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 Reports on Form 10-Q for the quarters ended March 31, 20062007 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
September 30, 20062007

ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 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 restructuring 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
• And the following transactional factors (in addition to others described elsewhere in this and in subsequent securities filings): (i) risks inherent in the contemplated Non-Utility Nuclear spin-off, joint venture and related transactions (including the level of debt incurred by SpinCo and the terms and costs related thereto); (ii) legislative and regulatory actions; and (iii) conditions of the capital markets during the periods covered by the forward-looking statements.  Entergy Corporation cannot provide any assurances that the spin-off or any of the proposed transactions related thereto will be completed, nor can it give assurances as to the terms on which such transactions will be consummated. The transaction is subject to certain conditions precedent, including regulatory approvals and the final approval by the Board.

(Page left blank intentionally)

DEFINITIONS

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

1

DEFINITIONS (Continued)

1

DEFINITIONS(Continued)

2

DEFINITIONS(Concluded)

2

DEFINITIONS(Concluded)

3

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 businessespower plants.

Plan to Pursue Separation of Non-Utility Nuclear

In November 2007, the Board approved a plan to pursue a separation of the Non-Utility Nuclear business from Entergy through a tax-free spin-off of Non-Utility Nuclear to Entergy shareholders. SpinCo, the term used to identify the new company that is yet to be named, will be a new, independent company with publicly-traded common equity. In addition, under the plan, SpinCo and Entergy are expected to enter into a nuclear services joint venture, with 50% ownership by SpinCo and 50% ownership by Entergy. The joint venture board of directors will be comprised of equal membership from both Entergy and SpinCo.

At the time that the transaction is consummated under the current plan, Entergy Corporation's shareholders will own 100 percent of the common equity in both SpinCo and Entergy. Entergy expects that SpinCo's business will be comprised of Non-Utility Nuclear's assets, including its six nuclear power plants, and Non-Utility Nuclear's power marketing operation. Entergy Corporation's remaining business will primarily be comprised of 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,Utility business. Entergy expects to record a gain relatedtreat the results of Non-Utility Nuclear as discontinued operations after the spin-off is consummated. The nuclear services joint venture is expected to this investmentoperate the nuclear assets owned by SpinCo. The joint venture is also expected to offer nuclear services to third parties, including decommissioning, plant relicensing, and plant operation administrative support services, including the services currently provided for the Cooper Nuclear Station in Nebraska.

Entergy Nuclear Operations, Inc. will supplement its application filed in July 2007 with the NRC, which seeks indirect transfer of approximately $60 million, net-of-tax, in the fourth quarter of 2006. In April 2006, Entergy sold the retail electric portioncontrol of the Competitive Retail Servicesoperating licenses for the six Non-Utility Nuclear power plants, to incorporate the planned business operating inseparation. Entergy Nuclear Operations, the ERCOT region of Texas, and now reports this portioncurrent NRC-licensed operator of the businessNon-Utility Nuclear plants, will remain the operator of those plants after the separation.  Entergy Operations, Inc., the current NRC-licensed operator of Entergy's five Utility nuclear plants, will remain a wholly-owned subsidiary of Entergy and will continue to be the operator of the Utility nuclear plants.

Subject to market terms and conditions, pursuant to the plan it is expected that approximately $4.5 billion of debt financing would be incurred by SpinCo in connection with the separation. Potential uses of the proceeds could include repayment of Entergy Corporation indebtedness, share repurchases, additional investments, or other corporate purposes.

Entergy is targeting third quarter 2008 as the effective date for the spin-off and joint venture transactions to be completed. Entergy expects the transactions to qualify for tax-free treatment for U.S. federal income tax purposes for both Entergy and its shareholders. The transactions are subject to various approvals.  Final terms of the transactions and spin-off completion will be subject to the subsequent approval of the Board. As

4

Entergy pursues completion of the separation and establishment of the joint venture, Entergy will continue to consider possible modifications to and variations upon the transaction structure, including a discontinued operation. Entergy reports Energy Commodity Services and Competitive Retail Services as partsponsored spin-off, a partial initial public offering preceding the spin-off, or the addition of All Other in its segment disclosures.a third-party joint venture partner.

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 has received a total of $134.5 million as of September 30, 2007 on its Hurricane Katrina and Hurricane Rita insurance claims, including $69.5 million that Entergy received in the second quarter 2007 in settlement of its Hurricane Katrina claim with one of its excess insurers. Of the $134.5 million received, $70.7 million was allocated to Entergy New Orleans, $33.2 million to Entergy Gulf States, and $24.8 million to Entergy Louisiana. In the third quarter 2007, Entergy filed a lawsuit in the U.S. District Court for the Eastern District of Louisiana against its other excess insurer on the Hurricane Katrina claim. At issue in the lawsuit is whether any policy exclusions limit the extent of coverage provided by that insurer. Refer to Note 8 to the financial statements in the Form 10-K.10-K for a further description of Entergy's Hurricane Katrina and Hurricane Rita insurance claims and the non-nuclear property insurance coverage in place at the time the cla ims occurred.

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 its 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 are being 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 $180.8 million for Entergy Louisiana,of the funds as of September 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.

4

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 costssubmits additional 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

5

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, 2006 Entergy New Orleans filed a 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 Entergy New Orleans has 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 which Entergy New Orleans has an exclusive right to file a plan of reorganization until November 15, 2006. Financial Guaranty Insurance Company (FGIC), the insurer of two series totaling $75 million 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 acceptances for such a proposed plan. FGIC's motion to terminate exclusivity 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:

6

• 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; and
• Entergy New Orleans receives a final order from the FERC authorizing issuance of short-term debt securities under credit agreements, 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. Entergy New Orleans currently estimates that approximately 85,000 electric customers and 65,000 gas customers have returned and are taking service. Prior to Hurricane Katrina, Entergy New Orleans had approximately 190,000 electric customers and 145,000 gas customers.

The bankruptcy judge set a date of April 19, 2006 by which creditors with prepetition claims against Entergy New Orleans, with certain exceptions, had 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 payable in full in cash, to issue two-year notes in satisfaction of the affiliate pre-petition accounts payable, and proposes that the first mortgage bonds will remain outstanding with their current maturity dates and interest terms. The plan of reorganization proposes that 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 after 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, 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 stock for three quarters. As discussed further inSee the Form 10-K if dividends with respect to the 4.75% preferred stock are not paid for four quarters, the holders of these shares have the right to elect a majority of the 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

7

 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 each quarter pending resolution of its plan of reorganization.

As discussed in the Form 10-K, as a resultdiscussion of the Entergy New Orleans bankruptcy proceeding,proceeding. On May 7, 2007, the bankruptcy judge entered an order confirming Entergy deconsolidatedNew 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. See Note 9 to the financial statements for financial reporting purposesa description of the significant terms in 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, 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.

5

Results of Operations

Third Quarter 20062007 Compared to Third Quarter 20052006

Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other, business segments, and Entergy comparing the third quarter 20062007 to the third 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.

86

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 third quarter 2007 compared to the third 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 the three months ended September 30, 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 third quarter of 20062007 to the third quarter of 2005.2006.

7

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 capacityfuel 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 price applied to unbilled electric sales variance is due to higher base rates and the exclusion in 2006 of the fuel cost componentincreased recovery in the calculationthird quarter 2007 of the price appliedfuel costs from retail and special rate customers in addition to unbilled sales. Effective January 1, 2006, the fuel cost component is no longer included in the unbilled revenue calculationpurchased power costs deferred at Entergy Louisiana and Entergy New Orleans as a result of the Louisiana jurisdiction atre-pricing, retroactive to 2003, of purchased power agreements among Entergy Gulf States, which is in accordance with regulatory treatment. Entergy expects thatsystem companies as directed by 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.FERC.

The volume/weather variance resulted primarily from an increase in electricityincreased usage including increased usageprimarily during the unbilled sales period. Billed usage increasedSee Note 1 to the financial statements in the Form 10-K for a totaldiscussion of 3% comparedthe 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 ongoing purchased power capacity costs. The formula rate plan filing is discussed in Note 2 to the financial statements in the Form 10-K.

The net wholesale revenue variance is primarily a result of lower wholesale revenues in the third quarter of 2005.2006 due to an October 2006 FERC order requiring Entergy Arkansas to make a refund to a coal plant co-owner resulting from a contract dispute.

The pass-through rider revenue variance is primarily due to a change effective in the third quarter 2006 in the accounting for city franchise tax revenues in Arkansas as directed by the APSC. The change resultsresulted in an increase in rider revenue in 2006 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 variance is primarily due to an October 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 2 to the consolidated financial statements for further discussion of the FERC's decision.

9

Non-Utility Nuclear

Net revenue increased for Non-Utility Nuclear from $364 million for the third quarter 2006 to $506 million for the third quarter 2007 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. Amortization of the Palisades purchased power agreement liability, which is discussed in Note 5 to the financial statements, also contributed to the increase. The increase inwas partially offset by the effect on revenues was increased generation in 2006 due toof a power uprate completed sincescheduled refueling outage and an unplanned outage during the third quarter of 2005 and fewer outages.2007. Following are key performance measures for Non-Utility Nuclear for the third quarters of 20062007 and 2005:2006:

Other Operation and Maintenance ExpensesIncome Statement Items

Other operation and maintenance expenses increased for the Utility from $326 million in 2005 to $420 million in 2006 primarily due to the following:

• an increase of $29 million in payroll and benefits costs;
• the receipt in 2005 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;
• an increase of $14 million due to the expensing of plant maintenance and distribution costs in 2006 versus the deferral or capitalization of storm costs in 2005;
• an increase of $6 million in nuclear costs as a result 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; and
• an increase of $4 million in customer service support costs primarily due to an increase in contract costs.

Taxes Other Than Income Taxes

Taxes other than income taxes increaseddecreased for the Utility from $82$127 million for the third quarter of 20052006 to $118$107 million for the third quarter of 20062007 primarily due to an increase in city franchise taxes in Arkansas due toin 2006 as a result of a change effective in August 2006 in the accounting for city franchise tax revenues as directed by the APSC. The change resultsresulted in an increase in taxes other than income taxes in 2006 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.

8

Other Income

Other income increased for Utility from $19 million for the third quarter 2006 to $46 million for the third quarter 2007 primarily due to carrying charges on storm restoration costs.

Interest and other charges increased for Utility from $100 million for the third quarter 2006 to $121 million for the third quarter 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 securitization bonds issued during the second quarter 2007 at Entergy Gulf States;
• interest on Entergy New Orleans' third-party accounts payable pursuant to its plan of reorganization, as discussed above under "Hurricane Katrina and Hurricane Rita - - Entergy New Orleans Bankruptcy"; and
• interest recorded on advances from independent power producers.

Non-Utility Nuclear

Other operation and maintenance expenses increased for Non-Utility Nuclear from $163 million for the third quarter 2006 to $198 million for the third quarter 2007 primarily due to the acquisition of the Palisades plant in April 2007.

Other income decreased for Non-Utility Nuclear from $46 million for the third quarter 2006 to $19 million for the third quarter 2007 primarily due to miscellaneous income of $27.0$27 million ($16.6 million net-of-tax) recorded in the third quarter 2006 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 athe plant will begin.

Parent & Other

Interest charges increased for Parent & Other from $32 million for the third quarter 2006 to $58 million for the third quarter 2007 primarily due to additional borrowings on Entergy Corporation's revolving credit facilities.

Income Taxes

The effective income tax ratesrate for the third quartersquarter 2007 was 33.1%. The reduction in the effective income tax rate versus the federal statutory rate of 35% is primarily due to:

• an adjustment to state income taxes for Non-Utility Nuclear to reflect the effect of a change in the methodology of computing New York state income taxes as required by that state's taxing authority;
• 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 at the Utility operating companies.

The effective income tax rate for the third quarter 2006 and 2005 werewas 33.8% and 37.9%, respectively.. The differencereduction in the effective income tax rate for the third quarter of 2006 versus the federal statutory rate of 35.0% is primarily due to the flow-through of a pension item 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.

10

9

Nine Months Ended September 30, 20062007 Compared to Nine Months Ended September 30, 20052006

Following are income statement variances for Utility, Non-Utility Nuclear, Parent & Other, business segments, and Entergy comparing the nine months ended September 30, 20062007 to the nine months ended September 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.

10

The variance explanations for the Utility for the nine months ended September 30, 2007 compared to the nine months ended September 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 the nine months ended September 30, 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 nine months ended September 30, 20062007 to the nine months ended September 30, 2005.2006.

11

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 the annual revenue requirement relatedongoing purchased power capacity 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 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 2%1,110 GWh, an increase of 1.5%. See Note 1 to the financial statements in the residential and commercial sectors.

The pass-through rider revenue variance is due toForm 10-K for a change in 2006 indiscussion of 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.unbilled revenues.

The fuel recovery variance resulted primarily from adjustmentsis due to the inclusion of fuel clause recoveriesGrand Gulf costs in Entergy New Orleans' fuel recoveries effective July 1, 2006. In June 2006, the City Council approved the recovery of Grand Gulf States' Louisiana jurisdiction,costs through the under-recoveryfuel adjustment clause, without a corresponding change in 2005base rates (a significant portion of fuelGrand Gulf costs from retail customers, and increased recovery in 2006 of fuel costs.was previously recovered through base rates). The increase was partially offsetis also due to purchased power costs deferred at Entergy Louisiana and Entergy New Orleans as a result of the re-pricing, retroactive to 2003, of purchased power agreements among Entergy system companies as directed by the Entergy Arkansas energy cost recovery true-up made in the first quarter of 2005.FERC.

The transmission revenue variance is primarily due to higher rates and the addition of new transmission customers in 2006. Also contributing to the increase was an increase in rates effective June 2006.late-2006.

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.discussed above.

The net wholesale revenue variance is due primarily to 1) more energy available for resale at Entergy New Orleans in 2006 due to the decrease in retail usage caused by customer losses following Hurricane Katrina and 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 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 net wholesale revenue variance is partially offset by the effect of lower wholesale revenues in the third quarter 2006 due to an October 2006 FERC order requiring Entergy Arkansas to make a refund to a coal plant co-owner as a result ofresulting from a contract dispute. Refer to Note 2 to the consolidated financial statements for further discussion of the FERC's decision.

Non-Utility Nuclear

Net revenue increased for Non-Utility Nuclear from $1,041 million for the nine months ended September 30, 2006 to $1,346 million for the nine months ended September 30, 2007 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. Amortization of the Palisades purchased power agreement liability, which is discussed in Note 5 to the financial statements, also contributed to the increase. The increase inwas partially offset by the effect on revenues was increased generation in 2006 due to power uprates at certain plants completed in 2005 and 2006 and fewerof more refueling outages in 2007 as compared to the same period in 2006. Following are key performance measures for Non-Utility Nuclear for the nine months ended September 30, 20062007 and 2005:2006:

12

Parent & Other

Net revenue increaseddecreased for Parent & Other from $99 million for the nine months ended September 30, 2006 to $34 million for the nine months ended September 30, 2007 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 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 Income Statement Items

Other Operation and Maintenance Expenses

Utility

Other operation and maintenance expenses increased for the Utility from $1.1 billion in 2005 to $1.2 billion in 2006 primarily due to the following:

• an increase of $23$1,238 million in payroll and benefits costs;
• the receipt in 2005 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;
• an increase of $14 million due to the expensing of plant maintenance and distribution costs in 2006 versus the deferral or capitalization of storm costs in 2005;
• an increase of $12 million related to storm reserves. This increase does not include costs associated with Hurricanes Katrina and Rita;
• an increase of $12 million in nuclear costs 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 costs due to an increase in contract costs and an increase 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 due to the timing of refueling outages, and increased benefit and insurance costs.

Taxes Other Than Income Taxes

Taxes other than income taxes increased for the Utility from $240 million in 2005 to $280 million in 2006 primarily due to an increase in city franchise taxes in Arkansas due to a change in 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.

Interest Charges

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.

Income Taxes

The effective income tax rates for the nine months ended September 30, 2006 to $1,328 million for the nine months ended September 30, 2007 primarily due to:

• an increase of $31 million in distribution expenses, including higher contract labor costs, increases in vegetation maintenance costs, and 2005the return to normal operations work in 2007 versus storm restoration activities in 2006 as a result of Hurricane Katrina and Hurricane Rita;
• an increase of $21 million in transmission expenses, including transmission line and substation maintenance and independent coordinator of transmission expenses;
• an increase of $21 million in nuclear expenses primarily due to non-refueling outages, increased nuclear labor and contract costs, and higher NRC fees;
• an increase of $11 million as a result of higher insurance premiums due to amending coverage in mid-2006 in addition to the timing of premium payments compared to 2006;
• an increase of $11 million due to a provision for storm-related bad debts;
• an increase of $9 million in customer service costs primarily as a result of the write-off of uncollectible customer accounts; and
• an increase of $6 million in fossil plant expenses due to the return to normal operations work in 2007 versus storm restoration activities in 2006 as a result of Hurricane Katrina and differing outage schedules and scopes from 2006 to 2007.

The increase is partially offset by a decrease of $33 million in payroll, payroll-related, and benefits costs.

Depreciation and amortization expenses increased from $618 million for the nine months ended September 30, 2006 to $630 million for the nine months ended September 30, 2007 primarily due to an increase in plant in service and a revision made in the first quarter 2006 to estimated depreciable lives involving certain intangible assets. The increase was partially offset by a revision in the third quarter 2007 related to depreciation previously recorded on storm-related assets. Recovery of the cost of those assets will now be through the securitization of storm costs approved by the LPSC in the third quarter 2007. The securitization approval is discussed in Note 2 to the financial statements.

Other income increased from $84 million for the nine months ended September 30, 2006 to $129 million for the nine months ended September 30, 2007 primarily due to carrying charges on storm restoration costs.

Interest and other charges increased from $289 million for the nine months ended September 30, 2006 to $324 million for the nine months ended September 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 securitization bonds issued during the second quarter 2007 at Entergy Gulf States;

13

• interest on Entergy New Orleans' third-party accounts payable pursuant to its plan of reorganization, as discussed above under "Hurricane Katrina and Hurricane Rita - Entergy New Orleans Bankruptcy"; and
• interest recorded on advances from independent power producers.

Non-Utility Nuclear

Other operation and maintenance expenses increased from $469 million for the nine months ended September 30, 2006 to $520 million for the nine months ended September 30, 2007 primarily due to the acquisition of the Palisades plant in April 2007.

Parent & Other

Interest charges increased from $95 million for the nine months ended September 30, 2006 to $148 million for the nine months ended September 30, 2007 primarily due to additional borrowings under Entergy Corporation's revolving credit facilities.

Income Taxes

The effective income tax rate for thenine monthsended September 30, 2007 was 33.5%. The reduction in the effective income tax rate versus the federal statutory rate of 35% for the nine months ended September 30, 2007 is primarily due to:

• the resolution of tax audit issues in the 2002-2003 audit cycle;
• an adjustment to state income taxes for Non-Utility Nuclear to reflect the effect of a change in the methodology of computing New York state income taxes as required by that state's taxing authority;
• book and tax differences related to the allowance for equity funds used during construction; and
• the amortization of investment tax credits.

These factors were 33.6%partially offset by book and 35.7%, respectively. tax differences for utility plant items and state income taxes at the Utility operating companies.

The differenceeffective income tax rate for thenine monthsended September 30, 2006 was 33.6%. The reduction in the effective income tax rate for the nine months ended September 30, 2006 versus the federal statutory rate of 35.0% is primarily due to to:

• the flow-through of a pension item, item;
• the recognition of an income tax benefit related to ANO 1 steam generator removal cost,cost; and
• the favorable resolution of a tax audit issue,issue.

These factors were partially offset by state income taxes. The difference in the effective income tax rate for the nine months ended September 30, 2005

13

 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.14

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.

As discussed in the Form 10-K, Entergy Corporation hashad in place two separate revolving credit facilities, a five-year credit facility and a three-year credit facility. The five-year credit facility expireswas due to expire in May 2010 and the three-year facility expireswas due to expire in December 2008.

In August 2007, Entergy canCorporation entered into a new, $3.5 billion, five-year credit facility, and terminated the two previously existing facilities. Entergy Corporation has the ability to issue letters of credit against the total borrowing capacity of both credit facilities. Following is a summary of the borrowings outstanding and capacity available under these facilitiesfacility. The weighted average interest rate as of September 30, 2006:2007 was 5.88% on the drawn portion of the facility. The facility fee is currently 0.09% of the commitment amount. The facility fee and interest rate can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.

14

Entergy Arkansas, Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi each has credit facilities available asAs of September 30, 2006 as follows:2007, amounts outstanding under the $3.5 billion credit facility are:

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:

In July 2006, Entergy's Non-Utility Nuclear business reached an agreement to purchase Consumers Energy Company's 798 MW Palisades nuclear energy plant located near South Haven, Michigan for $380 million. 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 15-year purchased power agreement with Consumers Energy for 100% of the plant's output, excluding any future uprates. 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 accept responsibility for spent fuel at the decommissioned Big Rock nuclear plant, which is located near Charlevoix, Michigan. Management expects to close the transaction in the second quarter 2007, pending the approvals of the NRC, the FERC, the Michigan Public Service Commission, and other regulatory agencies.2009.

Entergy is developing its capital plan for 20072008 through 20092010 and currently anticipates making $5.2$5.9 billion in capital investments during that period, including approximately $2.5$2.7 billion for maintenance of Entergy's existing assets ($2.32.5 billion for Utility and $0.2 billion for Non-Utility Nuclear) for maintenance of Entergy's existing assets.. The remaining $2.7$3.2 billion ($1.92.5 billion for Utility and $0.8$0.7 billion for Non-Utility Nuclear) is associated with specific investments such as the pending Palisades acquisition,Ouachita and Calcasieu acquisitions, the Little Gypsy repowering, replacement of the Waterford 3 steam generators, environmental compliance spending, transmission upgrades, business function relocation, dry cask storage and nuclear 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.

15

to meet load growth. The Pension Protection Act of 2006

The Pension Protection Act of 2006 was signed byplanned capital investment estimate does not include the President on August 17, 2006. The intent ofcosts associated with the legislationpotential interconnection between Entergy Gulf States and ERCOT that is discussed in Note 2 to require companies to fund 100% of their pension liability; and then for companies to fund, on a going-forward basis, an amount generallythe financial statements. These potential costs are currently estimated to be approximately $1 billion.

In April 2007, Entergy's Non-Utility Nuclear business purchased the amount798 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. Also as part of the transaction, Entergy's Non-Utility Nuclear business assumed responsibility for spent fuel at the decommissioned Big Rock Point nucl ear plant, which is located near Charlevoix, Michigan.  Palisades' 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 and coal will be the unit's primary fuel sources.  In July 2007, Entergy Louisiana filed with the LPSC for approval of the repowering project, and stated that it expects to spend $1.55 billion on the project. In addition to seeking a finding 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.

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. Entergyproject is in the process of evaluatingpublic interest, the effectsfiling with the LPSC asks that Entergy Louisiana be allowed to recover a portion of the new legislation,project's financing costs during the construction period. Hearings were held in October 2007 and an LPSC decision could come in the fourth quarter 2007. Entergy Louisiana expects the 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 Louisiana now expects to spend approximately $100 million more through 200 9 than the amounts included in the Form 10-K for the project.

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 Quachita Power, LLC.  Entergy Arkansas also plans to invest approximately $43 million in plant upgrades and transaction costs.  Upgrades to the Utility operating companies' transmission system also are expected to be required to obtain long-term transmission service for this resource.  The identity and cost of the transmission upgrades have not yet been determined definitively; additional transmission studies are currently underway.  The initial results of those additional studies are expected by the end of November 2007.  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-Louisiana, under a separate agreement, appro ximately 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.  Entergy Arkansas filed with the APSC in September 2007 for its approval of the acquisition, including full cost recovery, and the APSC approved a bifurcated procedural schedule whereby a hearing will be conducted first on an interim tolling agreement connected with the acquisition in December 2007, with a later hearing on the acquisition being conducted by April 2008.  APSC staff and Arkansas attorney general witnesses have filed testimony that generally oppose cost recovery by a separate rider, but expectsargue that the implementationcost recovery should be by the annual earnings review process currently being developed. An APSC staff witness also opposes allocating one-third of the Pension Protection Actoutput for sale to Entergy Gulf States-Louisiana. In November 2007, Entergy Gulf S tates filed a request with the LPSC for authorization for Entergy Gulf States-Louisiana to purchase one-third of the capacity and energy of the Ouachita plant during the term of the interim tolling agreement and for authorization for Entergy Gulf States-Louisiana to purchase one-third of the plant's capacity and energy on a life-of-unit basis after the plant's acquisition. 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.

Entergy Louisiana plans to replace the Waterford 3 steam generators, along with the reactor vessel closure head and control element drive mechanisms, in 2011.  Replacement of these components is common to pressurized water reactors throughout the nuclear industry.  The nuclear

16

industry continues to address susceptibility to stress corrosion cracking of certain materials associated with these components within the reactor coolant system.  The issue is applicable to Waterford 3 and is managed in accordance with standard industry practices and guidelines.  Routine inspections of the steam generators during Waterford 3's Fall 2006 refueling outage identified additional degradation of certain tube spacer supports in the steam generators that required repair beyond that anticipated prior to the outage.  Corrective measures were successfully implemented to permit continued operation of the steam generators. While potential future replacement of these components had been contemplated, the discovery of the additional steam generator degradation necessitates replacement of the steam generators as soon as reasonably achievable.  2011 is the earliest that new steam generators can be manufactured and delivered for installation. The reactor vessel head and control element drive mechanisms will not result in annual pension contributions going-forwardbe replaced at the same time, utilizing the same reactor building construction opening that are materially higheris necessary for the steam generator replacement.  Entergy Louisiana estimates that it will spend approximately $485 million on this project.

Entergy now expects to spend $73 million more through 2008 than the levels requiredamount included in 2005the Form 10-K planned capital investment estimate for initial development costs for potential new nuclear development at the Grand Gulf and 2006.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 $0.75, which is an increase from the prior quarterly dividend per share of $0.54. On October 26, 2007, the Board also declared a quarterly dividend per Entergy Corporation common share of $0.75. Declarations of dividends on Entergy's common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy's common stock dividends based upon Entergy's earnings, financial strength, and future investment opportunities.

Debtor-in-Possession Credit Agreement

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. 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.

Cash Flow Activity

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

17

Operating Activities

Entergy's cash flow provided by operating activities increaseddecreased by $1,150$631 million for the nine months ended September 30, 20062007 compared to the nine months ended September 30, 2005 primarily due to the following activity:2006. Following are cash flows from operating activities by segment:

• Utility provided $1,683$1,212 million in cash from operating activities in 20062007 compared to providing $821$1,683 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, and 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 $181 million of Community Development Block Grant funds by Entergy Corporation receivedNew Orleans in 2007, significant storm restoration spending in 2006, and a decrease in the amount of pension funding payments in 2007. 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 mo st of the remainder distributed primarily to Non-Utility Nuclear.

16

Investing Activities

Net cash used in investing activities increased by $191$56 million for the nine months ended September 30, 20062007 compared to the nine months ended September 30, 2005 primarily due to the2006. The following activity:

• Construction expenditures were $356 million higheractivity is notable in 2006 than in 2005, primarily due to an increase in the Utility business because of storm restoration expenditures.
• Liquidation of other temporary investments net of investments provided $188 million duringcomparing the nine months ended September 30, 2005. Entergy had no activity in other temporary investments during2007 to the nine months ended September 30, 2006:
  • Construction expenditures were $169 million lower in 2007 than in 2006, primarily due to storm restoration expenditures by the Utility in 2006.
  • Non-Utility Nuclear purchased the Palisades power plant in 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 $64 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 Hurricane Katrina and Hurricane 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 $258 million of cash used in financing activities was $699 million for the nine months ended September 30, 20062007 compared to netusing $699 million of cash flow provided by financing activities of $84 million for the nine months ended September 30, 2005. Following2006. The following activity is notable in comparing the nine months ended September 30, 2007 to the nine months ended September 30, 2006:

  • Entergy Corporation increased the net borrowings under its credit facilities by $1,296 million in 2007, compared to decreasing the net borrowings under its credit facilities by $290 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.

  18

  • Entergy Corporation repurchased $1,024 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 onArkansas borrowed $60 million against its credit facilities by $290facility in 2007 and Entergy Louisiana repaid $40 million during the nine months ended September 30, 2006 compared to increasing the netin 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 Corporationagainst its 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 activityfacility in 2006.
    • Entergy Corporation repurchased $878 million of its common stock during the nine months ended September 30, 2005.

    17

    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

    18

    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.

    19

    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

    Rough Production Cost Equalization proceeding

    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 filedachieve rough production cost equalization as defined 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 a 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 of 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

    IfSeveral parties intervened in the actual, annual, average natural gas price deviates by $1/mmBtu up or down fromrate proceeding at the price assumed above, it is expectedFERC, including the APSC, the MPSC, the Council, and the LPSC, which have also filed protests. Certain Entergy Arkansas wholesale customers also intervened, raising issues regarding whether the bandwidth payments are properly reflected in the wholesale rate that Entergy Arkansas' annual payments will change inArkansas charges. The APSC, the same direction by approximately $70MPSC, and the Council ask 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 hearing 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. Settlement procedures have been terminated, and the proceeding is set for hearing in May 2008.

    Entergy Arkansas will pay $36 million per month for seven months, and began making the payments to Entergy Gulf States, Entergy Louisiana, and Entergy Mississippi 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.

    19

    Additionally, the Utility operating companies had filed with the FERC proposing certain modifications to the rough production cost equalization calculation. The FERC rejected certain of the proposed modifications, accepted certain of the proposed modifications without further proceedings, and set two of the proposed modifications for hearing and settlement procedures. A settlement in principle was reached in one of the proceedings, which settlement has been filed with the FERC. Settlement procedures were terminated in the second proceeding that involves changes to the functionalization of costs to the production function and a hearing in that proceeding is currently scheduled for March 2008.

    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 further below in this purpose undersection. The LPSC appealed the decision to the D.C. Circuit Court of Appeals, and the Utility operating companies and the APSC intervened in that appeal.

    Based on the FERC's April 27, 2007 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 based on 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 pass the receipts on 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 estimated payments and receipts that may be required to implement the FERC's remedy based on calendar year 2007 produc tion costs will be recorded at the end of 2007 when all production costs for 2007 have been incurred.  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 Entergy System 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.

    As discussed in the Form 10-K, various parties, including the LPSC and the APSC, appealed to the D.C. Circuit the FERC's June 1 and December 19, 2005 orders establishing the rough production cost equalization bandwidth. The D.C. Circuit held oral argument on the appeals on November 2, 2007.

    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 theLPSC's complaint. The LPSC has requested rehearing.

    Other System Agreement, thereby reducing the amount of Vidalia costs reflectedAgreement-related Proceedings and Activity

    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 the FERC disallow any costs foundhas recently implemented reforms related to be imprudent, with a refund effective datetransmission. If those reforms are inadequate to be set ataddress the earliest possible time. Specific areasAPSC's concerns, then it can renew its complaint. The APSC, the MPSC, and the Council have asked for rehearing or clarification 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 duethis order to integration of 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 requestsconfirm that the FERC exercise its authority under Section 207 of the FPAdid not intend 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 havepreempt 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" inretail regulator from undertaking 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, allindependent prudence review of the production costs in setting retail rates.

    20

    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 formulait is possible it may ultimately be appropriate to require transition measures or other conditions to ensure just and reasonable wholesale rates filedand services" upon the termination of Entergy Arkansas' participation in compliance withthe current System 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 orders related to the treatment under the System Agreement decisionof the Utility operating companies' interruptible loads.  In its opinion, the D.C. Circuit concluded that the FERC (1) acted arbitrarily and retail regulators are preemptedcapriciously by allowing the Utility operating companies to phase-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. The FERC issued its order on remand in September 2007, in which it directs Entergy to make a compliance filing removing all interruptible loa d from takingthe computation of peak load responsibility commencing April 1, 2004 and to issue any action that disturbsnecessary refunds to reflect this change. In addition, the FERC's findings with respectorder directs the Utility operating companies to these production cost inputs andmake refunds for the FERC-determined allocation of production costs amongperiod May 1995 through July 1996. Entergy, the domestic utility companies. The domestic utility companies believe that their conduct with respect to these issues has been prudent and will vigorously defend such conduct.

    Several parties have intervened inAPSC, the proceeding, including the MPSC, the LPSC, and the City Council.Council have requested rehearing of the FERC's order on remand. The LPSC's answer and commentsFERC granted the Utility operating companies' request to delay the payment of refunds for the period May 1995 through July 1996 until 30 days following a FERC order on rehearing.

    In October 2007 the MPSC issued a letter confirming its belief that Entergy Mississippi should exit the System Agreement in responselight of recent developments involving the System Agreement. The MPSC letter also requests that Entergy Mississippi advise the MPSC regarding the status of the Utility operating companies' effort to develop successor arrangements to the APSC complaint askSystem Agreement and advise the FERCMPSC regarding Entergy Mississippi's position with respect to investigate whether Entergy Arkansas' withdrawal from the System Agreement is fair, just, and reasonable.Agreement. In September 2006, the domestic utility companies, the APSC, and other intervenors in the proceeding filed responsesNovember 2007, pursuant to the answers and comments submitted byprovisions of 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 whether Entergy Arkansas' continuedMississippi provided its written notice to terminate its participation in the System Agreement is ineffective ninety-six (96) months from the best interests of its customers. Citing its concerns that the benefits of its continued participation in the current formdate 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, 2005 or such earlier date as authorized by the FERC.

    In conjunction with the application of Entergy Arkansas indicated, however,Gulf 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 properly structured replacement agreement couldresource to be acquired or constructed has been determined by Entergy's Operating Committee to be a viable alternative. In June 2006resource 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, 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 those related to the following area s: construction of new generating plants located outside of Arkansas, costs of the Entergy New Orleans bankruptcy,LPSC, 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 persuadeCity Council filing protests.  In July 2007 the FERC to authorize Entergy Arkansas to exitdenied 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 Julypurchaser passes on the cost of the purchase to its customers." Entergy Gulf States and August 2006. A public hearing forCalcasieu Power's application before the purposeFERC seeking approval of cross-examination of Mr. McDonald on his testimony and for questioning by the APSC was also conducted in July 2006. Thereacquisition is no further procedural schedule set in this investigation at this time.

    MPSC System Agreement Inquirystill pending.

    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 evaluation of the issues concerning Entergy Mississippi's participation in the current System Agreement.21

    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 May 24, 2006, includingin April 2007 a request to make certain corrections and limited modifications to the executed ICT agreementcurrent WPP tariff provisions. The Utility operating companies have filed status reports with SPP. The domestic utility companies informedthe FERC notifying the FERC that, assuming theydue to unexpected issues with the development of the WPP software and testing, the WPP is still not operational. The Utility operating companies have received all required approvals,notified the domestic utilityFERC that Entergy will continue to pursue the implementation of the WPP as soon as possible and w ill notify the FERC upon the successful completion of the software testing.

    In October 2006 the Utility operating companies intendfiled revisions to install SPP astheir Open Access Transmission Tariff ("OATT") with the ICT within 30 days of FERC approval ofto establish a mechanism to recover from their wholesale transmission customers the (1) costs incurred to develop or join an RTO and to develop the ICT; and (2) the on-going costs that will be incurred under the ICT agreement. Several parties filed protests regardingintervened opposing the domestic utility companies' compliance filing. On October 18,proposed tariff revisions. In December 2006 the FERC accepted for filing Entergy's proposed tariff revisions, and set them for hearing and settlement procedures. In its Order, the domestic utility companies' compliance filing,FERC concluded that each of the Utility operating companies "should be allowed the opportunity to recover its start up costs associated with modification, and directed the domestic utility companies to install SPP asits formation of the ICT within 30 daysand its participation in prior failed attempts to form an RTO," but also that the proposed tariffs raised issues of fact that are more properly addressed through hearing and settlement procedures. In June 2007 the order. The required changesUtility operating companies reached a set tlement-in-principle with the parties to the compliance filing include, among others,proceeding and 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 ordered to file certain additional informationsettlement has been filed 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.

    Available Flowgate Capacity (AFC) Proceeding

    SeeIn April 2007 the Form 10-K for a discussionFERC issued an order terminating the AFC hearing involving Entergy because Entergy's ICT has been installed. In accordance with the provisions of previous activitythe FERC order approving the ICT, during the first three 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 bythese errors, certain market participants continue to urge the FERC to review the domestic utility companies' record retention policies and practices. In October 2006, the FERC Office of Enforcement issuedmove forward with an audit report addressing 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 have 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 recommendationsAFC hearing in the audit report, which were agreed to by the domestic utility companies, represent a consensual resolutionlight 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 reportedidentified errors.

    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.proceeding.

    22

    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.

    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 under physical or financial contracts (2006(2007 represents the remaining quarter 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		2012
    Non-Utility Nuclear (including Palisades acquisition):
    Percent of planned generation sold forward:
    Unit-contingent		48%		50%		42%		30%		29%		16%
    Unit-contingent with availability guarantees (1)		40%		36%		35%		28%		14%		7%
    Firm liquidated damages		7%		5%		0%		0%		0%		0%
    Total		95%		91%		77%		58%		43%		23%
    Planned generation (TWh)		11		41		41		40		41		41
    Average contract price per MWh		$47		$54		$60		$59		$55		$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 involvingfor energy sales from the FitzpatrickFitzPatrick 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. In October 2007 Non-Utility Nuclear owesand NYPA $0 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,amended and has refused NYPA's demand for $90.5 million. As called for byrestated the value sharing agreement,agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements Non-Utility Nuclear will make annual payments to NYPA hasbased on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Non-Utility Nuclear will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million. The annual payment for each year is due by January 15 of the following year, with the payment for year 2007 output due on January 15, 2008. If Entergy or an Entergy affiliate ceases to own the plants, then, after January 2009, the annual payment obligation terminates for generation after the date that Entergy ownership ceases.

    Non-Utility Nuclear had previously calculated that $0 was owed to NYPA under the value sharing agreements for generation output in 2005 and 2006. In November 2006 NYPA filed a demand for arbitration againstclaiming that $90.5 million was due to NYPA for 2005 under these agreements, and NYPA filed in April 2007 an amended demand for arbitration claiming that an additional $54 million was due to NYPA for 2006 under the value sharing agreements. As part of their agreement to amend the value sharing agreements, Non-Utility Nuclear subsidiaries that own Fitzpatrick and NYPA waived all present and future claims under the previous value sharing terms, including the claims for 2005 and 2006 pending before the arbitrator.

    Non-Utility Nuclear will record its liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. Non-Utility Nuclear recorded a $57 million liability for generation through September 30, 2007. An amount equal to determine the liability will be recorded to the plant

    23

    asset account as contingent purchase price consideration for the plants. This amount owed, if any, for 2005.will be depreciated over the expected remaining useful life of the plants.

    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 September 30, 2006,2007, based on power prices at that time, Entergy had in place as collateral $905$747 million of Entergy Corporation guarantees for wholesale transactions, including $85$65 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$325 million if gas prices increase $1 per MMBtu in both the 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 (2006(2007 represents the remaining quarter of the year):

    			2006		2007		2008		2009		2010		2007		2008		2009		2010		2011		2012
    Non-Utility Nuclear:
    Non-Utility Nuclear (including Palisades acquisition):
    Percent of capacity sold forward:	Percent of capacity sold forward:
    	Bundled capacity and energy contracts		13%		11%		11%		11%		11%
    	Capacity contracts		82%		64%		35%		26%		9%
    	Palisades assuming second quarter 2007 closing		0%		10%		16%		16%		16%
    	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
    Bundled capacity and energy contracts													27%		27%		26%		26%		26%		19%
    Capacity contracts													61%		59%		34%		16%		9%		2%
    Total													88%		86%		60%		42%		35%		21%
    Planned net MW in operation													4,998		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		$1.7		$1.8		$1.7		$2.5		$3.1		$3.5
    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%		93%		88%		73%		52%		36%		18%
    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													$49		$56		$61		$60		$56		$52

    Excluding the capacity associated with the pending Palisades acquisition,As of September 30, 2007, approximately 99% of Non-Utility Nuclear's total percent of planned capacity sold forward is 84% in 2007, 54% in 2008, 44% in 2009, and 23% in 2010. Excluding the generationcounterparty exposure from energy and capacity associatedcontracts is 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.counterparties with investment grade credit ratings.

    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

    In September 2006 the FASB Interpretationissued Statement of Financial Accounting Standards No. 48, "Accounting157, "Fair Value Measurements" (SFAS 157), which defines fair value, establishes a framework for Uncertaintymeasuring fair value in Income Taxes" (FIN 48) was issuedGAAP, and expands disclosures about fair value measurements. SFAS 157 generally does not require any new fair value measurements. However, in July 2006some cases, the application of SFAS 157 in the future may change Entergy's practice for measuring and disclosing fair values under other accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for Entergy in the first quarter 2008 and will be applied prospectively. Entergy is currently evaluating SFAS 157 and its potential future effects on its financial position, results of operations, and cash flows.

    24

    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 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,process of evaluating the potential effect of making this accounting election, but does not meetexpect the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payableprovisions of this standard to have a material effect on the tax return, is required to be recorded. Entergy does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.

    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.

     

     

    2725

     

    (Page left blank intentionally)

     

    28

    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME
    For the Three and Nine Months Ended September 30, 2006 and 2005
    (Unaudited)
    		Three Months Ended				Nine Months Ended
    		2006		2005		2006		2005
    		(In Thousands, Except Share Data)
    OPERATING REVENUES
    Domestic electric		$2,761,124		$2,490,265		$7,031,771		$6,236,949
    Natural gas		12,495		12,343		63,522		51,729
    Competitive businesses		481,100		395,650		1,355,961		1,165,153
    TOTAL		3,254,719		2,898,258		8,451,254		7,453,831
    OPERATING EXPENSES
    Operating and Maintenance:
    Fuel, fuel-related expenses, and
    gas purchased for resale		987,558		607,307		2,489,347		1,525,652
    Purchased power		607,777		748,552		1,646,555		1,788,736
    Nuclear refueling outage expenses		43,045		41,432		127,584		120,393
    Other operation and maintenance		590,992		490,483		1,693,657		1,552,858
    Decommissioning		36,933		35,056		108,787		108,579
    Taxes other than income taxes		133,527		98,717		327,995		284,349
    Depreciation and amortization		232,042		217,215		655,374		637,156
    Other regulatory charges (credits) - net		(21,563)		5,156		(124,509)		(44,814)
    TOTAL		2,610,311		2,243,918		6,924,790		5,972,909
    OPERATING INCOME		644,408		654,340		1,526,464		1,480,922
    OTHER INCOME
    Allowance for equity funds used during construction		7,721		5,894		32,088		29,414
    Interest and dividend income		37,720		50,564		116,689		115,621
    Equity in earnings of unconsolidated equity affiliates		14,772		8,419		26,843		22,012
    Miscellaneous - net		30,964		(10,377)		16,793		4,599
    TOTAL		91,177		54,500		192,413		171,646
    INTEREST AND OTHER CHARGES
    Interest on long-term debt		125,907		111,101		369,058		324,149
    Other interest - net		15,035		18,679		47,532		43,436
    Allowance for borrowed funds used during construction		(4,538)		(6,516)		(18,989)		(19,790)
    TOTAL		136,404		123,264		397,601		347,795
    INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		599,181		585,576		1,321,276		1,304,773
    Income taxes		202,437		222,080		444,170		466,172
    INCOME FROM CONTINUING OPERATIONS		396,744		363,496		877,106		838,601
    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)
    CONSOLIDATED NET INCOME		395,694		356,388		886,936		827,315
    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:
    Continuing operations		$1.87		$1.71		$4.11		$3.88
    Discontinued operations		-		($0.03)		$0.05		($0.05)
    Basic earnings per average common share		$1.87		$1.68		$4.16		$3.83
    Diluted earnings (loss) per average common share:
    Continuing operations		$1.83		$1.68		$4.03		$3.80
    Discontinued operations		-		($0.03)		$0.05		($0.05)
    Diluted earnings per average common share		$1.83		$1.65		$4.08		$3.75
    Dividends declared per common share		$0.54		$0.54		$1.62		$1.62
    Basic average number of common shares outstanding		208,382,863		207,906,762		208,034,946		211,033,629
    Diluted average number of common shares outstanding		212,404,770		212,335,619		211,782,858		215,540,185
    See Notes to Consolidated Financial Statements.

    2926

     

     

    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the Nine Months Ended September 30, 2006 and 2005
    (Unaudited)
    		2006		2005
    		(In Thousands)
    OPERATING ACTIVITIES
    Consolidated net income		$886,936		$827,315
    Adjustments to reconcile consolidated net income to net cash flow
    provided by operating activities:
    Reserve for regulatory adjustments		43,960		(85,212)
    Other regulatory credits - net		(124,509)		(44,814)
    Depreciation, amortization, and decommissioning		765,627		747,397
    Deferred income taxes and investment tax credits		(90,439)		204,297
    Equity in earnings of unconsolidated equity affiliates - net of dividends		(24,669)		(16,712)
    Changes in working capital:
    Receivables		210,311		(675,927)
    Fuel inventory		3,652		(10,407)
    Accounts payable		(390,804)		508,648
    Taxes accrued		768,251		186,803
    Interest accrued		3,190		15,231
    Deferred fuel		436,663		(267,441)
    Other working capital accounts		111,491		(64,075)
    Provision for estimated losses and reserves		27,595		5,755
    Changes in other regulatory assets		(193,323)		(316,327)
    Other		(176,575)		92,417
    Net cash flow provided by operating activities		2,257,357		1,106,948
    INVESTING ACTIVITIES
    Construction/capital expenditures		(1,233,505)		(877,165)
    Allowance for equity funds used during construction		32,088		29,414
    Nuclear fuel purchases		(260,759)		(260,587)
    Proceeds from sale/leaseback of nuclear fuel		135,079		174,140
    Proceeds from sale of assets and businesses		77,159		-
    Payment for purchase of plant		(88,199)		(162,075)
    Decrease in other investments		56,501		19,698
    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
    Investment in nuclear decommissioning trust funds		(655,788)		(786,635)
    Other regulatory investments		(38,506)		(240,232)
    Net cash flow used in investing activities		(1,395,185)		(1,203,998)
    See Notes to Consolidated Financial Statements.
    30
    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the Nine Months Ended September 30, 2006 and 2005
    (Unaudited)
    		2006		2005
    		(In Thousands)
    FINANCING ACTIVITIES
    Proceeds from the issuance of:
    Long-term debt		1,377,701		2,538,976
    Preferred stock		73,354		29,998
    Common stock and treasury stock		32,072		114,552
    Retirement of long-term debt		(1,598,425)		(1,366,909)
    Repurchase of common stock		-		(878,188)
    Redemption of preferred stock		(183,881)		(33,719)
    Changes in credit line borrowings - net		(40,000)		39,850
    Dividends paid:
    Common stock		(337,104)		(341,437)
    Preferred stock		(22,861)		(19,087)
    Net cash flow provided by (used in) financing activities		(699,144)		84,036
    Effect of exchange rates on cash and cash equivalents		(820)		(787)
    Net increase (decrease) in cash and cash equivalents		162,208		(13,801)
    Cash and cash equivalents at beginning of period		582,820		619,786
    Effect of the deconsolidation of Entergy New Orleans on cash and cash equivalents		-		(7,954)
    Cash and cash equivalents at end of period		$745,028		$598,031
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid (received) during the period for:
    Interest - net of amount capitalized		$390,059		$332,056
    Income taxes		($197,560)		$118,989
    See Notes to Consolidated Financial Statements.

    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF INCOME
    For the Three and Nine Months Ended September 30, 2007 and 2006
    (Unaudited)
    		Three Months Ended				Nine Months Ended
    		2007		2006		2007		2006
    		(In Thousands, Except Share Data)
    OPERATING REVENUES
    Electric		$2,646,546		$2,761,124		$6,952,648		$7,031,771
    Natural gas		30,154		12,495		158,014		63,522
    Competitive businesses		612,387		481,100		1,641,836		1,355,961
    TOTAL		3,289,087		3,254,719		8,752,498		8,451,254
    OPERATING EXPENSES
    Operating and Maintenance:
    Fuel, fuel-related expenses, and
    gas purchased for resale		809,283		987,558		2,192,296		2,489,347
    Purchased power		520,622		607,777		1,565,861		1,646,555
    Nuclear refueling outage expenses		44,387		43,045		131,977		127,584
    Other operation and maintenance		667,376		590,992		1,871,424		1,693,657
    Decommissioning		43,597		36,933		123,507		108,787
    Taxes other than income taxes		129,123		133,527		368,153		327,995
    Depreciation and amortization		239,064		232,042		710,127		655,374
    Other regulatory charges (credits) - net		25,303		(21,563)		62,187		(124,509)
    TOTAL		2,478,755		2,610,311		7,025,532		6,924,790
    OPERATING INCOME		810,332		644,408		1,726,966		1,526,464
    OTHER INCOME
    Allowance for equity funds used during construction		9,367		7,721		34,084		32,088
    Interest and dividend income		63,754		37,720		174,811		116,689
    Equity in earnings of unconsolidated equity affiliates		1,432		14,772		3,533		26,843
    Miscellaneous - net		(6,103)		30,964		(17,881)		16,793
    TOTAL		68,450		91,177		194,547		192,413
    INTEREST AND OTHER CHARGES
    Interest on long-term debt		133,165		125,907		380,321		369,058
    Other interest - net		52,503		15,035		118,270		47,532
    Allowance for borrowed funds used during construction		(5,260)		(4,538)		(20,175)		(18,989)
    Preferred dividend requirements and other		6,375		6,811		18,784		22,622
    TOTAL		186,783		143,215		497,200		420,223
    INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		691,999		592,370		1,424,313		1,298,654
    Income taxes		230,840		202,437		483,357		444,170
    INCOME FROM CONTINUING OPERATIONS		461,159		389,933		940,956		854,484
    INCOME (LOSS) FROM DISCONTINUED OPERATIONS (net of income
    tax expense (benefit) of ($563) and $5,423, respectively)		-		(1,050)		-		9,830
    CONSOLIDATED NET INCOME		$461,159		$388,883		$940,956		$864,314
    Basic earnings per average common share:
    Continuing operations		$2.37		$1.87		$4.77		$4.11
    Discontinued operations		-		-		-		0.05
    Basic earnings per average common share		$2.37		$1.87		$4.77		$4.16
    Diluted earnings per average common share:
    Continuing operations		$2.30		$1.83		$4.63		$4.03
    Discontinued operations		-		-		-		0.05
    Diluted earnings per average common share		$2.30		$1.83		$4.63		$4.08
    Dividends declared per common share		$0.75		$0.54		$1.83		$1.62
    Basic average number of common shares outstanding		194,864,359		208,382,863		197,443,652		208,034,946
    Diluted average number of common shares outstanding		200,532,942		212,404,770		203,362,110		211,782,858
    See Notes to Financial Statements.

    27

    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the Nine Months Ended September 30, 2007 and 2006
    (Unaudited)
    		2007		2006
    		(In Thousands)
    OPERATING ACTIVITIES
    Consolidated net income		$940,956		$864,314
    Adjustments to reconcile consolidated net income to net cash flow
    provided by operating activities:
    Reserve for regulatory adjustments		(18,337)		43,960
    Other regulatory charges (credits) - net		62,187		(124,509)
    Depreciation, amortization, and decommissioning		833,634		765,627
    Deferred income taxes, investment tax credits, and non-current taxes accrued		510,435		611,766
    Equity in earnings of unconsolidated equity affiliates - net of dividends		(3,533)		(24,669)
    Changes in working capital:
    Receivables		(317,454)		210,311
    Fuel inventory		390		3,652
    Accounts payable		(155,736)		(390,804)
    Taxes accrued		(176,790)		66,046
    Interest accrued		8,180		3,190
    Deferred fuel		(89,558)		436,663
    Other working capital accounts		(53,977)		111,491
    Provision for estimated losses and reserves		24,753		27,595
    Changes in other regulatory assets		124,102		(193,323)
    Other		(62,500)		(153,953)
    Net cash flow provided by operating activities		1,626,752		2,257,357
    INVESTING ACTIVITIES
    Construction/capital expenditures		(1,083,090)		(1,251,732)
    Allowance for equity funds used during construction		34,084		32,088
    Nuclear fuel purchases		(272,137)		(260,759)
    Proceeds from sale/leaseback of nuclear fuel		128,292		135,079
    Proceeds from sale of assets and businesses		13,063		77,159
    Payment for purchase of plant		(336,211)		(88,199)
    Insurance proceeds received for property damages		82,648		18,227
    Decrease in other investments		71,770		56,501
    Proceeds from nuclear decommissioning trust fund sales		1,299,685		580,745
    Investment in nuclear decommissioning trust funds		(1,388,806)		(655,788)
    Other regulatory investments		-		(38,506)
    Net cash flow used in investing activities		(1,450,702)		(1,395,185)
    See Notes to Financial Statements.
    28
    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    For the Nine Months Ended September 30, 2007 and 2006
    (Unaudited)
    		2007		2006
    		(In Thousands)
    FINANCING ACTIVITIES
    Proceeds from the issuance of:
    Long-term debt		2,437,163		1,377,701
    Preferred stock		-		73,354
    Common stock and treasury stock		59,175		32,072
    Retirement of long-term debt		(889,813)		(1,598,425)
    Repurchase of common stock		(1,024,185)		-
    Redemption of preferred stock		(3,450)		(183,881)
    Changes in credit line borrowings - net		60,000		(40,000)
    Dividends paid:
    Common stock		(361,574)		(337,104)
    Preferred stock		(19,532)		(22,861)
    Net cash flow provided by (used in) financing activities		257,784		(699,144)
    Effect of exchange rates on cash and cash equivalents		(394)		(820)
    Net increase in cash and cash equivalents		433,440		162,208
    Cash and cash equivalents at beginning of period		1,016,152		582,820
    Effect of the reconsolidation of Entergy New Orleans on cash and cash equivalents		17,093		-
    Cash and cash equivalents at end of period		$1,466,685		$745,028
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
    Cash paid/(received) during the period for:
    Interest - net of amount capitalized		$449,038		$390,059
    Income taxes		$349,058		($197,560)
    See Notes to Financial Statements.
    29

    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    ASSETS
    September 30, 2007 and December 31, 2006
    (Unaudited)
    		2007		2006
    		(In Thousands)
    CURRENT ASSETS
    Cash and cash equivalents:
    Cash		$127,307		$117,379
    Temporary cash investments - at cost,
    which approximates market		1,339,378		898,773
    Total cash and cash equivalents		1,466,685		1,016,152
    Note receivable - Entergy New Orleans DIP loan		-		51,934
    Notes receivable		421		699
    Accounts receivable:
    Customer		638,059		410,512
    Allowance for doubtful accounts		(27,537)		(19,348)
    Other		475,037		487,264
    Accrued unbilled revenues		345,321		249,165
    Total accounts receivable		1,430,880		1,127,593
    Deferred fuel costs		35,522		-
    Accumulated deferred income taxes		-		11,680
    Fuel inventory - at average cost		197,749		193,098
    Materials and supplies - at average cost		683,000		604,998
    Deferred nuclear refueling outage costs		209,473		147,521
    System agreement cost equalization		107,886		-
    Prepayments and other		106,449		171,759
    TOTAL		4,238,065		3,325,434
    OTHER PROPERTY AND INVESTMENTS
    Investment in affiliates - at equity		79,262		229,089
    Decommissioning trust funds		3,303,701		2,858,523
    Non-utility property - at cost (less accumulated depreciation)		212,110		212,726
    Other		69,711		47,115
    TOTAL		3,664,784		3,347,453
    PROPERTY, PLANT AND EQUIPMENT
    Electric		32,568,142		30,713,284
    Property under capital lease		737,459		730,182
    Natural gas		297,355		92,787
    Construction work in progress		973,798		786,147
    Nuclear fuel under capital lease		317,653		336,017
    Nuclear fuel		573,489		494,759
    TOTAL PROPERTY, PLANT AND EQUIPMENT		35,467,896		33,153,176
    Less - accumulated depreciation and amortization		14,891,183		13,715,099
    PROPERTY, PLANT AND EQUIPMENT - NET		20,576,713		19,438,077
    DEFERRED DEBITS AND OTHER ASSETS
    Regulatory assets:
    SFAS 109 regulatory asset - net		677,166		740,110
    Other regulatory assets		3,103,377		2,768,352
    Deferred fuel costs		168,122		168,122
    Long-term receivables		16,257		19,349
    Goodwill		377,172		377,172
    Other		936,861		898,662
    TOTAL		5,278,955		4,971,767
    TOTAL ASSETS		$33,758,517		$31,082,731
    See Notes to Financial Statements.
    30
    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    LIABILITIES AND SHAREHOLDERS' EQUITY
    September 30, 2007 and December 31, 2006
    (Unaudited)
    		2007		2006
    		(In Thousands)
    CURRENT LIABILITIES
    Currently maturing long-term debt		$626,942		$181,576
    Notes payable		83,037		25,039
    Accounts payable		978,614		1,122,596
    Customer deposits		283,526		248,031
    Taxes accrued		10,534		187,324
    Accumulated deferred income taxes		20,494		-
    Interest accrued		187,015		160,831
    Deferred fuel costs		-		73,031
    Obligations under capital leases		153,559		153,246
    Pension and other postretirement liabilities		32,693		41,912
    System agreement cost equalization		107,886		-
    Other		239,208		271,544
    TOTAL		2,723,508		2,465,130
    NON-CURRENT LIABILITIES
    Accumulated deferred income taxes and taxes accrued		6,328,049		5,820,700
    Accumulated deferred investment tax credits		348,099		358,550
    Obligations under capital leases		176,648		188,033
    Other regulatory liabilities		531,311		449,237
    Decommissioning and asset retirement cost liabilities		2,355,912		2,023,846
    Transition to competition		79,098		79,098
    Accumulated provisions		129,906		88,902
    Pension and other postretirement liabilities		1,409,540		1,410,433
    Long-term debt		10,147,126		8,798,087
    Preferred stock with sinking fund		7,050		10,500
    Other		1,187,878		847,415
    TOTAL		22,700,617		20,074,801
    Commitments and Contingencies
    Preferred stock without sinking fund		364,479		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		4,846,834		4,827,265
    Retained earnings		6,687,955		6,113,042
    Accumulated other comprehensive income (loss)		8,194		(100,512)
    Less - treasury stock, at cost (53,911,876 shares in 2007 and
    45,506,311 shares in 2006)		3,575,552		2,644,390
    TOTAL		7,969,913		8,197,887
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$33,758,517		$31,082,731
    See Notes to Financial Statements.
    31

    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
    For the Three Months Ended September 30, 2007 and 2006
    (Unaudited)
    				2007				2006
    				(In Thousands)
    RETAINED EARNINGS
    Retained Earnings - Beginning of period				$6,372,687				$5,681,618
    Add: Consolidated net income				461,159		$461,159		388,883		$388,883
    Deduct:
    Dividends declared on common stock				145,891				112,570
    Capital stock and other expenses				-				1,621
    Total				145,891				114,191
    Retained Earnings - End of period				$6,687,955				$5,956,310
    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
    Balance at beginning 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)
    Net derivative instrument fair value changes
    arising during the period (net of tax expense of $24,296 and $17,470)				42,201		42,201		27,295		27,295
    Pension and other postretirement liabilities (net of tax expense of $682)				69		69		-		-
    Net unrealized investment gains (net of tax expense of $24,586 and $18,788)				7,541		7,541		23,840		23,840
    Foreign currency translation (net of tax expense of $82 and $143)				152		152		265		265
    Minimum pension liability (net of tax expense of $386)				-		-		617		617
    Balance at end of period:
    Accumulated derivative instrument fair value changes				(17,361)				(167,334)
    Pension and other postretirement liabilities				(105,701)				-
    Net unrealized investment gains				124,438				83,216
    Foreign currency translation				6,818				4,038
    Minimum pension liability				-				(21,728)
    Total				$8,194				($101,808)
    Comprehensive Income						$511,122				$440,900
    PAID-IN CAPITAL
    Paid-in Capital - Beginning of period				$4,841,059				$4,817,628
    Add:
    Common stock issuances related to stock plans				5,775				1,264
    Paid-in Capital - End of period				$4,846,834				$4,818,892
    See Notes to Financial Statements.
    32

    ENTERGY CORPORATION AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF RETAINED EARNINGS, COMPREHENSIVE INCOME, AND PAID-IN CAPITAL
    For the Nine Months Ended September 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				940,956		$940,956		864,314		$864,314
    Adjustment related to FIN 48 implementation				(4,600)				-
    Total				936,356				864,314
    Deduct:
    Dividends declared on common stock				361,443				337,004
    Capital stock and other expenses				-				4,931
    Total				361,443				341,935
    Retained Earnings - End of period				$6,687,955				$5,956,310
    ACCUMULATED OTHER COMPREHENSIVE INCOME (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 $54,472 and $149,013)				88,217		88,217		225,280		225,280
    Pension and other postretirement liabilities (net of tax expense of $2,048)				208		208		-		-
    Net unrealized investment gains (net of tax expense of $31,693 and $10,986)				19,887		19,887		15,293		15,293
    Foreign currency translation (net of tax expense of $212 and $442)				394		394		821		821
    Minimum pension liability (net of tax expense of $386)				-		-		617		617
    Balance at end of period:
    Accumulated derivative instrument fair value changes				(17,361)				(167,334)
    Pension and other postretirement liabilities				(105,701)				-
    Net unrealized investment gains				124,438				83,216
    Foreign currency translation				6,818				4,038
    Minimum pension liability				-				(21,728)
    Total				$8,194				($101,808)
    Comprehensive Income						$1,049,662				$1,106,325
    PAID-IN CAPITAL
    Paid-in Capital - Beginning of period				$4,827,265				$4,817,637
    Add (Deduct):
    Common stock issuances related to stock plans				19,569				1,255
    Paid-in Capital - End of period				$4,846,834				$4,818,892
    See Notes to Financial Statements.
    33

    ENTERGY CORPORATION AND SUBSIDIARIES
    SELECTED OPERATING RESULTS
    For the Three and Nine Months Ended September 30, 2007 and 2006
    (Unaudited)
    		Three Months Ended				Increase/
    Description		2007		2006		(Decrease)		%
    		(Dollars In Millions)
    Utility Electric Operating Revenues:
    Residential		$1,076		$1,115		($39)		(3)
    Commercial		684		687		(3)		- -
    Industrial		646		704		(58)		(8)
    Governmental		60		42		18		43
    Total retail		2,466		2,548		(82)		(3)
    Sales for resale		106		147		(41)		(28)
    Other		75		66		9		14
    Total		$2,647		$2,761		($114)		(4)
    Utility Billed Electric Energy
    Sales (GWh):
    Residential		11,128		10,772		356		3
    Commercial		8,111		7,484		627		8
    Industrial		10,120		10,154		(34)		- -
    Governmental		637		436		201		46
    Total retail		29,996		28,846		1,150		4
    Sales for resale		1,413		2,894		(1,481)		(51)
    Total		31,409		31,740		(331)		(1)
    		Nine Months Ended				Increase/
    Description		2007		2006		(Decrease)		%
    		(Dollars In Millions)
    Utility Electric Operating Revenues:
    Residential		$2,512		$2,509		$3		- -
    Commercial		1,816		1,773		43		2
    Industrial		1,920		1,990		(70)		(4)
    Governmental		163		118		45		38
    Total retail		6,411		6,390		21		- -
    Sales for resale		295		488		(193)		(40)
    Other		247		154		93		60
    Total		$6,953		$7,032		($79)		(1)
    Utility Billed Electric Energy
    Sales (GWh):
    Residential		25,905		24,768		1,137		5
    Commercial		20,708		19,078		1,630		9
    Industrial		29,256		28,768		488		2
    Governmental		1,749		1,196		553		46
    Total retail		77,618		73,810		3,808		5
    Sales for resale		4,479		8,471		(3,992)		(47)
    Total		82,097		82,281		(184)		- -
    34

     

    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.

    33

    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-NuclearConventional Property Insurance

    See Note 8 to the consolidated financial statements in the Form 10-K for information on Entergy's non-nuclearconventional property insurance program. BeginningFollowing are updates to that information.

    Hurricane Katrina and Hurricane Rita Claims

    Entergy has received a total of $134.5 million as of September 30, 2007 on its Hurricane Katrina and Hurricane Rita insurance claims, including $69.5 million that Entergy received in Junethe second quarter 2007 in settlement of its Hurricane Katrina claim with one of its excess insurers. Of the $134.5 million received, $70.7 million was allocated to Entergy New Orleans, $33.2 million to Entergy Gulf States, and $24.8 million to Entergy Louisiana. In the third quarter 2007, Entergy filed a lawsuit in the U.S. District Court for the Eastern District of Louisiana against its other excess insurer on the Hurricane Katrina claim. At issue in the lawsuit is whether any policy exclusions limit the extent of coverage provided by that insurer.

    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 aggregation limitsettlement 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.

    Conventional Property Insurance Coverage Update

    Entergy's conventional property insurance program provides coverage up to $400 million on an Entergy system-wide basis for all partiesoperational perils including direct physical loss or damage due to machinery breakdown, electrical failure, fire, lightning, hail, and explosion on an "each and every loss" basis. In addition to this coverage, the program provides coverage up to $350 million on an Entergy system-wide basis for all natural perils including named windstorm, earthquake and flood on an annual aggregate basis. The coverage is subject to a $20 million self-insured retention per occurrence for operational perils or a 2% of the insured by Oil Insurance Limited (OIL)loss retention per occurrence for any one occurrence was reducednatural perils (up to $500 million. Mosta $35 million maximum self-insured retention). Covered property generally includes power plants, substations, facilities, inventories, and gas distribution-related properties. Excluded property generally includes above-ground transmission and distribution lines, poles, and towers. The primary

    35

    property program consists of Entergy's non-nucleara $150 million layer in excess of the self-insured retention and is placed through various insurers.The excess program consists of a $250 million layer in excess of the $150 million primary program for operational perils and a $150million layer in excess of the $150 million primary program for natural perils and is placed on a quota share basis through two insurers. The natural perils additional layer program consists of a $50 million layer in excess the $150 million excess program and is also placed on a quota share basis through two insurers. Coverage is in place for Entergy Corporation, the Registrant Subsidiaries, and certain other Entergy subsidiaries, including the owners of the Non-Utility Nuclear power plants.

    In addition to the conventional property insurance program, Entergy has purchased additional coverage includes($20 million per occurrence) for some of its non-regulated, non-generation assets. This policy serves to buy-down the $20 million deductible and is placed on a $75 million drop-down feature in the event of an OIL aggregation lossscheduled location basis. The applicable deductibles are $100,000 to which an Entergy loss contributes.$250,000.

    Nuclear Decommissioning and Other Asset Retirement CostsNYPA Value Sharing Agreements

    See Note 8 to the consolidatedfinancial statements in the Form 10-K for a discussion of Non-Utility Nuclear's value sharing agreements with NYPA for energy sales from the FitzPatrick and Indian Point 3 power plants. In October 2007 Non-Utility Nuclear and NYPA amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms. Under the amended value sharing agreements Non-Utility Nuclear will make annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014. Non-Utility Nuclear will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million, and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million. The annual payment for each year is due by January 15 of the following year, with the payment for year 2007 output due on January 15, 2008. If Entergy or an Entergy affiliate ceases to own the plants, then, after January 2009, the annual payment obligation terminates for generation after the date that Entergy ownership ceases.

    Non-Utility Nuclear had previously calculated that $0 was owed to NYPA under the value sharing agreements for generation output in 2005 and 2006. In November 2006 NYPA filed a demand for arbitration claiming that $90.5 million was due to NYPA for 2005 under these agreements, and NYPA filed in April 2007 an amended demand for arbitration claiming that an additional $54 million was due to NYPA for 2006 under the value sharing agreements. As part of their agreement to amend the value sharing agreements, Non-Utility Nuclear and NYPA waived all present and future claims under the previous value sharing terms, including the claims for 2005 and 2006 pending before the arbitrator.

    Non-Utility Nuclear will record its liability for payments to NYPA as power is generated and sold by Indian Point 3 and FitzPatrick. Non-Utility Nuclear recorded a $57 million liability for generation through September 30, 2007. An amount equal to the liability will be recorded to the plant asset account as contingent purchase price consideration for the plants. This amount will be depreciated over the expected remaining useful life of the plants.

    CashPoint Bankruptcy(Entergy Arkansas, 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 on nuclear decommissioning and other retirement costs. In the third quarter of 2006, Entergy's Non-Utility Nuclear business recorded a reduction of $27.0 million in its decommissioning cost liabilities in conjunction with a new decommissioning cost study as a result of revised decommissioning costs and changes in assumptions 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

    The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits and other labor-related proceedings filed by current and former 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 its 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 National Labor Relations Board; claims of retaliation; and claims for or regarding benefits under various Entergy Corporation sponsored plans. Entergy and certain subsidiariesthe Registrant Subsidiaries are defendants in numerous lawsuits filed by former employees asserting that they were wrongfully terminated and/or discriminated against on the basis of age, race, sex, or other protected characteristics. The defendant companiesresponding to these suits and proceedings and deny any liability to the plaintiffs.claimants.

    36

    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.

    Entergy Gulf States (Texas)

    The Entergy Gulf States rate filing made with the PUCT in September 2007, which is discussed below, includes a request to reconcile $858 million in fuel and purchased power costs on a Texas retail basis incurred over the period January 2006 through March 2007.

    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 be implemented$109.4 million. The refund was made 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 reconcilingreconciled $1.6 billion of fuel and purchased power costs on a Texas retail basis. HearingsA hearing was conducted before ALJs in April 2007. In July 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

    37

    purchased power capacity costs. In September 2007, the PUCT issued a final order, which affirmed the ultimate result of the ALJ's proposal for decision. Upon motions for rehearing, the PUCT added additional language in its order on rehearing.  In order to preserve any appeals, the parties will have to file a subsequent motion for rehearing to the PUCT's order on rehearing.

    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 through a transition charge amounts sufficient to service the securitization bonds. Entergy Gulf States will use the proceeds to refinance or retire debt and to reduce equity. 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 securitized debt issued. Securitization is authorized by a law signed by the Governor of Louisiana in May 2006. 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 States, Entergy Louisiana, the LPSC Staff's audit report finding thatstaff, and most other parties in the prices paidproceeding was read into the record. The stipulation quantifies the balance of storm restoration costs for natural gas and purchased power were reasonable and that given the market conditions surrounding Hurricanes Katrina and Rita,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 s tipulation also calls for securitization of the storm restoration costs and storm reserves in response to an extremely difficult environment.those same amounts. Hearings on authorization of securitization of the storm costs and reserves were held in June 2007. In August 2007, the LPSC issued orders approving recovery of the stipulated storm cost recovery and storm reserve amounts plus certain debt retirement and upfront and ongoing costs through securitization financing.

    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 on 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.

    38

    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 its 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 $180.8 million of the funds as of September 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 base rate filing requesting an adjusted annual increase of $106.5 million, the APSC ordered Entergy Arkansas filedto reduce its annual rates by $5 million, and set a return on common equity 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 decision, 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 decision 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 arejected Entergy Arkansas' 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.costs, but directed Entergy Arkansas and the other parties in the case to develop an annual earnings review process that may address this issue.

    The APSC denied Entergy Arkansas' request for rehearing of the APSC's June 2007 decision. In September 2007, Entergy Arkansas appealed the decision to the Arkansas Court of Appeals. In its Notice of Appeal, Entergy Arkansas states that the APSC's decision represents arbitrary decision-making, and enumerates seventeen reasons why the APSC's decision is unlawful. A proceduralbriefing schedule that concludes in the first quarter 2008 has been established with hearings expected to begin in April 2007.by the appeals court.

    See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends -Federal Regulation - -System Agreement Litigation" in the Form 10-K and herein for a discussion of Entergy's compliance filing in that proceeding. IfIn its June 2007 decision on Entergy Arkansas' rate filing, the FERC approves the compliance tariff as filed, then payments under that tariff will be classified as energy costs, which would then be included in settingAPSC approved through December 31, 2008 a production cost allocation rider for recovery from customers of 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 recoveryportion of the costs allocated to itEntergy Arkansas 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.litigation.

    Filings with the PUCT and Texas Cities(Entergy Gulf States)

    As discussedEntergy Gulf States made a rate filing in September 2007 with the Form 10-K, in August 2005,PUCT requesting an annual rate increase totaling $107.5 million, including a base rate increase of $64.3 million and special riders totaling $43.2 million. The base rate increase includes $12.2 million for the storm damage reserve. Entergy Gulf States is requesting an 11% return on common equity.

    39

    In September 2007, Entergy Gulf States filed with the PUCT a request to increase its incremental purchased capacity recovery rider to collect approximately $25 million on an application for recovery of its transitionannual basis. This filing also includes a request to competition costs. Entergy Gulf States requested recovery of $189implement an interim surcharge to collect approximately $10 million in transition to competitionunder-recovered incremental purchased capacity costs incurred 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 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 millionJuly 2007. A decision 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 partiesexpected in the transitionfirst quarter 2008. Amounts collected through the rider and interim surcharge are subject 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.final reconciliation.

    Filings with the LPSC

    Retail Rates - Electric

    (Entergy Gulf States)

    In March 2006, the LPSC approved an uncontested stipulated settlement inMay 2007, Entergy Gulf States'States made its formula rate plan filing with the LPSC for the 20042006 test year. The settlement includesfiling reflected a revenue requirement increase10.0% return on common equity, which is within the allowed earnings bandwidth, and an anticipated formula rate plan decrease of $36.8$23 million annually attributable to adjustments outside of the formula rate plan sharing mechanism related to capacity costs and calls forthe anticipated securitization of storm costs related to Hurricane Katrina and Hurricane Rita and the securitization of a storm reserve. In September 2007, Entergy Gulf States modified the formula rate plan filing to applyreflect a refund liability10.07% return on common equity, which is still within the allowed bandwidth. The modified filing also reflected implementation of $744 thousanda $4.1 million rate increase attributable to recovery of additional LPSC approved incremental deferred and ongoing capacity deferrals.costs. The refund liability pertained torate decrease anticipated in the periods 2004-2005 as well asoriginal filing did not occur because of the interim period in whichadditional capacity costs approved b y the LPSC, and because securitization of storm costs associated with Hurricane Katrina and Hurricane Rita and the establishment of a $37.2 million revenue increase was in place.storm reserve have not yet occurred. Entergy Gulf States is currently exploring its securitization options.

    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 common equity which is within the allowed bandwidth. The modified filing includes a formula rate plan increase of $17.2 million whichannually that provides for 1) interim recovery of $10.5 million of storm costs from HurricanesHurricane Katrina and Hurricane 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 Gulf States and the LPSC staff, affirming the rates that were implemented in September 2006.

    (Entergy Louisiana)

    In May 2006,2007, Entergy Louisiana made its formula rate plan filing with the LPSC for the 20052006 test year. Entergy Louisiana modified the filing in August 2006 to reflectyear, indicating a 9.45%7.6% return on common equity and an anticipated formula rate plan decrease of $6.9 million. The filing also included Entergy Louisiana's request to recover $39.8 million in unrecovered fixed costs associated with the loss of customers that resulted from Hurricane Katrina and Hurricane Rita, which if approved by the LPSC would increase the return on common equity under the original filing to 9.4%, which is within the allowedband of no change adjacent to the lower end of the sharing 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 ofIn September 2006. Comments were provided by the LPSC Staff, which2007, Entergy Louisiana is currently reviewing. Entergy Louisiana subsequently updatedmodified its formula rate plan riderfiling to reflect its implementation of certain adjustments proposed by the LPSC Staffstaff in its review of Entergy Louisiana's original filing with which it agrees. The adjusted return on equityEntergy Louisiana agreed, and to reflect its implementation of 9.56% remains within the allowed bandwidth. Ongoing and deferred incremental capacity costs were reduced to $119 million. The updatedan $18.4 million annual formula rate plan rider was implemented, subjectrate increase comprised of (1) a $23.8 million increase representing 60% of Entergy Louisiana's revenue deficiency, and (2) a $5.4 million decrease for reduced incremental and deferred capacity costs. The return on common equity in the modified filing is 7.63%. The LPSC authorized Entergy Louisiana to refund,defer for accounting purposes the difference between its $39.8 million claim for unrecovered fixed costs and 60% of the revenue deficiency to preserve Entergy Louisiana's right to pursue that claim in full during the formula rate plan proceeding. The rate decrease anticipated in the original filing did not occur because securitization of storm costs associated with Hurricane Katrina and Hurricane Rita and the first billing cycleestablishment of October 2006.a storm reserve have not yet occurred. Entergy Louisiana is currently exploring its securitization options.

    40

    Retail Rates -Rates- Gas (Entergy Gulf States)

    In January 2006,2007, Entergy Gulf States filed with the LPSC its gas rate stabilization plan.plan for the test year ending September 30, 2006.  The filing showed a revenue deficiency of $4.1$3.5 million based on an ROEa return on common equity mid-point of 10.5%.  On May 1, 2006,In March 2007, Entergy Gulf States filed a set of rate and rider schedules that reflected all proposed LPSC staff adjustments and implemented a $3.5$2.4 million base rate increase effective with the first billing cycle of April 2007 pursuant to an uncontested agreement with the LPSC Staff.rate stabilization plan. 

    Filings with the MPSC (Entergy Mississippi)

    In March 2006,2007, Entergy Mississippi made its annual scheduled formula rate plan filing for the 2006 test year with the MPSC.  The filing was amended by an April 2006 filing.  The amended filing showed that an increase of $3.1$12.9 million in annual electric revenues is warranted.  TheIn June 2007 the MPSC has approved a settlement providingjoint stipulation between Entergy Mississippi and the Mississippi Public Utilities staff that provides for a $1.8$10.5 million rate increase, which was implemented in August 2006.

    40

    Filingseffective beginning with the City Council

    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 DecemberJuly 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.billings.

    Customer-InitiatedElectric 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 deterioration of its credit quality and financial strength. The June 4, 2007 filing also proposes a rule making process to implement the Financial Stability Provision and to consider the construction and ownership of necessary ERCOT integration facilities by third parties. The filing also eliminated from the plan certain provisions whereby Entergy Gulf States had the a bility in its sole discretion to cease pursuit of the plan. Under Entergy Gulf States' plan, retail open access could commence as early as 2013, although that is unlikely given the PUCT's decision described below. 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 were completed in July 2007. In October 2007, the PUCT abated the proceeding to allow the Southwest Power Pool (SPP) to develop additional information about the costs and benefits of Entergy Gulf States joining the SPP similar to information presented regarding Entergy Gulf States joining ERCOT. The SPP has stated that it would take a minimum of six to nine months to develop this type of information. Entergy Gulf States filed a motion for reconsideration, in which it asks the PUCT to also allow for an update to the ERCOT cost study.

    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 respect 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.

    41

    Co-Owner-Initiated Proceeding at the FERC

    As discussed in Part I, Item 1 of the Form 10-K, in September(Entergy Arkansas)

    In October 2004, East TexasArkansas Electric Cooperative (ETEC)(AECC) filed a complaint at the FERC against Entergy Arkansas relating to a contract dispute over the pricing of substitute energy at the co-owned Independence and White Bluff coal unit.  In October 2004, Arkansas Electric Cooperative (AECC) filed a similar complaint at the FERC against Entergy Arkansas, addressing the same issue with respect to Independence and another co-owned coal unit, White Bluff. FERC consolidated these cases, ordered a hearing in the consolidated proceeding, and established refund effective dates.plants. The main issue in the consolidated case relatesrelated to the consequences under the governing contracts when the dispatch of the coal units is constrained due to system operating conditions.  In August 2005, Entergy Arkansas and ETEC filed a settlement at the FERC 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 anits order onin the ALJ's Initial Decision.proceeding. 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. The FERC denied Entergy Arkansas' request for rehearing and Entergy Arkansas estimates currently that this will result in a refundrefunded $22.1 million (including interest) to AECC of approximately $26 million, althoughin September 2007. Entergy Arkansas is still refininghad previously recorded a provision for the estimate. Requests for rehearingestimated effect of t hethis refund. AECC has filed a protest at the FERC claiming that Entergy Arkansas owes an additional $2.5 million plus interest. Entergy Arkansas has appealed the FERC's decision are due on November 24, 2006.to the D.C. Circuit.

    41

    NOTE 3. COMMON EQUITY

    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 September 30,
    			2007				2006
    			(In Millions, Except Per Share Data)
    					$/share				$/share
    Consolidated net income			$461.2				$388.9
    Average number of common shares   outstanding - basic			194.9		$2.37		208.4		$1.87
    Average dilutive effect of:
    	Stock Options		4.6		(0.055)		3.8		(0.034)
    	Equity Units		0.9		(0.011)		-		-
    	Deferred Units		0.1		(0.001)		0.2		(0.002)
    Average number of common shares   outstanding - diluted			200.5		$2.30		212.4		$1.83

    42

    			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 Nine Months Ended September 30,
    			2007				2006
    			(In Millions, Except Per Share Data)
    					$/share				$/share
    Consolidated net income			$941.0				$864.3
    Average number of common shares   outstanding - basic			197.4		$4.77		208.0		$4.16
    Average dilutive effect of:
    	Stock Options		4.9		(0.115)		3.6		(0.070)
    	Equity Units		1.0		(0.023)		-		-
    	Deferred Units		0.1		(0.003)		0.2		(0.004)
    Average number of common shares   outstanding - diluted			203.4		$4.63		211.8		$4.08

    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 nine months ended September 30, 2006,2007, Entergy Corporation issued 1,038,5781,556,977 shares of its previously repurchased common stock to satisfy stock option exercises and other stock-based awards. Also during the nine months ended September 30, 2007, Entergy Corporation purchased 9,962,542 shares of its common stock for a total purchase price of $1.0 billion.

    Retained Earnings

    On October 27, 2006,26, 2007, Entergy Corporation's Board of Directors declared a common stock dividend of $0.54$0.75 per share, payable on December 1, 20062007 to holders of record as of November 10, 2006.

    429, 2007.

    Accumulated Other Comprehensive Income

    Cash flow hedges with net unrealized losses of approximately $130$8.7 million net-of-tax at September 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 two separate revolving credit facilities,as of September 30, 2007, a five-year credit facility and a three-year credit facility. The five-year credit facility, which expires in May 2010,August 2012 and has a borrowing capacity of $2 billion, of which $495 million was outstanding as of September 30, 2006. The three-year facility, which expires in December 2008,$3.5 billion. Entergy Corporation also has a borrowing capacity of $1.5 billion, none of which was outstanding as of September 30, 2006. Entergy canthe ability to issue letters of credit against the total borrowing capacity of boththe credit facilities, and letters of credit totaling $94.1 million had been issued against the five-yearfacility. The facility at September 30, 2006. The total unused capacity for these facilities as of September 30, 2006 was approximately $2.9 billion. The commitment fee for this facility is currently 0.13% per annum0.09% of the unusedcommitment amount. CommitmentFacility fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate as of September 30, 2007 was 5.88% on the dome stic utility companies.drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of September 30, 2007.

    43

    Capacity		Borrowings		Letters of Credit		Capacity Available
    (In Millions)
    $3,500		$2,116		$71		$1,313

    Entergy Corporation's facility requires 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 one of the Registrant Subsidiaries (except Entergy New Orleans) default on other indebtedness or are in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.

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

    Company		Expiration Date		Amount of Facility		Amount Drawn as of September 30, 20062007
    Entergy Arkansas		April 20072008		$85100 million (a)		-$60 million
    Entergy Gulf States		February 2011		$502 million (a)(b)		-
    Entergy MississippiGulf States		May 2007August 2012		$30200 million (b)(c)		-
    Entergy Louisiana		August 2012		$200 million (d)		-
    Entergy Mississippi		May 20072008		$30 million (e)		-
    Entergy Mississippi		May 2008		$20 million (b)(e)		-

    (a)	The credit facility requires Entergy Arkansas to maintain a total shareholders' equity of at least 25% of its total assets. The interest rate on the outstanding borrowings is 7.25% as of September 30, 2007.
    (b)	The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of September 30, 2006,2007, $1.4 million in letters of credit had been issued.were outstanding. Entergy Gulf States downsized this facility from a $50 million facility in August 2007.
    (b)(c)	The credit facility allows Entergy Gulf States to issue letters of credit against the borrowing capacity of the facility. As of September 30, 2007, no letters of credit were outstanding.
    (d)	The credit facility allows Entergy Louisiana to issue letters of credit against the borrowing capacity of the facility. As of September 30, 2007, no letters of credit were outstanding.
    (e)	Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable.

    In May 2006,On August 2, 2007, Entergy Mississippi increased its $25 million credit facility to $30 million and renewed it through May 2007. Entergy Mississippi alsoGulf States entered into a new $20$200 million, 5-year bank credit facility. Entergy Gulf States has the ability to issue letters of credit against the facility. The credit agreement requires Entergy Gulf States to maintain a consolidated debt ratio of 65% or less of its total capitalization. The facility through May 2007.has a variable interest rate that would currently be approximately 5.54% on borrowings under the facility, and has a facility fee that is currently 0.125% of the commitment amount. The facility fee and interest rate can fluctuate depending on the senior unsecured debt ratings of Entergy Gulf States. As of September 30, 2007, there were no borrowings or letters of credit outstanding under the Entergy Gulf States $200 million facility.

    On August 2, 2007, Entergy Louisiana entered into a $200 million, 5-year bank credit facility. Entergy Louisiana has the ability to issue letters of credit against the facility. The credit agreement requires Entergy Louisiana to maintain a consolidated debt ratio of 65% or less of its total capitalization. The facility has a variable interest rate that would currently be approximately 5.48% on borrowings under the facility, and has a facility fee that is currently 0.09% of the commitment amount. The facility fee and interest rate can fluctuate depending on the senior unsecured debt ratings of Entergy Louisiana. As of September 30, 2007, there were no borrowings or letters of credit outstanding under the Entergy Louisiana $200 million facility.

    44

    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.

    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 September 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.$311.1 million, and Entergy's subsidiaries had $60 million in outstanding borrowings from external sources.

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

    		Authorized		Borrowings
    		(In Millions)
    Entergy Arkansas		$250		$90
    Entergy Gulf States		$350		-
    Entergy Louisiana		$250		$63
    Entergy Mississippi		$175		-
    Entergy New Orleans		$100		-
    System Energy		$200		-

    Debt Issuances

    43(Entergy Gulf States)

    Long-term Debt

    The following long-term debt has beenIn 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

    Although the principal amount of each tranche is not due until the dates given above, Entergy Gulf States Reconstruction Funding expects to make principal payments on the bonds over the next five years in the amounts of $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 through 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

    45

    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 (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%.

    (System Energy)

    In September 2007, System Energy issued $70 million of 6.20% Series First Mortgage Bonds due October 2012. System Energy used the proceeds to redeem, at maturity, $70 million of 4.875% Series First Mortgage Bonds in October 2007.

    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 assets acquired and liabilities assumed at the date of acquisition.

    46

    		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,Subsequent to the closing, Entergy Louisiana Holdings redeemed allreceived approximately $6 million from Consumers Energy Company as part of its preferred stockthe Post-Closing Adjustment defined in the Asset Sale Agreement. The Post-Closing Adjustment amount resulted in an approximately $6 million reduction in plant and amended its chartera corresponding reduction in other liabilities.

    Non-Utility Nuclear will amortize the PPA liability to eliminate authority to issue any future seriesrevenue over the life 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 (including $33 million through September 30, 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

    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

    The following table includes financial information for stock netoptions for each of related tax effects, for the thirdyears presented:

    	2007		2006
    	(In Millions)
    Compensation expense included in Entergy's Net Income for the third quarter	$3.9		$3.2
    Tax benefit recognized in Entergy's Net Income for the third quarter	$1.5		$1.2
    Compensation expense included in Entergy's Net Income for the nine months ended   September 30,	$11.0		$9.2
    Tax benefit recognized in Entergy's Net Income for the nine months ended   September 30,	$4.2		$3.5
    Compensation cost capitalized as part of fixed assets and inventory as of September 30,	$1.8		$1.6

    Entergy granted 1,854,900 stock options during the first quarter 2006 and nine months ended2007 with a weighted-average fair value of $14.15. At September 30, 2006 is $2.0 million and $5.7 million, respe ctively. Stock-based compensation expense included in earnings applicable to common2007, there were 11,043,483 stock netoptions outstanding with a weighted-average exercise price of related tax effects, for$57.96. The aggregate intrinsic value of the third quarter 2005 and nine months ended September 30, 2005 is $2.0 million and $5.8 million, respectively.stock options outstanding was $556 million.

    4547

    NOTE 7. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS

    Components of Net Pension Cost

    Entergy's qualified pension cost, including amounts capitalized, for the third 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		$24,263		$23,176
    Interest cost on projected benefit obligation		41,814		40,254		46,508		41,814
    Expected return on assets		(44,482)		(40,989)		(51,008)		(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		$32,590		$32,804

    Entergy's qualified pension cost, including amounts capitalized, for the nine months ended September 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		$72,301		$69,529
    Interest cost on projected benefit obligation		125,443		115,222		138,662		125,443
    Expected return on assets		(133,447)		(118,552)		(152,514)		(133,447)
    Amortization of transition asset		-		(497)
    Amortization of prior service cost		4,096		3,736		4,149		4,096
    Amortization of loss		32,790		25,109		34,332		32,790
    Net pension costs		$98,411		$87,289		$96,930		$98,411

    The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the third 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

    48

    		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

    The Registrant Subsidiaries' qualified pension cost, including amounts capitalized, for the nine months ended September 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		$10,914		$9,033		$6,693		$3,267		$1,410		$3,063
    Interest cost on projected
    benefit obligation		31,494		24,417		18,753		10,113		3,780		5,130
    Expected return on assets		(33,027)		(32,250)		(23,424)		(11,511)		(4,338)		(6,408)
    Amortization of prior service cost		1,236		912		480		342		132		36
    Amortization of loss		8,163		1,869		4,299		2,247		1,104		453
    Net pension cost		$18,780		$3,981		$6,801		$4,458		$2,088		$2,274

    		Entergy		Entergy		Entergy		Entergy		Entergy		System
    2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
    		(In Thousands)
    Service cost - benefits earned
    during the period		$10,878		$8,979		$6,547		$3,231		$1,503		$3,093
    Interest cost on projected
    benefit obligation		29,745		23,743		18,155		9,756		3,845		4,813
    Expected return on assets		(29,501)		(30,527)		(21,341)		(11,050)		(2,651)		(5,326)
    Amortization of prior service cost		1,246		926		422		385		169		37
    Amortization of loss		7,313		1,919		4,527		2,175		1,527		500
    Net pension cost		$19,681		$5,040		$8,310		$4,497		$4,393		$3,117

    Entergy recognized $5.2$4.0 million and $4.1$5.2 million in pension cost for its non-qualified pension plans in the third quarters of 20062007 and 2005,2006, respectively. Entergy recognized $13.1$12.0 million and $12.2$13.1 million in pension cost for its non-qualified pension plans for the nine months ended September 30, 20062007 and 2005,2006, respectively.

    49

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

    		Entergy		Entergy		Entergy		Entergy		Entergy
    		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans
    		(In Thousands)
    Non-Qualified Pension Cost   Third Quarter 2007		$123		$317		$6		$44		$57
    Non-Qualified Pension Cost   Third Quarter 2006		$125		$319		$6		$43		$55

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

    			Entergy			Entergy		Entergy		Entergy		Entergy
    			Arkansas			Gulf States		Louisiana		Mississippi		New Orleans
    				(In Thousands)
    Non-Qualified Pension Cost Nine   Months Ended September 30,2007			$369			$951		$18		$131		$171
    Non-Qualified Pension Cost Nine   Months Ended September 30, 2006			$350			$758		$17		$116		$163

    Components of Net Other Postretirement Benefit Cost

    Entergy's other postretirement benefit cost, including amounts capitalized, for the third 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		$11,105		$10,370
    Interest cost on APBO		14,316		12,441		15,869		14,316
    Expected return on assets		(4,756)		(4,338)		(6,358)		(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		$22,358		$22,482

    46

    Entergy's other postretirement benefit cost, including amounts capitalized, for the nine months ended September 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		$33,032		$31,110
    Interest cost on APBO		42,947		39,443		47,363		42,947
    Expected return on assets		(14,268)		(13,065)		(18,943)		(14,268)
    Amortization of transition obligation		1,627		3,025		2,874		1,627
    Amortization of prior service cost		(11,063)		(8,859)		(11,877)		(11,063)
    Amortization of loss		17,092		16,421		14,230		17,092
    Net other postretirement benefit cost		$67,445		$64,828		$66,679		$67,445

    50

    The Registrant Subsidiaries' other postretirement benefit cost, including amounts capitalized, for the third 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 nine months ended September 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		$4,575		$4,641		$2,919		$1,428		$765		$1,353
    Interest cost on APBO		9,111		8,628		5,823		3,147		2,610		1,299
    Expected return on assets		(6,693)		(5,091)		-		(2,457)		(2,046)		(1,410)
    Amortization of transition obligation		615		453		288		264		1,248		6
    Amortization of prior service cost		(591)		654		351		(186)		270		(849)
    Amortization of loss		4,500		2,379		2,292		1,839		846		447
    Net other postretirement benefit cost		$11,517		$11,664		$11,673		$4,035		$3,693		$846

    51

    		Entergy		Entergy		Entergy		Entergy		Entergy		System
    2006		Arkansas		Gulf States		Louisiana		Mississippi		New Orleans		Energy
    		(In Thousands)
    Service cost - benefits earned   during the period		$4,010		$3,761		$2,561		$1,256		$696		$1,242
    Interest cost on APBO		8,531		8,242		5,569		2,833		2,569		1,220
    Expected return on assets		(5,390)		(4,466)		-		(2,127)		(1,832)		(1,263)
    Amortization of transition obligation		616		453		287		263		1,247		7
    Amortization of prior service cost		(1,223)		-		(73)		(410)		29		(903)
    Amortization of loss		5,013		3,006		2,682		1,931		1,028		620
    Net other postretirement benefit cost		$11,557		$10,996		$11,026		$3,746		$3,737		$923

    Employer Contributions

    As of the end of October 2007, Entergy previously disclosed in the Form 10-K that it expected to contribute $349had contributed $177 million to its qualified pension plans and expects to make no additional contributions 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. As of the end of October 2006, Entergy has contributed the $318 million to its pension plans.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:

    		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   October 2007		$6,987		$25,346		$ -		$784		$43,585		$5,688

    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 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 third quarter 20062007 and 20052006 other postretirement benefit cost by $6.9$6.7 million and $5.7$6.9 million, respectively. It reduced the nine months ended September 30, 20062007 and 20052006 other postretirement benefit cost by $20.8$19.9 million and $18.6$20.8 million, respectively. In the third quarter 2006,nine months ended September 30, 2007, Entergy received $1.8$4.6 million in Medicare subsidies for prescription drug claims through June 2006. Referclaims.

    Based on actuarial analysis, the estimated impact of future Medicare subsidies reduced the December 31, 2006 APBO, the third quarters 2007 and 2006, and the nine months ended September 30, 2007 and 2006 other postretirement benefit cost for the Registrant Subsidiaries as follows:

    52

    		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 third quarter 2007
    other postretirement benefit cost		($1,376)		($1,222)		($762)		($438)		($311)		($246)
    Reduction in third quarter 2006
    other postretirement benefit cost		($1,562)		($1,332)		($865)		($512)		($376)		($268)
    Reduction in nine months ended
    September 30, 2007 other
    postretirement benefit cost		($4,128)		($3,666)		($2,286)		($1,314)		($933)		($738)
    Reduction in nine months ended
    September 30, 2006 other
    postretirement benefit cost		($4,685)		($3,996)		($2,595)		($1,535)		($1,127)		($803)
    Medicare subsidies received in the
    nine months ended September 30,
    2007		$1,195		$1,136		$701		$395		$409		$86

    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 September 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.

    Entergy's segment financial information for the third quarters of 20062007 and 20052006 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

    	Utility			Non-Utility Nuclear*		All Other*		Eliminations		Consolidated
    	(In Thousands)
    2007
    Operating Revenues	$2,677,291			$554,128		$64,460		($6,792)		$3,289,087
    Equity in earnings of
    unconsolidated equity affiliates	$-			$-		$1,432		$-		$1,432
    Income Taxes (Benefit)	$189,062			$61,863		($20,085)		$-		$230,840
    Net Income (Loss)	$333,098			$160,913		($32,852)		$-		$461,159
    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
    Net Income (Loss)	$290,033			$106,898		($8,174)		$126		$388,883

    4853

    Entergy's segment financial information for the nine months ended September 30, 20062007 and 20052006 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	$7,112,945			$1,483,900		$175,326		($19,673)		$8,752,498
    Equity in earnings of
    unconsolidated equity affiliates	($1)			$-		$3,534		$-		$3,533
    Income Taxes (Benefit)	$368,215			$210,527		($95,385)		$-		$483,357
    Net Income (Loss)	$585,741			$397,808		($42,593)		$-		$940,956
    Total Assets	$26,472,335			$6,857,774		$1,937,032		($1,508,624)		$33,758,517
    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
    Net Income (Loss)	$609,407			$251,806		$3,091		$10		$864,314
    Total Assets	$24,751,827			$5,230,065		$2,851,702		($2,275,940)		$30,557,654

    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.

    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.

    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 through the date of accounts receiva ble that are payable to Entergy or its subsidiaries by payment. 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 $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 its 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).

    54

    • 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.

    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 $212 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 $26 million. The federal and state tax and interest associated with this issue total $42 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 included in IRS Notices of Deficiency already issued and to be issued in the future on this issue will be $34 million. The federal and state tax and interest associated with this issue total $39 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 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.

    55

    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 filed a formal protest on July 30, 2007 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.

    PriorEntergy has $237 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 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 effect of deferred tax accounting, other than on 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 inte rest and penalties.

    56

    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

    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

    In September 2006 the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" (SFAS 157), which defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 generally does not require any new fair value measurements. However, in some cases, the application of SFAS 157 in the future may change Entergy's practice for measuring and disclosing fair values under other accounting pronouncements that require or permit fair value measurements. SFAS 157 is effective for Entergy in the first quarter 2008 and will be applied prospectively. Entergy is currently evaluating SFAS 157 and its potential future effects on its financial position, results of operations, and cash flows.

    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 2007. SFAS 159 provides an option for companies to select certain financial assets and liabilities to be

    57

    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, but does not expect that the adoptionprovisions of FIN 48 will materially affectthis standard to have a material effect on its financial position, results of operations, or cash flows.

    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, 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.

    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.

    5058

     

    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 Instruments."

    Part I, Item 4. Controls and Procedures

    Disclosure Controls and Procedures

    As of September 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 Exc hange 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.

    Changes in Internal Controls over Financial Reporting

    Under the supervision and with the participation of the Registrants' management, including their respective CEOs and CFOs, the Registrants evaluated changes in internal control over financial reporting that occurred during the quarter ended September 30, 2007 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

    59

    ENTERGY ARKANSAS, INC.

    MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

     

    Results of Operations

    Net Income

    Third Quarter 20062007 Compared to Third Quarter 20052006

    Net income decreased slightly$5.1 million primarily due to higher other operation and maintenance expenses, lower net revenue, and lower other income, substantially offset by a lowerhigher effective income tax rate.rate, partially offset by higher net revenue.

    Nine Months Ended September 30, 20062007 Compared to Nine Months Ended September 30, 20052006

    Net income remained relatively unchanged, increasing $0.9decreased $30.3 million in 2006.primarily due to a higher effective income tax rate, higher other operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest charges. The decrease was partially offset by higher net revenue.

    Net Revenue

    Third Quarter 20062007 Compared to Third 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 third quarter of 20062007 to the third quarter of 2005.

    		Amount
    		(In Millions)
    2005 net revenue		$325.2
    Pass-through rider revenue		27.4
    Net wholesale revenue		(8.3)
    Other		(0.2)
    2006 net revenue		$344.1

    The pass-through rider revenue variance is primarily due to a change in 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 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 domestic utility companies and System Energy financial statements for further discussion of the FERC's decision.

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

    Gross operating revenues increased primarily due to:

    • an increase of $96.3 million in fuel cost recovery revenues due to increases in the energy cost recovery rider effective October 2005 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 million in gross wholesale revenue primarily due to reserves recorded per a FERC order, as discussed above; and
    • a decrease of $5.9 million in Grand Gulf revenues due to a decrease in the Grand Gulf rider effective January 2006.

    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 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.

    Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

    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). Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2006 to the nine months ended September 30, 2005.

    		Amount
    		(In Millions)
    20052006 net revenue		$815.1344.1
    Net wholesale revenue		20.2
    Pass-through rider revenue		27.4
    Volume/weather		13.1
    Capacity costs		(11.1)
    Deferred fuel cost revisions		(6.1) (15.3)
    Other		(2.8)7.1
    20062007 net revenue		$835.6356.1

    The net wholesale revenue variance is primarily due to lower wholesale revenues in the third quarter 2006 due to an October 2006 FERC order requiring Entergy Arkansas to make a refund to a coal plant co-owner resulting from a contract dispute, in addition to re-pricing revisions, retroactive to 2003, of $5.9 million of purchased power agreements among Entergy system companies as directed by the FERC.

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

    The volume/weather variance isGross operating revenues and fuel and purchased power expenses

    Gross operating revenues decreased primarily due to ana decrease of $108.5 million in fuel cost recovery revenues due to a decrease in the energy cost recovery rider effective April 2007 and lower pass-through rider revenue of $15.3 million, as discussed above. The energy cost recovery rider filings are discussed in Note 2 to the financial statements in the Form 10-K. The decrease was partially offset by production cost allocation rider revenues of $69.6 million which became effective in July 2007 as a result of the System Agreement litigation. As a result of the System

    60

    Agreement litigation, Entergy Arkansas also has a corresponding increase in electricity usage, includingfuel expense for payments to other Entergy system companies such that there is no effect on net income. The System Agreement litigation is referenced below under "Significant Factors and Known Trends."

    Fuel and purchased power expenses decreased primarily due to a decrease in deferred fuel expense partially offset by the effectrough production cost equalization payments to affiliate companies as a result of more favorable weather duringthe System Agreement litigation.

    Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 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 nine months ended September 30, 2006 compared2007 to the nine months ended September 30, 2005. Billed electricity usage increased a total of 552 GWh in all sectors.2006.

    		Amount
    		(In Millions)
    2006 net revenue		$835.6
    Net wholesale revenue		12.3
    Deferred fuel cost revision		8.6
    Transmission revenue		7.8
    Reserve equalization		4.9
    Other		7.8
    2007 net revenue		877.0

    The capacity costsnet wholesale revenue variance is primarily due to higher capacity-related costs includinglower wholesale revenues in the revisionthird quarter 2006 due to an October 2006 FERC order requiring Entergy Arkansas to make a refund to a coal plant co-owner resulting from a contract dispute, in addition to re-pricing revisions, retroactive to 2003, of reserve equalization payments$5.9 million of purchased power agreements among Entergy system companies due to a FERC ruling regardingas directed by the inclusion of interruptible loads in reserve equalization calculations.FERC.

    The deferred fuel cost revisionsrevision 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 late-2006.

    The reserve equalization variance is due to lower reserve equalization expense related to changes in the Entergy System generation mix compared to the same period in 2006.

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

    Gross operating revenues increaseddecreased primarily due to:

    • an increaseto a decrease of $171.5$94.6 million in fuel cost recovery revenues due to increasesa decrease in the energy cost recovery rider effective October 2005 andApril 2007. The energy cost recovery rider filings are discussed in Note 2 to the financial statements in the Form 10-K. The decrease was partially offset by production cost allocation rider revenues of $69.6 million which became effective in July 2006;
    • an increase of $51.1 million in gross wholesale revenue due to an increase in volume2007 as a result of reducedthe System Agreement litigation. As a result of the System Agreement litigation, Entergy Arkansas also has a corresponding increase in fuel expense for payments to other Entergy system companies such that there is no effect on net area demandincome. The System Agreement litigation is referenced below under "Significant Factors 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.
    Known Trends."

    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 $15.3 million from a smaller over-recovery compared to the prior year of Grand Gulf costs due to a decrease in deferred fuel expense partially offset by the Grand Gulf rider effective January 2006; and
    • the amortization of $4.8 million in 2005rough production cost equalization payments to affiliate companies as a result 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.
    System Agreement litigation.

    61

    Other Income Statement Variances

    Third Quarter 20062007 Compared to Third Quarter 20052006

    Other operation and maintenance expenses decreased primarily due to:

    • a decrease of $7.9 million in payroll, payroll-related, and benefit costs; and
    • a decrease of $4.4 million in transmission spending due to lower transmission equalization expenses.

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

    Interest and other charges increased primarily due to higher interest accrued of $3 million on advances from independent power producers.

    Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006

    Other operation and maintenance expenses increased primarily due to:

    • an increase of $7.4$4.3 million in payrolllegal spending due to increased litigation and benefitslegal fees;
    • an increase of $4.2 million in distribution spending due to vegetation maintenance work and increased contract labor costs;
    • an increase of $6.2 million in additional 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 million in customer service support costs, including an increase in customer write-offs.

    Taxes other than income taxes increased primarily due to an increase in city franchise tax expense due to a change in 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

    Nine Months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

    Other operation and maintenance expenses increased primarily due to:

    • an increase of $6.7 million in additional transmission equalization expenses;
    • an increase of $6.4$2.8 million in nuclear spending due to higher NRC fees security costs, emergency plan fees, and labor costs;
    • an increase of $4.2$2.4 million in customer service support costs, including an increase in customer write-offs;
    • $4.1 million applied as a credit against bad debt expense in the first quarter of 2005 in accordance with a settlement agreement with the APSC;fossil spending due to outage scopes differing compared to prior year; and
    • an increase of $2.7$1.9 million in transmission spending related to the Independent Coordinator of Transmission.

    Partially offsetting the increase was a decrease of $9.6 million in payroll, payroll-related, 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.

  Taxes other than income taxes increased primarily due to an increase in city franchise tax expense due to a change in 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.costs.

  Depreciation and amortization expenses increased primarily due to an increase in plant in service and a revision in 20052006 of estimated depreciable lives involving certain intangible assets.

  Other income decreasedInterest and other charges increased primarily due to proceedshigher interest accrued of $4.9$6.5 million received in 2005recorded on advances 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.independent power producers.

  Income Taxes

  The effective income tax ratesrate was 34.9% for the third quarters of 2006quarter 2007 and 2005 were 13.8% and 37.4%, respectively. The effective income tax rates37.7% for the nine months ended September 30, 2006 and 2005 were 19.7% and 36.9%, respectively.2007. The difference in the effective income tax rate for the nine months ended September 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.

  The effective income tax rate was 13.8% for the third quarter of2006 and 19.7% for the nine months ended September 30, 2006. The differences in the effective income tax rates for the third quarter 2006 and the nine months ended September 30, 2006 versus the federal statutory rate of 35.0% isare primarily due to the flow-through of a pension item. 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, partially offset by book and tax differences related to utility plant items and the amortization of investment tax credits. The difference in the effective income tax rate for the nine months ended September 30, 2005 versus the federal statutory rate of 35.0% is primarily due to state income taxes, partially offset by a downward revision in the estimate of federal income tax expense related to tax depreciation, the amortization of investment tax credits, and book and tax differences related to the allowance for equity funds used during construction.

  62

  54

  Liquidity and Capital Resources

  Cash Flow

  Cash flows for the nine months ended September 30, 20062007 and 20052006 were as follows:

  			2006		2005			2007		2006
  			(In Thousands)					(In Thousands)
  Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period		$9,393		$89,744	Cash and cash equivalents at beginning of period		$34,815		$9,393
  Cash flow provided by (used in):	Cash flow provided by (used in):					Cash flow provided by (used in):
  	Operating activities		379,580		361,952	Operating activities		262,234		379,580
  	Investing activities		(205,230)		(312,096)	Investing activities		(196,893)		(205,230)
  	Financing activities		(164,843)		(124,746)	Financing activities		(96,831)		(164,843)
  Net increase (decrease) in cash and cash equivalents	Net increase (decrease) in cash and cash equivalents		9,507		(74,890)	Net increase (decrease) in cash and cash equivalents		(31,490)		9,507
  Cash and cash equivalents at end of period	Cash and cash equivalents at end of period		$18,900		$14,854	Cash and cash equivalents at end of period		$3,325		$18,900

  Operating Activities

  Cash flow from operations increased $17.6decreased $117.3 million for the nine months ended September 30, 20062007 compared to the nine months ended September 30, 20052006 primarily due to increaseddecreased recovery of deferred fuel costs and income tax payments of $25.8 million in 2007 compared to income tax refunds of $23.9 million in 2006 compared to income tax payments of $33.8 million in 2005. These increases were partially2006. The decrease was offset by an increasethe timing of $110.5payments to vendors and collection of receivables from customers and a decrease of $107.6 million in pension contributions.

  In the first quarter of 2006, Entergy Corporation received an income tax refund as a result of net operating loss carryback provisions contained in the Gulf Opportunity Zone Act of 2005, as discussed in Note 3 to the domestic utilities companies and System Energy financial statements in the Form 10-K. In accordance with Entergy's intercompany tax allocation agreement, in April 2006 Entergy Corporation distributed $12 million of the refund to Entergy Arkansas.

  Investing Activities

  Net cash flow used in investing activities decreased $106.9$8.3 million for the nine months ended September 30, 20062007 compared to the nine months ended September 30, 20052006 primarily due to amoney pool activity. The decrease of $107.5 millionwas partially offset by an increase in other regulatory investments that resultedconstruction expenditures resulting from fuel cost under-recoveries that have been deferredadditional spending on substations and are expected to be recovered over a period greater than twelve months.transmission lines.

  Financing Activities

  Net cash flow used in financing activities increased $40.1decreased $68 million for the nine months ended September 30, 20062007 compared to the nine months ended September 30, 20052006 primarily due to:

  • to borrowings on a credit facility in 2007 and money pool activity, partially offset by an increase of $64.8 million in common stock dividends paid; and
  • money pool activity.

  The increase was partially offset by the net retirement of $54.8 million of long-term debt in 2005.paid.

  See "Uses and Sources of Capital" below for the details of Entergy Arkansas' preferred stock activity in 2006.

  55

  Capital Structure

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

  		September 30, 2006		December 31, 2005		September 30, 2007		December 31, 2006
  Net debt to net capital		46.8%		47.4%		49.3%		47.5%
  Effect of subtracting cash from debt		0.3%		0.1%		0.1%		0.6%
  Debt to capital		47.1%		47.5%		49.4%		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.

  63

  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 March 2006,July 2007, Entergy Arkansas issued 3,000,000 shares of $25 par value 6.45% Series Preferred Stock. The dividends are cumulativesigned 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 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,owned by Quachita Power, LLC.  Entergy Arkansas usedalso plans to invest approximately $43 million in plant upgrades and transaction costs.  Upgrades to the proceedsUtility operating companies' transmission system also are expected to be required to obtain long-term transmission service for this resource.  The identity and cost of the transmission upgrades have not yet been determined definitively; additional transmission studies are currently underway.  The initial results of those additional studies are expected by the end of November 2007.  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-Louisiana, 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.  Entergy Arkansas filed with the APSC in September 2007 for its approval of the acquisition, including full cost recovery, and the APSC approved a bifurcated procedural schedule whereby a hearing will be conducted first on an interim tolling agreement connected with the acquisition in December 2007, with a later hearing on the acquisition being conducted by April 2008.  APSC staff and Arkansas attorney general witnesses have filed testimony that generally oppose cost recovery by a separate rider, but argue that the cost recovery should be by the annual earning s review process currently being developed. An APSC staff witness also opposes allocating one-third of the output for sale to Entergy Gulf States-Louisiana. In November 2007, Entergy Gulf States filed a request with the LPSC for authorization for Entergy Gulf States-Louisiana to purchase one-third of the capacity and energy of the Ouachita plant during the term of the interim tolling agreement and for authorization for Entergy Gulf States-Louisiana to purchase one-third of the plant's capacity and energy on a life-of-unit basis after the plant's acquisition. The planned capital investments estimate in the Form 10-K included $190 million in 2008 for the estimated cost of an acquisition of this issuance to redeem the following preferred stock:

  Series of Entergy Arkansas Preferred Stock		Redemption Price Per Share
  7.32% Preferred Stock, Cumulative, $100.00 par value		$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		$ 25.00

  type.

  In April 2006,2007, Entergy Arkansas renewed its $85 million credit facility through April 30, 2007. The facility is no longer subject to a combined borrowing limit with Entergy Louisiana's credit facility. The $85 million2008 and increased the amount of the credit facility requires that Entergy Arkansas maintain total shareholders' equity of at least 25% of its total assets.to $100 million. There were no outstanding$60 million in borrowings under the Entergy Arkansas credit facility as of September 30, 2006.

  In June 2006, Entergy Arkansas issued $54.7 million of 4.60% Series of Jefferson County bonds due October 2017.2007. The proceeds were used to redeem, prior to maturity, $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 transactioninterest rate on the cash flow statement since the proceeds were placed in a trust and never heldoutstanding borrowings is 7.25% as cash by Entergy Arkansas.of September 30, 2007.

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

  September 30, 2006		December 31, 2005		September 30, 2005		December 31, 2004
  (In Thousands)
  $19,659		($27,346)		$31,277		$23,561

  September 30, 2007		December 31, 2006		September 30, 2006		December 31, 2005
  (In Thousands)
  ($29,924)		$16,109		$19,659		($27,346)

  56

  The Pension Protection Act of 2006

  The Pension Protection Act of 2006 was signed bySee Note 4 to the President on August 17, 2006. The intentfinancial statements in the Form 10-K for further description of the legislation is to require companies to fund 100% of their pension liability;money pool 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.

  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. Entergy Arkansas 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.credit facility.

  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 utility restructuring, federal regulation and proceedings, market and credit risks, state and local rate regulatory risks,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.

  64

  State and Local Rate Regulation

  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 concerningJune 2007, after hearings on Entergy Arkansas' interim energy cost rate. TheAugust 2006 base rate filing requesting an adjusted annual increase inof $106.5 million, 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 filereduce its annual rates by $5 million, and set a costreturn on common equity of service study by June 8, 2006.9.9% 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 directedthreatens Entergy Arkansas' ability to recover $52 million of costs previously accumulated in Entergy Arkansas' storm reserve an d $18 million of removal costs associated with the termination of a lease. Management believes, however, that Entergy Arkansas is entitled to file testimonyrecover these prudently incurred costs and will vigorously pursue its right 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 therecover them. The APSC seeking again to implement the redetermined energy cost rate of $0.02827 per kWh. After a hearing, the APSC approvedrejected 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.

  57

  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.costs, but directed Entergy Arkansas and the other parties in the case to develop an annual earnings review process that may address this issue.

  The APSC denied Entergy Arkansas' request for rehearing of the APSC's June 2007 decision. In September 2007, Entergy Arkansas appealed the decision to the Arkansas Court of Appeals. In its Notice of Appeal, Entergy Arkansas states that the APSC's decision represents arbitrary decision-making, and enumerates seventeen reasons why the APSC's decision is unlawful. A proceduralbriefing schedule that concludes in the first quarter 2008 has been established with hearings expected to begin in April 2007.by the appeals court.

  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. IfIn its June 2007 decision on Entergy Arkansas' rate filing, the FERC approves the compliance tariff as filed, then payments under that tariff will be classified as energy costs, which would then be included in settingAPSC approved through December 31, 2008 a production cost allocation rider for recovery from customers of 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 recoveryportion of the costs allocated to itEntergy Arkansas as a result of the System Agreement litigation shouldlitigation.

  Energy Cost Rate Investigation

  In March 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.

  In its June 2007 order regarding Entergy Arkansas' rate case, the APSC approved the continuation of Entergy Arkansas' energy cost recovery rider be lawfully terminated by the APSC.  A separate exact recovery rider, sim ilar to the energy cost recovery rider, would ensure that Entergy Arkansas customers pay only the amount allocated by the FERC.through December 31, 2008.

  Federal Regulation

  See "

  System Agreement Proceedings

  See Entergy Corporation", "Independent Coordinator of Transmission", and Subsidiaries'"Available Flowgate Capacity Proceeding" in the "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends - Federal Regulation -System Agreement Litigation,APSC Complaint at the FERC,APSC System Agreement Investigation, andMPSC System Agreement Inquiry" for updates regarding proceedings involving the System Agreement.

  Independent Coordinatorsection of Transmission (ICT)

  See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant FactorsSubsidiaries Management's Financial Discussion and Known Trends - Federal Regulation -Independent Coordinator of Transmission"for an update regarding Entergy's ICT proposal.

  Available Flowgate Capacity (AFC) Proceeding

  See Entergy Corporation and Subsidiaries' "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Significant Factors and Known Trends - Federal Regulation -Available Flowgate Capacity Proceeding"Analysis for updates regardingto the AFC proceeding atdiscussion in the FERC.Form 10-K.

  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 Arkansas' accounting for nuclear decommissioning costs, unbilled revenue, and qualified pension and other postretirement benefits.

  Recently Issued65

  New Accounting Pronouncements

  FASB Interpretation No. 48, "AccountingSee "New Accounting Pronouncements" section of Entergy Corporation and Subsidiaries Management's Financial Discussion and Analysis for Uncertainty in Income Taxes" (FIN 48) was issued in July 2006 and is effective for Entergy Arkansas in the first quartera discussion of 2007. The FASB's objective in issuing this interpretation is to increase comparability among companies in financial reporting of income taxes. 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 Arkansas does not expect that the adoption of FIN 48 will materially affect its financial position, results of operations, or cash flows.new accounting pronouncements.

  58

  In September 2006, FASB issued SFAS 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements Nos. 87, 88, 106 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 Arkansas has previously disclosed its funded status in Note 10 to the domestic utility companies and System Energy financial statements in the Form 10-K. SFAS 158 also requires that changes in that funded status be recorded in other comprehensive income in the period in which the changes occur. Entergy Arkansas is generally allowed to recover pension and other postretirement benefit costs each period based upon costs calculated under SFAS 87 and SFAS 106. Entergy Arkansas' analysis, including the regulatory accounting requirements to support recording the majority of the effect of the adoption of this standard as a regulatory asset, is not yet complete. Entergy Arkansas does not expect the implementation of this standard, however, to materially affect its financial position or results of operations.

  5966

   

  ENTERGY ARKANSAS, INC.	ENTERGY ARKANSAS, INC.								ENTERGY ARKANSAS, INC.
  INCOME STATEMENTS	INCOME STATEMENTS								INCOME STATEMENTS
  For the Three and Nine Months Ended September 30, 2006 and 2005
  For the Three and Nine Months Ended September 30, 2007 and 2006									For the Three and Nine Months Ended September 30, 2007 and 2006
  (Unaudited)	(Unaudited)								(Unaudited)
  		Three Months Ended			��	Nine Months Ended				Three Months Ended				Nine Months Ended
  		2006		2005		2006		2005		2007		2006		2007		2006
  		(In Thousands)				(In Thousands)				(In Thousands)				(In Thousands)
  OPERATING REVENUES
  Domestic electric		$660,885		$556,445		$1,612,730		$1,373,902
  Electric										$624,664		$660,885		$1,561,428		$1,612,730
  OPERATING EXPENSES
  Operation and Maintenance:
  Fuel, fuel-related expenses, and
  gas purchased for resale		130,942		(25,857)		318,219		57,558		(6,674)		130,942		114,173		318,219
  Purchased power		186,758		249,023		473,669		496,554		277,627		186,758		587,122		473,669
  Nuclear refueling outage expenses		7,509		7,256		22,235		20,592		7,137		7,509		21,410		22,235
  Other operation and maintenance		120,140		91,719		317,790		283,275		111,723		120,140		326,781		317,790
  Decommissioning		7,737		7,566		22,828		23,925		8,271		7,737		24,405		22,828
  Taxes other than income taxes		38,489		9,465		57,091		29,353		23,011		38,489		59,245		57,091
  Depreciation and amortization		54,547		52,022		161,508		151,822		57,278		54,547		170,107		161,508
  Other regulatory charges (credits) - net		(907)		8,121		(14,793)		4,737
  Other regulatory credits - net										(2,405)		(907)		(16,896)		(14,793)
  TOTAL		545,215		399,315		1,358,547		1,067,816		475,968		545,215		1,286,347		1,358,547
  OPERATING INCOME		115,670		157,130		254,183		306,086		148,696		115,670		275,081		254,183
  OTHER INCOME
  Allowance for equity funds used during construction		2,242		511		6,060		7,961		1,794		2,242		9,191		6,060
  Interest and dividend income		4,972		9,490		16,645		18,860		3,687		4,972		15,420		16,645
  Miscellaneous - net		(784)		(598)		(2,356)		(1,277)		(594)		(784)		(2,400)		(2,356)
  TOTAL		6,430		9,403		20,349		25,544		4,887		6,430		22,211		20,349
  INTEREST AND OTHER CHARGES
  Interest on long-term debt		19,394		19,002		57,733		59,752		19,325		19,394		58,456		57,733
  Other interest - net		650		2,947		3,518		5,171		6,396		650		13,211		3,518
  Allowance for borrowed funds used during construction		(960)		(2,943)		(2,639)		(6,679)		(748)		(960)		(4,261)		(2,639)
  TOTAL		19,084		19,006		58,612		58,244		24,973		19,084		67,406		58,612
  INCOME BEFORE INCOME TAXES		103,016		147,527		215,920		273,386		128,610		103,016		229,886		215,920
  Income taxes		14,204		55,159		42,450		100,797		44,909		14,204		86,709		42,450
  NET INCOME		88,812		92,368		173,470		172,589		83,701		88,812		143,177		173,470
  Preferred dividend requirements and other		1,718		1,944		5,841		5,832		1,718		1,718		5,155		5,841
  EARNINGS APPLICABLE TO
  COMMON STOCK		$87,094		$90,424		$167,629		$166,757		$81,983		$87,094		$138,022		$167,629
  See Notes to Respective Financial Statements.
  See Notes to Financial Statements.

  60

  67

  (Page left blank intentionally)

  68

   

  ENTERGY ARKANSAS, INC.	ENTERGY ARKANSAS, INC.				ENTERGY ARKANSAS, INC.
  STATEMENTS OF CASH FLOWS	STATEMENTS OF CASH FLOWS				STATEMENTS OF CASH FLOWS
  For the Nine Months Ended September 30, 2006 and 2005
  For the Nine Months Ended September 30, 2007 and 2006					For the Nine Months Ended September 30, 2007 and 2006
  (Unaudited)	(Unaudited)				(Unaudited)
  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  OPERATING ACTIVITIES
  Net income		$173,470		$172,589		$143,177		$173,470
  Adjustments to reconcile net income to net cash flow provided by operating activities:
  Reserve for regulatory adjustments		21,323		- -		(18,607)		21,323
  Other regulatory charges (credits) - net		(14,793)		4,737
  Other regulatory credits - net						(16,896)		(14,793)
  Depreciation, amortization, and decommissioning		184,336		175,747		194,512		184,336
  Deferred income taxes and investment tax credits		(105,087)		38,755		2,770		(105,087)
  Changes in working capital:
  Receivables		(70,335)		(79,907)		(20,717)		(70,335)
  Fuel inventory		(5,389)		(4,728)		3,555		(5,389)
  Accounts payable		(28,836)		29,891		83,139		(28,836)
  Taxes accrued		168,985		23,821		(37,161)		168,985
  Interest accrued		3,521		1,814		1,339		3,521
  Deferred fuel costs		144,778		1,537		(68,021)		144,778
  Other working capital accounts		11,967		3,088		(135,837)		11,967
  Provision for estimated losses and reserves		(1,396)		(2,749)		(183)		(1,396)
  Changes in other regulatory assets		(58,208)		51,251		26,956		(58,208)
  Other		(44,756)		(53,894)		104,208		(44,756)
  Net cash flow provided by operating activities		379,580		361,952		262,234		379,580
  INVESTING ACTIVITIES
  Construction expenditures		(183,878)		(196,591)		(212,835)		(183,878)
  Allowance for equity funds used during construction		6,060		7,961		9,191		6,060
  Nuclear fuel purchases		(49,269)		(62,404)		(40,353)		(49,269)
  Proceeds from sale/leaseback of nuclear fuel		49,027		62,404		42,220		49,027
  Proceeds from nuclear decommissioning trust fund sales		84,126		156,167		59,155		84,126
  Investment in nuclear decommissioning trust funds		(91,168)		(163,923)		(68,569)		(91,168)
  Change in money pool receivable - net		(19,659)		(7,716)		14,298		(19,659)
  Other regulatory investments		(469)		(107,994)		- -		(469)
  Net cash flow used in investing activities		(205,230)		(312,096)		(196,893)		(205,230)
  FINANCING ACTIVITIES
  Proceeds from the issuance of long-term debt		- -		272,702
  Retirement of long-term debt		- -		(327,516)
  Proceeds from the issuance of preferred stock		73,355		- -		- -		73,355
  Redemption of preferred stock		(75,885)		- -		- -		(75,885)
  Change in credit borrowing - net						60,000		- -
  Change in money pool payable - net		(27,346)		- -		29,924		(27,346)
  Dividends paid:						- -
  Common stock		(128,900)		(64,100)		(181,600)		(128,900)
  Preferred stock		(6,067)		(5,832)		(5,155)		(6,067)
  Net cash flow used in financing activities		(164,843)		(124,746)		(96,831)		(164,843)
  Net increase (decrease) in cash and cash equivalents		9,507		(74,890)		(31,490)		9,507
  Cash and cash equivalents at beginning of period		9,393		89,744		34,815		9,393
  Cash and cash equivalents at end of period		$18,900		$14,854		$3,325		$18,900
  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid/(received) during the period for:
  Interest - net of amount capitalized		$48,682		$56,332		$60,050		$48,682
  Income taxes		($23,883)		$33,766		$25,795		($23,883)
  See Notes to Respective Financial Statements.
  See Notes to Financial Statements.

  69

  61

   

  ENTERGY ARKANSAS, INC.	ENTERGY ARKANSAS, INC.				ENTERGY ARKANSAS, INC.
  BALANCE SHEETS	BALANCE SHEETS				BALANCE SHEETS
  ASSETS	ASSETS				ASSETS
  September 30, 2006 and December 31, 2005
  September 30, 2007 and December 31, 2006					September 30, 2007 and December 31, 2006
  (Unaudited)	(Unaudited)				(Unaudited)
  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  CURRENT ASSETS
  Cash and cash equivalents:
  Cash		$10,095		$9,393		$3,325		$2,849
  Temporary cash investments - at cost,
  which approximates market		8,805		- -		- -		31,966
  Total cash and cash equivalents		18,900		9,393		3,325		34,815
  Accounts receivable:
  Customer		146,871		115,321		140,054		105,347
  Allowance for doubtful accounts		(14,237)		(15,777)		(15,676)		(15,257)
  Associated companies		73,967		30,902		42,984		57,554
  Other		70,025		63,702		79,154		114,108
  Accrued unbilled revenues		75,944		68,428		86,116		66,876
  Total accounts receivable		352,570		262,576		332,632		328,628
  Deferred fuel costs		59,873		153,136		70,178		2,157
  Accumulated deferred income taxes		5,002		- -		- -		19,232
  Fuel inventory - at average cost		17,731		12,342		19,418		22,973
  Materials and supplies - at average cost		95,105		87,875		105,792		100,061
  Deferred nuclear refueling outage costs		17,076		30,967		24,370		23,678
  System agreement cost equalization						107,886		- -
  Prepayments and other		8,296		9,628		36,354		6,368
  TOTAL		574,553		565,917		699,955		537,912
  OTHER PROPERTY AND INVESTMENTS
  Investment in affiliates - at equity		11,206		11,206		11,205		11,206
  Decommissioning trust funds		422,887		402,124		467,709		439,408
  Non-utility property - at cost (less accumulated depreciation)		1,447		1,449		1,443		1,446
  Other		2,976		2,976		5,390		2,976
  TOTAL		438,516		417,755		485,747		455,036
  UTILITY PLANT
  Electric		6,481,944		6,344,435		6,737,752		6,599,348
  Property under capital lease		5,969		9,900		3,122		5,260
  Construction work in progress		166,567		139,208		136,093		113,069
  Nuclear fuel under capital lease		104,859		92,181		93,347		124,850
  Nuclear fuel		21,519		22,616		17,334		21,044
  TOTAL UTILITY PLANT		6,780,858		6,608,340		6,987,648		6,863,571
  Less - accumulated depreciation and amortization		2,974,167		2,843,904		3,088,984		2,986,576
  UTILITY PLANT - NET		3,806,691		3,764,436		3,898,664		3,876,995
  DEFERRED DEBITS AND OTHER ASSETS
  Regulatory assets:
  SFAS 109 regulatory asset - net		115,187		61,236		95,606		93,682
  Other regulatory assets		465,152		461,015		520,860		542,052
  Deferred fuel costs		- -		51,046
  Other		45,202		46,605		36,556		35,359
  TOTAL		625,541		619,902		653,022		671,093
  TOTAL ASSETS		$5,445,301		$5,368,010		$5,737,388		$5,541,036
  See Notes to Respective Financial Statements.
  See Notes to Financial Statements.
  62
  70					70
  ENTERGY ARKANSAS, INC.	ENTERGY ARKANSAS, INC.				ENTERGY ARKANSAS, INC.
  BALANCE SHEETS	BALANCE SHEETS				BALANCE SHEETS
  LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY				LIABILITIES AND SHAREHOLDERS' EQUITY
  September 30, 2006 and December 31, 2005
  September 30, 2007 and December 31, 2006					September 30, 2007 and December 31, 2006
  (Unaudited)	(Unaudited)				(Unaudited)
  		2006		2005		2007		2006
  		(In Thousands)				(In Thousands)
  CURRENT LIABILITIES
  Notes payable						$60,000		$-
  Accounts payable:
  Associated companies		$66,376		$135,357		179,022		64,546
  Other		129,454		120,090		115,028		117,655
  Customer deposits		48,691		45,432		56,074		49,978
  Taxes accrued		25,623		- -		- -		37,161
  Accumulated deferred income taxes		- -		56,186		16,739		- -
  Interest accrued		22,728		19,207		20,918		19,579
  Deferred fuel costs						- -		- -
  Obligations under capital leases		48,295		46,857		55,289		56,265
  Other		26,024		21,836		17,734		15,372
  TOTAL		367,191		444,965		520,804		360,556
  NON-CURRENT LIABILITIES
  Accumulated deferred income taxes and taxes accrued		1,265,659		1,105,712		1,333,108		1,243,855
  Accumulated deferred investment tax credits		60,876		64,001		56,849		59,834
  Obligations under capital leases		62,290		55,224		41,180		73,845
  Other regulatory liabilities		90,229		76,507		122,237		103,350
  Decommissioning		464,943		442,115		497,216		472,810
  Accumulated provisions		27,677		29,073		14,356		14,539
  Pension and other postretirement liabilities						253,370		259,147
  Long-term debt		1,304,155		1,298,238		1,312,763		1,306,201
  Other		220,869		306,034		78,808		96,623
  TOTAL		3,496,698		3,376,904		3,709,887		3,630,204
  Commitments and Contingencies
  SHAREHOLDERS' EQUITY
  Preferred stock without sinking fund		116,350		116,350		116,350		116,350
  Common stock, $0.01 par value, authorized 325,000,000						��
  shares; issued and outstanding 46,980,196 shares in 2006
  and 2005		470		470
  shares; issued and outstanding 46,980,196 shares in 2007
  and 2006						470		470
  Paid-in capital		588,529		591,102		588,527		588,528
  Retained earnings		876,063		838,219		801,350		844,928
  TOTAL		1,581,412		1,546,141		1,506,697		1,550,276
  TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$5,445,301		$5,368,010		$5,737,388		$5,541,036
  See Notes to Respective Financial Statements.
  See Notes to Financial Statements.

  6371

   

  ENTERGY ARKANSAS, INC.	ENTERGY ARKANSAS, INC.								ENTERGY ARKANSAS, INC.
  SELECTED OPERATING RESULTS	SELECTED OPERATING RESULTS								SELECTED OPERATING RESULTS
  For the Three and Nine Months Ended September 30, 2006 and 2005
  For the Three and Nine Months Ended September 30, 2007 and 2006									For the Three and Nine Months Ended September 30, 2007 and 2006
  (Unaudited)	(Unaudited)								(Unaudited)
  		Three Months Ended				Increase/				Three Months Ended				Increase/
  Description		2006		2005		(Decrease)		%		2007		2006		(Decrease)		%
  		(Dollars In Millions)								(Dollars In Millions)
  Electric Operating Revenues:
  Residential		$ 265		$ 217		$ 48		22		$ 239		$ 265		($ 26)		(10)
  Commercial		144		107		37		35		127		144		(17)		(12)
  Industrial		140		108		32		30		122		140		(18)		(13)
  Governmental		6		5		1		20		6		6		-		- -
  Total retail		555		437		118		27		494		555		(61)		(11)
  Sales for resale
  Associated companies		70		52		18		35		74		70		4		6
  Non-associated companies		29		58		(29)		(50)		41		29		12		41
  Other		7		9		(2)		(22)		16		7		9		129
  Total		$ 661		$ 556		$ 105		19		$ 625		$ 661		($ 36)		(5)
  Billed Electric Energy
  Sales (GWh):
  Residential		2,550		2,550		-		- -		2,515		2,550		(35)		(1)
  Commercial		1,792		1,773		19		1		1,809		1,792		17		1
  Industrial		2,112		2,046		66		3		2,022		2,112		(90)		(4)
  Governmental		81		86		(5)		(6)		77		81		(4)		(5)
  Total retail		6,535		6,455		80		1		6,423		6,535		(112)		(2)
  Sales for resale
  Associated companies		1,680		901		779		86		1,686		1,680		6		- -
  Non-associated companies		714		1,077		(363)		(34)		503		714		(211)		(30)
  Total		8,929		8,433		496		6		8,612		8,929		(317)		(4)
  		Nine Months Ended				Increase/				Nine Months Ended				Increase/
  Description		2006		2005		(Decrease)		%		2007		2006		(Decrease)		%
  		(Dollars In Millions)								(Dollars In Millions)
  Electric Operating Revenues:
  Residential		$ 554		$ 476		$ 78		16		$ 545		$ 554		($ 9)		(2)
  Commercial		315		257		58		23		309		315		(6)		(2)
  Industrial		323		264		59		22		304		323		(19)		(6)
  Governmental		15		13		2		15		15		15		-		- -
  Total retail		1,207		1,010		197		20		1,173		1,207		(34)		(3)
  Sales for resale
  Associated companies		253		157		96		61		222		253		(31)		(12)
  Non-associated companies		113		158		(45)		(28)		110		113		(3)		(3)
  Other		40		49		(9)		(18)		56		40		16		40
  Total		$ 1,613		$ 1,374		$ 239		17		$ 1,561		$ 1,613		($ 52)		(3)
  Billed Electric Energy
  Sales (GWh):
  Residential		6,052		5,921		131		2		6,070		6,052		18		- -
  Commercial		4,462		4,327		135		3		4,519		4,462		57		1
  Industrial		5,727		5,430		297		5		5,542		5,727		(185)		(3)
  Governmental		209		220		(11)		(5)		210		209		1		- -
  Total retail		16,450		15,898		552		3		16,341		16,450		(109)		(1)
  Sales for resale
  Associated companies		5,977		3,877		2,100		54		5,257		5,977		(720)		(12)
  Non-associated companies		2,245		3,249		(1,004)		(31)		1,758		2,245		(487)		(22)
  Total		24,672		23,024		1,648		7		23,356		24,672		(1,316)		(5)

  6472

  ENTERGY GULF STATES, INC.

  MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS

   

  Hurricane Rita and Hurricane Katrina

  See the Form 10-K for a discussion of the effects of Hurricanes Katrina and Rita, which hit Entergy Gulf States' service territory in the Texas and Louisiana jurisdictions in August and September 2005. The storms2005, which resulted in power outages, significant damage to electric distribution, transmission, and generation and gas infrastructure, and the loss of sales and customers due to mandatory evacuations.evacuations, and Entergy Gulf States' efforts to recover storm restoration costs. Following isare updates to that discussion.

  Entergy reached an update to the discussionagreement with one of its excess insurers under which Entergy received $69.5 million in the Form 10-K.

  second quarter 2007 in settlement of its Hurricane Katrina claim with that insurer. Entergy Gulf States currently estimates that its total restoration costs forwas allocated $2.1 million of the repair or replacement of its electric and gas facilities damaged by Hurricanes Katrina and Rita and business continuity costs will be $633 million, the majority of which is due to Hurricane Rita.

  proceeds. Entergy Gulf States has received $18.9a total of $33.2 million thus faras of September 30, 2007 on its Hurricanes Katrina and Rita insurance claims.

  As discussedclaims, including $6.1 million in 2007. Refer to Note 8 to the financial statements in the Form 10-K for a federal hurricane aid package became law that includes funding for Community Development Block Grants (CDBG) that allows statefurther description of Entergy's Hurricane Katrina and local leaders to fund individual recovery priorities. The law permits funding for infrastructure restoration. It is uncertain how much funding, if any, will be designated for utility reconstructionHurricane Rita insurance claims and the timing of such decisions is also uncertain. In September 2006, Entergy Gulf States presented a revised CDBG request tonon-nuclear property insurance coverage in place at the Louisiana Recovery Authority's Infrastructure Committee. The updated request of $183 million includes estimated spending necessary to complete restoration in Louisiana net of estimated insurance proceeds.The Louisiana Recovery Authority did not act on Entergy Gulf States' request at its October 2006 meeting, and as discussed below, Entergy Gulf States continues to pursue other means of recovering its storm costs.time the claims occurred.

  Storm CostsCost Recovery Filings with Retail Regulators

  OnIn 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, 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 through a transition charge amounts sufficient to service the securitization bonds. Entergy Gulf States will use the proceeds to refinance or retire debt and to reduce equity. Entergy Gulf States began cost recovery through the transition charge in July 31, 2006,2007, 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.

  In February 2007, Entergy Louisiana and Entergy Gulf States filed rebuttal testimony and filed a second supplemental and amending application by which they seek authority from the LPSC to securitize their storm cost recovery applicationand storm reserve amounts, together 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 E ntergy 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 suchcertain debt retirement 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-relatedupfront and ongoing 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 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, whichsecuritized debt issued. Securitization is authorized by a law signed by the Governor of Louisiana in May 2006.

  65

  In July 2006, 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 States, filed an application withEntergy Louisiana, the PUCT with respect toLPSC staff, and most other parties in the $393.2proceeding was read into the record. The stipulation quantifies the balance of storm restoration costs for recovery as $545 million of Hurricane Rita reconstruction costs incurred in its Texas retail jurisdiction through March 31, 2006. The filing asks the PUCT to determine that $393.2for Entergy Louisiana and $187 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,and sets the storm reserve amounts at $152 million for Entergy Louisiana and $87 million for 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 sessionStates. The s tipulation also calls for securitization of the Texas Legislature. A hearing before the PUCTstorm restoration costs and storm reserves in those same amounts. Hearings on the filing was scheduled for November 1-3, 2006, but at the commencementauthorization of securitization of the hearing all ofstorm costs and reserves were held in June 2007. In August 2007, 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 andLPSC issued orders approving recovery of the stipulated storm cost recovery and storm reserve amounts plus certain debt retirement and upfront and ongoing costs eligible forthrough securitization through retail rates and tariffs. Entergy Gulf States expects to make the second filing following the conclusion of the reconstruction cost case.financing.

  73

  Results of Operations

  Net Income

  Third Quarter 20062007 Compared to Third Quarter 20052006

  Net income decreased $34.7increased $29.0 million primarily due to higher net revenue and higher other income, partially offset by higher other operation and maintenance expenses higher taxes other than income taxes, lower other income, and higher interest and other charges.

  Nine Months Ended September 30, 20062007 Compared to Nine Months Ended September 30, 20052006

  Net income decreased slightly by $5.5$8.2 million primarily due to lower net revenue, higher other operation and maintenance expenses, higher taxes other than income taxes, and higher interest and other charges,charges. This decrease was substantially offset by higher net revenue.other income and lower taxes other than income taxes.

  Net Revenue

  Third Quarter 20062007 Compared to Third Quarter 20052006

  Net revenue which is Entergy Gulf States' 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).charges. Following is an analysis of the change in net revenue comparing the third quarter of 20062007 to the third quarter of 2005.2006.

  		Amount
  		(In Millions)
  2005 net revenue		$362.0
  Base revenues		19.5
  Volume/weather		10.5
  Net wholesale revenue		9.0
  Reserve equalization		6.1
  Price applied to unbilled electric sales		(28.4)
  Fuel recovery		(11.4)
  Purchased power capacity		(9.2)
  Other		5.9
  2006 net revenue		$364.0
  Net wholesale revenue		15.4
  Fuel recovery		5.8
  Securitization transition charge		4.9
  Transmission revenue		3.5
  Other		1.2
  2007 net revenue		$394.8

  66

  Base revenues increased due to increases in both the Louisiana and Texas jurisdictions. The increases in the Louisiana jurisdiction were effective in October 2005 for the 2004 formula rate plan filing and the annual revenue requirement related to the purchase of power from the Perryville generating station and in September 2006 for the 2005 formula rate plan filing that includes the recovery of incremental deferred and ongoing capacity requirement. The increases in the Texas jurisdiction are related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006. Refer to Note 2 to the domestic utility companies and System Energy financial statements and "State and Local Rate Regulation" herein for further discussion of the rate increases.

  The volume/weather variance is primarily due to an increase in electricity usage, primarily during the unbilled sales period. The increase in usage was slightly offset by less favorable weather compared to the same period in 2005.

  The net wholesale revenue variance is primarily due to increased volume andre-pricing revisions, retroactive to 2003, of $8.4 million of purchased power agreements among Entergy system companies as directed by the FERC in addition to higher margins on sales to municipal and co-op customers.

  The reserve equalization variance is due to lower payments in 2006 as a resultfrom the non-regulated portion of resource plan capacity purchases effective February 2006 which reduced the amount of system-wide capacity allocated to Entergy Gulf States.

  The price applied to unbilled electric 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, which is in accordance with regulatory treatment. Entergy Gulf States expects that the effect of this factor will be a decrease in net revenue of approximately $40 million in its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.River Bend.

  The fuel recovery variance resulted primarily from the under-recovery in the third quarter of 2006increased recovery of fuel costs from retailspecial rate customers comparedin 2007 in addition to the over-recoveryunder-recovery of fuel costs in the third quarter of 2005.2006 from retail customers.

  The purchased power capacitysecuritization transition charge variance is primarily due to higher capacity charges primarily associated with power purchases from the Perryville generating station and new purchased power contracts in 2006. A portion of the higher charges is due to the amortizationissuance of deferred capacity costssecuritization bonds. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company wholly-owned and consolidated by Entergy Gulf States, issued securitization bonds and with the proceeds purchased from Entergy Gulf States the transition property, which is offset in base revenuesthe right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. See Note 4 to the financial statements herein for details of the securitization bond issuance.

  The transmission revenue variance is due to base rate increases implemented to recover incremental deferredhigher rates and ongoing purchased power capacity charges, as discussed above.the addition of new transmission customers in late-2006.

  74

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

  Gross operating revenues increaseddecreased primarily due to an increasea decrease in fuel cost recovery revenues of $88$116.6 million due to higherlower fuel rates.rates and refunds. Refer to Note 2 to the financial statements for a discussion of the fuel refund filing with the PUCT. The decrease in gross operating revenues was partially offset by wholesale revenue from the system agreement cost equalization payments from Entergy Arkansas. The receipt of such payments for the Texas jurisdiction is being refunded to customers by crediting deferred fuel costs and reducing fuel rates ultimately charged to customers. As a result, the system agreement cost equalization receipt and refund to customers have no effect on net income.

  Fuel and purchased power expenses increaseddecreased primarily due toa decrease in deferred fuel expense as a result of highera decrease in fuel rates partially offset by decreases in the average market prices of natural gas and purchased power.cost recovery revenues, as discussed above.

  Other regulatory charges increased primarily due to:

  • to the deferral of under-recovered purchased power capacity costs in 2005 combined with the amortization of purchased power capacity costs in 2006. A rider was implemented in December 2005recovery in the Texas jurisdiction, effective July 2007, of bond expenses related to the bond securitization, as discussed above. The increase was also due to theamortization of storm costs in 2007 as a result of the May 2006 formula rate plan filing (for the 2005 test year) with the LPSC to recover incremental purchased power capacitysuch costs and inthrough base rates effective September 2006 in2006.See Note 4 to the Louisiana jurisdiction to recovery incremental and ongoing purchased power capacity costs; and
  • financial statements herein for details of the amortization of transition to competition costs. A rider was implemented effective March 2006 in the Texas jurisdiction to recover incremental transition to competition costs incurred from June 1, 1999 through June 17, 2005.

  67securitization bond issuance.

  Nine Months Ended September 30, 20062007 Compared to Nine Months Ended September 30, 20052006

  Net revenue which is Entergy Gulf States' 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).charges. Following is an analysis of the change in net revenue comparing the nine months ended September 30, 20062007 to the nine months ended September 30, 2005.2006.

  		Amount
  		(In Millions)
  2005 net revenue		$906.5
  Base revenues		50.0
  Volume/weather		30.8
  Net wholesale revenue		22.3
  Fuel recovery		18.2
  Reserve equalization		11.5
  Price applied to unbilled electric sales		(48.5)
  Purchased power capacity		(26.7)
  Other		21.5
  2006 net revenue		$985.6
  Fuel recovery		(30.7)
  Purchased power capacity		(9.0)
  Volume/weather		10.1
  Transmission revenue		9.3
  Net wholesale revenue		6.5
  Securitization transition charge		4.9
  Other		5.2
  2007 net revenue		$981.9

  Base revenues increased due to increases in both the Louisiana and Texas jurisdictions. The increases in the Louisiana jurisdiction were effective in October 2005 for the 2004 formula rate plan filing and the annual revenue requirement related to the purchase of power from the Perryville generating station and in September 2006 for the 2005 formula rate plan filing that includes the recovery of incremental deferred and ongoing capacity requirement. The increases in the Texas jurisdiction are related to an incremental purchased capacity recovery rider that began in December 2005 and a transition to competition rider that began in March 2006. Refer to Note 2 to the domestic utility companies and System Energy financial statements and "State and Local Rate Regulation" herein for further discussion of the rate increases.

  The volume/weather variance is due to increased weather-adjusted electricity usage on billed sales in addition to an increase in usage during the unbilled sales period. Weather-adjusted usage increased a total of 402 GWh in the residential and commercial sectors and decreased 202 GWh in the industrial sector.

  The net wholesale revenue variance is primarily due to increased volume and higher margins on sales to municipal and co-op customers.

  The fuel recovery variance resulted primarily from adjustments of fuel clause recoveries in the first quarter 2006 in Entergy Gulf States' Louisiana jurisdiction. The variance is also due tojurisdiction and a reserve for potential rate refunds in the under-recoveryfirst quarter 2007 in 2005 of fuel costs from retail customers and increased fuel cost recovery in 2006Entergy Gulf States' Texas jurisdiction as a result of special rate contracts.

  The reserve equalization variance is due to lower payments in 2006 as a result of resource plan capacity purchases effective February 2006 and power purchases from the Perryville generating station effective July 2005 both of which reduced the amount of system-wide capacity allocated to Entergy Gulf States.

  The price applied to unbilled electric sales variance is duePUCT ruling related to the exclusionapplication of past PUCT rulings addressing transition to competition 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, which is in accordance with regulatory treatment. Entergy expects that the effect of this factor will be a decrease in net revenue of approximately $40 million in its annual results for 2006. See "MANAGEMENT'S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates" herein for a discussion of the accounting for unbilled revenues.

  68Texas.

  The purchased power capacity variance is primarily due to an increase in capacity charges primarily associated with power purchases from the Perryville generating station in addition to newongoing purchased power contracts in 2006.capacity expense and the amortization of deferred capacity charges. A portion of the increase in purchased power capacity costs is offset in base revenues due tobeing recovered through base rate increases implemented to recover incremental deferred and ongoing purchased power capacity charges,charges. The base rate increases are discussed in Note 2 to the financial statements in the Form 10-K.

  The volume/weather variance is primarily due to increased electricity usage primarily in the residential and commercial sectors, including increased usage during the unbilled sales period. The increase in usage was substantially offset by decreased usage in the industrial sector in addition to less favorable weather compared to the same period in 2006. See Note 1 to the financial statements in the Form 10-K for a discussion of the accounting for unbilled revenues.

  75

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

  The net wholesale revenue variance is primarily due to re-pricing revisions, retroactive to 2003, of $8.4 million of purchased power agreements among Entergy system companies as discussed above.directed by the FERC.

  The securitization transition charge variance is due to the issuance of securitization bonds. In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company wholly-owned and consolidated by Entergy Gulf States, issued securitization bonds and with the proceeds purchased from Entergy Gulf States the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. See Note 4 to the financial statements herein for details of the securitization bond issuance.

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

  Gross operating revenues increaseddecreased primarily due to an increase of $356 milliona decrease in fuel cost recovery revenues of $222.7 million due to higherlower fuel rates and refunds. Refer to Note 2 to the financial statements for a discussion of the fuel refund filing with the PUCT. The decrease was partially offset by more favorable volume/weather as discussed above and higher volume.wholesale revenue from the system agreement cost equalization payments from Entergy Arkansas. The receipt of such payments for the Texas jurisdiction is being refunded to customers by crediting deferred fuel costs and reducing fuel rates ultimately charged to customers. As a result, the system agreement cost equalization receipt and refund to customers have no effect on net income.

  Fuel and purchased power expenses increaseddecreased primarily due to an increasea decrease in deferred fuel expense due to higheras a result of a decrease in fuel ratescost recovery revenues, as discussed above. The decrease was partially offset by decreasesan increase in the average market pricesprice of natural gasassociated purchased power and purchased power.an increase in demand.

  Other regulatory charges increased primarily due to:

  • the deferralan increase of under-recovered purchased power$5.2 million as a result of higher capacity costs in 2005 combined withcharges and the amortization of purchased power capacity costs in 2006. A rider was implemented in December 2005charges;
  • the recovery of $4.9 million in the Texas jurisdiction, effective July 2007, of bond expenses related to recover incremental purchased power capacity costs and in September 2006 in the Louisiana jurisdictionbond securitization, as discussed above. See Note 4 to recovery incremental and ongoing purchased power capacity costs;
  • the amortizationfinancial statements herein for details of transition to competition costs. A rider was implemented effective March 2006 in the Texas jurisdiction to recover incremental transition to competition costs incurred from June 1, 1999 through June 17, 2005;securitization bond issuance; and
  • the interim recovery of storm costs as allowed by the LPSC.

  Partially offsetting the increase was a regulatory credit of $4.5 million recorded during the second quarter of 2006 as a result of Entergy Gulf States reinstating the application of regulatory accounting principles to its wholesale business. Refer to "Application"Application of SFAS 71"71" in Note 71 to the domestic utility companies and System Energy financial statements in the Form 10-K for further discussion.