,042		735,221
  Other regulatory assets		2,376,634		2,133,724
  Deferred fuel costs		168,122		120,489
  Long-term receivables		22,989		25,572
  Goodwill		377,172		377,172
  Other		968,303		991,835
  TOTAL		4,690,262		4,384,013
  TOTAL ASSETS		$30,557,654		$30,851,269
  See Notes to Consolidated Financial Statements.
  32
  ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  LIABILITIES AND SHAREHOLDERS' EQUITY
  September 30, 2006 and December 31, 2005
  (Unaudited)
  		2006		2005
  		(In Thousands)
  CURRENT LIABILITIES
  Currently maturing long-term debt		$108,191		$103,517
  Notes payable		41		40,041
  Accounts payable		869,185		1,655,787
  Customer deposits		239,612		222,206
  Taxes accrued		254,205		188,159
  Accumulated deferred income taxes		36,805		143,409
  Nuclear refueling outage costs		4,791		15,548
  Interest accrued		158,045		154,855
  Obligations under capital leases		136,944		130,882
  Other		329,125		473,510
  TOTAL		2,136,944		3,127,914
  NON-CURRENT LIABILITIES
  Accumulated deferred income taxes and taxes accrued		5,958,146		5,279,228
  Accumulated deferred investment tax credits		363,050		376,550
  Obligations under capital leases		183,835		175,005
  Other regulatory liabilities		431,901		408,667
  Decommissioning and retirement cost liabilities		1,994,185		1,923,971
  Transition to competition		79,098		79,101
  Regulatory reserves		15,916		18,624
  Accumulated provisions		515,547		556,028
  Long-term debt		8,614,114		8,824,493
  Preferred stock with sinking fund		10,500		13,950
  Other		1,351,123		1,879,017
  TOTAL		19,517,415		19,534,634
  Commitments and Contingencies
  Preferred stock without sinking fund		345,035		445,974
  SHAREHOLDERS' EQUITY
  Common stock, $.01 par value, authorized 500,000,000
  shares; issued 248,174,087 shares in 2006 and in 2005		2,482		2,482
  Paid-in capital		4,818,892		4,817,637
  Retained earnings		5,950,786		5,428,407
  Accumulated other comprehensive loss		(101,808)		(343,819)
  Less - treasury stock, at cost (39,606,024 shares in 2006 and
  40,644,602 shares in 2005)		2,112,092		2,161,960
  TOTAL		8,558,260		7,742,747
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$30,557,654		$30,851,269
  See Notes to Consolidated Financial Statements.

  ENTERGY CORPORATION AND SUBSIDIARIES
  SELECTED OPERATING RESULTS
  For the Three and Six Months Ended June 30, 2007 and 2006
  (Unaudited)
  		Three Months Ended				Increase/
  Description		2007		2006		(Decrease)		%
  		(Dollars in Millions)
  Utility Electric Operating Revenues:
  Residential		$691		$697		($6)		(1)
  Commercial		576		546		30		5
  Industrial		640		620		20		3
  Governmental		54		36		18		50
  Total retail		1,961		1,899		62		3
  Sales for resale (1)		98		161		(63)		(39)
  Other		136		118		18		15
  Total		$2,195		$2,178		$17		1
  Utility Billed Electric Energy
  Sales (GWh):
  Residential		6,985		7,034		(49)		(1)
  Commercial		6,481		6,060		421		7
  Industrial		9,814		9,561		253		3
  Governmental		562		378		184		49
  Total retail		23,842		23,033		809		4
  Sales for resale (1)		1,428		2,816		(1,388)		(49)
  Total		25,270		25,849		(579)		(2)
  		Six Months Ended				Increase/
  Description		2007		2006		(Decrease)		%
  		(Dollars in Millions)
  Utility Electric Operating Revenues:
  Residential		$1,435		$1,394		$41		3
  Commercial		1,132		1,087		45		4
  Industrial		1,273		1,287		(14)		(1)
  Governmental		105		76		29		38
  Total retail		3,945		3,844		101		3
  Sales for resale (1)		189		336		(147)		(44)
  Other		172		91		81		89
  Total		$4,306		$4,271		$35		1
  Utility Billed Electric Energy
  Sales (GWh):
  Residential		14,777		13,997		780		6
  Commercial		12,597		11,594		1,003		9
  Industrial		19,137		18,613		524		3
  Governmental		1,111		760		351		46
  Total retail		47,622		44,964		2,658		6
  Sales for resale (1)		3,066		5,577		(2,511)		(45)
  Total		50,688		50,541		147		- -
  (1) 2006 includes sales to Entergy New Orleans, which was deconsolidated for 2006. Entergy New Orleans was reconsolidated effective January 1, 2007.

   

  3332

   

  ENTERGY CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
  For the Three and Nine Months Ended September 30, 2006 and 2005
  (Unaudited)
  				Three Months Ended
  				2006				2005
  				(In Thousands)
  RETAINED EARNINGS
  Retained Earnings - Beginning of period				$5,676,094				$5,212,985
  Add: Earnings applicable to common stock				388,883		$388,883		349,952		$349,952
  Deduct:
  Dividends declared on common stock				112,570				112,166
  Capital stock and other expenses				1,621				553
  Total				114,191				112,719
  Retained Earnings - End of period				$5,950,786				$5,450,218
  ACCUMULATED OTHER COMPREHENSIVE LOSS
  Balance at beginning of period
  Accumulated derivative instrument fair value changes				($194,629)				($208,067)
  Other accumulated comprehensive income items				40,804				61,060
  Total				(153,825)				(147,007)
  Net derivative instrument fair value changes
  arising during the period (net of tax expense (benefit) of $17,470 and ($77,484))				27,295		27,295		(116,238)		(116,238)
  Foreign currency translation (net of tax expense of $143 and $493)				265		265		916		916
  Minimum pension liability (net of tax expense of $386)				617		617		-		-
  Net unrealized investment gains (net of tax expense (benefit) of $18,788 and ($651))				23,840		23,840		(3,548)		(3,548)
  Balance at end of period:
  Accumulated derivative instrument fair value changes				($167,334)				($324,305)
  Other accumulated comprehensive income items				65,526				58,428
  Total				($101,808)				($265,877)
  Comprehensive Income						$440,900				$231,082
  PAID-IN CAPITAL
  Paid-in Capital - Beginning of period				$4,817,628				$4,845,037
  Add: Common stock issuances related to stock plans				1,264				(5,227)
  Paid-in Capital - End of period				$4,818,892				$4,839,810
  				Nine Months Ended
  				2006				2005
  				(In Thousands)
  RETAINED EARNINGS
  Retained Earnings - Beginning of period				$5,428,407				$4,984,302
  Add: Earnings applicable to common stock				864,314		$864,314		808,098		$808,098
  Deduct:
  Dividends declared on common stock				337,004				341,614
  Capital stock and other expenses				4,931				568
  Total				341,935				342,182
  Retained Earnings - End of period				$5,950,786				$5,450,218
  ACCUMULATED OTHER COMPREHENSIVE LOSS
  Balance at beginning of period
  Accumulated derivative instrument fair value changes				($392,614)				($141,411)
  Other accumulated comprehensive income items				48,795				47,958
  Total				(343,819)				(93,453)
  Net derivative instrument fair value changes
  arising during the period (net of tax expense (benefit) of $149,013 and ($115,176))				225,280		225,280		(182,894)		(182,894)
  Foreign currency translation (net of tax expense of $442 and $424)				821		821		787		787
  Minimum pension liability (net of tax expense (benefit) of $386 and ($1,344))				617		617		(2,054)		(2,054)
  Net unrealized investment gains (net of tax expense of $10,986 and $8,794)				15,293		15,293		11,737		11,737
  Balance at end of period:
  Accumulated derivative instrument fair value changes				($167,334)				($324,305)
  Other accumulated comprehensive income items				65,526				58,428
  Total				($101,808)				($265,877)
  Comprehensive Income						$1,106,325				$635,674
  PAID-IN CAPITAL
  Paid-in Capital - Beginning of period				$4,817,637				$4,835,375
  Add: Common stock issuances related to stock plans				1,255				4,435
  Paid-in Capital - End of period				$4,818,892				$4,839,810
  See Notes to Consolidated Financial Statements.

  34

  ENTERGY CORPORATION AND SUBSIDIARIES
  SELECTED OPERATING RESULTS
  For the Three and Nine Months Ended September 30, 2006 and 2005
  (Unaudited)
  		Three Months Ended				Increase/
  Description		2006		2005		(Decrease)		%
  		(Dollars In Millions)
  U.S. Utility Electric Operating Revenues:
  Residential		$1,115		$1,002		$113		11
  Commercial		687		601		86		14
  Industrial		704		642		62		10
  Governmental		42		37		5		14
  Total retail		2,548		2,282		266		12
  Sales for resale		147		189		(42)		(22)
  Other		66		19		47		247
  Total		$2,761		$2,490		$271		11
  U.S. Utility Billed Electric Energy
  Sales (GWh):
  Residential		10,772		10,630		142		1
  Commercial		7,484		7,301		183		3
  Industrial		10,154		9,736		418		4
  Governmental		436		424		12		3
  Total retail		28,846		28,091		755		3
  Sales for resale		2,894		3,184		(290)		(9)
  Total		31,740		31,275		465		1
  		Nine Months Ended				Increase/
  Description		2006		2005		(Decrease)		%
  		(Dollars In Millions)
  U.S. Utility Electric Operating Revenues:
  Residential		$2,509		$2,164		$345		16
  Commercial		1,773		1,469		304		21
  Industrial		1,990		1,742		248		14
  Governmental		118		101		17		17
  Total retail		6,390		5,476		914		17
  Sales for resale		488		474		14		3
  Other		154		287		(133)		(46)
  Total		$7,032		$6,237		$795		13
  U.S. Utility Billed Electric Energy
  Sales (GWh):
  Residential		24,768		24,358		410		2
  Commercial		19,078		18,507		571		3
  Industrial		28,768		28,837		(69)		- -
  Governmental		1,196		1,184		12		1
  Total retail		73,810		72,886		924		1
  Sales for resale		8,471		8,811		(340)		(4)
  Total		82,281		81,697		584		1

  35

  ENTERGY CORPORATION AND SUBSIDIARIES

  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (Unaudited)

  NOTE 1. COMMITMENTS AND CONTINGENCIES

  Entergy New Orleans Bankruptcy

  See Note 9 to the consolidated financial statements herein for information on the Entergy New Orleans bankruptcy proceeding.

  Nuclear Insurance

  See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy's nuclear power plants. Following is an update to that information.

  Property Insurance

  In April 2007, the excess layer coverage for the Utility nuclear plants was increased to $750 million per occurrence per plant and the blanket layer coverage (shared among the plants) for the Utility nuclear plants was decreased to $350 million per occurrence.

  Non-Nuclear Property Insurance

  See Note 8 to the consolidated financial statements in the Form 10-K for information on Entergy's non-nuclear property insurance program. Beginning in June 2006, the aggregation limit for all parties insured by Oil Insurance Limited (OIL) for anyFollowing is an update to that information.

  Entergy reached an agreement with one occurrence was reduced to $500 million. Most of Entergy's non-nuclearits excess property insurance coverage includes a $75insurers under which Entergy received $69.5 million drop-down feature in the eventsecond quarter 2007 in settlement of an OIL aggregation lossits Hurricane Katrina claim with that insurer. $53.8 million of the proceeds were allocated to which an Entergy loss contributes.New Orleans, $2.1 million were allocated to Entergy Gulf States, and $9.7 million were allocated to Entergy Louisiana. Entergy has received a total of $134.5 million as of June 30, 2007 on its Hurricanes Katrina and Rita claims, including $70.7 million allocated to Entergy New Orleans, $33.2 million allocated to Entergy Gulf States, and $24.8 million allocated to Entergy Louisiana.

  To the extent that Entergy New Orleans receives insurance proceeds for future construction expenditures associated with rebuilding its gas system, the October 2006 City Council resolution approving the settlement of Entergy New Orleans' rate and storm-cost recovery filings requires Entergy New Orleans to record those proceeds in a designated sub-account of other deferred credits. This other deferred credit is shown as "Gas system rebuild insurance proceeds" on Entergy New Orleans' balance sheet.

  Nuclear Decommissioning and Other Asset Retirement CostsNYPA Value Sharing Agreements

  See Note 8 to the consolidated financial statements in the Form 10-K for information on nuclear decommissioningthe NYPA Value Sharing Agreements. 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 other retirement costs. In the third quarter of 2006, Entergy'sIndian Point 3 power plants. Non-Utility Nuclear business recordedcalculated that $0 was owed to NYPA for 2005 under the value sharing agreements. In November 2006, NYPA filed a reductiondemand for arbitration claiming that $90.5 million was due to NYPA for 2005 under these agreements. Non-Utility Nuclear filed a motion in New York state court to determine whether NYPA's claim should be decided by a court as opposed to an arbitrator. In February 2007, the court issued an order denying Non-Utility Nuclear's request, and NYPA's claim is now in arbitration. Non-Utility Nuclear has also calculated that $0 was owed to NYPA for 2006 under the value sharing agreements. In April 2007, NYPA filed an amended demand for arbitration claimin g that an additional $54 million was due to NYPA for 2006 under the value sharing agreements. With respect to both of $27.0 millionthese claims, Non-Utility Nuclear disagrees with NYPA's interpretation of the value sharing agreements, believes it has meritorious defenses to NYPA's claims, and intends to defend against those claims vigorously. Arbitration hearings were held in its decommissioning cost liabilitiesJuly 2007, and the arbitrator's decision is pending.

  33

  CashPoint Bankruptcy(Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

  See Note 8 to the financial statements in conjunction with a new decommissioning cost study as a result of revised decommissioning costs and changes in assumptionsthe Form 10-K for information regarding the timingbankruptcy of whenCashPoint, which managed a network of payment agents for the decommissioning of a plant will begin. The revised estimate resulted in miscellaneous income of $27.0 million ($16.6 million net-of-tax), reflecting the excess of the reduction in the liability over the amount of undepreciated asset retirement cost.Utility operating companies.

  Employment Litigationand Labor-related Proceedings

  Entergy Corporation and certain subsidiariesthe Registrant Subsidiaries are defendants in numerousresponding to various lawsuits and other labor-related proceedings filed by current and former employees asserting that they were wrongfully terminated and/employees. These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or discriminated against onits state counterparts; claims of race, gender and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the basisNational Labor Relations Board; claims of age, race, sex,retaliation; and claims for or other protected characteristics. The defendant companiesregarding benefits under various Entergy Corporation sponsored plans. Entergy Corporation and the Registrant Subsidiaries are responding to these suits and proceedings and deny any liability to the plaintiffs.claimants.

  Asbestos and Hazardous Material Litigation(Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans)

  See Note 8 to the financial statements in the Form 10-K for information regarding asbestos and hazardous material litigation at Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.

  NOTE 2. RATE AND REGULATORY MATTERS

  Storm Costs Recovery Filings with Retail RegulatorsRegulatory Assets

  On July 31, 2006, Entergy Louisiana and Entergy Gulf States filed a supplemental and amending storm cost recovery application with the LPSC, in which Entergy Louisiana and Entergy Gulf States requested that the LPSC (1) review Entergy Louisiana's and Entergy Gulf States' testimony and exhibits relatingOther Regulatory Assets

  See Note 2 to the costs associated with Hurricanes Katrina and Rita, and declare that those verified, actual storm-related costs through May 31, 2006 are $466.8 million for Entergy Louisiana and $200.3 million for Entergy Gulf Statesfinancial statements in the Louisiana jurisdiction and that those costs were prudently incurred; (2) declare that the annual revenue requirements associated with the recovery of those costs, including carrying costs, based on a ten-year levelized rate are $54.4 millionForm 10-K for Entergy Louisiana and $26.2 million for Entergy Gulf States; (3) authorize Entergy Louisiana and Entergy

  36

   Gulf States to recover the costs through Storm Cost Recovery Riders (SCRRs) proposed by Entergy Louisiana and Entergy Gulf States; (4) declare that the storm costs incurred subsequent to May 31, 2006 are to be filed by Entergy Louisiana and Entergy Gulf States with the LPSC on an annual basis in connection with their annual formula rate plan (FRP) filings, and that the SCRRs be adjusted annually to reflect such costs and any insurance proceeds or CDBG funds actually received, with the adjusted amounts to be collected through the SCRRs to take effect contemporaneous with the effective date of rate changes under the FRP; (5) declare that the storm-related costs incurred by Entergy Louisiana and Entergy Gulf States meet the conditions set forthinformation regarding regulatory assets in the FRP for exclusion from the sharing provisions in those FRPs and authorize the permanent recovery of storm costs outside of the FRPs adopted by the LPSC for Entergy Louisiana and Entergy Gulf States; and (6) authorize the funding o f a storm reserve through securitization sufficient to fund a storm cost reserve of $132 million for Entergy Louisiana and $81 million for Entergy Gulf States. Hearings are scheduled for March 2007. Entergy Gulf States and Entergy Louisiana also intend to pursue securitization options for the storm cost recovery as well, which is authorized by a law signed by the Governor of Louisiana in May 2006.

  In July 2006, Entergy Gulf States filed an application with the PUCT with respect to the $393.2 million of Hurricane Rita reconstruction costs incurred in its Texas retail jurisdiction through March 31, 2006. The filing asks the PUCT to determine that $393.2 million is the amount of reasonable and necessary hurricane reconstruction costs eligible for securitization and recovery, approve the recovery of carrying costs, and approve the manner in which Entergy Gulf States allocates those costs among its Texas retail customer classes.  If approved, Entergy Gulf States' application will ultimately affect all its retail customers in Texas. Entergy Gulf States' filing does not request recovery of costs through a specific rider on customer bills or through any other means at this time. This is the first of two filings authorized by a law passed earlier this year in a special session of the Texas Legislature. A hearing before the PUCTUtility business reflected on the filing was scheduled for November 1-3, 2006, but at the commencementbalance sheets of the hearing all of the parties in attendance announced that they had reached a unanimous agreement in principle to settle the issues in the proceeding. The parties are developing the documentation to formalize the settlement. The parties intend to submit the settlement documents to the PUCT prior to Thanksgiving 2006 so that the PUCT can approve them by early December 2006. A second filing will request securitization and recovery of the costs eligible for securitization through retail rates and tariffs. Entergy Gulf States expects to make the second filing following the conclusion of the reconstruction cost case.

  In March 2006, the Governor of Mississippi signed a law that established a mechanism by which the MPSC could authorize and certify an electric utility financing order and the state could issue general obligation bonds to finance the costs of repairing damage caused by Hurricane Katrina to the systems of investor-owned electric utilities.  Because of the passage of this law and the possibility of Entergy Mississippi obtaining 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 a review of Entergy Mississippi's total storm restoration costs in an Application for an Accounting Order proceeding.  The Stipulation stated that the procedural schedule of Entergy Mississippi's December 2005 filing seeking recovery of hurricane costs through an existing Entergy Mississippi storm damage rider should be suspended until the MP SC issues a final order in the Application for an Accounting Order proceeding. Registrant Subsidiaries.

  In June 2006, the MPSC issued an order certifying Entergy Mississippi's Hurricane Katrina restoration costs incurred through March 31, 2006 of $89 million, net of estimated insurance proceeds. Two days later, Entergy Mississippi filed a request with the Mississippi Development Authority for $89 million of CDBG funding for reimbursement of its Hurricane Katrina infrastructure restoration costs. Entergy Mississippi also filed a Petition for Financing Order with the MPSC for authorization of state general obligation bond financing of $169 million for Hurricane Katrina restoration costs and future storm costs. The $169 million amount included the $89 million of Hurricane Katrina restoration costs plus $80 million to build Entergy Mississippi's storm damage reserve for the future. Entergy Mississippi's filing stated that the amount actually financed through the state bonds would be net of any CDBG funds that Entergy Mississippi received.

  37

  In October 2006, the Mississippi Development Authority approved for payment and Entergy Mississippi received $81 million in CDBG funding for Hurricane Katrina costs. The MPSC then issued a financing order authorizing the issuance of $48 million of state general obligation bonds, with $8 million for the remainder of Entergy Mississippi's certified Hurricane Katrina restoration costs and $40 million for the increase in Entergy Mississippi's storm damage reserve. $30 million of the storm reserve will be set aside in a restricted account. Entergy Mississippi expects to forward the financing order to the state bond commission, as per the March 2006 law, and expects to receive the proceeds from the state general obligation bond issuance in the first quarter of 2007.

  Deferred Fuel Costs

  See Note 2 to the consolidated financial statements in the Form 10-K for information regarding fuel proceedings involving the domestic utilityUtility operating companies. The following are updates to the Form 10-K.

  Entergy Arkansas

  In March 2006,2007, in order to allow further consideration by the APSC, the APSC granted Entergy Arkansas' petition for rehearing and for stay of the APSC's January 2007 order in the proceeding investigating Entergy Arkansas' interim energy cost rate. The APSC has taken no action in this proceeding since its March 2007 order.

  Also in March 2007, Entergy Arkansas filed with the APSC its annual redetermination of the energy cost rate for application to the period April 20062007 through March 2007.2008. The filed energy cost rate of $0.02827 per decreased from $0.02827/kWh was proposed to replace$0.01179/kWh effective the interim rate of $0.01900 per kWh that had beenfirst billing cycle in place since October 2005. The interim energy cost rate is discussed in Note 2 to the financial statements in the Form 10-K, along with the investigation that the APSC commenced concerning Entergy Arkansas' interim energy cost rate. The increase in the energy cost rate is due to increases in the cost of purchased power primarily due to the natural gas cost increase and the effect that Hurricanes Katrina and Rita had on market conditions, increased demand for purchased power during the ANO 1 refueling and steam generator replacement outage in the fall of 2005, and coal plant generation curtailments during off-peak periods due to railroad delivery problems.

  On March 31, 2006, the APSC suspended implementation of the $0.02827 per kWh energy cost rate, and ordered that the $0.01900 per kWh interim rate remain in effect pending the APSC proceedings on the energy cost recovery filings. The APSC also extended its investigation into Entergy Arkansas' interim energy cost rate to cover the costs included in Entergy Arkansas' March 2006 filing. The extended investigation did not identify new issues in addition to the four issues listed in the Form 10-K and covers the same time period. On April 7, 2006, the APSC issued a show cause order in the investigation proceeding that ordered Entergy Arkansas to file a cost of service study by June 8, 2006. The order also directed Entergy Arkansas to file testimony to support the cost of service study, to support the $0.02827 per kWh cost rate, and to address the general topic of elimination of the energy cost recovery rider.2007.

  In its June 2006,2007 order regarding Entergy Arkansas filed a motion with the APSC seeking again to implement the redetermined energy costArkansas' rate of $0.02827 per kWh. After a hearing,case, discussed below, the APSC approved the continuation of Entergy Arkansas' request and the redetermined rate was implemented in July 2006, subject to refund pending the outcome of the APSC energy cost recovery investigation. Because of the delay in implementing the redetermined energy cost rate, Entergy Arkansas estimated in its motion that $46 million of energy costs would remain under-recovered at December 31, 2006.

  On June 7, 2006, Entergy Arkansas filed a cost of service study and testimony supporting the redetermined energy cost rate and testimony addressing the prospective elimination of the energy cost recovery rider as ordered by the APSC. A hearing was held in the APSC energy cost recovery investigation on October 12, 2006 and post-hearing briefs were filed by Entergy Arkansas, the APSC General Staff, the Arkansas Attorney General, and the Arkansas Electric Energy Consumers. No party recommended termination of the energy cost recovery rider in the fuel cost investigation proceeding. The timing of a decision in this proceeding is uncertain.through December 31, 2008.

  34

  Entergy Gulf States (Texas)

  In March 2006,2007 Entergy Gulf States filed a request with the PUCT an application to implement an interim fuel surcharge in connection with the under-recovery of $97refund $78.5 million, including interest, on eligibleof fuel costs for the period August 2005cost recovery over-collections through January 2006. This surcharge is in addition to an interim surcharge that went into effect in January 2006. Entergy Gulf States entered into2007. In June 2007 the PUCT approved a unanimous stipulation and settlement agreement that reducedupdated the requested surcharge for

  38

   actual over-collections from the monthsover-collection balance through April 2007 and established a refund amount, including interest, of February and March 2006, resulting in a surcharge of $78.8 million to$109.4 million. The refund will be implementedmade over a twelve-monthtwo-month period beginning in June 2006. The PUCT approved the surcharge in June 2006. Entergy Gulf States has since entered into a joint agreement with several parties, which was approved by the PUCT, to remove the first interim fuel surcharge (the January 2006 surcharge) effective with the first billing cycle in November 2006. That surcharge was to be in effect until the end of 2006. Additionally, Entergy Gulf States requested that the PUCT remove the second interim surcharge (the June 2006 surcharge) as of November 2006 as well, which the PUCT has approved. Both of these requests are the result of over-recoveries in recent months.July 2007. Amounts collectedrefunded through the interim fuel surchargesrefund are subject to final reconciliation in a future fuel reconciliation proceeding.

  In May 2006, Entergy Gulf States filed with the PUCT a fuel and purchased power reconciliation case covering the period September 2003 through December 2005 for costs recoverable through the Texas fixed fuel factor rate and the incremental purchased capacity recovery rider. Entergy Gulf States is reconciling $1.6 billion of fuel and purchased power costs on a Texas retail basis. HearingsA hearing was conducted before administrative law judges (ALJs) in April 2007. On July 24, 2007, the ALJs issued a proposal for decision recommending that Entergy Gulf States be authorized to reconcile all of its requested Texas fixed fuel factor expenses and recommending a minor adjustment to the incremental purchased capacity recovery calculation. The ALJs also recommend granting an exception to PUCT rules to allow for recovery of an additional $11.4 million in Texas-jurisdictional purchased power capacity costs. The PUCT is scheduled to consider the proposal for decision during its August 16, 2007 open meeting.

  Storm Cost Recovery Filings

  See Note 2 to the financial statements in the Form 10-K for information regarding storm cost recovery filings involving the Utility operating companies. The following are scheduled for February 2007 and a PUCT decision is expected in July 2007.updates to the Form 10-K.

  Entergy Gulf States - Texas

  In April 2007, the PUCT issued its financing order authorizing the issuance of securitization bonds to recover $353 million of hurricane reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC (Entergy Gulf States Reconstruction Funding), a company wholly-owned and consolidated by Entergy Gulf States, issued $329.5 million of senior secured transition bonds (securitization bonds). With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Gulf States the transition property, which is the right to recover from customers though a transition charge amounts sufficient to service the securitization bonds. Entergy Gulf States began cost recovery through the transition charge in July 2007, and the transition charge is expected to remain in place over a 15-year period. See Note 4 to the financial statements for additional information regarding the securitization bonds.

  Entergy Gulf States - Louisiana and Entergy Louisiana

  In November 2005, the LPSC authorized its staff to initiate an expedited proceeding to audit the fuel and power procurement activities ofFebruary 2007, Entergy Louisiana and Entergy Gulf States for the period January 1, 2005 through October 31, 2005. In April 2006,filed rebuttal testimony and filed a second supplemental and amending application by which they seek authority from the LPSC acceptedto securitize their storm cost recovery and storm reserve amounts, together with certain debt retirement costs and upfront and ongoing costs of the LPSC Staff's audit report findingsecuritized debt issued. Securitization is authorized by a law signed by the Governor of Louisiana in May 2006. The filing updates actual storm-related costs through January 2007 and estimated future costs, including carrying charges, declaring that Entergy Louisiana's costs are $561 million and Entergy Gulf States' costs are $219 million.  The filing also updates the prices paidrequested storm reserve amounts, requesting $141 million for natural gas and purchased power were reasonable and that given the market conditions surrounding Hurricanes Katrina and Rita, Entergy Louisiana and $87 million for Entergy Gulf States. Hearings on the quantification of the amounts eligible for securitization began in late-April 2007. At the start of the hearing, a stipulation among Entergy Gulf State s, Entergy Louisiana, the LPSC staff, and most other parties in the proceeding was read into the record. The stipulation quantifies the balance of storm restoration costs for recovery as $545 million for Entergy Louisiana and $187 million for Entergy Gulf States, acted reasonably and prudentlysets the storm reserve amounts at $152 million for Entergy Louisiana and $87 million for Entergy Gulf States. The stipulation also calls for securitization of the storm restoration costs and storm reserves in responsethose same amounts. Hearings on authorization of securitization of the storm costs and reserves were held in June 2007. On August 1, 2007, the LPSC voted to issue an extremely difficult environment.order approving recovery of the stipulated storm cost recovery and storm reserve amounts plus certain debt retirement and upfront and ongoing costs through securitization financing.

  35

  Entergy Mississippi

  In October 2006 the MPSC issued a financing order authorizing the issuance of state bonds to finance $8 million of Entergy Mississippi's certified Hurricane Katrina restoration costs and $40 million for an increase in Entergy Mississippi's storm damage reserve. $30 million of the storm damage reserve will be set aside in a restricted account. A Mississippi state entity issued the bonds in May 2007, and Entergy Mississippi received proceeds of $48 million. Entergy Mississippi will not report the bonds in its balance sheet because the bonds are the obligation of the state entity, and there is no recourse against Entergy Mississippi in the event of a bond default. To service the bonds, Entergy Mississippi will collect a system restoration charge on behalf of the state, and will remit the collections to the state. By analogy to and in accordance with Entergy's accounting policy for collection of sales taxes, Entergy Mississippi will not report the collections as revenue because it is merely acting as the billing and collection agent for the state.

  Entergy New Orleans

  In March 2007, the City Council certified that Entergy New Orleans has incurred $205 million in storm-related costs through December 2006 that are eligible for CDBG funding under the state action plan, and certified Entergy New Orleans' estimated costs of $465 million for the gas system rebuild. In April 2007, Entergy New Orleans executed an agreement with the Louisiana Office of Community Development under which $200 million of CDBG funds will be made available to Entergy New Orleans. Entergy New Orleans submitted the agreement to the bankruptcy court, which approved it on April 25, 2007. Entergy New Orleans has received $176.8 million of the funds as of June 30, 2007, and the remainder will be paid to Entergy New Orleans as it incurs and submits additional eligible costs.

  Retail Rate Proceedings

  See Note 2 to the consolidated financial statements in the Form 10-K for information regarding retail rate proceedings involving the domestic utilityUtility operating companies. The following are updates to the Form 10-K.

  Filings with the APSC (Entergy Arkansas)

  In June 2007, after hearings on Entergy Arkansas' August 2006 rate filing requesting an adjusted annual increase of $106.5 million, the APSC ordered Entergy Arkansas filed with the APSC a request for a change in base rates. Entergy Arkansas requested a general base rate increase of $150to reduce its annual rates by $5 million, (usingand set an ROE of 11.25%), as well as9.9% with a hypothetical common equity level lower than Entergy Arkansas' actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy's stock-based compensation plans. In addition, under the terms of the APSC's order, recovery of FERC-allocatedstorm restoration costs pursuantin the future will be limited to a fixed annual amount of $14.4 million, regardless of the FERC decision onactual annual amount of future restoration costs. The APSC's order also threatens Entergy Arkansas' ability to recover $52 million of costs previously accumulated in Entergy Arkansas' storm reserve and $18 million of rem oval costs associated with the System Agreement.termination of a lease. Management believes, however, that Entergy Arkansas also requestedis entitled to recover these prudently incurred costs and will vigorously pursue its right to recover them. The APSC rejected Entergy Arkansas' request for a capacity management rider to recover incremental capacity costs, but directed Entergy Arkansas and the other parties in the case to develop an annual earnings review process that may address this issue.

  See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends - Federal Regulation -System Agreement Litigation" for a discussion of Entergy's compliance filing in that proceeding. In its June 2007 decision on Entergy Arkansas' rate filing, the APSC approved through December 31, 2008 a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement litigation.

  36

  Entergy Arkansas filed in July 2007 for rehearing of the APSC's June 2007 order.

  Filings with the LPSC

  (Entergy Gulf States)

  In May 2006, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Gulf States modified the filing in August 2006 to reflect an 11.1% return on equity which is within the allowed bandwidth. The modified filing includes a formula rate plan increase of $17.2 million annually that provides for 1) interim recovery of $10.5 million of storm costs from Hurricanes Katrina and Rita and 2) recovery of $6.7 million of LPSC-approved incremental deferred and ongoing capacity costs. The increase was implemented, subject to refund, with the first billing cycle of September 2006. In May 2007 the LPSC approved a settlement between Entergy Louisiana and the LPSC Staff, affirming the rates that were implemented in September 2006.

  In May 2007, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2006 test year. The filing reflected a 10.0% return on equity, which is within the allowed bandwidth. The filing includes three adjustments that result in a formula rate plan decrease of $23 million annually: 1) cessation of interim Hurricanes Katrina and Rita cost recovery, in anticipation of securitized storm cost recovery; 2) reduction of the storm cost accrual, in anticipation of a securitized storm reserve; and 3) reduced capacity costs in the 2006 test year compared to the 2005 test year.

  (Entergy Louisiana)

  In May 2007, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2006 test year, indicating a 7.6% return on equity. If the LPSC approves Entergy Louisiana's request to recover $39.8 million in unrecovered fixed costs associated with the loss of customers that resulted from Hurricanes Katrina and Rita, the ROE would increase to 9.4%, which is within the band of no change adjacent to the lower end of the sharing bandwidth. Other adjustments included in the filing that result ultimately in a formula rate plan decrease of $6.9 million annually include: 1) cessation of interim Hurricanes Katrina and Rita cost recovery, in anticipation of securitized storm cost recovery; 2) reduction of the storm cost accrual, in anticipation of a securitized storm reserve; and 3) reduced capacity costs in the 2006 test year compared to the 2005 test year.

  Retail Rates- Gas (Entergy Gulf States)

  In January 2007, Entergy Gulf States filed with the LPSC its gas rate stabilization plan for the test year ending September 30, 2006.  The filing showed a revenue deficiency of $3.5 million based on an ROE mid-point of 10.5%.  In March 2007, Entergy Gulf States filed a set of rate and rider schedules that reflected all proposed LPSC staff adjustments and implemented a $2.4 million base rate increase effective with the first billing cycle of April 2007 pursuant to the rate stabilization plan. 

  Filings with the MPSC (Entergy Mississippi)

  In March 2007, Entergy Mississippi made its annual scheduled formula rate plan filing for the 2006 test year with the MPSC.  The filing showed that an increase of $12.9 million in annual electric revenues is warranted.  In June 2007 the MPSC approved a joint stipulation between Entergy Mississippi and the Mississippi Public Utilities Staff that provides for a $10.5 million rate increase, which was effective beginning with July 2007 billings.

  37

  Electric Industry Restructuring

  Texas (Entergy Gulf States)

  Refer to Note 2 to the financial statements in the Form 10-K for the current Texas legislation and Entergy Gulf States' proposed transition to competition plan.

  As required by the June 2005 legislation, Entergy Gulf States filed its proposed transition to competition plan in December 2006. The plan provides that to achieve full customer choice, Entergy Gulf States should join ERCOT because ERCOT already has all of the prerequisites for retail choice. Pursuant to PUCT order, on June 4, 2007 Entergy Gulf States filed a restatement of the plan, in which Entergy Gulf States requested that the PUCT approve a "Financial Stability Provision" that is designed to ensure that Entergy Gulf States' proposed integration with ERCOT will not, during the necessary construction period, cause certain Entergy Gulf States' credit metrics and rating to decrease. The June 4, 2007 filing also proposes a rule making process and recognizes that legislative action might be needed to accomplish the required infrastructure improvements. Under Entergy Gulf States' plan, retail open access could commence as early as 2013. Entergy Gulf States' plan includes an estimate that direct construction costs for facilities to interconnect Entergy Gulf States' Texas operations with ERCOT could be approximately $1 billion. The Texas Legislature did not pass legislation addressing Entergy Gulf States' transition plan before adjourning its 2007 session. PUCT hearings on Entergy Gulf States' plan began in May 2007, were abated, and were then completed in July 2007. A procedural schedule has been establishedPUCT decision on Entergy Gulf States' plan is expected in the third quarter 2007.

  In December 2006, the PUCT asked for parties to brief the effects of the 2005 legislation on the competition dockets of Entergy Gulf States, most notably, the settlement that the parties entered with hearingsrespect to the unbundling of Entergy Gulf States for retail open access. Finding that the 2005 legislation now provides the mechanism by which Entergy Gulf States will transition to competition, the PUCT, on February 1, 2007, dismissed Entergy Gulf States' unbundled cost of service proceeding. After analyzing the PUCT's decision, Entergy Gulf States recorded a provision for its estimated exposure related to certain past fuel cost recoveries that may be credited to customers.

  NOTE 3. COMMON EQUITY

  Common Stock

  Earnings per Share

  The following tables present Entergy's basic and diluted earnings per share calculations included on the consolidated income statement:

  			For the Three Months Ended June 30,
  			2007				2006
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Consolidated net income			$267.6				$281.8
  Average number of common shares   outstanding - basic			197.0		$1.36		208.0		$1.35
  Average dilutive effect of:
  	Stock Options		5.1		(0.034)		3.4		(0.022)
  	Equity Units		1.2		(0.008)		-		-
  	Deferred Units		0.1		(0.001)		0.2		(0.001)
  Average number of common shares   outstanding - diluted			203.4		$1.32		211.6		$1.33

  38

  			For the Six Months Ended June 30,
  			2007				2006
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Consolidated net income			$479.8				$475.4
  Average number of common shares   outstanding - basic			198.8		$2.41		207.9		$2.29
  Average dilutive effect of:
  	Stock Options		5.0		(0.059)		3.4		(0.037)
  	Equity Units		0.9		(0.011)		-		-
  	Deferred Units		0.1		(0.001)		0.2		(0.002)
  Average number of common shares   outstanding - diluted			204.8		$2.34		211.5		$2.25

  Entergy's stock option and other equity compensation plans are discussed in Note 12 to the consolidated financial statements in the Form 10-K.

  Treasury Stock

  During the six months ended June 30, 2007, Entergy Corporation issued 1,404,160 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards. Also during the six months ended June 30, 2007, Entergy Corporation purchased 8,012,542 shares of its common stock for a total purchase price of $825.5 million.

  Retained Earnings

  On July 30, 2007, Entergy Corporation's Board of Directors declared a common stock dividend of $0.75 per share, payable on September 1, 2007, to holders of record as of August 10, 2007.

  Accumulated Other Comprehensive Income

  Cash flow hedges with net unrealized losses of approximately $38.5 million net-of-tax at June 30, 2007 are expected to beginbe reclassified into earnings during the next twelve months.

  NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT

  Entergy Corporation had in place as of June 30, 2007, two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in May 2010, has a borrowing capacity of $2 billion and the three-year facility, which expires in December 2008, has a borrowing capacity of $1.5 billion. Entergy Corporation also has the ability to issue letters of credit against the total borrowing capacity of both credit facilities. The commitment fee for these facilities 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 Utility operating companies. The weighted average interest rates as of June 30, 2007 were 5.78% on the five-year facility and 5.85% on the three-year facility. Following is a summary of the borrowings outstanding and capacity available under these facilities as of June 30, 2007.

  39

  Facility		Capacity		Borrowings		Letters of Credit		Capacity Available
  		(In Millions)
  5-Year Facility		$2,000		$855		$79		$1,066
  3-Year Facility		$1,500		$1,115		$-		$385

  Entergy Corporation's facilities require it to maintain a consolidated debt ratio of 65% or less of its total capitalization. If Entergy fails to meet this ratio, or if Entergy or the Utility operating companies and System Energy default on other indebtedness or are in bankruptcy or insolvency proceedings, an acceleration of the facilities' maturity dates may occur.

  On August 2, 2007, Entergy Corporation entered into a new, $3.5 billion credit facility, and terminated the two previously existing facilities. See Part II, Item 5 herein for additional information on the new credit facility, including the amounts of the borrowings and letters of credit outstanding as of August 8, 2007.

  Entergy Arkansas, Entergy Gulf States, and Entergy Mississippi, each had credit facilities available as of June 30, 2007 as follows:

  Company		Expiration Date		Amount of Facility		Amount Drawn as of June 30, 2007
  Entergy Arkansas		April 2008		$100 million		-
  Entergy Gulf States		February 2011		$50 million (a)		-
  Entergy Mississippi		May 2008		$30 million (b)		-
  Entergy Mississippi		May 2008		$20 million (b)		-

  (a)	The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of June 30, 2007, $1.4 million in letters of credit had been issued.
  (b)	Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.

  The credit facilities have variable interest rates and the average commitment fee is 0.13%. The Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets.

  On August 2, 2007, Entergy Gulf States and Entergy Louisiana each entered into new, $200 million credit facilities. See Part II, Item 5 herein for additional information on the new credit facilities, under which there were no borrowings or letters of credit outstanding as of August 8, 2007.

  The short-term borrowings of the Registrant Subsidiaries and certain other Entergy subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2008 (except for Entergy New Orleans, which is effective through May 4, 2009). In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the FERC-authorized limits. As of June 30, 2007, Entergy's subsidiaries' aggregate money pool and external short-term borrowings authorized limit was $2.0 billion, the aggregate outstanding borrowing from the money pool was $305.6 million, and Entergy's subsidiaries had no outstanding short-term borrowing from external sources.

  40

  The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings from the money pool for the Registrant Subsidiaries as of June 30, 2007:

  		Authorized		Borrowings
  		(In Millions)
  Entergy Arkansas		$250		-
  Entergy Gulf States		$350		-
  Entergy Louisiana		$250		$47
  Entergy Mississippi		$175		-
  Entergy New Orleans		$100		-
  System Energy		$200		-

  Debt Issuances

  (Entergy Gulf States)

  In April 2007, the PUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million of Entergy Gulf States' Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company wholly-owned and consolidated by Entergy Gulf States, issued $329.5 million of senior secured transition bonds (securitization bonds), as follows:

  	Amount
  	(In Thousands)
  Senior Secured Transition Bonds, Series A:
  Tranche A-1 (5.51%) due October 2013	$93,500
  Tranche A-2 (5.79%) due October 2018	121,600
  Tranche A-3 (5.93%) due June 2022	114,400
  Total senior secured transition bonds	$329,500

  The scheduled principal payments for the bonds for the next five years are $19.1 million for 2008, $17.7 million for 2009, $18.6 million for 2010, $19.7 million for 2011, and $20.8 million for 2012. All of the scheduled principal payments for 2008-2012 are for Tranche A-1, except for $2.3 million for Tranche A-2 in 2012.

  With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Gulf States the transition property, which is the right to recover from customers though a transition charge amounts sufficient to service the securitization bonds. Entergy Gulf States began cost recovery through the transition charge in July 2007. The creditors of Entergy Gulf States do not have recourse to the assets or revenues of Entergy Gulf States Reconstruction Funding, including the transition property, and the creditors of Entergy Gulf States Reconstruction Funding do not have recourse to the assets or revenues of Entergy Gulf States. Entergy Gulf States has no payment obligations to Entergy Gulf States Reconstruction Funding except to remit transition charge collections.

  (Entergy Mississippi)

  In January 2007, Entergy Mississippi redeemed, prior to maturity, its $100 million, 4.35% Series First Mortgage Bonds due April 2008.

  (Entergy New Orleans)

  Pursuant to its plan of reorganization, in May 2007 Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005

  41

   (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. The Louisiana judicial rate of interest is 9.5% for 2007. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%.

  Entergy New Orleans Debtor-in-Possession Credit Facility

  See Note 4 in the Form 10-K for a discussion of the Entergy New Orleans $200 million debtor-in-possession (DIP) credit facility. Pursuant to the terms of its plan of reorganization, which became effective in May 2007, Entergy New Orleans fully repaid its DIP credit facility borrowings.

  NOTE 5. ACQUISITIONS

  In April 2007, Entergy's Non-Utility Nuclear business purchased the 798 MW Palisades nuclear energy plant located near South Haven, Michigan from Consumers Energy Company for a net cash payment of $336 million. Entergy received the plant, nuclear fuel, inventories, and other assets. The liability to decommission the plant, as well as related decommissioning trust funds, was also transferred to Entergy's Non-Utility Nuclear business. Entergy's Non-Utility Nuclear business executed a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant's output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. In the first quarter 2007, the NRC renewed Palisades' operating license until 2031. As part of the transaction, Entergy's Non-Utility Nuclear business assumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan.  Palisades' financial results since April 2007 are included in Entergy's Non-Utility Nuclear business segment.  The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

  		Amount
  		(In Millions)
  Plant (including nuclear fuel)		$727
  Decommissioning trust funds		252
  Other assets		41
  Total assets acquired		1,020
  Purchased power agreement (below market)		420
  Decommissioning liability		220
  Other liabilities		44
  Total liabilities assumed		684
  Net assets acquired		$336

  The allocation was based on preliminary information and the final allocation may differ, although management does not expect the difference to be material.

  Non-Utility Nuclear will amortize the purchased power agreement liability to revenue over the life of the agreement. The amount that will be amortized each period is based upon the difference between the present value calculated at the date of acquisition of each year's difference between revenue under the agreement and revenue based on estimated market prices. The amounts to be amortized to revenue for the next five years will be $50 million for 2007, $76 million for 2008, $53 million for 2009, $46 million for 2010, and $43 million for 2011.

  42

  NOTE 6. STOCK-BASED COMPENSATION

  Entergy grants equity-based awards including, but not limited to, stock option awards, which are described more fully in Note 12 to the consolidated financial statements in the Form 10-K. Entergy adopted SFAS 123R, "Share-Based Payment" on January 1, 2006. The adoption of the standard did not materially affect Entergy's financial position, results of operations, or cash flows because Entergy adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation" on January 1, 2003. Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans generally vest over three years.

  The following table includes financial information for stock options for each of the years presented:

  	2007		2006
  	(In Millions)
  Compensation expense included in Entergy's Net Income for the second quarter	$3.9		$3.2
  Tax benefit recognized in Entergy's Net Income for the second quarter	$1.5		$1.2
  Compensation expense included in Entergy's Net Income for the six months ended June 30,	$7.1		$6.0
  Tax benefit recognized in Entergy's Net Income for the six months ended June 30,	$2.7		$2.3
  Compensation cost capitalized as part of fixed assets and inventory as of June 30,	$1.2		$1.1

  Entergy granted 1,854,900 stock options during the first quarter of 2007 with a weighted-average fair value of $14.15. At June 30, 2007, there were 11,215,584 stock options outstanding with a weighted-average exercise price of $57.88. The aggregate intrinsic value of the stock options outstanding was $555 million.

  NOTE 7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS

  Components of Net Pension Cost

  Entergy's qualified pension cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$24,141		$23,176
  Interest cost on projected benefit obligation		46,292		41,814
  Expected return on assets		(50,880)		(44,482)
  Amortization of prior service cost		1,383		1,365
  Amortization of loss		11,444		10,931
  Net pension costs		$32,380		$32,804

  43

  Entergy's qualified pension cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$48,038		$46,352
  Interest cost on projected benefit obligation		92,154		83,628
  Expected return on assets		(101,506)		(88,964)
  Amortization of prior service cost		2,766		2,730
  Amortization of loss		22,888		21,862
  Net pension costs		$64,340		$65,608

  The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,638		$3,011		$2,231		$1,089		$470		$1,021
  Interest cost on projected
  benefit obligation		10,498		8,139		6,251		3,371		1,260		1,710
  Expected return on assets		(11,009)		(10,750)		(7,808)		(3,837)		(1,446)		(2,136)
  Amortization of prior service cost		412		304		160		114		44		12
  Amortization of loss		2,721		623		1,433		749		368		151
  Net pension cost		$6,260		$1,327		$2,267		$1,486		$696		$758

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,626		$2,993		$2,182		$1,077		$501		$1,031
  Interest cost on projected
  benefit obligation		9,915		7,914		6,052		3,252		1,282		1,604
  Expected return on assets		(9,834)		(10,176)		(7,114)		(3,683)		(884)		(1,775)
  Amortization of prior service cost		415		309		141		128		56		12
  Amortization of loss		2,438		640		1,509		725		509		167
  Net pension cost		$6,560		$1,680		$2,770		$1,499		$1,464		$1,039

  44

  The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$7,276		$6,022		$4,462		$2,178		$940		$2,042
  Interest cost on projected
  benefit obligation		20,996		16,278		12,502		6,742		2,520		3,420
  Expected return on assets		(22,018)		(21,500)		(15,616)		(7,674)		(2,892)		(4,272)
  Amortization of prior service cost		824		608		320		228		88		24
  Amortization of loss		5,442		1,246		2,866		1,498		736		302
  Net pension cost		$12,520		$2,654		$4,534		$2,972		$1,392		$1,516

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$7,252		$5,986		$4,365		$2,154		$1,002		$2,062
  Interest cost on projected
  benefit obligation		19,830		15,828		12,103		6,504		2,563		3,209
  Expected return on assets		(19,668)		(20,351)		(14,227)		(7,366)		(1,767)		(3,551)
  Amortization of prior service cost		831		617		281		257		112		24
  Amortization of loss		4,875		1,280		3,018		1,449		1,018		334
  Net pension cost		$13,120		$3,360		$5,540		$2,998		$2,928		$2,078

  Entergy recognized $4.0 million and $3.9 million in pension cost for its non-qualified pension plans in the second quarters of 2007 and 2006, respectively. Entergy recognized $8.0 million and $7.8 million in pension cost for its non-qualified pension plans for the six months ended June 30, 2007 and 2006, respectively.

  The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans in the second quarters of 2007 and 2006:

  		Entergy		Entergy		Entergy		Entergy		Entergy
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans
  		(In Thousands)
  Non-Qualified Pension Cost   Second Quarter 2007		$123		$317		$6		$44		$57
  Non-Qualified Pension Cost   Second Quarter 2006		$113		$220		$5		$36		$54

  45

  The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans for the six months ended June 30, 2007 and 2006:

  		Entergy		Entergy		Entergy		Entergy		Entergy
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans
  		(In Thousands)
  Non-Qualified Pension Cost Six   Months Ended June 30, 2007		$246		$634		$12		$88		$114
  Non-Qualified Pension Cost Six   Months Ended June 30, 2006		$226		$439		$11		$73		$107

  Components of Net Other Postretirement Benefit Cost

  Entergy's other postretirement benefit cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$11,034		$10,370
  Interest cost on APBO		15,808		14,316
  Expected return on assets		(6,325)		(4,756)
  Amortization of transition obligation		958		542
  Amortization of prior service cost		(3,959)		(3,688)
  Amortization of loss		4,743		5,698
  Net other postretirement benefit cost		$22,259		$22,482

  Entergy's other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$21,927		$20,740
  Interest cost on APBO		31,494		28,632
  Expected return on assets		(12,585)		(9,512)
  Amortization of transition obligation		1,916		1,084
  Amortization of prior service cost		(7,918)		(7,376)
  Amortization of loss		9,486		11,396
  Net other postretirement benefit cost		$44,320		$44,964

  46

  The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$1,525		$1,547		$973		$476		$255		$451
  Interest cost on APBO		3,037		2,876		1,941		1,049		870		433
  Expected return on assets		(2,231)		(1,697)		-		(819)		(682)		(470)
  Amortization of transition obligation		205		151		96		88		416		2
  Amortization of prior service cost		(197)		218		117		(62)		90		(283)
  Amortization of loss		1,500		793		764		613		282		149
  Net other postretirement benefit cost		$3,839		$3,888		$3,891		$1,345		$1,231		$282

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$1,337		$1,254		$854		$419		$232		$414
  Interest cost on APBO		2,844		2,747		1,856		944		856		407
  Expected return on assets		(1,797)		(1,489)		-		(709)		(611)		(421)
  Amortization of transition obligation		205		151		96		88		416		2
  Amortization of prior service cost		(408)		-		(24)		(137)		10		(301)
  Amortization of loss		1,671		1,002		893		644		343		207
  Net other postretirement benefit cost		$3,852		$3,665		$3,675		$1,249		$1,246		$308

  The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,050		$3,094		$1,946		$952		$510		$902
  Interest cost on APBO		6,074		5,752		3,882		2,098		1,740		866
  Expected return on assets		(4,462)		(3,394)		-		(1,638)		(1,364)		(940)
  Amortization of transition obligation		410		302		192		176		832		4
  Amortization of prior service cost		(394)		436		234		(124)		180		(566)
  Amortization of loss		3,000		1,586		1,528		1,226		564		298
  Net other postretirement benefit cost		$7,678		$7,776		$7,782		$2,690		$2,462		$564

  47

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$2,674		$2,508		$1,708		$838		$464		$828
  Interest cost on APBO		5,688		5,494		3,712		1,888		1,712		814
  Expected return on assets		(3,594)		(2,978)		-		(1,418)		(1,222)		(842)
  Amortization of transition obligation		410		302		192		176		832		4
  Amortization of prior service cost		(816)		-		(48)		(274)		20		(602)
  Amortization of loss		3,342		2,004		1,786		1,288		686		414
  Net other postretirement benefit cost		$7,704		$7,330		$7,350		$2,498		$2,492		$616

  Employer Contributions

  Entergy expects to contribute $176 million to its qualified pension plans in 2007. As of the end of July 2007, Entergy had contributed $153 million to its pension plans. Therefore, Entergy presently anticipates contributing an additional $23 million to fund its qualified pension plans in 2007.

  The Registrant Subsidiaries expect to contribute the following to qualified pension plans in 2007:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Expected 2007 pension contributions   disclosed in Form 10-K		$6,987		$25,346		$ -		$784		$43,585		$5,688
  Pension contributions made through   July 2007		$ -		$25,346		$ -		$ -		$43,585		$5,419
  Remaining estimated pension   contributions to be made in 2007		$6,987		$ -		$ -		$784		$ -		$269

  Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)

  Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2006 Accumulated Postretirement Benefit Obligation by $183 million, and reduced the second quarter 2007 and 2006 other postretirement benefit cost by $6.6 million and $6.9 million, respectively. It reduced the six months ended June 30, 2007 and 2006 other postretirement benefit cost by $13.2 million and $13.9 million, respectively. In the six months ended June 30, 2007, Entergy received $1.7 million in Medicare subsidies for prescription drug claims during 2006.

  48

  Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2006 APBO and the second quarters 2007 and 2006 other postretirement benefit cost for the Registrant Subsidiaries as follows:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Reduction in 12/31/2006 APBO		($40,636)		($35,991)		($22,486)		($13,560)		($10,110)		($5,966)
  Reduction in second quarter 2007
  other postretirement benefit cost		($1,376)		($1,222)		($762)		($438)		($311)		($246)
  Reduction in second quarter 2006
  other postretirement benefit cost		($1,562)		($1,332)		($865)		($512)		($376)		($268)
  Reduction in six months ended
  June 30, 2007 other
  postretirement benefit cost		($2,752)		($2,444)		($1,524)		($876)		($622)		($492)
  Reduction in six months ended
  June 30, 2006 other
  postretirement benefit cost		($3,124)		($2,664)		($1,730)		($1,024)		($752)		($536)
  Medicare subsidies received in the
  six months ended June 30, 2007
  for 2006 claims		$484		$402		$248		$142		$146		$30

  For further information on the Medicare Act refer to Note 11 to the financial statements in the Form 10-K.

  NOTE 8. BUSINESS SEGMENT INFORMATION

  Entergy's reportable segments as of June 30, 2007 are Utility and Non-Utility Nuclear. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the non-nuclear wholesale assets business and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005 and reported Entergy New Orleans results under the equity method of accounting in the Utility segment in 2006 and 2005. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007.

  49

  Entergy's segment financial information for the second quarters of 2007 and 2006 is as follows:

  	Utility			Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2007
  Operating Revenues	$2,238,555			$471,521		$65,817		($6,541)		$2,769,352
  Equity in earnings of
  unconsolidated equity affiliates	$-			$-		$477		$-		$477
  Income Taxes (Benefit)	$98,460			$63,929		($55,938)		$-		$106,451
  Net Income	$148,194			$108,726		$10,682		$-		$267,602
  2006
  Operating Revenues	$2,191,891			$362,363		$82,785		($8,537)		$2,628,502
  Equity in earnings (loss) of
  unconsolidated equity affiliates	$10,682			$-		($2,199)		$-		$8,483
  Income Taxes (Benefit)	$93,776			$41,331		($12,206)		$-		$122,901
  Net Income	$199,623			$63,379		$18,883		($83)		$281,802

  Entergy's segment financial information for the six months ended June 30, 2007 and 2006 is as follows:

  	Utility		Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2007
  Operating Revenues	$4,435,654		$929,772		$110,865		($12,880)		$5,463,411
  Equity in earnings (loss) of
  unconsolidated equity affiliates	($1)		$-		$2,102		$-		$2,101
  Income Taxes (Benefit)	$179,152		$148,664		($75,299)		$-		$252,517
  Net Income (Loss)	$252,644		$236,896		($9,743)		$-		$479,797
  Total Assets	$26,244,883		$6,649,467		$10,814,538		($10,294,161)		$33,414,727
  2006
  Operating Revenues	$4,322,913		$750,372		$149,476		($26,224)		$5,196,537
  Equity in earnings (loss) of
  unconsolidated equity affiliates	$16,325		$-		($4,255)		$-		$12,070
  Income Taxes (Benefit)	$170,749		$94,248		($23,265)		$-		$241,732
  Net Income	$319,375		$144,908		$11,263		($115)		$475,431
  Total Assets	$24,763,451		$5,138,175		$3,127,773		($2,465,726)		$30,563,673

  Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity. Almost all of Entergy's goodwill is related to the Utility segment.

  50

  NOTE 9. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING

  See Note 18 to the financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With the receipt of CDBG funds, and the agreement on insurance recovery with one of its excess insurers, Entergy New Orleans waived the conditions precedent in its plan of reorganization, and the plan became effective on May 8, 2007.

  Following are significant terms in Entergy New Orleans' plan of reorganization:

  • Entergy New Orleans paid in full, in cash, the allowed third-party prepetition accounts payable (approximately $29 million, including interest). Entergy New Orleans paid interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007. The Louisiana judicial rate of interest for 2007 is 9.5%.
  • Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. The Louisiana judicial rate of interest is 9.5% for 2007. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%.
  • Entergy New Orleans repaid to Entergy Corporation, in full, in cash, the outstanding borrowings under the debtor-in-possession (DIP) credit agreement (approximately $67 million).
  • Entergy New Orleans' first mortgage bonds will remain outstanding with their current maturity dates and interest terms. Pursuant to an agreement with the first mortgage bondholders, Entergy New Orleans paid the first mortgage bondholders an amount equal to the one year of interest from the bankruptcy petition date that the bondholders had waived previously in the bankruptcy proceeding (approximately $12 million).
  • Entergy New Orleans' preferred stock will remain outstanding on its current dividend terms, and Entergy New Orleans paid its unpaid preferred dividends in arrears (approximately $1 million).
  • Litigation claims will generally be unaltered, and will generally proceed as if Entergy New Orleans had not filed for bankruptcy protection, with exceptions for certain claims.

  (Entergy Corporation)

  With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007. Because Entergy owns all of the common stock of Entergy New Orleans, reconsolidation does not affect the amount of net income that Entergy records from Entergy New Orleans' operations for any current or prior period, but does result in Entergy New Orleans' results being included in each individual income statement line item in 2007, rather than just its net income being presented as "Equity in earnings (loss) of unconsolidated equity affiliates," as will remain the case for 2005 and 2006.

  (Entergy New Orleans)

  Reorganization items reported as operating expenses in 2006 in the Entergy New Orleans income statement primarily consist of professional fees associated with the bankruptcy case.

  51

  NOTE 10. INCOME TAXES

  Entergy or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. With few exceptions, as discussed below, Entergy is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by taxing authorities for years before 2002.

  Entergy entered into an agreement with the IRS Appeals Division in the second quarter 2007 to partially settle tax years 1999 - 2001. Entergy will litigate the following issues that it is not settling:

  • The ability to credit the U.K. Windfall Tax against U.S. tax as a foreign tax credit - Entergy expects that the total tax to be included in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $152 million. The U.K. Windfall Tax relates to Entergy's former investment in London Electricity. The tax and interest associated with this issue total $208 million for all open tax years.
  • The validity of Entergy's change in method of tax accounting for street lighting assets and the related increase in depreciation deductions - Entergy expects that the total tax to be included in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $33 million. The tax and interest associated with this issue total $48 million for all open tax years.
  • The allowance of depreciation deductions that resulted from Entergy's purchase price allocations on its acquisitions of its nuclear power plants - Entergy expects that the total tax to be i ncluded in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $42 million. The tax and interest associated with this issue total $48 million for all open tax years.

  The U.K. Windfall Tax and street lighting issues are already docketed in U.S. Tax Court for tax years 1997 and 1998 with a trial date set in the first quarter of 2008.

  The IRS completed its examination of the 2002 and 2003 tax returns and issued an Examination Report on June 29, 2007. During the examination, Entergy agreed to adjustments related to its method of accounting for income tax purposes related to 1) its wholesale electric power contracts and 2) the simplified method of allocating overhead or "mixed service costs" provided for under IRS regulations, which affects the amount of cost of goods sold related to the production of electricity.

  Entergy's agreement with the IRS on electric power contracts involved an adjustment to reduce Entergy Louisiana Holdings' deduction related to its accounting for the contract to purchase power from the Vidalia hydroelectric project. The adjustment did not have a material impact on Entergy Louisiana Holdings' earnings. The agreement on overhead allocation methodology related to the Registrant Subsidiaries' 2003 filing of a change in tax accounting method for the allocation of "mixed service costs" to self-produced assets. Entergy reached a settlement agreement concerning the Registrant Subsidiaries' deductions related to the method change for the year ended December 31, 2003. As Entergy has a consolidated net operating loss for 2003, these adjustments have the effect of reducing the consolidated net operating loss carryover and do not require a payment to the IRS at this time. The settlement did not have a material impact on the Registrant Subsidiaries' earnings.

  In the report for the 2002-2003 audit cycle, the IRS also proposed adjustments which Entergy did not agree to as follows: 1) the U.K. Windfall Tax foreign tax credit issue mentioned above; 2) the street lighting issue mentioned above; 3) certain repair deductions; 4) deductions claimed for research and experimentation (R&E) expenditures; 5) income tax credits claimed for R&E; and 6) a 2003 deduction associated with the revisions to the emergency plans at the Indian Point Energy Center. Regarding all of these issues, Entergy disagrees with the IRS Examination Division position and will file a formal protest with the IRS and will pursue administrative relief within the IRS Appeals Division.

  Entergy believes that the provisions recorded in its financial statements are sufficient to address these issues as well as other liabilities that are reasonably estimable, including an estimate of probable interest expense, associated with all uncertain tax positions.

  52

  Entergy has $202 million in deposits on account with the IRS to cover its uncertain tax positions.

  FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy and the Registrant Subsidiaries adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), on January 1, 2007. As a result of the implementation of FIN 48, Entergy recognized an increase in the liability for unrecognized tax benefits of approximately $5 million, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

  As of January 1, 2007, Entergy had a total balance of unrecognized tax benefits of approximately $2 billion. Included in this balance of unrecognized tax benefits are $1.7 billion of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. Entergy's January 1, 2007 balance of unrecognized tax benefits includes $244 million which could affect the effective income tax rate. Entergy accrues interest and penalties expenses related to unrecognized tax benefits in income tax expense. Entergy's January 1, 2007 balance of unrecognized tax benefits includes approximately $52 million accrued for the possible payment of interes t and penalties.

  As of January 1, 2007, Entergy and the Registrant Subsidiaries had total balances of unrecognized tax benefits reflected in their balance sheets as follows:

  				Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Entergy		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Taxes accrued		($184,372)		($43,445)		($640)		$234		$5,830		$4,304		($35,506)
  Accumulated deferred   income taxes and   taxes accrued		2,161,372		194,718		193,949		58,839		44,599		16,118		209,599
  Total unrecognized   tax benefit		$1,977,000		$151,273		$193,309		$59,073		$50,429		$20,422		$174,093

  The Registrant Subsidiaries' January 1, 2007 balances of unrecognized tax benefits included amounts that could affect the effective income tax rate as follows (in millions):

  Entergy Arkansas	$0.8
  Entergy Gulf States	$3.6
  Entergy Louisiana	$1.2
  Entergy Mississippi	$3.4
  Entergy New Orleans	$1.4
  System Energy	$1.7

  53

  The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Included in the January 1, 2007 balance of unrecognized tax benefits were accruals for the possible payment of interest and penalty as follows (in millions):

  Entergy Arkansas	$1.6
  Entergy Gulf States	$4.0
  Entergy Louisiana	$0.8
  Entergy Mississippi	$3.9
  Entergy New Orleans	$0.9
  System Energy	$0.8

  Entergy and the Registrant Subsidiaries do not expect that total unrecognized tax benefits will significantly change within the next twelve months.

  NOTE 11. NEW ACCOUNTING PRONOUNCEMENTS

  The FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS 159) during the first quarter of 2007. SFAS 159 provides an option for companies to select certain financial assets and liabilities to be accounted for at fair value with changes in the fair value of those assets or liabilities being reported through earnings. The intent of the standard is to mitigate volatility in reported earnings caused by the application of the more complicated fair value hedging accounting rules. Under SFAS 159, companies can select existing assets or liabilities for this fair value option concurrent with the effective date of January 1, 2008 for companies with fiscal years ending December 31 or can select future assets or liabilities as they are acquired or entered into. Entergy is in the process of evaluating the potential effect of making this accounting election.

  In June 2006, the EITF reached a consensus on EITF Issue 06-3 "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)" (EITF 06-3). The scope of this issue includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and some excise taxes. Under EITF 06-3, the presentation of taxes within the scope of this issue on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. For any such taxes reported on a gross basis, the amounts of those taxes in interim and annual financial statements, for each period for which an income statement is presented, should be disclosed if those amounts are significant. Entergy's pol icy is to present such taxes on a net basis, unless required to report differently by a regulatory agency. EITF 06-3 did not affect Entergy's financial statements.

  In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the Registrant Subsidiaries is subject to seasonal fluctuations, however, with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.

  54

  Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk

  Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends- Market and Credit Risk Sensitive InstrumentsOF ENTERGY CORPORATION AND SUBSIDIARIES."

  Part I, Item 4. Controls and Procedures

  Disclosure Controls and Procedures

  As of June 30, 2007, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Resources (each individually a "Registrant" and collectively the "Registrants") management, including their respective Chief Executive Officers (CEO) and Chief Financial Officers (CFO). The evaluations assessed the effectiveness of the Registrants' disclosure controls and procedures. Based on the evaluations, each CEO and CFO has concluded that, as to the Registrant or Registrants for which they serve as CEO or CFO, the Registrant's or Registrants' disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant's or Registrants' disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant's or Registrants' management, including their respective CEOs and CFOs, as appropriate to allow timely decisions regarding required disclosure.

  55

  ENTERGY ARKANSAS, INC.

  MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

  Results of Operations

  Net Income

  Second Quarter 2007 Compared to Second Quarter 2006

  Net income decreased $25.1 million primarily due to a higher effective income tax rate and higher other operation and maintenance expenses. The decrease was partially offset by higher net revenue.

  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

  Net income decreased $25.2 million primarily due to a higher effective income tax rate and higher other operation and maintenance expenses. The decrease was partially offset by higher net revenue.

  Net Revenue

  Second Quarter 2007 Compared to Second Quarter 2006

  Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the second quarter of 2007 to the second quarter of 2006.

  		Amount
  		(In Millions)
  2006 net revenue		$259.8
  Pass-through rider revenue		6.8
  Transmission revenue		3.4
  Volume/weather		(5.4)
  Other		3.0
  2007 net revenue		$267.6

  The pass-through rider revenue variance is primarily due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes resulting in no effect on net income.

  The transmission revenue variance is primarily due to higher rates and the addition of new transmission customers in 2006.

  The volume/weather variance is primarily due to the effect of less favorable weather compared to the same period in 2006. Billed retail electricity usage decreased by a total of 110 GWh.

  56

  Gross operating revenues and fuel and purchased power expenses

  Gross operating revenues decreased primarily due to:

  • a decrease of $36.0 million in fuel cost recovery revenues due to a decrease in the energy cost recovery rider effective April 2007. The energy cost recovery rider filings are discussed in Note 2 to the financial statements in the Form 10-K; and
  • a decrease of $32.6 million in gross wholesale revenue due to lower wholesale prices and a decrease in sales to affiliate customers.

  Fuel and purchased power expenses decreased primarily due to a decrease in deferred fuel expense associated with lower energy cost recovery rates collected from customers.

  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

  Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2007 to the six months ended June 30, 2006.

  		Amount
  		(In Millions)
  2006 net revenue		$491.5
  Pass-through rider revenue		15.3
  Deferred fuel costs revisions		8.6
  Transmission revenue		3.9
  Net wholesale revenue		(7.9)
  Other		9.5
  2007 net revenue		$520.9

  The pass-through rider revenue variance is primarily due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes resulting in no effect on net income.

  The deferred fuel cost revisions variance is primarily due to the 2006 energy cost recovery true-up, made in the first quarter of 2007, which increased net revenue by $6.6 million.

  The transmission revenue variance is due to higher rates and the addition of new transmission customers in 2006.

  The net wholesale revenue variance is primarily due to decreased results from wholesale contracts and lower wholesale prices.

  Other Income Statement Variances

  Second Quarter 2007 Compared to Second Quarter 2006

  Other operation and maintenance expenses increased primarily due to:

  • an increase of $3.5 million in transmission spending due to additional labor and materials costs related to substation and transmission line maintenance and higher transmission equalization expenses; and
  • an increase of $2.0 million in nuclear spending due to higher NRC fees and labor costs.

  57

  Taxes other than income taxes increased primarily due to an increase in city franchise tax expense due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income.

  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

  Other operation and maintenance expenses increased primarily due to:

  • an increase of $6.2 million in transmission spending due to additional labor and material costs related to substation and transmission line maintenance, higher transmission equalization expenses, and additional costs related to the Independent Coordinator of Transmission;
  • an increase of $4.7 million in nuclear spending due to higher NRC fees and labor costs; and
  • an increase of $2.6 million in distribution spending due to vegetation maintenance work and increased labor costs.

  Partially offsetting the increase was a decrease of $1.6 million in payroll and benefits costs.

  Taxes other than income taxes increased primarily due to an increase in city franchise tax expense due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income.

  Depreciation and amortization expenses increased primarily due to an increase in plant in service and a revision in 2006 of estimated depreciable lives involving certain intangible assets.

  Other income increased primarily due to a revision in the first quarter of 2007 to the allowance for equity funds used during construction related to removal costs.

  Interest and other charges increased primarily due to interest expense of $3.6 million recorded in the six months ended June 30, 2007 on advances from independent power producers per a FERC order, partially offset by a revision to the estimate of allowance for borrowed funds used during construction related to removal costs.

  Income Taxes

  The effective income tax rate was 36.8% for the second quarter of 2007 and 41.3% for the six months ended June 30, 2007. The difference in the effective income tax rate for the second quarter of 2007 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction. The difference in the effective income tax rate for the six months ended June 30, 2007 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by a downward revision in the estimate of federal income tax expense related to tax depreciation.

  The effective income tax rate was 8.9% for the second quarter of 2006 and 25.0% for the six months ended June 30, 2006. The differences in the effective income tax rate for the second quarter of 2006 and the six months ended June 30, 2006 versus the federal statutory rate of 35.0% are primarily due to the flow through of an income tax benefit related to the steam generator removal cost.

  58

  Liquidity and Capital Resources

  Cash Flow

  Cash flows for the six months ended June 30, 2007 and 2006 were as follows:

  			2007		2006
  			(In Thousands)
  Cash and cash equivalents at beginning of period			$34,815		$9,393
  Cash flow provided by (used in):
  	Operating activities		225,125		225,953
  	Investing activities		(159,165)		(147,364)
  	Financing activities		(33,937)		(68,931)
  Net increase in cash and cash equivalents			32,023		9,658
  Cash and cash equivalents at end of period			$66,838		$19,051

  Operating Activities

  Cash flow from operations was practically unchanged for the six months ended June 30, 2007 compared to the six months ended June 30, 2006. Income tax payments of $18.6 million in 2007 compared to income tax refunds of $23.5 million in 2006, along with decreased recovery of deferred fuel costs, were almost entirely offset by the timing of collection of receivables from customers.

  Investing Activities

  Net cash flow used in investing activities increased $11.8 million for the six months ended June 30, 2007 compared to the six months ended June 30, 2006 primarily due to increased construction expenditures resulting from an increase in transmission spending for additional costs for substation and transmission lines. The increase was partially offset by other regulatory investments in 2006 resulting from fuel cost under-recoveries that have been deferred and are expected to be recovered over a period greater than twelve months.

  Financing Activities

  Net cash flow used in financing activities decreased $35 million for the six months ended June 30, 2007 compared to the six months ended June 30, 2006 primarily due to money pool activity.

  Capital Structure

  Entergy Arkansas' capitalization is balanced between equity and debt, as shown in  the following table.

  		June 30, 2007		December 31, 2006
  Net debt to net capital		46.3%		47.5%
  Effect of subtracting cash from debt		1.2%		0.6%
  Debt to capital		47.5%		48.1%

  Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas 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 Arkansas' financial condition.

  59

  Uses and Sources of Capital

  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources"in the Form 10-K for a discussion of Entergy Arkansas' uses and sources of capital. Following are updates to the information provided in the Form 10-K.

  See the table in the Form 10-K under "Uses of Capital" which sets forth the amounts of Entergy Arkansas' planned construction and other capital investments for 2007 through 2009. In July 2007, Entergy Arkansas signed an agreement to purchase for $210 million the Ouachita Power Facility, a 789 MW natural gas-fired, combined-cycle, load-following generating facility located in north Louisiana and owned by Ouachita Power, LLC. Entergy Arkansas plans to invest approximately $43 million in reliability upgrades. The Ouachita plant will be 100 percent owned by Entergy Arkansas, and the acquisition is expected to close in 2008. Entergy Arkansas expects to sell to Entergy Gulf States, under a separate agreement, approximately one-third of the output of the Ouachita plant on a long-term basis. The purchase of the plant is contingent upon obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. The planned capital investments estimate in the Form 10-K included $190 million in 2008 for the estimated cost of an acquisition of this type.

  In April 2007, Entergy Arkansas renewed its credit facility through April 2008 and increased the amount of the credit facility to $100 million. There were no outstanding borrowings under the Entergy Arkansas credit facility as of June 30, 2007.

  Entergy Arkansas' receivables from or (payables to) the money pool were as follows:

  June 30, 2007		December 31, 2006		June 30, 2006		December 31, 2005
  (In Thousands)
  $26,450		$16,109		$15,567		($27,346)

  See Note 4 to the financial statements in the Form 10-K for a description of the money pool.

  Significant Factors and Known Trends

  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in the Form 10-K for a discussion of state and local rate regulation, energy cost rate investigation, federal regulation, utility restructuring, nuclear matters, and environmental risks. Following are updates to the information provided in the Form 10-K.

  State and Local Rate Regulation

  In June 2007, after hearings on Entergy Arkansas' August 2006 rate filing requesting an adjusted annual increase of $106.5 million, the APSC ordered Entergy Arkansas to reduce its annual rates by $5 million, and set an ROE of 9.9% with a hypothetical common equity level lower than Entergy Arkansas' actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy's stock-based compensation plans. In addition, under the terms of the APSC's order, recovery of storm restoration costs in the future will be limited to a fixed annual amount of $14.4 million, regardless of the actual annual amount of future restoration costs. The APSC's order also threatens Entergy Arkansas' ability to recover $52 million of costs previously accumulated in Entergy Arkansas' storm reserve and $18 million of removal costs associated with the termination of a lease. Management believes, however, that Entergy Arkansas is entitled to recover these prudently incurred costs and will vigorously pursue its right to recover them. The APSC rejected Entergy Arkansas' request for a capacity management rider to recover incremental capacity costs, but directed Entergy Arkansas and the other parties in the case to develop an annual earnings review process that may address this issue.

  60

  See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends -Federal Regulation -

  Common Stock

  Earnings per Share

  System Agreement Litigation"

  The following tables present Entergy's basic and diluted earnings per share calculations included on the consolidated income statement:

  			For the Three Months Ended June 30,
  			2007				2006
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Consolidated net income			$267.6				$281.8
  Average number of common shares   outstanding - basic			197.0		$1.36		208.0		$1.35
  Average dilutive effect of:
  	Stock Options		5.1		(0.034)		3.4		(0.022)
  	Equity Units		1.2		(0.008)		-		-
  	Deferred Units		0.1		(0.001)		0.2		(0.001)
  Average number of common shares   outstanding - diluted			203.4		$1.32		211.6		$1.33

  38

  			For the Six Months Ended June 30,
  			2007				2006
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Consolidated net income			$479.8				$475.4
  Average number of common shares   outstanding - basic			198.8		$2.41		207.9		$2.29
  Average dilutive effect of:
  	Stock Options		5.0		(0.059)		3.4		(0.037)
  	Equity Units		0.9		(0.011)		-		-
  	Deferred Units		0.1		(0.001)		0.2		(0.002)
  Average number of common shares   outstanding - diluted			204.8		$2.34		211.5		$2.25

  Entergy's stock option and other equity compensation plans are discussed in Note 12 to the consolidated financial statements in the Form 10-K10-K.

  Treasury Stock

  During the six months ended June 30, 2007, Entergy Corporation issued 1,404,160 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards. Also during the six months ended June 30, 2007, Entergy Corporation purchased 8,012,542 shares of its common stock for a total purchase price of $825.5 million.

  Retained Earnings

  On July 30, 2007, Entergy Corporation's Board of Directors declared a common stock dividend of $0.75 per share, payable on September 1, 2007, to holders of record as of August 10, 2007.

  Accumulated Other Comprehensive Income

  Cash flow hedges with net unrealized losses of approximately $38.5 million net-of-tax at June 30, 2007 are expected to be reclassified into earnings during the next twelve months.

  NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT

  Entergy Corporation had in place as of June 30, 2007, two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in May 2010, has a borrowing capacity of $2 billion and the three-year facility, which expires in December 2008, has a borrowing capacity of $1.5 billion. Entergy Corporation also has the ability to issue letters of credit against the total borrowing capacity of both credit facilities. The commitment fee for these facilities 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 Utility operating companies. The weighted average interest rates as of June 30, 2007 were 5.78% on the five-year facility and 5.85% on the three-year facility. Following is a summary of the borrowings outstanding and capacity available under these facilities as of June 30, 2007.

  39

  Facility		Capacity		Borrowings		Letters of Credit		Capacity Available
  		(In Millions)
  5-Year Facility		$2,000		$855		$79		$1,066
  3-Year Facility		$1,500		$1,115		$-		$385

  Entergy Corporation's facilities require it to maintain a consolidated debt ratio of 65% or less of its total capitalization. If Entergy fails to meet this ratio, or if Entergy or the Utility operating companies and System Energy default on other indebtedness or are in bankruptcy or insolvency proceedings, an acceleration of the facilities' maturity dates may occur.

  On August 2, 2007, Entergy Corporation entered into a new, $3.5 billion credit facility, and terminated the two previously existing facilities. See Part II, Item 5 herein for a discussion of Entergy's compliance filing in that proceeding. Ifadditional information on the FERC approvesnew credit facility, including the compliance tariff as filed, then payments under that tariff will be classified as energy costs, which would then be included in setting the retail energy cost rate as partamounts of the normal workingborrowings and letters of the energy cost recovery rider.  As noted above, the APSC has given notice that it is considering the prospective eliminationcredit outstanding as of the energy cost recovery rider.  Therefore, Entergy Arkansas proposed in the August 2006 base rate case an alternative to the energy cost recovery rider for recovery of the costs allocated to it as a result of the System Agreement litigation should the energy cost recovery rider be lawfully terminated by the APSC.& nbsp; A separate exact recovery rider, similar to the energy cost recovery rider, would ensure that Entergy Arkansas customers pay only the amount allocated by the FERC.8, 2007.

  Filings with the PUCT and Texas Cities

  As discussed in the Form 10-K, in August 2005,Entergy Arkansas, Entergy Gulf States, filed withand Entergy Mississippi, each had credit facilities available as of June 30, 2007 as follows:

  Company		Expiration Date		Amount of Facility		Amount Drawn as of June 30, 2007
  Entergy Arkansas		April 2008		$100 million		-
  Entergy Gulf States		February 2011		$50 million (a)		-
  Entergy Mississippi		May 2008		$30 million (b)		-
  Entergy Mississippi		May 2008		$20 million (b)		-

  (a)	The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of June 30, 2007, $1.4 million in letters of credit had been issued.
  (b)	Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.

  The credit facilities have variable interest rates and the PUCT an application for recoveryaverage commitment fee is 0.13%. The Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its transition to competition costs.total assets.

  On August 2, 2007, Entergy Gulf States requested recovery of $189and Entergy Louisiana each entered into new, $200 million in transition to competition costs through implementation of a 15-year rider to be effective no later than March 1, 2006. The $189 million represents transition to competition costs Entergy Gulf States incurred from June 1, 1999

  39

   through June 17, 2005 in preparingcredit facilities. See Part II, Item 5 herein for competition in its Texas service area, including attendant AFUDC, and all carrying costs projected to be incurredadditional information on the transition to competition costs through February 28, 2006. The $189 million is before any gross-up for taxesnew credit facilities, under which there were no borrowings or carrying costs over the 15-year recovery period. Entergy Gulf States reached a unanimous settlement agreement on all issues with the active parties in the transition to competition cost recovery case. The agreement allows Entergy Gulf States to recover $14.5 million per year in transition to competition costs over a 15-year period. Entergy Gulf States implemented interim rates based on this revenue level on March 1, 2006. The PUCT approved the settlement agreement in June 2006.letters of credit outstanding as of August 8, 2007.

  Filings withThe short-term borrowings of the LPSCRegistrant Subsidiaries and certain other Entergy subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2008 (except for Entergy New Orleans, which is effective through May 4, 2009). In addition to borrowings from commercial banks, these companies are authorized under a FERC order to borrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external borrowings combined may not exceed the FERC-authorized limits. As of June 30, 2007, Entergy's subsidiaries' aggregate money pool and external short-term borrowings authorized limit was $2.0 billion, the aggregate outstanding borrowing from the money pool was $305.6 million, and Entergy's subsidiaries had no outstanding short-term borrowing from external sources.

  Retail Rates - Electric40

  The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings from the money pool for the Registrant Subsidiaries as of June 30, 2007:

  		Authorized		Borrowings
  		(In Millions)
  Entergy Arkansas		$250		-
  Entergy Gulf States		$350		-
  Entergy Louisiana		$250		$47
  Entergy Mississippi		$175		-
  Entergy New Orleans		$100		-
  System Energy		$200		-

  Debt Issuances

  (Entergy Gulf States)

  In March 2006,April 2007, the LPSC approved an uncontested stipulated settlement inPUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million of Entergy Gulf States' formula rate plan filing for the 2004 test year. The settlement includes a revenue requirement increaseHurricane Rita reconstruction costs and up to $6 million of $36.8transaction costs, offset by $32 million and calls forof related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company wholly-owned and consolidated by Entergy Gulf States, issued $329.5 million of senior secured transition bonds (securitization bonds), as follows:

  	Amount
  	(In Thousands)
  Senior Secured Transition Bonds, Series A:
  Tranche A-1 (5.51%) due October 2013	$93,500
  Tranche A-2 (5.79%) due October 2018	121,600
  Tranche A-3 (5.93%) due June 2022	114,400
  Total senior secured transition bonds	$329,500

  The scheduled principal payments for the bonds for the next five years are $19.1 million for 2008, $17.7 million for 2009, $18.6 million for 2010, $19.7 million for 2011, and $20.8 million for 2012. All of the scheduled principal payments for 2008-2012 are for Tranche A-1, except for $2.3 million for Tranche A-2 in 2012.

  With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Gulf States the transition property, which is the right to applyrecover from customers though a refund liabilitytransition charge amounts sufficient to service the securitization bonds. Entergy Gulf States began cost recovery through the transition charge in July 2007. The creditors of $744 thousand to capacity deferrals. The refund liability pertainedEntergy Gulf States do not have recourse to the periods 2004-2005assets or revenues of Entergy Gulf States Reconstruction Funding, including the transition property, and the creditors of Entergy Gulf States Reconstruction Funding do not have recourse to the assets or revenues of Entergy Gulf States. Entergy Gulf States has no payment obligations to Entergy Gulf States Reconstruction Funding except to remit transition charge collections.

  (Entergy Mississippi)

  In January 2007, Entergy Mississippi redeemed, prior to maturity, its $100 million, 4.35% Series First Mortgage Bonds due April 2008.

  (Entergy New Orleans)

  Pursuant to its plan of reorganization, in May 2007 Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005

  41

   (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. The Louisiana judicial rate of interest is 9.5% for 2007. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%.

  Entergy New Orleans Debtor-in-Possession Credit Facility

  See Note 4 in the Form 10-K for a discussion of the Entergy New Orleans $200 million debtor-in-possession (DIP) credit facility. Pursuant to the terms of its plan of reorganization, which became effective in May 2007, Entergy New Orleans fully repaid its DIP credit facility borrowings.

  NOTE 5. ACQUISITIONS

  In April 2007, Entergy's Non-Utility Nuclear business purchased the 798 MW Palisades nuclear energy plant located near South Haven, Michigan from Consumers Energy Company for a net cash payment of $336 million. Entergy received the plant, nuclear fuel, inventories, and other assets. The liability to decommission the plant, as well as related decommissioning trust funds, was also transferred to Entergy's Non-Utility Nuclear business. Entergy's Non-Utility Nuclear business executed a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the interim periodplant's output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. In the first quarter 2007, the NRC renewed Palisades' operating license until 2031. As part of the transaction, Entergy's Non-Utility Nuclear business assumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which a $37.2 million revenue increaseis located near Charlevoix, Michigan.  Palisades' financial results since April 2007 are included in Entergy's Non-Utility Nuclear business segment.  The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

  		Amount
  		(In Millions)
  Plant (including nuclear fuel)		$727
  Decommissioning trust funds		252
  Other assets		41
  Total assets acquired		1,020
  Purchased power agreement (below market)		420
  Decommissioning liability		220
  Other liabilities		44
  Total liabilities assumed		684
  Net assets acquired		$336

  The allocation was in place.based on preliminary information and the final allocation may differ, although management does not expect the difference to be material.

  Non-Utility Nuclear will amortize the purchased power agreement liability to revenue over the life of the agreement. The amount that will be amortized each period is based upon the difference between the present value calculated at the date of acquisition of each year's difference between revenue under the agreement and revenue based on estimated market prices. The amounts to be amortized to revenue for the next five years will be $50 million for 2007, $76 million for 2008, $53 million for 2009, $46 million for 2010, and $43 million for 2011.

  42

  NOTE 6. STOCK-BASED COMPENSATION

  Entergy grants equity-based awards including, but not limited to, stock option awards, which are described more fully in Note 12 to the consolidated financial statements in the Form 10-K. Entergy adopted SFAS 123R, "Share-Based Payment" on January 1, 2006. The adoption of the standard did not materially affect Entergy's financial position, results of operations, or cash flows because Entergy adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation" on January 1, 2003. Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans generally vest over three years.

  The following table includes financial information for stock options for each of the years presented:

  	2007		2006
  	(In Millions)
  Compensation expense included in Entergy's Net Income for the second quarter	$3.9		$3.2
  Tax benefit recognized in Entergy's Net Income for the second quarter	$1.5		$1.2
  Compensation expense included in Entergy's Net Income for the six months ended June 30,	$7.1		$6.0
  Tax benefit recognized in Entergy's Net Income for the six months ended June 30,	$2.7		$2.3
  Compensation cost capitalized as part of fixed assets and inventory as of June 30,	$1.2		$1.1

  Entergy granted 1,854,900 stock options during the first quarter of 2007 with a weighted-average fair value of $14.15. At June 30, 2007, there were 11,215,584 stock options outstanding with a weighted-average exercise price of $57.88. The aggregate intrinsic value of the stock options outstanding was $555 million.

  NOTE 7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS

  Components of Net Pension Cost

  Entergy's qualified pension cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$24,141		$23,176
  Interest cost on projected benefit obligation		46,292		41,814
  Expected return on assets		(50,880)		(44,482)
  Amortization of prior service cost		1,383		1,365
  Amortization of loss		11,444		10,931
  Net pension costs		$32,380		$32,804

  43

  Entergy's qualified pension cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$48,038		$46,352
  Interest cost on projected benefit obligation		92,154		83,628
  Expected return on assets		(101,506)		(88,964)
  Amortization of prior service cost		2,766		2,730
  Amortization of loss		22,888		21,862
  Net pension costs		$64,340		$65,608

  The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,638		$3,011		$2,231		$1,089		$470		$1,021
  Interest cost on projected
  benefit obligation		10,498		8,139		6,251		3,371		1,260		1,710
  Expected return on assets		(11,009)		(10,750)		(7,808)		(3,837)		(1,446)		(2,136)
  Amortization of prior service cost		412		304		160		114		44		12
  Amortization of loss		2,721		623		1,433		749		368		151
  Net pension cost		$6,260		$1,327		$2,267		$1,486		$696		$758

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,626		$2,993		$2,182		$1,077		$501		$1,031
  Interest cost on projected
  benefit obligation		9,915		7,914		6,052		3,252		1,282		1,604
  Expected return on assets		(9,834)		(10,176)		(7,114)		(3,683)		(884)		(1,775)
  Amortization of prior service cost		415		309		141		128		56		12
  Amortization of loss		2,438		640		1,509		725		509		167
  Net pension cost		$6,560		$1,680		$2,770		$1,499		$1,464		$1,039

  44

  The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$7,276		$6,022		$4,462		$2,178		$940		$2,042
  Interest cost on projected
  benefit obligation		20,996		16,278		12,502		6,742		2,520		3,420
  Expected return on assets		(22,018)		(21,500)		(15,616)		(7,674)		(2,892)		(4,272)
  Amortization of prior service cost		824		608		320		228		88		24
  Amortization of loss		5,442		1,246		2,866		1,498		736		302
  Net pension cost		$12,520		$2,654		$4,534		$2,972		$1,392		$1,516

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$7,252		$5,986		$4,365		$2,154		$1,002		$2,062
  Interest cost on projected
  benefit obligation		19,830		15,828		12,103		6,504		2,563		3,209
  Expected return on assets		(19,668)		(20,351)		(14,227)		(7,366)		(1,767)		(3,551)
  Amortization of prior service cost		831		617		281		257		112		24
  Amortization of loss		4,875		1,280		3,018		1,449		1,018		334
  Net pension cost		$13,120		$3,360		$5,540		$2,998		$2,928		$2,078

  Entergy recognized $4.0 million and $3.9 million in pension cost for its non-qualified pension plans in the second quarters of 2007 and 2006, respectively. Entergy recognized $8.0 million and $7.8 million in pension cost for its non-qualified pension plans for the six months ended June 30, 2007 and 2006, respectively.

  The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans in the second quarters of 2007 and 2006:

  		Entergy		Entergy		Entergy		Entergy		Entergy
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans
  		(In Thousands)
  Non-Qualified Pension Cost   Second Quarter 2007		$123		$317		$6		$44		$57
  Non-Qualified Pension Cost   Second Quarter 2006		$113		$220		$5		$36		$54

  45

  The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans for the six months ended June 30, 2007 and 2006:

  		Entergy		Entergy		Entergy		Entergy		Entergy
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans
  		(In Thousands)
  Non-Qualified Pension Cost Six   Months Ended June 30, 2007		$246		$634		$12		$88		$114
  Non-Qualified Pension Cost Six   Months Ended June 30, 2006		$226		$439		$11		$73		$107

  Components of Net Other Postretirement Benefit Cost

  Entergy's other postretirement benefit cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$11,034		$10,370
  Interest cost on APBO		15,808		14,316
  Expected return on assets		(6,325)		(4,756)
  Amortization of transition obligation		958		542
  Amortization of prior service cost		(3,959)		(3,688)
  Amortization of loss		4,743		5,698
  Net other postretirement benefit cost		$22,259		$22,482

  Entergy's other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		2007		2006
  		(In Thousands)
  Service cost - benefits earned during the period		$21,927		$20,740
  Interest cost on APBO		31,494		28,632
  Expected return on assets		(12,585)		(9,512)
  Amortization of transition obligation		1,916		1,084
  Amortization of prior service cost		(7,918)		(7,376)
  Amortization of loss		9,486		11,396
  Net other postretirement benefit cost		$44,320		$44,964

  46

  The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$1,525		$1,547		$973		$476		$255		$451
  Interest cost on APBO		3,037		2,876		1,941		1,049		870		433
  Expected return on assets		(2,231)		(1,697)		-		(819)		(682)		(470)
  Amortization of transition obligation		205		151		96		88		416		2
  Amortization of prior service cost		(197)		218		117		(62)		90		(283)
  Amortization of loss		1,500		793		764		613		282		149
  Net other postretirement benefit cost		$3,839		$3,888		$3,891		$1,345		$1,231		$282

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$1,337		$1,254		$854		$419		$232		$414
  Interest cost on APBO		2,844		2,747		1,856		944		856		407
  Expected return on assets		(1,797)		(1,489)		-		(709)		(611)		(421)
  Amortization of transition obligation		205		151		96		88		416		2
  Amortization of prior service cost		(408)		-		(24)		(137)		10		(301)
  Amortization of loss		1,671		1,002		893		644		343		207
  Net other postretirement benefit cost		$3,852		$3,665		$3,675		$1,249		$1,246		$308

  The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,050		$3,094		$1,946		$952		$510		$902
  Interest cost on APBO		6,074		5,752		3,882		2,098		1,740		866
  Expected return on assets		(4,462)		(3,394)		-		(1,638)		(1,364)		(940)
  Amortization of transition obligation		410		302		192		176		832		4
  Amortization of prior service cost		(394)		436		234		(124)		180		(566)
  Amortization of loss		3,000		1,586		1,528		1,226		564		298
  Net other postretirement benefit cost		$7,678		$7,776		$7,782		$2,690		$2,462		$564

  47

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$2,674		$2,508		$1,708		$838		$464		$828
  Interest cost on APBO		5,688		5,494		3,712		1,888		1,712		814
  Expected return on assets		(3,594)		(2,978)		-		(1,418)		(1,222)		(842)
  Amortization of transition obligation		410		302		192		176		832		4
  Amortization of prior service cost		(816)		-		(48)		(274)		20		(602)
  Amortization of loss		3,342		2,004		1,786		1,288		686		414
  Net other postretirement benefit cost		$7,704		$7,330		$7,350		$2,498		$2,492		$616

  Employer Contributions

  Entergy expects to contribute $176 million to its qualified pension plans in 2007. As of the end of July 2007, Entergy had contributed $153 million to its pension plans. Therefore, Entergy presently anticipates contributing an additional $23 million to fund its qualified pension plans in 2007.

  The Registrant Subsidiaries expect to contribute the following to qualified pension plans in 2007:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Expected 2007 pension contributions   disclosed in Form 10-K		$6,987		$25,346		$ -		$784		$43,585		$5,688
  Pension contributions made through   July 2007		$ -		$25,346		$ -		$ -		$43,585		$5,419
  Remaining estimated pension   contributions to be made in 2007		$6,987		$ -		$ -		$784		$ -		$269

  Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)

  Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2006 Accumulated Postretirement Benefit Obligation by $183 million, and reduced the second quarter 2007 and 2006 other postretirement benefit cost by $6.6 million and $6.9 million, respectively. It reduced the six months ended June 30, 2007 and 2006 other postretirement benefit cost by $13.2 million and $13.9 million, respectively. In the six months ended June 30, 2007, Entergy received $1.7 million in Medicare subsidies for prescription drug claims during 2006.

  48

  Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2006 APBO and the second quarters 2007 and 2006 other postretirement benefit cost for the Registrant Subsidiaries as follows:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Reduction in 12/31/2006 APBO		($40,636)		($35,991)		($22,486)		($13,560)		($10,110)		($5,966)
  Reduction in second quarter 2007
  other postretirement benefit cost		($1,376)		($1,222)		($762)		($438)		($311)		($246)
  Reduction in second quarter 2006
  other postretirement benefit cost		($1,562)		($1,332)		($865)		($512)		($376)		($268)
  Reduction in six months ended
  June 30, 2007 other
  postretirement benefit cost		($2,752)		($2,444)		($1,524)		($876)		($622)		($492)
  Reduction in six months ended
  June 30, 2006 other
  postretirement benefit cost		($3,124)		($2,664)		($1,730)		($1,024)		($752)		($536)
  Medicare subsidies received in the
  six months ended June 30, 2007
  for 2006 claims		$484		$402		$248		$142		$146		$30

  For further information on the Medicare Act refer to Note 11 to the financial statements in the Form 10-K.

  NOTE 8. BUSINESS SEGMENT INFORMATION

  Entergy's reportable segments as of June 30, 2007 are Utility and Non-Utility Nuclear. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the non-nuclear wholesale assets business and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005 and reported Entergy New Orleans results under the equity method of accounting in the Utility segment in 2006 and 2005. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007.

  49

  Entergy's segment financial information for the second quarters of 2007 and 2006 Entergy Gulf States made its formula rate plan filingis as follows:

  	Utility			Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2007
  Operating Revenues	$2,238,555			$471,521		$65,817		($6,541)		$2,769,352
  Equity in earnings of
  unconsolidated equity affiliates	$-			$-		$477		$-		$477
  Income Taxes (Benefit)	$98,460			$63,929		($55,938)		$-		$106,451
  Net Income	$148,194			$108,726		$10,682		$-		$267,602
  2006
  Operating Revenues	$2,191,891			$362,363		$82,785		($8,537)		$2,628,502
  Equity in earnings (loss) of
  unconsolidated equity affiliates	$10,682			$-		($2,199)		$-		$8,483
  Income Taxes (Benefit)	$93,776			$41,331		($12,206)		$-		$122,901
  Net Income	$199,623			$63,379		$18,883		($83)		$281,802

  Entergy's segment financial information for the six months ended June 30, 2007 and 2006 is as follows:

  	Utility		Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2007
  Operating Revenues	$4,435,654		$929,772		$110,865		($12,880)		$5,463,411
  Equity in earnings (loss) of
  unconsolidated equity affiliates	($1)		$-		$2,102		$-		$2,101
  Income Taxes (Benefit)	$179,152		$148,664		($75,299)		$-		$252,517
  Net Income (Loss)	$252,644		$236,896		($9,743)		$-		$479,797
  Total Assets	$26,244,883		$6,649,467		$10,814,538		($10,294,161)		$33,414,727
  2006
  Operating Revenues	$4,322,913		$750,372		$149,476		($26,224)		$5,196,537
  Equity in earnings (loss) of
  unconsolidated equity affiliates	$16,325		$-		($4,255)		$-		$12,070
  Income Taxes (Benefit)	$170,749		$94,248		($23,265)		$-		$241,732
  Net Income	$319,375		$144,908		$11,263		($115)		$475,431
  Total Assets	$24,763,451		$5,138,175		$3,127,773		($2,465,726)		$30,563,673

  Businesses marked with * are sometimes referred to as the "competitive businesses," with the LPSCexception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity. Almost all of Entergy's goodwill is related to the Utility segment.

  50

  NOTE 9. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING

  See Note 18 to the financial statements in the Form 10-K for a discussion of the 2005 test year. Entergy Gulf States modifiedNew Orleans bankruptcy proceeding. On May 7, 2007, the filingbankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With the receipt of CDBG funds, and the agreement on insurance recovery with one of its excess insurers, Entergy New Orleans waived the conditions precedent in August 2006 to reflect an 11.1% returnits plan of reorganization, and the plan became effective on equity which is withinMay 8, 2007.

  Following are significant terms in Entergy New Orleans' plan of reorganization:

  • Entergy New Orleans paid in full, in cash, the allowed bandwidth.third-party prepetition accounts payable (approximately $29 million, including interest). Entergy New Orleans paid interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007. The modified filing includes a formulaLouisiana judicial rate plan increase of $17.2interest for 2007 is 9.5%.
  • Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, which providesincluding interest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for interim recovery2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of storm costsinterest plus 1% for 2007 through the date of issuance of the notes. The Louisiana judicial rate of interest is 9.5% for 2007. Entergy New Orleans will pay interest on the notes from Hurricanes Katrinatheir date of issuance at the Louisiana judicial rate of interest plus 1%.
  • Entergy New Orleans repaid to Entergy Corporation, in full, in cash, the outstanding borrowings under the debtor-in-possession (DIP) credit agreement (approximately $67 million).
  • Entergy New Orleans' first mortgage bonds will remain outstanding with their current maturity dates and Rita and recovery of LPSC-approved incremental deferred and ongoing capacity costs. The increase was implemented, subjectinterest terms. Pursuant to refund,an agreement with the first billing cyclemortgage bondholders, Entergy New Orleans paid the first mortgage bondholders an amount equal to the one year of Septemberinterest from the bankruptcy petition date that the bondholders had waived previously in the bankruptcy proceeding (approximately $12 million).
  • Entergy New Orleans' preferred stock will remain outstanding on its current dividend terms, and Entergy New Orleans paid its unpaid preferred dividends in arrears (approximately $1 million).
  • Litigation claims will generally be unaltered, and will generally proceed as if Entergy New Orleans had not filed for bankruptcy protection, with exceptions for certain claims.

  (Entergy Corporation)

  With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007. Because Entergy owns all of the common stock of Entergy New Orleans, reconsolidation does not affect the amount of net income that Entergy records from Entergy New Orleans' operations for any current or prior period, but does result in Entergy New Orleans' results being included in each individual income statement line item in 2007, rather than just its net income being presented as "Equity in earnings (loss) of unconsolidated equity affiliates," as will remain the case for 2005 and 2006.

  (Entergy Louisiana)New Orleans)

  Reorganization items reported as operating expenses in 2006 in the Entergy New Orleans income statement primarily consist of professional fees associated with the bankruptcy case.

  51

  NOTE 10. INCOME TAXES

  Entergy or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. With few exceptions, as discussed below, Entergy is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by taxing authorities for years before 2002.

  Entergy entered into an agreement with the IRS Appeals Division in the second quarter 2007 to partially settle tax years 1999 - 2001. Entergy will litigate the following issues that it is not settling:

  • The ability to credit the U.K. Windfall Tax against U.S. tax as a foreign tax credit - Entergy expects that the total tax to be included in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $152 million. The U.K. Windfall Tax relates to Entergy's former investment in London Electricity. The tax and interest associated with this issue total $208 million for all open tax years.
  • The validity of Entergy's change in method of tax accounting for street lighting assets and the related increase in depreciation deductions - Entergy expects that the total tax to be included in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $33 million. The tax and interest associated with this issue total $48 million for all open tax years.
  • The allowance of depreciation deductions that resulted from Entergy's purchase price allocations on its acquisitions of its nuclear power plants - Entergy expects that the total tax to be i ncluded in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $42 million. The tax and interest associated with this issue total $48 million for all open tax years.

  The U.K. Windfall Tax and street lighting issues are already docketed in U.S. Tax Court for tax years 1997 and 1998 with a trial date set in the first quarter of 2008.

  The IRS completed its examination of the 2002 and 2003 tax returns and issued an Examination Report on June 29, 2007. During the examination, Entergy agreed to adjustments related to its method of accounting for income tax purposes related to 1) its wholesale electric power contracts and 2) the simplified method of allocating overhead or "mixed service costs" provided for under IRS regulations, which affects the amount of cost of goods sold related to the production of electricity.

  Entergy's agreement with the IRS on electric power contracts involved an adjustment to reduce Entergy Louisiana Holdings' deduction related to its accounting for the contract to purchase power from the Vidalia hydroelectric project. The adjustment did not have a material impact on Entergy Louisiana Holdings' earnings. The agreement on overhead allocation methodology related to the Registrant Subsidiaries' 2003 filing of a change in tax accounting method for the allocation of "mixed service costs" to self-produced assets. Entergy reached a settlement agreement concerning the Registrant Subsidiaries' deductions related to the method change for the year ended December 31, 2003. As Entergy has a consolidated net operating loss for 2003, these adjustments have the effect of reducing the consolidated net operating loss carryover and do not require a payment to the IRS at this time. The settlement did not have a material impact on the Registrant Subsidiaries' earnings.

  In May 2006,the report for the 2002-2003 audit cycle, the IRS also proposed adjustments which Entergy Louisiana made its formula rate plan filingdid not agree to as follows: 1) the U.K. Windfall Tax foreign tax credit issue mentioned above; 2) the street lighting issue mentioned above; 3) certain repair deductions; 4) deductions claimed for research and experimentation (R&E) expenditures; 5) income tax credits claimed for R&E; and 6) a 2003 deduction associated with the LPSCrevisions to the emergency plans at the Indian Point Energy Center. Regarding all of these issues, Entergy disagrees with the IRS Examination Division position and will file a formal protest with the IRS and will pursue administrative relief within the IRS Appeals Division.

  Entergy believes that the provisions recorded in its financial statements are sufficient to address these issues as well as other liabilities that are reasonably estimable, including an estimate of probable interest expense, associated with all uncertain tax positions.

  52

  Entergy has $202 million in deposits on account with the IRS to cover its uncertain tax positions.

  FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy and the Registrant Subsidiaries adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), on January 1, 2007. As a result of the implementation of FIN 48, Entergy recognized an increase in the liability for unrecognized tax benefits of approximately $5 million, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

  As of January 1, 2007, Entergy had a total balance of unrecognized tax benefits of approximately $2 billion. Included in this balance of unrecognized tax benefits are $1.7 billion of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. Entergy's January 1, 2007 balance of unrecognized tax benefits includes $244 million which could affect the effective income tax rate. Entergy accrues interest and penalties expenses related to unrecognized tax benefits in income tax expense. Entergy's January 1, 2007 balance of unrecognized tax benefits includes approximately $52 million accrued for the 2005 test year.possible payment of interes t and penalties.

  As of January 1, 2007, Entergy Louisiana modifiedand the filingRegistrant Subsidiaries had total balances of unrecognized tax benefits reflected in August 2006their balance sheets as follows:

  				Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Entergy		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Taxes accrued		($184,372)		($43,445)		($640)		$234		$5,830		$4,304		($35,506)
  Accumulated deferred   income taxes and   taxes accrued		2,161,372		194,718		193,949		58,839		44,599		16,118		209,599
  Total unrecognized   tax benefit		$1,977,000		$151,273		$193,309		$59,073		$50,429		$20,422		$174,093

  The Registrant Subsidiaries' January 1, 2007 balances of unrecognized tax benefits included amounts that could affect the effective income tax rate as follows (in millions):

  Entergy Arkansas	$0.8
  Entergy Gulf States	$3.6
  Entergy Louisiana	$1.2
  Entergy Mississippi	$3.4
  Entergy New Orleans	$1.4
  System Energy	$1.7

  53

  The Registrant Subsidiaries accrue interest and penalties related to reflect a 9.45% return on equity which isunrecognized tax benefits in income tax expense. Included in the January 1, 2007 balance of unrecognized tax benefits were accruals for the possible payment of interest and penalty as follows (in millions):

  Entergy Arkansas	$1.6
  Entergy Gulf States	$4.0
  Entergy Louisiana	$0.8
  Entergy Mississippi	$3.9
  Entergy New Orleans	$0.9
  System Energy	$0.8

  Entergy and the Registrant Subsidiaries do not expect that total unrecognized tax benefits will significantly change within the allowed bandwidth. next twelve months.

  NOTE 11. NEW ACCOUNTING PRONOUNCEMENTS

  The modified filing includesFASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS 159) during the first quarter of 2007. SFAS 159 provides an increaseoption for companies to select certain financial assets and liabilities to be accounted for at fair value with changes in the fair value of $24 millionthose assets or liabilities being reported through earnings. The intent of the standard is to mitigate volatility in reported earnings caused by the application of the more complicated fair value hedging accounting rules. Under SFAS 159, companies can select existing assets or liabilities for interim recovery of storm costs from Hurricanes Katrina and Rita and a $120 million rate increase to recover LPSC-approved incremental deferred and ongoing capacity costs. The filing requested recovery of approximately $50 million for the amortization of capacity deferrals over a three-year period, including carrying charges, and approximately $70 million for ongoing capacity costs. The increase was implemented, subject to refund,this fair value option concurrent with the first billing cycleeffective date of September 2006. Comments were provided byJanuary 1, 2008 for companies with fiscal years ending December 31 or can select future assets or liabilities as they are acquired or entered into. Entergy is in the LPSC Staff, which Entergy Louisiana is currently reviewing. Entergy Louisiana subsequently updated its formula rate plan rider to reflect adjustments proposed byprocess of evaluating the LPSC Staff with which it agrees. The adjusted return on equitypotential effect of 9.56% remains within the allowed bandwidth. Ongoing and deferred incremental capacity costs were reduced to $119 million. The updated formula rate plan rider was implemented, subject to refund, with the first billing cycle of October 2006.

  Retail Rates - Gas (Entergy Gulf States)

  In January 2006, Entergy Gulf States filed with the LPSC its gas rate stabilization plan. The filing showed a revenue deficiency of $4.1 million based on an ROE mid-point of 10.5%. On May 1, 2006, Entergy Gulf States implemented a $3.5 million rate increase pursuant to an uncontested agreement with the LPSC Staff.

  Filings with the MPSC

  In March 2006, Entergy Mississippi made its annual scheduled formula rate plan filing with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing showed that an increase of $3.1 million in electric revenues is warranted.  The MPSC has approved a settlement providing for a $1.8 million rate increase, which was implemented in August 2006.

  40

  Filings with the City Councilmaking this accounting election.

  In June 2006, the EITF reached a consensus on EITF Issue 06-3 "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)" (EITF 06-3). The scope of this issue includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and some excise taxes. Under EITF 06-3, the presentation of taxes within the scope of this issue on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) is an accounting policy decision that should be disclosed. For any such taxes reported on a gross basis, the amounts of those taxes in interim and annual financial statements, for each period for which an income statement is presented, should be disclosed if those amounts are significant. Entergy's pol icy is to present such taxes on a net basis, unless required to report differently by a regulatory agency. EITF 06-3 did not affect Entergy's financial statements.

  In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, made its annual formula rate plan filingsand System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the Registrant Subsidiaries is subject to seasonal fluctuations, however, with the City Council.peak periods occurring during the third quarter. The filingsresults for the interim periods presented various alternativesshould not be used as a basis for estimating results of operations for a full year.

  54

  Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk

  Refer to reflect"MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends- Market and Credit Risk Sensitive InstrumentsOF ENTERGY CORPORATION AND SUBSIDIARIES."

  Part I, Item 4. Controls and Procedures

  Disclosure Controls and Procedures

  As of June 30, 2007, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Resources (each individually a "Registrant" and collectively the "Registrants") management, including their respective Chief Executive Officers (CEO) and Chief Financial Officers (CFO). The evaluations assessed the effectiveness of the Registrants' disclosure controls and procedures. Based on the evaluations, each CEO and CFO has concluded that, as to the Registrant or Registrants for which they serve as CEO or CFO, the Registrant's or Registrants' disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant's or Registrants' disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant's or Registrants' management, including their respective CEOs and CFOs, as appropriate to allow timely decisions regarding required disclosure.

  55

  ENTERGY ARKANSAS, INC.

  MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

  Results of Operations

  Net Income

  Second Quarter 2007 Compared to Second Quarter 2006

  Net income decreased $25.1 million primarily due to a higher effective income tax rate and higher other operation and maintenance expenses. The decrease was partially offset by higher net revenue.

  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

  Net income decreased $25.2 million primarily due to a higher effective income tax rate and higher other operation and maintenance expenses. The decrease was partially offset by higher net revenue.

  Net Revenue

  Second Quarter 2007 Compared to Second Quarter 2006

  Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the second quarter of 2007 to the second quarter of 2006.

  		Amount
  		(In Millions)
  2006 net revenue		$259.8
  Pass-through rider revenue		6.8
  Transmission revenue		3.4
  Volume/weather		(5.4)
  Other		3.0
  2007 net revenue		$267.6

  The pass-through rider revenue variance is primarily due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes resulting in no effect on net income.

  The transmission revenue variance is primarily due to higher rates and the addition of new transmission customers in 2006.

  The volume/weather variance is primarily due to the effect of Entergy New Orleans' lostless favorable weather compared to the same period in 2006. Billed retail electricity usage decreased by a total of 110 GWh.

  56

  Gross operating revenues and fuel and purchased power expenses

  Gross operating revenues decreased primarily due to:

  • a decrease of $36.0 million in fuel cost recovery revenues due to a decrease in the energy cost recovery rider effective April 2007. The energy cost recovery rider filings are discussed in Note 2 to the financial statements in the Form 10-K; and
  • a decrease of $32.6 million in gross wholesale revenue due to lower wholesale prices and a decrease in sales to affiliate customers.

  Fuel and purchased power expenses decreased primarily due to a decrease in deferred fuel expense associated with lower energy cost recovery rates collected from customers.

  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

  Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2007 to the six months ended June 30, 2006.

  		Amount
  		(In Millions)
  2006 net revenue		$491.5
  Pass-through rider revenue		15.3
  Deferred fuel costs revisions		8.6
  Transmission revenue		3.9
  Net wholesale revenue		(7.9)
  Other		9.5
  2007 net revenue		$520.9

  The pass-through rider revenue variance is primarily due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes resulting in no effect on net income.

  The deferred fuel cost revisions variance is primarily due to the 2006 energy cost recovery true-up, made in the first quarter of 2007, which increased net revenue by $6.6 million.

  The transmission revenue variance is due to higher rates and the addition of new transmission customers in 2006.

  The net wholesale revenue variance is primarily due to decreased results from wholesale contracts and decreased revenue. Entergy New Orleans' recommended alternative adjustslower wholesale prices.

  Other Income Statement Variances

  Second Quarter 2007 Compared to Second Quarter 2006

  Other operation and maintenance expenses increased primarily due to:

  • an increase of $3.5 million in transmission spending due to additional labor and materials costs related to substation and transmission line maintenance and higher transmission equalization expenses; and
  • an increase of $2.0 million in nuclear spending due to higher NRC fees and labor costs.

  57

  Taxes other than income taxes increased primarily due to an increase in city franchise tax expense due to a change in August 2006 in the accounting for lost customerscity franchise tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income.

  Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

  Other operation and assumes thatmaintenance expenses increased primarily due to:

  • an increase of $6.2 million in transmission spending due to additional labor and material costs related to substation and transmission line maintenance, higher transmission equalization expenses, and additional costs related to the City Council'sIndependent Coordinator of Transmission;
  • an increase of $4.7 million in nuclear spending due to higher NRC fees and labor costs; and
  • an increase of $2.6 million in distribution spending due to vegetation maintenance work and increased labor costs.

  Partially offsetting the increase was a decrease of $1.6 million in payroll and benefits costs.

  Taxes other than income taxes increased primarily due to an increase in city franchise tax expense due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income.

  Depreciation and amortization expenses increased primarily due to an increase in plant in service and a revision in 2006 of estimated depreciable lives involving certain intangible assets.

  Other income increased primarily due to a revision in the first quarter of 2007 to the allowance for equity funds used during construction related to removal costs.

  Interest and other charges increased primarily due to interest expense of $3.6 million recorded in the six months ended June 30, 2007 on advances from independent power producers per a FERC order, partially offset by a revision to the estimate of allowance for borrowed funds used during construction related to removal costs.

  Income Taxes

  The effective income tax rate was 36.8% for the second quarter of 2007 and 41.3% for the six months ended June 30, 2007. The difference in the effective income tax rate for the second quarter of 2007 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction. The difference in the effective income tax rate for the six months ended June 30, 2007 versus the federal statutory rate of 35.0% is primarily due to book and tax differences related to utility plant items and state income taxes, partially offset by a downward revision in the estimate of federal income tax expense related to tax depreciation.

  The effective income tax rate was 8.9% for the second quarter of 2006 decisionand 25.0% for the six months ended June 30, 2006. The differences in the effective income tax rate for the second quarter of 2006 and the six months ended June 30, 2006 versus the federal statutory rate of 35.0% are primarily due to allowthe flow through of an income tax benefit related to the steam generator removal cost.

  58

  Liquidity and Capital Resources

  Cash Flow

  Cash flows for the six months ended June 30, 2007 and 2006 were as follows:

  			2007		2006
  			(In Thousands)
  Cash and cash equivalents at beginning of period			$34,815		$9,393
  Cash flow provided by (used in):
  	Operating activities		225,125		225,953
  	Investing activities		(159,165)		(147,364)
  	Financing activities		(33,937)		(68,931)
  Net increase in cash and cash equivalents			32,023		9,658
  Cash and cash equivalents at end of period			$66,838		$19,051

  Operating Activities

  Cash flow from operations was practically unchanged for the six months ended June 30, 2007 compared to the six months ended June 30, 2006. Income tax payments of $18.6 million in 2007 compared to income tax refunds of $23.5 million in 2006, along with decreased recovery of all Grand Gulfdeferred fuel costs, throughwere almost entirely offset by the fuel adjustment clause stays in place during the rate-effective period (a significant portiontiming of Grand Gulf costs was previously recovered through base rates).collection of receivables from customers.

  Investing Activities

  AtNet cash flow used in investing activities increased $11.8 million for the same time as it made its formula rate plan filings, Entergy New Orleans also filed withsix months ended June 30, 2007 compared to the City Council a requestsix months ended June 30, 2006 primarily due to implement two storm-related riders. With the first rider, Entergy New Orleans sought to recover the electric and gas restoration costs that it had actually spent through March 31, 2006. Entergy New Orleans also proposed semiannual filings to update the riderincreased construction expenditures resulting from an increase in transmission spending for additional restoration spendingcosts for substation and alsotransmission lines. The increase was partially offset by other regulatory investments in 2006 resulting from fuel cost under-recoveries that have been deferred and are expected to consider the receipt of CDBG funds or insurance proceeds that it may receive. With the second rider, Entergy New Orleans sought to establishbe recovered over a storm reserve to provideperiod greater than twelve months.

  Financing Activities

  Net cash flow used in financing activities decreased $35 million for the risksix months ended June 30, 2007 compared to the six months ended June 30, 2006 primarily due to money pool activity.

  Capital Structure

  Entergy Arkansas' capitalization is balanced between equity and debt, as shown in  the following table.

  		June 30, 2007		December 31, 2006
  Net debt to net capital		46.3%		47.5%
  Effect of subtracting cash from debt		1.2%		0.6%
  Debt to capital		47.5%		48.1%

  Net debt consists of another storm.debt less cash and cash equivalents. Debt consists of notes payable, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt and shareholders' equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas 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 Arkansas' financial condition.

  59

  Uses and Sources of Capital

  See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources"in the Form 10-K for a discussion of Entergy Arkansas' uses and sources of capital. Following are updates to the information provided in the Form 10-K.

  See the table in the Form 10-K under "Uses of Capital" which sets forth the amounts of Entergy Arkansas' planned construction and other capital investments for 2007 through 2009. In July 2007, Entergy Arkansas signed an agreement to purchase for $210 million the Ouachita Power Facility, a 789 MW natural gas-fired, combined-cycle, load-following generating facility located in north Louisiana and owned by Ouachita Power, LLC. Entergy Arkansas plans to invest approximately $43 million in reliability upgrades. The Ouachita plant will be 100 percent owned by Entergy Arkansas, and the acquisition is expected to close in 2008. Entergy Arkansas expects to sell to Entergy Gulf States, under a separate agreement, approximately one-third of the output of the Ouachita plant on a long-term basis. The purchase of the plant is contingent upon obtaining necessary approvals, including full cost recovery, from various federal and state regulatory and permitting agencies. The planned capital investments estimate in the Form 10-K included $190 million in 2008 for the estimated cost of an acquisition of this type.

  In October 2006April 2007, Entergy Arkansas renewed its credit facility through April 2008 and increased the City Council approved a settlement agreement that resolvesamount of the credit facility to $100 million. There were no outstanding borrowings under the Entergy New Orleans' rate and storm-related rider filings by providing for phased-in rate increases, while taking into account with respectArkansas credit facility as of June 30, 2007.

  Entergy Arkansas' receivables from or (payables to) the money pool were as follows:

  June 30, 2007		December 31, 2006		June 30, 2006		December 31, 2005
  (In Thousands)
  $26,450		$16,109		$15,567		($27,346)

  See Note 4 to storm restoration costs the anticipated receipt of CDBG funding as recommended byfinancial statements in the Louisiana Recovery Authority. The settlement providesForm 10-K for a 0% increase in electric base rates through December 2007, with a $3.9 million increase implemented in January 2008. Recovery of all Grand Gulf costs through the fuel adjustment clause will continue. Gas base rates will increase by $4.75 million in November 2006, an additional $1.5 million in March 2007, and an additional $4.75 million in November 2007. The settlement calls for Entergy New Orleans to file a base rate case by July 31, 2008. Any storm costs in excess of CDBG funding and insurance proceeds will be addressed in that base rate case. A storm cost recovery rider is authorized but initially set at $0 becausedescription of the anticipated receipt of CDBG funding. The settlement also authorizes a $75 million storm reserve for damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007. These storm reserve funds will be held in a restricted escrow account.money pool.

  Customer-Initiated Proceeding at the FERCSignificant Factors and Known Trends

  As discussedSee "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends" in Part I, Item 1 of the Form 10-K for a discussion of state and local rate regulation, energy cost rate investigation, federal regulation, utility restructuring, nuclear matters, and environmental risks. Following are updates to the information provided in September 2004, East Texas Electric Cooperative (ETEC) filed a complaint at the FERC againstForm 10-K.

  State and Local Rate Regulation

  In June 2007, after hearings on Entergy Arkansas' August 2006 rate filing requesting an adjusted annual increase of $106.5 million, the APSC ordered Entergy Arkansas relatingto reduce its annual rates by $5 million, and set an ROE of 9.9% with a hypothetical common equity level lower than Entergy Arkansas' actual capital structure. For the purpose of setting rates, the APSC disallowed a portion of costs associated with incentive compensation based on financial measures and all costs associated with Entergy's stock-based compensation plans. In addition, under the terms of the APSC's order, recovery of storm restoration costs in the future will be limited to a contract dispute overfixed annual amount of $14.4 million, regardless of the pricingactual annual amount of substitute energy atfuture restoration costs. The APSC's order also threatens Entergy Arkansas' ability to recover $52 million of costs previously accumulated in Entergy Arkansas' storm reserve and $18 million of removal costs associated with the co-owned Independence coal unit.  In October 2004, Arkansas Electric Cooperative (AECC) filedtermination of a similar complaint at the FERC againstlease. Management believes, however, that Entergy Arkansas addressing the same issue with respectis entitled to Independencerecover these prudently incurred costs and another co-owned coal unit, White Bluff. FERC consolidated these cases, orderedwill vigorously pursue its right to recover them. The APSC rejected Entergy Arkansas' request for a hearing in the consolidated proceeding, and established refund effective dates.  The main issue in the consolidated case relatescapacity management rider to the consequences under the governing contracts when the dispatch of the coal units is constrained due to system operating conditions.  In August 2005,recover incremental capacity costs, but directed Entergy Arkansas and ETEC filed a settlement at the FERCother parties in the case to develop an annual earnings review process that resolved all issues in dispute between ETEC and Entergy Arkansas. As part of the settlement, ETEC dismi ssed its complaint. A hearing was held on the AECC complaint and an ALJ Initial Decision was issued in January 2006 in which the ALJ found AECC's claims to be without merit. On October 25, 2006, the FERC issued an order on the ALJ's Initial Decision. In the order, the FERC reversed the ALJ's findings. Specifically, the FERC found that the governing contracts do not recognize the effects of dispatch constraints on the co-owned units. The FERC explained that for over twenty-three years the course of conduct of the parties was such that AECC received its full entitlement to the two coal units, regardless of any reduced output caused by system operating constraints. Based on the order, Entergy Arkansas is required to refund to AECC all excess amounts billed to AECC as a result of the system operating constraints. Entergy Arkansas estimates currently thatmay address this will result in a refund to AECC of approximately $26 million, although Entergy Arkansas is still refining the estimate. Requests for rehearing of t he FERC's decision are due on November 24, 2006.issue.

  4160

  NOTE 3. COMMON EQUITY

  See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends -

  Common Stock

  Earnings per Share

  The following tables present Entergy's basic and diluted earnings per share (EPS) calculations included on the consolidated income statement:

  			For the Three Months Ended September 30,
  			2006				2005
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Earnings applicable to common stock			$388.9				$350.0
  Average number of common shares outstanding - basic			208.4		$1.87		207.9		$1.68
  Average dilutive effect of:
  	Stock Options		3.8		(0.034)		4.2		(0.033)
  	Deferred Units		0.2		(0.002)		0.2		(0.002)
  Average number of common shares outstanding - diluted			212.4		$1.83		212.3		$1.65

  			For the Three Months Ended June 30,
  			2007				2006
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Consolidated net income			$267.6				$281.8
  Average number of common shares   outstanding - basic			197.0		$1.36		208.0		$1.35
  Average dilutive effect of:
  	Stock Options		5.1		(0.034)		3.4		(0.022)
  	Equity Units		1.2		(0.008)		-		-
  	Deferred Units		0.1		(0.001)		0.2		(0.001)
  Average number of common shares   outstanding - diluted			203.4		$1.32		211.6		$1.33

  38

  			For the Nine Months Ended September 30,
  			2006				2005
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Earnings applicable to common stock			$864.3				$808.1
  Average number of common shares outstanding - basic			208.0		$4.16		211.0		$3.83
  Average dilutive effect of:
  	Stock Options		3.6		(0.070)		4.3		(0.076)
  	Deferred Units		0.2		(0.004)		0.2		(0.005)
  Average number of common shares outstanding - diluted			211.8		$4.08		215.5		$3.75

  			For the Six Months Ended June 30,
  			2007				2006
  			(In Millions, Except Per Share Data)
  					$/share				$/share
  Consolidated net income			$479.8				$475.4
  Average number of common shares   outstanding - basic			198.8		$2.41		207.9		$2.29
  Average dilutive effect of:
  	Stock Options		5.0		(0.059)		3.4		(0.037)
  	Equity Units		0.9		(0.011)		-		-
  	Deferred Units		0.1		(0.001)		0.2		(0.002)
  Average number of common shares   outstanding - diluted			204.8		$2.34		211.5		$2.25

  Entergy's stock option and other equity compensation plans are discussed in Note 712 to the consolidated financial statements in the Form 10-K.

  Treasury Stock

  During the ninesix months ended SeptemberJune 30, 2006,2007, Entergy Corporation issued 1,038,5781,404,160 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards. Also during the six months ended June 30, 2007, Entergy Corporation purchased 8,012,542 shares of its common stock for a total purchase price of $825.5 million.

  Retained Earnings

  On October 27, 2006,July 30, 2007, Entergy Corporation's Board of Directors declared a common stock dividend of $0.54$0.75 per share, payable on DecemberSeptember 1, 20062007, to holders of record as of NovemberAugust 10, 2006.

  422007.

  Accumulated Other Comprehensive Income

  Cash flow hedges with net unrealized losses of approximately $130$38.5 million net-of-tax at SeptemberJune 30, 20062007 are scheduledexpected to maturebe reclassified into earnings during the next twelve months.

  NOTE 4. LINES OF CREDIT, RELATED SHORT-TERM BORROWINGS, AND LONG-TERM DEBT

  Entergy Corporation hashad in place as of June 30, 2007, two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in May 2010, has a borrowing capacity of $2 billion of which $495 million was outstanding as of September 30, 2006. Theand the three-year facility, which expires in December 2008, has a borrowing capacity of $1.5 billion, none of which was outstanding as of September 30, 2006.billion. Entergy canCorporation also has the ability to issue letters of credit against the total borrowing capacity of both credit facilities, and letters of credit totaling $94.1 million had been issued against the five-year facility at September 30, 2006. The total unused capacity for these facilities as of September 30, 2006 was approximately $2.9 billion.facilities. The commitment fee for this facilitythese facilities 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 dome stic utilityUtility operating companies. The weighted average interest rates as of June 30, 2007 were 5.78% on the five-year facility and 5.85% on the three-year facility. Following is a summary of the borrowings outstanding and capacity available under these facilities as of June 30, 2007.

  39

  Facility		Capacity		Borrowings		Letters of Credit		Capacity Available
  		(In Millions)
  5-Year Facility		$2,000		$855		$79		$1,066
  3-Year Facility		$1,500		$1,115		$-		$385

  Entergy Corporation's facilities require it to maintain a consolidated debt ratio of 65% or less of its total capitalization. If Entergy fails to meet this ratio, or if Entergy or the Utility operating companies and System Energy default on other indebtedness or are in bankruptcy or insolvency proceedings, an acceleration of the facilities' maturity dates may occur.

  On August 2, 2007, Entergy Corporation entered into a new, $3.5 billion credit facility, and terminated the two previously existing facilities. See Part II, Item 5 herein for additional information on the new credit facility, including the amounts of the borrowings and letters of credit outstanding as of August 8, 2007.

  Entergy Arkansas, Entergy Gulf States, and Entergy Mississippi, each hashad credit facilities available as of SeptemberJune 30, 20062007 as follows:

  Company		Expiration Date		Amount of Facility		Amount Drawn as of SeptemberJune 30, 20062007
  Entergy Arkansas		April 20072008		$85100 million		-
  Entergy Gulf States		February 2011		$50 million (a)		-
  Entergy Mississippi		May 20072008		$30 million (b)		-
  Entergy Mississippi		May 20072008		$20 million (b)		-

  (a)	The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of SeptemberJune 30, 2006,2007, $1.4 million in letters of credit had been issued.
  (b)	Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.

  In May 2006, Entergy Mississippi increased its $25 million credit facility to $30 million and renewed it through May 2007. Entergy Mississippi also entered into a new $20 million credit facility through May 2007.

  The credit facilities have variable interest rates and the average commitment fee is 0.13%. The $85 million Entergy Arkansas credit facility requires that it maintain total shareholders' equity of at least 25% of its total assets.

  On August 2, 2007, Entergy Gulf States and Entergy Louisiana each entered into new, $200 million credit facilities. See Part II, Item 5 herein for additional information on the new credit facilities, under which there were no borrowings or letters of credit outstanding as of August 8, 2007.

  The FERC has issued an order ("FERC Short-Term Order") approving the short-term borrowing limitsborrowings of the domestic utility companies (exceptRegistrant Subsidiaries and certain other Entergy New Orleans) and System Energysubsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through March 31, 2008.2008 (except for Entergy New Orleans, may rely on existing SEC PUHCA 1935 orders for its financing authority, subject to bankruptcy court approval.which is effective through May 4, 2009). In addition to borrowings from commercial banks, thethese companies are authorized under a FERC Short-Term Order authorized the domestic utility companies (except Entergy New Orleans, which is authorized by an SEC PUHCA 1935 order) and System Energyorder to continue as participants inborrow from the Entergy System money pool. The money pool is an inter-company borrowing arrangement designed to reduce Entergy's subsidiaries' dependence on external short-term borrowings. Borrowings from the money pool and external short-term borrowings combined may not exceed the authorizedFERC-authorized limits. As of SeptemberJune 30, 2006,2007, Entergy's subsidiaries' aggregate money pool and external short-term borrowings authorized limit was $2.0 billion, and the aggregate outstanding borrow ingborrowing from the money pool was $346.9 million.$305.6 million, and Entergy's subsidiaries had no outstanding short-term borrowing from external sources.

  4340

  Long-term

  The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings from the money pool for the Registrant Subsidiaries as of June 30, 2007:

  		Authorized		Borrowings
  		(In Millions)
  Entergy Arkansas		$250		-
  Entergy Gulf States		$350		-
  Entergy Louisiana		$250		$47
  Entergy Mississippi		$175		-
  Entergy New Orleans		$100		-
  System Energy		$200		-

  Debt Issuances

  The following long-term debt has been(Entergy Gulf States)

  In April 2007, the PUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million of Entergy Gulf States' Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company wholly-owned and consolidated by Entergy in 2006:Gulf States, issued $329.5 million of senior secured transition bonds (securitization bonds), as follows:

  	Issue DateAmount
  	(In Thousands)
  Senior Secured Transition Bonds, Series A:
  Tranche A-1 (5.51%) due October 2013	$93,500
  Tranche A-2 (5.79%) due October 2018	121,600
  Tranche A-3 (5.93%) due June 2022	114,400
  Total senior secured transition bonds	$329,500

  The scheduled principal payments for the bonds for the next five years are $19.1 million for 2008, $17.7 million for 2009, $18.6 million for 2010, $19.7 million for 2011, and $20.8 million for 2012. All of the scheduled principal payments for 2008-2012 are for Tranche A-1, except for $2.3 million for Tranche A-2 in 2012.

  With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Gulf States the transition property, which is the right to recover from customers though a transition charge amounts sufficient to service the securitization bonds. Entergy Gulf States began cost recovery through the transition charge in July 2007. The creditors of Entergy Gulf States do not have recourse to the assets or revenues of Entergy Gulf States Reconstruction Funding, including the transition property, and the creditors of Entergy Gulf States Reconstruction Funding do not have recourse to the assets or revenues of Entergy Gulf States. Entergy Gulf States has no payment obligations to Entergy Gulf States Reconstruction Funding except to remit transition charge collections.

  (Entergy Mississippi)

  In January 2007, Entergy Mississippi redeemed, prior to maturity, its $100 million, 4.35% Series First Mortgage Bonds due April 2008.

  (Entergy New Orleans)

  Pursuant to its plan of reorganization, in May 2007 Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including interest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005

  41

   (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. The Louisiana judicial rate of interest is 9.5% for 2007. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%.

  Entergy New Orleans Debtor-in-Possession Credit Facility

  See Note 4 in the Form 10-K for a discussion of the Entergy New Orleans $200 million debtor-in-possession (DIP) credit facility. Pursuant to the terms of its plan of reorganization, which became effective in May 2007, Entergy New Orleans fully repaid its DIP credit facility borrowings.

  NOTE 5. ACQUISITIONS

  In April 2007, Entergy's Non-Utility Nuclear business purchased the 798 MW Palisades nuclear energy plant located near South Haven, Michigan from Consumers Energy Company for a net cash payment of $336 million. Entergy received the plant, nuclear fuel, inventories, and other assets. The liability to decommission the plant, as well as related decommissioning trust funds, was also transferred to Entergy's Non-Utility Nuclear business. Entergy's Non-Utility Nuclear business executed a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant's output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. In the first quarter 2007, the NRC renewed Palisades' operating license until 2031. As part of the transaction, Entergy's Non-Utility Nuclear business assumed responsibility for spent fuel at the decommissioned Big Rock Point nuclear plant, which is located near Charlevoix, Michigan.  Palisades' financial results since April 2007 are included in Entergy's Non-Utility Nuclear business segment.  The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition.

  		Amount
  			(In Thousands)Millions)
  U.S. Utility
  Mortgage Bonds:Plant (including nuclear fuel)		$727
  Decommissioning trust funds		252
  Other assets		41
  Total assets acquired
  5.92% Series due February 2016- Entergy Mississippi	January 2006		$100,000
  Other Long-term Debt:
  4.60% Series due October 2017, Jefferson County - Arkansas  (Entergy Arkansas) (secured by a series of collateral first  mortgage bonds)	June 2006		$54,700

  The following long-term debt was retired by Entergy in 2006:

  	Retirement Date		Amount
  			(In Thousands)
  U.S. Utility
  Other Long-term Debt:
  5.95% Series due December 2023, St. Charles Parish -  Louisiana (Entergy Louisiana)	June 2006		$25,000
  Grand Gulf Lease Obligation payment (System Energy)	N/A		$22,989
  5.6% Series due October 2017, Jefferson County - Arkansas  (Entergy Arkansas)	July 2006		$45,500
  6.3% Series due June 2018, Jefferson County - Arkansas  (Entergy Arkansas)	July 2006		$9,200

  Entergy Mississippi used the proceeds from the January 2006 issuance to purchase the Attala power plant from Central Mississippi Generating Company, LLC and to repay short-term indebtedness.

  Entergy Arkansas used the proceeds from the June 2006 issuance to redeem, prior to maturity, the $45.5 million of 5.6% Series of Jefferson County bonds and $9.2 million of 6.3% Series of Jefferson County bonds in July 2006. The issuance is shown as a non-cash transaction on the cash flow statement since the proceeds were placed in a trust and never held as cash by Entergy Arkansas.

  44

  NOTE 5. PREFERRED STOCK

  In March 2006, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock, all of which were outstanding as of September 30, 2006. The dividends are cumulative and payable quarterly beginning July 1, 2006. The preferred stock is redeemable on or after April 1, 2011, at Entergy Arkansas' option, at the call price of $25 per share. In April 2006, Entergy Arkansas used the proceeds from this issuance to redeem the following preferred stock:

  Series of Entergy Arkansas Preferred Stock		Redemption Price Per Share1,020
  7.32% Preferred Stock, Cumulative, $100.00 par valuePurchased power agreement (below market)		420
  Decommissioning liability		220
  Other liabilities		44
  Total liabilities assumed		684
  Net assets acquired		$103.17
  7.80% Preferred Stock, Cumulative, $100.00 par value		$103.25
  7.40% Preferred Stock, Cumulative, $100.00 par value		$102.80
  7.88% Preferred Stock, Cumulative, $100.00 par value		$103.00
  $1.96 Preferred Stock, Cumulative, $0.01 par value		$ 25.00336

  In June 2006, Entergy Louisiana Holdings redeemed allThe allocation was based on preliminary information and the final allocation may differ, although management does not expect the difference to be material.

  Non-Utility Nuclear will amortize the purchased power agreement liability to revenue over the life of its preferred stock and amended its charter to eliminate authority to issue any future series of preferred stock.the agreement. The redemption was madeamount that will be amortized each period is based upon the difference between the present value calculated at the following respective redemption prices as provided indate of acquisition of each year's difference between revenue under the Entergy Louisiana Holdings amendedagreement and restated articles of incorporation:revenue based on estimated market prices. The amounts to be amortized to revenue for the next five years will be $50 million for 2007, $76 million for 2008, $53 million for 2009, $46 million for 2010, and $43 million for 2011.

  Series of Entergy Louisiana Holdings Preferred Stock		Redemption Price Per Share
  4.96% Preferred Stock, Cumulative, $100.00 par value		$104.25
  4.16% Preferred Stock, Cumulative, $100.00 par value		$104.21
  4.44% Preferred Stock, Cumulative, $100.00 par value		$104.06
  5.16% Preferred Stock, Cumulative, $100.00 par value		$104.18
  5.40% Preferred Stock, Cumulative, $100.00 par value		$103.00
  6.44% Preferred Stock, Cumulative, $100.00 par value		$102.92
  7.84% Preferred Stock, Cumulative, $100.00 par value		$103.78
  7.36% Preferred Stock, Cumulative, $100.00 par value		$103.36
  8% Preferred Stock, Cumulative, $25.00 par value		$ 25.00

  42

  NOTE 6. STOCK-BASED COMPENSATION PLANS

  Entergy grants equity-based awards including, but not limited to, stock options,option awards, which are described more fully in Note 712 to the consolidated financial statements in the Form 10-K. Entergy adopted SFAS 123R, "Share-Based Payment" on January 1, 2006. The effect of adoption of the standard did not materially affect Entergy's financial position, results of operations, or cash flows because Entergy adopted the fair value based method of accounting for stock options prescribed by SFAS 123, "Accounting for Stock-Based Compensation" on January 1, 2003. Prior to 2003, Entergy applied the recognition and measurement principles of APB Opinion 25, "Accounting for Stock Issued to Employees," and related Interpretations in accounting for those plans. Awards under Entergy's plans generally vest over three years. Stock-based compensation expense included in earnings applicable to common stock, net of related tax effects, for the third quarter 2006 and nine months ended September 30, 2006 is $2.0 million and $5.7 million, respe ctively. Stock-based compensation expense included in earnings applicable to common stock, net of related tax effects, for the third quarter 2005 and nine months ended September 30, 2005 is $2.0 million and $5.8 million, respectively.

  45The following table includes financial information for stock options for each of the years presented:

  	2007		2006
  	(In Millions)
  Compensation expense included in Entergy's Net Income for the second quarter	$3.9		$3.2
  Tax benefit recognized in Entergy's Net Income for the second quarter	$1.5		$1.2
  Compensation expense included in Entergy's Net Income for the six months ended June 30,	$7.1		$6.0
  Tax benefit recognized in Entergy's Net Income for the six months ended June 30,	$2.7		$2.3
  Compensation cost capitalized as part of fixed assets and inventory as of June 30,	$1.2		$1.1

  Entergy granted 1,854,900 stock options during the first quarter of 2007 with a weighted-average fair value of $14.15. At June 30, 2007, there were 11,215,584 stock options outstanding with a weighted-average exercise price of $57.88. The aggregate intrinsic value of the stock options outstanding was $555 million.

  NOTE 7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS

  Components of Net Pension Cost

  Entergy's qualified pension cost, including amounts capitalized, for the thirdsecond quarters of 20062007 and 2005,2006, included the following components:

  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  Service cost - benefits earned during the period		$23,176		$20,250		$24,141		$23,176
  Interest cost on projected benefit obligation		41,814		40,254		46,292		41,814
  Expected return on assets		(44,482)		(40,989)		(50,880)		(44,482)
  Amortization of transition asset		-		(165)
  Amortization of prior service cost		1,365		1,125		1,383		1,365
  Amortization of loss		10,931		10,497		11,444		10,931
  Net pension costs		$32,804		$30,972		$32,380		$32,804

  43

  Entergy's qualified pension cost, including amounts capitalized, for the ninesix months ended SeptemberJune 30, 20062007 and 2005,2006, included the following components:

  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  Service cost - benefits earned during the period		$69,529		$62,271		$48,038		$46,352
  Interest cost on projected benefit obligation		125,443		115,222		92,154		83,628
  Expected return on assets		(133,447)		(118,552)		(101,506)		(88,964)
  Amortization of transition asset		-		(497)
  Amortization of prior service cost		4,096		3,736		2,766		2,730
  Amortization of loss		32,790		25,109		22,888		21,862
  Net pension costs		$98,411		$87,289		$64,340		$65,608

  The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,638		$3,011		$2,231		$1,089		$470		$1,021
  Interest cost on projected
  benefit obligation		10,498		8,139		6,251		3,371		1,260		1,710
  Expected return on assets		(11,009)		(10,750)		(7,808)		(3,837)		(1,446)		(2,136)
  Amortization of prior service cost		412		304		160		114		44		12
  Amortization of loss		2,721		623		1,433		749		368		151
  Net pension cost		$6,260		$1,327		$2,267		$1,486		$696		$758

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,626		$2,993		$2,182		$1,077		$501		$1,031
  Interest cost on projected
  benefit obligation		9,915		7,914		6,052		3,252		1,282		1,604
  Expected return on assets		(9,834)		(10,176)		(7,114)		(3,683)		(884)		(1,775)
  Amortization of prior service cost		415		309		141		128		56		12
  Amortization of loss		2,438		640		1,509		725		509		167
  Net pension cost		$6,560		$1,680		$2,770		$1,499		$1,464		$1,039

  44

  The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$7,276		$6,022		$4,462		$2,178		$940		$2,042
  Interest cost on projected
  benefit obligation		20,996		16,278		12,502		6,742		2,520		3,420
  Expected return on assets		(22,018)		(21,500)		(15,616)		(7,674)		(2,892)		(4,272)
  Amortization of prior service cost		824		608		320		228		88		24
  Amortization of loss		5,442		1,246		2,866		1,498		736		302
  Net pension cost		$12,520		$2,654		$4,534		$2,972		$1,392		$1,516

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$7,252		$5,986		$4,365		$2,154		$1,002		$2,062
  Interest cost on projected
  benefit obligation		19,830		15,828		12,103		6,504		2,563		3,209
  Expected return on assets		(19,668)		(20,351)		(14,227)		(7,366)		(1,767)		(3,551)
  Amortization of prior service cost		831		617		281		257		112		24
  Amortization of loss		4,875		1,280		3,018		1,449		1,018		334
  Net pension cost		$13,120		$3,360		$5,540		$2,998		$2,928		$2,078

  Entergy recognized $5.2$4.0 million and $4.1$3.9 million in pension cost for its non-qualified pension plans in the thirdsecond quarters of 20062007 and 2005,2006, respectively. Entergy recognized $13.1$8.0 million and $12.2$7.8 million in pension cost for its non-qualified pension plans for the ninesix months ended SeptemberJune 30, 20062007 and 2005,2006, respectively.

  The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans in the second quarters of 2007 and 2006:

  		Entergy		Entergy		Entergy		Entergy		Entergy
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans
  		(In Thousands)
  Non-Qualified Pension Cost   Second Quarter 2007		$123		$317		$6		$44		$57
  Non-Qualified Pension Cost   Second Quarter 2006		$113		$220		$5		$36		$54

  45

  The Registrant Subsidiaries recognized the following pension cost for their non-qualified pension plans for the six months ended June 30, 2007 and 2006:

  		Entergy		Entergy		Entergy		Entergy		Entergy
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans
  		(In Thousands)
  Non-Qualified Pension Cost Six   Months Ended June 30, 2007		$246		$634		$12		$88		$114
  Non-Qualified Pension Cost Six   Months Ended June 30, 2006		$226		$439		$11		$73		$107

  Components of Net Other Postretirement Benefit Cost

  Entergy's other postretirement benefit cost, including amounts capitalized, for the thirdsecond quarters of 20062007 and 2005,2006, included the following components:

  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  Service cost - benefits earned during the period		$10,370		$9,447		$11,034		$10,370
  Interest cost on APBO		14,316		12,441		15,808		14,316
  Expected return on assets		(4,756)		(4,338)		(6,325)		(4,756)
  Amortization of transition obligation		542		345		958		542
  Amortization of prior service cost		(3,688)		(4,881)		(3,959)		(3,688)
  Amortization of loss		5,698		5,877		4,743		5,698
  Net other postretirement benefit cost		$22,482		$18,891		$22,259		$22,482

  46

  Entergy's other postretirement benefit cost, including amounts capitalized, for the ninesix months ended SeptemberJune 30, 20062007 and 2005,2006, included the following components:

  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  Service cost - benefits earned during the period		$31,110		$27,863		$21,927		$20,740
  Interest cost on APBO		42,947		39,443		31,494		28,632
  Expected return on assets		(14,268)		(13,065)		(12,585)		(9,512)
  Amortization of transition obligation		1,627		3,025		1,916		1,084
  Amortization of prior service cost		(11,063)		(8,859)		(7,918)		(7,376)
  Amortization of loss		17,092		16,421		9,486		11,396
  Net other postretirement benefit cost		$67,445		$64,828		$44,320		$44,964

  46

  The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the second quarters of 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$1,525		$1,547		$973		$476		$255		$451
  Interest cost on APBO		3,037		2,876		1,941		1,049		870		433
  Expected return on assets		(2,231)		(1,697)		-		(819)		(682)		(470)
  Amortization of transition obligation		205		151		96		88		416		2
  Amortization of prior service cost		(197)		218		117		(62)		90		(283)
  Amortization of loss		1,500		793		764		613		282		149
  Net other postretirement benefit cost		$3,839		$3,888		$3,891		$1,345		$1,231		$282

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$1,337		$1,254		$854		$419		$232		$414
  Interest cost on APBO		2,844		2,747		1,856		944		856		407
  Expected return on assets		(1,797)		(1,489)		-		(709)		(611)		(421)
  Amortization of transition obligation		205		151		96		88		416		2
  Amortization of prior service cost		(408)		-		(24)		(137)		10		(301)
  Amortization of loss		1,671		1,002		893		644		343		207
  Net other postretirement benefit cost		$3,852		$3,665		$3,675		$1,249		$1,246		$308

  The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2007 and 2006, included the following components:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2007		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$3,050		$3,094		$1,946		$952		$510		$902
  Interest cost on APBO		6,074		5,752		3,882		2,098		1,740		866
  Expected return on assets		(4,462)		(3,394)		-		(1,638)		(1,364)		(940)
  Amortization of transition obligation		410		302		192		176		832		4
  Amortization of prior service cost		(394)		436		234		(124)		180		(566)
  Amortization of loss		3,000		1,586		1,528		1,226		564		298
  Net other postretirement benefit cost		$7,678		$7,776		$7,782		$2,690		$2,462		$564

  47

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Service cost - benefits earned
  during the period		$2,674		$2,508		$1,708		$838		$464		$828
  Interest cost on APBO		5,688		5,494		3,712		1,888		1,712		814
  Expected return on assets		(3,594)		(2,978)		-		(1,418)		(1,222)		(842)
  Amortization of transition obligation		410		302		192		176		832		4
  Amortization of prior service cost		(816)		-		(48)		(274)		20		(602)
  Amortization of loss		3,342		2,004		1,786		1,288		686		414
  Net other postretirement benefit cost		$7,704		$7,330		$7,350		$2,498		$2,492		$616

  Employer Contributions

  Entergy previously disclosed in the Form 10-K that it expectedexpects to contribute $349$176 million to its qualified pension plans in 2006 (including $107 million delayed from 2005 as a result of the Katrina Emergency Tax Relief Act). Due to the Pension Protection Act, described below, Entergy has revised its 2006 contributions to $318 million.2007. As of the end of October 2006,July 2007, Entergy hashad contributed the $318$153 million to its pension plans. Therefore, Entergy presently anticipates contributing an additional $23 million to fund its qualified pension plans in 2007.

  The Pension Protection Act of 2006 was signed byRegistrant Subsidiaries expect to contribute the President on August 17, 2006. The intent of the legislation isfollowing to require companies to fund 100% of theirqualified pension liability; and then for companies to fund, on a going-forward basis, an amount generally estimated to be the amount that the pension liability increases each year due to an additional year of service by the employees eligible for pension benefits. The legislation requires that funding shortfalls be eliminated by companies over a seven-year period, beginningplans in 2008.2007:

  The Pension Protection Act also extended the provisions of the Pension Funding Equity Act that would have expired in 2006 had the Pension Protection Act not been enacted, which increased the allowed discount rate used to calculate the pension funding liability. The latter provision reduced Entergy's 2006 expected pension contributions by approximately $31 million.

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Expected 2007 pension contributions   disclosed in Form 10-K		$6,987		$25,346		$ -		$784		$43,585		$5,688
  Pension contributions made through   July 2007		$ -		$25,346		$ -		$ -		$43,585		$5,419
  Remaining estimated pension   contributions to be made in 2007		$6,987		$ -		$ -		$784		$ -		$269

  Entergy is in the process of evaluating the effects of the new legislation, but expects that the implementation of the Pension Protection Act will not result in annual pension contributions going-forward that are materially higher than the levels required in 2005 and 2006.

  Medicare Prescription Drug, Improvement and Modernization Act of 2003 (Medicare Act)

  Based on actuarial analysis, the estimated effectimpact of future Medicare subsidies reduced the December 31, 20052006 Accumulated Postretirement Benefit Obligation by $176$183 million, and reduced the thirdsecond quarter 20062007 and 20052006 other postretirement benefit cost by $6.9$6.6 million and $5.7$6.9 million, respectively. It reduced the ninesix months ended SeptemberJune 30, 20062007 and 20052006 other postretirement benefit cost by $20.8$13.2 million and $18.6$13.9 million, respectively. In the third quarter 2006,six months ended June 30, 2007, Entergy received $1.8$1.7 million in Medicare subsidies for prescription drug claims through Juneduring 2006. Refer

  48

  Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2006 APBO and the second quarters 2007 and 2006 other postretirement benefit cost for the Registrant Subsidiaries as follows:

  		Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Reduction in 12/31/2006 APBO		($40,636)		($35,991)		($22,486)		($13,560)		($10,110)		($5,966)
  Reduction in second quarter 2007
  other postretirement benefit cost		($1,376)		($1,222)		($762)		($438)		($311)		($246)
  Reduction in second quarter 2006
  other postretirement benefit cost		($1,562)		($1,332)		($865)		($512)		($376)		($268)
  Reduction in six months ended
  June 30, 2007 other
  postretirement benefit cost		($2,752)		($2,444)		($1,524)		($876)		($622)		($492)
  Reduction in six months ended
  June 30, 2006 other
  postretirement benefit cost		($3,124)		($2,664)		($1,730)		($1,024)		($752)		($536)
  Medicare subsidies received in the
  six months ended June 30, 2007
  for 2006 claims		$484		$402		$248		$142		$146		$30

  For further information on the Medicare Act refer to Note 1011 to the consolidated financial statements in the Form 10-K for further discussion.10-K.

  47

  NOTE 8. BUSINESS SEGMENT INFORMATION

  Entergy's reportable segments as of SeptemberJune 30, 20062007 are Utility and Non-Utility Nuclear. "All Other" includes the parent company, Entergy Corporation, and other business activity, including the Energy Commodity Services segment, the Competitive Retail Servicesnon-nuclear wholesale assets business and earnings on the proceeds of sales of previously-owned businesses. As a result of the Entergy New Orleans bankruptcy filing, Entergy has discontinued the consolidation of Entergy New Orleans retroactive to January 1, 2005 and is reportingreported Entergy New Orleans results under the equity method of accounting in the Utility segment.segment in 2006 and 2005. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the second quarter 2007, retroactive to January 1, 2007.

  49

  Entergy's segment financial information for the second quarters of 2007 and 2006 is as follows:

  	Utility			Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2007
  Operating Revenues	$2,238,555			$471,521		$65,817		($6,541)		$2,769,352
  Equity in earnings of
  unconsolidated equity affiliates	$-			$-		$477		$-		$477
  Income Taxes (Benefit)	$98,460			$63,929		($55,938)		$-		$106,451
  Net Income	$148,194			$108,726		$10,682		$-		$267,602
  2006
  Operating Revenues	$2,191,891			$362,363		$82,785		($8,537)		$2,628,502
  Equity in earnings (loss) of
  unconsolidated equity affiliates	$10,682			$-		($2,199)		$-		$8,483
  Income Taxes (Benefit)	$93,776			$41,331		($12,206)		$-		$122,901
  Net Income	$199,623			$63,379		$18,883		($83)		$281,802

  Entergy's segment financial information for the third quarters ofsix months ended June 30, 2007 and 2006 and 2005 is as follows:

  	Utility			Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2006
  Operating revenues	$2,774,447			$409,431		$77,571		($6,730)		$3,254,719
  Equity in earnings of  unconsolidated equity affiliates	7,336			- -		7,436		- -		14,772
  Income taxes	141,009			57,494		3,934		-		202,437
  Income (loss) from continuing  operations	295,989			106,898		(6,269)		126		396,744
  Loss from discontinued  operations (net of income taxes)	- -			- -		(1,050)		- -		(1,050)
  Net income (loss)	295,989			106,898		(7,319)		126		395,694
  2005
  Operating revenues	$2,503,000			$360,777		$56,601		($22,120)		$2,898,258
  Equity in earnings of  unconsolidated equity affiliates	6,417			- -		2,002		- -		8,419
  Income taxes (benefit)	185,594			41,018		(4,532)		-		222,080
  Income (loss) from continuing  operations	304,459			69,253		(10,293)		77		363,496
  Loss from discontinued operations  (net of income tax benefit)	- -			- -		(7,108)		- -		(7,108)
  Net income (loss)	304,459			69,253		(17,401)		77		356,388

  48

  Entergy's segment financial information for the nine months ended September 30, 2006 and 2005 is as follows:

  	Utility		Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2006
  Operating revenues	$7,097,362		$1,159,803		$227,043		($32,954)		$8,451,254
  Equity in earnings of  unconsolidated equity affiliates	23,661		- -		3,182		- -		26,843
  Income taxes (benefit)	311,760		151,742		(19,332)		-		444,170
  Income (loss) from continuing  operations	629,464		251,806		(4,174)		10		877,106
  Income from discontinued  operations (net of income taxes)	- -		- -		9,830		- -		9,830
  Net income	629,464		251,806		5,656		10		886,936
  Total assets	24,751,827		5,230,065		2,851,702		(2,275,940)		30,557,654
  2005
  Operating revenues	$6,289,865		$1,052,058		$170,020		($58,112)		$7,453,831
  Equity in earnings of  unconsolidated equity affiliates	20,045		- -		1,967		- -		22,012
  Income taxes (benefit)	363,212		127,164		(24,204)		-		466,172
  Income from continuing operations	617,745		205,495		15,331		30		838,601
  Loss from discontinued operations  (net of income tax benefit)	- -		- -		(11,286)		- -		(11,286)
  Net income	617,745		205,495		4,045		30		827,315
  Total assets	24,243,609		4,893,308		3,629,739		(2,799,914)		29,966,742

  	Utility		Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
  	(In Thousands)
  2007
  Operating Revenues	$4,435,654		$929,772		$110,865		($12,880)		$5,463,411
  Equity in earnings (loss) of
  unconsolidated equity affiliates	($1)		$-		$2,102		$-		$2,101
  Income Taxes (Benefit)	$179,152		$148,664		($75,299)		$-		$252,517
  Net Income (Loss)	$252,644		$236,896		($9,743)		$-		$479,797
  Total Assets	$26,244,883		$6,649,467		$10,814,538		($10,294,161)		$33,414,727
  2006
  Operating Revenues	$4,322,913		$750,372		$149,476		($26,224)		$5,196,537
  Equity in earnings (loss) of
  unconsolidated equity affiliates	$16,325		$-		($4,255)		$-		$12,070
  Income Taxes (Benefit)	$170,749		$94,248		($23,265)		$-		$241,732
  Net Income	$319,375		$144,908		$11,263		($115)		$475,431
  Total Assets	$24,763,451		$5,138,175		$3,127,773		($2,465,726)		$30,563,673

  Businesses marked with * are sometimes referred to as the "competitive businesses," with the exception of the parent company, Entergy Corporation. Eliminations are primarily intersegment activity. Almost all of Entergy's goodwill is related to the Utility segment.

  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 realized a $26.3 million gain ($17.1 million net-of-tax) on the sale.50

  NOTE 9. ENTERGY NEW ORLEANS BANKRUPTCY PROCEEDING

  See Note 1618 to the consolidated financial statements in the Form 10-K for a discussion of the Entergy New Orleans bankruptcy proceeding,proceeding. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy New Orleans' plan of reorganization. With the receipt of CDBG funds, and a discussionthe agreement on insurance recovery with one of Entergy's decision to deconsolidate its investmentexcess insurers, Entergy New Orleans waived the conditions precedent in its plan of reorganization, and the plan became effective on May 8, 2007.

  Following are significant terms in Entergy New Orleans and report it under the equity methodOrleans' plan of accounting. Entergy's income statement for the three and nine months ended September 30, 2006 includes $48 million and $177 million, respectively, in operating revenues and $19 million and $30 million, respectively, in purchased power expenses from transactions between reorganization:

  • Entergy New Orleans and Entergy's subsidiaries. Entergy's income statement forpaid in full, in cash, the three and nine months ended September 30, 2005 includes $53allowed third-party prepetition accounts payable (approximately $29 million, and $139 million, respectively, in operating revenues and $26 million and $107 million, respectively, in purchased power from transactions betweenincluding interest). Entergy New Orleans paid interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and Entergy's subsidiaries. Entergy's balance sheet as2006 (8%), and at the Louisiana judicial rate of September 30, 2006 includes $109 millioninterest plus 1% for 2007. The Louisiana judicial rate of accounts receiva ble that are payable to Entergy or its subsidiaries by interest for 2007 is 9.5%.
  • Entergy New Orleans issued notes due in three years in satisfaction of its affiliate prepetition accounts payable (approximately $74 million, including $66.8 millioninterest), including its indebtedness to the Entergy System money pool. Entergy New Orleans included in the principal amount of pre-petition accounts.the notes accrued interest from September 23, 2005 at the Louisiana judicial rate of interest for 2005 (6%) and 2006 (8%), and at the Louisiana judicial rate of interest plus 1% for 2007 through the date of issuance of the notes. The Louisiana judicial rate of interest is 9.5% for 2007. Entergy New Orleans will pay interest on the notes from their date of issuance at the Louisiana judicial rate of interest plus 1%.
  • Entergy New Orleans repaid to Entergy Corporation, in full, in cash, the outstanding borrowings under the debtor-in-possession (DIP) credit agreement (approximately $67 million).
  • Entergy New Orleans' first mortgage bonds will remain outstanding with their current maturity dates and interest terms. Pursuant to an agreement with the first mortgage bondholders, Entergy New Orleans paid the first mortgage bondholders an amount equal to the one year of interest from the bankruptcy petition date that the bondholders had waived previously in the bankruptcy proceeding (approximately $12 million).
  • Entergy New Orleans' preferred stock will remain outstanding on its current dividend terms, and Entergy New Orleans paid its unpaid preferred dividends in arrears (approximately $1 million).
  • Litigation claims will generally be unaltered, and will generally proceed as if Entergy New Orleans had not filed for bankruptcy protection, with exceptions for certain claims.

  (Entergy Corporation)

  As discussedWith confirmation of the plan of reorganization, Entergy reconsolidated Entergy New Orleans in the Form 10-K, becausesecond quarter 2007, retroactive to January 1, 2007. Because Entergy owns all of the common stock of Entergy New Orleans, Entergy's deconsolidation of Entergy New Orleansreconsolidation does not affect the amount of net income that Entergy records resulting from Entergy New Orleans' operations.operations for any current or prior period, but does result in Entergy New Orleans' results being included in each individual income statement line item in 2007, rather than just its net income being presented as "Equity in earnings (loss) of unconsolidated equity affiliates," as will remain the case for 2005 and 2006.

  49(Entergy New Orleans)

  Reorganization items reported as operating expenses in 2006 in the Entergy New Orleans income statement primarily consist of professional fees associated with the bankruptcy case.

  51

  NOTE 10. ACCOUNTING POLICY UPDATE

  Revenue and Fuel CostsINCOME TAXES

  Entergy recognizes revenueor one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. With few exceptions, as discussed below, Entergy is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by taxing authorities for years before 2002.

  Entergy entered into an agreement with the IRS Appeals Division in the second quarter 2007 to partially settle tax years 1999 - 2001. Entergy will litigate the following issues that it is not settling:

  • The ability to credit the U.K. Windfall Tax against U.S. tax as a foreign tax credit - Entergy expects that the total tax to be included in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $152 million. The U.K. Windfall Tax relates to Entergy's former investment in London Electricity. The tax and interest associated with this issue total $208 million for all open tax years.
  • The validity of Entergy's change in method of tax accounting for street lighting assets and the related increase in depreciation deductions - Entergy expects that the total tax to be included in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $33 million. The tax and interest associated with this issue total $48 million for all open tax years.
  • The allowance of depreciation deductions that resulted from Entergy's purchase price allocations on its acquisitions of its nuclear power plants - Entergy expects that the total tax to be i ncluded in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $42 million. The tax and interest associated with this issue total $48 million for all open tax years.

  The U.K. Windfall Tax and street lighting issues are already docketed in U.S. Tax Court for tax years 1997 and 1998 with a trial date set in the first quarter of 2008.

  The IRS completed its examination of the 2002 and 2003 tax returns and issued an Examination Report on June 29, 2007. During the examination, Entergy agreed to adjustments related to its method of accounting for income tax purposes related to 1) its wholesale electric power contracts and gas sales when it delivers2) the simplified method of allocating overhead or "mixed service costs" provided for under IRS regulations, which affects the amount of cost of goods sold related to the production of electricity.

  Entergy's agreement with the IRS on electric power or gascontracts involved an adjustment to reduce Entergy Louisiana Holdings' deduction related to its customers. Toaccounting for the extentcontract to purchase power from the Vidalia hydroelectric project. The adjustment did not have a material impact on Entergy Louisiana Holdings' earnings. The agreement on overhead allocation methodology related to the Registrant Subsidiaries' 2003 filing of a change in tax accounting method for the allocation of "mixed service costs" to self-produced assets. Entergy reached a settlement agreement concerning the Registrant Subsidiaries' deductions related to the method change for the year ended December 31, 2003. As Entergy has a consolidated net operating loss for 2003, these adjustments have the effect of reducing the consolidated net operating loss carryover and do not require a payment to the IRS at this time. The settlement did not have a material impact on the Registrant Subsidiaries' earnings.

  In the report for the 2002-2003 audit cycle, the IRS also proposed adjustments which Entergy did not agree to as follows: 1) the U.K. Windfall Tax foreign tax credit issue mentioned above; 2) the street lighting issue mentioned above; 3) certain repair deductions; 4) deductions claimed for research and experimentation (R&E) expenditures; 5) income tax credits claimed for R&E; and 6) a 2003 deduction associated with the revisions to the emergency plans at the Indian Point Energy Center. Regarding all of these issues, Entergy disagrees with the IRS Examination Division position and will file a formal protest with the IRS and will pursue administrative relief within the IRS Appeals Division.

  Entergy believes that deliveries have occurred but a bill has not been issued, the domestic utility companies accrueprovisions recorded in its financial statements are sufficient to address these issues as well as other liabilities that are reasonably estimable, including an estimate of the revenues for energy delivered since the latest billings. Entergy calculates the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in the domestic utility companies' various jurisdictions. Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Modifications made to the billing system in the third quarter 2006 provide better information related to the amount of generation that remains unbilled at the end of each month.  Accordingly, the domestic utility companies refined the calculation of unbilled revenue to reflect this additional information.  This refinement added $25.7 million to unbilled revenue in the third quarter 2006.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month's estimate is reversed. Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are so recorded and reversed.probable interest expense, associated with all uncertain tax positions.

  Prior52

  Entergy has $202 million in deposits on account with the IRS to 2006, Entergy Louisiana and the Louisiana portion of Entergy Gulf States included a component of fuel cost recovery in their unbilled revenue calculations. Effective January 1, 2006, this fuel component of unbilled accounts receivable was reclassified to deferred fuel and is no longer included in the unbilled revenue calculations for Entergy Louisiana and the Louisiana portion of Entergy Gulf States, which is in accordance with regulatory treatment.

  Recently Issued Accounting Pronouncementscover its uncertain tax positions.

  FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy in the first quarter of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes.2006. FIN 48 establishes a "more-likely-than-not" recognition threshold that must be met before a tax benefit can be recognized in the financial statements. If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded. Entergy doesand the Registrant Subsidiaries adopted the provisions of FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" (FIN 48), on January 1, 2007. As a result of the implementation of FIN 48, Entergy recognized an increase in the liability for unrecognized tax benefits of approximately $5 million, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

  As of January 1, 2007, Entergy had a total balance of unrecognized tax benefits of approximately $2 billion. Included in this balance of unrecognized tax benefits are $1.7 billion of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. Entergy's January 1, 2007 balance of unrecognized tax benefits includes $244 million which could affect the effective income tax rate. Entergy accrues interest and penalties expenses related to unrecognized tax benefits in income tax expense. Entergy's January 1, 2007 balance of unrecognized tax benefits includes approximately $52 million accrued for the possible payment of interes t and penalties.

  As of January 1, 2007, Entergy and the Registrant Subsidiaries had total balances of unrecognized tax benefits reflected in their balance sheets as follows:

  				Entergy		Entergy		Entergy		Entergy		Entergy		System
  		Entergy		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
  		(In Thousands)
  Taxes accrued		($184,372)		($43,445)		($640)		$234		$5,830		$4,304		($35,506)
  Accumulated deferred   income taxes and   taxes accrued		2,161,372		194,718		193,949		58,839		44,599		16,118		209,599
  Total unrecognized   tax benefit		$1,977,000		$151,273		$193,309		$59,073		$50,429		$20,422		$174,093

  The Registrant Subsidiaries' January 1, 2007 balances of unrecognized tax benefits included amounts that could affect the effective income tax rate as follows (in millions):

  Entergy Arkansas	$0.8
  Entergy Gulf States	$3.6
  Entergy Louisiana	$1.2
  Entergy Mississippi	$3.4
  Entergy New Orleans	$1.4
  System Energy	$1.7

  53

  The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense. Included in the January 1, 2007 balance of unrecognized tax benefits were accruals for the possible payment of interest and penalty as follows (in millions):

  Entergy Arkansas	$1.6
  Entergy Gulf States	$4.0
  Entergy Louisiana	$0.8
  Entergy Mississippi	$3.9
  Entergy New Orleans	$0.9
  System Energy	$0.8

  Entergy and the Registrant Subsidiaries do not expect that total unrecognized tax benefits will significantly change within the adoptionnext twelve months.

  NOTE 11. NEW ACCOUNTING PRONOUNCEMENTS

  The FASB issued Statement of FIN 48 will materially affect itsFinancial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" (SFAS 159) during the first quarter of 2007. SFAS 159 provides an option for companies to select certain financial position, resultsassets and liabilities to be accounted for at fair value with changes in the fair value of operations,those assets or cash flows.liabilities being reported through earnings. The intent of the standard is to mitigate volatility in reported earnings caused by the application of the more complicated fair value hedging accounting rules. Under SFAS 159, companies can select existing assets or liabilities for this fair value option concurrent with the effective date of January 1, 2008 for companies with fiscal years ending December 31 or can select future assets or liabilities as they are acquired or entered into. Entergy is in the process of evaluating the potential effect of making this accounting election.

  In SeptemberJune 2006, FASB issued SFAS 158, "Employers' Accounting for Defined Benefit Pensionthe EITF reached a consensus on EITF Issue 06-3 "How Taxes Collected from Customers and Other Postretirement Plans,Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)" (EITF 06-3). The scope of this issue includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, and may include, but is not limited to, sales, use, value added, and some excise taxes. Under EITF 06-3, the presentation of taxes within the scope of this issue on either a gross basis (included in revenues and costs) or a net basis (excluded from revenues) is an amendmentaccounting policy decision that should be disclosed. For any such taxes reported on a gross basis, the amounts of FASB Statements Nos. 87, 88, 106those taxes in interim and 132(R)," to be effective December 31, 2006. SFAS 158 requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its balance sheet with the offset recorded to other comprehensive income. Entergy has previously disclosed its funded status in Note 10 to the consolidatedannual financial statements, in the Form 10-K. SFAS 158 also requires that changes in that funded statusfor each period for which an income statement is presented, should be recorded in other comprehensive income in the period in which the changes occur.disclosed if those amounts are significant. Entergy's Utility business, with the exception of the Louisiana jurisdictions which provide for recovery of other postretirement benefit costspol icy is to present such taxes on a pay as you gonet basis, is generally allowedunless required to recover pension and other postretirement benefit costs each period based upon costs calculated und er SFAS 87 and SFAS 106. Entergy's analysis, including the regulatory accounting requirements to support recording the majority of the effect of adoption of SFAS 158 asreport differently by a regulatory asset, isagency. EITF 06-3 did not yet complete.  Entergy does not expect the implementation of this standard, however, to materially affect Entergy's financial position or results of operations.statements.

  In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. The business of the Utility segment, however,Registrant Subsidiaries is subject to seasonal fluctuations, however, with the peak periods occurring during the third quarter. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.

  5054

  Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk

  Refer to "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends- Market and Credit Risk Sensitive InstrumentsOF ENTERGY CORPORATION AND SUBSIDIARIES."

  Part I, Item 4. Controls and Procedures

  Disclosure Controls and Procedures

  As of June 30, 2007, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy Resources (each individually a "Registrant" and collectively the "Registrants") management, including their respective Chief Executive Officers (CEO) and Chief Financial Officers (CFO). The evaluations assessed the effectiveness of the Registrants' disclosure controls and procedures. Based on the evaluations, each CEO and CFO has concluded that, as to the Registrant or Registrants for which they serve as CEO or CFO, the Registrant's or Registrants' disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant's or Registrants' disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant's or Registrants' management, including their respective CEOs and CFOs, as appropriate to allow timely decisions regarding required disclosure.

  55

   

  ENTERGY ARKANSAS, INC.

  MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

   

  Results of Operations

  Net Income

  ThirdSecond Quarter 20062007 Compared to ThirdSecond Quarter 20052006

  Net income decreased slightly$25.1 million primarily due to a higher effective income tax rate and higher other operation and maintenance expenses, lower net revenue, and lower other income, substantiallyexpenses. The decrease was partially offset by a lower effective income tax rate.higher net revenue.

  NineSix Months Ended SeptemberJune 30, 20062007 Compared to NineSix Months Ended SeptemberJune 30, 20052006

  Net income remained relatively unchanged, increasing $0.9decreased $25.2 million in 2006.primarily due to a higher effective income tax rate and higher other operation and maintenance expenses. The decrease was partially offset by higher net revenue.

  Net Revenue

  ThirdSecond Quarter 20062007 Compared to ThirdSecond Quarter 20052006

  Net revenue which is Entergy Arkansas' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).credits. Following is an analysis of the change in net revenue comparing the thirdsecond quarter of 20062007 to the thirdsecond quarter of 2005.2006.

  		Amount
  		(In Millions)
  20052006 net revenue		$325.2259.8
  Pass-through rider revenue		27.46.8
  Net wholesaleTransmission revenue		(8.3)3.4
  Volume/weather		(5.4)
  Other		(0.2)3.0
  20062007 net revenue		$344.1267.6

  The pass-through rider revenue variance is primarily due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes resulting in no effect on net income.

  The net wholesaletransmission revenue variance is primarily due to an October 2006 FERC order requiring Entergy Arkansas to make a refund to a coal plant co-owner as a resulthigher rates and the addition of a contract dispute. Refer to Note 2new transmission customers in 2006.

  The volume/weather variance is primarily due to the domestic utility companies and System Energy financial statements for further discussioneffect of less favorable weather compared to the FERC's decision.same period in 2006. Billed retail electricity usage decreased by a total of 110 GWh.

  Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)56

  Gross operating revenues increasedand fuel and purchased power expenses

  Gross operating revenues decreased primarily due to:

  • an increasea decrease of $96.3$36.0 million in fuel cost recovery revenues due to increasesa decrease in the energy cost recovery rider effective October 2005April 2007. The energy cost recovery rider filings are discussed in Note 2 to the financial statements in the Form 10-K; and July 2006; and
  • an increase of $27.4 million in pass-through rider revenue, as discussed above.

  51

  The increase was partially offset by:

  • a decrease of $11.1$32.6 million in gross wholesale revenue primarily due to reserves recorded per a FERC order, as discussed above;lower wholesale prices and
  • a decrease of $5.9 million in Grand Gulf revenues due to a decrease in the Grand Gulf rider effective January 2006.sales to affiliate customers.

  Fuel and purchased power expenses increased primarily due to an increase in the recovery from customers of deferred fuel costs.

  Other regulatory charges decreased primarily due to:

  • a decrease of $6.6 million resulting from a smaller over-recovery compared to the prior year of Grand Gulf costs due to a decrease in the Grand Gulf rider effective January 2006; and
  • the amortization of $2.2 million in 2005 of the transition to competition regulatory asset. The regulatory asset was amortized by the amountdeferred fuel expense associated with lower energy cost recovery rates collected through the Transition Cost rider beginning with the first billing cycle in October 2004 and ending with the last billing cycle of January 2006, resulting in no effect on net income.
  from customers.

  NineSix Months Ended SeptemberJune 30, 20062007 Compared to NineSix Months Ended SeptemberJune 30, 20052006

  Net revenue which is Entergy Arkansas' measure of gross margin, consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).credits. Following is an analysis of the change in net revenue comparing the ninesix months ended SeptemberJune 30, 20062007 to the ninesix months ended SeptemberJune 30, 2005.2006.

  		Amount
  		(In Millions)
  20052006 net revenue		$815.1491.5
  Pass-through rider revenue		27.4
  Volume/weather		13.1
  Capacity costs		(11.1)15.3
  Deferred fuel costcosts revisions		8.6
  (6.1)Transmission revenue		3.9
  Net wholesale revenue		(7.9)
  Other		(2.8)9.5
  20062007 net revenue		$835.6520.9

  The pass-through rider revenue variance is primarily due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in rider revenue with a corresponding increase in taxes other than income taxes resulting in no effect on net income.

  The volume/weather variance is primarily due to an increase in electricity usage, including the effect of more favorable weather during the nine months ended September 30, 2006 compared to the nine months ended September 30, 2005. Billed electricity usage increased a total of 552 GWh in all sectors.

  The capacity costs variance is primarily due to higher capacity-related costs including the revision of reserve equalization payments among Entergy companies due to a FERC ruling regarding the inclusion of interruptible loads in reserve equalization calculations.

  The deferred fuel cost revisions variance is primarily due to the 20042006 energy cost recovery true-up, made in the first quarter of 2005,2007, which increased net revenue by $4$6.6 million.

  52The transmission revenue variance is due to higher rates and the addition of new transmission customers in 2006.

  Gross operating revenues, fuel and purchased power expenses, and other regulatory charges (credits)

  Gross operating revenues increased primarily due to:

  • an increase of $171.5 million in fuel cost recovery revenues due to increases in the energy cost recovery rider effective October 2005 and July 2006;
  • an increase of $51.1 million in grossThe net wholesale revenue due to an increase in volume as a result of reduced net area demand and new resource plan contracts with affiliated customers;
  • an increase of $27.4 million in pass-through rider revenue, as discussed above; and
  • an increase of $13.1 million related to volume/weather, as discussed above.

  Fuel and purchased power expenses increasedvariance is primarily due to an increase in the recoverydecreased results from customers of deferred fuel costs.wholesale contracts and lower wholesale prices.

  Other regulatory charges decreased primarily due to:

  • a decrease of $15.3 million from a smaller over-recovery compared to the prior year of Grand Gulf costs due to a decrease in the Grand Gulf rider effective January 2006; and
  • the amortization of $4.8 million in 2005 of the transition to competition regulatory asset. The regulatory asset was amortized by the amount collected through the Transition Cost rider beginning with the first billing cycle in October 2004 and ending with the last billing cycle of January 2006, resulting in no effect on net income.

  Other Income Statement Variances

  ThirdSecond Quarter 20062007 Compared to ThirdSecond Quarter 20052006

  Other operation and maintenance expenses increased primarily due to:

  • an increase of $7.4$3.5 million in payrolltransmission spending due to additional labor and benefits costs;
  • an increase of $6.2 million in additionalmaterials costs related to substation and transmission line maintenance and higher transmission equalization expenses;
  • the receipt in 2005 of proceeds of $2.4 million from the radwaste settlement which is discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends - - Central States Compact Claim" in the Form 10-K; and
  • an increase of $2.3$2.0 million in customer service support costs, including an increase in customer write-offs.nuclear spending due to higher NRC fees and labor costs.

  57

  Taxes other than income taxes increased primarily due to an increase in city franchise tax expense due to a change in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change results in an increase in taxes other than income taxes with a corresponding increase in rider revenue, resulting in no effect on net income.

  Other income decreased primarily due to proceeds of $4.9 million received in 2005 from the radwaste settlement which is discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends - - Central States Compact Claim" in the Form 10-K.

  53

  NineSix Months Ended SeptemberJune 30, 20062007 Compared to NineSix Months Ended SeptemberJune 30, 20052006

  Other operation and maintenance expenses increased primarily due to:

  • an increase of $6.7$6.2 million in transmission spending due to additional labor and material costs related to substation and transmission line maintenance, higher transmission equalization expenses;expenses, and additional costs related to the Independent Coordinator of Transmission;
  • an increase of $6.4$4.7 million in nuclear spending due to higher NRC fees security costs, emergency plan fees, and labor costs; and
  • an increase of $4.2$2.6 million in customer service support costs, including andistribution spending due to vegetation maintenance work and increased labor costs.

  Partially offsetting the increase in customer write-offs;

• $4.1 million applied aswas a credit against bad debt expense in the first quarterdecrease of 2005 in accordance with a settlement agreement with the APSC;
• an increase of $2.7$1.6 million in payroll and benefits costs; and
• the receipt in 2005 of proceeds of $2.4 million from the radwaste settlement which is discussed in "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends - - Central States Compact Claim" in the Form 10-K.