UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
| |
| (Mark One) | |
| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| | For the Quarterly Period Ended June 30, 2016March 31, 2017 |
| | OR |
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | |
| | For the transition period from ____________ to ____________ |
|
| | | | |
Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. | |
Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. |
| 1-11299 | ENTERGY CORPORATION (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 72-1229752 | | 1-35747 | ENTERGY NEW ORLEANS, INC. (a Louisiana corporation) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3700 72-0273040 |
| | | | | |
| | | | | |
| 1-10764 | ENTERGY ARKANSAS, INC. (an Arkansas corporation) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 71-0005900 | | 1-34360 | ENTERGY TEXAS, INC. (a Texas corporation) 9425 Pinecroft10055 Grogans Mill Road
The Woodlands, Texas 77380 Telephone (409) 981-2000 61-1435798 |
| | | | | |
| | | | | |
| 1-32718 | ENTERGY LOUISIANA, LLC (a Texas limited liability company) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 576-4000 47-4469646 | | 1-09067 | SYSTEM ENERGY RESOURCES, INC. (an Arkansas corporation) Echelon One
1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 72-0752777 |
| | | | | |
| | | | | |
| 1-31508 | ENTERGY MISSISSIPPI, INC. (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 64-0205830 | | | |
| | | | | |
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. Yes Rþ No o
Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Rþ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
|
| | | | | | | | | |
| | Large accelerated filer | | Accelerated filer | | Non- accelerated filer | | Smaller reporting company | | Emerging growth company |
| Entergy Corporation | ü | | | | | | | | |
| Entergy Arkansas, Inc. | | | | | ü | | | | |
| Entergy Louisiana, LLC | | | | | ü | | | | |
| Entergy Mississippi, Inc. | | | | | ü | | | | |
| Entergy New Orleans, Inc. | | | | | ü | | | | |
| Entergy Texas, Inc. | | | | | ü | | | | |
| System Energy Resources, Inc. | | | | | ü | | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No Rþ
|
| | |
| Common Stock Outstanding | | Outstanding at July 29, 2016April 28, 2017 |
| Entergy Corporation | ($0.01 par value) | 178,982,069179,465,897 |
Entergy Corporation, Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, 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, 2015 and the Quarterly Report for Form 10-Q for the quarter ended March 31, 2016, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2016March 31, 2017
|
| |
| | Page Number |
| | |
| |
| |
| Part 1. Financial Information | |
| Entergy Corporation and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| |
| Notes to Financial Statements | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| Entergy Arkansas, Inc. and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| Entergy Louisiana, LLC and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| |
Entergy Mississippi, Inc. | |
| |
| |
| |
| |
| |
| |
Entergy New Orleans, Inc. and Subsidiaries | |
| |
| |
| |
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2016March 31, 2017
|
| |
| | Page Number |
| | |
| |
| |
| Entergy Mississippi, Inc. | |
| |
| |
| |
| |
| |
| |
| Entergy New Orleans, Inc. and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| Entergy Texas, Inc. and Subsidiaries | |
| |
| |
| |
| |
| |
| |
| System Energy Resources, Inc. | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
FORWARD-LOOKING INFORMATION
In this combined 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 “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although each 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, these registrants 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. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-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 others described elsewhere in this combined report and in subsequent securities filings):
resolution of pending and future rate cases and negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;
the termination of Entergy Arkansas’s participation in the System Agreement, which occurred in December 2013, the termination of Entergy Mississippi’s participation in the System Agreement, which occurred in November 2015,long-term risks and the termination of Entergy Texas’s, Entergy New Orleans’s, and Entergy Louisiana’s participation in the System Agreement, which will occur on August 31, 2016, and will result inuncertainties associated with the termination of the System Agreement in its entirety pursuant2016, including the potential absence of federal authority to a settlement agreement approved by FERC in December 2015;resolve certain issues among the Utility operating companies and their retail regulators;
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ move toparticipation in MISO, which occurred in December 2013, including the effect of current or projected MISO market rules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;
changes in utility regulation, including the beginning or end of retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC;FERC or the U.S. Department of Justice;
changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned potential or actual shutdown of nuclear generating facilities owned or operated by Entergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;
resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications or other authorizations required of nuclear generating facilities and the effect of public and political opposition on these applications, regulatory proceedings, and litigation;
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at its nuclear generating facilities;
the operation and maintenance of Entergy’s nuclear generating facilities require the commitment of substantial human and capital resources that can result in increased costs and capital expenditures;
Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants;
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;
FORWARD-LOOKING INFORMATION (Concluded)
volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers;
FORWARD-LOOKING INFORMATION (Concluded)
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;
changes in environmental tax, and other laws and regulations or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, thermal energy,particulate matter, heat, and other regulated air and water emissions, and changes in costs of compliance with environmental and other laws and regulations;
the effects of changes in federal, state or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, or energy policies;
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
effects of climate change;change, including the potential for increases in sea levels or coastal land and wetland loss;
changes in the quality and availability of water supplies and the related regulation of water use and diversion;
Entergy’s ability to manage its capital projects and operation and maintenance costs;
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;
the economic climate, and particularly economic conditions in Entergy’s Utility service area and the Northeast United States and events and circumstances that could influence economic conditions in those areas, including power prices, and the risk that anticipated load growth may not materialize;
the effects of Entergy’s strategies to reduce tax payments;
changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing debt,securities, execute share repurchase programs, 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;
the effect of litigation and government investigations or proceedings;
changes in technology, including with respect to new, developing, or alternative sources of generation;
the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, including increased security costs,natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
Entergy’s ability to attract and retain talented management and directors;
changes in accounting standards and corporate governance;
declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans;
future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;
changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites;sites and the implementation of decommissioning of such sites following shutdown;
the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by as early as 2021, including the implementation of the planned shutdown of Pilgrim, Palisades, Indian Point 2, and FitzPatrick and the related decommissioning of those plants and Vermont Yankee;Indian Point 3;
the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;
factors that could lead to impairment of long-lived assets; and
the ability to successfully complete merger, acquisition,strategic transactions Entergy may undertake, including mergers, acquisitions, or divestiture plans,divestitures, regulatory or other limitations imposed as a result of merger, acquisition, or divestiture,any such strategic transaction, and the success of the business following a merger, acquisition, or divestiture.any such strategic transaction.
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are defined below: |
| |
| Abbreviation or Acronym | Term |
AFUDC | Allowance for Funds Used During Construction |
| ALJ | Administrative Law Judge |
| ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas |
| APSC | Arkansas Public Service Commission |
ASLB | Atomic Safety and Licensing Board, the board within the NRC that conducts hearings and performs other regulatory functions that the NRC authorizes |
| ASU | Accounting Standards Update issued by the FASB |
| Board | Board of Directors of Entergy Corporation |
| Cajun | Cajun Electric Power Cooperative, Inc. |
| capacity factor | Actual plant output divided by maximum potential plant output for the period |
City Council or Council | Council of the City of New Orleans, Louisiana |
| D.C. Circuit | U.S. Court of Appeals for the District of Columbia Circuit |
| DOE | United States Department of Energy |
| Entergy | Entergy Corporation and its direct and indirect subsidiaries |
| Entergy Corporation | Entergy Corporation, a Delaware corporation |
| Entergy Gulf States Louisiana | Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana. |
| Entergy Louisiana | Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes. |
| Entergy Texas | Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires. |
Entergy Wholesale Commodities | Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers |
| EPA | United States Environmental Protection Agency |
| FASB | Financial Accounting Standards Board |
| FERC | Federal Energy Regulatory Commission |
| FitzPatrick | James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017 |
| Form 10-K | Annual Report on Form 10-K for the calendar year ended December 31, 20152016 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries |
FTR | Financial transmission right |
| Grand Gulf | Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy |
DEFINITIONS (Continued)
|
| |
Abbreviation or Acronym | Term |
| GWh | Gigawatt-hour(s), which equals one million kilowatt-hours |
| Independence | Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC |
| Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
DEFINITIONS (Continued)
|
| |
| Abbreviation or Acronym | Term |
| |
| Indian Point 3 | Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| IRS | Internal Revenue Service |
| ISO | Independent System Operator |
| kW | Kilowatt, which equals one thousand watts |
| kWh | Kilowatt-hour(s) |
| LPSC | Louisiana Public Service Commission |
| MISO | Midcontinent Independent System Operator, Inc., a regional transmission organization |
| MMBtu | One million British Thermal Units |
| MPSC | Mississippi Public Service Commission |
| MW | Megawatt(s), which equals one thousand kilowatts |
| MWh | Megawatt-hour(s) |
| Net debt to net capital ratio | Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents |
| Net MW in operation | Installed capacity owned and operated |
| NRC | Nuclear Regulatory Commission |
| NYPA | New York Power Authority |
| Palisades | Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| Parent & Other | The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation |
| Pilgrim | Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| PPA | Purchased power agreement or power purchase agreement |
| PUCT | Public Utility Commission of Texas |
| Registrant Subsidiaries | Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc., and System Energy Resources, Inc. |
| River Bend | River Bend Station (nuclear), owned by Entergy Louisiana |
RTO | Regional transmission organization |
| SEC | Securities and Exchange Commission |
| System Agreement | Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. Entergy ArkansasThe agreement terminated its participation in the System Agreement effective December 18, 2013. Entergy Mississippi terminated its participation in the System Agreement effective November 7, 2015.August 2016. |
| System Energy | System Energy Resources, Inc. |
| TWh | Terawatt-hour(s), which equals one billion kilowatt-hours |
| Unit Power Sales Agreement | Agreement, dated as of June 10, 1982, as amended and approved by FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf |
| Utility | Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
| Utility operating companies | Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
DEFINITIONS (Concluded)
|
| |
| Abbreviation or Acronym | Term |
Utility | Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
Utility operating companies | Entergy Arkansas, Entergy Gulf States Louisiana (prior to the completion of the business combination with Entergy Louisiana), Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
| Vermont Yankee | Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 |
| Waterford 3 | Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana |
| weather-adjusted usage | Electric usage excluding the effects of deviations from normal weather |
| White Bluff | White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas |
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.
The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.
The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for discussion of the operation and planned shutdown or sale of each of the Entergy Wholesale Commodities nuclear power plants.
Results of Operations
SecondFirst Quarter 20162017 Compared to SecondFirst Quarter 20152016
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the secondfirst quarter 20162017 to the secondfirst quarter 20152016 showing how much the line item increased or (decreased) in comparison to the prior period:
|
| | | | | | | | | | | | | | | | |
| | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy |
| | | (In Thousands) |
| 2nd Quarter 2015 Consolidated Net Income (Loss) | |
| $204,035 |
| |
| ($3,545 | ) | |
| ($46,768 | ) | |
| $153,722 |
|
| | | | | | | | | |
| Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 36,565 |
| | (57,433 | ) | | (6 | ) | | (20,874 | ) |
| Other operation and maintenance | | (29,906 | ) | | (41,646 | ) | | 2,938 |
| | (68,614 | ) |
| Asset write-offs, impairments, and related charges | | — |
| | 6,969 |
| | — |
| | 6,969 |
|
| Taxes other than income taxes | | 2,146 |
| | (9,375 | ) | | 100 |
| | (7,129 | ) |
| Depreciation and amortization | | 13,204 |
| | (18,004 | ) | | 114 |
| | (4,686 | ) |
| Other income | | 15,134 |
| | 1,778 |
| | (990 | ) | | 15,922 |
|
| Interest expense | | 6,952 |
| | 630 |
| | 3,101 |
| | 10,683 |
|
| Other expenses | | 4,604 |
| | (16,893 | ) | | — |
| | (12,289 | ) |
| Income taxes | | (121,583 | ) | | (231,755 | ) | | 4,584 |
| | (348,754 | ) |
| | | | | | | | | |
| 2nd Quarter 2016 Consolidated Net Income (Loss) | |
| $380,317 |
| |
| $250,874 |
| |
| ($58,601 | ) | |
| $572,590 |
|
| |
(a) | Parent & Other includes eliminations, which are primarily intersegment activity. |
Refer to “ENTERGY CORPORATION AND SUBSIDIARIES -SELECTED OPERATING RESULTS” for further information with respect to operating statistics.
Second quarter 2016 results of operations include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a tax election to treat a subsidiary that owns one of the Entergy Wholesale Commodities nuclear power plants as a corporation for federal income tax purposes; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Ike storm costs pursuant to Louisiana Act 55; and a reduction in expenses of $59 million ($38 million net-of-tax) due to the effects of recording in second quarter 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 10 to the financial statements herein for additional discussion of the income tax items and Note 1 to the financial statements herein for discussion of the DOE litigation.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the second quarter 2016 to the second quarter 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $1,488 |
|
Retail electric price | 55 |
|
Volume/weather | 8 |
|
Louisiana Act 55 financing savings obligation | (16 | ) |
Other | (11 | ) |
2016 net revenue |
| $1,524 |
|
The retail electric price variance is primarily due to:
an increase in base rates at Entergy Arkansas, as approved by the APSC. The new rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. A significant portion of the increase is related to the purchase of Power Block 2 of the Union Power Station;
an increase in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the City Council, effective with the first billing cycle of March 2016, related to the purchase of Power Block 1 of the Union Power Station; and
an increase in the formula rate plan for Entergy Louisiana, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station.
See Note 2 to the financial statements herein for further discussion of the rate proceedings. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
The volume/weather variance is primarily due to an increase of 369 GWh, or 1%, in billed electricity usage primarily due to an increase in industrial usage, partially offset by the effect of less favorable weather on residential and commercial sales. The increase in industrial usage is primarily due to increased growth from new and expansion customers, primarily in the chemicals industry, as well as existing customers, primarily in the petroleum refining industry.
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings results from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 10 to the financial statements for additional discussion of the settlement and benefit sharing.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the second quarter 2016 to the second quarter 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $350 |
|
Nuclear realized price changes | (38 | ) |
Nuclear volume | (36 | ) |
Rhode Island State Energy Center | (10 | ) |
Nuclear fuel expenses | 29 |
|
Other | (2 | ) |
2016 net revenue |
| $293 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $57 million in the second quarter 2016 as compared to the second quarter 2015 primarily due to:
lower realized wholesale energy prices and lower capacity prices;
lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more refueling outage days in the second quarter 2016 as compared to the second quarter 2015. See “Nuclear Matters - Indian Point 2 Outage” below for discussion of the extended Indian Point 2 outage in second quarter 2016; and
the sale of the Rhode Island State Energy Center in December 2015.
The decrease was partially offset by a decrease in nuclear fuel expenses primarily related to the impairments of the FitzPatrick, Pilgrim, and Palisades plants and related assets in the third and fourth quarters of 2015. See Note 1 to the financial statements in the Form 10-K for discussion of the impairments.
Following are key performance measures for Entergy Wholesale Commodities for the second quarter2016 and 2015:
|
| | | |
| | 2016 | | 2015 |
| Owned capacity (MW) (a) | 4,880 | | 5,463 |
| GWh billed | 7,866 | | 9,578 |
| Average revenue per MWh | $43.74 | | $45.87 |
| | | | |
| Entergy Wholesale Commodities Nuclear Fleet | | | |
| Capacity factor | 76% | | 89% |
| GWh billed | 7,308 | | 8,555 |
| Average revenue per MWh | $43.52 | | $45.84 |
| Refueling Outage Days: | | | |
| Indian Point 2 | 77 | | — |
| Pilgrim | — | | 34 |
| |
(a) | The reduction in owned capacity is due to the sale of the 583 MW Rhode Island State Energy Center in December 2015. |
Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants” in the Form 10-K for a discussion of the effects
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
of sustained low natural gas prices and power market structure challenges on market prices for electricity over the past few years in the power regions where the Entergy Wholesale Commodities power plants are located. As shown in the contracted sale of energy table in “Market and Credit Risk Sensitive Instruments” below, Entergy Wholesale Commodities has sold forward 87% of its planned nuclear energy output for 2016 for an expected average contracted energy price of $41.70 per MWh based on market prices at June 30, 2016. In addition, Entergy Wholesale Commodities has sold forward 83% of its planned nuclear energy output for 2017 for an expected average contracted energy price of $44.20 per MWh based on market prices at June 30, 2016.
The market price trend presents a challenging economic situation for the Entergy Wholesale Commodities plants. The severity of the challenge varies for each of the plants based on a variety of factors such as their market for both energy and capacity, their size, their contracted positions, and the amount of investment required to continue to operate and maintain the safety and integrity of the plants, including the estimated asset retirement costs. In addition, currently the market design under which the plants operate does not adequately compensate merchant nuclear plants for their environmental and fuel diversity benefits in their regions.
In October 2015, Entergy determined that it will close the Pilgrim and FitzPatrick plants. The decisions to shut down the plants were primarily due to the poor market conditions that have led to reduced revenues, the poor market design that fails to properly compensate nuclear generators for the benefits they provide, and increased operational costs. The Pilgrim plant is expected to cease operations on May 31, 2019. The FitzPatrick plant is preparing to shut down at the end of its current fuel cycle, which is planned for late January 2017, and those preparations are ongoing. Entergy announced in July 2016, however, that it is in discussions with another company for the possible sale of FitzPatrick, which is discussed in more detail in “Critical Accounting Estimates -Impairment of Long-lived Assets and Trust Fund Investments.”
Entergy previously shut down Vermont Yankee in 2014, and, after the closure of Pilgrim and the closure or sale of FitzPatrick, will have two remaining nuclear power generating facilities in operation in the Entergy Wholesale Commodities business, Indian Point and Palisades. Unlike the three facilities that Entergy has decided to shut down, Indian Point is a multi-unit site, with both Indian Point 2 and 3 in operation, that sells power at NYISO Zone G, which is a key supply region for New York City. In addition, Indian Point 2 (1,028 MW) and 3 (1,041 MW) are significantly larger plants than Vermont Yankee (605 MW), Pilgrim (688 MW), or FitzPatrick (838 MW). The Indian Point plants, however, are currently involved and face opposition in extensive licensing proceedings, which are described in “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” in the Form 10-K and with updates herein. Palisades (811 MW) is similar in size to FitzPatrick, is also a single-unit site, and the MISO market in which it operates has also experienced market price declines over the past few years. At this time, however, most of the Palisades output is sold under a 15-year power purchase agreement, entered at the plant’s acquisition in 2007, that expires in 2022. The power purchase agreement prices currently exceed market prices and escalate each year, up to $61.50/MWh in 2022.
In 2015, Entergy recorded impairment and other related charges to write down the carrying values of the FitzPatrick, Pilgrim, and Palisades plants and related assets to their fair values. Impairment of long-lived assets and nuclear decommissioning costs, and the factors that influence these items, are both discussed in the Form 10-K in “MANAGMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Critical Accounting Estimates,” with updates herein. If economic conditions or regulatory activity no longer support Entergy’s continued operation of Indian Point or Palisades for their expected lives or no longer support the recovery of the costs of the plants, it could adversely affect Entergy’s results of operations through loss of revenue, impairment charges, increased depreciation rates, transitional costs, or accelerated decommissioning costs.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement Items
Utility
Other operation and maintenance expenses decreased from $612 million for the second quarter 2015 to $582 million for the second quarter 2016 primarily due to:
a decrease of $16 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
a decrease of $12 million in fossil-fueled generation expenses primarily due to an overall lower scope of work done during plant outages in the second quarter 2016 as compared to the second quarter 2015, partially offset by an increase as a result of the purchase of the Union Power Station in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchase of the Union Power Station in March 2016.
Other income increased primarily due to higher earnings on decommissioning trust fund investments in the second quarter 2016 as compared to the second quarter 2015.
Entergy Wholesale Commodities
Other operation and maintenance expenses decreased from $212 million for the second quarter 2015 to $171 million for the second quarter 2016 primarily due to a decrease of $42 million related to proceeds received in June 2016 as a result of the litigation against the DOE for the reimbursement of spent nuclear fuel storage costs. See Note 1 to the financial statements herein for discussion of the DOE litigation.
Depreciation and amortization expenses decreased primarily due to:
the effects of recording the final court decisions in the FitzPatrick, Vermont Yankee, and Indian Point 3 lawsuits against the DOE related to spent nuclear fuel disposal. The damages awarded include the reimbursement of approximately $11 million of spent nuclear fuel storage costs previously recorded as depreciation. See Note 1 to the financial statements herein for discussion of the DOE litigation;
decreases in depreciable asset balances as a result of the impairments of the FitzPatrick, Pilgrim, and Palisades plants in the third and fourth quarters of 2015. See Note 1 to the financial statements in the Form 10-K for discussion of the impairments; and
a decrease in depreciable asset balances as a result of the sale of the Rhode Island State Energy Center in December 2015.
Other expenses decreased primarily due to the reduction in deferred refueling outage amortization costs related to the impairments of the FitzPatrick, Pilgrim, and Palisades plants and related assets in the third and fourth quarters of 2015. See Note 1 to the financial statements in the Form 10-K for discussion of the impairments.
Income Taxes
The effective income tax rate was (76.9%) for the second quarter 2016. The difference in the effective income tax rate for the second quarter 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat a subsidiary that owns one of the Entergy Wholesale Commodities nuclear power plants as a corporation for federal
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
income tax purposes that resulted in reduced income tax expense and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016. See Note 10 to the financial statements for additional discussion of the tax election and the tax settlements.
The effective income tax rate was 39.4% for the second quarter 2015. The difference in the effective income tax rate for the second quarter 2015 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the six months ended June 30, 2016 to the six months ended June 30, 2015 showing how much the line item increased or (decreased) in comparison to the prior period:
| | | | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy |
| | | (In Thousands) | | (In Thousands) |
| 2015 Consolidated Net Income (Loss) | |
| $431,786 |
| |
| $119,887 |
| |
| ($95,022 | ) | |
| $456,651 |
| |
| 2016 Consolidated Net Income (Loss) | | |
| $199,651 |
| |
| $79,557 |
| |
| ($43,966 | ) | |
| $235,242 |
|
| | | | | | | | | | | | | | | | | |
| Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 1,139 |
| | (117,750 | ) | | (17 | ) | | (116,628 | ) | | 29,119 |
| | 27,906 |
| | (2 | ) | | 57,023 |
|
| Other operation and maintenance | | (71,184 | ) | | (40,309 | ) | | 4,684 |
| | (106,809 | ) | | 53,442 |
| | 81,437 |
| | 752 |
| | 135,631 |
|
| Asset write-offs, impairments, and related charges | | — |
| | 14,329 |
| | — |
| | 14,329 |
| | — |
| | 204,430 |
| | — |
| | 204,430 |
|
| Taxes other than income taxes | | (4,315 | ) | | (10,349 | ) | | (210 | ) | | (14,874 | ) | | 7,602 |
| | (1,320 | ) | | 293 |
| | 6,575 |
|
| Depreciation and amortization | | 21,823 |
| | (24,162 | ) | | (62 | ) | | (2,401 | ) | | 16,450 |
| | (3,514 | ) | | 56 |
| | 12,992 |
|
| Gain on sale of assets | | | — |
| | 16,270 |
| | — |
| | 16,270 |
|
| Other income | | 6,836 |
| | (18,755 | ) | | (1,911 | ) | | (13,830 | ) | | 9,440 |
| | 30,459 |
| | 61 |
| | 39,960 |
|
| Interest expense | | 7,921 |
| | 818 |
| | 5,854 |
| | 14,593 |
| | (3,974 | ) | | 338 |
| | 1,554 |
| | (2,082 | ) |
| Other expenses | | 10,545 |
| | (37,743 | ) | | — |
| | (27,198 | ) | | 6,411 |
| | 30,668 |
| | 1 |
| | 37,080 |
|
| Income taxes | | (104,997 | ) | | (249,632 | ) | | (4,650 | ) | | (359,279 | ) | | (9,344 | ) | | (130,651 | ) | | 7,813 |
| | (132,182 | ) |
| | | | | | | | | | | | | | | | | |
| 2016 Consolidated Net Income (Loss) | |
| $579,968 |
| |
| $330,430 |
| |
| ($102,566 | ) | |
| $807,832 |
| |
| 2017 Consolidated Net Income (Loss) | | |
| $167,623 |
| |
| ($27,196 | ) | |
| ($54,376 | ) | |
| $86,051 |
|
| |
| (a) | Parent & Other includes eliminations, which are primarily intersegment activity. |
Refer to “ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS” for further information with respect to operating statistics.
ResultsFirst quarter 2017 results of operations for the six months ended June 30, 2016 include a reductionincludes $212 million ($138 million net-of-tax) of income taximpairment charges due to costs being charged directly to expense net of unrecognized tax benefits, of $238 million as a result of a tax election to treat a subsidiary that owns onethe impaired value of the Entergy Wholesale Commodities nuclear power plants as a corporation for federal income tax purposes; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and a reduction in expenses of $59 million ($38 million net-of-tax)plants’ long-lived assets due to the effects of recording in second quarter 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 10 to the financial statements herein for additional discussion of the income tax items and Note 1 to the financial statements herein for discussion of the DOE litigation.
significantly reduced remaining estimated operating lives associated with
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the six months ended June 30, 2016first quarter 2017 to the six months ended June 30, 2015:first quarter 2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $2,8981,375 |
|
| Retail electric price | 8237 |
|
Louisiana Act 55 financing savings obligationOpportunity sales | (168 | )
|
| Volume/weather | (3917 | ) |
| Other | (261 | )
|
20162017 net revenue |
| $2,8991,404 |
|
The retail electric price variance is primarily due to:
an increase in base rates and the implementation of formula rate plan rates at Entergy Arkansas, as approved by the APSC. The new base rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. The increase includes an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. A significant portion of the base rate increase iswas related to the purchase of Power Block 2 of the Union Power Station;
an increaseStation in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the City Council,March 2016. The formula rate plan rates were effective with the first billing cycle of March 2016, related to the purchase of Power Block 1 of the Union Power Station; andJanuary 2017;
an increase in the formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station.Station in March 2016;
an increase in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station in March 2016; and
an increase in revenues at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016.
See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the rate proceedings. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase.
The Louisiana Act 55 financing savings obligationopportunity sales variance results from a regulatory charge for tax savings to be sharedthe estimated net revenue effect recorded in the first quarter 2016 in connection with customers per an agreement approved by the LPSC. The tax savings results fromFERC orders issued in April 2016 in the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike.opportunity sales proceeding. See Note 102 to the financial statements in the Form 10-K for additionalfurther discussion of the settlement and benefit sharing.opportunity sales proceeding.
The volume/weather variance is primarily due to a decrease of 480517 GWh, or 1%2%, in billed electricity usage, primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to increased growth for new customers in the primary metals and industrial gases industries and expansion customers,projects primarily in the chemicals industry, as well aspartially offset by a decrease in usage by existing customers primarily in the petroleum refining industry.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the six months ended June 30, 2016first quarter 2017 to the six months ended June 30, 2015:first quarter 2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $877466 |
|
| FitzPatrick reimbursement agreement | 98 |
|
| Nuclear realized price changes | (11665 | ) |
Nuclear volume | (25 | ) |
Rhode Island State Energy Center | (25 | ) |
Nuclear fuel expenses | 50 |
|
| Other | (25 | ) |
20162017 net revenue |
| $759494 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreasedincreased by $118$28 million in the six months ended June 30, 2016first quarter 2017 as compared to the six months ended June 30, 2015first quarter 2016 primarily due to:
lower realized wholesale energy pricesto an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon is reimbursing Entergy for specified out-of-pocket costs associated with preparing for the refueling and lower capacity prices;
lower volumeoperation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017. Revenues received from Exelon in the Entergy Wholesale Commodities nuclear fleet resulting from more refueling outage daysfirst quarter 2017 under the reimbursement agreement are offset in 2016 as comparedother operation and maintenance expenses and taxes other than income taxes and have no material effect on net income. See Note 13 to the same period in 2015, partially offset by fewer unplanned outage days in 2016 as compared to the same period in 2015. See “Nuclear Matters - Indian Point 2 Outage” below for discussion of the extended Indian Point 2 outage in the second quarter 2016;financial statements herein and
the sale of the Rhode Island State Energy Center in December 2015.
The decrease was partially offset by a decrease in nuclear fuel expenses primarily related to the impairments of the FitzPatrick, Pilgrim, and Palisades plants and related assets in the third and fourth quarters of 2015. See Note 114 to the financial statements in the Form 10-K for further discussion of the impairments.reimbursement agreement. The increase was partially offset by lower realized wholesale energy prices.
Following are key performance measures for Entergy Wholesale Commodities for the six months ended June 30, 2016first quarter2017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
Owned capacity (MW) (a)(b) | 4,880 | | 5,463 | 4,800 | | 4,880 |
| GWh billed | 17,112 | | 19,170 | 8,363 | | 9,246 |
| Average revenue per MWh | $50.62 | | $56.44 | |
| | | |
| Entergy Wholesale Commodities Nuclear Fleet | | |
| Capacity factor | 83% | | 89% | 80% | | 90% |
| GWh billed | 15,996 | | 17,173 | 7,835 | | 8,688 |
| Average revenue per MWh | $51.07 | | $55.85 | |
| Refueling Outage Days: | | |
| Average energy and capacity revenue per MWh | | $55.15 | | $56.16 |
| Refueling outage days: | | |
| FitzPatrick | | 42 | | — |
| Indian Point 2 | 102 | | — | — | | 25 |
| Indian Point 3 | — | | 23 | 19 | | — |
| Pilgrim | — | | 34 | |
| |
| (a) | The reduction in owned capacity is due to theEntergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 14 to the 583financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale. |
| |
| (b) | Includes the 838 MW Rhode Island State Energy CenterFitzPatrick plant, which was sold to Exelon in December 2015.March 2017. See Note 13 to the financial statements herein for discussion of the FitzPatrick sale. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement Items
Utility
Other operation and maintenance expenses decreasedincreased from $1,167$514 million for the six months ended June 30, 2015first quarter 2016 to $1,096$568 million for the six months ended June 30, 2016first quarter 2017 primarily due to:
a decrease of $31 millionthe deferral in fossil-fueled generation expenses primarily due to an overall lower scope of work done during plant outages infirst quarter 2016 as compared to the same period in 2015, partially offset by an increase as a result of the purchase of the Union Power Station in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase;
a decrease of $30 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
the deferral of $8 million of previously-incurred costs related to ANO post-Fukushima compliance and $10 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC in February 2016 as part of the Entergy Arkansas 2015 rate case settlement. See Note 2 to the financial statements herein for further discussion of the rate case settlement; and
a decrease of $7 million as a result of spending in 2015 related to the Entergy Louisiana and Entergy Gulf States Louisiana business combination. Deferrals of $15.8 million of certain external costs incurred were recorded in the third and fourth quarter 2015, as approved by the LPSC. These costs are being amortized over a ten-year period beginning December 2015.March 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination”Note 2 to the financial statements in the Form 10-K for afurther discussion of the combination.
rate case settlement;
The decrease was partially offset by an increase of $29$10 million in nuclearcompensation and benefits costs primarily due to a revision to estimated incentive compensation expense in first quarter 2016;
an increase of $8 million in fossil-fueled generation expenses primarily due to an increasethe purchase of Union Power Station in regulatory compliance costs,March 2016 and an overall higher scope of work doneperformed during plant outages in 2017 as compared to prior year,the same period in 2016; and higher
an increase of $7 million in loss provisions.
Also, an increase in nuclear labor costs, including contract labor.generation expenses due to additional training and initiatives to support management’s operational goals at Grand Gulf was offset by a decrease in regulatory compliance costs. The increasedecrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” below and in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the Grand Gulf outage.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchaseUnion Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
Other income increased primarily due to higher realized gains in March 2016.first quarter 2017 as compared to first quarter 2016 on the decommissioning trust fund investments.
Entergy Wholesale Commodities
Other operation and maintenance expenses decreasedincreased from $425$214 million for the six months ended June 30, 2015first quarter 2016 to $384$295 million for the six months ended June 30, 2016first quarter 2017 primarily due to a decrease of $42 million relatedFitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being charged directly to proceeds received in June 2016other operation and maintenance expenses as a result of the litigation againstreimbursement agreement Entergy entered into with Exelon and an increase in severance and retention costs in the DOEfirst quarter 2017 as compared to the first quarter 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being charged directly to other operation and maintenance expenses as a result of the reimbursement agreement Entergy entered into with Exelon are offset by revenue and have no effect on net income. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of spent nuclear fuel storage costs.management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 113 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the DOE litigation.reimbursement agreement.
DepreciationThe asset write-offs, impairments, and amortization expenses decreasedrelated charges variance is primarily due to:
the effectsto $212 million ($138 million net-of-tax) of recording the final court decisionsimpairment charges in the FitzPatrick, Vermont Yankee, and Indian Point 3 lawsuits against the DOE relatedfirst quarter 2017 due to spent nuclear fuel disposal. The damages awarded include the reimbursementcosts being charged directly to expense as a result of approximately $11 million of spent nuclear fuel storage costs previously recorded as depreciation. See Note 1 to the financial statements herein for discussion of the DOE litigation;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
decreasesthe impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in depreciable asset balancesthe Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
The gain on sale of assets resulted from the sale in March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergy sold the FitzPatrick plant for approximately $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See Note 13 to the financial statements herein for a discussion of the sale.
Other income increased primarily due to higher realized gains in first quarter 2017 as compared to first quarter 2016 on the decommissioning trust fund investments, including the increase in value from year-end realized upon the receipt from NYPA of the decommissioning trust funds for the Indian Point 3 and FitzPatrick plants in January 2017. See Note 9 to the financial statements herein and Note 16 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA.
Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the impairments ofdecommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick Pilgrim,plants to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point 2, Indian Point 3, and Palisades plants in the third and fourth quarters of 2015; and
a decrease in depreciable asset balances as a result of revised decommissioning cost studies in the salefourth quarter 2016. See Note 9 to the financial statements in the Form 10-K for discussion of the Rhode Island State Energy Center in December 2015.
Other income decreased primarily due to lower realized gains ontrust transfer agreement with NYPA and the revised decommissioning trust fund investments in 2016 as compared to the same period in 2015, which included realized decommissioning trust gains that resulted from portfolio reallocations for the Vermont Yankee nuclear decommissioning trust funds.
Other expenses decreased primarily due to thecost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the FitzPatrick, Pilgrim,Indian Point 3, Indian Point 2, and Palisades plants and related assets in the third and fourth quarters of 2015.assets. See Note 114 to the financial statements in the Form 10-K for discussion of the impairments.impairments and related charges.
Income Taxes
The effective income tax rate was (15.6%)8.3% for the six months ended June 30,first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of 35% was primarily due to the re-determined tax basis of the FitzPatrick plant as a result of the sale on March 31, 2017 and book and tax differences related to the allowance for equity funds used during construction, partially offset by a write-off of a stock-based compensation deferred tax asset, state income taxes, certain book and tax differences related to utility plant items, and the provision for uncertain tax positions. See Note 10 to the financial statements herein for further discussion of the tax benefit associated with the sale of FitzPatrick and the write-off of the stock-based compensation deferred tax asset.
The effective income tax rate was 37.3% for the first quarter 2016. The difference in the effective income tax rate for the six months ended June 30,first quarter 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat a subsidiary that owns one of the Entergy Wholesale Commodities nuclear power plants as a corporation for federal income tax purposes that resulted in reduced income tax expense and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016. See Note 10 to the financial statements for additional discussion of the tax election and the tax settlements.
The effective income tax rate was 35.4% for the six months ended June 30, 2015. The difference in the effective income tax rate for the six months ended June 30, 2015 versus the federal statutory rate of 35% was primarily due to state income taxes, and certain book and tax differences related to utility plant items, partially offset by the reversal of a portion ofand the provision for uncertain tax positions, resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS andpartially offset by book and tax differences related to the allowance for equity funds used during construction.
ANO Damage, Outage, and NRC Reviews
See Note 3 to the financial statements“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the finalized taxANO stator incident, subsequent NRC reviews, and interest computationsthe deferral of replacement power costs.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Exit from the Merchant Power Business
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Following are updates to that discussion.
Entergy expects to incur employee retention and severance expenses associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet of approximately $110 million in 2017, of which $24 million had been incurred as of March 31, 2017, and approximately $225 million from 2018 through the end of 2021. In addition, Entergy Wholesale Commodities incurred $212 million of impairment charges in the first quarter 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged directly to expense as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to charge these costs directly to expense over the remaining operating lives of the plants.
In March 2017 the NRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a purchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the 2006-2007 audit.proration of certain expenses prepaid by Entergy. See Note 13 to the financial statements herein for further discussion of the sale of FitzPatrick. As discussed in Note 10 to the financial statements herein, as a result of the sale of FitzPatrick on March 31, 2017, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit.
Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” in the Form 10-K for a discussion of the NRC operating licenseslicensing proceedings for Indian Point 2 and Indian Point 3 and the NRC license renewal joint application in process for these plants.settlement reached with New York State. Following are updatesis an update to that discussion.
Indian Point NRC/ASLB Proceedings
In May 2016accordance with the NRCsettlement with New York State, in March 2017 the New York State Department of State issued a decision sustaining New York State’s appeal of the ASLB’s November 2013 Track 1 decision upholding the adequacy of Severe Accident Mitigation Alternatives (SAMA) decontamination cost estimates. The NRC directed its staff to supplement its SAMA analysis to include sensitivity runs for two inputs to SAMA decontamination costs. Since SAMA analysis is part of the NRC’s environmental impact analysis, and not part of its safety analysis, further supplementation of the NRC’s Final Supplemental Environmental Impact Statement (FSEIS) will be required,concurrence with attendant impact on the schedule for completion of proceedings before the NRC.
In June 2016 the ASLB resolved in favor of Entergy and the NRC staff the last outstanding Track 1 appeal. That appeal addressed SAMA issues separate from those resolved in the May 2016 NRC decision discussed above. With respect to Track 2 contentions, the ASLB issued a scheduling order in July 2016 setting a schedule for the filing of (a) supplemental testimony on New York State’s contention challenging the adequacy of Indian Point’s aging management program for reactor vessel internals, with a focus on baffle-former bolts and (b) findings of fact and
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
conclusions of law on all Track 2 issues. Deadlines for several rounds of filings were set for November 2016 through June 2017.
The NRC staff advised that the target for issuance of the second supplemental FSEIS for Indian Point was moved from September 2016 to January 2017.
Indian Pointnew Coastal Zone Management Act Proceedings
As discussed in the Form 10-K, in January 2016, Entergy filed suit in(CZMA) consistency certification and, on Entergy’s motion, the U.S. District Court for the Northern District of New York challengingdismissed Entergy’s appeal related to the initial Indian Point CZMA consistency certification. Also in March 2017 the Atomic Safety and Licensing Board of the NRC granted the motion of New York State and Riverkeeper to withdraw their pending contentions on the NRC license renewal application and terminated the proceedings. Subsequent to the issuance of the water quality certification and water discharge permit in January 2017 by the New York State Department of Environmental Conservation’s objectionConservation (NYSDEC), in April 2017 the NYSDEC updated its environmental analysis to Entergy’s withdrawn Coastal Zone Management Act consistency certification on federal preemption grounds. Entergy’s complaint requests a determination thatreflect the objection, which cites nuclear safety concerns, is preempted and thus invalid. The New York State Department of State filed a motion to dismiss Entergy’s lawsuit in March 2016, and Entergy filed its response in May 2016.
ANO Damage, Outage, and NRC Reviews
See Note 8 toearly shutdown per the financial statements in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews.
As discussed in the Form 10-K, in March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” (Column 4) of the NRC’s Reactor Oversight Process Action Matrix. Placement into Column 4 requires significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. Entergy Arkansas incurred incremental expenses of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur incremental expenses of approximately $50 million in 2016, of which $30.6 million was incurred through June 30, 2016, in support of NRC inspection activities and to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. A lesser amount of incremental expenses is expected to be ongoing annually after 2016, until ANO transitions out of Column 4.
The NRC completed the supplemental inspection required for ANO’s Column 4 designation in February 2016, and published its inspection report in June 2016. In its inspection report, the NRC concluded that the ANO site is being operated safely and that Entergy understands the depth and breadth of performance concerns associated with ANO’s performance decline. Also in June 2016, the NRC issued a confirmatory action letter to confirm the actions Entergy Arkansas has taken and will continue to take to improve performance at ANO. The NRC will verify the completion of those actions through quarterly follow-up inspections, the results of which will determine when ANO should transition out of Column 4.settlement agreement.
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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | June 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 59.6 | % | | 59.1 | % | 65.4 | % | | 64.8 | % |
| Effect of excluding securitization bonds | (1.2 | %) | | (1.4 | %) | (1.0 | %) | | (1.0 | %) |
| Debt to capital, excluding securitization bonds (a) | 58.4 | % | | 57.7 | % | 64.4 | % | | 63.8 | % |
| Effect of subtracting cash | (1.8 | %) | | (2.7 | %) | (1.7 | %) | | (2.0 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 56.6 | % | | 55.0 | % | 62.7 | % | | 61.8 | % |
| |
| (a) | Calculation excludes the Arkansas, Louisiana, New Orleans, and Texas securitization bonds, which are non-recourse to Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas, respectively. |
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2020.2021. Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility. The commitment fee is currently 0.275%0.225% of the undrawn commitment amount. Commitment 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 for the sixthree months ended June 30, 2016March 31, 2017 was 2.28%2.29% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2016:March 31, 2017:
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $240 | | $6 | | $3,254 | | $225 | | $6 | | $3,269 |
A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility’s maturity date may occur. See Note 4 to the financial statements herein for additional discussion of the Entergy Corporation credit facility and discussion of the Registrant Subsidiaries’ credit facilities.
Entergy Nuclear Vermont Yankee entered intohas a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100 million which expires in January 2018. In the first quarter 2016, Entergy Nuclear Vermont Yankee increased the borrowing capacity of its credit facility to $100 million. As of June 30, 2016, $59March 31, 2017, $58 million in cash borrowings were outstanding under the credit facility. Entergy Nuclear Vermont Yankee also entered intohas an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. As of
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Corporation with a borrowing capacity of $85 million which expires in January 2018. As of June 30, 2016March 31, 2017, there were no cash borrowings outstanding under the uncommitted credit facility. See Note 4 to the financial statements herein for additional discussion of the Vermont Yankee facilities.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5 billion. As of June 30, 2016,March 31, 2017, Entergy Corporation had $853 million$1.1 billion of commercial paper outstanding. The weighted-average interest rate for the sixthree months ended June 30, 2016March 31, 2017 was 1.13%1.33%.
Capital Expenditure Plans and Other Uses of Capital
See the table and discussion in the Form 10-K under “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital,” that sets forth the amounts of planned construction and other capital investments by operating segment for 20162017 through 2018.2019. Following are updates to the discussion.
Following are the current annual amounts of Entergy’s planned construction and other capital investments by operating segment for 2016 through 2018.
|
| | | | | | | | | | | | |
| Planned construction and capital investments | | 2016 | | 2017 | | 2018 |
| | | (In Millions) |
| Utility: | | | | | | |
| Generation | |
| $1,770 |
| |
| $1,160 |
| |
| $1,390 |
|
| Transmission | | 690 |
| | 860 |
| | 765 |
|
| Distribution | | 765 |
| | 870 |
| | 800 |
|
| Other | | 280 |
| | 200 |
| | 175 |
|
| Total | | 3,505 |
| | 3,090 |
| | 3,130 |
|
| Entergy Wholesale Commodities | | 265 |
| | 255 |
| | 200 |
|
| Total | |
| $3,770 |
| |
| $3,345 |
| |
| $3,330 |
|
The updated capital plan for 2016-2018 reflects capital plan refinements and includes specific investments such as the Union Power Station purchase in March 2016, the St. Charles Power Station and the New Orleans Power Station, each discussed below, the self-build option at Entergy Louisiana’s Nelson site selected in the request for proposal for Developmental and Existing Capacity and Energy Resources, and the self-build option at Entergy Texas’s Lewis Creek site selected in the request for proposal for Long-Term Combined Cycle Turbine Capacity and Energy Resources and Limited-Term Capacity and Energy Resources; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintain reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments.
St.Lake Charles Power Station
In August 2015,November 2016, Entergy Louisiana filed an application with the LPSC an application seeking certification that the public necessityconvenience and conveniencenecessity would be served by the construction of the St.Lake Charles Power Station, a nominal 980 megawatt994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Little GypsyNelson plant in St.Calcasieu Parish. The current estimated cost of the Lake Charles Parish, Louisiana. ItPower Station is currently$872 million, including estimated to cost $869 million to construct, includingcosts of transmission interconnection and other related costs. Testimony was filed by LPSC staff and intervenors, withan intervenor. The LPSC staff concludingtestimony concludes that the construction of the project serves the public convenience and necessity. Three intervenors contendThe intervenor contends that Entergy Louisiana has not established that construction of the project isa need for Lake Charles Power Station in the public interest, claiming thatproposed timeframe (2020 commercial operation date) and presents questions regarding the request for proposal excluded considerationscope and timing of certain resources that could be more cost effective, that the request for proposal provided undue preference to the self-build option,generation deactivations and that a 30-year capacity commitment is not warranted by current supply
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
conditions.needs. The request for proposal independent monitor also filed testimony and a report affirming that the St.Lake Charles Power Station resource was selected through an objective and fair request for proposal that showed no undue preference to any proposal. AnA procedural schedule has been issued, with an evidentiary hearing was held in April 2016 and, in July 2016 an ALJ issued a final recommendation that the LPSC certify that the construction of St. Charles Power Station is in the public interest.scheduled for May 2017. Subject to timely regulatory approval by the LPSC and receipt of other permits and approvals, construction will commence, and commercial operation is estimated to occur in 2019. Pending receipt of these approvals, Entergy Louisiana continues pre-construction design and procurement activities, primarily focused on procuring long lead time items in order to preserve the project schedule.by mid-2020.
New Orleans Power Station
In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 megawattMW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which facility was deactivated effective May 31, 2016. The current estimated cost of the New Orleans Power Station is $216 million. Subject to timely approval by the City Council and receipt of other permits and approvals, commercial operation is estimated to occur by late-2019. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In February 2017, Entergy New Orleans filed a motion to temporarily suspend the procedural schedule to allow for further analysis regarding its proposal, and that motion was granted. A status conference was held in March 2017 wherein the hearing officer suspended the procedural schedule until Entergy New Orleans files a supplemental and amending application, currently expected to occur in second quarter 2017. In April 2017, Entergy New Orleans filed a status report with the City Council advising that it was in the process of conducting additional analyses regarding generation needed to meet the future electricity needs of New Orleans and stating that it expects to include in the supplemental and amending application a request for approval of either the original New Orleans Power Station combustion turbine or an alternative proposal for an approximately 126 MW unit, as well as a commitment to pursue up to 100 MW of renewable resources to serve New Orleans.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Montgomery County Power Station
In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is seeking$937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal that showed no undue preference to any proposal. Discovery has commenced, and a procedural schedule that will providehas been established for this proceeding, including an evidentiary hearing in May 2017. In March 2017 an intervenor filed direct testimony generally opposing certification of Montgomery County Power Station and proposed certain conditions if the certification is to be granted. In April 2017, Entergy Texas and the independent monitor filed rebuttal testimony in accordance with the procedural schedule. A PUCT decision regarding the application is expected by October 2017, pursuant to a Council decisionTexas statute requiring the PUCT to issue a certificate of convenience and necessity within a timeframe that would support a366 days of the filing. Subject to timely approval by the PUCT and receipt of other permits and approvals, commercial operation dateis estimated to occur by mid-2021.
Washington Parish Energy Center
In April 2017, Entergy Louisiana signed a purchase and sale agreement with a subsidiary of Calpine Corporation for the acquisition of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with a total nominal capacity of approximately 360 MW. The plant, named the Washington Parish Energy Center, will be located in late-2019.Bogalusa, Louisiana and is expected to be completed in 2021. Subject to relevant regulatory approvals, Entergy Louisiana will purchase the plant once it is complete.
Dividends
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 per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its July 2016April 2017 meeting, the Board declared dividendsa dividend of $0.85$0.87 per share, which is the same quarterly dividend per share that Entergy has paid sincein the fourth quarter 2015.2016.
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the sixthree months ended June 30,March 31, 2017 and 2016 and 2015 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Cash and cash equivalents at beginning of period |
| $1,351 |
| |
| $1,422 |
|
| $1,188 |
| |
| $1,351 |
|
| | | | | | | |
| Cash flow provided by (used in): | |
| | |
| |
| | |
|
| Operating activities | 1,252 |
| | 1,338 |
| 529 |
| | 533 |
|
| Investing activities | (2,266 | ) | | (1,370 | ) | (812 | ) | | (1,878 | ) |
| Financing activities | 659 |
| | (480 | ) | 178 |
| | 1,086 |
|
| Net decrease in cash and cash equivalents | (355 | ) | | (512 | ) | (105 | ) | | (259 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $996 |
| |
| $910 |
|
| $1,083 |
| |
| $1,092 |
|
Operating Activities
Net cash flow provided by operating activities decreased $86 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to:
lower Entergy Wholesale Commodities net revenue in 2016 as compared to the same period in 2015, as discussed previously;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
an increaseOperating Activities
Net cash flow provided by operating activities was relatively unchanged, decreasing by $4 million, for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. Significant operating cash flow activities included:
a decrease due to the timing of $70 millionrecovery of fuel and purchased power costs in interest paid in 20162017 as compared to the same period in 20152016. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements in the Form 10-K for discussion of the settlement and refund;
lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in 2017 as compared to the same period in 2016, as discussed above. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;
a decrease of $73 million in interest paid in 2017 as compared to the same period in 2016 primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets and an increase in interest expense as a result of 2016 debt issuances by various Utility operating companies, partially offset by a decrease in interest paid in 2016 on the Grand Gulf sale-leaseback obligation.assets. See Note 1110 to the financial statements hereinin the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets, see Note 4assets;
income tax refunds of $18 million in 2017 compared to income tax payments of $26 million in 2016. Entergy received income tax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related to the financial statements hereineffect of the 2006-2007 IRS audit and for a discussionjurisdictions that do not have net operating loss carryovers or jurisdictions in which the utilization of debt issuances, and seenet operating loss carryovers are limited. See Note 103 to the financial statements in the Form 10-K for detailsa discussion of the Grand Gulf sale-leaseback obligation; andincome tax audit;
an increasea decrease of $34$28 million in spending in 2016 as compared to the same period in 2015 on activities related to the decommissioning of Vermont Yankee, which ceased power production in December 2014.
The decrease was partially offset by:
spending of $54 million in 2015 related to the shutdown of Vermont Yankee, including the severance and retention payments accrued in 2014 and defueling activities that took place after the plant ceased power production in December 2014;
the timing of payments to vendors;
a decrease of $25 million in spending on nuclear refueling outages in 2016 as compared to the same period in 2015; and
proceeds of $11$23 million received in June 2016first quarter 2017 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 18 to the financial statements hereinin the Form 10-K for discussion of the DOEspent nuclear fuel litigation.
Investing Activities
Net cash flow used in investing activities increased $896decreased $1,066 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
the purchase of the Union Power Station for approximately $948 million in March 2016. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase;
the deposit in March 2016 of $197 million held in trust as a result of the issuance by the Louisiana Public Facilities Authority of $83.68 million of 3.375% pollution control refunding revenue bonds and $115 million of 3.50% pollution control refunding revenue bonds; and
proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 13 to the financial statements herein for a discussion of the sale.
The decrease was partially offset by an increase of $158 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an overall higher scopeincrease of work$114 million in fossil-fueled generation construction expenditures primarily due to spending on transmission projectsthe St. Charles Power Station project in 2016 as compared to the same period in 2015,2017 and an increase due to various technology projects and upgrades in 2016, and an increaseof $27 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 20162017 as compared to the same period in 2015, partially offset by a decrease in spending related to compliance with NRC post-Fukushima requirements.
The increase was partially offset by:
proceeds of $89 million received in June 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 1 to the financial statements herein for discussion of the DOE litigation;
a $71 million NYPA value sharing payment in 2015. See Note 15 to the financial statements in the Form 10-K for further discussion of Entergy’s NYPA value sharing agreements;
a change in collateral deposit activity, reflected in the “Decrease (increase) in other investments” line on the Consolidated Statement of Cash Flows, as certain Utility operating companies posted cash collateral of $54 million in 2015 to support their obligations to MISO; and
a decrease in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.2016.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Entergy’sNet cash flow provided by financing activities provided $659decreased $908 million of cash for the sixthree months ended June 30, 2016March 31, 2017 compared to using $480 million of cash for the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
to long-term debt activity providingusing approximately $437$575 million of cash in 20162017 compared to usingproviding approximately $519$966 million of cash in 2015.2016. Included in the long-term debt activity is $595$475 million in 20162017 and $424$219 million in 20152016 for the repayment of borrowings on the Entergy Corporation long-term credit facility; and
facility. The decrease was partially offset by an increase of $100$588 million in 2016net issuances of commercial paper in 2017 compared to the same period in 2016 and a decreasenet increase of $70$48 million in 20152017 in short-term borrowings by the nuclear fuel company variable interest entities.
For the details of Entergy’s commercial paper program, and the nuclear fuel company variable interest entities’ short-term borrowings, and long-term debt see Note 4 to the financial statements herein. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for details of long-term debt.10-K.
Rate, Cost-recovery, and Other Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Rate, Cost-recovery, and Other Regulation” in the Form 10-K for discussions of rate regulation, federal regulation, and related regulatory proceedings.
State and Local Rate Regulation and Fuel-Cost Recovery
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Rate, Cost-recovery, and Other Regulation - Federal Regulation”Note 2 to the financial statements herein for updates to the discussion in the Form 10-K for a discussion ofregarding federal regulatory proceedings. The following are updates to that discussion.
Entergy’s Integration Into the MISO Regional Transmission Organization
As discussed in the Form 10-K, in January 2013, Occidental Chemical Corporation filed with the FERC a petition for declaratory judgment and complaint against MISO alleging that MISO’s proposed treatment of Qualifying Facilities (QFs) in the Entergy region is unduly discriminatory in violation of sections 205 and 206 of the Federal Power Act and violates the Public Utility Regulatory Policies Act (PURPA) and the FERC’s implementing regulations. In April 2016 the FERC denied Occidental’s complaint against MISO and found that MISO’s treatment of QFs in Entergy’s service territories is consistent with the requirements of PURPA and does not violate sections 205 and 206 of the Federal Power Act. In February 2014, Occidental also filed with the FERC a petition for enforcement against the LPSC. Occidental’s petition for enforcement alleges that the LPSC’s January 2014 order, which approved Entergy Louisiana’s application for modification of Entergy’s methodology for calculating avoided cost rates paid to QFs, is inconsistent with the requirements of PURPA and the FERC’s regulations implementing PURPA. In April 2014 the FERC issued a “Notice Of Intent Not To Act At This Time” with respect to Occidental’s petition for enforcement against the LPSC. The FERC concluded that Occidental’s petition for enforcement largely raises the same issues as those raised in the January 2013 complaint and petition for declaratory order that Occidental filed against MISO, and that the two proceedings should be addressed at the same time. The FERC reserved its ability to issue a further order or to take further action at a future date should it find that doing so is appropriate. In April 2016 the FERC reviewed its earlier “Notice of Intent Not to Act as This Time” and issued another notice declining to initiate an enforcement action against the LPSC. In January 2016, in a separate proceeding, the FERC issued an order granting the Utility operating companies’ petition to terminate the requirement that they enter into new obligations or contracts with QFs with net capacity in excess of 20 MW, including Occidental’s Taft QF, effective October 2015. The FERC denied
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
without prejudice the petition as it relates to Dow Chemical Company’s Plaquemine QF. In April 2016 the FERC denied Occidental’s request for rehearing of the order granting the Utility operating companies’ petition to terminate the QF purchase requirement for QFs with net capacity in excess of 20 MW and affirmed that Occidental failed to rebut the presumption that its Taft QF has non-discriminatory access to the MISO markets. In June 2016, Occidental filed in the United States Court of Appeals for the District of Columbia Circuit a petition for review of the FERC’s January 2016 and April 2016 orders granting the Utility operating companies’ petition to terminate the QF purchase requirement for QFs with net capacity in excess of 20MW.
System Agreement
As discussed in the Form 10-K, in December 2013 the FERC issued an order accepting revisions to the System Agreement filed in November 2012 by the Utility operating companies. In the December 2013 order, the FERC set one issue for hearing involving a settlement with Union Pacific regarding certain coal delivery issues. Entergy Arkansas’s participation in the System Agreement terminated effective December 18, 2013. In December 2014 a FERC ALJ issued an initial decision finding that Entergy Arkansas would realize benefits after December 18, 2013 from the 2008 settlement agreement between Entergy Services, Entergy Arkansas, and Union Pacific, related to certain coal delivery issues. The ALJ further found that all of the Utility operating companies should share in those benefits pursuant to the methodology proposed by the MPSC. The Utility operating companies and other parties to the proceeding filed briefs on exceptions and/or briefs opposing exceptions with the FERC challenging various aspects of the December 2014 initial decision. In March 2016 the FERC issued an opinion affirming the December 2014 initial decision with regard to the determination that there were benefits related to the Union Pacific settlement, which were realized post Entergy Arkansas’s December 2013 withdrawal from the System Agreement, that should be shared with the other Utility operating companies utilizing the methodology proposed by the MPSC and trued-up to actual coal volumes purchased. In May 2016, Entergy made a compliance filing that provided the calculation of Union Pacific settlement benefits utilizing the methodology adopted by the initial decision, trued-up for the actual volumes of coal purchased. The payments were made in May 2016. The compliance filing remains pending at the FERC.
Market and Credit Risk Sensitive Instruments
Commodity Price Risk
Power Generation
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets. In addition to selling the energy produced by its plants, Entergy Wholesale Commodities sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas. Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy. While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. Certain hedge volumes have price downside and upside relative to market price movement. The contracted minimum, expected value, and sensitivities are provided in the table below to show potential variations. The sensitivities may not reflect the total maximum upside potential from higher market prices. The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of June 30, 2016 (2016March 31, 2017 (2017 represents the remainder of the year):
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Nuclear Portfolio
| | | | | 2016 | | 2017 | | 2018 | | 2019 | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 |
| Energy | | |
| Percent of planned generation under contract (a): | | |
| Unit-contingent (b) | | 68% | | 83% | | 22% | | 26% | | 86% | | 68% | | 20% | | —% | | —% |
| Firm LD (c) | | 39% | | 9% | | —% | | —% | | 10% | | 5% | | —% | | —% | | —% |
| Offsetting positions (d) | | (20%) | | (9%) | | —% | | —% | | (10%) | | (10%) | | —% | | —% | | —% |
| Total | | 87% | | 83% | | 22% | | 26% | | 86% | | 63% | | 20% | | —% | | —% |
| Planned generation (TWh) (e) (f) | | 18.0 | | 27.7 | | 28.1 | | 25.9 | | 19.9 | | 26.7 | | 18.8 | | 11.7 | | 2.9 |
| Average revenue per MWh on contracted volumes: | | |
| Minimum | | $41.1 | | $43.6 | | $56.1 | | $56.9 | | $40.5 | | $35.9 | | $37.8 | | $— | | $— |
| Expected based on market prices as of June 30, 2016 | | $41.7 | | $44.2 | | $56.1 | | $56.9 | |
| Expected based on market prices as of March 31, 2017 | | | $40.5 | | $35.9 | | $37.8 | | $— | | $— |
| Sensitivity: -/+ $10 per MWh market price change | | $41.1-$43.4 | | $43.9-$44.4 | | $56.1 | | $56.9 | | $40.5-$40.6 | | $34.8-$37.1 | | $37.8 | | $— | | $— |
| | | |
| Capacity | | |
| Percent of capacity sold forward (g): | | |
| Bundled capacity and energy contracts (h) | | 18% | | 22% | | 22% | | 25% | | 22% | | 10% | | —% | | —% | | —% |
| Capacity contracts (i) | | 41% | | 20% | | 20% | | 9% | | 28% | | 23% | | 12% | | —% | | —% |
| Total | | 59% | | 42% | | 42% | | 34% | | 50% | | 33% | | 12% | | —% | | —% |
| Planned net MW in operation (average) (f) | | 4,406 | | 3,568 | | 3,568 | | 3,167 | | 3,568 | | 3,365 | | 2,356 | | 1,384 | | 347 |
| Average revenue under contract per kW per month (applies to capacity contracts only) | | $6.0 | | $5.5 | | $9.4 | | $11.1 | | $5.8 | | $9.4 | | $11.1 | | $— | | $— |
| | | |
| Total Nuclear Energy and Capacity Revenues (j) | | |
| Expected sold and market total revenue per MWh | | $46.4 | | $51.4 | | $51.0 | | $51.2 | | $49.6 | | $43.9 | | $44.6 | | $45.1 | | $51.3 |
| Sensitivity: -/+ $10 per MWh market price change | | $44.6-$49.2 | | $49.8-$53.0 | | $43.4-$58.5 | | $43.8-$58.6 | | $48.7-$50.7 | | $40.3-$47.6 | | $36.6-$52.6 | | $35.1-$55.1 | | $41.3-$61.3 |
| |
| (a) | Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights. Positions that are not classified as hedges are netted in the planned generation under contract. |
| |
| (b) | Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide 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. |
| |
| (c) | Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products. This also includes option transactions that may expire without being exercised. |
| |
| (d) | Transactions for the purchase of energy, generally to offset a Firm LD transaction. |
| |
| (e) | Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that affect dispatch. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
| |
| (f) | Assumes NRC license renewals for plants with NRC license renewal applications in process. Assumesthe planned shutdown of FitzPatrick in late January 2017,Palisades on October 1, 2018, planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, and uninterrupted normal operation at remaining plants.planned shutdown of Indian Point 3 on April 30, 2021, and reflects the sale of FitzPatrick in March 2017. Assumes NRC license renewal applications are in processrenewals for two units, as follows (with current license expirations in parentheses): Indian Point 2 (September 2013 and now operating under its period of extended operations while its application is pending) and Indian Point 3 (December 2015 and now operating under its period of extended operations while its application is pending). For a discussion regarding the planned shutdown of the FitzPatrickPalisades, Pilgrim, Indian Point 2, and PilgrimIndian Point 3 plants, see “Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear PlantsExit from the Merchant Power Business” above.in the Form 10-K. For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” above and in the Form 10-K. |
| |
| (g) | Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions. |
| |
| (h) | A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold. |
| |
| (i) | A contract for the sale of an installed capacity product in a regional market. |
| |
| (j) | Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues. |
Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on June 30, 2016March 31, 2017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $50$22 million for the remainder of 2016.2017. As of June 30, 2015,March 31, 2016, a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $24$79 million for the remainder of 2015.2016. A negative $10 per MWh change in the annual average energy price in the markets based on June 30, 2016March 31, 2017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($32)19) million for the remainder of 2016.2017. As of June 30, 2015,March 31, 2016, a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($24)69) million for the remainder of 2015.2016.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power. The primary form of credit support to satisfy these requirements is an Entergy Corporation guaranty. Cash and letters of credit are also acceptable forms of credit support. At June 30, 2016,March 31, 2017, based on power prices at that time, Entergy had liquidity exposure of $138$130 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $5$7 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of June 30, 2016,March 31, 2017, Entergy would have been required to provide approximately $58$56 million of additional cash or letters of credit under some of the agreements. As of June 30, 2016,March 31, 2017, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $147$234 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.
As of June 30, 2016,March 31, 2017, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 20192021 is with counterparties or their guarantors that have public investment grade credit ratings.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following are updatesis an update to that discussion.
In June 2012 the U.S. Court of Appeals for the D.C. Circuit vacated the NRC’s 2010 update to its Waste Confidence Decision, which had found generically that a permanent geologic repository to store spent nuclear fuel
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
would be available when necessary and that spent nuclear fuel could be stored at nuclear reactor sites in the interim without significant environmental effects, and remanded the case for further proceedings. The court concluded that the NRC had not satisfied the requirements of the National Environmental Policy Act (NEPA) when it considered environmental effects in reaching these conclusions. The Waste Confidence Decision has been relied upon by NRC license renewal applicants to address some of the issues that the NEPA requires the NRC to address before it issues a renewed license. Certain nuclear opponents filed requests with the NRC asking it to address the issues raised by the court’s decision in the license renewal proceedings for a number of nuclear plants including Grand Gulf and Indian Point 2 and 3. In August 2012 the NRC issued an order stating that it will not issue final licenses dependent upon the Waste Confidence Decision until the D.C. Circuit���s remand is addressed, but also stating that licensing reviews and proceedings should continue to move forward. In September 2014 the NRC published a new final Waste Confidence rule, named Continued Storage of Spent Nuclear Fuel, that for licensing purposes adopts non-site specific findings concerning the environmental impacts of the continued storage of spent nuclear fuel at reactor sites - for 60 years, 100 years and indefinitely - after the reactor’s licensed period of operations. The NRC also issued an order lifting its suspension of licensing proceedings after the final rule’s effective date in October 2014. After the final rule became effective, New York, Connecticut, and Vermont filed a challenge to the rule in the U.S. Court of Appeals. In June 2016 the court denied the challenge.
See “ANO Damage, Outage, and NRC Reviews”above for discussion of the NRC’s decision to move ANO into the “multiple/repetitive degraded cornerstone column” (Column 4) of the NRC’s Reactor Oversight Process Action Matrix, and the resulting significant additional NRC inspection activities at the ANO site.
See Note 1 to the financial statements herein for discussion of the NRC’s decision in September 2015 to place Pilgrim in Column 4 of its Reactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program that contributed to repeated unscheduled shutdowns and equipment failures.
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear sustainability plan. That plan has not been fully developed, but it will result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear sustainability plan, and an estimate of the costs associated with this plan cannot be made at this time.
Indian Point 2 Outage
During the scheduled refueling and maintenance outage at Indian Point Unit 2 in the first quarter 2016, comprehensive inspections were done as part of the aging management program whichthat calls for an in-depth inspection of the reactor vessel. Inspections of more than 2,000 bolts in the reactor'sreactor’s removable insert liner identified issues with roughly 11% of the bolts that required further analysis. Entergy replaced bolts as appropriate, and the unit returned to service onin June 16, 2016. The repair costs were accounted for as deferred refueling outage costs and will be amortized over the plant’s subsequent fuel cycle. The increase in the deferred refueling outage balance is expected to increase outage amortization expense inIn 2016, 2017, and 2018. In addition to the repair costs, Entergy lost net revenue due to the plant being offline. Entergy estimates the negative effect on earnings was approximately $51 million pre-tax in second quarter 2016. Entergy is evaluatingevaluated the scope and duration of Indian Point 3’s next scheduled refueling outage planned for 2017, which began in March 2017. Based on the results of thatthe 2016 evaluation and analysis, Entergy could modify its planextended Indian Point 3’s planned 2017 outage duration. Entergy is performing the same in-depth inspection of the reactor vessel at Indian Point 3 during Indian Point 3’s spring 2017 refueling and maintenance outage that it performed for Indian Point 2. Based on inspection data, Entergy is replacing approximately the same number of bolts at Indian Point 3 that outage andit replaced at Indian Point 2. Entergy currently expects thatIndian Point 3 to be back online by the outage will be extended.end of May 2017.
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, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. Following are updates to that discussion.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Impairment of Long-lived Assets and Trust Fund Investments
As discussed in the Form 10-K, Entergy has significant investments in long-lived assets in both of its operating segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment when there are indications that an impairment may exist. This evaluation involves a significant degree of estimation and uncertainty. In the Entergy Wholesale Commodities business, Entergy’s investments in merchant generation assets are subject to impairment in adverse market or regulatory conditions, particularly if it leads to a decision or an expectation that Entergy will operate or own a plant for a shorter period than previously expected; if there is a significant adverse change in the physical condition of a plant; if investment in a plant significantly exceeds previously-expected amounts; or, for Indian Point 2 and 3, if their operating licenses are not renewed.
See “Impairment of Long-Lived Assets” in Note 1 to the financial statements in the Form 10-K for a discussion of the impairments prior to 2016 of the Vermont Yankee, FitzPatrick, Pilgrim, and Palisades plants. See “Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants” above for a discussion of market price trends and other factors affecting the Entergy Wholesale Commodities power plants. See “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” above for a discussion of the Indian Point licensing activities.
On July 13, 2016, Entergy announced that it is in discussions with another company for the possible sale of FitzPatrick. There is much uncertainty regarding whether an agreement can be reached with the third party, whether regulatory approval will be obtained, or whether potential conditions to the sale would be met such that a transaction would be consummated. While the discussions are ongoing, FitzPatrick will work two parallel paths, one to prepare for a potential refueling outage and another to continue the plant shutdown and decommissioning effort in the event a sale does not occur. If the discussions do not result in an agreement for the sale and transfer of ownership of FitzPatrick, Entergy will move forward with its current plan to cease operations by late January 2017, followed by decommissioning. After the impairment of the plant in 2015, the only FitzPatrick-related asset with more than a minimal book value remaining on Entergy’s balance sheet is the decommissioning contract asset that is discussed in “Impairment of Long-Lived Assets”in Note 1 to the financial statements in the Form 10-K.
Taxation and Uncertain Tax Positions
Management exercises significant judgment in evaluating the potential tax effects of Entergy’s operations, transactions, and other events. Management evaluates each tax position based on the technical merits and facts and circumstances of the position, assuming the position will be examined by a taxing authority having full knowledge of all relevant information. Income tax expense and tax positions recorded could be significantly affected by events such as additional transactions contemplated or consummated by Entergy or the progress of audits or reviews of the tax treatment of transactions or issues by taxing authorities. Entergy’s income taxes, including unrecognized tax benefits, open audits, and other significant tax matters are disclosed in Note 3 to the financial statements in the Form 10-K, and significant updates to that disclosure are included in Note 10 to the financial statements herein.
New Accounting Pronouncements
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - New Accounting Pronouncements” in the Form 10-K for a discussion of new accounting pronouncements. Following are updates to that discussion.
In February 2016As discussed in the FASB issuedForm 10-K, ASU No. 2016-02, “Leases2014-09, “Revenue from Contracts with Customers (Topic 842).606)” The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires that the assets and liabilities related to all leases with a term greater than 12 months must be recorded on the balance sheet. ASU 2016-02 is effective for Entergy for the first quarter 2019. Entergy2018. Entergy’s evaluation of ASU 2014-09 has not identified any effects that it expects that ASU 2016-02 will affect materially its financial position by increasing the assets and liabilities recorded
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
relating to its operating leases. Entergy is evaluating the ASU for other effects on the results of operations, financial position, andor cash flows. Entergy continues to monitor the development and finalization of industry-specific application guidance that could have an effect on this assessment.
In March 20162017 the FASB issued ASU No. 2016-09,2017-07, “Compensation - Stock CompensationRetirement Benefits (Topic 718)715): Improvements to Employee Share-Based Payment Accounting.” The ASU seeks to simplify several aspectsImproving the Presentation of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities,Net Periodic Pension Cost and classification on the statement of cash flows. The statement is effective beginning in 2017 and Entergy will prospectively recognize all income tax effects related to share-based payments through the income statement. Entergy is evaluating the ASU for other effects on the results of operations, financial position, and cash flows.
In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.Net Periodic Postretirement Benefit Cost.” The ASU requires entities to record a valuation allowance on financial instruments held at amortizedreport the service cost component of defined benefit pension cost and available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreasespostretirement benefit cost (net benefit cost) in the valuation allowance willsame line item as other compensation costs arising from services rendered during the period. The other components of net benefit cost are required to be recognized immediatelypresented in earnings.the income statement separately from the service cost component and outside a subtotal of income from operations. In addition, the ASU 2016-13allows only the service cost component of net benefit cost to be eligible for capitalization. ASU 2017-07 is effective for Entergy for the first quarter 2020.2018. Entergy expects thatdoes not expect ASU 2016-13 will2017-07 to affect materially its results of operations by requiring a valuation allowance for all unrealized credit losses on debt investments held by the nuclear decommissioning trust funds, with the increases and decreases to be recorded immediately in earnings, whereas unrealized credit losses are currently recorded in other comprehensive income until they are determined to be other-than-temporary. In accordance with the regulatory treatment of the decommissioning trust funds of Entergy Arkansas, Entergy Louisiana, and System Energy, an offsetting amount of unrealized credit losses will continue to be recorded in other regulatory assets. Entergy is evaluating the ASU for other effects on the results of operations, financial position, andor cash flows.
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | |
| | Three Months Ended | | Six Months Ended | | |
| | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 |
| | (In Thousands, Except Share Data) | | (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | | | | | | | | | |
| Electric |
| $2,093,331 |
| |
| $2,246,148 |
| |
| $4,135,492 |
| |
| $4,464,137 |
| |
| $1,991,740 |
| |
| $2,042,160 |
|
| Natural gas | 25,121 |
| | 27,777 |
| | 70,734 |
| | 87,288 |
| | 43,351 |
| | 45,613 |
|
| Competitive businesses | 344,110 |
| | 439,306 |
| | 866,189 |
| | 1,081,896 |
| | 553,367 |
| | 522,079 |
|
| TOTAL | 2,462,562 |
| | 2,713,231 |
| | 5,072,415 |
| | 5,633,321 |
| | 2,588,458 |
| | 2,609,852 |
|
| | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | 381,465 |
| | 549,702 |
| | 886,432 |
| | 1,180,156 |
| | 417,566 |
| | 504,967 |
|
| Purchased power | 242,672 |
| | 322,929 |
| | 504,996 |
| | 664,951 |
| | 357,768 |
| | 262,323 |
|
| Nuclear refueling outage expenses | 47,045 |
| | 67,129 |
| | 98,276 |
| | 131,998 |
| | 42,564 |
| | 51,230 |
|
| Other operation and maintenance | 759,258 |
| | 827,872 |
| | 1,491,174 |
| | 1,597,983 |
| | 867,546 |
| | 731,915 |
|
| Asset write-offs, impairments, and related charges | 6,969 |
| | — |
| | 14,329 |
| | — |
| | 211,791 |
| | 7,361 |
|
| Decommissioning | 76,625 |
| | 68,830 |
| | 145,253 |
| | 138,729 |
| | 114,374 |
| | 68,628 |
|
| Taxes other than income taxes | 149,249 |
| | 156,378 |
| | 299,027 |
| | 313,901 |
| | 156,353 |
| | 149,778 |
|
| Depreciation and amortization | 335,668 |
| | 340,354 |
| | 669,939 |
| | 672,340 |
| | 347,265 |
| | 334,273 |
|
| Other regulatory charges | 21,353 |
| | 2,654 |
| | 22,512 |
| | 13,111 |
| |
| Other regulatory charges (credits) | | | (85,302 | ) | | 1,159 |
|
| TOTAL | 2,020,304 |
| | 2,335,848 |
| | 4,131,938 |
| | 4,713,169 |
| | 2,429,925 |
| | 2,111,634 |
|
| | | | | | |
| Gain on sale of assets | | | 16,270 |
| | — |
|
| | | | | | | | | | | | |
| OPERATING INCOME | 442,258 |
| | 377,383 |
| | 940,477 |
| | 920,152 |
| | 174,803 |
| | 498,218 |
|
| | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | |
| Allowance for equity funds used during construction | 13,860 |
| | 11,974 |
| | 32,792 |
| | 23,712 |
| | 19,008 |
| | 18,932 |
|
| Interest and investment income | 46,375 |
| | 39,705 |
| | 79,128 |
| | 107,839 |
| | 56,549 |
| | 32,753 |
|
| Miscellaneous - net | (8,377 | ) | | (15,743 | ) | | (18,963 | ) | | (24,764 | ) | | 5,501 |
| | (10,587 | ) |
| TOTAL | 51,858 |
| | 35,936 |
| | 92,957 |
| | 106,787 |
| | 81,058 |
| | 41,098 |
|
| | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | |
| Interest expense | 177,631 |
| | 165,860 |
| | 351,442 |
| | 332,197 |
| | 171,089 |
| | 173,811 |
|
| Allowance for borrowed funds used during construction | (7,132 | ) | | (6,044 | ) | | (16,813 | ) | | (12,161 | ) | | (9,042 | ) | | (9,682 | ) |
| TOTAL | 170,499 |
| | 159,816 |
| | 334,629 |
| | 320,036 |
| | 162,047 |
| | 164,129 |
|
| | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | 323,617 |
| | 253,503 |
| | 698,805 |
| | 706,903 |
| | 93,814 |
| | 375,187 |
|
| | | | | | | | | | | | |
| Income taxes | (248,973 | ) | | 99,781 |
| | (109,027 | ) | | 250,252 |
| | 7,763 |
| | 139,945 |
|
| | | | | | | | | | | | |
| CONSOLIDATED NET INCOME | 572,590 |
| | 153,722 |
| | 807,832 |
| | 456,651 |
| | 86,051 |
| | 235,242 |
|
| | | | | | | | | | | | |
| Preferred dividend requirements of subsidiaries | 5,276 |
| | 4,879 |
| | 10,552 |
| | 9,759 |
| | 3,446 |
| | 5,276 |
|
| | | | | | | | | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION |
| $567,314 |
| |
| $148,843 |
| |
| $797,280 |
| |
| $446,892 |
| |
| $82,605 |
| |
| $229,966 |
|
| | | | | | | | | | | | |
| Earnings per average common share: | | | | | | | | | | | |
| Basic |
| $3.17 |
| |
| $0.83 |
| |
| $4.46 |
| |
| $2.49 |
| |
| $0.46 |
| |
| $1.29 |
|
| Diluted |
| $3.16 |
| |
| $0.83 |
| |
| $4.45 |
| |
| $2.48 |
| |
| $0.46 |
| |
| $1.28 |
|
| Dividends declared per common share |
| $0.85 |
| |
| $0.83 |
| |
| $1.70 |
| |
| $1.66 |
| |
| $0.87 |
| |
| $0.85 |
|
| | | | | | | | | | | | |
| Basic average number of common shares outstanding | 178,808,149 |
| | 179,521,276 |
| | 178,693,342 |
| | 179,589,748 |
| | 179,335,063 |
| | 178,578,536 |
|
| Diluted average number of common shares outstanding | 179,503,582 |
| | 180,119,837 |
| | 179,233,209 |
| | 180,298,233 |
| | 179,842,053 |
| | 178,976,380 |
|
| | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | |
(page left blank intentionally)
|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three and Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Three Months Ended | | Six Months Ended |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | (In Thousands) |
| | | | | | | | |
| Net Income |
| $572,590 |
| |
| $153,722 |
| |
| $807,832 |
| |
| $456,651 |
|
| | | | | | | |
| Other comprehensive income (loss) | | | | | | | |
| Cash flow hedges net unrealized gain (loss) | | | | | | | |
| (net of tax expense (benefit) of ($34,576), $20,706, ($39,777), and $4,808) | (64,041 | ) | | 38,696 |
| | (73,547 | ) | | 9,366 |
|
| Pension and other postretirement liabilities | | | | | | | |
| (net of tax expense of $2,779, $4,165, $3,037, and $7,340) | 5,043 |
| | 7,438 |
| | 12,605 |
| | 15,886 |
|
| Net unrealized investment gains (losses) | | | | | | | |
| (net of tax expense (benefit) of $19,515, ($30,292), $37,873, and ($26,626)) | 20,955 |
| | (33,880 | ) | | 44,024 |
| | (29,877 | ) |
| Foreign currency translation | | | | | | | |
| (net of tax expense (benefit) of ($487), $359, ($640), and $62) | (904 | ) | | 667 |
| | (1,188 | ) | | 116 |
|
| Other comprehensive income (loss) | (38,947 | ) | | 12,921 |
| | (18,106 | ) | | (4,509 | ) |
| | | | | | | |
| Comprehensive Income | 533,643 |
| | 166,643 |
| | 789,726 |
| | 452,142 |
|
| Preferred dividend requirements of subsidiaries | 5,276 |
| | 4,879 |
| | 10,552 |
| | 9,759 |
|
| Comprehensive Income Attributable to Entergy Corporation |
| $528,367 |
| |
| $161,764 |
| |
| $779,174 |
| |
| $442,383 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| | | | | |
| Net Income | |
| $86,051 |
| |
| $235,242 |
|
| | | | |
| Other comprehensive income | | | | |
| Cash flow hedges net unrealized loss (net of tax benefit of $359 and $5,201) | | (528 | ) | | (9,506 | ) |
| Pension and other postretirement liabilities (net of tax expense of $6,377 and $258) | | 8,632 |
| | 7,562 |
|
| Net unrealized investment gains (net of tax expense of $39,294 and $18,358) | | 37,827 |
| | 23,069 |
|
| Foreign currency translation (net of tax benefit of $153) | | — |
| | (284 | ) |
| Other comprehensive income | | 45,931 |
| | 20,841 |
|
| | | | |
| Comprehensive Income | | 131,982 |
| | 256,083 |
|
| Preferred dividend requirements of subsidiaries | | 3,446 |
| | 5,276 |
|
| Comprehensive Income Attributable to Entergy Corporation | |
| $128,536 |
| |
| $250,807 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Consolidated net income | |
| $807,832 |
| |
| $456,651 |
| |
| $86,051 |
| |
| $235,242 |
|
| Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,012,753 |
| | 1,069,888 |
| | 531,373 |
| | 500,248 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (170,026 | ) | | 180,006 |
| | 16,497 |
| | 75,415 |
|
| Asset write-offs, impairments, and related charges | | 14,329 |
| | — |
| | 145,026 |
| | 7,361 |
|
| Gain on sale of assets | | | (16,270 | ) | | — |
|
| Changes in working capital: | | | | | | | | |
| Receivables | | (57,673 | ) | | (100,168 | ) | | 156,201 |
| | 76,532 |
|
| Fuel inventory | | 9,586 |
| | (3,748 | ) | | 6,465 |
| | (9,089 | ) |
| Accounts payable | | 45,412 |
| | (104,595 | ) | | (47,682 | ) | | (67,364 | ) |
| Taxes accrued | | 7,056 |
| | (19,027 | ) | | (58,832 | ) | | (15,996 | ) |
| Interest accrued | | (9,543 | ) | | (18,984 | ) | | (13,921 | ) | | (27,535 | ) |
| Deferred fuel costs | | 3,757 |
| | 72,449 |
| | (7,389 | ) | | 97,566 |
|
| Other working capital accounts | | (121,929 | ) | | (124,146 | ) | | (7,324 | ) | | (95,291 | ) |
| Changes in provisions for estimated losses | | 1,533 |
| | (6,987 | ) | | (4,031 | ) | | (3,968 | ) |
| Changes in other regulatory assets | | 109,700 |
| | 124,785 |
| | 47,497 |
| | 56,047 |
|
| Changes in other regulatory liabilities | | 70,505 |
| | (15,059 | ) | | (18,324 | ) | | 18,735 |
|
| Changes in pensions and other postretirement liabilities | | (168,856 | ) | | (116,896 | ) | | (86,430 | ) | | (89,046 | ) |
| Other | | (302,356 | ) | | (55,808 | ) | | (199,514 | ) | | (226,036 | ) |
| Net cash flow provided by operating activities | | 1,252,080 |
| | 1,338,361 |
| | 529,393 |
| | 532,821 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction/capital expenditures | | (1,294,498 | ) | | (1,095,926 | ) | | (794,448 | ) | | (636,011 | ) |
| Allowance for equity funds used during construction | | 33,152 |
| | 25,165 |
| | 19,254 |
| | 19,107 |
|
| Nuclear fuel purchases | | (124,107 | ) | | (165,704 | ) | | (137,613 | ) | | (85,819 | ) |
| Payment for purchase of plant | | (947,903 | ) | | — |
| | — |
| | (947,778 | ) |
| Proceeds from sale of assets | | | 100,000 |
| | — |
|
| Insurance proceeds received for property damages | | — |
| | 12,745 |
| | 20,909 |
| | — |
|
| Changes in securitization account | | 13,239 |
| | 6,604 |
| | (963 | ) | | (1,399 | ) |
| NYPA value sharing payment | | — |
| | (70,790 | ) | |
| Payments to storm reserve escrow account | | (805 | ) | | (3,689 | ) | | (480 | ) | | (367 | ) |
| Decrease (increase) in other investments | | 57 |
| | (54,022 | ) | |
| Receipts from storm reserve escrow account | | | 8,836 |
| | — |
|
| Increase in other investments | | | (10,377 | ) | | (196,509 | ) |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | | 25,493 |
| | — |
|
| Proceeds from nuclear decommissioning trust fund sales | | 1,232,672 |
| | 948,542 |
| | 513,750 |
| | 729,414 |
|
| Investment in nuclear decommissioning trust funds | | (1,267,452 | ) | | (973,016 | ) | | (556,161 | ) | | (758,665 | ) |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 89,407 |
| | — |
| |
| Net cash flow used in investing activities | | (2,266,238 | ) | | (1,370,091 | ) | | (811,800 | ) | | (1,878,027 | ) |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of: | | | | | | | | |
| Long-term debt | | 3,856,768 |
| | 865,634 |
| | 236,198 |
| | 2,869,808 |
|
| Treasury stock | | 16,855 |
| | 23,897 |
| | 2,448 |
| | 5,787 |
|
| Retirement of long-term debt | | (3,420,196 | ) | | (1,384,658 | ) | | (811,690 | ) | | (1,903,670 | ) |
| Repurchase of common stock | | — |
| | (25,078 | ) | |
| Changes in credit borrowings and commercial paper - net | | 530,540 |
| | 341,578 |
| | 908,378 |
| | 271,730 |
|
| Other | | (10,276 | ) | | 6,719 |
| | 1,810 |
| | (644 | ) |
| Dividends paid: | | | | | | | | |
| Common stock | | (303,843 | ) | | (298,259 | ) | | (156,073 | ) | | (151,839 | ) |
| Preferred stock | | (10,552 | ) | | (9,759 | ) | | (3,446 | ) | | (5,276 | ) |
| Net cash flow provided by (used in) financing activities | | 659,296 |
| | (479,926 | ) | |
| Net cash flow provided by financing activities | | | 177,625 |
| | 1,085,896 |
|
| | | | | | | | |
| Net decrease in cash and cash equivalents | | (354,862 | ) | | (511,656 | ) | | (104,782 | ) | | (259,310 | ) |
| | | | | | | | |
| Cash and cash equivalents at beginning of period | | 1,350,961 |
| | 1,422,026 |
| | 1,187,844 |
| | 1,350,961 |
|
| | | | | | | | |
| Cash and cash equivalents at end of period | |
| $996,099 |
| |
| $910,370 |
| |
| $1,083,062 |
| |
| $1,091,651 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | |
| Cash paid (received) during the period for: | | | | | |
| Interest - net of amount capitalized | |
| $410,744 |
| |
| $340,993 |
| |
| $178,134 |
| |
| $251,305 |
|
| Income taxes | |
| $84,607 |
| |
| $90,767 |
| |
| ($18,044 | ) | |
| $26,382 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | June 30, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $103,282 |
| |
| $63,497 |
| |
| $60,868 |
| |
| $129,579 |
|
| Temporary cash investments | | 892,817 |
| | 1,287,464 |
| | 1,022,194 |
| | 1,058,265 |
|
| Total cash and cash equivalents | | 996,099 |
| | 1,350,961 |
| | 1,083,062 |
| | 1,187,844 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 542,598 |
| | 608,491 |
| | 512,225 |
| | 654,995 |
|
| Allowance for doubtful accounts | | (42,938 | ) | | (39,895 | ) | | (12,524 | ) | | (11,924 | ) |
| Other | | 237,480 |
| | 178,364 |
| | 134,223 |
| | 158,419 |
|
| Accrued unbilled revenues | | 432,830 |
| | 321,940 |
| | 339,219 |
| | 368,677 |
|
| Total accounts receivable | | 1,169,970 |
| | 1,068,900 |
| | 973,143 |
| | 1,170,167 |
|
| Deferred fuel costs | | 31,895 |
| | — |
| | 117,971 |
| | 108,465 |
|
| Fuel inventory - at average cost | | 208,224 |
| | 217,810 |
| | 173,135 |
| | 179,600 |
|
| Materials and supplies - at average cost | | 903,973 |
| | 873,357 |
| | 681,267 |
| | 698,523 |
|
| Deferred nuclear refueling outage costs | | 248,932 |
| | 211,512 |
| | 160,550 |
| | 146,221 |
|
| Prepayments and other | | 292,835 |
| | 344,872 |
| | 208,363 |
| | 193,448 |
|
| TOTAL | | 3,851,928 |
| | 4,067,412 |
| | 3,397,491 |
| | 3,684,268 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investment in affiliates - at equity | | 4,845 |
| | 4,341 |
| | 198 |
| | 198 |
|
| Decommissioning trust funds | | 5,555,651 |
| | 5,349,953 |
| | 6,669,326 |
| | 5,723,897 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 225,996 |
| | 219,999 |
| | 243,683 |
| | 233,641 |
|
| Other | | 469,791 |
| | 468,704 |
| | 451,715 |
| | 469,664 |
|
| TOTAL | | 6,256,283 |
| | 6,042,997 |
| | 7,364,922 |
| | 6,427,400 |
|
| | | | | | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | | | | | |
| Electric | | 46,947,112 |
| | 44,467,159 |
| | 45,385,925 |
| | 45,191,216 |
|
| Property under capital lease | | 610,225 |
| | 952,465 |
| | 619,135 |
| | 619,527 |
|
| Natural gas | | 400,423 |
| | 392,032 |
| | 418,862 |
| | 413,224 |
|
| Construction work in progress | | 1,258,370 |
| | 1,456,735 |
| | 1,594,449 |
| | 1,378,180 |
|
| Nuclear fuel | | 1,246,430 |
| | 1,345,422 |
| | 998,013 |
| | 1,037,899 |
|
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 50,462,560 |
| | 48,613,813 |
| | 49,016,384 |
| | 48,640,046 |
|
| Less - accumulated depreciation and amortization | | 21,392,881 |
| | 20,789,452 |
| | 20,843,031 |
| | 20,718,639 |
|
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 29,069,679 |
| | 27,824,361 |
| | 28,173,353 |
| | 27,921,407 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 769,535 |
| | 775,528 |
| | 764,266 |
| | 761,280 |
|
| Other regulatory assets (includes securitization property of $665,535 as of June 30, 2016 and $714,044 as of December 31, 2015) | | 4,603,489 |
| | 4,704,796 |
| |
| Other regulatory assets (includes securitization property of $576,351 as of March 31, 2017 and $600,996 as of December 31, 2016) | | | 4,719,430 |
| | 4,769,913 |
|
| Deferred fuel costs | | 239,001 |
| | 238,902 |
| | 239,149 |
| | 239,100 |
|
| Goodwill | | 377,172 |
| | 377,172 |
| | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 122,389 |
| | 54,903 |
| | 115,134 |
| | 117,885 |
|
| Other | | 587,566 |
| | 561,610 |
| | 167,289 |
| | 1,606,009 |
|
| TOTAL | | 6,699,152 |
| | 6,712,911 |
| | 6,382,440 |
| | 7,871,359 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $45,877,042 |
| |
| $44,647,681 |
| |
| $45,318,206 |
| |
| $45,904,434 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | June 30, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $671,732 |
| |
| $214,374 |
| |
| $333,709 |
| |
| $364,900 |
|
| Notes payable and commercial paper | | 1,024,888 |
| | 494,348 |
| | 1,323,390 |
| | 415,011 |
|
| Accounts payable | | 967,080 |
| | 1,071,798 |
| | 1,149,498 |
| | 1,285,577 |
|
| Customer deposits | | 424,977 |
| | 419,407 |
| | 403,842 |
| | 403,311 |
|
| Taxes accrued | | 217,133 |
| | 210,077 |
| | 122,282 |
| | 181,114 |
|
| Interest accrued | | 185,021 |
| | 194,565 |
| | 173,308 |
| | 187,229 |
|
| Deferred fuel costs | | 271,736 |
| | 235,986 |
| | 104,920 |
| | 102,753 |
|
| Obligations under capital leases | | 2,815 |
| | 2,709 |
| | 2,721 |
| | 2,423 |
|
| Pension and other postretirement liabilities | | 62,789 |
| | 62,513 |
| | 73,317 |
| | 76,942 |
|
| Other | | 193,672 |
| | 184,181 |
| | 192,056 |
| | 180,836 |
|
| TOTAL | | 4,021,843 |
| | 3,089,958 |
| | 3,879,043 |
| | 3,200,096 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 8,183,048 |
| | 8,306,865 |
| | 7,561,382 |
| | 7,495,290 |
|
| Accumulated deferred investment tax credits | | 228,917 |
| | 234,300 |
| | 224,338 |
| | 227,147 |
|
| Obligations under capital leases | | 25,567 |
| | 27,001 |
| | 23,573 |
| | 24,582 |
|
| Other regulatory liabilities | | 1,485,402 |
| | 1,414,898 |
| | 1,554,605 |
| | 1,572,929 |
|
| Decommissioning and asset retirement cost liabilities | | 4,868,788 |
| | 4,790,187 |
| | 6,078,576 |
| | 5,992,476 |
|
| Accumulated provisions | | 462,214 |
| | 460,727 |
| | 477,281 |
| | 481,636 |
|
| Pension and other postretirement liabilities | | 3,018,226 |
| | 3,187,357 |
| | 2,953,206 |
| | 3,036,010 |
|
| Long-term debt (includes securitization bonds of $716,201 as of June 30, 2016 and $774,696 as of December 31, 2015) | | 13,112,072 |
| | 13,111,556 |
| |
| Long-term debt (includes securitization bonds of $637,342 as of March 31, 2017 and $661,175 as of December 31, 2016) | | | 13,927,204 |
| | 14,467,655 |
|
| Other | | 394,993 |
| | 449,856 |
| | 378,624 |
| | 1,121,619 |
|
| TOTAL | | 31,779,227 |
| | 31,982,747 |
| | 33,178,789 |
| | 34,419,344 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Subsidiaries' preferred stock without sinking fund | | 318,185 |
| | 318,185 |
| | 203,185 |
| | 203,185 |
|
| | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | |
| Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2016 and in 2015 | | 2,548 |
| | 2,548 |
| |
| Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2017 and in 2016 | | | 2,548 |
| | 2,548 |
|
| Paid-in capital | | 5,392,546 |
| | 5,403,758 |
| | 5,398,079 |
| | 5,417,245 |
|
| Retained earnings | | 9,887,350 |
| | 9,393,913 |
| | 8,122,103 |
| | 8,195,571 |
|
| Accumulated other comprehensive income (loss) | | (9,155 | ) | | 8,951 |
| | 10,960 |
| | (34,971 | ) |
| Less - treasury stock, at cost (75,856,619 shares in 2016 and 76,363,763 shares in 2015) | | 5,515,502 |
| | 5,552,379 |
| |
| Less - treasury stock, at cost (75,319,784 shares in 2017 and 75,623,363 shares in 2016) | | | 5,476,501 |
| | 5,498,584 |
|
| TOTAL | | 9,757,787 |
| | 9,256,791 |
| | 8,057,189 |
| | 8,081,809 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | |
| $45,877,042 |
| |
| $44,647,681 |
| |
| $45,318,206 |
| |
| $45,904,434 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | For the Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | |
|
|
| Common Shareholders’ Equity |
|
|
|
| Common Shareholders’ Equity |
|
|
| | Subsidiaries’ Preferred Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total | Subsidiaries’ Preferred Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (In Thousands) | (In Thousands) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2014 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,497,526 | ) | |
| $5,375,353 |
| |
| $10,169,657 |
| |
| ($42,307 | ) | |
| $10,101,725 |
| |
| Balance at December 31, 2015 | |
| $— |
| |
| $2,548 |
| |
| ($5,552,379 | ) | �� |
| $5,403,758 |
| |
| $9,393,913 |
| |
| $8,951 |
| |
| $9,256,791 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated net income (a) | 9,759 |
| | — |
| | — |
| | — |
| | 446,892 |
| | — |
| | 456,651 |
| 5,276 |
| | — |
| | — |
| | — |
| | 229,966 |
| | — |
| | 235,242 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (4,509 | ) | | (4,509 | ) | |
| Common stock repurchases | — |
| | — |
| | (25,078 | ) | | — |
| | — |
| | — |
| | (25,078 | ) | |
| Other comprehensive income | | — |
| | — |
| | — |
| | — |
| | — |
| | 20,841 |
| | 20,841 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 44,445 |
| | (13,020 | ) | | — |
| | — |
| | 31,425 |
| — |
| | — |
| | 24,184 |
| | (18,996 | ) | | — |
| | — |
| | 5,188 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (298,259 | ) | | — |
| | (298,259 | ) | — |
| | — |
| | — |
| | — |
| | (151,839 | ) | | — |
| | (151,839 | ) |
| Preferred dividend requirements of subsidiaries (a) | (9,759 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (9,759 | ) | (5,276 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (5,276 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 2015 |
| $94,000 |
| |
| $2,548 |
| |
| ($5,478,159 | ) | |
| $5,362,333 |
| |
| $10,318,290 |
| |
| ($46,816 | ) | |
| $10,252,196 |
| |
| Balance at March 31, 2016 | |
| $— |
| |
| $2,548 |
| |
| ($5,528,195 | ) | |
| $5,384,762 |
| |
| $9,472,040 |
| |
| $29,792 |
| |
| $9,360,947 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $— |
| |
| $2,548 |
| |
| ($5,552,379 | ) | |
| $5,403,758 |
| |
| $9,393,913 |
| |
| $8,951 |
| |
| $9,256,791 |
| |
| Balance at December 31, 2016 | |
| $— |
| |
| $2,548 |
| |
| ($5,498,584 | ) | |
| $5,417,245 |
| |
| $8,195,571 |
| |
| ($34,971 | ) | |
| $8,081,809 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Consolidated net income (a) | 10,552 |
| | — |
| | — |
| | — |
| | 797,280 |
| | — |
| | 807,832 |
| 3,446 |
| | — |
| | — |
| | — |
| | 82,605 |
| | — |
| | 86,051 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (18,106 | ) | | (18,106 | ) | |
| Other comprehensive income | | — |
| | — |
| | — |
| | — |
| | — |
| | 45,931 |
| | 45,931 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 36,877 |
| | (11,212 | ) | | — |
| | — |
| | 25,665 |
| — |
| | — |
| | 22,083 |
| | (19,166 | ) | | — |
| | — |
| | 2,917 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (303,843 | ) | | — |
| | (303,843 | ) | — |
| | — |
| | — |
| | — |
| | (156,073 | ) | | — |
| | (156,073 | ) |
| Preferred dividend requirements of subsidiaries (a) | (10,552 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (10,552 | ) | (3,446 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (3,446 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance at June 30, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,515,502 | ) | |
| $5,392,546 |
| |
| $9,887,350 |
| |
| ($9,155 | ) | |
| $9,757,787 |
| |
| Balance at March 31, 2017 | |
| $— |
| |
| $2,548 |
| |
| ($5,476,501 | ) | |
| $5,398,079 |
| |
| $8,122,103 |
| |
| $10,960 |
| |
| $8,057,189 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | | | | | | | | | | | | See Notes to Financial Statements. | | | | | | | | | | | | |
| | (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2016 and 2015 include $10.6 million and $6.4 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity. | |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2017 and 2016 include $3.4 million and $5.3 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity. | | (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2017 and 2016 include $3.4 million and $5.3 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity. |
| | ENTERGY CORPORATION AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | Three Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | (Dollars in Millions) | | | | (Dollars in Millions) | | |
| Utility Electric Operating Revenues: | | | | | | | | | |
| Utility electric operating revenues: | | | | | | | | | |
| Residential | |
| $667 |
| |
| $733 |
| |
| ($66 | ) | | (9 | ) | |
| $705 |
| |
| $744 |
| |
| ($39 | ) | | (5 | ) |
| Commercial | | 543 |
| | 597 |
| | (54 | ) | | (9 | ) | | 536 |
| | 538 |
| | (2 | ) | | — |
|
| Industrial | | 551 |
| | 591 |
| | (40 | ) | | (7 | ) | | 565 |
| | 560 |
| | 5 |
| | 1 |
|
| Governmental | | 52 |
| | 55 |
| | (3 | ) | | (5 | ) | | 53 |
| | 51 |
| | 2 |
| | 4 |
|
| Total retail | | 1,813 |
| | 1,976 |
| | (163 | ) | | (8 | ) | | 1,859 |
| | 1,893 |
| | (34 | ) | | (2 | ) |
| Sales for resale | | 72 |
| | 86 |
| | (14 | ) | | (16 | ) | | 78 |
| | 55 |
| | 23 |
| | 42 |
|
| Other | | 208 |
| | 184 |
| | 24 |
| | 13 |
| | 55 |
| | 94 |
| | (39 | ) | | (41 | ) |
| Total | |
| $2,093 |
| |
| $2,246 |
| |
| ($153 | ) | | (7 | ) | |
| $1,992 |
| |
| $2,042 |
| |
| ($50 | ) | | (2 | ) |
| | | | | | | | | | | | | | | | |
| Utility Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Utility billed electric energy sales (GWh): | | | | | | | | | |
| Residential | | 7,081 |
| | 7,364 |
| | (283 | ) | | (4 | ) | | 7,637 |
| | 8,137 |
| | (500 | ) | | (6 | ) |
| Commercial | | 6,777 |
| | 6,904 |
| | (127 | ) | | (2 | ) | | 6,439 |
| | 6,511 |
| | (72 | ) | | (1 | ) |
| Industrial | | 11,509 |
| | 10,737 |
| | 772 |
| | 7 |
| | 11,117 |
| | 11,055 |
| | 62 |
| | 1 |
|
| Governmental | | 609 |
| | 602 |
| | 7 |
| | 1 |
| | 593 |
| | 600 |
| | (7 | ) | | (1 | ) |
| Total retail | | 25,976 |
| | 25,607 |
| | 369 |
| | 1 |
| | 25,786 |
| | 26,303 |
| | (517 | ) | | (2 | ) |
| Sales for resale | | 3,579 |
| | 3,138 |
| | 441 |
| | 14 |
| | 3,022 |
| | 3,140 |
| | (118 | ) | | (4 | ) |
| Total | | 29,555 |
| | 28,745 |
| | 810 |
| | 3 |
| | 28,808 |
| | 29,443 |
| | (635 | ) | | (2 | ) |
| | | | | | | | | | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | | | | | | | | | |
| Operating Revenues | |
| $344 |
| |
| $439 |
| |
| ($95 | ) | | (22 | ) | |
| Billed Electric Energy Sales (GWh) | | 7,866 |
| | 9,578 |
| | (1,712 | ) | | (18 | ) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Six Months Ended | | Increase/ | | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | |
| | (Dollars in Millions) | | | |
| Utility Electric Operating Revenues: | | | | | | | | | |
| Residential | |
| $1,411 |
| |
| $1,615 |
| |
| ($204 | ) | | (13 | ) | |
| Commercial | | 1,081 |
| | 1,180 |
| | (99 | ) | | (8 | ) | |
| Industrial | | 1,111 |
| | 1,167 |
| | (56 | ) | | (5 | ) | |
| Governmental | | 103 |
| | 107 |
| | (4 | ) | | (4 | ) | |
| Total retail | | 3,706 |
| | 4,069 |
| | (363 | ) | | (9 | ) | |
| Sales for resale | | 127 |
| | 146 |
| | (19 | ) | | (13 | ) | |
| Other | | 302 |
| | 249 |
| | 53 |
| | 21 |
| |
| Total | |
| $4,135 |
| |
| $4,464 |
| |
| ($329 | ) | | (7 | ) | |
| | | | | | | | | |
| Utility Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 15,218 |
| | 16,796 |
| | (1,578 | ) | | (9 | ) | |
| Commercial | | 13,288 |
| | 13,625 |
| | (337 | ) | | (2 | ) | |
| Industrial | | 22,564 |
| | 21,144 |
| | 1,420 |
| | 7 |
| |
| Governmental | | 1,209 |
| | 1,194 |
| | 15 |
| | 1 |
| |
| Total retail | | 52,279 |
| | 52,759 |
| | (480 | ) | | (1 | ) | |
| Sales for resale | | 6,719 |
| | 4,949 |
| | 1,770 |
| | 36 |
| |
| Total | | 58,998 |
| | 57,708 |
| | 1,290 |
| | 2 |
| |
| | | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | | |
| Operating Revenues | |
| $866 |
| |
| $1,082 |
| |
| ($216 | ) | | (20 | ) | |
| Billed Electric Energy Sales (GWh) | | 17,112 |
| | 19,170 |
| | (2,058 | ) | | (11 | ) | |
| Operating revenues | | |
| $553 |
| |
| $522 |
| |
| $31 |
| | 6 |
|
| Billed electric energy sales (GWh) | | | 8,363 |
| | 9,246 |
| | (883 | ) | | (10 | ) |
ENTERGY CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business. While management is unable to predict with certainty the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material adverse effect on Entergy’s results of operations, cash flows, or financial condition, except as otherwise discussed in the Form 10-K or in this report. Entergy discusses regulatory proceedings in Note 2 to the financial statements in the Form 10-K and herein and discusses tax proceedings in Note 3 to the financial statements in the Form 10-K and Note 10 to the financial statements herein.
Vidalia Purchased Power Agreement
See Note 8 to the financial statements in the Form 10-K for information on Entergy Louisiana’s Vidalia purchased power agreement.
ANO Damage, Outage, and NRC Reviews
See Note 8 to the financial statements in the Form 10-K for a discussion of the ANO stator incident, and subsequent NRC reviews.reviews, and the deferral of replacement power costs.
As discussed in the Form 10-K, in March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” (Column 4) of the NRC’s Reactor Oversight Process Action Matrix. Placement into Column 4 requires significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. Entergy Arkansas incurred incremental expenses of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas expects to incur incremental expenses of approximately $50 million in 2016, of which $30.6 million was incurred as of June 30, 2016, in support of NRC inspection activities and to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. A lesser amount of incremental expenses is expected to be ongoing annually after 2016, until ANO transitions out of Column 4.
The NRC completed the supplemental inspection required for ANO’s Column 4 designation in February 2016, and published its inspection report in June 2016. In its inspection report, the NRC concluded that the ANO site is being operated safely and that Entergy understands the depth and breadth of performance concerns associated with ANO’s performance decline. Also in June 2016, the NRC issued a confirmatory action letter to confirm the actions Entergy Arkansas has taken and will continue to take to improve performance at ANO. The NRC will verify the completion of those actions through quarterly follow-up inspections, the results of which will determine when ANO should transition out of Column 4.
Pilgrim NRC Oversight and Planned Shutdown
In September 2015See Note 8 to the NRC placed Pilgrim in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program that contributed to repeated unscheduled shutdowns and equipment failures. The preliminary estimate of direct costs of Pilgrim’s response to a planned NRC enhanced inspection ranges from $45 million to $60 million in operation and maintenance expense, including approximately $30 million in 2016, of which $12 million was incurred as of June 30, 2016. The estimate does not include potential capital investment or other costs to address issues that may arisefinancial statements in the inspection.
Entergy determined in April 2016 that it intends to refuelForm 10-K for a discussion of the NRC’s enhanced inspections of Pilgrim in 2017 and then cease operations May 31, 2019. In October 2015, Entergy previously announced its intention to cease operations atEntergy’s planned shutdown of Pilgrim because of poor
Entergy Corporation and Subsidiaries
Notes to Financial Statements
market conditions, reduced revenues, and increased operational costs. Pilgrim currently has approximately 677 MW of Capacity Supply Obligations in ISO New England through Mayno later than June 1, 2019.
Spent Nuclear Fuel Litigation
UnderSee Note 8 to the Nuclear Waste Policy Act of 1982,financial statements in the DOE is required,Form 10-K for a specified fee, to construct storage facilities for, and to dispose of, allinformation on Entergy’s spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors. Entergy’s nuclear owner/licensee subsidiaries have been charged fees for the estimated future disposal costs of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982. The affected Entergy companies entered into contracts with the DOE, whereby the DOE is to furnish disposal services at a cost of one mill per net kWh generated and sold after April 7, 1983, plus a one-time fee for generation prior to that date. Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be proper components of nuclear fuel expense. Provisions to recover such costs have been or will be made in applications to regulatory authorities for the Utility plants. Following the current Presidential administration’s defunding of the Yucca Mountain spent fuel repository program, the National Association of Regulatory Utility Commissioners and others sued the government seeking cessation of collection of the one mill per net kWh generated and sold after April 7, 1983 fee. In November 2013 the D.C. Circuit Court of Appeals ordered the DOE to submit a proposal to Congress to reset the fee to zero until the DOE complies with the Nuclear Waste Policy Act or Congress enacts an alternative waste disposal plan. In January 2014 the DOE submitted the proposal to Congress under protest, and also filed a petition for rehearing with the D.C. Circuit. The petition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May 2014. Management cannot predict the potential timing or magnitude of future spent fuel fee revisions that may occur.
Because the DOE has not begun accepting spent fuel, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts. As a result of the DOE’s failure to begin disposal of spent nuclear fuel in 1998 pursuant to the Nuclear Waste Policy Act of 1982 and the spent fuel disposal contracts, Entergy’s nuclear owner/licensee subsidiaries have incurred and will continue to incur damages. Beginning in November 2003 these subsidiaries have pursued litigation to recover the damages caused by the DOE’s delay in performance. Following are details of final judgments recorded by Entergy in 2016 related to Entergy’s nuclear owner licensee subsidiaries litigation with the DOE.
In December 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $81 million in favor of Entergy Nuclear Indian Point 3 and Entergy Nuclear FitzPatrick in the first round Indian Point 3/FitzPatrick damages case, and Entergy received the payment from the U.S. Treasury in June 2016. The effect of recording the Indian Point 3 proceeds was a reduction to plant, other operation and maintenance expense, and depreciation expense. The Indian Point 3 damages award included $45 million related to costs previously capitalized and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $45 million, Entergy recorded $8 million as a reduction to previously-recorded depreciation expense. Entergy reduced its Indian Point 3 plant asset balance by the remaining $37 million. The effect of recording the FitzPatrick proceeds was a reduction to plant and other operation and maintenance expense. The FitzPatrick damages awarded included $32 million related to costs previously capitalized and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $32 million, Entergy recorded an $11 million reduction to bring its remaining FitzPatrick plant asset balance to zero. The remaining $21 million was recorded as a reduction to other operation and maintenance expense because FitzPatrick’s plant asset balance is fully impaired.
In April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42 million in favor of Entergy Louisiana and against the DOE in the first round River Bend damages case, reserving the issue of cask loading costs pending resolution of the appeal on the same issues in the Entergy Arkansas and System Energy cases. The appeals period for the partial judgment has ended with no appeals filed, and Entergy Louisiana requested payment from the U.S. Treasury of the $42 million in June 2016 and recorded a receivable as of June 30, 2016. The primary effects of recording the receivable were reductions to plant, nuclear fuel expense, other operation and maintenance expense, and depreciation expense. The River Bend damages award included $17 million related to costs previously capitalized, $23 million related to costs previously recorded as nuclear fuel expense, and $2 million related to costs
Entergy Corporation and Subsidiaries
Notes to Financial Statements
previously recorded as other operation and maintenance expense. Of the $17 million, Entergy Louisiana recorded $3 million as a reduction to previously-recorded depreciation expense. Entergy Louisiana reduced its River Bend plant asset balance by the remaining $14 million.
In May 2016, Entergy Nuclear Vermont Yankee and the DOE entered into a stipulation agreement and the U.S. Court of Federal Claims issued a judgment in the amount of $19 million in favor of Entergy Nuclear Vermont Yankee and against the DOE in the second round Vermont Yankee damages case. Entergy received payment from the U.S. Treasury in June 2016. The effect of recording the proceeds was a reduction to other operation and maintenance expense and depreciation expense. The damages awarded included $15 million related to costs previously capitalized and $4 million related to costs previously recorded as other operation and maintenance expense. Of the $15 million, Entergy recorded $2 million as a reduction to previously-recorded depreciation expense. The remaining $13 million would have been recorded as a reduction to Vermont Yankee’s plant asset balance, but was recorded as a reduction to other operation and maintenance expense because Vermont Yankee’s plant asset balance is fully impaired.
Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.litigation.
Nuclear Insurance
See Note 8 to the financial statements in the Form 10-K for information on nuclear liability and property insurance associated with Entergy’s nuclear power plants.
Conventional Property Insurance
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.
Employment Litigationand Labor-related Proceedings
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)
See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation at Entergy Louisiana, Entergy New Orleans, and Entergy Texas.litigation.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets and Regulatory Liabilities
See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets and regulatory liabilities in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries. The following are updates to that discussion.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fuel and purchased power cost recovery
Entergy Arkansas
ProductionEnergy Cost AllocationRecovery Rider
In May 2016,March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the productionenergy cost allocationrecovery rider, which reflected recovery of the production cost allocation rider true-up adjustment of the 2014 and 2015 unrecovered retail balancean increase in the amount of $1.9 million. Additionally,rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March 2017 recommending that the redetermined rates reflect the recovery of a $1.9 million System Agreement bandwidth remedy payment resulting from a compliance filing pursuant to the FERC’s December 2015 order related to test year 2009 production costs. The rates for the 2016 production cost allocation rider update became effectiverate should be implemented with the first billing cycle of July 2016, and rates will be effective through June 2017.April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff.
Entergy Louisiana
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. The LPSC staff issued its audit report in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates. The recommended refund was made by Entergy Louisiana in May 2013As discussed in the form of a credit to customers through its fuel adjustment clause filing. Two parties intervenedForm 10-K, in the proceeding. A procedural schedule was established for the identification of issues by the intervenors and for Entergy Louisiana to submit comments regarding the LPSC staff report and any issues raised by intervenors. One intervenor sought further proceedings regarding certain issues it raised in its comments on the LPSC staff report. Entergy Louisiana filed responses to both the LPSC staff report and the issues raised by the intervenor. After conducting additional discovery, in April 2016 the LPSC staff consultant issued its supplemental audit report, which concluded that Entergy Louisiana was not imprudent on the issues raised by the intervenor. A procedural schedule has been established for this proceeding, including an evidentiary hearing in November 2016.
In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009. In March 2016 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $8.6 million, plus interest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustment clause to base rates. Entergy Louisiana has recorded a provision for the estimated outcome of this proceeding. A procedural schedule has been established for this proceeding, including a hearing in December 2016.
In June 2016 the LPSC staff provided notice of an auditaudits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. In recognition of the business combination that occurredDiscovery commenced in 2015, the audit notice was issued to Entergy Louisiana and will also include a review of charges to legacy Entergy Gulf States Louisiana customers prior to the business combination. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment and purchased gas adjustment mechanisms for the period from 2012 through 2015. Discovery has not commenced.March 2017.
Entergy Mississippi
Entergy Mississippi had a deferred fuel over-recovery balance of $58.3 million as of May 31, 2015, along with an under-recovery balance of $12.3 million under the power management rider. Pursuant to those tariffs, in July 2015, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider to flow through to customers the approximately $46 million net over-recovery over a six-month period. In August
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2015 the MPSC approved the interim adjustments effective with September 2015 bills. In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected through January 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC further ordered, however, that due to the significant change in natural gas price forecasts since Entergy Mississippi’s filing in November 2015, Entergy Mississippi shall file a revised fuel factor with the MPSC no later than February 1, 2016. Pursuant to that order, Entergy Mississippi submitted a revised fuel factor. Additionally, because Entergy Mississippi’s projected over-recovery balance for the period ending January 31, 2017 was $68 million, in February 2016, Entergy Mississippi filed for another interim adjustment to the energy cost factor effective April 2016 to flow through to customers the projected over-recovery balance over a six-month period. That interim adjustment was approved by the MPSC in February 2016 effective for April 2016 bills.
Entergy TexasAttorney General Complaint
As discussed in the Form 10-K, in July 2015 certain parties filed briefs in the open proceeding asserting that Entergy Texas should refund to retail customers an additional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs. In October 2015 an ALJ issued a proposal for decision recommending that the additional $10.9 million in bandwidth remedy payments be refunded to retail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed a motion for rehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy TexasMississippi attorney general filed a complaint in Federal District Court for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. Both appeals are pending, but the appeals do not stay the PUCT’s decision. The federal appeal is scheduled to be heardstate court in December 2016. In April 2016,2008 against Entergy Texas filed withCorporation, Entergy Mississippi, Entergy Services, and Entergy Power. The defendants have denied the PUCT an application to refund to customers approximately $56.2 million. The refund resulted from (i) $41.8 million of fuel cost recovery over-collections through February 2016, (ii) the $10.9 millionallegations. Discovery is currently in bandwidth remedy payments, discussed above, that Entergy Texas received related to calendar year 2006 production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008 production costs. In June 2016, Entergy Texas filed an unopposed settlement agreement that added additional over-recovered fuel costs for the months of March and April 2016. The settlement resulted in a $68 million refund. The ALJ approved the refund on an interim basis to be made to most customers over a four-month period beginning with the first billing cycle of July 2016. In July 2016 the PUCT issued an order approving the interim refund. progress.
InEntergy Texas
As discussed in the Form 10-K, in July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013 through March 31, 2016. Under a recent PUCT rule change, a fuel reconciliation is required to be filed at least once every three years and outside of a base rate case filing. During the reconciliation period,In December 2016, Entergy Texas incurred approximately $1.77 billionentered into a stipulation and settlement agreement resulting in Texas jurisdictional eligible fuela $6 million disallowance not associated with any particular issue raised and purchased power expenses, neta refund of certain revenues credited to such expenses and other adjustments. Entergy Texas estimates anthe over-recovery balance of approximately $19.3$21 million including interest, which Entergy Texas is requesting authorityas of November 30, 2016, to carry over as themost customers beginning balance for the subsequentApril 2017 through June 2017. The fuel reconciliation period beginning Apri1 2016. Entergy Texas also notes, however, that the $19.3 million over collection is currently being refunded to customers as a portion of the interim fuel refund beginning with the first billing cycle of July 2016, discussed above. Entergy Texas also is requesting a prudence finding for each of the fuel-related contracts and arrangements entered into or modified during the reconciliation period that have not be reviewedsettlement was approved by the PUCT in a prior proceeding. The PUCT has one year to issue a final order in this proceeding.March 2017.
Retail Rate Proceedings
See Note 2 to the financial statements in the Form 10-K for detailed information regarding retail rate proceedings involving the Utility operating companies. The following are updates to that information.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC
2015 Rate Case
In April 2015, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notified the APSC of Entergy Arkansas’s intent to implement a formula rate review mechanism pursuant to Arkansas legislation passed in 2015, and requested a retail rate increase of$268.4 million, with a net increase in revenue of $167 million. The filing requested a 10.2% return on common equity. In September 2015 the APSC staff and intervenors filed direct testimony, with the APSC staff recommending a revenue requirement of $217.9 million and a 9.65% return on common equity. In December 2015, Entergy Arkansas, the APSC staff, and certain of the intervenors in the rate case filed with the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 million with a net increase in revenue of approximately $133 million; an authorized return on common equity of 9.75%; and a formula rate plan tariff that provides a +/- 50 basis point band around the 9.75% allowed return on common equity. A significant portion of the rate increase is related to Entergy Arkansas’s acquisition in March 2016 of Union Power Station Power Block 2 for a base purchase price of $237 million, subject to closing adjustments. The settlement agreement also provided for amortization over a 10-year period of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance. A settlement hearing was held in January 2016. In February 2016 the APSC approved the settlement with one exception that would reduce the retail rate increase proposed in the settlement by $5 million. The settling parties agreed to the APSC modifications in February 2016. The new rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliance filing regarding the new rates that included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. The interim base rate adjustment surcharge will recover a total of $21.1 million over the nine-month period from April 2016 through December 2016.
2016 Formula Rate Plan Filing
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In April 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction with its 2017 formula rate plan filing, scheduled to be made in July 2017.
In JulyAdvanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in September 2016, Entergy Arkansas filed withan application seeking a finding from the APSC its 2016 Entergy Arkansas formula rate plan filing showingthat Entergy Arkansas’s projected earned return on common equity fordeployment of advanced metering infrastructure is in the twelve months ended December 31, 2017 test year to be belowpublic interest. This matter is pending before the formula rate plan bandwidth. The filing requests a $68 million rate increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75%. Entergy Arkansas requested an order approving its proposed formula rate plan adjustment by December 9, 2016. If a final order is not issued by this date, the proposed formula rate plan adjustment will become effective December 30, 2016, subject to refund.APSC.
Filings with the LPSC
Retail Rates - Electric
2015 Formula Rate Plan Filing
InAs discussed in the Form 10-K, in May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. The evaluation report reflects an earned return on common equity of 9.07%. As such, no adjustment to base formula rate plan revenueLPSC’s review is required. The following other adjustments, however, are required under the formula rate plan: an increasepending. Also, in the legacyNovember 2016, Entergy Louisiana additional capacity mechanism of $14.2 million;filed with the LPSC a separate increase in legacy Entergy Louisiana revenue of $10 million primarilyrequest to reflect the effects of the termination of the System Agreement; an increase in the legacy Entergy Gulf States Louisiana additional capacity mechanism of $0.5 million; a decrease in legacy Entergy Gulf States Louisiana revenue of $58.7 million primarily to reflect the effects of the termination of the System Agreement; and an increase of $11 million toextend the MISO cost recovery mechanism. Rates are scheduled to be implemented withmechanism rider provision of its formula rate plan. A procedural schedule was established, including a hearing in July 2017. In March 2017 the first billing cycleLPSC staff submitted direct testimony generally supportive of September 2016, subject to refund.a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding does not oppose an extension for this period of time.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Waterford 3 Replacement Steam Generator Project
Ninemile 6
As discussedSee Note 2 to the financial statements in the Form 10-K in July 2015, Entergy Louisiana submittedfor discussion of the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC a Ninemile 6 compliance filing including an estimate at completion, inclusive of interconnection costs and transmission upgrades, of approximately $648 million, or $76 million less than originally estimated, along with other project details and supporting evidence,was made to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project. Testimony filed by LPSC staff generally supports the prudence of the management of the project and recovery of the costs incurred to complete the project. The LPSC staff had questioned the warranty coverage for one element of the project. In March 2016, Entergy Louisiana and the LPSC staff filed a joint motion to suspend the procedural schedule pending the filing of an uncontested joint stipulated settlement.customers in January 2017.
Union Power Station
As discussed in the Form 10-K, in October 2015 the LPSC approved a settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station. In March 2016, Entergy Louisiana acquired Power Blocks 3 and 4 of Union Power Station for an aggregate purchase price of approximately $474 million and implemented rates to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.
As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1. In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of Entergy Louisiana’sthe decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to retire Willow Glen 2 and 4, as opposed to temporarily suspending those units. This matter is pending before an ALJ, with an evidentiary hearing scheduled to commence in July 2017. The ALJ recently dismissed claims of an industrial user regarding a proposed process for future deactivation because the LPSC initiated a generic rulemaking to consider whether the LPSC should review deactivation decisions prior to implementation.
Entergy Corporation and a hearing has been scheduled in March 2017Subsidiaries
Notes to determine, under applicable law, whether Willow Glen 2 and 4 units should be returned to service. Financial Statements
Retail Rates - Gas
2016 Rate Stabilization Plan Filing
In January 2016,2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2015.2016. The filing showedof the evaluation report for test year 2016 reflected an earned return on common equity of 10.22%, which is within6.37%. As part of the authorized bandwidth, therefore requiring no changeoriginal filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in rates. In Marchdeferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million. Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff issued its report stating thatconfirmed Entergy Louisiana’s filing was consistent with the 2015principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization plan filing ispending LPSC consideration in compliancea separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the exceptionfirst billing cycle of several issues that require additional information, explanation, or clarification for which the LPSC staff has reserved the right to further review. In July 2016 the parties to the proceeding filed an unopposed joint report and motion for entry of order accepting report that indicates no outstanding issues remainMay 2017.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the filing. Absent approval of an extension by the LPSC, test year 2015 is the final year under the current gas rate stabilization plan. In FebruaryForm 10-K, in November 2016, however, Entergy Louisiana filed an application seeking a motion requesting to extendfinding from the termLPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the gas rate stabilization planpublic interest. This matter is pending before an ALJ, and an evidentiary hearing is scheduled for an additional three-year term. A procedural schedule has been established, including a hearing in November 2016.September 2017.
Filings with the MPSC
Formula Rate Plan
In March 2016,2017, Entergy Mississippi submitted its formula rate plan 20162017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 20162017 calendar year to be below the formula rate plan bandwidth. The filing showed a $32.6 million rate increase was necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96%, within the formula rate plan bandwidth. In Junebandwidth, resulting in no change in rates. The filing is currently subject to MPSC review.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Mississippi filed an application seeking a finding from the MPSC approvedthat Entergy Mississippi’s joint stipulation withdeployment of advanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff. TheStaff and Entergy Mississippi entered into and filed a joint stipulation provided forsupporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without any material changes, finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a total revenue increasecertificate of $23.7 million.public convenience and necessity. The revenue increase includes a $19.4 million increase throughMPSC order also confirmed that Entergy Mississippi shall continue to include in rate base the formula rate plan, resulting in a return on common equity pointremaining book value of adjustmentexisting meters that will be retired as part of 10.07%. The revenue increasethe AMI deployment and also includes $4.3 million in incremental ad valorem tax expenses to be collected through an updated ad valorem tax adjustment rider. The revenue increase and ad valorem tax adjustment rider were effective with the July 2016 bills.depreciate those assets using current depreciation rates.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the City Council
Retail Rates
As discussed in the Form 10-K, in November 2015February 2017, Entergy New Orleans filed a proposed implementation plan for the Energy Smart program from April 2017 through March 2020. As part of the proposal, Entergy New Orleans requested that the City Council authorized expansionidentify its desired level of funding for the termsprogram during this time period and approve
Entergy Corporation and capacity acquisitionSubsidiaries
Notes to Financial Statements
a cost recovery ridermechanism. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to recovercontinue funding the non-fuel purchased power expense from Ninemile 6,program for Entergy New Orleans’s legacy customers and that the revenue requirement associated withEnergy Smart Algiers program continue to be funded through the purchase of Power Block 1 ofAlgiers fuel adjustment clause, until additional customer funding is required for the Union Power Station, and a credit to customers of $400 thousand monthly beginning June 2016 in recognition of the decrease in other operation and maintenance expenses that would result with the deactivation of Michoud Units 2 and 3. In March 2016,legacy customers. The City Council ordered Entergy New Orleans purchased Power Block 1to submit a supplemental and amended implementation plan for program years 8 and 9 of the Union Power StationEnergy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost recovery mechanism for approximately $237 millionthe program for both legacy and initiated recovery of these costs with March 2016 bills. In July 2016,Algiers customers. The City Council will not permit Entergy New Orleans andto recover lost contribution to fixed costs for program years 7, 8, or 9 of the City Council Utility Committee agreed to a temporary increase in the credit to customers to a total of $1.4 million monthly for August 2016 through December 2016.Energy Smart program.
Internal Restructuring
InAs discussed in the Form 10-K, in July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuring whichthat would result in the transfer of substantially all of the assets and operations of Entergy New Orleans to a new entity, which would ultimately be heldowned by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval ofIn May 2017 the City Council andadopted a resolution approving the FERC. If the application is approved byproposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in 2016,principle, Entergy New Orleans has proposed towill credit retail customers $5$10 million in each2017, $1.4 million in the first quarter of the years 2016year after the transaction closes, and 2017. The filing with$117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Additionally, if the FERC has not yet been made, but ifapproves the restructuring is approved by the FERC bytransaction prior to December 31, 2018, Entergy New Orleans has proposed towill credit retail customers $5 million in each of the years 2018, 2019, and 2020. If City Council and FERC approvals are obtained,
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in October 2016, Entergy New Orleans expectsfiled an application seeking a finding from the restructuring will be consummated by December 31, 2017.
It is currently contemplatedCity Council that Entergy New Orleans would undertake a multi-step restructuring, which would includeOrleans’s deployment of advanced electric and gas metering infrastructure is in the following:
public interest. In April 2017, Entergy New Orleans would redeem its outstanding preferred stock atreceived intervenor testimony that is generally supportive of AMI deployment. The City Council’s advisors are scheduled to file testimony in May 2017, and a price of approximately $21 million, which includes an expected call premium of approximately $819,000, plus any accumulated and unpaid dividends.hearing is currently set for July 2017.
Entergy New Orleans would convert from a Louisiana corporation to a Texas corporation.
Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans will allocate substantially all of its assets to a new subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), and Entergy New Orleans Power will assume substantially all of the liabilities of Entergy New Orleans, in a transaction regarded as a merger under the TXBOC. Entergy New Orleans will remain in existence and hold the membership interests in Entergy New Orleans Power.
Entergy New Orleans will contribute the membership interests in Entergy New Orleans Power to an affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution, Entergy New Orleans Power will be a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.
Entergy New Orleans will change its name to Entergy New Orleans Holdings, Inc., and Entergy New Orleans Power will then change its name to Entergy New Orleans, LLC.
Upon the completion of the restructuring, Entergy New Orleans, LLC will hold substantially all of the assets, and will have assumed substantially all of the liabilities, of Entergy New Orleans. Entergy New Orleans may modify or supplement the steps to be taken to effectuate the restructuring.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the PUCT
2011 Rate Case
See the Form 10-K for discussion of Entergy Texas’s 2011 rate case. As discussed in the Form 10-K, several parties, including Entergy Texas, appealed various aspects of the PUCT’s order to the Travis County District Court. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced in the Form 10-K, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issued its opinion affirming the District Court’s decision on all points. Entergy Texas petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. That petition is pending.
Other Filings
In September 2015,2016, Entergy Texas filed forwith the PUCT a request to amend its transmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider requesting a $13is designed to collect approximately $29.5 million increase, incremental to base rates. Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among other things, MISO charges, vegetation management costs, and bad debt expenses that would reduce the requested increase by approximately $2 million. In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request be reduced by an additional $3.4 million to account for load growth since base rates were last set. A hearing on the merits was held in December 2015. In February 2016 a State Office of Administrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 millionannually from Entergy Texas’s $13retail customers. This amount includes the approximately $10.5 million request, but recommendingannually that Entergy Texas is currently authorized to collect through the PUCT not accept the load growth offset.TCRF rider. In AprilSeptember 2016 the PUCT votedsuspended the effective date of the tariff change to allow Entergy Texas’s TCRF rates to become effective as of April 14,March 2017. In December 2016, when those rates are finally approved, but did not otherwise address the proposal for decision. In May 2016 the PUCT deferred final consideration of Entergy Texas’s TCRF application and opened the record to consider additional evidence to be provided by Entergy Texas and potentially other parties regarding the rate-making treatment of spare transmission-level transformers that are transferred among the Utility operating companies. In June 2016 the PUCT indicated that it would take up inreached a future rulemaking projectsettlement agreeing to the issueamended TCRF annual revenue requirement of whether a load growth adjustment should apply to a TCRF. In July 2016 the PUCT issued an order generally accepting the proposal for decision but declining to adjust the TCRF baseline in two instances as recommended by the ALJ, which results in a total annual allowance of approximately $10.5$29.5 million. The PUCT also ordered its staffapproved the settlement and issued a final order in March 2017. Entergy Texas to track all spare autotransformer transfers going forward so that it could addressimplemented the appropriate accounting treatmentamended TCRF rider beginning with bills covering usage on and prudence of such transfers in Entergy Texas’s next base rate case.after March 20, 2017.
System Agreement Cost Equalization Proceedings
Rough Production Cost Equalization Rates
Consolidated 2011, 2012, 2013, and 2014 Rate Filing Proceedings
As discussed in the Form 10-K, in December 2014 the FERC consolidated the 2011, 2012, 2013, and 2014 rate filings for settlement and hearing procedures. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimony concerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidth calculations for prior years. In July 2015 the parties filed direct and answering testimony. In August and September 2015 the parties filed additional rounds of testimony in the consolidated hearing for the 2011, 2012, 2013, and 2014 rate filings. In October 2015 the LPSC withdrew its testimony challenging the accounting for joint account sales of energy. The hearings occurred in November 2015, and an initial decision from the ALJ was issued in July 2016. In the initial decision, the ALJ generally agreed with Entergy’s bandwidth calculations with one exception on the accounting related to the Waterford 3 sale/leaseback. Briefs are due in August and September 2016.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2015 Rate Filing Based on Calendar Year 2014 Production Costs
In May 2015, Entergy filed with the FERC the 2015 rates in accordance with the FERC’s orders in the System Agreement proceeding. The filing shows that no payments and receipts are required in 2015 to implement the FERC’s remedy based on calendar year 2014 production costs. Several parties intervened in the proceeding and the LPSC and City Council intervened and filed comments. In October 2015 the FERC accepted the 2015 rates for filing, suspended them for a nominal period, to become effective June 1, 2015, as requested, subject to refund, and set them for hearing and settlement judge procedures. In March 2016, Entergy Services filed a settlement at the FERC resolving the 2015 rate filing. In the settlement, the parties did not dispute the 2015 rates as calculated with no payments or receipts. Pursuant to the settlement, the 2015 rates are subject to a recalculation and compliance filing upon resolution of other ongoing bandwidth-related proceedings. The settlement is pending at the FERC.
2016 Rate Filing Based on Calendar Year 2015 Production Costs
In May 2016, Entergy filed with the FERC the 2016 rates in accordance with the FERC’s orders in the System Agreement proceeding. The filing showed that no payments and receipts were required in 2016 to implement the FERC’s remedy based on calendar year 2015 production costs. The LPSC and City Council intervened in the proceeding.
Interruptible Load Proceedings
See the Form 10-K for a discussion of the interruptible load proceeding. In April 2016litigation involving the System Agreement at the FERC issued an order on remand that addressed the December 2014 decision by the D.C. Circuitand in the interruptible load proceeding. The order on remand affirmed the FERC’s denial of refunds for the 15-month refund effective period. The FERC explained and clarified its policies regarding refunds and concluded that the evidence in the record demonstrated that the relevant equitable factors favored not requiring refunds in this case. The FERC also noted that, under Section 206(c) of the Federal Power Act, in a Section 206 proceeding involving two or more electric utility companies of a registered holding company system, the FERC may order refunds only if it determines the refunds would not cause the registered holding company to experience any reduction in revenues resulting from an inability of an electric utility company in the system to recover the resulting increase in costs. The FERC stated it was not able to find that the Entergy system would not experience a reduction in revenues if refunds were awarded in this proceeding, which further supported the denial of refunds. In May 2016 the LPSC filed a request for rehearing of the FERC’s April 2016 order.federal courts.
Entergy Arkansas Opportunity Sales Proceedings
See the Form 10-K for a discussion of the proceeding initiated at the FERC by the LPSC in June 2009 in which the LPSC initially requested that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. In April 2016 the FERC issued orders addressing the requests for rehearing filed in July 2012 and the ALJ’s August 2013 initial decision. The first order denies Entergy’s request for rehearing and affirms FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas.2009.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.Complaint Against System Energy
In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The effectcomplaint seeks a reduction in the return on equity component of the FERC’s decisions, if upheld, is thatUnit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, will make paymentsEntergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to some or allEntergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94%. The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017, as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67%. System Energy answered the other Utility operating companies. As partcomplaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The City of New Orleans filed comments in February 2017 supporting the further proceedings requiredcomplaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. Action by the FERC Entergy will re-run intra-system bills for a ten-year period (2000-2009) to quantify the effects of the FERC's rulings. The ALJ will issue an initial decision and FERC will issue an order reviewing that decision. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing that initial decision and Entergy submits a subsequent filing to comply with that order. Because further proceedings are required, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case, however, in the first quarter 2016 Entergy Arkansas recorded a liability of $87 million for its estimated increased costs and payment to the other Utility operating companies, including interest. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Therefore Entergy Arkansas recorded a regulatory asset of approximately $75 million, which represents its estimate of the retail portion of the costs.
In May 2016 a procedural schedule was established with a hearing in May 2017 and an initial decision expected in August 2017. Also in May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order addressing the requests for rehearing filed in July 2012. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order.
Storm Cost Recovery
Entergy Mississippi
As discussed in the Form 10-K, in February 2015, Entergy Mississippi provided notice to the Mississippi Public Utilities Staff that the storm damage provision would be set to zero effective with the March 2015 billing cycle as a result of Entergy Mississippi’s storm damage provision balance exceeding $15 million as of January 31, 2015, but would return to its current level when the storm damage provision balance becomes less than $10 million. As of April 30, 2016, Entergy Mississippi’s storm damage provision balance was less than $10 million, therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with June 2016 bills.pending.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 3. EQUITY (Entergy Corporation and Entergy Louisiana)
Common Stock
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
|
| | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended June 30, |
| | 2016 | | 2015 |
| | (In Millions, Except Per Share Data) |
| Basic earnings per share | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation |
| $567.3 |
| | 178.8 |
| |
| $3.17 |
| |
| $148.8 |
| | 179.5 |
| |
| $0.83 |
|
| Average dilutive effect of: | | | | | | | | | | | |
| Stock options | | | 0.2 |
| | — |
| | | | 0.2 |
| | — |
|
| Other equity plans | | | 0.5 |
| | (0.01 | ) | | | | 0.4 |
| | — |
|
| Diluted earnings per share |
| $567.3 |
| | 179.5 |
| |
| $3.16 |
| |
| $148.8 |
| | 180.1 |
| |
| $0.83 |
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 4.1 million for the three months ended June 30, 2016 and approximately 5.1 million for the three months ended June 30, 2015.
| | | | For the Six Months Ended June 30, | For the Three Months Ended March 31, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions, Except Per Share Data) | (In Millions, Except Per Share Data) |
| Basic earnings per share | Income | | Shares | | $/share | | Income | | Shares | | $/share | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation |
| $797.3 |
| | 178.7 |
| |
| $4.46 |
| |
| $446.9 |
| | 179.6 |
| |
| $2.49 |
|
| $82.6 |
| | 179.3 |
| |
| $0.46 |
| |
| $230.0 |
| | 178.6 |
| |
| $1.29 |
|
| Average dilutive effect of: | | | | | | | | | | | | | | | | | | | | | | |
| Stock options | | | 0.1 |
| | — |
| | | | 0.4 |
| | (0.01 | ) | | | 0.1 |
| | — |
| | | | 0.1 |
| | — |
|
| Other equity plans | | | 0.4 |
| | (0.01 | ) | | | | 0.3 |
| | — |
| | | 0.4 |
| | — |
| | | | 0.3 |
| | (0.01 | ) |
| Diluted earnings per share |
| $797.3 |
| | 179.2 |
| |
| $4.45 |
| |
| $446.9 |
| | 180.3 |
| |
| $2.48 |
|
| $82.6 |
| | 179.8 |
| |
| $0.46 |
| |
| $230.0 |
| | 179.0 |
| |
| $1.28 |
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 5.14.9 million for the sixthree months ended June 30, 2016March 31, 2017 and approximately 4.36.1 million for the sixthree months ended June 30, 2015.March 31, 2016.
Entergy’s stock options and other equity compensation plans are discussed in Note 5 to the financial statements herein and in Note 12 to the financial statements in the Form 10-K.
Treasury Stock
During the sixthree months ended June 30, 2016,March 31, 2017, Entergy Corporation issued 507,144303,579 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and other stock-based awards. Entergy Corporation did not repurchase any of its common stock during the sixthree months ended June 30, 2016.
Retained Earnings
On July 29, 2016, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.85 per share, payable on September 1, 2016, to holders of record as of August 11, 2016.March 31, 2017.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Retained Earnings
On April 5, 2017, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.87 per share, payable on June 1, 2017, to holders of record as of May 11, 2017.
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 30, 2016March 31, 2017 by component:
| | | | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) | (In Thousands) |
| Beginning balance, April 1, 2016 |
| $96,464 |
| |
| ($459,042 | ) | |
| $390,626 |
| |
| $1,744 |
| |
| $29,792 |
| |
| Beginning balance, January 1, 2017 | |
| $3,993 |
| |
| ($469,446 | ) | |
| $429,734 |
| |
| $748 |
| |
| ($34,971 | ) |
| Other comprehensive income (loss) before reclassifications | (34,138 | ) | | — |
| | 24,016 |
| | (904 | ) | | (11,026 | ) | 32,608 |
| | — |
| | 39,872 |
| | — |
| | 72,480 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (29,903 | ) | | 5,043 |
| | (3,061 | ) | | — |
| | (27,921 | ) | (33,136 | ) | | 8,632 |
| | (2,045 | ) | | — |
| | (26,549 | ) |
| Net other comprehensive income (loss) for the period | (64,041 | ) | | 5,043 |
| | 20,955 |
| | (904 | ) | | (38,947 | ) | (528 | ) | | 8,632 |
| | 37,827 |
| | — |
| | 45,931 |
|
| Ending balance, June 30, 2016 |
| $32,423 |
| |
| ($453,999 | ) | |
| $411,581 |
| |
| $840 |
| |
| ($9,155 | ) | |
| Ending balance, March 31, 2017 | |
| $3,465 |
| |
| ($460,814 | ) | |
| $467,561 |
| |
| $748 |
| |
| $10,960 |
|
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 30, 2015 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, April 1, 2015 |
| $68,788 |
| |
| ($561,341 | ) | |
| $430,698 |
| |
| $2,118 |
| |
| ($59,737 | ) |
| Other comprehensive income (loss) before reclassifications | 88,796 |
| | — |
| | (25,108 | ) | | 667 |
| | 64,355 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (50,100 | ) | | 7,438 |
| | (8,772 | ) | | — |
| | (51,434 | ) |
| Net other comprehensive income (loss) for the period | 38,696 |
| | 7,438 |
| | (33,880 | ) | | 667 |
| | 12,921 |
|
| Ending balance, June 30, 2015 |
| $107,484 |
| |
| ($553,903 | ) | |
| $396,818 |
| |
| $2,785 |
| |
| ($46,816 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30,March 31, 2016 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2016 |
| $105,970 |
| |
| ($466,604 | ) | |
| $367,557 |
| |
| $2,028 |
| |
| $8,951 |
|
| Other comprehensive income (loss) before reclassifications | 56,169 |
| | — |
| | 49,048 |
| | (1,188 | ) | | 104,029 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (129,716 | ) | | 12,605 |
| | (5,024 | ) | | — |
| | (122,135 | ) |
| Net other comprehensive income (loss) for the period | (73,547 | ) | | 12,605 |
| | 44,024 |
| | (1,188 | ) | | (18,106 | ) |
| Ending balance, June 30, 2016 |
| $32,423 |
| |
| ($453,999 | ) | |
| $411,581 |
| |
| $840 |
| |
| ($9,155 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30, 2015 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2015 |
| $98,118 |
| |
| ($569,789 | ) | |
| $426,695 |
| |
| $2,669 |
| |
| ($42,307 | ) |
| Other comprehensive income (loss) before reclassifications | 67,900 |
| | 13 |
| | (12,450 | ) | | 116 |
| | 55,579 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (58,534 | ) | | 15,873 |
| | (17,427 | ) | | — |
| | (60,088 | ) |
| Net other comprehensive income (loss) for the period | 9,366 |
| | 15,886 |
| | (29,877 | ) | | 116 |
| | (4,509 | ) |
| Ending balance, June 30, 2015 |
| $107,484 |
| |
| ($553,903 | ) | |
| $396,818 |
| |
| $2,785 |
| |
| ($46,816 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended June 30, 2016: |
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2016 |
| $105,970 |
| |
| ($466,604 | ) | |
| $367,557 |
| |
| $2,028 |
| |
| $8,951 |
|
| Other comprehensive income (loss) before reclassifications | 90,307 |
| | — |
| | 25,032 |
| | (284 | ) | | 115,055 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (99,813 | ) | | 7,562 |
| | (1,963 | ) | | — |
| | (94,214 | ) |
| Net other comprehensive income (loss) for the period | (9,506 | ) | | 7,562 |
| | 23,069 |
| | (284 | ) | | 20,841 |
|
| Ending balance, March 31, 2016 |
| $96,464 |
| |
| ($459,042 | ) | |
| $390,626 |
| |
| $1,744 |
| |
| $29,792 |
|
|
| | | | |
| | | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance April 1, 2016 | |
| ($56,675 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (230 | ) |
Net other comprehensive income (loss) for the period | | (230 | ) |
Ending balance, June 30, 2016 | |
| ($56,905 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended June 30, 2015:March 31, 2017 and 2016:
|
| | | | | | | | |
| | | Pension and Other
Postretirement Liabilities |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| Beginning balance, January 1, | |
| ($48,442 | ) | |
| ($56,412 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (370 | ) | | (263 | ) |
| Net other comprehensive income (loss) for the period | | (370 | ) | | (263 | ) |
| Ending balance, March 31, | |
| ($48,812 | ) | |
| ($56,675 | ) |
|
| | | | |
| | | Pension and Other
Postretirement Liabilities |
| | | (In Thousands) |
Beginning balance April 1, 2015 |
|
| ($78,843 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) |
| 412 |
|
Net other comprehensive income (loss) for the period |
| 412 |
|
Ending balance, June 30, 2015 |
|
| ($78,431 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the six months ended June 30, 2016:
|
| | | | |
| | | Pension and Other
Postretirement Liabilities |
| | | (In Thousands) |
Beginning balance, January 1, 2016 | |
| ($56,412 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (493 | ) |
Net other comprehensive income (loss) for the period | | (493 | ) |
Ending balance, June 30, 2016 | |
| ($56,905 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the six months ended June 30, 2015:
|
| | | | |
| | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance, January 1, 2015 | |
| ($79,223 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | 792 |
|
Net other comprehensive income (loss) for the period | | 792 |
|
Ending balance, June 30, 2015 | |
| ($78,431 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended June 30,March 31, 2017 and 2016 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI
| | Income Statement Location |
| (In Thousands) | | |
Cash flow hedges net unrealized gain (loss) | | | |
Power contracts |
| $45,975 |
| | Competitive business operating revenues |
Interest rate swaps | 30 |
| | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 46,005 |
| | |
| (16,102 | ) | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $29,903 |
| | |
| | | |
Pension and other postretirement liabilities | | | |
Amortization of prior-service credit |
| $7,355 |
| | (a) |
Amortization of loss | (15,177 | ) | | (a) |
Total amortization | (7,822 | ) | | |
| 2,779 |
| | Income taxes |
Total amortization (net of tax) |
| ($5,043 | ) | | |
| | | |
Net unrealized investment gain (loss) | | | |
Realized gain (loss) |
| $6,000 |
| | Interest and investment income |
| (2,939 | ) | | Income taxes |
Total realized investment gain (loss) (net of tax) |
| $3,061 |
| | |
| | | |
Total reclassifications for the period (net of tax) |
| $27,921 |
| | |
|
| | | | | | | | | |
| Amounts reclassified
from AOCI |
| Income Statement Location |
| | 2017 | | 2016 | | |
| (In Thousands) |
|
|
| Cash flow hedges net unrealized gain (loss) |
| | |
|
|
| Power contracts |
| $51,227 |
| |
| $153,958 |
|
| Competitive business operating revenues |
| Interest rate swaps | (250 | ) | | (400 | ) |
| Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | 50,977 |
| | 153,558 |
|
|
|
| (17,841 | ) | | (53,745 | ) |
| Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
| $33,136 |
| |
| $99,813 |
|
|
|
|
|
| | |
|
|
| Pension and other postretirement liabilities |
|
| | |
|
|
| Amortization of prior-service credit |
| $6,562 |
| |
| $7,355 |
|
| (a) |
| Amortization of loss | (21,571 | ) | | (15,175 | ) |
| (a) |
| Total amortization | (15,009 | ) | | (7,820 | ) |
|
|
| 6,377 |
| | 258 |
|
| Income taxes |
| Total amortization (net of tax) |
| ($8,632 | ) | |
| ($7,562 | ) |
|
|
|
| | |
|
|
| Net unrealized investment gain (loss) |
| | |
|
|
| Realized gain (loss) |
| $4,010 |
| |
| $3,850 |
|
| Interest and investment income |
| (1,965 | ) | | (1,887 | ) |
| Income taxes |
| Total realized investment gain (loss) (net of tax) |
| $2,045 |
| |
| $1,963 |
|
|
|
|
|
| | |
|
|
| Total reclassifications for the period (net of tax) |
| $26,549 |
| |
| $94,214 |
|
|
|
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the three months ended June 30, 2015 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI |
| Income Statement Location |
| (In Thousands) |
|
|
Cash flow hedges net unrealized gain (loss) |
|
|
|
Power contracts |
| $77,587 |
|
| Competitive business operating revenues |
Interest rate swaps | (510 | ) |
| Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 77,077 |
|
|
|
| (26,977 | ) |
| Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $50,100 |
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities |
|
|
|
|
Amortization of prior-service credit |
| $5,985 |
|
| (a) |
Amortization of loss | (17,588 | ) |
| (a) |
Total amortization | (11,603 | ) |
|
|
| 4,165 |
|
| Income taxes |
Total amortization (net of tax) |
| ($7,438 | ) |
|
|
|
|
|
|
Net unrealized investment gain (loss) |
|
|
|
Realized gain (loss) |
| $17,201 |
|
| Interest and investment income |
| (8,429 | ) |
| Income taxes |
Total realized investment gain (loss) (net of tax) |
| $8,772 |
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax) |
| $51,434 |
|
|
|
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the six months ended June 30, 2016 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI |
| Income Statement Location |
| (In Thousands) |
|
|
Cash flow hedges net unrealized gain (loss) |
|
|
|
Power contracts |
| $199,933 |
|
| Competitive business operating revenues |
Interest rate swaps | (370 | ) |
| Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 199,563 |
|
|
|
| (69,847 | ) |
| Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $129,716 |
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities |
|
|
|
|
Amortization of prior-service credit |
| $14,710 |
|
| (a) |
Amortization of loss | (30,352 | ) |
| (a) |
Total amortization | (15,642 | ) |
|
|
| 3,037 |
|
| Income taxes |
Total amortization (net of tax) |
| ($12,605 | ) |
|
|
|
|
|
|
Net unrealized investment gain (loss) |
|
|
|
Realized gain (loss) |
| $9,850 |
|
| Interest and investment income |
| (4,826 | ) |
| Income taxes |
Total realized investment gain (loss) (net of tax) |
| $5,024 |
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax) |
| $122,135 |
|
|
|
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the six months ended June 30, 2015 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI | | Income Statement Location |
| (In Thousands) | | |
Cash flow hedges net unrealized gain (loss) | | | |
Power contracts |
| $91,109 |
| | Competitive business operating revenues |
Interest rate swaps | (1,056 | ) | | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 90,053 |
| | |
| (31,519 | ) | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $58,534 |
| | |
| | | | |
Pension and other postretirement liabilities | | | |
Amortization of prior-service credit |
| $11,971 |
| | (a) |
Amortization of loss | (35,176 | ) | | (a) |
Total amortization | (23,205 | ) | | |
| 7,332 |
| | Income taxes |
Total amortization (net of tax) |
| ($15,873 | ) | | |
| | | |
Net unrealized investment gain (loss) | | | |
Realized gain (loss) |
| $34,171 |
| | Interest and investment income |
| (16,744 | ) | | Income taxes |
Total realized investment gain (loss) (net of tax) |
| $17,427 |
| | |
| | | |
Total reclassifications for the period (net of tax) |
| $60,088 |
| | |
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the three months ended June 30,March 31, 2017 and 2016 are as follows:
|
| | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | (In Thousands) | | |
Pension and other postretirement liabilities | | | | |
Amortization of prior-service credit | |
| $1,947 |
| | (a) |
Amortization of loss | | (1,573 | ) | | (a) |
Total amortization | | 374 |
| | |
| | (144 | ) | | Income taxes |
Total amortization (net of tax) | | 230 |
| | |
| | | | |
Total reclassifications for the period (net of tax) | |
| $230 |
| | |
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the three months ended June 30, 2015 are as follows:
|
| | | | | | |
|
| Amounts reclassified
from AOCI |
| Income Statement Location |
| | (In Thousands) |
|
|
Pension and other postretirement liabilities |
|
|
|
|
Amortization of prior-service credit |
|
| $1,866 |
|
| (a) |
Amortization of loss |
| (2,535 | ) |
| (a) |
Total amortization |
| (669 | ) |
|
|
|
| 257 |
|
| Income taxes |
Total amortization (net of tax) |
| (412 | ) |
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax) |
|
| ($412 | ) |
|
|
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the six months ended June 30, 2016 are as follows:
|
| | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | (In Thousands) | | |
Pension and other postretirement liabilities | | | | |
Amortization of prior-service credit | |
| $3,894 |
| | (a) |
Amortization of loss | | (3,142 | ) | | (a) |
Total amortization | | 752 |
| | |
| | (259 | ) | | Income taxes |
Total amortization (net of tax) | | 493 |
| | |
| | | | |
Total reclassifications for the period (net of tax) | |
| $493 |
| | |
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the six months ended June 30, 2015 are as follows:
|
| | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | (In Thousands) | | |
Pension and other postretirement liabilities | | | | |
Amortization of prior-service credit | |
| $3,733 |
| | (a) |
Amortization of loss | | (5,070 | ) | | (a) |
Total amortization | | (1,337 | ) | | |
| | 545 |
| | Income taxes |
Total amortization (net of tax) | | (792 | ) | | |
| | | | |
Total reclassifications for the period (net of tax) | |
| ($792 | ) | | |
|
| | | | | | | | | | |
| | | Amounts reclassified
from AOCI | | Income Statement Location |
| | | 2017 | | 2016 | | |
| | | (In Thousands) | | |
| Pension and other postretirement liabilities | | | | | | |
| Amortization of prior-service credit | |
| $1,934 |
| |
| $1,947 |
| | (a) |
| Amortization of loss | | (1,332 | ) | | (1,569 | ) | | (a) |
| Total amortization | | 602 |
| | 378 |
| | |
| | | (232 | ) | | (115 | ) | | Income taxes |
| Total amortization (net of tax) | | 370 |
| | 263 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $370 |
| |
| $263 |
| | |
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2020.2021. Entergy Corporation also has the ability to issue letters of credit against 50% of the total borrowing capacity of the credit facility. The commitment fee is currently 0.275%0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior
Entergy Corporation and Subsidiaries
Notes to Financial Statements
unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the sixthree months ended June 30, 2016March 31, 2017 was 2.28%2.29% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2016.March 31, 2017.
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $240 | | $6 | | $3,254 | | $225 | | $6 | | $3,269 |
Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization. Entergy is in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5 billion. At June 30, 2016,March 31, 2017, Entergy Corporation had $853 million$1.1 billion of commercial paper outstanding. The weighted-average interest rate for the sixthree months ended June 30, 2016March 31, 2017 was 1.13%1.33%.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of June 30, 2016March 31, 2017 as follows:
|
| | | | | | | | | |
| Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of June 30, 2016March 31, 2017
| Letters of Credit Outstanding as of June 30, 2016March 31, 2017 |
| Entergy Arkansas | | April 2017 | | $20 million (b) | | 1.71%2.23% | | $— | $— |
| Entergy Arkansas | | August 20202021 | | $150 million (c) | | 1.71%2.23% | | $— | $— |
| Entergy Louisiana | | August 20202021 | | $350 million (d) | | 1.71%2.23% | | $— | $6.43.4 million |
| Entergy Mississippi | | May 2017 | | $37.5 million (e) | | 1.96%2.48% | | $— | $— |
| Entergy Mississippi | | May 2017 | | $35 million (e) | | 1.96%2.48% | | $— | $— |
| Entergy Mississippi | | May 2017 | | $20 million (e) | | 1.96%2.48% | | $— | $— |
| Entergy Mississippi | | May 2017 | | $10 million (e) | | 1.96%2.48% | | $— | $— |
| Entergy New Orleans | | November 2018 | | $25 million (f) | | 2.21%2.46% | | $— | $—0.8 million |
| Entergy Texas | | August 20202021 | | $150 million (g) | | 1.96%2.48% | | $— | $1.34.7 million |
| |
| (a) | The interest rate is the rate as of June 30, 2016March 31, 2017 that would most likely apply to outstanding borrowings under the facility. |
| |
| (b) | Borrowings under the Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option. In April 2017, Entergy Arkansas renewed its credit facility through April 2018. |
| |
| (c) | The credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. |
| |
| (d) | The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. |
| |
| (e) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. Entergy Mississippi expects to renew its credit facilities prior to expiration. |
| |
| (f) | The credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility. |
| |
| (g) | The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The commitment fees on the credit facilities range from 0.075% to 0.275% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations related to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of June 30, 2016:March 31, 2017:
|
| | | | | | |
| Company | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of June 30, 2016March 31, 2017 (a) |
| Entergy Arkansas | | $25 million | | 0.70% | | $1.0 million |
| Entergy Louisiana | | $125 million | | 0.70% | | $59.115.8 million |
| Entergy Mississippi | | $40 million | | 0.70% | | $26.77.1 million |
| Entergy New Orleans | | $15 million | | 0.75%1.00% | | $13.31.0 million |
| Entergy Texas | | $50 million | | 0.70% | | $14.427.6 million |
| |
| (a) | The amountAs of March 31 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Texas includes $1.4Arkansas and $0.1 million related to FTR exposure.for Entergy Mississippi. See Note 8 to the financial statements herein for discussion of FTRs.financial transmission rights. |
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The current FERC-authorized limits are effective through October 31, 2017. In addition to borrowings from commercial banks, these companies may also borrow from the Entergy System money pool.pool and from other internal short-term borrowing arrangements. The money pool is anand the other internal borrowing arrangements are inter-company borrowing arrangementarrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings from the money poolinternal and external short term borrowings combined may not exceed the FERC-authorized limits. The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of June 30, 2016March 31, 2017 (aggregating both money poolinternal and external short-term borrowings) for the Registrant Subsidiaries:
|
| | | |
| Authorized | | Borrowings |
| (In Millions) |
Entergy Arkansas | $250 | | $— |
Entergy Louisiana | $450 | | $— |
Entergy Mississippi | $175 | | $— |
Entergy New Orleans | $100 | | $— |
Entergy Texas | $200 | | $— |
System Energy | $200 | | $— |
|
| | | |
| | Authorized | | Borrowings |
| | (In Millions) |
| Entergy Arkansas | $250 | | $31 |
| Entergy Louisiana | $450 | | $— |
| Entergy Mississippi | $175 | | $12 |
| Entergy New Orleans | $100 | | $— |
| Entergy Texas | $200 | | $29 |
| System Energy | $200 | | $— |
Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through October 2017. Entergy Arkansas has obtained long-term financing authorization from the APSC that extends through December 2018. Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through June 2018.
Entergy Nuclear Vermont Yankee Credit Facilities
Entergy Nuclear Vermont Yankee entered intohas a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100 million which expires in January 2018. In the first quarter 2016, Entergy Nuclear Vermont Yankee increased the borrowing capacity of its credit facility to $100 million. Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against the credit facility. This facility provides working capital to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee. The commitment fee is currently 0.25%0.20% of the undrawn commitment amount. As of June 30, 2016, $59March 31, 2017, $58 million in cash borrowings were
Entergy Corporation and Subsidiaries
Notes to Financial Statements
outstanding under the credit facility. The weighted average interest rate for the sixthree months ended June 30, 2016March 31, 2017 was 2.21%2.32% on the drawn portion of the facility.
Entergy Nuclear Vermont Yankee also entered intohas an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million which expires in January 2018. Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against the credit facility. This facility provides an additional funding source to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee. As of June 30, 2016,March 31, 2017, there were no cash borrowings outstanding under the credit facility. The
Entergy Corporation and Subsidiaries
Notes to Financial Statements
rate as of June 30, 2016March 31, 2017 that would most likely apply to outstanding borrowings under the facility was 2.21%2.48% on the drawn portion of the facility.
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
See Note 1817 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs). To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs also issue commercial paper details of which follow as of June 30, 2016:March 31, 2017 as follows:
| | | Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of June 30, 2016 | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of March 31, 2017 |
| | |
| | (Dollars in Millions) | |
| | (Dollars in Millions) |
| Entergy Arkansas VIE | | May 2019 | | $80 | | 2.075% | | $12.6 (b) | | May 2019 | | $80 | | 2.34% | | $52.3 (b) |
| Entergy Louisiana River Bend VIE | | May 2019 | | $105 | | n/a | | $— | | May 2019 | | $105 | | 1.98% | | $18.8 |
| Entergy Louisiana Waterford VIE | | May 2019 | | $85 | | 1.95% | | $59.5 (b) | | May 2019 | | $85 | | 2.25% | | $72.5 (b) |
| System Energy VIE | | May 2019 | | $120 | | 2.075% | | $99.6 (b) | | May 2019 | | $120 | | 2.28% | | $110.7 (b) |
| |
| (a) | Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel company variable interest entity for Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility. |
| |
| (b) | Commercial paper, classified as a current liability. |
The commitment fees on the credit facilities are 0.10% of the undrawn commitment amount for the Entergy Arkansas, and Entergy Louisiana, VIEs and 0.125% of the undrawn commitment amount for the System Energy VIE.VIEs. Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of June 30, 2016March 31, 2017 as follows:
|
| | | | |
| Company | | Description | | Amount |
Entergy Arkansas VIE | | 3.23% Series J due July 2016 | | $55 million |
| Entergy Arkansas VIE | | 2.62% Series K due December 2017 | | $60 million |
Entergy Arkansas VIE
| | 3.65% Series L due July 2021
| | $90 million |
| Entergy Arkansas VIE | | 3.17% Series M due December 2023 | | $40 million |
| Entergy Louisiana River Bend VIE | | 3.25% Series Q due July 2017 | | $75 million |
| Entergy Louisiana River Bend VIE | | 3.38% Series R due August 2020 | | $70 million |
| Entergy Louisiana Waterford VIE | | 3.25% Series G due July 2017 | | $25 million |
| Entergy Louisiana Waterford VIE | | 3.92% Series H due February 2021 | | $40 million |
System EnergyEntergy Louisiana Waterford VIE | | 4.02%3.22% Series HI due February 2017December 2023 | | $5020 million |
| System Energy VIE | | 3.78% Series I due October 2018 | | $85 million |
In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.
Debt Issuances and Redemptions
(Entergy Arkansas)
In January 2016, Entergy Arkansas issued $325 million of 3.5% Series first mortgage bonds due April 2026. Entergy Arkansas used the proceeds to pay, prior to maturity, its $175 million of 5.66% Series first mortgage bonds due February 2025, and used the remainder of the proceeds, together with other funds, towards the purchase of Power Block 2 at the Union Power Station and for general corporate purposes. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
In June 2016, Entergy Arkansas issued $55 million of 3.5% Series first mortgage bonds due April 2026. These bonds were a further issuance of the 3.5% Series first mortgage bonds issued in January 2016. In July 2016, Entergy Arkansas used the proceeds, together with other funds, to pay, prior to maturity, its $60 million of 6.38% Series first mortgage bonds due November 2034 and for general corporate purposes.
In July 2016 the Entergy Arkansas nuclear fuel company variable interest entity redeemed, at maturity, its $55 million of 3.23% Series J notes.
(Entergy Louisiana)
In March 2016, Entergy Louisiana issued $200 million of 4.95% Series first mortgage bonds due January 2045. These bonds were a further issuance of the 4.95% Series first mortgage bonds issued in November 2014. Entergy Louisiana used the proceeds to pay, together with other funds, the $60 million cash portion of the price to purchase the undivided interests of Waterford 3, to repay borrowings from the money pool, to repay borrowings under its $350 million credit facility, and for general corporate purposes. A portion of the proceeds of the borrowings described in the preceding sentence were used, together with other funds, for the purchase of Power Blocks 3 and 4 at the Union Power Station. See Note 11 to the financial statements herein for discussion of the Waterford 3 transaction and Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
In March 2016, Entergy Louisiana issued $425 million of 3.25% Series collateral trust mortgage bonds due April 2028. Entergy Louisiana used the proceeds to pay, together with other funds, the $60 million cash portion of the price to purchase the undivided interests of Waterford 3, to repay borrowings from the money pool, and for general corporate purposes. A portion of the proceeds of the borrowings described in the preceding sentence were used, together
Entergy Corporation and Subsidiaries
Notes to Financial Statements
with other funds, for the purchase of Power Blocks 3Debt Issuances and 4 at the Union Power Station. See Note 11 to the financial statements herein for discussion of the Waterford 3 transaction and Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
In March 2016, Entergy Louisiana arranged for the issuance by the Louisiana Public Facilities Authority of (i) $83.680 million of 3.375% pollution control refunding revenue bonds (Entergy Louisiana, LLC Project) Series 2016A due September 2028, and (ii) $115 million of 3.50% pollution control refunding revenue bonds (Entergy Louisiana, LLC Project) Series 2016B due June 2030, each of which series is evidenced by a separate series of non-interest bearing collateral trust mortgage bonds of Entergy Louisiana. The proceeds from these issuances were applied in April 2016 to the refunding of $198.68 million of outstanding pollution control revenue bonds previously issued on behalf of Entergy Louisiana.
In March 2016, Entergy Louisiana issued $51.972 million of Waterford Series collateral trust mortgage notes due July 2017 as part of the purchase of the undivided interests in Waterford 3. See Note 11 to the financial statements herein for discussion of the Waterford 3 transaction.
In March 2016 the Entergy Louisiana nuclear fuel company variable interest entity redeemed, at maturity, its $20 million of 3.30% Series F notes.
In May 2016, Entergy Louisiana issued $325 million of 3.05% Series collateral trust mortgage bonds due June 2031. Entergy Louisiana used the proceeds, together with other funds, to pay, prior to maturity, its $240 million of 6.2% Series first mortgage bonds due July 2033 and its $85 million of 6.18% Series first mortgage bonds due March 2035, and for general corporate purposes.
(Entergy Mississippi)
In May 2016, Entergy Mississippi issued $375 million of 2.85% Series first mortgage bonds due June 2028. Entergy Mississippi used the proceeds to pay, at maturity, its $125 million of 3.25% Series first mortgage bonds due June 2016, to pay, prior to maturity, its $75 million of 6.0% Series first mortgage bonds due November 2032, and its $100 million of 6.25% Series first mortgage bonds due April 2034, and to cause the repayment of the $30 million of 4.90% pollution control revenue bonds due 2022 issued on behalf of Entergy Mississippi, and for general corporate purposes.
(Entergy New Orleans)
In March 2016, Entergy New Orleans issued $110 million of 5.50% Series first mortgage bonds due April 2066. Entergy New Orleans used the proceeds to repay borrowings from the money pool, to repay borrowings under its $25 million credit facility, and for general corporate purposes. A portion of the proceeds of the borrowings described in the preceding sentence were used, together with other funds, for the purchase of Power Block 1 of the Union Power Station. See Note 13 to the financial statements for discussion of the Union Power Station purchase.Retirements
In May 2016, Entergy New Orleans issued $85 million of 4% Series first mortgage bonds due June 2026. Entergy New Orleans used the proceeds to pay, prior to maturity, its $33.271 million of 5.6% Series first mortgage bonds due September 2024, to pay, prior to maturity, its $37.772 million of 5.65% Series first mortgage bonds due September 2029, and for general corporate purposes.
(Entergy Texas)
In March 2016, Entergy Texas issued $125 million of 2.55% Series first mortgage bonds due June 2021. Entergy Texas used the proceeds for general corporate purposes.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(System Energy)
In May 2016,February 2017 the System Energy caused the repayment of $22nuclear fuel company variable interest entity paid, at maturity, its $50 million of its $156 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of System Energy.4.02% Series H notes.
Fair Value
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of June 30, 2016March 31, 2017 are as follows:
| | | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) | (In Thousands) |
| Entergy |
| $13,783,804 |
| |
| $14,556,026 |
|
| $14,260,913 |
| |
| $14,435,145 |
|
| Entergy Arkansas |
| $2,830,658 |
| |
| $2,835,020 |
|
| $2,830,478 |
| |
| $2,676,887 |
|
| Entergy Louisiana |
| $5,410,218 |
| |
| $5,859,090 |
|
| $5,775,355 |
| |
| $5,987,581 |
|
| Entergy Mississippi |
| $1,091,938 |
| |
| $1,153,791 |
|
| $1,121,139 |
| |
| $1,109,658 |
|
| Entergy New Orleans |
| $459,095 |
| |
| $466,368 |
|
| $449,134 |
| |
| $465,593 |
|
| Entergy Texas |
| $1,539,889 |
| |
| $1,704,985 |
|
| $1,484,583 |
| |
| $1,575,584 |
|
| System Energy |
| $550,926 |
| |
| $543,935 |
|
| $501,215 |
| |
| $483,464 |
|
| |
| (a) | The values exclude lease obligations of $57 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $182 million at Entergy Arkansas, and the note payable to NYPA of $35 million at Entergy, and include debt due within one year. |
| |
| (b) | Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein and are based on prices derived from inputs such as benchmark yields and reported trades. |
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 20152016 were as follows:
| | | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) | (In Thousands) |
| Entergy |
| $13,325,930 |
| |
| $13,578,511 |
|
| $14,832,555 |
| |
| $14,815,535 |
|
| Entergy Arkansas |
| $2,629,839 |
| |
| $2,498,108 |
|
| $2,829,785 |
| |
| $2,623,910 |
|
| Entergy Louisiana |
| $4,836,162 |
| |
| $5,018,786 |
|
| $5,812,791 |
| |
| $5,929,488 |
|
| Entergy Mississippi |
| $1,045,085 |
| |
| $1,087,326 |
|
| $1,120,916 |
| |
| $1,086,203 |
|
| Entergy New Orleans |
| $342,880 |
| |
| $351,040 |
|
| $448,994 |
| |
| $455,459 |
|
| Entergy Texas |
| $1,451,967 |
| |
| $1,590,616 |
|
| $1,508,407 |
| |
| $1,600,156 |
|
| System Energy |
| $572,667 |
| |
| $552,762 |
|
| $551,132 |
| |
| $529,520 |
|
| |
| (a) | The values exclude lease obligations of $109$57 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $181$182 million at Entergy Arkansas, and the note payable to NYPA of $35 million at Entergy, and include debt due within one year. |
| |
| (b) | Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein and are based on prices derived from inputs such as benchmark yields and reported trades. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 5. STOCK-BASED COMPENSATION (Entergy Corporation)
Entergy grants stock and stock-based awards, which are described more fully in Note 12 to the financial statements in the Form 10-K. Awards under Entergy’s plans generally vest over three years.
Effective January 1, 2017, Entergy adopted ASU 2016-09, which permits the election of an accounting policy change to the method of recognizing forfeitures of stock-based compensation. Previously, Entergy recorded an estimate of the number of forfeitures expected to occur each period. Entergy elected to change this policy to account for forfeitures when they occur. This accounting change was applied retrospectively, but did not result in an adjustment to retained earnings as of January 1, 2017.
Stock Options
Entergy granted options on 696,900791,900 shares of its common stock under the 2015 Equity Ownership Plan during the first quarter 20162017 with a weighted-average fair value of $7.40$6.54 per option. As of June 30, 2016,March 31, 2017, there were options on 7,386,8786,263,626 shares of common stock outstanding with a weighted-average exercise price of $84.48.$81.50. The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of June 30, 2016.March 31, 2017. Because Entergy’s stock price at June 30, 2016March 31, 2017 was less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of June 30, 2016March 31, 2017 was zero. The intrinsic value of all “in the money” stock options was $36.2$19.8 million as of June 30, 2016.March 31, 2017. The following table includes financial information for outstanding stock options for the three months ended June 30, 2016March 31, 2017 and 2015:2016:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $1.1 |
| |
| $1.0 |
|
| Tax benefit recognized in Entergy’s net income |
| $0.4 |
| |
| $0.4 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.2 |
| |
| $0.2 |
|
The following table includes financial information for outstanding stock options for the six months ended June 30, 2016 and 2015:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $2.2 |
| |
| $2.1 |
|
| $1.1 |
| |
| $1.1 |
|
| Tax benefit recognized in Entergy’s net income |
| $0.8 |
| |
| $0.8 |
|
| $0.4 |
| |
| $0.4 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.4 |
| |
| $0.4 |
|
| $0.2 |
| |
| $0.2 |
|
Other Equity Awards
In January 20162017 the Board approved and Entergy granted 370,000379,850 restricted stock awards and 199,800220,450 long-term incentive awards under the 2015 Equity Ownership Plan. The restricted stock awards were made effective as of January 28, 201626, 2017 and were valued at $70.56$70.53 per share, which was the closing price of Entergy’s common stock on that date. One-third of the restricted stock awards will vest upon each anniversary of the grant date. In addition, long-term incentive awards were granted in the form of performance units that represent the value of, and are settled with, one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period on the number of performance units earned. The performance units were granted effective as of January 28, 201626, 2017 and were valued at $84.52$71.40 per share. Entergy considers various factors, primarily market conditions, in determining the value of the performance units. Shares of restricted stock have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period. Performance units have the same dividend rights as shares of Entergy common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for other outstanding equity awards for the three months ended June 30, 2016March 31, 2017 and 2015:2016:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $8.5 |
| |
| $8.0 |
|
| Tax benefit recognized in Entergy’s net income |
| $3.3 |
| |
| $3.1 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $1.9 |
| |
| $1.6 |
|
The following table includes financial information for other outstanding equity awards for the six months ended June 30, 2016 and 2015:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $16.9 |
| |
| $16.1 |
|
| $8.2 |
| |
| $8.4 |
|
| Tax benefit recognized in Entergy’s net income |
| $6.5 |
| |
| $6.2 |
|
| $3.1 |
| |
| $3.2 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $3.7 |
| |
| $3.1 |
|
| $2.0 |
| |
| $1.8 |
|
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Components of Qualified Net Pension Cost
Entergy’s qualified pension cost, including amounts capitalized, for the secondfirst quarters of 20162017 and 2015,2016, included the following components:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Service cost - benefits earned during the period |
| $35,811 |
| |
| $43,762 |
|
| $33,410 |
| |
| $35,811 |
|
| Interest cost on projected benefit obligation | 65,403 |
| | 75,694 |
| 65,206 |
| | 65,403 |
|
| Expected return on assets | (97,366 | ) | | (98,655 | ) | (102,056 | ) | | (97,366 | ) |
| Amortization of prior service cost | 270 |
| | 390 |
| 65 |
| | 270 |
|
| Amortization of loss | 48,824 |
| | 58,981 |
| 56,930 |
| | 48,824 |
|
| Net pension costs |
| $52,942 |
| |
| $80,172 |
|
| $53,555 |
| |
| $52,942 |
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the six months ended June 30,first quarters of 2017 and 2016, and 2015, included the following components:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $71,622 |
| |
| $87,524 |
|
| Interest cost on projected benefit obligation | 130,806 |
| | 151,388 |
|
| Expected return on assets | (194,732 | ) | | (197,310 | ) |
| Amortization of prior service cost | 540 |
| | 780 |
|
| Amortization of loss | 97,648 |
| | 117,962 |
|
| Special termination benefit | — |
| | 76 |
|
| Net pension costs |
| $105,884 |
| |
| $160,420 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $5,090 |
| |
| $6,925 |
| |
| $1,472 |
| |
| $625 |
| |
| $1,364 |
| |
| $1,536 |
|
| Interest cost on projects benefit obligation | | 12,944 |
| | 14,809 |
| | 3,732 |
| | 1,791 |
| | 3,392 |
| | 3,091 |
|
| Expected return on assets | | (20,427 | ) | | (23,017 | ) | | (6,131 | ) | | (2,800 | ) | | (6,180 | ) | | (4,663 | ) |
| Amortization of loss | | 11,640 |
| | 12,354 |
| | 3,053 |
| | 1,658 |
| | 2,310 |
| | 2,964 |
|
| Net pension cost | |
| $9,247 |
| |
| $11,071 |
| |
| $2,126 |
| |
| $1,274 |
| |
| $886 |
| |
| $2,928 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the second quarters of 2016 and 2015, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $5,181 |
| |
| $7,049 |
| |
| $1,562 |
| |
| $656 |
| |
| $1,416 |
| |
| $1,566 |
|
| Interest cost on projected | | | | | | | | | | | | |
| benefit obligation | | 13,055 |
| | 14,870 |
| | 3,811 |
| | 1,814 |
| | 3,557 |
| | 2,992 |
|
| Expected return on assets | | (19,772 | ) | | (22,096 | ) | | (5,981 | ) | | (2,687 | ) | | (6,062 | ) | | (4,459 | ) |
| Amortization of loss | | 10,936 |
| | 11,946 |
| | 2,985 |
| | 1,615 |
| | 2,340 |
| | 2,604 |
|
| Net pension cost | |
| $9,400 |
| |
| $11,769 |
| |
| $2,377 |
| |
| $1,398 |
| |
| $1,251 |
| |
| $2,703 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $6,661 |
| |
| $8,599 |
| |
| $1,982 |
| |
| $849 |
| |
| $1,645 |
| |
| $1,957 |
|
| Interest cost on projected | | | | | | | | | | | | |
| benefit obligation | | 15,471 |
| | 17,367 |
| | 4,502 |
| | 2,108 |
| | 4,354 |
| | 3,493 |
|
| Expected return on assets | | (20,026 | ) | | (22,701 | ) | | (6,105 | ) | | (2,725 | ) | | (6,222 | ) | | (4,568 | ) |
| Amortization of loss | | 13,564 |
| | 14,951 |
| | 3,724 |
| | 2,013 |
| | 3,238 |
| | 3,264 |
|
| Net pension cost | |
| $15,670 |
| |
| $18,216 |
| |
| $4,103 |
| |
| $2,245 |
| |
| $3,015 |
| |
| $4,146 |
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the six months ended June 30, 2016 and 2015, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $10,362 |
| |
| $14,098 |
| |
| $3,124 |
| |
| $1,312 |
| |
| $2,832 |
| |
| $3,132 |
|
| Interest cost on projected | | | | | | | | | | | | |
| benefit obligation | | 26,110 |
| | 29,740 |
| | 7,622 |
| | 3,628 |
| | 7,114 |
| | 5,984 |
|
| Expected return on assets | | (39,544 | ) | | (44,192 | ) | | (11,962 | ) | | (5,374 | ) | | (12,124 | ) | | (8,918 | ) |
| Amortization of loss | | 21,872 |
| | 23,892 |
| | 5,970 |
| | 3,230 |
| | 4,680 |
| | 5,208 |
|
| Net pension cost | |
| $18,800 |
| |
| $23,538 |
| |
| $4,754 |
| |
| $2,796 |
| |
| $2,502 |
| |
| $5,406 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $13,322 |
| |
| $17,198 |
| |
| $3,964 |
| |
| $1,698 |
| |
| $3,290 |
| |
| $3,914 |
|
| Interest cost on projected | | |
| | |
| | |
| | |
| | |
| | |
|
| benefit obligation | | 30,942 |
| | 34,734 |
| | 9,004 |
| | 4,216 |
| | 8,708 |
| | 6,986 |
|
| Expected return on assets | | (40,052 | ) | | (45,402 | ) | | (12,210 | ) | | (5,450 | ) | | (12,444 | ) | | (9,136 | ) |
| Amortization of loss | | 27,128 |
| | 29,902 |
| | 7,448 |
| | 4,026 |
| | 6,476 |
| | 6,528 |
|
| Net pension cost | |
| $31,340 |
| |
| $36,432 |
| |
| $8,206 |
| |
| $4,490 |
| |
| $6,030 |
| |
| $8,292 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $5,181 |
| |
| $7,049 |
| |
| $1,562 |
| |
| $656 |
| |
| $1,416 |
| |
| $1,566 |
|
| Interest cost on projected benefit obligation | | 13,055 |
| | 14,870 |
| | 3,811 |
| | 1,814 |
| | 3,557 |
| | 2,992 |
|
| Expected return on assets | | (19,772 | ) | | (22,096 | ) | | (5,981 | ) | | (2,687 | ) | | (6,062 | ) | | (4,459 | ) |
| Amortization of loss | | 10,936 |
| | 11,946 |
| | 2,985 |
| | 1,615 |
| | 2,340 |
| | 2,604 |
|
| Net pension cost | |
| $9,400 |
| |
| $11,769 |
| |
| $2,377 |
| |
| $1,398 |
| |
| $1,251 |
| |
| $2,703 |
|
Non-Qualified Net Pension Cost
Entergy recognized $4.3$4.6 million and $4.5$4.3 million in pension cost for its non-qualified pension plans in the secondfirst quarters of 20162017 and 2015, respectively. Entergy recognized $8.5 million and $8.9 million in pension costs for its non-qualified pension plans for the six months ended June 30, 2016, and 2015, respectively.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the secondfirst quarters of 20162017 and 2015:2016:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| Non-qualified pension cost | | | | | | | | | |
| second quarter 2016 |
| $106 |
| |
| $59 |
| |
| $59 |
| |
| $16 |
| |
| $127 |
|
| Non-qualified pension cost | | | | | | | | | |
| second quarter 2015 |
| $113 |
| |
| $68 |
| |
| $59 |
| |
| $16 |
| |
| $149 |
|
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the six months ended June 30, 2016 and 2015:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| Non-qualified pension cost six | | | | | | | | | |
| months ended June 30, 2016 |
| $212 |
| |
| $118 |
| |
| $118 |
| |
| $32 |
| |
| $254 |
|
| Non-qualified pension cost six | | | | | | | | | |
| months ended June 30, 2015 |
| $226 |
| |
| $136 |
| |
| $118 |
| |
| $32 |
| |
| $298 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| First quarter 2017 |
| $105 |
| |
| $48 |
| |
| $64 |
| |
| $18 |
| |
| $127 |
|
| First quarter 2016 |
| $106 |
| |
| $59 |
| |
| $59 |
| |
| $16 |
| |
| $127 |
|
Components of Net Other Postretirement Benefit Cost
Entergy’s other postretirement benefit cost, including amounts capitalized, for the secondfirst quarters of 20162017 and 2015,2016, included the following components:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Service cost - benefits earned during the period |
| $8,073 |
| |
| $11,326 |
|
| $6,729 |
| |
| $8,073 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 14,083 |
| | 17,984 |
| 13,960 |
| | 14,083 |
|
| Expected return on assets | (10,455 | ) | | (11,344 | ) | (9,408 | ) | | (10,455 | ) |
| Amortization of prior service credit | (11,373 | ) | | (9,320 | ) | (10,356 | ) | | (11,373 | ) |
| Amortization of loss | 4,554 |
| | 7,893 |
| 5,476 |
| | 4,554 |
|
| Net other postretirement benefit cost |
| $4,882 |
| |
| $16,539 |
|
| $6,401 |
| |
| $4,882 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 2016 and 2015, included the following components:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $16,146 |
| |
| $22,652 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 28,166 |
| | 35,968 |
|
| Expected return on assets | (20,910 | ) | | (22,688 | ) |
| Amortization of prior service credit | (22,746 | ) | | (18,640 | ) |
| Amortization of loss | 9,108 |
| | 15,786 |
|
| Net other postretirement benefit cost |
| $9,764 |
| |
| $33,078 |
|
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the second quarters of 2016 and 2015, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $978 |
| |
| $1,869 |
| |
| $386 |
| |
| $156 |
| |
| $398 |
| |
| $334 |
|
| Interest cost on APBO | | 2,324 |
| | 3,260 |
| | 709 |
| | 448 |
| | 1,039 |
| | 529 |
|
| Expected return on assets | | (4,464 | ) | | — |
| | (1,379 | ) | | (1,154 | ) | | (2,394 | ) | | (814 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (1,368 | ) | | (1,947 | ) | | (234 | ) | | (186 | ) | | (681 | ) | | (393 | ) |
| Amortization of loss | | 1,064 |
| | 732 |
| | 223 |
| | 37 |
| | 537 |
| | 287 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| ($1,466 | ) | |
| $3,914 |
| |
| ($295 | ) | |
| ($699 | ) | |
| ($1,101 | ) | |
| ($57 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $1,739 |
| |
| $2,474 |
| |
| $507 |
| |
| $205 |
| |
| $500 |
| |
| $470 |
|
| Interest cost on APBO | | 3,130 |
| | 4,078 |
| | 859 |
| | 652 |
| | 1,342 |
| | 628 |
|
| Expected return on assets | | (4,798 | ) | | — |
| | (1,542 | ) | | (1,201 | ) | | (2,588 | ) | | (911 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (610 | ) | | (1,867 | ) | | (229 | ) | | (177 | ) | | (681 | ) | | (366 | ) |
| Amortization of loss | | 1,339 |
| | 1,780 |
| | 215 |
| | 118 |
| | 685 |
| | 300 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| $800 |
| |
| $6,465 |
| |
| ($190 | ) | |
| ($403 | ) | |
| ($742 | ) | |
| $121 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the six months ended June 30,first quarters of 2017 and 2016, and 2015, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $1,956 |
| |
| $3,738 |
| |
| $772 |
| |
| $312 |
| |
| $796 |
| |
| $668 |
|
| Interest cost on APBO | | 4,648 |
| | 6,520 |
| | 1,418 |
| | 896 |
| | 2,078 |
| | 1,058 |
|
| Expected return on assets | | (8,928 | ) | | — |
| | (2,758 | ) | | (2,308 | ) | | (4,788 | ) | | (1,628 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (2,736 | ) | | (3,894 | ) | | (468 | ) | | (372 | ) | | (1,362 | ) | | (786 | ) |
| Amortization of loss | | 2,128 |
| | 1,464 |
| | 446 |
| | 74 |
| | 1,074 |
| | 574 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| ($2,932 | ) | |
| $7,828 |
| |
| ($590 | ) | |
| ($1,398 | ) | |
| ($2,202 | ) | |
| ($114 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $863 |
| |
| $1,593 |
| |
| $290 |
| |
| $142 |
| |
| $372 |
| |
| $320 |
|
| Interest cost on APBO | | 2,255 |
| | 3,025 |
| | 690 |
| | 469 |
| | 1,124 |
| | 559 |
|
| Expected return on assets | | (3,959 | ) | | — |
| | (1,200 | ) | | (1,159 | ) | | (2,180 | ) | | (717 | ) |
| Amortization of prior service credit | | (1,278 | ) | | (1,934 | ) | | (456 | ) | | (186 | ) | | (579 | ) | | (378 | ) |
| Amortization of loss | | 1,115 |
| | 465 |
| | 419 |
| | 105 |
| | 826 |
| | 390 |
|
| Net other postretirement benefit cost | |
| ($1,004 | ) | |
| $3,149 |
| |
| ($257 | ) | |
| ($629 | ) | |
| ($437 | ) | |
| $174 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $3,478 |
| |
| $4,948 |
| |
| $1,014 |
| |
| $410 |
| |
| $1,000 |
| |
| $940 |
|
| Interest cost on APBO | | 6,260 |
| | 8,156 |
| | 1,718 |
| | 1,304 |
| | 2,684 |
| | 1,256 |
|
| Expected return on assets | | (9,596 | ) | | — |
| | (3,084 | ) | | (2,402 | ) | | (5,176 | ) | | (1,822 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (1,220 | ) | | (3,734 | ) | | (458 | ) | | (354 | ) | | (1,362 | ) | | (732 | ) |
| Amortization of loss | | 2,678 |
| | 3,560 |
| | 430 |
| | 236 |
| | 1,370 |
| | 600 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| $1,600 |
| |
| $12,930 |
| |
| ($380 | ) | |
| ($806 | ) | |
| ($1,484 | ) | |
| $242 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $978 |
| |
| $1,869 |
| |
| $386 |
| |
| $156 |
| |
| $398 |
| |
| $334 |
|
| Interest cost on APBO | | 2,324 |
| | 3,260 |
| | 709 |
| | 448 |
| | 1,039 |
| | 529 |
|
| Expected return on assets | | (4,464 | ) | | — |
| | (1,379 | ) | | (1,154 | ) | | (2,394 | ) | | (814 | ) |
| Amortization of prior service credit | | (1,368 | ) | | (1,947 | ) | | (234 | ) | | (186 | ) | | (681 | ) | | (393 | ) |
| Amortization of loss | | 1,064 |
| | 731 |
| | 223 |
| | 37 |
| | 537 |
| | 287 |
|
| Net other postretirement benefit cost | |
| ($1,466 | ) | |
| $3,913 |
| |
| ($295 | ) | |
| ($699 | ) | |
| ($1,101 | ) | |
| ($57 | ) |
Reclassification out of Accumulated Other Comprehensive Income (Loss)
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the secondfirst quarters of 20162017 and 2015:2016:
| | | 2016 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total | |
| 2017 | |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
| | | (In Thousands) | | |
| (In Thousands) |
|
|
| Entergy | | | | | | | | |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit | |
| ($270 | ) | |
| $7,738 |
| |
| ($113 | ) | |
| $7,355 |
|
|
| ($65 | ) |
|
| $6,717 |
|
|
| ($90 | ) |
|
| $6,562 |
|
| Amortization of loss | | (12,482 | ) | | (2,063 | ) | | (632 | ) | | (15,177 | ) |
| (18,450 | ) |
| (2,202 | ) |
| (919 | ) |
| (21,571 | ) |
| | |
| ($12,752 | ) | |
| $5,675 |
| |
| ($745 | ) | |
| ($7,822 | ) |
|
| ($18,515 | ) |
|
| $4,515 |
|
|
| ($1,009 | ) |
|
| ($15,009 | ) |
| Entergy Louisiana | | | | | | | | |
|
|
|
|
|
|
|
|
| Amortization of prior service credit | |
| $— |
| |
| $1,947 |
| |
| $— |
| |
| $1,947 |
|
|
| $— |
|
|
| $1,934 |
|
|
| $— |
|
|
| $1,934 |
|
| Amortization of loss | | (836 | ) | | (732 | ) | | (5 | ) | | (1,573 | ) |
| (865 | ) |
| (465 | ) |
| (2 | ) |
| (1,332 | ) |
| | |
| ($836 | ) | |
| $1,215 |
| |
| ($5 | ) | |
| $374 |
|
|
| ($865 | ) |
|
| $1,469 |
|
|
| ($2 | ) |
|
| $602 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2015 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($389 | ) |
|
| $6,482 |
|
|
| ($108 | ) |
|
| $5,985 |
|
| Amortization of loss |
| (12,627 | ) |
| (4,409 | ) |
| (552 | ) |
| (17,588 | ) |
|
|
| ($13,016 | ) |
|
| $2,073 |
|
|
| ($660 | ) |
|
| ($11,603 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| $— |
|
|
| $1,867 |
|
|
| ($1 | ) |
|
| $1,866 |
|
| Amortization of loss |
| (751 | ) |
| (1,779 | ) |
| (5 | ) |
| (2,535 | ) |
|
|
| ($751 | ) |
|
| $88 |
|
|
| ($6 | ) |
|
| ($669 | ) |
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the six months ended June 30, 2016 and 2015:
|
| | | | | | | | | | | | | | | | |
| 2016 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($540 | ) |
|
| $15,476 |
|
|
| ($226 | ) |
|
| $14,710 |
|
| Amortization of loss |
| (24,964 | ) |
| (4,126 | ) |
| (1,262 | ) |
| (30,352 | ) |
|
|
| ($25,504 | ) |
|
| $11,350 |
|
|
| ($1,488 | ) |
|
| ($15,642 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
| Amortization of prior service credit |
|
| $— |
|
|
| $3,894 |
|
|
| $— |
|
|
| $3,894 |
|
| Amortization of loss |
| (1,672 | ) |
| (1,464 | ) |
| (6 | ) |
| (3,142 | ) |
|
|
| ($1,672 | ) |
|
| $2,430 |
|
|
| ($6 | ) |
|
| $752 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($778 | ) | |
| $12,964 |
| |
| ($215 | ) | |
| $11,971 |
|
| Amortization of loss | | (25,254 | ) | | (8,818 | ) | | (1,104 | ) | | (35,176 | ) |
| | |
| ($26,032 | ) | |
| $4,146 |
| |
| ($1,319 | ) | |
| ($23,205 | ) |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| $— |
| |
| $3,734 |
| |
| ($1 | ) | |
| $3,733 |
|
| Amortization of loss | | (1,502 | ) | | (3,558 | ) | | (10 | ) | | (5,070 | ) |
| | |
| ($1,502 | ) | |
| $176 |
| |
| ($11 | ) | |
| ($1,337 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2016 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($270 | ) | |
| $7,738 |
| |
| ($113 | ) | |
| $7,355 |
|
| Amortization of loss | | (12,482 | ) | | (2,063 | ) | | (630 | ) | | (15,175 | ) |
| | |
| ($12,752 | ) | |
| $5,675 |
| |
| ($743 | ) | |
| ($7,820 | ) |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | |
| $— |
| |
| $1,947 |
| |
| $— |
| |
| $1,947 |
|
| Amortization of loss | | (836 | ) | | (731 | ) | | (2 | ) | | (1,569 | ) |
| | |
| ($836 | ) | |
| $1,216 |
| |
| ($2 | ) | |
| $378 |
|
Employer Contributions
Based on current assumptions, Entergy expects to contribute $387.5$409.9 million to its qualified pension plans in 2016.2017. As of June 30, 2016,March 31, 2017, Entergy had contributed $169.8$84.2 million to its pension plans. Based on current assumptions, the Registrant Subsidiaries expect to contribute the following to qualified pension plans for their employees in 2016:2017:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| Expected 2016 pension | | | | | | | | | | | |
| contributions |
| $82,831 |
| |
| $83,909 |
| |
| $19,913 |
| |
| $10,694 |
| |
| $15,770 |
| |
| $20,206 |
|
| Pension contributions made | | | | | | | | | | | |
| through June 2016 |
| $36,549 |
| |
| $37,319 |
| |
| $8,919 |
| |
| $4,680 |
| |
| $6,999 |
| |
| $8,891 |
|
| Remaining estimated pension | | | | | | | | | | | |
| contributions to be made in 2016 |
| $46,282 |
| |
| $46,590 |
| |
| $10,994 |
| |
| $6,014 |
| |
| $8,771 |
| |
| $11,315 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| Expected 2017 pension contributions |
| $79,495 |
| |
| $87,923 |
| |
| $19,146 |
| |
| $9,920 |
| |
| $17,064 |
| |
| $18,180 |
|
| Pension contributions made through March 2017 |
| $17,265 |
| |
| $17,591 |
| |
| $4,027 |
| |
| $2,273 |
| |
| $3,294 |
| |
| $4,500 |
|
| Remaining estimated pension contributions to be made in 2017 |
| $62,230 |
| |
| $70,332 |
| |
| $15,119 |
| |
| $7,647 |
| |
| $13,770 |
| |
| $13,680 |
|
NOTE 7. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation
Entergy’s reportable segments as of June 30, 2016March 31, 2017 are Utility and Entergy Wholesale Commodities. Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas utility service in portions of Louisiana.distribution business. Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also includes the ownership ofprovides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. “All Other” includes the parent company, Entergy Corporation, and other business activity.
Entergy’s segment financial information for the second quarters of 2016 and 2015 is as follows:
|
| | | | | | | | | | | | | | | | | | | | |
| | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Entergy |
| | | (In Thousands) |
| 2016 | | | | | | | | | | |
| Operating revenues | |
| $2,118,478 |
| |
| $344,110 |
| |
| $— |
| |
| ($26 | ) | |
| $2,462,562 |
|
| Income taxes | |
| ($3,785 | ) | |
| ($235,055 | ) | |
| ($10,133 | ) | |
| $— |
| |
| ($248,973 | ) |
| Consolidated net income (loss) | |
| $380,317 |
| |
| $250,874 |
| |
| ($26,703 | ) | |
| ($31,898 | ) | |
| $572,590 |
|
| 2015 | | | | | | | | | | |
| Operating revenues | |
| $2,273,945 |
| |
| $439,306 |
| |
| $— |
| |
| ($20 | ) | |
| $2,713,231 |
|
| Income taxes | |
| $117,798 |
| |
| ($3,300 | ) | |
| ($14,717 | ) | |
| $— |
| |
| $99,781 |
|
| Consolidated net income (loss) | |
| $204,035 |
| |
| ($3,545 | ) | |
| ($14,870 | ) | |
| ($31,898 | ) | |
| $153,722 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s segment financial information for the six months ended June 30,first quarters of 2017 and 2016 and 2015 is as follows:
| | | | | Utility | | Entergy Wholesale Commodities* | | All Other | | Eliminations | | Entergy | | Utility | | Entergy Wholesale Commodities | | All Other | | Eliminations | | Entergy |
| | | (In Thousands) | | (In Thousands) |
| 2017 | | | | | | | | | | | |
| Operating revenues | | |
| $2,035,112 |
| |
| $553,367 |
| |
| $— |
| |
| ($21 | ) | |
| $2,588,458 |
|
| Income taxes | | |
| $98,492 |
| |
| ($78,337 | ) | |
| ($12,392 | ) | |
| $— |
| |
| $7,763 |
|
| Consolidated net income (loss) | | |
| $167,623 |
| |
| ($27,197 | ) | |
| ($22,477 | ) | |
| ($31,898 | ) | |
| $86,051 |
|
| Total assets as of March 31, 2017 | | |
| $41,194,179 |
| |
| $6,018,217 |
| |
| $1,242,423 |
| |
| ($3,136,613 | ) | |
| $45,318,206 |
|
| 2016 | | | | | | | | | | | | | | | | | | | | |
| Operating revenues | |
| $4,206,272 |
| |
| $866,189 |
| |
| $— |
| |
| ($46 | ) | |
| $5,072,415 |
| |
| $2,087,793 |
| |
| $522,079 |
| |
| $— |
| |
| ($20 | ) | |
| $2,609,852 |
|
| Income taxes | |
| $104,051 |
| |
| ($182,741 | ) | |
| ($30,337 | ) | |
| $— |
| |
| ($109,027 | ) | |
| $107,836 |
| |
| $52,314 |
| |
| ($20,205 | ) | |
| $— |
| |
| $139,945 |
|
| Consolidated net income (loss) | |
| $579,968 |
| |
| $330,430 |
| |
| ($38,769 | ) | |
| ($63,797 | ) | |
| $807,832 |
| |
| $199,651 |
| |
| $79,557 |
| |
| ($12,067 | ) | |
| ($31,899 | ) | |
| $235,242 |
|
| Total assets as of June 30, 2016 | |
| $39,841,100 |
| |
| $7,913,442 |
| |
| $1,211,715 |
| |
| ($3,089,215 | ) | |
| $45,877,042 |
| |
| 2015 | | | | | | | | | | | |
| Operating revenues | |
| $4,551,455 |
| |
| $1,081,896 |
| |
| $— |
| |
| ($30 | ) | |
| $5,633,321 |
| |
| Income taxes | |
| $209,048 |
| |
| $66,891 |
| |
| ($25,687 | ) | |
| $— |
| |
| $250,252 |
| |
| Consolidated net income (loss) | |
| $431,786 |
| |
| $119,887 |
| |
| ($31,224 | ) | |
| ($63,798 | ) | |
| $456,651 |
| |
| Total assets as of December 31, 2015 | |
| $38,356,906 |
| |
| $8,210,183 |
| |
| ($461,505 | ) | |
| ($1,457,903 | ) | |
| $44,647,681 |
| |
| Total assets as of December 31, 2016 | | |
| $41,098,751 |
| |
| $6,696,038 |
| |
| $1,283,816 |
| |
| ($3,174,171 | ) | |
| $45,904,434 |
|
Businesses marked with * areThe Entergy Wholesale Commodities business is sometimes referred to as the “competitive businesses.” Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.
As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions in 2016. Additional restructuring charges in the first quarter of 2017 were comprised of the following:
|
| | | | | | | | | | | |
| | Employee retention and severance expenses and other benefits-related costs | | Contracted economic development costs | | Total |
| | (In Millions) |
| Balance as of January 1, 2017 |
| $70 |
| |
| $21 |
| |
| $91 |
|
| Restructuring costs accrued | 24 |
| | — |
| | 24 |
|
| Balance as of March 31, 2017 |
| $94 |
| |
| $21 |
| |
| $115 |
|
In addition, Entergy incurred $212 million of impairment charges in the first quarter 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged directly to expense as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
Registrant Subsidiaries
Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business. Each of the Registrant Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 8. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.
Derivatives
Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rate swaps. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments.
Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation. The maximum length of time over which Entergy is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at June 30, 2016March 31, 2017 is approximately 2 years. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 87%86% for the remainder of 2016,2017, of which approximately 60% 59%
Entergy Corporation and Subsidiaries
Notes to Financial Statements
is sold under financial derivatives and the remainder under normal purchase/normal sale contracts. Total planned generation for the remainder of 20162017 is 1819.9 TWh.
Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guaranty, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidation of all positions in the event of a failure or inability to post collateral.
Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations whendepending on the current market prices exceedmark-to-market values of the contracted power prices.contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. As of June 30, 2016,March 31, 2017, derivative contracts with fourthree counterparties were in a liability position (approximately $7$13 million total). In addition to the corporate guarantee, $1 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and letters of credit$3 million in the amount of $23 million werecash collateral was required to be posted by its counterparties to the Entergy subsidiary as of June 30, 2016.subsidiary. As of December 31, 2015,2016, derivative contracts with twothree counterparties were in a liability position (approximately $2$8 million total). As of December 31, 2015, $9In addition to the corporate guarantee, $2 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $68 million was required to be posted by its counterparties to the Entergy subsidiary.counterparties. If the Entergy Corporation credit rating falls below investment grade, the effect of the corporate guarantee is typically ignored and Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of short-term natural gas swaps that financially settle against NYMEX futures. These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy Louisiana and Entergy New Orleans. The total volume of natural gas swaps outstanding as of June 30, 2016March 31, 2017 is 32,588,00059,830,000 MMBtu for Entergy, including 26,370,00050,230,000 MMBtu for Entergy Louisiana 5,950,000and 9,600,000 MMBtu for Entergy Mississippi, and 268,000 MMBtu for Entergy New Orleans.Mississippi. Credit support for these natural gas swaps is covered by master agreements that do not require collateralization based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.
During the second quarter 2016, Entergy participated in the annual FTRfinancial transmission rights auction process for the MISO planning year of June 1, 2016 through May 31, 2017. FTRsFinancial transmission rights are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records FTRsfinancial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on FTRsfinancial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on FTRs.financial transmission rights. The total volume of FTRsfinancial transmission rights outstanding as of June 30, 2016March 31, 2017 is 103,99518,365 GWh for Entergy, including 23,6274,197 GWh for Entergy Arkansas, 44,5567,669 GWh for Entergy Louisiana, 16,9033,142 GWh for Entergy Mississippi, 5,064883 GWh for Entergy New Orleans, and 13,3012,434 GWh for Entergy Texas. Credit support for FTRsfinancial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for FTRsfinancial transmission rights held by Entergy Wholesale Commodities is covered by cash. As of June 30, 2016, letters of credit posted with MISO covered the FTR exposure for Entergy Texas. No cash collateral was required to be posted for FTR exposure for the Utility operating companies or Entergy Wholesale Commodities. As of December 31, 2015, no cash or letters of credit were required to be posted for FTRfinancial transmission rights exposure for the Utility operating companies or Entergy Wholesale Commodities as of March 31, 2017 and December 31, 2016, respectively. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas and Entergy Mississippi as of March 31, 2017 and December 31, 2016, respectively.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30,March 31, 2017 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
|
| | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business |
| | | | | (In Millions) | | |
| Derivatives designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $13 | | ($13) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $16 | | ($9) | | $7 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $24 | | ($14) | | $10 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $13 | | ($9) | | $4 | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $20 | | ($5) | | $15 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $2 | | ($1) | | $1 | | Entergy Wholesale Commodities |
| Natural gas swaps | | Prepayments and other | | $5 | | $— | | $5 | | Utility |
| Financial transmission rights | | Prepayments and other | | $9 | | ($1) | | $8 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities(current portion) | | $8 | | ($4) | | $4 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $2 | | ($2) | | $— | | Entergy Wholesale Commodities |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2016 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
|
| | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business |
| | | | | (In Millions) | | |
| Derivatives designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $50 | | ($9) | | $41 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $5 | | ($5) | | $— | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $7 | | ($7) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $7 | | ($5) | | $2 | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $50 | | ($22) | | $28 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $8 | | $— | | $8 | | Entergy Wholesale Commodities |
| Natural gas swaps | | Prepayments and other | | $16 | | $— | | $16 | | Utility |
| FTRs | | Prepayments and other | | $47 | | ($1) | | $46 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities(current portion) | | $31 | | ($24) | | $7 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $3 | | ($1) | | $2 | | Entergy Wholesale Commodities |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2015 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
| | | Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business |
| | | (In Millions) | | | (In Millions) | |
| Derivatives designated as hedging instruments | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $173 | | ($34) | | $139 | | Entergy Wholesale Commodities | | Prepayments and other (current portion) | | $25 | | ($14) | | $11 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $17 | | ($2) | | $15 | | Entergy Wholesale Commodities | | Other deferred debits and other assets (non-current portion) | | $6 | | ($6) | | $— | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $14 | | ($14) | | $— | | Entergy Wholesale Commodities | | Other current liabilities (current portion) | | $11 | | ($10) | | $1 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $2 | | ($2) | | $— | | Entergy Wholesale Commodities | | Other non-current liabilities (non-current portion) | | $16 | | ($7) | | $9 | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | | | | | | | |
| Assets: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $54 | | ($13) | | $41 | | Entergy Wholesale Commodities | | Prepayments and other (current portion) | | $18 | | ($13) | | $5 | | Entergy Wholesale Commodities |
| FTRs | | Prepayments and other | | $24 | | ($1) | | $23 | | Utility and Entergy Wholesale Commodities | |
| Electricity swaps and options | | | Other deferred debits and other assets (non-current portion) | | $5 | | ($5) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | | Prepayments and other | | $13 | | $— | | $13 | | Utility |
| Financial transmission rights | | | Prepayments and other | | $22 | | ($1) | | $21 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities (current portion) | | $38 | | ($32) | | $6 | | Entergy Wholesale Commodities | | Other current liabilities (current portion) | | $18 | | ($17) | | $1 | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $9 | | $— | | $9 | | Utility | |
| Electricity swaps and options | | | Other non-current liabilities (non-current portion) | | $4 | | ($4) | | $— | | Entergy Wholesale Commodities |
| |
| (a) | Represents the gross amounts of recognized assets/liabilities |
| |
| (b) | Represents the netting of fair value balances with the same counterparty |
| |
| (c) | Represents the net amounts of assets /liabilitiesassets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance SheetsSheet |
| |
| (d) | Excludes cash collateral in the amount of $1 million posted as of June 30, 2016 and $9 million posted and $68$3 million held as of DecemberMarch 31, 2015. Also excludes letters of credit in the amount of $12017 and $2 million posted and $23 million held as of June 30,December 31, 2016. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements of operations for the three months ended June 30,March 31, 2017 and 2016 and 2015 are as follows:
| | | Instrument | | Amount of gain (loss) recognized in other comprehensive income | | Income Statement location | | Amount of gain reclassified from AOCI into income (a) | | Amount of gain (loss) recognized in other comprehensive income | | Income Statement location | | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a) |
| | | (In Millions) | | (In Millions) | | (In Millions) | | (In Millions) |
| 2017 | | |
| Electricity swaps and options | | | $50 | | Competitive businesses operating revenues | | $51 |
| | | |
| 2016 | | |
| Electricity swaps and options | | ($53) | | Competitive businesses operating revenues | | $46 | | $139 | | Competitive businesses operating revenues | | $154 |
| | | |
| 2015 | | |
| Electricity swaps and options | | $137 | | Competitive businesses operating revenues | | $78 | |
| |
| (a) | Before taxes of $16$18 million and $27$54 million for the three months ended June 30,March 31, 2017 and 2016, and 2015, respectively |
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated statements of operations for the six months ended June 30, 2016 and 2015 are as follows:
|
| | | | | | |
| Instrument | | Amount of gain recognized in other comprehensive income | | Income Statement location | | Amount of gain reclassified from AOCI into income (a) |
| | (In Millions) | | | | (In Millions) |
| 2016 | | | | | | |
| Electricity swaps and options | | $86 | | Competitive businesses operating revenues | | $200 |
| | | | | | | |
| 2015 | | | | | | |
| Electricity swaps and options | | $105 | | Competitive businesses operating revenues | | $91 |
|
| | | | | | |
(a) | Before taxes of $70 million and $32 million for the six months ended June 30, 2016 and 2015, respectively | | | | | |
At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive business operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended June 30,March 31, 2017 and 2016 and 2015 was ($3)1) million and $2 million, respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the six months ended June 30, 2016 and 2015 was ($0.3) million and $11) million, respectively.
Based on market prices as of June 30, 2016, netMarch 31, 2017, unrealized gains recorded in AOCI on cash flow hedges relating to power sales totaled $53 million.$8 million of net unrealized gains. Approximately $51$5 million is expected to be reclassified from AOCI to operating revenues in the next twelve months. The actual amount reclassified from AOCI, however, could vary due to future changes in market prices.
Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation. Gains or losses accumulated in other comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are included in income as the original hedged transaction occurs. From the point of de-designation, the gains or losses on the original hedge
Entergy Corporation and Subsidiaries
Notes to Financial Statements
and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated statements of operations for the three months ended June 30, 2016 and 2015 are as follows:
|
| | | | | | |
| Instrument | | Amount of loss recognized in AOCI | | Income Statement
location | | Amount of gain (loss)
recorded in the income statement |
| | | (In Millions) | | | | (In Millions) |
| 2016 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($6) |
| FTRs | | $— | | Purchased power expense | (b) | $38 |
| Electricity swaps and options de-designated as hedged items | | ($10) | | Competitive business operating revenues | | ($6) |
| | | | | | | |
| 2015 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $3 |
| FTRs | | $— | | Purchased power expense | (b) | $46 |
| Electricity swaps and options de-designated as hedged items | | ($3) | | Competitive business operating revenues | | ($5) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements of operations for the sixthree months ended June 30,March 31, 2017 and 2016 and 2015 are as follows:
|
| | | | | | |
| Instrument |
| Amount of gain recognized in AOCI |
| Income Statement
location |
| Amount of gain (loss)
recorded in the income statement |
| | | (In Millions) | | | | (In Millions) |
| 2016 | |
| | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($30) |
| FTRs |
| $— |
| Purchased power expense | (b) | $59 |
| Electricity swaps and options de-designated as hedged items | | $15 | | Competitive business operating revenues | | ($9) |
| | | | | | | |
| 2015 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($16) |
| FTRs | | $— | | Purchased power expense | (b) | $79 |
| Electricity swaps and options de-designated as hedged items | | $1 | | Competitive business operating revenues | | ($39) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | |
| Instrument |
| Amount of gain (loss) recognized in accumulated other comprehensive income |
| Income Statement
location |
| Amount of gain (loss)
recorded in the income statement |
| | (In Millions) | | | | (In Millions) |
| 2017 | |
| | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($7) |
| Financial transmission rights |
| $— |
| Purchased power expense | (b) | $30 |
| Electricity swaps and options | | $9 | (c) | Competitive business operating revenues | | $— |
| | | | | | |
| 2016 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($24) |
| Financial transmission rights | | $— | | Purchased power expense | (b) | $21 |
| Electricity swaps and options | | $25 | (c) | Competitive business operating revenues | | $— |
| |
| (a) | Due to regulatory treatment, the natural gas swaps are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms. |
| |
| (b) | Due to regulatory treatment, the changes in the estimated fair value of FTRsfinancial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the FTRsfinancial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. |
| |
| (c) | Amount of gain (loss) recognized in accumulated other comprehensive income from electricity swaps and options de-designated as hedged items. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30,March 31, 2017 are as follows:
|
| | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
| Assets: | | | | | | |
| Natural gas swaps | | Prepayments and other | | $3.8 | | Entergy Louisiana |
| Natural gas swaps | | Prepayments and other | | $0.7 | | Entergy Mississippi |
| | | | | | |
| Financial transmission rights | | Prepayments and other | | $0.9 | | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | | $4.1 | | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | | $1.3 | | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | | $0.5 | | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | | $1.0 | | Entergy Texas |
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2016 are as follows:
|
| | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | | (In Millions) | | |
| Assets: | | | | | | |
| Natural gas swaps | | Prepayments and other | | $12.810.9 | | Entergy Louisiana |
| Natural gas swaps | | Prepayments and other | | $2.72.3 | | Entergy Mississippi |
| Natural gas swaps | | Prepayments and other | | $0.2 | | Entergy New Orleans |
| | | | | | | |
FTRsFinancial transmission rights | | Prepayments and other | | $14.05.4 | | Entergy Arkansas |
FTRsFinancial transmission rights | | Prepayments and other | | $16.28.5 | | Entergy Louisiana |
FTRsFinancial transmission rights | | Prepayments and other | | $5.63.2 | | Entergy Mississippi |
FTRsFinancial transmission rights | | Prepayments and other | | $2.01.1 | | Entergy New Orleans |
FTRsFinancial transmission rights | | Prepayments and other | | $8.03.1 | | Entergy Texas |
| |
| (a) | As of March 31, 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas and $0.1 million for Entergy Mississippi. As of December 31, 2016, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Arkansas and $0.1 million for Entergy Mississippi. |
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2015 are as follows:
|
| | | | | | |
Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
Assets: | | | | | | |
FTRs | | Prepayments and other | | $7.9 | | Entergy Arkansas |
FTRs | | Prepayments and other | | $8.5 | | Entergy Louisiana |
FTRs | | Prepayments and other | | $2.4 | | Entergy Mississippi |
FTRs | | Prepayments and other | | $1.5 | | Entergy New Orleans |
FTRs | | Prepayments and other | | $2.2 | | Entergy Texas |
| | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Other current liabilities | | $7.0 | | Entergy Louisiana |
Natural gas swaps | | Other current liabilities | | $1.3 | | Entergy Mississippi |
Natural gas swaps | | Other current liabilities | | $0.5 | | Entergy New Orleans |
| |
(a) | Excludes letters of credit in the amount of $1.4 million posted by Entergy Texas as of June 30, 2016. No cash collateral was required to be posted as of June 30, 2016 and December 31, 2015, respectively. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30,March 31, 2017 and 2016 and 2015 are as follows:
|
| | | | | | |
Instrument | | Income Statement Location | | Amount of gain
(loss) recorded
in the income statement | | Registrant |
| | | | (In Millions) | | |
2016 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($4.9) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.9) | (a) | Entergy Mississippi |
| | | | | | |
FTRs | | Purchased power expense | | $5.5 | (b) | Entergy Arkansas |
FTRs | | Purchased power expense | | $21.6 | (b) | Entergy Louisiana |
FTRs | | Purchased power expense | | $3.6 | (b) | Entergy Mississippi |
FTRs | | Purchased power expense | | $1.4 | (b) | Entergy New Orleans |
FTRs | | Purchased power expense | | $5.4 | (b) | Entergy Texas |
| | | | | | |
2015 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $2.5 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $0.6 | (a) | Entergy Mississippi |
| | | | | | |
FTRs | | Purchased power expense | | $19.6 | (b) | Entergy Arkansas |
FTRs | | Purchased power expense | | $17.3 | (b) | Entergy Louisiana |
FTRs | | Purchased power expense | | $3.9 | (b) | Entergy Mississippi |
FTRs | | Purchased power expense | | $4.5 | (b) | Entergy New Orleans |
FTRs | | Purchased power expense | | $1.2 | (b) | Entergy Texas |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 2016 and 2015 are as follows:
|
| | | | | | |
| Instrument |
| Income Statement Location |
| Amount of gain
(loss) recorded
in the income statement |
| Registrant |
| | | | | (In Millions) | | |
20162017 | | | |
| | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($24.2)6.1) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($5.0)1.1) | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.1) | (a) | Entergy New Orleans |
| | | | | | |
| Financial transmission rights | | Purchased power expense | | $4.6 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $15.2 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $3.1 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $2.4 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $5.3 | (b) | Entergy Texas |
| | | | | | |
| 2016 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($19.3) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($4.1) | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.5) | (a) | Entergy New Orleans |
| | | | | | | |
FTRsFinancial transmission rights | | Purchased power expense | | $13.37.8 | (b) | Entergy Arkansas |
FTRsFinancial transmission rights | | Purchased power expense | | $32.110.5 | (b) | Entergy Louisiana |
FTRsFinancial transmission rights | | Purchased power expense | | $4.40.8 | (b) | Entergy Mississippi |
FTRsFinancial transmission rights | | Purchased power expense | | $1.90.5 | (b) | Entergy New Orleans |
FTRsFinancial transmission rights | | Purchased power expense | | $6.9 | (b) | Entergy Texas |
| | | | | | |
2015 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($13.5) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($2.4) | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.5) | (a) | Entergy New Orleans |
| | | | | | |
FTRs | | Purchased power expense | | $34.7 | (b) | Entergy Arkansas |
FTRs | | Purchased power expense | | $31.7 | (b) | Entergy Louisiana |
FTRs | | Purchased power expense | | $7.2 | (b) | Entergy Mississippi |
FTRs | | Purchased power expense | | $6.0 | (b) | Entergy New Orleans |
FTRs | | Purchased power expense | | ($0.2)1.5 | (b) | Entergy Texas |
| |
| (a) | Due to regulatory treatment, the natural gas swaps are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms. |
| |
| (b) | Due to regulatory treatment, the changes in the estimated fair value of FTRsfinancial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the FTRs for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
simultaneously reversed and recorded as an offsetting regulatory asset or liability. The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the estimates
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments other than those instruments held by the Entergy Wholesale Commodities business are reflected in future rates and therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.
Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.
Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs.
Effective first quarter 2016, Entergy retrospectively adopted ASU 2015-07, which simplifies the disclosure for fair value investments by removing the requirement to categorize within the fair value hierarchy investment for which fair value is measured using the net asset value per share as a practical expedient. For all periods presented the common trust funds have not been assigned a level and are presented within the fair value tables only as a reconciling item to the total fair value of investments.
The three levels of the fair value hierarchy are:
Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas hedge contracts. Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date. Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value. Level 2 inputs include the following:
- quoted prices for similar assets or liabilities in active markets;
- quoted prices for identical assets or liabilities in inactive markets;
- inputs other than quoted prices that are observable for the asset or liability; or
| |
-– | quoted prices for similar assets or liabilities in active markets; |
| |
| – | quoted prices for identical assets or liabilities in inactive markets; |
| |
| – | inputs other than quoted prices that are observable for the asset or liability; or |
| |
| – | inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
Level 2 consists primarily of individually-owned debt instruments.
Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources. These inputs are used with internally developed methodologies to produce management’s best
Entergy Corporation and Subsidiaries
Notes to Financial Statements
estimate of fair value for the asset or liability. Level 3 consists primarily of FTRsfinancial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Business Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accounting group. The primary functions of the Business Unit Risk Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Business Unit Risk Control group is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Accounting Policy and Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Business Unit Risk Control group reports to the Vice President and Treasurer while the Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The amounts reflected as the fair value of electricity swaps are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts include cash flow hedges that swap fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities. For contracts that have unit contingent terms, a further discount is applied based on the historical relationship between contract and market prices for similar contract terms.
The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes. Inputs to the valuation include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.
On a daily basis, the Business Unit Risk Control group calculates the mark-to-market for electricity swaps and options. The Business Unit Risk Control group also validates forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and uses multiplecompared with other sources of market implied volatilities. Moreover, on at least a monthly basis, the Office of Corporate Risk Oversight confirms the mark-to-market calculations and prepares price scenarios and credit downgrade scenario analysis. The scenario analysis is communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis is completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects are calculated for this analysis. This analysis is communicated to senior management within Entergy and Entergy Wholesale Commodities.
The values of FTRsfinancial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Business Unit Risk Control group. The values are calculated internally and verified against the data published by MISO. Entergy’s Accounting Policy and Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Business Unit Risk
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Control groups report to the Vice President and Treasurer. The Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2016March 31, 2017 and December 31, 2015.2016. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect theirits placement within the fair value hierarchy levels.
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $893 |
| |
| $— |
| |
| $— |
| |
| $893 |
| |
| $1,022 |
| |
| $— |
| |
| $— |
| |
| $1,022 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 464 |
| | — |
| | — |
| | 464 |
| | 512 |
| | — |
| | — |
| | 512 |
|
| Debt securities | | 1,053 |
| | 1,220 |
| | — |
| | 2,273 |
| | 966 |
| | 1,264 |
| | — |
| | 2,230 |
|
| Common trusts (b) | | | | | | | | 2,819 |
| | | | | | | | 3,927 |
|
| Power contracts | | — |
| | — |
| | 77 |
| | 77 |
| | — |
| | — |
| | 23 |
| | 23 |
|
| Securitization recovery trust account | | 37 |
| | — |
| | — |
| | 37 |
| | 47 |
| | — |
| | — |
| | 47 |
|
| Escrow accounts | | 433 |
| | — |
| | — |
| | 433 |
| | 415 |
| | — |
| | — |
| | 415 |
|
| Gas hedge contracts | | 16 |
| | — |
| | — |
| | 16 |
| | 5 |
| | — |
| | — |
| | 5 |
|
| FTRs | | — |
| | — |
| | 46 |
| | 46 |
| |
| Financial transmission rights | | | — |
| | — |
| | 8 |
| | 8 |
|
| | |
| $2,896 |
| |
| $1,220 |
| |
| $123 |
| |
| $7,058 |
| |
| $2,967 |
| |
| $1,264 |
| |
| $31 |
| |
| $8,189 |
|
| Liabilities: | | | | | | | | | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $11 |
| |
| $11 |
| |
| $— |
| |
| $— |
| |
| $18 |
| |
| $18 |
|
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $1,287 |
| |
| $— |
| |
| $— |
| |
| $1,287 |
| |
| $1,058 |
| |
| $— |
| |
| $— |
| |
| $1,058 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 468 |
| | — |
| | — |
| | 468 |
| | 480 |
| | — |
| | — |
| | 480 |
|
| Debt securities | | 1,061 |
| | 1,094 |
| | — |
| | 2,155 |
| | 985 |
| | 1,228 |
| | — |
| | 2,213 |
|
| Common trusts (b) | | | | | | | | 2,727 |
| | | | | | | | 3,031 |
|
| Power contracts | | — |
| | — |
| | 195 |
| | 195 |
| | — |
| | — |
| | 16 |
| | 16 |
|
| Securitization recovery trust account | | 50 |
| | — |
| | — |
| | 50 |
| | 46 |
| | — |
| | — |
| | 46 |
|
| Escrow accounts | | 425 |
| | — |
| | — |
| | 425 |
| | 433 |
| | — |
| | — |
| | 433 |
|
| FTRs | | — |
| | — |
| | 23 |
| | 23 |
| |
| Gas hedge contracts | | | 13 |
| | — |
| | — |
| | 13 |
|
| Financial transmission rights | | | — |
| | — |
| | 21 |
| | 21 |
|
| | |
| $3,291 |
| |
| $1,094 |
| |
| $218 |
| |
| $7,330 |
| |
| $3,015 |
| |
| $1,228 |
| |
| $37 |
| |
| $7,311 |
|
| Liabilities: | | | | | | | | | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $6 |
| |
| $6 |
| |
| $— |
| |
| $— |
| |
| $11 |
| |
| $11 |
|
| Gas hedge contracts | | 9 |
| | — |
| | — |
| | 9 |
| |
| | |
| $9 |
| |
| $— |
| |
| $6 |
| |
| $15 |
| |
| |
| (a) | The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (b) | Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2016March 31, 2017 and 2015:2016:
|
| | | | | | | | | | | | | | | |
| | 2016 | | 2015 |
| | Power Contracts | | FTRs | | Power Contracts | | FTRs |
| | (In Millions) |
| Balance as of April 1, |
| $183 |
| |
| $9 |
| |
| $145 |
| |
| $15 |
|
| Total gains (losses) for the period (a) | | | | | | | |
| Included in earnings | (9 | ) | | — |
| | 22 |
| | — |
|
| Included in OCI | (53 | ) | | — |
| | 131 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 20 |
| | — |
| | 18 |
|
| Issuances of FTRs | — |
| | 55 |
| | — |
| | 80 |
|
| Purchases | — |
| | — |
| | 4 |
| | — |
|
| Settlements | (55 | ) | | (38 | ) | | (98 | ) | | (46 | ) |
| Balance as of June 30, |
| $66 |
| |
| $46 |
| |
| $204 |
| |
| $67 |
|
|
| | | | | | | | | | | | | | | |
| | 2017 | | 2016 |
| | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| (In Millions) |
| Balance as of January 1, |
| $5 |
| |
| $21 |
| |
| $189 |
| |
| $23 |
|
| Total gains (losses) for the period (a) | | | | | | | |
| Included in OCI | 50 |
| | — |
| | 139 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 17 |
| | — |
| | 7 |
|
| Settlements | (50 | ) | | (30 | ) | | (145 | ) | | (21 | ) |
| Balance as of March 31, |
| $5 |
| |
| $8 |
| |
| $183 |
| |
| $9 |
|
| |
| (a) | Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($6)$0.4 million for the three months ended June 30, 2016March 31, 2017 and ($1)$6 million for the three months ended June 30, 2015.March 31, 2016. |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2016 and 2015:
|
| | | | | | | | | | | | | | | |
| | 2016 | | 2015 |
| | Power Contracts | | FTRs | | Power Contracts | | FTRs |
| (In Millions) |
| Balance as of January 1, |
| $189 |
| |
| $23 |
| |
| $215 |
| |
| $47 |
|
| Total gains (losses) for the period (a) | | | | | | | |
| Included in earnings | (9 | ) | | — |
| | (13 | ) | | (1 | ) |
| Included in OCI | 86 |
| | — |
| | 105 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 27 |
| | — |
| | 20 |
|
| Issuances of FTRs | — |
| | 55 |
| | — |
| | 80 |
|
| Purchases | — |
| | — |
| | 14 |
| | — |
|
| Settlements | (200 | ) | | (59 | ) | | (117 | ) | | (79 | ) |
| Balance as of June 30, |
| $66 |
| |
| $46 |
| |
| $204 |
| |
| $67 |
|
| |
(a) | For the six months ended June 30, 2016, there is no change in unrealized gains or losses included in earnings for derivatives held at the end of the reporting period. Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($7) million for the six months ended June 30, 2015. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of June 30, 2016:March 31, 2017:
| | | Transaction Type | | Fair Value as of June 30, 2016 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value | | Fair Value as of March 31, 2017 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | | (In Millions) | | (In Millions) | | (In Millions) | | (In Millions) |
| Power contracts - electricity swaps | | $61 | | Unit contingent discount | | +/- | 3% | | $2 | | $5 | | Unit contingent discount | | +/- | 4% | | $1 |
| Power contracts - electricity options | | $5 | | Implied volatility | | +/- | 34% | | $3 | |
The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
|
| | | | | | | | |
Significant Unobservable Input | | Transaction Type | | Position | | Change to Input | | Effect on Fair Value |
| Unit contingent discount | | Electricity swaps | | Sell | | Increase (Decrease) | | Decrease (Increase) |
| Implied volatility | | Electricity options | | Sell | | Increase (Decrease) | | Increase (Decrease) |
| Implied volatility | | Electricity options | | Buy | | Increase (Decrease) | | Increase (Decrease) |
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of June 30, 2016March 31, 2017 and December 31, 2015.2016. The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.
Entergy Arkansas
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $11.3 |
| |
| $— |
| |
| $— |
| |
| $11.3 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 16.8 |
| | — |
| | — |
| | 16.8 |
|
| Debt securities | | 97.4 |
| | 207.8 |
| | — |
| | 305.2 |
|
| Common trusts (b) | | | | | | | | 480.8 |
|
| Securitization recovery trust account | | 3.2 |
| | — |
| | — |
| | 3.2 |
|
| Escrow accounts | | 7.1 |
| | — |
| | — |
| | 7.1 |
|
| FTRs | | — |
| | — |
| | 14.0 |
| | 14.0 |
|
| | |
| $135.8 |
| |
| $207.8 |
| |
| $14.0 |
| |
| $838.4 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | |
| $3.0 |
| |
| $— |
| |
| $— |
| |
| $3.0 |
|
| Debt securities | | 110.5 |
| | 193.4 |
| | — |
| | 303.9 |
|
| Common trusts (b) | | | | | | | | 464.4 |
|
| Securitization recovery trust account | | 4.2 |
| | — |
| | — |
| | 4.2 |
|
| Escrow accounts | | 12.2 |
| | — |
| | — |
| | 12.2 |
|
| FTRs | | — |
| | — |
| | 7.9 |
| | 7.9 |
|
| | |
| $129.9 |
| |
| $193.4 |
| |
| $7.9 |
| |
| $795.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy LouisianaArkansas
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $50.1 |
| |
| $— |
| |
| $— |
| |
| $50.1 |
| |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 6.9 |
| | — |
| | — |
| | 6.9 |
| |
| $6.1 |
| |
| $— |
| |
| $— |
| |
| $6.1 |
|
| Debt securities | | 137.0 |
| | 299.2 |
| | — |
| | 436.2 |
| | 106.7 |
| | 203.3 |
| | — |
| | 310.0 |
|
| Common trusts (b) | | | | | | | | 651.7 |
| | | | | | | | 551.6 |
|
| Securitization recovery trust account | | | 7.8 |
| | — |
| | — |
| | 7.8 |
|
| Escrow accounts | | 305.2 |
| | — |
| | — |
| | 305.2 |
| | 4.7 |
| | — |
| | — |
| | 4.7 |
|
| Securitization recovery trust account | | 3.0 |
| | — |
| | — |
| | 3.0 |
| |
| Gas hedge contracts | | 12.8 |
| | — |
| | — |
| | 12.8 |
| |
| FTRs | | — |
| | — |
| | 16.2 |
| | 16.2 |
| |
| Financial transmission rights | | | — |
| | — |
| | 0.9 |
| | 0.9 |
|
| | |
| $515.0 |
| |
| $299.2 |
| |
| $16.2 |
| |
| $1,482.1 |
| |
| $125.3 |
| |
| $203.3 |
| |
| $0.9 |
| |
| $881.1 |
|
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $34.8 |
| |
| $— |
| |
| $— |
| |
| $34.8 |
| |
| Decommissioning trust funds (a): | | |
| | |
| | |
| | |
| | | | | | | | |
| Equity securities | | 7.1 |
| | — |
| | — |
| | 7.1 |
| |
| $3.6 |
| |
| $— |
| |
| $— |
| |
| $3.6 |
|
| Debt securities | | 161.1 |
| | 248.8 |
| | — |
| | 409.9 |
| | 112.5 |
| | 196.8 |
| | — |
| | 309.3 |
|
| Common trusts (b) | | | | | | | | 625.3 |
| | | | | | | | 521.8 |
|
| Securitization recovery trust account | | | 4.1 |
| | — |
| | — |
| | 4.1 |
|
| Escrow accounts | | 290.4 |
| | — |
| | — |
| | 290.4 |
| | 7.1 |
| | — |
| | — |
| | 7.1 |
|
| Securitization recovery trust account | | 3.2 |
| | — |
| | — |
| | 3.2 |
| |
| FTRs | | — |
| | — |
| | 8.5 |
| | 8.5 |
| |
| Financial transmission rights | | | — |
| | — |
| | 5.4 |
| | 5.4 |
|
| | |
| $496.6 |
| |
| $248.8 |
| |
| $8.5 |
| |
| $1,379.2 |
| |
| $127.3 |
| |
| $196.8 |
| |
| $5.4 |
| |
| $851.3 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | |
| $7.0 |
| |
| $— |
| |
| $— |
| |
| $7.0 |
| |
Entergy MississippiLouisiana
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $105.3 |
| |
| $— |
| |
| $— |
| |
| $105.3 |
| |
| $64.7 |
| |
| $— |
| |
| $— |
| |
| $64.7 |
|
| Decommissioning trust funds (a): | | | | | | | | | |
| Equity securities | | | 7.6 |
| | — |
| | — |
| | 7.6 |
|
| Debt securities | | | 132.0 |
| | 307.5 |
| | — |
| | 439.5 |
|
| Common trusts (b) | | | | | | | | | 743.0 |
|
| Escrow accounts | | 31.8 |
| | — |
| | — |
| | 31.8 |
| | 292.5 |
| | — |
| | — |
| | 292.5 |
|
| Securitization recovery trust account | | | 8.4 |
| | — |
| | — |
| | 8.4 |
|
| Gas hedge contracts | | 2.7 |
| | — |
| | — |
| | 2.7 |
| | 3.8 |
| | — |
| | — |
| | 3.8 |
|
| FTRs | | — |
| | — |
| | 5.6 |
| | 5.6 |
| |
| Financial transmission rights | | | — |
| | — |
| | 4.1 |
| | 4.1 |
|
| | |
| $139.8 |
| |
| $— |
| |
| $5.6 |
| |
| $145.4 |
| |
| $509.0 |
| |
| $307.5 |
| |
| $4.1 |
| |
| $1,563.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $144.2 |
| |
| $— |
| |
| $— |
| |
| $144.2 |
| |
| $163.9 |
| |
| $— |
| |
| $— |
| |
| $163.9 |
|
| Decommissioning trust funds (a): | | | |
| | |
| | |
| | |
|
| Equity securities | | | 13.9 |
| | — |
| | — |
| | 13.9 |
|
| Debt securities | | | 132.3 |
| | 292.5 |
| | — |
| | 424.8 |
|
| Common trusts (b) | | | | | | | | | 702.0 |
|
| Escrow accounts | | 41.7 |
| | — |
| | — |
| | 41.7 |
| | 305.7 |
| | — |
| | — |
| | 305.7 |
|
| FTRs | | — |
| | — |
| | 2.4 |
| | 2.4 |
| |
| Securitization recovery trust account | | | 2.8 |
| | — |
| | — |
| | 2.8 |
|
| Gas hedge contracts | | | 10.9 |
| | — |
| | — |
| | 10.9 |
|
| Financial transmission rights | | | — |
| | — |
| | 8.5 |
| | 8.5 |
|
| | |
| $185.9 |
| |
| $— |
| |
| $2.4 |
| |
| $188.3 |
| |
| $629.5 |
| |
| $292.5 |
| |
| $8.5 |
| |
| $1,632.5 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | |
| $1.3 |
| |
| $— |
| |
| $— |
| |
| $1.3 |
| |
Entergy Mississippi
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Escrow accounts | |
| $31.8 |
| |
| $— |
| |
| $— |
| |
| $31.8 |
|
| Gas hedge contracts | | 0.7 |
| | — |
| | — |
| | 0.7 |
|
| Financial transmission rights | | — |
| | — |
| | 1.3 |
| | 1.3 |
|
| | |
| $32.5 |
| |
| $— |
| |
| $1.3 |
| |
| $33.8 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $76.8 |
| |
| $— |
| |
| $— |
| |
| $76.8 |
|
| Escrow accounts | | 31.8 |
| | — |
| | — |
| | 31.8 |
|
| Gas hedge contracts | | 2.3 |
| | — |
| | — |
| | 2.3 |
|
| Financial transmission rights | | — |
| | — |
| | 3.2 |
| | 3.2 |
|
| | |
| $110.9 |
| |
| $— |
| |
| $3.2 |
| |
| $114.1 |
|
Entergy New Orleans
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $23.4 |
| |
| $— |
| |
| $— |
| |
| $23.4 |
|
| Securitization recovery trust account | | 1.3 |
| | — |
| | — |
| | 1.3 |
|
| Escrow accounts | | 88.3 |
| | — |
| | — |
| | 88.3 |
|
| FTRs | | — |
| | — |
| | 2.0 |
| | 2.0 |
|
| | |
| $113.0 |
| |
| $— |
| |
| $2.0 |
| |
| $115.0 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $87.8 |
| |
| $— |
| |
| $— |
| |
| $87.8 |
|
| Securitization recovery trust account | | 4.6 |
| | — |
| | — |
| | 4.6 |
|
| Escrow accounts | | 81.0 |
| | — |
| | — |
| | 81.0 |
|
| FTRs | | — |
| | — |
| | 1.5 |
| | 1.5 |
|
| | |
| $173.4 |
| |
| $— |
| |
| $1.5 |
| |
| $174.9 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $0.5 |
| |
| $— |
| |
| $— |
| |
| $0.5 |
|
Entergy Texas
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
Assets: | | | | | | | | | |
| Assets: | | | | | | | | | |
| Temporary cash investments | |
| $54.6 |
| |
| $— |
| |
| $— |
| |
| $54.6 |
| |
| $55.0 |
| |
| $— |
| |
| $— |
| |
| $55.0 |
|
| Securitization recovery trust account | | 29.4 |
| | — |
| | — |
| | 29.4 |
| | 4.6 |
| | — |
| | — |
| | 4.6 |
|
| FTRs | | — |
| | — |
| | 8.0 |
| | 8.0 |
| |
| Escrow accounts | | | 86.3 |
| | — |
| | — |
| | 86.3 |
|
| Financial transmission rights | | | — |
| | — |
| | 0.5 |
| | 0.5 |
|
| | |
| $84.0 |
| |
| $— |
| |
| $8.0 |
| |
| $92.0 |
| |
| $145.9 |
| |
| $— |
| |
| $0.5 |
| |
| $146.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
Assets: | | | | | | | | | |
| Assets: | | | | | | | | | |
| Temporary cash investments | | |
| $103.0 |
| |
| $— |
| |
| $— |
| |
| $103.0 |
|
| Securitization recovery trust account | |
| $38.2 |
| |
| $— |
| |
| $— |
| |
| $38.2 |
| | 1.7 |
| | — |
| | — |
| | 1.7 |
|
| FTRs | | — |
| | — |
| | 2.2 |
| | 2.2 |
| |
| Escrow accounts | | | 88.6 |
| | — |
| | — |
| | 88.6 |
|
| Gas hedge contracts | | | 0.2 |
| | — |
| | — |
| | 0.2 |
|
| Financial transmission rights | | | — |
| | — |
| | 1.1 |
| | 1.1 |
|
| | |
| $38.2 |
| |
| $— |
| |
| $2.2 |
| |
| $40.4 |
| |
| $193.5 |
| |
| $— |
| |
| $1.1 |
| |
| $194.6 |
|
System EnergyEntergy Texas
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $138.0 |
| |
| $— |
| |
| $— |
| |
| $138.0 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 0.7 |
| | — |
| | — |
| | 0.7 |
|
| Debt securities | | 247.4 |
| | 56.3 |
| | — |
| | 303.7 |
|
| Common trusts (b) | | | | | | | | 436.7 |
|
| | |
| $386.1 |
| |
| $56.3 |
| |
| $— |
| |
| $879.1 |
|
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Securitization recovery trust account | |
| $26.3 |
| |
| $— |
| |
| $— |
| |
| $26.3 |
|
| Financial transmission rights | | — |
| | — |
| | 1.0 |
| | 1.0 |
|
| | |
| $26.3 |
| |
| $— |
| |
| $1.0 |
| |
| $27.3 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $222.0 |
| |
| $— |
| |
| $— |
| |
| $222.0 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 1.8 |
| | — |
| | — |
| | 1.8 |
|
| Debt securities | | 218.6 |
| | 59.2 |
| | — |
| | 277.8 |
|
| Common trusts (b) | | | | | | | | 421.9 |
|
| | |
| $442.4 |
| |
| $59.2 |
| |
| $— |
| |
| $923.5 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Temporary cash investments | |
| $5.0 |
| |
| $— |
| |
| $— |
| |
| $5.0 |
|
| Securitization recovery trust account | | 37.5 |
| | — |
| | — |
| | 37.5 |
|
| Financial transmission rights | | — |
| | — |
| | 3.1 |
| | 3.1 |
|
| | |
| $42.5 |
| |
| $— |
| |
| $3.1 |
| |
| $45.6 |
|
| |
(a) | The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios. |
| |
(b) | Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of April 1, |
| $3.7 |
| |
| $3.3 |
| |
| $0.9 |
| |
| $0.6 |
| |
| $0.9 |
|
| Issuances of FTRs | 18.8 |
| | 18.1 |
| | 5.9 |
| | 2.8 |
| | 9.3 |
|
| Gains (losses) included as a regulatory liability/asset | (3.0 | ) | | 16.4 |
| | 2.4 |
| | — |
| | 3.2 |
|
| Settlements | (5.5 | ) | | (21.6 | ) | | (3.6 | ) | | (1.4 | ) | | (5.4 | ) |
| Balance as of June 30, |
| $14.0 |
| |
| $16.2 |
| |
| $5.6 |
| |
| $2.0 |
| |
| $8.0 |
|
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2015.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of April 1, |
| $0.6 |
| |
| $8.8 |
| |
| $0.9 |
| |
| $1.4 |
| |
| $3.4 |
|
| Issuances of FTRs | 7.0 |
| | 48.2 |
| | 5.4 |
| | 7.3 |
| | 11.4 |
|
| Gains (losses) included as a regulatory liability/asset | 21.1 |
| | (2.4 | ) | | 2.5 |
| | 2.5 |
| | (5.7 | ) |
| Settlements | (19.6 | ) | | (17.3 | ) | | (3.9 | ) | | (4.5 | ) | | (1.2 | ) |
| Balance as of June 30, |
| $9.1 |
| |
| $37.3 |
| |
| $4.9 |
| |
| $6.7 |
| |
| $7.9 |
|
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $7.9 |
| |
| $8.5 |
| |
| $2.4 |
| |
| $1.5 |
| |
| $2.2 |
|
| Issuances of FTRs | 18.8 |
| | 18.1 |
| | 5.9 |
| | 2.8 |
| | 9.3 |
|
| Gains (losses) included as a regulatory liability/asset | 0.6 |
| | 21.7 |
| | 1.7 |
| | (0.4 | ) | | 3.4 |
|
| Settlements | (13.3 | ) | | (32.1 | ) | | (4.4 | ) | | (1.9 | ) | | (6.9 | ) |
| Balance as of June 30, |
| $14.0 |
| |
| $16.2 |
| |
| $5.6 |
| |
| $2.0 |
| |
| $8.0 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2015.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $0.7 |
| |
| $25.5 |
| |
| $3.4 |
| |
| $4.1 |
| |
| $12.3 |
|
| Issuances of FTRs | 7.0 |
| | 48.2 |
| | 5.4 |
| | 7.3 |
| | 11.4 |
|
| Gains (losses) included as a regulatory liability/asset | 36.1 |
| | (4.7 | ) | | 3.3 |
| | 1.3 |
| | (16.0 | ) |
| Settlements | (34.7 | ) | | (31.7 | ) | | (7.2 | ) | | (6.0 | ) | | 0.2 |
|
| Balance as of June 30, |
| $9.1 |
| |
| $37.3 |
| |
| $4.9 |
| |
| $6.7 |
| |
| $7.9 |
|
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades (NYPA currently retains the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick). The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 1 and 2, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available-for-sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other-than-temporary and therefore recorded in earnings. Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
The securities held as of June 30, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $3,283 |
| |
| $1,467 |
| |
| $1 |
|
| Debt Securities | | 2,273 |
| | 108 |
| | 1 |
|
| Total | |
| $5,556 |
| |
| $1,575 |
| |
| $2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2015 | | | | | | |
| Equity Securities | |
| $3,195 |
| |
| $1,396 |
| |
| $2 |
|
| Debt Securities | | 2,155 |
| | 41 |
| | 17 |
|
| Total | |
| $5,350 |
| |
| $1,437 |
| |
| $19 |
|
Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $380 million and $342 million as of June 30, 2016 and December 31, 2015, respectively. The amortized cost of debt securities was $2,189 million as of June 30, 2016 and $2,124 million as of December 31, 2015. As of June 30, 2016, the debt securities have an average coupon rate of approximately 3.20%, an average duration of approximately 5.83 years, and an average maturity of approximately 9.22 years. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $24 |
| |
| $1 |
| |
| $84 |
| |
| $— |
|
| More than 12 months | 1 |
| | — |
| | 33 |
| | 1 |
|
| Total |
| $25 |
| |
| $1 |
| |
| $117 |
| |
| $1 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $54 |
| |
| $2 |
| |
| $1,031 |
| |
| $15 |
|
| More than 12 months | 1 |
| | — |
| | 61 |
| | 2 |
|
| Total |
| $55 |
| |
| $2 |
| |
| $1,092 |
| |
| $17 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of June 30, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $73 |
| |
| $77 |
|
| 1 year - 5 years | 839 |
| | 857 |
|
| 5 years - 10 years | 755 |
| | 704 |
|
| 10 years - 15 years | 152 |
| | 124 |
|
| 15 years - 20 years | 63 |
| | 50 |
|
| 20 years+ | 391 |
| | 343 |
|
| Total |
| $2,273 |
| |
| $2,155 |
|
During the three months endedJune 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $504 million and $456 million, respectively. During the three months ended June 30, 2016 and 2015, gross gains of $10 million and $19 million, respectively, and gross losses of $2 million and $1 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
During the six months ended June 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $1,233 million and $949 million, respectively. During the six months ended June 30, 2016 and 2015, gross gains of $20 million and $45 million, respectively, and gross losses of $5 million and $3 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
Entergy Arkansas
Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of June 30, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $497.6 |
| |
| $246.3 |
| |
| $0.1 |
|
| Debt Securities | | 305.2 |
| | 12.1 |
| | 0.1 |
|
| Total | |
| $802.8 |
| |
| $258.4 |
| |
| $0.2 |
|
| | | | | | | |
| 2015 | | | | | | |
| Equity Securities | |
| $467.4 |
| |
| $234.4 |
| |
| $0.2 |
|
| Debt Securities | | 303.9 |
| | 4.1 |
| | 2.2 |
|
| Total | |
| $771.3 |
| |
| $238.5 |
| |
| $2.4 |
|
The amortized cost of debt securities was $299.5 million as of June 30, 2016 and $301.8 million as of December 31, 2015. As of June 30, 2016, the debt securities have an average coupon rate of approximately 2.61%, an average duration of approximately 5.19 years, and an average maturity of approximately 5.94 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $4.5 |
| |
| $0.1 |
| |
| $18.2 |
| |
| $— |
|
| More than 12 months | — |
| | — |
| | 1.6 |
| | 0.1 |
|
| Total |
| $4.5 |
| |
| $0.1 |
| |
| $19.8 |
| |
| $0.1 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $7.8 |
| |
| $0.2 |
| |
| $111.4 |
| |
| $1.7 |
|
| More than 12 months | — |
| | — |
| | 18.5 |
| | 0.5 |
|
| Total |
| $7.8 |
| |
| $0.2 |
| |
| $129.9 |
| |
| $2.2 |
|
The fair value of debt securities, summarized by contractual maturities, as of June 30, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $5.4 |
| |
| $1.8 |
|
| 1 year - 5 years | 119.9 |
| | 145.2 |
|
| 5 years - 10 years | 163.5 |
| | 138.5 |
|
| 10 years - 15 years | 9.7 |
| | 2.4 |
|
| 15 years - 20 years | 1.1 |
| | 2.0 |
|
| 20 years+ | 5.6 |
| | 14.0 |
|
| Total |
| $305.2 |
| |
| $303.9 |
|
During the three months endedJune 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $45.2 million and $64.9 million, respectively. During the three months ended June 30, 2016 and 2015, gross gains of $0.4 million and $0.3 million, respectively, and gross losses of $0.2 million and $0.02 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.
During the six months endedJune 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $103.8 million and $146.8 million, respectively. During the six months ended June 30, 2016 and 2015, gross gains of $1.2 million and $5.4 million, respectively, and gross losses of $0.3 million and $0.02 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of June 30, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $658.6 |
| |
| $300.4 |
| |
| $— |
|
| Debt Securities | | 436.2 |
| | 24.7 |
| | 0.3 |
|
| Total | |
| $1,094.8 |
| |
| $325.1 |
| |
| $0.3 |
|
| | | | | | | |
| 2015 | | | | | | |
| Equity Securities | |
| $632.4 |
| |
| $283.7 |
| |
| $0.2 |
|
| Debt Securities | | 409.9 |
| | 13.2 |
| | 2.4 |
|
| Total | |
| $1,042.3 |
| |
| $296.9 |
| |
| $2.6 |
|
The amortized cost of debt securities was $413.4 million as of June 30, 2016 and $399.2 million as of December 31, 2015. As of June 30, 2016, the debt securities have an average coupon rate of approximately 3.85%, an average duration of approximately 5.47 years, and an average maturity of approximately 11.19 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $1.6 |
| |
| $— |
| |
| $3.7 |
| |
| $— |
|
| More than 12 months | 0.8 |
| | — |
| | 6.8 |
| | 0.3 |
|
| Total |
| $2.4 |
| |
| $— |
| |
| $10.5 |
| |
| $0.3 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $9.4 |
| |
| $0.2 |
| |
| $124.0 |
| |
| $2.0 |
|
| More than 12 months | — |
| | — |
| | 7.4 |
| | 0.4 |
|
| Total |
| $9.4 |
| |
| $0.2 |
| |
| $131.4 |
| |
| $2.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of June 30, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $18.9 |
| |
| $27.1 |
|
| 1 year - 5 years | 115.0 |
| | 124.0 |
|
| 5 years - 10 years | 117.1 |
| | 114.3 |
|
| 10 years - 15 years | 51.8 |
| | 39.3 |
|
| 15 years - 20 years | 30.9 |
| | 26.5 |
|
| 20 years+ | 102.5 |
| | 78.7 |
|
| Total |
| $436.2 |
| |
| $409.9 |
|
During the three months ended June 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $69.7 million and $39.6 million, respectively. During the three months ended June 30, 2016 and 2015, gross gains of $1.7 million and $0.2 million, respectively, and gross losses of $0.04 million and $0.2 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
During the six months ended June 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $123.5 million and $65.2 million, respectively. During the six months ended June 30, 2016 and 2015, gross gains of $2.6 million and $1.5 million, respectively, and gross losses of $0.1 million and $0.2 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
System Energy
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $239.6 |
| |
| $— |
| |
| $— |
| |
| $239.6 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 8.1 |
| | — |
| | — |
| | 8.1 |
|
| Debt securities | | 245.7 |
| | 61.3 |
| | — |
| | 307.0 |
|
| Common trusts (b) | | | | | | | | 500.9 |
|
| | |
| $493.4 |
| |
| $61.3 |
| |
| $— |
| |
| $1,055.6 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $245.1 |
| |
| $— |
| |
| $— |
| |
| $245.1 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 0.3 |
| | — |
| | — |
| | 0.3 |
|
| Debt securities | | 248.3 |
| | 58.3 |
| | — |
| | 306.6 |
|
| Common trusts (b) | | | | | | | | 473.6 |
|
| | |
| $493.7 |
| |
| $58.3 |
| |
| $— |
| |
| $1,025.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (a) | The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements for additional information on the investment portfolios. |
| |
| (b) | Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date. |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2017.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $5.4 |
| |
| $8.5 |
| |
| $3.2 |
| |
| $1.1 |
| |
| $3.1 |
|
| Gains (losses) included as a regulatory liability/asset | 0.1 |
| | 10.8 |
| | 1.2 |
| | 1.8 |
| | 3.2 |
|
| Settlements | (4.6 | ) | | (15.2 | ) | | (3.1 | ) | | (2.4 | ) | | (5.3 | ) |
| Balance as of March 31, |
| $0.9 |
| |
| $4.1 |
| |
| $1.3 |
| |
| $0.5 |
| |
| $1.0 |
|
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $7.9 |
| |
| $8.5 |
| |
| $2.4 |
| |
| $1.5 |
| |
| $2.2 |
|
| Gains (losses) included as a regulatory liability/asset | 3.6 |
| | 5.3 |
| | (0.7 | ) | | (0.4 | ) | | 0.2 |
|
| Settlements | (7.8 | ) | | (10.5 | ) | | (0.8 | ) | | (0.5 | ) | | (1.5 | ) |
| Balance as of March 31, |
| $3.7 |
| |
| $3.3 |
| |
| $0.9 |
| |
| $0.6 |
| |
| $0.9 |
|
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System EnergyEnergy)
Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades. The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.
See Note 16 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. In January 2017, NYPA transferred to Entergy the Indian Point 3 decommissioning trust fund with a fair value of $726 million and the FitzPatrick decommissioning trust fund with a fair value of $793 million.
As discussed in Note 13 to the financial statements herein, in March 2017, Entergy closed on the sale of the FitzPatrick plant to Exelon. As part of the transaction, Entergy transferred the FitzPatrick decommissioning trust fund
Entergy Corporation and Subsidiaries
Notes to Financial Statements
to Exelon. The FitzPatrick decommissioning trust fund had a disposition-date fair value of $805 million and was classified as held for sale within other deferred debits as of December 31, 2016.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana has recorded an offsetting amount of unrealized gains/(losses) in other deferred credits. Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available-for-sale. Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other-than-temporary and therefore recorded in earnings. Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.
The securities held as of June 30, 2016March 31, 2017 and December 31, 20152016 are summarized as follows:
| | | | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) | | (In Millions) |
| 2016 | | | | | | | |
| 2017 | | | | | | | |
| Equity Securities | |
| $437.4 |
| |
| $190.0 |
| |
| $0.1 |
| |
| $4,439 |
| |
| $1,823 |
| |
| $5 |
|
| Debt Securities | | 303.7 |
| | 8.4 |
| | 0.1 |
| | 2,230 |
| | 35 |
| | 22 |
|
| Total | |
| $741.1 |
| |
| $198.4 |
| |
| $0.2 |
| |
| $6,669 |
| |
| $1,858 |
| |
| $27 |
|
| | | | | | | | |
| 2015 | | | | | | | |
| Equity Securities | |
| $423.7 |
| |
| $179.2 |
| |
| $0.3 |
| |
| Debt Securities | | 277.8 |
| | 2.2 |
| | 2.3 |
| |
| Total | |
| $701.5 |
| |
| $181.4 |
| |
| $2.6 |
| |
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $3,511 |
| |
| $1,673 |
| |
| $1 |
|
| Debt Securities | | 2,213 |
| | 34 |
| | 27 |
|
| Total | |
| $5,724 |
| |
| $1,707 |
| |
| $28 |
|
The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31, 2017 are $458 million for Indian Point 1, $582 million for Indian Point 2, $743 million for Indian Point 3, $426 million for Palisades, $994 million for Pilgrim, and $592 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $438 million and $399 million as of March 31, 2017 and December 31, 2016, respectively. The amortized cost of debt securities was $295.2$2,217 million as of June 30, 2016March 31, 2017 and $270.7$2,212 million as of December 31, 2015.2016. As of June 30, 2016,March 31, 2017, the debt securities have an average coupon rate of approximately 1.87%3.21%, an average duration of approximately 5.205.79 years, and an average maturity of approximately 6.359.45 years. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2016:March 31, 2017:
| | | | Equity Securities | | Debt Securities | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | (In Millions) |
| Less than 12 months |
| $1.0 |
| |
| $0.1 |
| |
| $20.2 |
| |
| $— |
|
| $13 |
| |
| $5 |
| |
| $1,087 |
| |
| $21 |
|
| More than 12 months | — |
| | — |
| | 1.1 |
| | 0.1 |
| — |
| | — |
| | 13 |
| | 1 |
|
| Total |
| $1.0 |
| |
| $0.1 |
| |
| $21.3 |
| |
| $0.1 |
|
| $13 |
| |
| $5 |
| |
| $1,100 |
| |
| $22 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2015:2016:
| | | | Equity Securities | | Debt Securities | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | (In Millions) |
| Less than 12 months |
| $8.3 |
| |
| $0.2 |
| |
| $200.4 |
| |
| $2.2 |
|
| $23 |
| |
| $1 |
| |
| $1,169 |
| |
| $26 |
|
| More than 12 months | 0.9 |
| | 0.1 |
| | 5.0 |
| | 0.1 |
| 1 |
| | — |
| | 20 |
| | 1 |
|
| Total |
| $9.2 |
| |
| $0.3 |
| |
| $205.4 |
| |
| $2.3 |
|
| $24 |
| |
| $1 |
| |
| $1,189 |
| |
| $27 |
|
The fair value of debt securities, summarized by contractual maturities, as of June 30, 2016March 31, 2017 and December 31, 20152016 are as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $3.1 |
| |
| $2.0 |
|
| $99 |
| |
| $125 |
|
| 1 year - 5 years | 192.2 |
| | 181.2 |
| 783 |
| | 763 |
|
| 5 years - 10 years | 75.6 |
| | 63.0 |
| 742 |
| | 719 |
|
| 10 years - 15 years | 3.6 |
| | 4.4 |
| 113 |
| | 109 |
|
| 15 years - 20 years | 1.5 |
| | 1.6 |
| 69 |
| | 73 |
|
| 20 years+ | 27.7 |
| | 25.6 |
| 424 |
| | 424 |
|
| Total |
| $303.7 |
| |
| $277.8 |
|
| $2,230 |
| |
| $2,213 |
|
During the three months ended June 30,March 31, 2017 and 2016, and 2015, proceeds from the dispositions of securities amounted to $100.9$514 million and $83.6$729 million, respectively. During the three months ended June 30,March 31, 2017 and 2016, and 2015, gross gains of $0.9$9 million and $0.4$10 million, respectively, and gross losses of $5 million and $3 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $557.7 |
| |
| $307.2 |
| |
| $— |
|
| Debt Securities | | 310.0 |
| | 3.1 |
| | 3.6 |
|
| Total | |
| $867.7 |
| |
| $310.3 |
| |
| $3.6 |
|
| | | | | | | |
| 2016 | | | | | | |
| Equity Securities | |
| $525.4 |
| |
| $281.5 |
| |
| $— |
|
| Debt Securities | | 309.3 |
| | 3.4 |
| | 4.2 |
|
| Total | |
| $834.7 |
| |
| $284.9 |
| |
| $4.2 |
|
The amortized cost of debt securities was $310.5 million as of March 31, 2017 and $310.1 million as of December 31, 2016. As of March 31, 2017, the debt securities have an average coupon rate of approximately 2.61%, an average duration of approximately 5.26 years, and an average maturity of approximately 6.10 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $1.1 |
| |
| $— |
| |
| $150.5 |
| |
| $3.6 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
|
| Total |
| $1.1 |
| |
| $— |
| |
| $150.5 |
| |
| $3.6 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
|
| Total |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $17.8 |
| |
| $16.7 |
|
| 1 year - 5 years | 109.7 |
| | 106.2 |
|
| 5 years - 10 years | 162.1 |
| | 161.2 |
|
| 10 years - 15 years | 7.0 |
| | 7.7 |
|
| 15 years - 20 years | 1.0 |
| | 1.0 |
|
| 20 years+ | 12.4 |
| | 16.5 |
|
| Total |
| $310.0 |
| |
| $309.3 |
|
During the three months endedMarch 31, 2017 and 2016, proceeds from the dispositions of securities amounted to $36 million and $58.6 million, respectively. During the three months ended March 31, 2017 and 2016, gross gains of $0.5 million and $0.8 million, respectively, and gross losses of $0.1 million and $0.04$0.1 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Louisiana
Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $750.6 |
| |
| $382.7 |
| |
| $— |
|
| Debt Securities | | 439.5 |
| | 8.5 |
| | 4.3 |
|
| Total | |
| $1,190.1 |
| |
| $391.2 |
| |
| $4.3 |
|
| | | | | | | |
| 2016 | | | | | | |
| Equity Securities | |
| $715.9 |
| |
| $346.6 |
| |
| $— |
|
| Debt Securities | | 424.8 |
| | 8.0 |
| | 5.0 |
|
| Total | |
| $1,140.7 |
| |
| $354.6 |
| |
| $5.0 |
|
The amortized cost of debt securities was $435.2 million as of March 31, 2017 and $421.9 million as of December 31, 2016. As of March 31, 2017, the debt securities have an average coupon rate of approximately 3.77%, an average duration of approximately 5.72 years, and an average maturity of approximately 11.20 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $1.6 |
| |
| $— |
| |
| $189.9 |
| |
| $4.1 |
|
| More than 12 months | — |
| | — |
| | 2.7 |
| | 0.2 |
|
| Total |
| $1.6 |
| |
| $— |
| |
| $192.6 |
| |
| $4.3 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $198.8 |
| |
| $4.8 |
|
| More than 12 months | — |
| | — |
| | 4.8 |
| | 0.2 |
|
| Total |
| $— |
| |
| $— |
| |
| $203.6 |
| |
| $5.0 |
|
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $28.1 |
| |
| $31.4 |
|
| 1 year - 5 years | 101.2 |
| | 99.1 |
|
| 5 years - 10 years | 126.4 |
| | 122.8 |
|
| 10 years - 15 years | 44.0 |
| | 41.4 |
|
| 15 years - 20 years | 30.3 |
| | 30.9 |
|
| 20 years+ | 109.5 |
| | 99.2 |
|
| Total |
| $439.5 |
| |
| $424.8 |
|
During the sixthree months ended June 30,March 31, 2017 and 2016, and 2015, proceeds from the dispositions of securities amounted to $289.4$40.6 million and $162$53.8 million, respectively. During the sixthree months ended June 30,March 31, 2017 and 2016, and 2015, gross gains of $2.5$0.03 million and $0.8$0.9 million, respectively, and gross losses of $0.4$0.2 million and $0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of March 31, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $509.0 |
| |
| $245.4 |
| |
| $— |
|
| Debt Securities | | 307.0 |
| | 2.4 |
| | 3.4 |
|
| Total | |
| $816.0 |
| |
| $247.8 |
| |
| $3.4 |
|
| | | | | | | |
| 2016 | | | | | | |
| Equity Securities | |
| $473.9 |
| |
| $221.9 |
| |
| $0.1 |
|
| Debt Securities | | 306.6 |
| | 2.0 |
| | 4.5 |
|
| Total | |
| $780.5 |
| |
| $223.9 |
| |
| $4.6 |
|
The amortized cost of debt securities was $308 million as of March 31, 2017 and $309.1 million as of December 31, 2016. As of March 31, 2017, the debt securities have an average coupon rate of approximately 1.99%, an average duration of approximately 5.04 years, and an average maturity of approximately 6.45 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $1.0 |
| |
| $— |
| |
| $200.5 |
| |
| $3.3 |
|
| More than 12 months | — |
| | — |
| | 0.2 |
| | 0.1 |
|
| Total |
| $1.0 |
| |
| $— |
| |
| $200.7 |
| |
| $3.4 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $220.9 |
| |
| $4.4 |
|
| More than 12 months | — |
| | 0.1 |
| | 0.8 |
| | 0.1 |
|
| Total |
| $— |
| |
| $0.1 |
| |
| $221.7 |
| |
| $4.5 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $1.7 |
| |
| $6.6 |
|
| 1 year - 5 years | 188.5 |
| | 188.2 |
|
| 5 years - 10 years | 84.6 |
| | 78.5 |
|
| 10 years - 15 years | 1.4 |
| | 1.3 |
|
| 15 years - 20 years | 7.6 |
| | 7.8 |
|
| 20 years+ | 23.2 |
| | 24.2 |
|
| Total |
| $307.0 |
| |
| $306.6 |
|
During the three months ended March 31, 2017 and 2016, proceeds from the dispositions of securities amounted to $75.8 million and $188.5 million, respectively. During the three months ended March 31, 2017 and 2016, gross gains of $0.1 million and $1.6 million, respectively, and gross losses of $0.7 million and $0.3 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
Other-than-temporary impairments and unrealized gains and losses
Entergy evaluates investment securities in the Entergy Arkansas, Entergy Louisiana, and System Energy evaluateWholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred. The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs. Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss). Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three and six months ended June 30, 2016March 31, 2017 and 2015.2016. The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment continues to beis based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. Entergy did not have anyrecord material charges relating to other income for the three months endedMarch 31, 2017 and 2016, resulting from the recognition of the other-than-temporary impairment of certain equity securities for the three and six months endedJune 30, 2016 and 2015.held in its decommissioning trust funds.
NOTE 10. INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See “Income Tax Litigation,” “Income Tax Audits,” and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax proceedings, income tax audits and other income tax matters involving Entergy. The following are updatesis an update to that discussion.
2010-2011 IRS Audit
As discussed in the Form 10-K, in the second quarter 2016, Entergy made a tax election to treat its subsidiary that owned the FitzPatrick nuclear power plant as a corporation for federal income tax purposes. The IRS has completed its examinationeffect of the 2010election was that the plant and 2011associated assets were deemed to be contributed to a new corporation for federal income tax yearspurposes, which created permanent and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy has agreed to all proposed adjustments containedtemporary differences, as discussed in the RAR.
As a result ofForm 10-K. One permanent difference, which increased tax expense in 2016 under the issuance ofapplicable accounting standards, was the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:
Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million, of which Entergy Louisiana recorded $61.6 million. Entergy Louisiana also accrued a regulatory liability of $16.1 million ($9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.
Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability relatedreduction to the Vidalia purchased power agreement. As a result,plant’s tax basis to the extent that it exceeded its fair market value. Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.
The settlement ofsold the above-described items, along with other minor recorded adjustments, decreased Entergy Louisiana’s balance of unrecognized tax benefits from $796.9 million as of DecemberFitzPatrick plant on March 31, 2015 to $564.7 million as of June 30, 2016, net of carryovers for losses and credits. The unrecognized tax benefits were settled primarily through utilization of net operating loss carryovers.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other Tax Matters
Entergy made a tax election to treat its subsidiary that owns one2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy Wholesale Commodities nuclear power plantsto re-determine the plant’s tax basis, using the closing price as indicative of a corporationhigher fair market value for federal income tax purposes. Thisthe plant. The re-determined basis resulted in a constructive contribution of all the assets and liabilities associated with the plant to a new subsidiary corporation for federal$44 million income tax purposes. The constructive contribution requiredbenefit in the first quarter 2017.
In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize the plant’s nuclear decommissioning liability forall income tax purposes resulting in permanent differences undereffects related to share-based payments through the income tax accounting standards. The accrual ofstatement. In the nuclear decommissioning liability required Entergy to recognize a gain for income tax purposes, a significant portion of whichfirst quarter 2017, stock option expirations, along with other stock compensation activity, resulted in an increasethe write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in tax basis of the assets constructively contributedNote 12 to the subsidiary. The permanent difference reduced income tax expense, net of unrecognized tax benefits, by $238 million.financial statements in the Form 10-K.
NOTE 11. PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Construction Expenditures in Accounts Payable
Construction expenditures included in accounts payable at June 30, 2016March 31, 2017 are $138$209 million for Entergy, $20.4$33.4 million for Entergy Arkansas, $43.3$74.4 million for Entergy Louisiana, $2.3$3.3 million for Entergy Mississippi, $0.2$0.6 million for Entergy New Orleans, $11.5$13.8 million for Entergy Texas, and $11.8$26.9 million for System Energy. Construction expenditures included in accounts payable at December 31, 20152016 are $234$253 million for Entergy, $43$40.9 million for Entergy Arkansas, $68.6$114.8 million for Entergy Louisiana, $11.4$11.5 million for Entergy Mississippi, $1.5$2.3 million for Entergy New Orleans, $33.1$9.3 million for Entergy Texas, and $6.8$6.2 million for System Energy.
Waterford 3 Transaction
See Note 10 to the financial statements in the Form 10-K for a discussion of the Waterford 3 lease obligation. In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana will continue to make payments on the lessor debt that remains outstanding. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt will be equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.
NOTE 12. VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 1817 to the financial statements in the Form 10-K for a discussion of variable interest entities. See Note 4 to the financial statements herein for details of the nuclear fuel companies’ credit facilities and commercial paper borrowings and long-term debt.
Entergy Louisiana was considered to hold a variable interest in the lessor from which it leased an undivided interest representing approximately 9.3% of the Waterford 3 nuclear plant. After Entergy Louisiana acquired a beneficial interest in the leased assets in March 2016, however, the lessor was no longer considered a variable interest entity. Entergy Louisiana made payments on its lease, including interest, of $9.2 million and $21 million in the six months ended June 30, 2016 and 2015, respectively.through March 2016. See Note 1110 to the financial statements hereinin the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 10 to the financial statements in the Form 10-K. System Energy made payments on its lease, including interest, of $8.6 million in the three months ended March 31, 2017 and $37.6$8.6 million in the sixthree months ended June 30, 2016 and 2015, respectively.March 31, 2016.
NOTE 13. ACQUISITIONSDISPOSITIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans)Corporation)
In March 2016, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans purchased2017 the Union Power Station, a 1,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union Power Station consists of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). Entergy Louisiana purchased twoNRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power blocks andplant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a 50% undivided ownership interestpurchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain assetsliabilities related to the facility,FitzPatrick plant, resulting in a pre-tax gain on the sale
Entergy Corporation and Entergy Arkansas and Entergy New Orleans each purchased one power block and a 25% undivided ownership interest in such related assets. The aggregate purchase priceSubsidiaries
Notes to Financial Statements
of $16 million. At the transaction close, Exelon paid an additional $8 million for the Union Power Stationproration of certain expenses prepaid by Entergy.
As discussed in Note 10 to the financial statements herein, as a result of the sale of FitzPatrick on March 31, 2017, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit.
The assets and liabilities associated with the sale of FitzPatrick to Exelon were classified as held for sale on Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet as of December 31, 2016. The disposition-date fair value of the decommissioning trust fund was approximately $949$805 million, (approximately $237classified within other deferred debits, and the disposition-date fair value of the asset retirement obligation was $727 million, classified within other non-current liabilities. The transaction also included property, plant, and equipment with a net book value of zero, materials and supplies, and prepaid assets.
As discussed in Note 14 to the financial statements in the Form 10-K, Entergy entered into a reimbursement agreement with Exelon pursuant to which Exelon reimburses Entergy for each power blockspecified out-of-pocket costs associated with the operation of FitzPatrick. In the first quarter 2017, Entergy billed Exelon for reimbursement of $98 million of other operation and associated assets).maintenance expenses, $7 million in lost operating revenues, and $3 million in taxes other than income taxes, partially offset by a $10 million defueling credit to Exelon.
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, 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. Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk
See “Market and Credit Risk Sensitive Instruments” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Part I, Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of June 30, 2016,March 31, 2017, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
Under the supervision and with the participation of each Registrants’ management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended June 30, 2016March 31, 2017 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter2016 Compared to Second Quarter2015
Net income increased $12.4decreased $5 million primarily due to higher net revenue,other operation and maintenance expenses, partially offset by higher depreciation and amortization expenses and higher other operation and maintenance expenses.
Six Months Ended June 30, 2016Compared toSix Months Ended June 30, 2015
Net income increased $13.8 million primarily due to higher net revenue, partially offset by higher depreciation and amortization expenses, a higher effective income tax rate, and higher interest expense.revenue.
Net Revenue
Second Quarter2016 Compared to Second Quarter2015
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 charges (credits). Following is an analysis of the change in net revenue comparing the secondfirst quarter 20162017 to the secondfirst quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $335.0321.7 |
|
| Retail electric price | 25.720.2 |
|
Transmission revenueOpportunity sales | 7.17.5 |
|
| Volume/weather | (18.0 | ) |
| Other | (2.11.1 | ) |
20162017 net revenue |
| $365.7330.3 |
|
The retail electric price variance is primarily due to an increase in base rates as approved byand the APSC. The new rates were effective February 24, 2016 and began billing with the first billing cycleimplementation of April 2016. A significant portion of the increase is related to the purchase of Power Block 2 of the Union Power Station. See Note 2 to the financial statements herein for further discussion of theformula rate case. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
The transmission revenue variance is primarily due to an increase in Attachment O rates charged by MISO to transmission customers.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
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 charges (credits). Following is an analysis of the change in net revenue comparing the six months ended June 30, 2016 to the six months ended June 30, 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $642.3 |
|
Retail electric price | 48.9 |
|
Transmission revenue | 12.6 |
|
Asset retirement obligation | 5.4 |
|
Opportunity sales | (7.5 | ) |
Volume/weather | (11.6 | ) |
Other | (2.7 | ) |
2016 net revenue |
| $687.4 |
|
The retail electric price variance is primarily due to an increase in baseplan rates, as approved by the APSC. The new base rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. The increase includes an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. A significant portion of the base rate increase iswas related to the purchase of Power Block 2 of the Union Power Station. See Note 2 to the financial statements herein for further discussion of the rate case. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
The transmission revenue variance is primarily due to an increase in Attachment O rates charged by MISO to transmission customers.
The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 is primarily caused by an increase in regulatory credits because of lower realized gains on decommissioning trust fund investments.
The opportunity sales variance results from the estimated net revenue effect of the FERC orders issued in April 2016 in the opportunity sales proceeding. See “Opportunity Sales Proceeding” below for further discussion of the opportunity sales proceeding.
The volume/weather variance is primarily due to a decrease of 702 GWh, or 7%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales.
Other Income Statement Variances
Second Quarter 2016 Compared to Second Quarter 2015
Other operation and maintenance expenses increased primarily due to:
$6.5 million in credits received in the second quarter 2015 related to incentives recognized as a result of participation in energy efficiency programs;
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
an increase of $2.5 million in fossil-fueled generation expenses primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016. The formula rate plan rates were effective with the first billing cycle of January 2017. See Note 132 to the financial statements hereinin the Form 10-K for further discussion of the rate cases. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase; and
an increase of $1.6 million in nuclear generation expenses primarily due to an increase in regulatory compliance costs and an overall higher scope of work done during plant outages as compared to prior year. The increase in regulatory compliance costs is primarily related to additional NRC inspection activities as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s Reactor Oversight Process Action Matrix. See “ANO Damage, Outage, and NRC Reviews” below.
purchase.
The increase was partially offset by:
a decrease of $4.5 million in compensation and benefits costs primarily due to a decrease inopportunity sales variance results from the estimated net periodic pension and other postretirement benefits costs as a result of an increaserevenue effect recorded in the discount rate used to valuefirst quarter 2016 in connection with the benefit liabilities and a refinementFERC orders issued in April 2016 in the approach usedopportunity sales proceeding. See Note 2 to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits”financial statements in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
a decrease of $3.7 million in energy efficiency costs, including the effects of true-ups to the energy efficiency filings in June 2016 for fixed costs to be collected from customers.opportunity sales proceeding.
Depreciation and amortization expenses increasedThe volume/weather variance is primarily due to additions to plant in service, including the purchase of Power Block 2effect of the Union Power Station in March 2016.unbilled sales period including less favorable weather and decreased usage.
Other income increased primarily due to higher earnings on decommissioning trust fund investments in the second quarter 2016 as compared to the second quarter 2015.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015Income Statement Variances
Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages as compared to the previous outages.
Other operation and maintenance expenses decreasedincreased primarily due to:
the deferral in first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC as part of the 2015 rate case settlement. See Note 2 to the financial statements herein for further discussion of the rate case settlement;
These costs are being amortized over a decrease of $9.7 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
a decrease of $9.1 million in energy efficiency costs, including the effects of true-ups to the energy efficiency filings in June 2016 for fixed costs to be collected from customers.
The decrease was partially offset by:
an increase of $23.5 million in nuclear generation expenses primarily due to an increase in regulatory compliance costs and an overall higher scope of work done during plant outages as compared to prior year. The increase in regulatory compliance costs is primarily related to additional NRC inspection activities as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstoneten-year period
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
beginning March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;
an increase of $2.7 million in distribution expenses primarily due to timing differences in the vegetation maintenance costs incurred in 2017;
an increase of $2.6 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in 2017 as compared to the same period in 2016; and
an increase of $2.4 million in compensation and benefits costs primarily due to a revision to estimated incentive compensation expense in first quarter 2016.
The increase was partially offset by a decrease of $13.2 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs as compared to the prior year. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s Reactor Oversight Process Action Matrix.reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” below; and
$6.5 million in credits received in the second quarter 2015 related to incentives recognized asForm 10-K for a resultdiscussion of participation in energy efficiency programs.
Taxes other than income taxes decreased primarily due to a decrease in payroll taxes.the ANO stator incident and subsequent NRC reviews.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchase of Power Block 2 of the Union Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
Other income decreasedincreased primarily due to lowerhigher realized gains in 20162017 as compared to 20152016 on the decommissioning trust fund investments, partially offset by an increase in the allowance for equity funds used during construction resulting from increased transmission spending in 2016.investments.
Interest expense increaseddecreased primarily due to $5.1 million in estimated interest expense recorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the opportunity sales proceeding.
Income Taxes
The effective income tax rate was 40.1%44.4% for the secondfirst quarter 2016 and 40.0% for the six months ended June 30, 2016.2017. The differencesdifference in the effective income tax ratesrate for the secondfirst quarter 2016 and the six months ended June 30, 20162017 versus the federal statutory rate of 35% werewas primarily due to a write-off of a stock-based compensation deferred tax asset, state income taxes, and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 40.9%39.8% for the secondfirst quarter 2015.2016. The difference in the effective income tax rate for the secondfirst quarter 20152016 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 35.4% for the six months ended June 30, 2015. The difference in the effective income tax rate for the six months ended June 30, 2015 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction and the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS. See Note 3 to the financial statements in the Form 10-K for a discussion of the finalized tax and interest computations for the 2006-2007 audit.
ANO Damage, Outage, and NRC Reviews
See Note 8 to the financial statements“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident, and subsequent NRC reviews.reviews, and the deferral of replacement power costs.
As discussed in the Form 10-K, in March 2015 the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column” (Column 4) of the NRC’s Reactor Oversight Process Action Matrix. Placement into Column 4 requires significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with the flood barrier and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. Entergy Arkansas incurred incremental expenses of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediation and response costs that may result from the additional NRC inspection
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
activities, Entergy Arkansas expects to incur incremental expenses of approximately $50 million in 2016, of which $30.6 million was incurred through June 30, 2016, in support of NRC inspection activities and to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. A lesser amount of incremental expenses is expected to be ongoing annually after 2016, until ANO transitions out of Column 4.
The NRC completed the supplemental inspection required for ANO’s Column 4 designation in February 2016, and published its inspection report in June 2016. In its inspection report, the NRC concluded that the ANO site is being operated safely and that Entergy understands the depth and breadth of performance concerns associated with ANO’s performance decline. Also in June 2016, the NRC issued a confirmatory action letter to confirm the actions Entergy Arkansas has taken and will continue to take to improve performance at ANO. The NRC will verify the completion of those actions through quarterly follow-up inspections, the results of which will determine when ANO should transition out of Column 4.
Liquidity and Capital Resources
Cash Flow
Cash flows for the sixthree months ended June 30,March 31, 2017 and 2016 and 2015 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $9,135 |
| |
| $218,505 |
|
| $20,509 |
| |
| $9,135 |
|
| | | | | | | |
| Cash flow provided by (used in): |
|
| | |
|
|
| | |
|
| Operating activities | 253,703 |
| | 214,338 |
| 154,541 |
| | 139,613 |
|
| Investing activities | (577,426 | ) | | (277,187 | ) | (207,097 | ) | | (395,106 | ) |
| Financing activities | 339,700 |
| | (56,429 | ) | 32,522 |
| | 280,137 |
|
| Net increase (decrease) in cash and cash equivalents | 15,977 |
| | (119,278 | ) | (20,034 | ) | | 24,644 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $25,112 |
| |
| $99,227 |
|
| $475 |
| |
| $33,779 |
|
Operating Activities
Net cash flow provided by operating activities increased $39.4$14.9 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
an increase due to the timing of recovery of fuel and purchased power costs;
income tax payments of $7.2 million in 2016 in accordance with an intercompany income tax allocation agreement;
a decrease of $21.8$3.7 million in interest paid; and
a decrease of $2.2 million in pension contributions in 2017. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.
The increase was partially offset by an increase of $3.5 million in spending on nuclear refueling outages in 2016;
a decrease of $10.3 million in income tax payments primarily due to the final settlement of amounts outstanding associated with the 2006-2007 IRS audit paid in the first quarter of 2015. See Note 3 to the financial statements in the Form 10-K for a discussion of the 2006-2007 IRS audit;
the timing of payments to vendors; and
a decrease of $4.7 million in storm spending in 2016.
The increase was partially offset by:
a decrease in the recovery of fuel and purchased power costs including System Agreement bandwidth remedy collections from customers of $16.8 million received in 2016 as compared to $29.7 million received in 2015. See Note 2 herein and in the Form 10-K for a discussion of the System Agreement proceedings; and
an increase of $8.1 million in interest paid resulting from an increase in interest expense, as discussed above.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
2017.
Investing Activities
Net cash flow used in investing activities increased $300.2decreased $188 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
to the purchase of Power Block 2 of the Union Power Station in March 2016 for approximately $237 million. See Note 13 to the financial statements herein for discussionmillion and a decrease of the Union Power Station purchase;
an increase$15.6 million in non-storm related transmission and distribution construction expenditures primarily due to a higherlower scope of work performed in 2016; and
2017. The decrease was partially offset by the fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle.
Thecycle and an increase was partially offset by the decreaseof $18.6 million in nuclear construction expenditures primarily due to decreased spendinga higher scope of work performed on compliance with NRC post-Fukushima requirementsvarious nuclear projects in 2017. See Note 14 to the financial statements for discussion of the Union Power Station purchase.
Entergy Arkansas, Inc. and a decrease in storm-related transmissionSubsidiaries
Management's Financial Discussion and distribution construction expenditures primarily due to higher storm restoration spending in 2015.Analysis
Financing Activities
Entergy Arkansas’sNet cash flow provided by financing activities provided $339.7decreased $247.6 million of cash for the sixthree months ended June 30, 2016March 31, 2017 compared to using $56.4 million of cash for the sixthree months ended June 30, 2015March 31, 2016 primarily due to the following activity:to:
the issuance of $325 million of 3.5% Series first mortgage bonds in January 2016. Entergy Arkansas used2016, a portion of the proceeds of which were used to pay, prior to maturity, $175 million of 5.66% Series first mortgage bonds. Entergy Arkansas used the remainder of the proceeds, together with other funds, for the purchase of Power Block 2 of the Union Power Station as discussed above, and for general corporate purposes; and
a $200 million capital contribution received from Entergy Corporation in March 2016 primarily in anticipation of Entergy Arkansas’s purchase of Power Block 2 of the Union Power Station;Station.
the issuance
The decrease was partially offset by net borrowings of $55 million of 3.5% Series first mortgage bonds in June 2016. These bonds were a further issuance of the 3.5% Series first mortgage bonds issued in January 2016. Entergy Arkansas used the proceeds, together with other funds, to pay, prior to maturity, $60 million of 6.38% Series first mortgage bonds in July 2016;
money pool activity; and
net repayments of $48$52.3 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2015.2017 compared to net repayments of $11.7 million in 2016 and money pool activity.
Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $20.2 million in 2017 compared to decreasing by $52.7 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Decreases in Entergy Arkansas’s payable See Note 14 to the money pool are a usefinancial statements in the Form 10-K for discussion of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $52.7 million for the six months ended June 30, 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Union Power Station purchase.
Capital Structure
Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital ratio for Entergy Arkansas is primarily due to the capital contribution received from Entergy Corporation in March 2016, as discussed above.
| | | | June 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 55.7 | % | | 56.8 | % | 55.6 | % | | 55.3 | % |
| Effect of excluding the securitization bonds | (0.4 | %) | | (0.6 | %) | (0.4 | %) | | (0.4 | %) |
| Debt to capital, excluding securitization bonds (a) | 55.3 | % | | 56.2 | % | 55.2 | % | | 54.9 | % |
| Effect of subtracting cash | (0.3 | %) | | (0.1 | %) | — | % | | (0.2 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 55.0 | % | | 56.1 | % | 55.2 | % | | 54.7 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas. |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because the securitization bonds are non-recourse to Entergy Arkansas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Arkansas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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’s uses and sources of capital. Entergy Arkansas seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support planned investments, Entergy Arkansas may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure. In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure if financed entirely with debt and reducing dividends, Entergy Arkansas may receive equity contributions to maintain the targeted capital structure.
Following are updates to the information provided in the Form 10-K.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The current annual amounts of Entergy Arkansas’s planned construction and other capital investments are as follows:
|
| | | | | | | | | | | |
| | 2016 | | 2017 | | 2018 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $415 |
| |
| $160 |
| |
| $140 |
|
| Transmission | 175 |
| | 185 |
| | 135 |
|
| Distribution | 215 |
| | 255 |
| | 205 |
|
| Other | 70 |
| | 30 |
| | 35 |
|
| Total |
| $875 |
| |
| $630 |
| |
| $515 |
|
The updated capital plan for 2016-2018 reflects capital plan refinements and includes specific investments such as the Union Power Station purchase in March 2016; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintain reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments.
Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
June 30, 2016 | | December 31, 2015 | | June 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $1,453 | | ($52,742) | | $6,177 | | $2,218 |
|
| | | | | | |
March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($31,008) | | ($51,232) | | $1,842 | | ($52,742) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in August 2020.2021. Entergy Arkansas also has a $20 million credit facility which was scheduled to expire in April 2017.2017, but was renewed by Entergy Arkansas through April 2018. The $150 million credit facility allows Entergy Arkansas to issue letters of credit against 50% of the borrowing capacity of the facility. As of June 30, 2016,March 31, 2017, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of June 30, 2016,March 31, 2017, a $1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in May 2019. As of June 30, 2016, $12.6March 31, 2017, $52.3 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
2016 Formula Rate Plan Filing
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In April 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction with its 2017 formula rate plan filing, scheduled to be made in July 2017.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’s deployment of advanced metering infrastructure is in the public interest. This matter is pending before the APSC.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
2015 Rate CaseEnergy Cost Recovery Rider
In April 2015,March 2017, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notified the APSCits annual redetermination of Entergy Arkansas’s intent to implement a formulaits energy cost rate review mechanism pursuant to Arkansas legislation passed in 2015, and requested a retail ratethe energy cost recovery rider, which reflected an increase of $268.4 million, with a net increase in revenue of $167 million. The filing requested a 10.2% return on common equity. In September 2015 the APSC staff and intervenors filed direct testimony, with the APSC staff recommending a revenue requirement of $217.9 million and a 9.65% return on common equity. In December 2015, Entergy Arkansas, the APSC staff, and certain of the intervenors in the rate casefrom $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed with the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 million with a net increase in revenue of approximately $133 million; an authorized return on common equity of 9.75%; and a formula rate plan tariff that provides a +/- 50 basis point band around the 9.75% allowed return on common equity. A significant portion of the rate increase is related to Entergy Arkansas’s acquisitiontestimony in March 2016 of Union Power Station Power Block 2 for a base purchase price of $237 million, subject to closing adjustments. The settlement agreement also provided for amortization over a 10-year period of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance. A settlement hearing was held in January 2016. In February 20162017 recommending that the APSC approved the settlement with one exception that would reduce the retailredetermined rate increase proposed in the settlement by $5 million. The settling parties agreed to the APSC modifications in February 2016. The new rates were effective February 24, 2016 and began billingshould be implemented with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliance filing regarding2017 under the new rates that included an interim basenormal operation of the tariff. Accordingly, the redetermined rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 throughwent into effect on March 31, 2016. The interim base rate adjustment surcharge will recover a total of $21.1 million over the nine-month period from April 2016 through December 2016.
2016 Formula Rate Plan Filing
In July 2016, Entergy Arkansas filed with the APSC its 2016 Entergy Arkansas formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2017 test year to be below the formula rate plan bandwidth. The filing requests a $68 million rate increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75%. Entergy Arkansas requested an order approving its proposed formula rate plan adjustment by December 9, 2016. If a final order is not issued by this date, the proposed formula rate plan adjustment will become effective December 30, 2016, subject to refund.
Production Cost Allocation Rider
In May 2016, Entergy Arkansas filed its annual redetermination of the production cost allocation rider, which reflected recovery of the production cost allocation rider true-up adjustment of the 2014 and 2015 unrecovered retail balance in the amount of $1.9 million. Additionally, the redetermined rates reflect the recovery of a $1.9 million System Agreement bandwidth remedy payment resulting from a compliance filing pursuant to the FERC’s December 2015 order related to test year 2009 production costs. The rates for the 2016 production cost allocation rider update became effective with the first billing cycle of July 2016, and rates will be effective through June 2017.
Opportunity Sales Proceeding
See the Form 10-K for a discussion of the proceeding initiated at the FERC by the LPSC in June 2009 in which the LPSC initially requested that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocate the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibits sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. In April 2016 the FERC issued orders addressing the requests for rehearing filed in July 2012 and the ALJ’s August 2013 initial decision. The first order denies Entergy’s request for rehearing and affirms FERC’s earlier rulings that Entergy’s
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.
The effect of the FERC’s decisions, if upheld, is that Entergy Arkansas will make payments to some or all of the other Utility operating companies. As part of the further proceedings required by the FERC, Entergy will re-run intra-system bills for a ten-year period (2000-2009) to quantify the effects of the FERC's rulings. The ALJ will issue an initial decision and FERC will issue an order reviewing that decision. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing that initial decision and Entergy submits a subsequent filing to comply with that order. Because further proceedings are required, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case, however, in the first quarter 2016 Entergy Arkansas recorded a liability of $87 million for its estimated increased costs and payment to the other Utility operating companies, including interest. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Therefore Entergy Arkansas recorded a regulatory asset of approximately $75 million, which represents its estimate of the retail portion of the costs.
In May 2016 a procedural schedule was established with a hearing in May 2017 and an initial decision expected in August 2017. In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order addressing the requests for rehearing filed in July 2012. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order.tariff.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear sustainability plan. That plan has not been fully developed, but it will result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear sustainability plan, and an estimate of the costs associated with this plan cannot be made at this time.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits. The following is an update to that discussion.
Taxationbenefits, and Uncertain Tax Positions
See “Critical Accounting Estimates - Taxation and Uncertain Tax Positions” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $474,351 |
| |
| $465,373 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 99,409 |
| | 80,937 |
|
| Purchased power | | 55,133 |
| | 61,804 |
|
| Nuclear refueling outage expenses | | 19,619 |
| | 15,069 |
|
| Other operation and maintenance | | 165,857 |
| | 152,906 |
|
| Decommissioning | | 13,895 |
| | 13,103 |
|
| Taxes other than income taxes | | 24,051 |
| | 23,086 |
|
| Depreciation and amortization | | 67,066 |
| | 63,173 |
|
| Other regulatory charges (credits) - net | | (10,526 | ) | | 917 |
|
| TOTAL | | 434,504 |
| | 410,995 |
|
| | | | | |
| OPERATING INCOME | | 39,847 |
| | 54,378 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 4,350 |
| | 4,932 |
|
| Interest and investment income | | 6,932 |
| | 3,594 |
|
| Miscellaneous - net | | (107 | ) | | (775 | ) |
| TOTAL | | 11,175 |
| | 7,751 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 27,252 |
| | 32,782 |
|
| Allowance for borrowed funds used during construction | | (1,962 | ) | | (2,715 | ) |
| TOTAL | | 25,290 |
| | 30,067 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 25,732 |
| | 32,062 |
|
| | | | | |
| Income taxes | | 11,428 |
| | 12,768 |
|
| | | | | |
| NET INCOME | | 14,304 |
| | 19,294 |
|
| | | | | |
| Preferred dividend requirements | | 357 |
| | 1,718 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $13,947 |
| |
| $17,576 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(page left blank intentionally)
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three and Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $504,252 |
| |
| $551,809 |
| |
| $969,625 |
| |
| $1,063,062 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 88,022 |
| | 145,315 |
| | 168,959 |
| | 250,187 |
|
| Purchased power | | 49,714 |
| | 80,671 |
| | 111,518 |
| | 180,485 |
|
| Nuclear refueling outage expenses | | 14,981 |
| | 13,443 |
| | 30,050 |
| | 25,506 |
|
| Other operation and maintenance | | 173,909 |
| | 169,365 |
| | 326,815 |
| | 329,910 |
|
| Decommissioning | | 13,301 |
| | 12,491 |
| | 26,404 |
| | 24,795 |
|
| Taxes other than income taxes | | 22,961 |
| | 22,980 |
| | 46,047 |
| | 48,684 |
|
| Depreciation and amortization | | 67,115 |
| | 61,540 |
| | 130,288 |
| | 121,642 |
|
| Other regulatory charges (credits) - net | | 802 |
| | (9,145 | ) | | 1,719 |
| | (9,952 | ) |
| TOTAL | | 430,805 |
| | 496,660 |
| | 841,800 |
| | 971,257 |
|
| | | | | | | | | |
| OPERATING INCOME | | 73,447 |
| | 55,149 |
| | 127,825 |
| | 91,805 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 3,995 |
| | 3,532 |
| | 8,927 |
| | 5,906 |
|
| Interest and investment income | | 5,770 |
| | 2,861 |
| | 9,364 |
| | 13,813 |
|
| Miscellaneous - net | | (1,020 | ) | | (521 | ) | | (1,795 | ) | | (688 | ) |
| TOTAL | | 8,745 |
| | 5,872 |
| | 16,496 |
| | 19,031 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 27,792 |
| | 26,417 |
| | 60,574 |
| | 52,904 |
|
| Allowance for borrowed funds used during construction | | (2,136 | ) | | (1,844 | ) | | (4,851 | ) | | (3,075 | ) |
| TOTAL | | 25,656 |
| | 24,573 |
| | 55,723 |
| | 49,829 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 56,536 |
| | 36,448 |
| | 88,598 |
| | 61,007 |
|
| | | | | | | | | |
| Income taxes | | 22,645 |
| | 14,923 |
| | 35,413 |
| | 21,617 |
|
| | | | | | | | | |
| NET INCOME | | 33,891 |
| | 21,525 |
| | 53,185 |
| | 39,390 |
|
| | | | | | | | | |
| Preferred dividend requirements | | 1,718 |
| | 1,718 |
| | 3,437 |
| | 3,437 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $32,173 |
| |
| $19,807 |
| |
| $49,748 |
| |
| $35,953 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $14,304 |
| |
| $19,294 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 105,721 |
| | 102,975 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 16,361 |
| | 20,645 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 53,355 |
| | (4,405 | ) |
| Fuel inventory | | (5,747 | ) | | (5,825 | ) |
| Accounts payable | | (73,635 | ) | | 55,077 |
|
| Prepaid taxes and taxes accrued | | 7,175 |
| | 1,210 |
|
| Interest accrued | | 8,562 |
| | 5,228 |
|
| Deferred fuel costs | | (9,137 | ) | | (37,198 | ) |
| Other working capital accounts | | 15,485 |
| | 15,203 |
|
| Provisions for estimated losses | | 1,997 |
| | 355 |
|
| Other regulatory assets | | 1,815 |
| | 892 |
|
| Pension and other postretirement liabilities | | (19,553 | ) | | (24,288 | ) |
| Other assets and liabilities | | 37,838 |
| | (9,550 | ) |
| Net cash flow provided by operating activities | | 154,541 |
| | 139,613 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (165,496 | ) | | (171,090 | ) |
| Allowance for equity funds used during construction | | 4,557 |
| | 5,080 |
|
| Payment for purchase of plant | | — |
| | (236,947 | ) |
| Nuclear fuel purchases | | (88,537 | ) | | (22,692 | ) |
| Proceeds from sale of nuclear fuel | | 51,029 |
| | 40,336 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 36,013 |
| | 58,604 |
|
| Investment in nuclear decommissioning trust funds | | (40,961 | ) | | (63,039 | ) |
| Changes in money pool receivable - net | | — |
| | (1,842 | ) |
| Changes in securitization account | | (3,702 | ) | | (3,413 | ) |
| Other | | — |
| | (103 | ) |
| Net cash flow used in investing activities | | (207,097 | ) | | (395,106 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 321,289 |
|
| Retirement of long-term debt | | — |
| | (175,002 | ) |
Capital contribution from parent
| | — |
| | 200,000 |
|
| Changes in short-term borrowings - net | | 52,300 |
| | (11,690 | ) |
| Change in money pool payable - net | | (20,224 | ) | | (52,742 | ) |
| Dividends paid: | | | | |
| Preferred stock | | (357 | ) | | (1,718 | ) |
| Other | | 803 |
| | — |
|
| Net cash flow provided by financing activities | | 32,522 |
| | 280,137 |
|
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (20,034 | ) | | 24,644 |
|
| Cash and cash equivalents at beginning of period | | 20,509 |
| | 9,135 |
|
| Cash and cash equivalents at end of period | |
| $475 |
| |
| $33,779 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
|
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $17,311 |
| |
| $20,998 |
|
| Income taxes | |
| $— |
| |
| $7,242 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $139 |
| |
| $20,174 |
|
| Temporary cash investments | | 336 |
| | 335 |
|
| Total cash and cash equivalents | | 475 |
| | 20,509 |
|
| Securitization recovery trust account | | 7,842 |
| | 4,140 |
|
| Accounts receivable: | | | | |
| Customer | | 91,838 |
| | 102,229 |
|
| Allowance for doubtful accounts | | (1,197 | ) | | (1,211 | ) |
| Associated companies | | 32,096 |
| | 35,286 |
|
| Other | | 38,312 |
| | 58,153 |
|
| Accrued unbilled revenues | | 80,246 |
| | 100,193 |
|
| Total accounts receivable | | 241,295 |
| | 294,650 |
|
| Deferred fuel costs | | 105,778 |
| | 96,690 |
|
| Fuel inventory - at average cost | | 38,507 |
| | 32,760 |
|
| Materials and supplies - at average cost | | 176,958 |
| | 182,600 |
|
| Deferred nuclear refueling outage costs | | 70,579 |
| | 81,313 |
|
| Prepayments and other | | 9,387 |
| | 14,293 |
|
| TOTAL | | 650,821 |
| | 726,955 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 867,746 |
| | 834,735 |
|
| Other | | 5,538 |
| | 7,912 |
|
| TOTAL | | 873,284 |
| | 842,647 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 10,459,549 |
| | 10,488,060 |
|
| Property under capital lease | | 679 |
| | 716 |
|
| Construction work in progress | | 391,018 |
| | 304,073 |
|
| Nuclear fuel | | 266,045 |
| | 307,352 |
|
| TOTAL UTILITY PLANT | | 11,117,291 |
| | 11,100,201 |
|
| Less - accumulated depreciation and amortization | | 4,610,294 |
| | 4,635,885 |
|
| UTILITY PLANT - NET | | 6,506,997 |
| | 6,464,316 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 63,986 |
| | 62,646 |
|
| Other regulatory assets (includes securitization property of $37,988 as of March 31, 2017 and $41,164 as of December 31, 2016) | | 1,424,874 |
| | 1,428,029 |
|
| Deferred fuel costs | | 66,947 |
| | 66,898 |
|
| Other | | 20,149 |
| | 14,626 |
|
| TOTAL | | 1,575,956 |
| | 1,572,199 |
|
| | | | | |
| TOTAL ASSETS | |
| $9,607,058 |
| |
| $9,606,117 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $114,700 |
| |
| $114,700 |
|
| Short-term borrowings | | 52,300 |
| | — |
|
| Accounts payable: | | | | |
| Associated companies | | 161,666 |
| | 239,711 |
|
| Other | | 155,810 |
| | 185,153 |
|
| Customer deposits | | 97,817 |
| | 97,512 |
|
| Taxes accrued | | 14,369 |
| | 7,194 |
|
| Interest accrued | | 25,142 |
| | 16,580 |
|
| Other | | 28,114 |
| | 36,557 |
|
| TOTAL | | 649,918 |
| | 697,407 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,200,404 |
| | 2,186,623 |
|
| Accumulated deferred investment tax credits | | 35,005 |
| | 35,305 |
|
| Other regulatory liabilities | | 329,342 |
| | 305,907 |
|
| Decommissioning | | 938,247 |
| | 924,353 |
|
| Accumulated provisions | | 20,679 |
| | 18,682 |
|
| Pension and other postretirement liabilities | | 404,654 |
| | 424,234 |
|
| Long-term debt (includes securitization bonds of $48,216 as of March 31, 2017 and $48,139 as of December 31, 2016) | | 2,715,778 |
| | 2,715,085 |
|
| Other | | 14,417 |
| | 13,854 |
|
| TOTAL | | 6,658,526 |
| | 6,624,043 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 31,350 |
| | 31,350 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2017 and 2016 | | 470 |
| | 470 |
|
| Paid-in capital | | 790,243 |
| | 790,243 |
|
| Retained earnings | | 1,476,551 |
| | 1,462,604 |
|
| TOTAL | | 2,267,264 |
| | 2,253,317 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $9,607,058 |
| |
| $9,606,117 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $53,185 |
| |
| $39,390 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 211,630 |
| | 201,426 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 122,195 |
| | 37,397 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (42,371 | ) | | (35,452 | ) |
| Fuel inventory | | 5,093 |
| | 13,730 |
|
| Accounts payable | | 66,118 |
| | (8,930 | ) |
| Prepaid taxes and taxes accrued | | (89,124 | ) | | (29,667 | ) |
| Interest accrued | | (1,093 | ) | | (543 | ) |
| Deferred fuel costs | | (40,847 | ) | | 56,023 |
|
| Other working capital accounts | | 25,021 |
| | (23,969 | ) |
| Provisions for estimated losses | | 1,142 |
| | (133 | ) |
| Other regulatory assets | | 7,048 |
| | 14,173 |
|
| Pension and other postretirement liabilities | | (45,752 | ) | | (41,182 | ) |
| Other assets and liabilities | | (18,542 | ) | | (7,925 | ) |
| Net cash flow provided by operating activities | | 253,703 |
| | 214,338 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (316,569 | ) | | (268,714 | ) |
| Allowance for equity funds used during construction | | 9,229 |
| | 7,329 |
|
| Payment for purchase of plant | | (236,969 | ) | | — |
|
| Nuclear fuel purchases | | (64,689 | ) | | (34,750 | ) |
| Proceeds from sale of nuclear fuel | | 40,336 |
| | 26,636 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 103,815 |
| | 146,823 |
|
| Investment in nuclear decommissioning trust funds | | (112,040 | ) | | (150,453 | ) |
| Changes in money pool receivable - net | | (1,453 | ) | | (3,959 | ) |
| Changes in securitization account | | 1,017 |
| | (99 | ) |
| Other | | (103 | ) | | — |
|
| Net cash flow used in investing activities | | (577,426 | ) | | (277,187 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 380,141 |
| | — |
|
| Retirement of long-term debt | | (181,604 | ) | | (6,518 | ) |
Capital contribution from parent
| | 200,000 |
| | — |
|
| Changes in short-term borrowings - net | | 908 |
| | (47,968 | ) |
| Change in money pool payable - net | | (52,742 | ) | | — |
|
| Dividends paid: | | | | |
| Preferred stock | | (3,437 | ) | | (3,437 | ) |
| Other | | (3,566 | ) | | 1,494 |
|
| Net cash flow provided by (used in) financing activities | | 339,700 |
| | (56,429 | ) |
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | 15,977 |
| | (119,278 | ) |
| Cash and cash equivalents at beginning of period | | 9,135 |
| | 218,505 |
|
| Cash and cash equivalents at end of period | |
| $25,112 |
| |
| $99,227 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
|
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $58,733 |
| |
| $50,671 |
|
| Income taxes | |
| $7,242 |
| |
| $17,587 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $13,780 |
| |
| $9,066 |
|
| Temporary cash investments | | 11,332 |
| | 69 |
|
| Total cash and cash equivalents | | 25,112 |
| | 9,135 |
|
| Securitization recovery trust account | | 3,187 |
| | 4,204 |
|
| Accounts receivable: | | | | |
| Customer | | 107,896 |
| | 108,636 |
|
| Allowance for doubtful accounts | | (34,401 | ) | | (34,226 | ) |
| Associated companies | | 33,069 |
| | 32,987 |
|
| Other | | 82,046 |
| | 84,216 |
|
| Accrued unbilled revenues | | 121,151 |
| | 73,583 |
|
| Total accounts receivable | | 309,761 |
| | 265,196 |
|
| Deferred fuel costs | | 31,895 |
| | — |
|
| Fuel inventory - at average cost | | 57,596 |
| | 62,689 |
|
| Materials and supplies - at average cost | | 178,563 |
| | 169,919 |
|
| Deferred nuclear refueling outage costs | | 38,372 |
| | 67,834 |
|
| Prepaid taxes | | 119,415 |
| | 30,291 |
|
| Prepayments and other | | 25,692 |
| | 15,145 |
|
| TOTAL | | 789,593 |
| | 624,413 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 802,763 |
| | 771,313 |
|
| Other | | 7,915 |
| | 12,895 |
|
| TOTAL | | 810,678 |
| | 784,208 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 10,171,128 |
| | 9,536,802 |
|
| Property under capital lease | | 779 |
| | 844 |
|
| Construction work in progress | | 309,915 |
| | 388,075 |
|
| Nuclear fuel | | 256,222 |
| | 286,341 |
|
| TOTAL UTILITY PLANT | | 10,738,044 |
| | 10,212,062 |
|
| Less - accumulated depreciation and amortization | | 4,517,372 |
| | 4,349,809 |
|
| UTILITY PLANT - NET | | 6,220,672 |
| | 5,862,253 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 62,273 |
| | 61,438 |
|
| Other regulatory assets (includes securitization property of $48,788 as of June 30, 2016 and $54,450 as of December 31, 2015) | | 1,325,890 |
| | 1,333,773 |
|
| Deferred fuel costs | | 66,799 |
| | 66,700 |
|
| Other | | 19,892 |
| | 14,989 |
|
| TOTAL | | 1,474,854 |
| | 1,476,900 |
|
| | | | | |
| TOTAL ASSETS | |
| $9,295,797 |
| |
| $8,747,774 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $55,000 |
| |
| $55,000 |
|
| Short-term borrowings | | 12,599 |
| | 11,690 |
|
| Accounts payable: | | | | |
| Associated companies | | 137,691 |
| | 110,464 |
|
| Other | | 130,621 |
| | 177,758 |
|
| Customer deposits | | 119,586 |
| | 118,340 |
|
| Interest accrued | | 18,790 |
| | 19,883 |
|
| Deferred fuel costs | | — |
| | 8,853 |
|
| Other | | 51,610 |
| | 45,219 |
|
| TOTAL | | 525,897 |
| | 547,207 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,100,985 |
| | 1,982,812 |
|
| Accumulated deferred investment tax credits | | 35,906 |
| | 36,506 |
|
| Other regulatory liabilities | | 266,938 |
| | 242,913 |
|
| Decommissioning | | 898,750 |
| | 872,346 |
|
| Accumulated provisions | | 6,694 |
| | 5,552 |
|
| Pension and other postretirement liabilities | | 413,401 |
| | 459,153 |
|
| Long-term debt (includes securitization bonds of $54,807 as of June 30, 2016 and $61,249 as of December 31, 2015) | | 2,775,658 |
| | 2,574,839 |
|
| Other | | 13,812 |
| | 18,438 |
|
| TOTAL | | 6,512,144 |
| | 6,192,559 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 116,350 |
| | 116,350 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2016 and 2015 | | 470 |
| | 470 |
|
| Paid-in capital | | 788,493 |
| | 588,493 |
|
| Retained earnings | | 1,352,443 |
| | 1,302,695 |
|
| TOTAL | | 2,141,406 |
| | 1,891,658 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $9,295,797 |
| |
| $8,747,774 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | | |
| | | Common Equity | | |
| | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| | | (In Thousands) |
| | | | | | | | | |
| Balance at December 31, 2015 | |
| $470 |
| |
| $588,493 |
| |
| $1,302,695 |
| |
| $1,891,658 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 19,294 |
| | 19,294 |
|
| Capital contribution from parent | | — |
| | 200,000 |
| | — |
| | 200,000 |
|
| Preferred stock dividends | | — |
| | — |
| | (1,718 | ) | | (1,718 | ) |
| | | | | | | | | |
| Balance at March 31, 2016 | |
| $470 |
| |
| $788,493 |
| |
| $1,320,271 |
| |
| $2,109,234 |
|
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2016 | |
| $470 |
| |
| $790,243 |
| |
| $1,462,604 |
| |
| $2,253,317 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 14,304 |
| | 14,304 |
|
| Preferred stock dividends | | — |
| | — |
| | (357 | ) | | (357 | ) |
| | | | | | | | | |
| Balance at March 31, 2017 | |
| $470 |
| |
| $790,243 |
| |
| $1,476,551 |
| |
| $2,267,264 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Common Equity | | |
| | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| | | (In Thousands) |
| | | | | | | | | |
| Balance at December 31, 2014 | |
| $470 |
| |
| $588,471 |
| |
| $1,235,296 |
| |
| $1,824,237 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 39,390 |
| | 39,390 |
|
| Preferred stock dividends | | — |
| | — |
| | (3,437 | ) | | (3,437 | ) |
| | | | | | | | | |
| Balance at June 30, 2015 | |
| $470 |
| |
| $588,471 |
| |
| $1,271,249 |
| |
| $1,860,190 |
|
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2015 | |
| $470 |
| |
| $588,493 |
| |
| $1,302,695 |
| |
| $1,891,658 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 53,185 |
| | 53,185 |
|
| Capital contribution from parent | | — |
| | 200,000 |
| | — |
| | 200,000 |
|
| Preferred stock dividends | | — |
| | — |
| | (3,437 | ) | | (3,437 | ) |
| | | | | | | | | |
| Balance at June 30, 2016 | |
| $470 |
| |
| $788,493 |
| |
| $1,352,443 |
| |
| $2,141,406 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | Electric Operating Revenues: | | | | | | | Electric Operating Revenues: | | | | | | |
| Residential | |
| $153 |
| |
| $159 |
| |
| ($6 | ) | | (4 | ) | |
| $183 |
| |
| $192 |
| |
| ($9 | ) | | (5 | ) |
| Commercial | | 115 |
| | 119 |
| | (4 | ) | | (3 | ) | | 106 |
| | 110 |
| | (4 | ) | | (4 | ) |
| Industrial | | 100 |
| | 111 |
| | (11 | ) | | (10 | ) | | 96 |
| | 100 |
| | (4 | ) | | (4 | ) |
| Governmental | | 4 |
| | 5 |
| | (1 | ) | | (20 | ) | | 4 |
| | 4 |
| | — |
| | — |
|
| Total retail | | 372 |
| | 394 |
| | (22 | ) | | (6 | ) | | 389 |
| | 406 |
| | (17 | ) | | (4 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 25 |
| | 32 |
| | (7 | ) | | (22 | ) | | 32 |
| | (32 | ) | | 64 |
| | 200 |
|
| Non-associated companies | | 37 |
| | 68 |
| | (31 | ) | | (46 | ) | | 45 |
| | 38 |
| | 7 |
| | 18 |
|
| Other | | 70 |
| | 58 |
| | 12 |
| | 21 |
| | 8 |
| | 53 |
| | (45 | ) | | (85 | ) |
| Total | |
| $504 |
| |
| $552 |
| |
| ($48 | ) | | (9 | ) | |
| $474 |
| |
| $465 |
| |
| $9 |
| | 2 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,409 |
| | 1,486 |
| | (77 | ) | | (5 | ) | | 1,927 |
| | 2,024 |
| | (97 | ) | | (5 | ) |
| Commercial | | 1,350 |
| | 1,374 |
| | (24 | ) | | (2 | ) | | 1,315 |
| | 1,340 |
| | (25 | ) | | (2 | ) |
| Industrial | | 1,582 |
| | 1,612 |
| | (30 | ) | | (2 | ) | | 1,681 |
| | 1,576 |
| | 105 |
| | 7 |
|
| Governmental | | 55 |
| | 55 |
| | — |
| | — |
| | 56 |
| | 56 |
| | — |
| | — |
|
| Total retail | | 4,396 |
| | 4,527 |
| | (131 | ) | | (3 | ) | | 4,979 |
| | 4,996 |
| | (17 | ) | | — |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 539 |
| | 597 |
| | (58 | ) | | (10 | ) | | 446 |
| | 425 |
| | 21 |
| | 5 |
|
| Non-associated companies | | 2,252 |
| | 2,859 |
| | (607 | ) | | (21 | ) | | 1,962 |
| | 2,556 |
| | (594 | ) | | (23 | ) |
| Total | | 7,187 |
| | 7,983 |
| | (796 | ) | | (10 | ) | | 7,387 |
| | 7,977 |
| | (590 | ) | | (7 | ) |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Six Months Ended | | Increase/ | | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | | |
| Electric Operating Revenues: | | | | | | | |
| Residential | |
| $345 |
| |
| $381 |
| |
| ($36 | ) | | (9 | ) | |
| Commercial | | 225 |
| | 230 |
| | (5 | ) | | (2 | ) | |
| Industrial | | 200 |
| | 209 |
| | (9 | ) | | (4 | ) | |
| Governmental | | 8 |
| | 9 |
| | (1 | ) | | (11 | ) | |
| Total retail | | 778 |
| | 829 |
| | (51 | ) | | (6 | ) | |
| Sales for resale: | | | | | | | | | |
| Associated companies | | (7 | ) | | 61 |
| | (68 | ) | | (111 | ) | |
| Non-associated companies | | 75 |
| | 108 |
| | (33 | ) | | (31 | ) | |
| Other | | 124 |
| | 65 |
| | 59 |
| | 91 |
| |
| Total | |
| $970 |
| |
| $1,063 |
| |
| ($93 | ) | | (9 | ) | |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 3,433 |
| | 3,971 |
| | (538 | ) | | (14 | ) | |
| Commercial | | 2,690 |
| | 2,789 |
| | (99 | ) | | (4 | ) | |
| Industrial | | 3,158 |
| | 3,223 |
| | (65 | ) | | (2 | ) | |
| Governmental | | 111 |
| | 111 |
| | — |
| | — |
| |
| Total retail | | 9,392 |
| | 10,094 |
| | (702 | ) | | (7 | ) | |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 964 |
| | 1,107 |
| | (143 | ) | | (13 | ) | |
| Non-associated companies | | 4,808 |
| | 4,328 |
| | 480 |
| | 11 |
| |
| Total | | 15,164 |
| | 15,529 |
| | (365 | ) | | (2 | ) | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy Louisiana and Entergy Gulf States Louisiana Business Combination
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination” in the Form 10-K for a discussion of the combination of the businesses formerly conducted by Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility on October 1, 2015. The effect of the business combination has been retrospectively applied to the three and six months ended June 30, 2015 Entergy Louisiana financial statements that are presented in this report.
Results of Operations
Net Income
Second Quarter 2016 Compared to Second Quarter 2015
Net income increased $144.3decreased $17.2 million primarily due to the effect of a settlement with the IRS related to the 2010-2011 IRS audit which resulted in a $136.1 million reduction of income tax expense. See Note 10 to the financial statements herein for additional discussion of the settlementhigher other operation and benefit sharing.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Net income increased $129.8 million primarily due to the effect of a settlement with the IRS related to the 2010-2011 IRS audit which resulted in a $136.1 million reduction of income tax expense. See Note 10 to the financial statements herein for additional discussion of the settlementmaintenance expenses and benefit sharing.higher depreciation and amortization expenses, partially offset by higher other income.
Net Revenue
Second Quarter 2016 Compared to Second Quarter 2015
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 charges (credits).credits. Following is an analysis of the change in net revenue comparing the secondfirst quarter 20162017 to the secondfirst quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $612.9563.9 |
|
Louisiana Act 55 financing savings obligationNet wholesale revenue | (16.19.8 | ) |
| Volume/weather | (3.44.3 | ) |
| Transmission equalization | (3.1 | ) |
| Retail electric price | 18.018.7 |
|
| Other | (3.24.3 | ) |
20162017 net revenue |
| $608.2561.1 |
|
The Louisiana Act 55 financing savings obligationnet wholesale revenue variance results from a regulatory charge for tax savingsis primarily due to be shared with customers per an agreement approved by the LPSC. The tax savings resultslower capacity revenues resulting from the 2010-2011 IRS audit settlement on the treatmenttermination of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 10 to the financial statements herein for additional discussion of the settlement and benefit sharing.
purchased power agreements between Entergy Louisiana LLC and SubsidiariesEntergy Texas in August 2016.
Management's Financial Discussion and Analysis
The volume/weather variance is primarily due to a decrease of 296 GWh, or 2%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales partially offset by an increaseand a decrease in industrial usage. The increasedecrease in industrial usage is primarily due to increased demandextended seasonal outages for an existing large refinery customers, new customers, andcustomer, partially offset by expansion projects primarily in the chemicals industry.
The transmission equalization variance is primarily due to changes in transmission investments, including Entergy Louisiana’s exit from the System Agreement in August 2016.
The retail electric price variance is primarily due to an increase in the formula rate plan revenues, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station.Station in March 2016. See Note 2 to the financial statements herein and in the Form 10-K for further discussion.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
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 charges (credits). Following is an analysis of the change in net revenue comparing the six months ended June 30, 2016 to the six months ended June 30, 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $1,192.0 |
|
Volume/weather | (21.2 | ) |
Louisiana Act 55 financing savings obligation | (16.1 | ) |
Retail electric price | 25.8 |
|
Other | (8.4 | ) |
2016 net revenue |
| $1,172.1 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to increased demand for existing large refinery customers, new customers, and expansion projects, primarily in the chemicals industry.
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings results from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 10 to the financial statements herein for additional discussion of the settlement and benefit sharing.
The retail electric price variance is primarily due to an increase in the formula rate plan implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station. See Note 2 to the financial statements herein for further discussion.revenues.
Other Income Statement Variances
Second Quarter 2016 Compared to Second Quarter 2015
Other operation and maintenance expenses decreasedincreased primarily due to:
an increase of $5.9 million in loss provisions;
a decreasean increase of $6$4.7 million in compensation and benefits costs primarily due to a decreaserevision to estimated incentive compensation expense in net periodic pensionfirst quarter 2016; and other postretirement costs as a result of higher discount rates used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
a decrease of $4.4 million as a result of spending in 2015 related to the Entergy Louisiana and Entergy Gulf States Louisiana business combination. Deferrals of $15.8 million of certain external costs incurred were
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
recorded in the third and fourth quarter 2015, as approved by the LPSC. These costs are being amortized over a ten-year period beginning December 2015. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination” in the Form 10-K for a discussion of the combination;
a decrease of $3 million in fossil-fueled generation expenses due to an overall lower scope of work done during plant outages in 2016 as compared to the same period in 2015, partially offset by an increase as a result of the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase; and
the effects of recording the final court decision in the Entergy Louisiana lawsuit against the DOE related to River Bend spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $1.9 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 1 to the financial statements herein for discussion of the DOE litigation.
The decrease was partially offset by an increase of $5 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor.
Other income increased primarily due to higher trust income in 2016 on the River Bend and Waterford 3 decommissioning trust fund investments.
Interest expense increased primarily due to the issuance in March 2016 of $425 million of 3.25% Series collateral trust mortgage bonds and the issuance in March 2016 of $200 million of 4.95% Series first mortgage bonds, which were a further issuance of the 4.95% Series first mortgage bonds issued in November 2014.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Other operation and maintenance expenses decreased primarily due to:
a decrease of $13 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement costs as a result of higher discount rates used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
a decrease of $12.1$4.7 million in fossil-fueled generation expenses primarily due to an overall lower scope of work done during plant outages in 2016 as compared to the same period in 2015, partially offset by an increase as a result of the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase;
a decrease of $7.4 million as a result of spending in 2015 related to the Entergy Louisiana and Entergy Gulf States Louisiana business combination. Deferrals of $15.8 million of certain external costs incurred were recorded in the third and fourth quarter 2015, as approved by the LPSC. These costs are being amortized over a ten-year period beginning December 2015. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination” in the Form 10-K for a discussion of the combination; and
the effects of recording the final court decision in the Entergy Louisiana lawsuit against the DOE related to River Bend spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $1.9 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 1 to the financial statements for discussion of the DOE litigation.
The decrease was partially offset by an increase of $10.3 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Blocks 3 and 4 of the Union Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
Other income increased primarily due to higher trust income in 2016 on the River Bend and Waterford 3 decommissioning trust fund investments, partially offset by an increase in the allowance for equity funds used during construction resulting from increased transmission spending in 2016.
Interest expense increased primarily due to higher construction work in progress in 2017, which included the issuanceSt. Charles Power Station project, and higher realized gains in March 2016 of $425 million of 3.25% Series collateral2017 on the River Bend and Waterford 3 decommissioning trust mortgage bonds and the issuance in March 2016 of $200 million of 4.95% Series first mortgage bonds, which were a further issuance of the 4.95% Series first mortgage bonds issued in November 2014.fund investments.
Income Taxes
The effective income tax rate was (50.6%)31.3% for the secondfirst quarter 2016 and (10.7%) for the six months ended June 30, 2016.2017. The differencesdifference in the effective income tax ratesrate for the secondfirst quarter 2016 and the six months ended June 30, 20162017 versus the federal statutory rate of 35% werewas primarily due to the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016 and book and tax differences related to the non-taxable income distributions earned on preferred membership interests and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Note 10 to the financial statements for additional discussiontaxes and a write-off of the 2010-2011 IRS audit settlement.a stock-based compensation deferred tax asset.
The effective income tax rate was 33.1%30.8% for the secondfirst quarter 2015.2016. The difference in the effective income tax rate for the secondfirst quarter 20152016 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by state income taxes.
The effective income tax rate was 29.1% for the six months ended June 30, 2015. The difference in the effective income tax rate for the six months ended June 30, 2015 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests and the reversal of a portion of the provision for uncertain tax positions resulting from the receipt of finalized tax and interest computations for the 2006-2007 audit from the IRS, partially offset by state income taxes. See Note 3 to the financial statements in the Form 10-K for a discussion of the finalized tax and interest computations for the 2006-2007 audit.
Louisiana Tax Legislation
InSee “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Louisiana Tax Legislation” in the first and second quartersForm 10-K for a discussion of 2016 the Louisiana Legislature conducted special sessions in which various corporate tax changes passedlegislation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2017 and 2016 were enacted. Entergy Louisiana does not consider any current changes to be material to results of operations, financial position, or cash flows. A summary of the changes is described below:as follows:
Restrictions were enacted on the utilization of net operating loss carryovers. Entergy Louisiana has determined that no additional valuation allowance is necessary at this time on its Louisiana net operating loss carryovers.Depending on the outcome of a statewide election to amend the Louisiana Constitution in November 2016, the applicable Louisiana corporate tax rate may change slightly. It would require a deferred tax adjustment for Entergy companies that have a Louisiana nexus; however, the net effect would be less than a 1% increase in the applicable tax rate for such companies. |
| | | | | | | |
| | 2017 | | 2016 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $213,850 |
| |
| $35,102 |
|
| | | | |
| Cash flow provided by (used in): | | | |
| Operating activities | 339,704 |
| | 148,481 |
|
| Investing activities | (472,011 | ) | | (872,761 | ) |
| Financing activities | (14,250 | ) | | 801,126 |
|
| Net increase (decrease) in cash and cash equivalents | (146,557 | ) | | 76,846 |
|
| | | | |
| Cash and cash equivalents at end of period |
| $67,293 |
| |
| $111,948 |
|
Effective January 1, 2017, franchise tax will be applicable to limited liability companies that elect to be taxed as corporations for income tax purposes. Entergy currently estimates that its consolidated Louisiana franchise tax liability will increase in the range of $4 million to $10 million as a result of such franchise tax change.
The Louisiana state sales tax rate was increased by 1% and certain tax exemptions were made temporarily inoperable. The combination of the two will likely increase Entergy Louisiana’s costs related to fuel, capital
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
expenditures, and other operating expenses. These temporary provisions are currently scheduled to be in place through mid-2018.
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2016 and 2015 were as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $35,102 |
| |
| $320,516 |
|
| | | | |
| Cash flow provided by (used in): | | | |
| Operating activities | 440,356 |
| | 563,822 |
|
| Investing activities | (859,906 | ) | | (536,796 | ) |
| Financing activities | 459,253 |
| | (47,410 | ) |
| Net increase (decrease) in cash and cash equivalents | 39,703 |
| | (20,384 | ) |
| | | | |
| Cash and cash equivalents at end of period |
| $74,805 |
| |
| $300,132 |
|
Operating Activities
Net cash flow provided by operating activities decreased $123.5increased $191.2 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
income tax refunds of $116.9 million in 2017 compared to income tax payments of $62.7$22.7 million in 2016 compared to2016. Entergy Louisiana received income tax refunds of $4.1 million in 2015. Entergy Louisiana2017 and made income tax payments in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the utilization of $62.7 millionEntergy Louisiana’s net operating losses. The income tax payments in 2016 related to the 2016 payments for state taxes resulting from the correlative effect of the final settlement of the 2006-2007 IRS audit and the effect of net operating loss limitations discussed above in “Louisiana Tax Legislation”. Entergy Louisiana received income tax refunds of $4.1 million in 2015 in accordance with the Entergy Corporation and Subsidiary Companies Intercompany Income Tax Allocation Agreement. The income tax refunds in 2015 resulted primarily from an Entergy Louisiana overpayment associated with the final settlement of amounts outstanding from the 2006-2007 IRS audit. See Note 3 to the financial statements in the Form 10-K for a discussion of the 2006-2007 IRS audit; and
an increase of $72 million in interest paid primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets.assets; and
the timing of collections from customers and payments to vendors.
The increase was partially offset by:
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 112 to the financial statements hereinin the Form 10-K for a discussion of the purchasesettlement and refund;
a decrease due to the timing of a beneficial interestrecovery of fuel and purchased power costs in the Waterford 3 leased assets.2017; and
an increase of $10.6 million in spending on nuclear refueling outages in 2017.
Investing Activities
Net cash flow used in investing activities increased $323.1decreased $400.8 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
the purchase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $474 million in March 2016. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase;
an increase in fossil-fueled generation construction expenditures primarily due to increased spending on the St. Charles Power Station project; and
an increasethe deposit in March 2016 of $11.2$197 million due to various technology projectsheld in trust as a result of the issuance by the Louisiana Public Facilities Authority of $83.68 million of 3.375% pollution control refunding revenue bonds and upgrades in 2016.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
3.50% pollution control refunding revenue bonds.
The increasedecrease was partially offset by:
fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle;
cash collateralan increase of $32.3$102 million posted in 2015 to support Entergy Louisiana’s obligation to MISO;
a decrease in nuclearfossil-fueled generation construction expenditures primarily due to higher spending on the St. Charles Power Station project in 2017;
an increase of $28.1 million in transmission construction expenditures due to a decreasedhigher scope of work performed in 20162017 as compared to 2015;the same period in 2016; and
money pool activity.an increase of $16.8 million due in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017.
Increases in
Entergy Louisiana’s receivable from the money pool are a use of cash flow,Louisiana, LLC and Entergy Louisiana’s receivable from the money pool increased by $0.2 million for the six months ended June 30, 2016 compared to increasing by $16.9 million for the six months ended June 30, 2015. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Entergy Louisiana’s financing activities provided $459.3used $14.3 million of cash for the sixthree months ended June 30, 2016March 31, 2017 compared to using $47.4providing $801.1 million of cash for the sixthree months ended June 30, 2015March 31, 2016 primarily due to the following activity:
the net retirement of $57.5 million of long-term debt in 2017 compared to the net issuance of $569 million of long-term debt in 2016 compared to the net retirement of $25.4 million of long-term debt in 2015, partially offset by $105.5$783.2 million in 2016;
common equity distributions of $42.1 million in 2016. No common equityfirst quarter 2017. There were no distributions were made during the six months ended June 30, 2015in first quarter 2016 in anticipation of the purchase of Power Blocks 3 and 4 of the Union Power Station. Station; and
an increase in net borrowings of $70.4 million on the nuclear fuel company variable interest entities’ credit facilities in 2017.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of long-term debt in 2016 and the increase in cash and cash equivalents.
| | | | June 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 52.3 | % | | 50.8 | % | 53.3 | % | | 53.4 | % |
| Effect of excluding securitization bonds | (0.5 | %) | | (0.6 | %) | (0.5 | %) | | (0.5 | %) |
| Debt to capital, excluding securitization bonds (a) | 51.8 | % | | 50.2 | % | 52.8 | % | | 52.9 | % |
| Effect of subtracting cash | (0.4 | %) | | (0.2 | %) | (0.3 | %) | | (0.9 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 51.4 | % | | 50.0 | % | 52.5 | % | | 52.0 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana. |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Louisiana also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 Louisiana’s uses and sources of capital. Entergy Louisiana seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as an equity distribution, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support planned investments, Entergy Louisiana may issue incremental debt or reduce equity distributions, or both, to maintain its targeted capital structure. Due to the variability in many of the components of operating cash flows as well as the variability in investments, the amount of cash available for equity distributions can change significantly from year to year.
Following are updates to the information provided in the Form 10-K.
The current annual amounts of Entergy Louisiana’s planned construction and other capital investments are as follows:
|
| | | | | | | | | | | |
| | 2016 | | 2017 | | 2018 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $920 |
| |
| $775 |
| |
| $820 |
|
| Transmission | 250 |
| | 390 |
| | 295 |
|
| Distribution | 265 |
| | 335 |
| | 300 |
|
| Other | 65 |
| | 50 |
| | 45 |
|
| Total |
| $1,500 |
| |
| $1,550 |
| |
| $1,460 |
|
The updated capital plan for 2016-2018 reflects capital plan refinements and includes specific investments such as the Union Power Station purchase in March 2016, the St. Charles Power Station, discussed below, and the self-build option at Entergy Louisiana’s Nelson site selected in the RFP for Developmental and Existing Capacity and Energy Resources; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintain reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments.
Entergy Louisiana’s receivables from the money pool were as follows:
|
| | | | | | |
June 30, 2016 | | December 31, 2015 | | June 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $6,322 | | $6,154 | | $19,756 | | $2,815 |
|
| | | | | | |
March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $30,550 | | $22,503 | | $13,713 | | $6,154 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in August 2020.2021. The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility. As of June 30, 2016,March 31, 2017, there were no cash borrowings and $6.4$3.4 million of letters of credit outstanding under the credit facility. In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of June 30, 2016,March 31, 2017, a $59.1$15.8 million letter of credit was outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, one in the amount of $105 million and one in the amount of $85 million, both scheduled to expire in May 2019. As of June 30, 2016, $59.5March 31, 2017, $18.8 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity and $72.5 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the Entergy Louisiana Waterford 3 nuclear fuel company variable interest entity and there were no letters of credit outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.
St.Lake Charles Power Station
In August 2015,November 2016, Entergy Louisiana filed an application with the LPSC an application seeking certification that the public necessityconvenience and conveniencenecessity would be served by the construction of the St.Lake Charles Power Station, a nominal 980 megawatt994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Little GypsyNelson plant in St.Calcasieu Parish. The current estimated cost of the Lake Charles Parish, Louisiana. ItPower Station is currently$872 million, including estimated to cost $869 million to construct, includingcosts of transmission interconnection and other related costs. Testimony was filed by LPSC staff and intervenors, withan intervenor. The LPSC staff concludingtestimony concludes that the construction of the project serves the public convenience and necessity. Three intervenors contendThe intervenor contends that Entergy Louisiana has not established that construction of the project isa need for Lake Charles Power Station in the public interest, claiming thatproposed timeframe (2020 commercial operation date) and presents questions regarding the request for proposal excluded considerationscope and timing of certain resources that could be more cost effective, that the request for proposal provided undue preference to the self-build option,generation deactivations and that a 30-year capacity commitment is not warranted by current supply conditions.needs. The request for proposal independent monitor also filed testimony and a report affirming that the St.Lake Charles Power Station resource was selected through an objective and fair request for proposal that showed no undue preference to any proposal. AnA procedural schedule has been issued, with an evidentiary hearing was held in April 2016 and, in July 2016 an ALJ issued a final recommendation that the LPSC certify that the construction of St. Charles Power Station is in the public interest.scheduled for May 2017. Subject to timely regulatory approval by the LPSC and receipt of other permits and approvals, construction will commence, and commercial operation is estimated to occur by mid-2020.
Washington Parish Energy Center
In April 2017, Entergy Louisiana signed a purchase and sale agreement with a subsidiary of Calpine Corporation for the acquisition of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with a total nominal capacity of approximately 360 MW. The plant, named the Washington Parish Energy Center, will be located in 2019. Pending receipt of theseBogalusa, Louisiana and is expected to be completed in 2021. Subject to relevant regulatory approvals, Entergy Louisiana continues pre-construction design and procurement activities, primarily focused on procuring long lead time items in order to preservewill purchase the project schedule. plant once it is complete.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel cost recovery. The following are updates to that discussion.
Retail Rates - Electric
2015 Formula Rate Plan Filing
InAs discussed in the Form 10-K, in May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. The evaluation report reflects an earned return on common equity of 9.07%. As such, no adjustment to base formula rate plan revenueLPSC’s review is required. The following other adjustments, however, are required under the formula rate plan: an increasepending. Also, in the legacyNovember 2016, Entergy Louisiana additional capacity mechanism of $14.2 million; a separate increase in legacy Entergy Louisiana revenue of $10 million primarily to reflect the effects of the termination of the System Agreement; an increase in the legacy Entergy Gulf States Louisiana additional capacity mechanism of $0.5 million; a decrease in legacy Entergy Gulf States Louisiana revenue of $58.7 million primarily to reflect the effects of the termination of the System Agreement; and an increase of $11 million to the MISO cost recovery mechanism. Rates are scheduled to be implemented with the first billing cycle of September 2016, subject to refund.
Ninemile 6
As discussed in the Form 10-K, in July 2015, Entergy Louisiana submitted to the LPSC a Ninemile 6 compliance filing including an estimate at completion, inclusive of interconnection costs and transmission upgrades, of
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
approximately $648 million, or $76 million less than originally estimated, alongfiled with other project details and supporting evidence, to enable the LPSC a request to reviewextend the prudenceMISO cost recovery mechanism rider provision of Entergy Louisiana’s management of the project. Testimony filed by LPSC staff generally supports the prudence of the management of the project and recovery of the costs incurred to complete the project. The LPSC staff had questioned the warranty coverage for one element of the project.its formula rate plan. A procedural schedule was established, including a hearing in July 2017. In March 2016, Entergy Louisiana and2017 the LPSC staff filedsubmitted direct testimony generally supportive of a joint motionone-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding does not oppose an extension for this period of time.
Waterford 3 Replacement Steam Generator Project
See Note 2 to suspend the procedural schedule pendingfinancial statements in the filingForm 10-K for discussion of an uncontested joint stipulated settlement.the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made to customers in January 2017.
Union Power Station
As discussed in the Form 10-K, in October 2015 the LPSC approved a settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station. In March 2016, Entergy Louisiana acquired Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $474 million and implemented rates to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.
As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1. In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of Entergy Louisiana’sthe decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to retire Willow Glen 2 and 4, as opposed to temporarily suspending those units. This matter is pending before an ALJ, with an evidentiary hearing scheduled to commence in July 2017. The ALJ recently dismissed claims of an industrial user regarding a proposed process for future deactivation because the LPSC initiated a generic rulemaking to consider whether the LPSC should review deactivation decisions prior to implementation.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. This matter is pending before an ALJ, and aan evidentiary hearing has beenis scheduled in March 2017 to determine, under applicable law, whether Willow Glen 2 and 4 units should be returned to service.for September 2017.
Retail Rates - Gas
2016 Rate Stabilization Plan Filing
In January 2016,2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2015.2016. The filing showedof the evaluation report for test year 2016 reflected an earned return on common equity of 10.22%, which is within6.37%. As part of the authorized bandwidth, therefore requiring no changeoriginal filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in rates. In Marchdeferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million. Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff issued its report stating thatconfirmed Entergy Louisiana’s filing was consistent with the 2015principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization plan filing ispending LPSC consideration in compliancea separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the exceptionfirst billing cycle of several issues that require additional information, explanation, or clarification for which the LPSC staff has reserved the right to further review. In July 2016 the parties to the proceeding filed an unopposed joint report and motion for entry of order accepting report that indicates no outstanding issues remain in the filing. Absent approval of an extension by the LPSC, test year 2015 is the final year under the current gas rate stabilization plan. In February 2016, however, Entergy Louisiana filed a motion requesting to extend the term of the gas rate stabilization plan for an additional three-year term. A procedural schedule has been established, including a hearing in November 2016.May 2017.
Fuel and purchased power cost recovery
In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. The LPSC staff issued its audit report in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates. The recommended refund was made by Entergy Louisiana in May 2013 in the form of a credit to customers through its fuel adjustment clause filing. Two parties intervened in the proceeding. A procedural schedule was established for the identification of issues by the intervenors and for Entergy Louisiana to submit comments regarding the LPSC staff report and any issues raised by intervenors. One intervenor sought further proceedings regarding certain issues it raised in its comments on the LPSC staff report. Entergy Louisiana filed responses to both the LPSC staff report and the issues raised by the intervenor. After conducting additional discovery, in April 2016 the LPSC staff consultant issued its supplemental audit report, which concluded that Entergy Louisiana was not imprudent on the issues raised by the
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
intervenor. A procedural schedule has been established for this proceeding, including an evidentiary hearingFuel and purchased power cost recovery
As discussed in November 2016.
In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009. In March 2016 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $8.6 million, plus interest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustment clause to base rates. Entergy Louisiana has recorded a provision for the estimated outcome of this proceeding. A procedural schedule has been established for this proceeding, including a hearingForm 10-K, in December 2016.
In June 2016 the LPSC staff provided notice of an auditaudits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. In recognition of the business combination that occurredDiscovery commenced in 2015, the audit notice was issued to Entergy Louisiana and will also include a review of charges to legacy Entergy Gulf States Louisiana customers prior to the business combination. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment and purchased gas adjustment mechanisms for the period from 2012 through 2015. Discovery has not commenced.
Other dockets
In March 2016 the LPSC opened two dockets to examine, on a generic basis, issues that it identified in connection with its review of Cleco Corporation’s acquisition by third party investors. The first docket is captioned “In re: Investigation of double leveraging issues for all LPSC-jurisdictional utilities,” and the second is captioned “In re: Investigation of tax structure issues for all LPSC-jurisdictional utilities.” In April 2016 the LPSC clarified that the concerns giving rise to the two dockets arose as a result of its review of the structure of the recently-approved Cleco-Macquarie transaction and that the specific intent of the directives is to seek more information regarding intra-corporate debt financing of a utility’s capital structure as well as the use of investment tax credits to mitigate the tax obligation at the parent level of a consolidated entity. No schedule has been set for either docket.2017.
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following are updates to that discussion.
Waterford 3’s operating license is currently due to expire in December 2024. In March 2016, Entergy Louisiana filed an application with the NRC for an extension of Waterford 3’s operating license to 2044.
In June 2012 the U.S. Court of Appeals for the D.C. Circuit vacated the NRC’s 2010 update to its Waste Confidence Decision, which had found generically that a permanent geologic repository to store spent nuclear fuel would be available when necessary and that spent nuclear fuel could be stored at nuclear reactor sites in the interim without significant environmental effects, and remanded the case for further proceedings. The court concluded that
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
the NRC had not satisfied the requirements of the National Environmental Policy Act (NEPA) when it considered environmental effects in reaching these conclusions. The Waste Confidence Decision has been relied upon by NRC license renewal applicants to address some of the issues that the NEPA requires the NRC to address before it issues a renewed license. Certain nuclear opponents filed requests with the NRC asking it to address the issues raised by the court’s decision in the license renewal proceedings for a number of nuclear plants including Waterford 3. In August 2012 the NRC issued an order stating that it will not issue final licenses dependent upon the Waste Confidence Decision until the D.C. Circuit’s remand is addressed, but also stating that licensing reviews and proceedings should continue to move forward. In September 2014 the NRC published a new final Waste Confidence rule, named Continued Storage of Spent Nuclear Fuel, that for licensing purposes adopts non-site specific findings concerning the environmental impacts of the continued storage of spent nuclear fuel at reactor sites - for 60 years, 100 years and indefinitely - after the reactor’s licensed period of operations. The NRC also issued an order lifting its suspension of licensing proceedings after the final rule’s effective date in October 2014. After the final rule became effective, New York, Connecticut, and Vermont filed a challenge to the rule in the U.S. Court of Appeals. In June 2016 the court denied the challenge.
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear sustainability plan. That plan has not been fully developed, but it will result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear sustainability plan, and an estimate of the costs associated with this plan cannot be made at this time.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 Louisiana’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits. The following is an update to that discussion.
Taxationbenefits, and Uncertain Tax Positions
See “Critical Accounting Estimates - Taxation and Uncertain Tax Positions” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | |
| | | Three Months Ended | | Six Months Ended | | Three Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | |
| Electric | |
| $989,732 |
| |
| $1,064,328 |
| |
| $1,926,163 |
| |
| $2,109,139 |
| |
| $864,076 |
| |
| $936,431 |
|
| Natural gas | | 9,302 |
| | 10,270 |
| | 28,016 |
| | 34,651 |
| | 16,707 |
| | 18,714 |
|
| TOTAL | | 999,034 |
| | 1,074,598 |
| | 1,954,179 |
| | 2,143,790 |
| | 880,783 |
| | 955,145 |
|
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 152,340 |
| | 176,991 |
| | 354,423 |
| | 396,649 |
| | 154,044 |
| | 202,083 |
|
| Purchased power | | 224,699 |
| | 289,560 |
| | 416,097 |
| | 560,759 |
| | 239,827 |
| | 191,398 |
|
| Nuclear refueling outage expenses | | 12,974 |
| | 11,809 |
| | 25,754 |
| | 22,939 |
| | 12,185 |
| | 12,780 |
|
| Other operation and maintenance | | 232,957 |
| | 248,277 |
| | 439,021 |
| | 469,078 |
| | 223,230 |
| | 206,064 |
|
| Decommissioning | | 11,658 |
| | 10,784 |
| | 23,166 |
| | 21,429 |
| | 12,123 |
| | 11,508 |
|
| Taxes other than income taxes | | 44,366 |
| | 40,171 |
| | 86,728 |
| | 84,061 |
| | 45,283 |
| | 42,362 |
|
| Depreciation and amortization | | 112,452 |
| | 110,758 |
| | 222,043 |
| | 217,626 |
| | 115,630 |
| | 109,591 |
|
| Other regulatory charges (credits) - net | | 13,836 |
| | (4,820 | ) | | 11,577 |
| | (5,595 | ) | |
| Other regulatory credits - net | | | (74,187 | ) | | (2,259 | ) |
| TOTAL | | 805,282 |
| | 883,530 |
| | 1,578,809 |
| | 1,766,946 |
| | 728,135 |
| | 773,527 |
|
| | | | | | | | | | | | | |
| OPERATING INCOME | | 193,752 |
| | 191,068 |
| | 375,370 |
| | 376,844 |
| | 152,648 |
| | 181,618 |
|
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 4,506 |
| | 4,223 |
| | 11,744 |
| | 9,695 |
| | 9,990 |
| | 7,238 |
|
| Interest and investment income | | 40,251 |
| | 34,781 |
| | 77,667 |
| | 74,797 |
| | 39,830 |
| | 37,416 |
|
| Miscellaneous - net | | (1,870 | ) | | (4,588 | ) | | (5,615 | ) | | (4,788 | ) | | (3,024 | ) | | (3,745 | ) |
| TOTAL | | 42,887 |
| | 34,416 |
| | 83,796 |
| | 79,704 |
| | 46,796 |
| | 40,909 |
|
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | 70,787 |
| | 65,003 |
| | 135,863 |
| | 130,284 |
| | 67,315 |
| | 65,076 |
|
| Allowance for borrowed funds used during construction | | (2,383 | ) | | (2,365 | ) | | (6,280 | ) | | (5,493 | ) | | (5,174 | ) | | (3,897 | ) |
| TOTAL | | 68,404 |
| | 62,638 |
| | 129,583 |
| | 124,791 |
| | 62,141 |
| | 61,179 |
|
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 168,235 |
| | 162,846 |
| | 329,583 |
| | 331,757 |
| | 137,303 |
| | 161,348 |
|
| | | | | | | | | | | | | |
| Income taxes | | (85,090 | ) | | 53,865 |
| | (35,348 | ) | | 96,667 |
| | 42,925 |
| | 49,742 |
|
| | | | | | | | | | | | | |
| NET INCOME | | 253,325 |
| | 108,981 |
| | 364,931 |
| | 235,090 |
| |
| $94,378 |
| |
| $111,606 |
|
| | | | | | | | | | | | | |
| Preferred dividend requirements and other | | — |
| | 1,944 |
| | — |
| | 3,887 |
| |
| | | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON EQUITY | |
| $253,325 |
| |
| $107,037 |
| |
| $364,931 |
| |
| $231,203 |
| |
| | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | |
| | Three Months Ended | | Six Months Ended | Three Months Ended |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | | (In Thousands) | (In Thousands) |
| | | | | | | | | | | |
| Net Income |
| $253,325 |
| |
| $108,981 |
| |
| $364,931 |
| |
| $235,090 |
|
| $94,378 |
| |
| $111,606 |
|
| Other comprehensive income (loss) | | | | | | | | |
| Pension and other postretirement liabilities | | | | | | | | |
| (net of tax expense (benefit) of ($144), $257, ($259), and $545) | (230 | ) | | 412 |
| | (493 | ) | | 792 |
| |
| Other comprehensive income (loss) | (230 | ) | | 412 |
| | (493 | ) | | 792 |
| |
| Other comprehensive loss | | | | |
| Pension and other postretirement liabilities (net of tax benefit of $232 and $115) | | (370 | ) | | (263 | ) |
| Other comprehensive loss | | (370 | ) | | (263 | ) |
| Comprehensive Income |
| $253,095 |
| |
| $109,393 |
| |
| $364,438 |
| |
| $235,882 |
|
| $94,008 |
| |
| $111,343 |
|
| | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $364,931 |
| |
| $235,090 |
| |
| $94,378 |
| |
| $111,606 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 301,815 |
| | 297,302 |
| | 151,472 |
| | 146,870 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (49,661 | ) | | 135,120 |
| | 163,299 |
| | 172,887 |
|
| Changes in working capital: | | | | | | | | |
| Receivables | | (72,931 | ) | | (76,119 | ) | | 75,196 |
| | (25,879 | ) |
| Fuel inventory | | (5,053 | ) | | (2,890 | ) | | 3,066 |
| | (2,538 | ) |
| Accounts payable | | (22,830 | ) | | 34,241 |
| | (7,846 | ) | | (110,500 | ) |
| Prepaid taxes and taxes accrued | | 23,850 |
| | 23,931 |
| | 22,563 |
| | (104,444 | ) |
| Interest accrued | | (4,216 | ) | | 1,985 |
| | 5,983 |
| | (2,185 | ) |
| Deferred fuel costs | | 4,093 |
| | (32,819 | ) | | (19,487 | ) | | 45,511 |
|
| Other working capital accounts | | (26,514 | ) | | (31,192 | ) | | (20,810 | ) | | 1,387 |
|
| Changes in provisions for estimated losses | | 1,734 |
| | (5,165 | ) | | (4,059 | ) | | (2,695 | ) |
| Changes in other regulatory assets | | 58,429 |
| | 45,422 |
| | 28,922 |
| | 30,033 |
|
| Changes in other regulatory liabilities | | | (59,969 | ) | | (998 | ) |
| Changes in pension and other postretirement liabilities | | (35,869 | ) | | (24,796 | ) | | (17,054 | ) | | (19,115 | ) |
| Other | | (97,422 | ) | | (36,288 | ) | | (75,950 | ) | | (91,459 | ) |
| Net cash flow provided by operating activities | | 440,356 |
| | 563,822 |
| | 339,704 |
| | 148,481 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (403,387 | ) | | (374,174 | ) | | (360,693 | ) | | (206,572 | ) |
| Allowance for equity funds used during construction | | 11,744 |
| | 9,695 |
| | 9,990 |
| | 7,238 |
|
| Payment for purchase of plant | | (473,956 | ) | | — |
| | — |
| | (473,888 | ) |
| Nuclear fuel purchases | | (38,773 | ) | | (119,798 | ) | | (139,620 | ) | | (26,684 | ) |
| Proceeds from the sale of nuclear fuel | | 64,498 |
| | 17,070 |
| | 28,884 |
| | 47,565 |
|
| Increase in investments | | — |
| | (32,300 | ) | |
| Receipts from storm reserve escrow account | | | 8,836 |
| | — |
|
| Payments to storm reserve escrow account | | — |
| | (42 | ) | | (332 | ) | | — |
|
| Changes to securitization account | | 225 |
| | 9 |
| | (5,527 | ) | | (5,506 | ) |
| Proceeds from nuclear decommissioning trust fund sales | | 123,546 |
| | 65,127 |
| | 40,586 |
| | 53,793 |
|
| Investment in nuclear decommissioning trust funds | | (143,091 | ) | | (80,352 | ) | | (51,393 | ) | | (64,337 | ) |
| Changes in money pool receivable - net | | (168 | ) | | (16,941 | ) | | (8,047 | ) | | (7,559 | ) |
| Changes in other investments - net | | (544 | ) | | (5,090 | ) | |
| Funds held on deposit | | | — |
| | (196,568 | ) |
| Insurance proceeds | | | 5,305 |
| | — |
|
| Other | | | — |
| | (243 | ) |
| Net cash flow used in investing activities | | (859,906 | ) | | (536,796 | ) | | (472,011 | ) | | (872,761 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | 1,128,580 |
| | — |
| | — |
| | 809,369 |
|
| Retirement of long-term debt | | (559,839 | ) | | (25,368 | ) | | (57,499 | ) | | (26,189 | ) |
| Changes in credit borrowings - net | | (888 | ) | | (5,766 | ) | | 87,504 |
| | 17,094 |
|
| Distributions paid: | | | | | | | | |
| Common equity | | (105,500 | ) | | — |
| | (42,125 | ) | | — |
|
| Preferred membership interests | | — |
| | (3,887 | ) | |
| Other | | (3,100 | ) | | (12,389 | ) | | (2,130 | ) | | 852 |
|
| Net cash flow provided by (used in) financing activities | | 459,253 |
| | (47,410 | ) | | (14,250 | ) | | 801,126 |
|
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | 39,703 |
| | (20,384 | ) | | (146,557 | ) | | 76,846 |
|
| Cash and cash equivalents at beginning of period | | 35,102 |
| | 320,516 |
| | 213,850 |
| | 35,102 |
|
| Cash and cash equivalents at end of period | |
| $74,805 |
| |
| $300,132 |
| |
| $67,293 |
| |
| $111,948 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $196,514 |
| |
| $124,491 |
| |
| $59,261 |
| |
| $125,589 |
|
| Income taxes | |
| $62,676 |
| |
| ($4,056 | ) | |
| ($116,937 | ) | |
| $22,676 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | June 30, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $24,659 |
| |
| $348 |
| |
| $2,639 |
| |
| $49,972 |
|
| Temporary cash investments | | 50,146 |
| | 34,754 |
| | 64,654 |
| | 163,878 |
|
| Total cash and cash equivalents | | 74,805 |
| | 35,102 |
| | 67,293 |
| | 213,850 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 167,646 |
| | 179,051 |
| | 173,598 |
| | 213,517 |
|
| Allowance for doubtful accounts | | (6,633 | ) | | (4,209 | ) | | (6,889 | ) | | (6,277 | ) |
| Associated companies | | 131,488 |
| | 94,418 |
| | 136,949 |
| | 155,794 |
|
| Other | | 112,044 |
| | 56,793 |
| | 48,471 |
| | 54,186 |
|
| Accrued unbilled revenues | | 180,343 |
| | 143,079 |
| | 152,848 |
| | 159,176 |
|
| Total accounts receivable | | 584,888 |
| | 469,132 |
| | 504,977 |
| | 576,396 |
|
| Fuel inventory | | 53,098 |
| | 48,045 |
| | 47,672 |
| | 50,738 |
|
| Materials and supplies - at average cost | | 305,376 |
| | 282,688 |
| | 286,906 |
| | 294,421 |
|
| Deferred nuclear refueling outage costs | | 41,548 |
| | 66,984 |
| | 58,207 |
| | 22,535 |
|
| Gas hedge contracts | | 12,817 |
| | — |
| |
| Prepaid taxes | | | 87,541 |
| | 110,104 |
|
| Prepayments and other | | 45,300 |
| | 28,294 |
| | 35,109 |
| | 41,687 |
|
| TOTAL | | 1,117,832 |
| | 930,245 |
| | 1,087,705 |
| | 1,309,731 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investment in affiliate preferred membership interests | | 1,390,587 |
| | 1,390,587 |
| | 1,390,587 |
| | 1,390,587 |
|
| Decommissioning trust funds | | 1,094,817 |
| | 1,042,293 |
| | 1,190,105 |
| | 1,140,707 |
|
| Storm reserve escrow account | | 290,966 |
| | 290,422 |
| | 282,981 |
| | 291,485 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 212,741 |
| | 206,293 |
| | 227,684 |
| | 217,494 |
|
| Other | | 28,920 |
| | 14,776 |
| | 24,261 |
| | 28,844 |
|
| TOTAL | | 3,018,031 |
| | 2,944,371 |
| | 3,115,618 |
| | 3,069,117 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 18,891,958 |
| | 17,629,077 |
| | 18,937,417 |
| | 18,827,532 |
|
| Natural gas | | 165,193 |
| | 159,252 |
| | 175,438 |
| | 172,816 |
|
| Property under capital lease | | — |
| | 341,514 |
| |
| Construction work in progress | | 382,197 |
| | 420,874 |
| | 799,802 |
| | 670,201 |
|
| Nuclear fuel | | 289,234 |
| | 386,524 |
| | 361,069 |
| | 249,807 |
|
| TOTAL UTILITY PLANT | | 19,728,582 |
| | 18,937,241 |
| | 20,273,726 |
| | 19,920,356 |
|
| Less - accumulated depreciation and amortization | | 8,594,494 |
| | 8,302,774 |
| | 8,475,891 |
| | 8,420,596 |
|
| UTILITY PLANT - NET | | 11,134,088 |
| | 10,634,467 |
| | 11,797,835 |
| | 11,499,760 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 474,456 |
| | 478,243 |
| | 472,806 |
| | 470,480 |
|
| Other regulatory assets (includes securitization property of $104,520 as of June 30, 2016 and $114,701 as of December 31, 2015) | | 1,163,232 |
| | 1,217,874 |
| |
| Other regulatory assets (includes securitization property of $88,126 as of March 31, 2017 and $92,951 as of December 31, 2016) | | | 1,136,810 |
| | 1,168,058 |
|
| Deferred fuel costs | | 168,122 |
| | 168,122 |
| | 168,122 |
| | 168,122 |
|
| Other | | 20,081 |
| | 14,125 |
| | 20,982 |
| | 16,003 |
|
| TOTAL | | 1,825,891 |
| | 1,878,364 |
| | 1,798,720 |
| | 1,822,663 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $17,095,842 |
| |
| $16,387,447 |
| |
| $17,799,878 |
| |
| $17,701,271 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | June 30, 2016 and December 31, 2015 | |
| March 31, 2017 and December 31, 2016 | | March 31, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $61,004 |
| |
| $29,372 |
| |
| $161,506 |
| |
| $200,198 |
|
| Short-term borrowings | | 59,469 |
| | 60,356 |
| | 72,497 |
| | 3,794 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 102,443 |
| | 165,419 |
| | 71,512 |
| | 82,106 |
|
| Other | | 268,030 |
| | 276,280 |
| | 308,209 |
| | 358,741 |
|
| Customer deposits | | 148,760 |
| | 146,555 |
| | 149,063 |
| | 148,601 |
|
| Taxes accrued | | 148,992 |
| | 125,142 |
| |
| Interest accrued | | 70,164 |
| | 74,380 |
| | 81,581 |
| | 75,598 |
|
| Deferred fuel costs | | 69,327 |
| | 65,234 |
| | 28,724 |
| | 48,211 |
|
| Other | | 88,794 |
| | 79,982 |
| | 70,178 |
| | 80,013 |
|
| TOTAL | | 1,016,983 |
| | 1,022,720 |
| | 943,270 |
| | 997,262 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,447,814 |
| | 2,506,956 |
| | 2,849,713 |
| | 2,691,118 |
|
| Accumulated deferred investment tax credits | | 129,251 |
| | 131,760 |
| | 125,523 |
| | 126,741 |
|
| Regulatory liability for income taxes - net | | — |
| | 2,473 |
| |
| Other regulatory liabilities | | 848,739 |
| | 818,623 |
| | 821,005 |
| | 880,974 |
|
| Decommissioning | | 1,054,914 |
| | 1,027,862 |
| | 1,096,846 |
| | 1,082,685 |
|
| Accumulated provisions | | 312,016 |
| | 310,282 |
| | 306,713 |
| | 310,772 |
|
| Pension and other postretirement liabilities | | 797,246 |
| | 833,185 |
| | 763,093 |
| | 780,278 |
|
| Long-term debt (includes securitization bonds of $110,717 as of June 30, 2016 and $120,549 as of December 31, 2015) | | 5,349,214 |
| | 4,806,790 |
| |
| Long-term payables - associated companies | | 403 |
| | 1,073 |
| |
| Long-term debt (includes securitization bonds of $99,282 as of March 31, 2017 and $99,217 as of December 31, 2016) | | | 5,613,849 |
| | 5,612,593 |
|
| Other | | 143,027 |
| | 188,411 |
| | 146,178 |
| | 137,039 |
|
| TOTAL | | 11,082,624 |
| | 10,627,415 |
| | 11,722,920 |
| | 11,622,200 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Member's equity | | 5,053,140 |
| | 4,793,724 |
| | 5,182,500 |
| | 5,130,251 |
|
| Accumulated other comprehensive loss | | (56,905 | ) | | (56,412 | ) | | (48,812 | ) | | (48,442 | ) |
| TOTAL | | 4,996,235 |
| | 4,737,312 |
| | 5,133,688 |
| | 5,081,809 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $17,095,842 |
| |
| $16,387,447 |
| |
| $17,799,878 |
| |
| $17,701,271 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | For the Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | |
| | | | Common Equity | | | Common Equity | | |
| | Preferred Membership Interests | | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total |
| | | | (In Thousands) | | | (In Thousands) | | |
| | | | | | | | | | | | | |
| Balance at December 31, 2014 |
| $110,000 |
| |
| $4,316,210 |
| |
| ($79,223 | ) | |
| $4,346,987 |
| |
| Balance at December 31, 2015 | |
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
|
| | | | | | | | | | | | | |
| Net income | — |
| | 235,090 |
| | — |
| | 235,090 |
| 111,606 |
| | — |
| | 111,606 |
|
| Other comprehensive income | — |
| | — |
| | 792 |
| | 792 |
| — |
| | (263 | ) | | (263 | ) |
| Distributions declared on preferred membership interests | — |
| | (3,887 | ) | | — |
| | (3,887 | ) | |
| Other | — |
| | (15 | ) | | — |
| | (15 | ) | (7 | ) | | — |
| | (7 | ) |
| | | | | | | | | | | | | |
| Balance at June 30, 2015 |
| $110,000 |
| |
| $4,547,398 |
| |
| ($78,431 | ) | |
| $4,578,967 |
| |
| Balance at March 31, 2016 | |
| $4,905,323 |
| |
| ($56,675 | ) | |
| $4,848,648 |
|
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $— |
| |
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
| |
| Balance at December 31, 2016 | |
| $5,130,251 |
| |
| ($48,442 | ) | |
| $5,081,809 |
|
| | | | | | | | | | | | | |
| Net income | — |
| | 364,931 |
| | — |
| | 364,931 |
| 94,378 |
| | — |
| | 94,378 |
|
| Other comprehensive loss | — |
| | — |
| | (493 | ) | | (493 | ) | — |
| | (370 | ) | | (370 | ) |
| Distributions declared on common equity | — |
| | (105,500 | ) | | — |
| | (105,500 | ) | (42,125 | ) | | — |
| | (42,125 | ) |
| Other | — |
| | (15 | ) | | — |
| | (15 | ) | (4 | ) | | — |
| | (4 | ) |
| | | | | | | | | | | | | |
| Balance at June 30, 2016 |
| $— |
| |
| $5,053,140 |
| |
| ($56,905 | ) | |
| $4,996,235 |
| |
| Balance at March 31, 2017 | |
| $5,182,500 |
| |
| ($48,812 | ) | |
| $5,133,688 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | SELECTED OPERATING RESULTS (a) | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | �� | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $246 |
| |
| $280 |
| |
| ($34 | ) | | (12 | ) | |
| $221 |
| |
| $254 |
| |
| ($33 | ) | | (13 | ) |
| Commercial | | 212 |
| | 235 |
| | (23 | ) | | (10 | ) | | 195 |
| | 209 |
| | (14 | ) | | (7 | ) |
| Industrial | | 319 |
| | 344 |
| | (25 | ) | | (7 | ) | | 325 |
| | 326 |
| | (1 | ) | | — |
|
| Governmental | | 16 |
| | 16 |
| | — |
| | — |
| | 15 |
| | 16 |
| | (1 | ) | | (6 | ) |
| Total retail | | 793 |
| | 875 |
| | (82 | ) | | (9 | ) | | 756 |
| | 805 |
| | (49 | ) | | (6 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 105 |
| | 108 |
| | (3 | ) | | (3 | ) | | 62 |
| | 89 |
| | (27 | ) | | (30 | ) |
| Non-associated companies | | 18 |
| | 12 |
| | 6 |
| | — |
| | 14 |
| | 6 |
| | 8 |
| | 133 |
|
| Other | | 74 |
| | 69 |
| | 5 |
| | 7 |
| | 32 |
| | 36 |
| | (4 | ) | | — |
|
| Total | |
| $990 |
| |
| $1,064 |
| |
| ($74 | ) | | (7 | ) | |
| $864 |
| |
| $936 |
| |
| ($72 | ) | | (8 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 2,919 |
| | 3,117 |
| | (198 | ) | | (6 | ) | | 2,852 |
| | 3,054 |
| | (202 | ) | | (7 | ) |
| Commercial | | 2,693 |
| | 2,784 |
| | (91 | ) | | (3 | ) | | 2,540 |
| | 2,566 |
| | (26 | ) | | (1 | ) |
| Industrial | | 7,294 |
| | 6,748 |
| | 546 |
| | 8 |
| | 6,961 |
| | 7,023 |
| | (62 | ) | | (1 | ) |
| Governmental | | 195 |
| | 187 |
| | 8 |
| | 4 |
| | 193 |
| | 199 |
| | (6 | ) | | (3 | ) |
| Total retail | | 13,101 |
| | 12,836 |
| | 265 |
| | 2 |
| | 12,546 |
| | 12,842 |
| | (296 | ) | | (2 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 2,175 |
| | 2,049 |
| | 126 |
| | 6 |
| | 994 |
| | 1,569 |
| | (575 | ) | | (37 | ) |
| Non-associated companies | | 698 |
| | 191 |
| | 507 |
| | 265 |
| | 295 |
| | 288 |
| | 7 |
| | 2 |
|
| Total | | 15,974 |
| | 15,076 |
| | 898 |
| | 6 |
| | 13,835 |
| | 14,699 |
| | (864 | ) | | (6 | ) |
| | | | | | | | | | | | | | | | | |
| | | Six Months Ended | | Increase/ | | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | | |
| Electric Operating Revenues: | | | | | | | | | |
| Residential | |
| $500 |
| |
| $587 |
| |
| ($87 | ) | | (15 | ) | |
| Commercial | | 421 |
| | 467 |
| | (46 | ) | | (10 | ) | |
| Industrial | | 645 |
| | 686 |
| | (41 | ) | | (6 | ) | |
| Governmental | | 32 |
| | 33 |
| | (1 | ) | | (3 | ) | |
| Total retail | | 1,598 |
| | 1,773 |
| | (175 | ) | | (10 | ) | |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 194 |
| | 204 |
| | (10 | ) | | (5 | ) | |
| Non-associated companies | | 24 |
| | 24 |
| | — |
| | — |
| |
| Other | | 110 |
| | 108 |
| | 2 |
| | — |
| |
| Total | |
| $1,926 |
| |
| $2,109 |
| |
| ($183 | ) | | (9 | ) | |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 5,973 |
| | 6,624 |
| | (651 | ) | | (10 | ) | |
| Commercial | | 5,259 |
| | 5,457 |
| | (198 | ) | | (4 | ) | |
| Industrial | | 14,317 |
| | 13,315 |
| | 1,002 |
| | 8 |
| |
| Governmental | | 394 |
| | 377 |
| | 17 |
| | 5 |
| |
| Total retail | | 25,943 |
| | 25,773 |
| | 170 |
| | 1 |
| |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 3,744 |
| | 3,681 |
| | 63 |
| | 2 |
| |
| Non-associated companies | | 986 |
| | 398 |
| | 588 |
| | 148 |
| |
| Total | | 30,673 |
| | 29,852 |
| | 821 |
| | 3 |
| |
| | | | | | | | | | |
(a) Amounts have been retrospectively adjusted to reflect the effects of the Entergy Louisiana and Entergy Gulf States Louisiana business combination for the three and six months ended June 30, 2015. See Note 1 to the financial statements in the Form 10-K for a discussion of the business combination.
| |
ENTERGY MISSISSIPPI, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter 2016 Compared to Second Quarter2015
Net income increased $5.9 million primarily dueremained relatively unchanged for the first quarter 2017 compared to lower other operation and maintenance expenses and lower taxes other than income taxes, partially offset by lower net revenue and higher depreciation and amortization expenses.
the first quarter 2016Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015.
Net income decreased $1.9 million primarily due to lower net revenue and higher depreciation and amortization expenses, partially offset by lower other operation and maintenance expenses and lower taxes other than income taxes.
Net Revenue
Second Quarter 2016 Compared to Second Quarter2015
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 charges (credits). Following is an analysis of the change in net revenue comparing the second quarter 2016 to the second quarter 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $178.9 |
|
Retail electric price | (1.9 | ) |
Other | (0.2 | ) |
2016 net revenue |
| $176.8 |
|
The retail electric price variance is primarily due to a decrease in ad valorem tax collections in 2016 as compared to the same period in 2015 as part of the 2015 rate case order. In June 2016 the MPSC approved an ad valorem tax rider schedule, effective with the first billing cycle of July 2016, that is set to recover calendar year 2016 incremental ad valorem tax expense above the amount approved in the forward test year formula rate plan. See Note 2 to the financial statements herein for more discussion on the ad valorem tax rider.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
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 charges (credits).credits. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2016first quarter 2017 to the six months ended June 30, 2015:first quarter 2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $354.7149.6 |
|
| Retail electric price | (13.96.3 | )
|
| Volume/weather | (7.8 | ) |
Reserve equalization | (2.82.3 | ) |
| Other | (3.80.5 | )
|
20162017 net revenue |
| $326.4154.1 |
|
The retail electric price variance is primarily due to a decrease$19.4 million net annual increase in ad valorem tax collections in 2016revenues, as compared toapproved by the same period in 2015 as part of the 2015 rate case order. In June 2016 the MPSC, approved an ad valorem tax rider schedule, effective with the first billing cycle of July 2016, that is set to recover calendar year 2016 incremental ad valorem tax expense above the amount approved in the forward test year formula rate plan.2016. See Note 2 to the financial statements herein and in the Form 10-K for morefurther discussion onof the ad valorem tax rider.formula rate plan.
The volume/weather variance is primarily due to a decrease of 18875 GWh, or 3%2%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales.
sales, partially offset by an increase in industrial usage.The reserve equalization revenue varianceincrease in industrial usage is primarily due to an increase in usage by the absence of reserve equalization revenue as comparedmid to small industrial sector, expansion projects in the same periodpulp and paper industry, and new customers in 2015 resulting from Entergy Mississippi’s exit from the System Agreement in November 2015.wood products industry.
Other Income Statement Variances
Second Quarter 2016 Compared to Second Quarter2015
Other operation and maintenance expenses decreasedincreased primarily due to:
a decrease of $4 million in fossil-fueled generation expenses primarily due to a lower scope of work done during plant outages in 2016 as compared to the same period in 2015;
a $2.6 million loss recognized in 2015 on the disposition of plant components; and
a decreasean increase of $1.4 million in compensation and benefits costs primarily due to a decreaserevision to estimated incentive compensation expense in net periodic pension and other postretirement benefits costs as a result of first quarter 2016;
an increase of $0.8 million in the discount rate useddistribution expenses primarily due to value the benefit liabilitieshigher vegetation maintenance; and a refinement
an increase of $0.6 million in the approach used to estimate the service cost and interest cost components of pension and other postretirementenergy efficiency costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.
Income Taxes
The decreaseeffective income tax rate was 41.0% for the first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of 35% was primarily due to a write-off of a stock-based compensation deferred tax asset and state income taxes, partially offset by an increase of $2.5 million in loss reservesbook and an increase of $1.7 million in storm damage provisions. See Note 2tax differences related to the financial statements in the Form 10-Kallowance for a discussion of storm cost recovery.equity funds used during construction.
Taxes other than income taxes decreased primarily due to the MPSC's June 2016 approval of a revised ad valorem tax rider allowing Entergy Mississippi to recover the difference in 2016 ad valorem tax expense and the amount approved in base rates in the 2016 formula rate plan order. See Note 2 to the financial statements herein for further discussion on the ad valorem tax rider.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Other operation and maintenance expenses decreased primarily due to:
a decrease of $13.6 million in fossil-fueled generation expenses primarily due to a lower scope of work done during plant outages in 2016 as compared to the same period in 2015;
a $2.6 million loss recognized in 2015 on the disposition of plant components; and
a decrease of $2.2 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.
The decrease was partially offset by an increase of $2.7 million in distribution expenses primarily due to vegetation maintenance.
Taxes other than income taxes decreased primarily due to the MPSC's June 2016 approval of a revised ad valorem tax rider allowing Entergy Mississippi to recover the difference in 2016 ad valorem tax expense and the amount approved in base rates in the 2016 formula rate plan order. See Note 2 to the financial statements herein for further discussion on the ad valorem tax rider.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Income Taxes
The effective income tax rate was 32.7%39.3% for the secondfirst quarter 2016. The difference in the effective income tax rate for the secondfirst quarter 2016 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items, partially offset by state income taxes.
The effective income tax rate was 35.2% for the six months ended June 30, 2016. The difference in the effective income tax rate for the six months ended June 30, 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 39.6% for the second quarter 2015 and 39.4% for the six months ended June 30, 2015. The differences in the effective income tax rates for the second quarter 2015 and the six months ended June 30, 2015 versus the federal statutory rate of 35% were primarily due to state income taxes and certain book and tax differences related to utility plant items.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2017 and 2016 were as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $76,834 |
| |
| $145,605 |
|
| | | | |
| Cash flow provided by (used in): | | | |
| Operating activities | (9,132 | ) | | 30,276 |
|
| Investing activities | (79,691 | ) | | (61,178 | ) |
| Financing activities | 12,036 |
| | (757 | ) |
| Net decrease in cash and cash equivalents | (76,787 | ) | | (31,659 | ) |
| | | | |
| Cash and cash equivalents at end of period |
| $47 |
| |
| $113,946 |
|
Operating Activities
Entergy Mississippi’s operating activities used $9.1 million of cash for the three months ended March 31, 2017 compared to providing $30.3 million of cash for the three months ended March 31, 2016 primarily due to the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016 and the timing of collections from customers. The decrease was partially offset by an increase of $8.9 million in income tax refunds in 2017 compared to the same period in 2016. Entergy Mississippi received state income tax refunds of $15.1 million in 2017 and $6.2 million in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the carryback of net operating losses.
Investing Activities
Net cash flow used in investing activities increased $18.5 million for the three months ended March 31, 2017 compared to the three months ended March 31, 2016 primarily due to:
an increase of $13.5 million in transmission construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016;
an increase of $6.6 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2017 as compared to the same period in 2016; and
an increase of $5.2 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed during plant outages in 2017 compared to the same period in 2016.
Financing Activities
Entergy Mississippi’s financing activities provided $12 million of cash for the three months ended March 31, 2017 compared to using $0.8 million of cash for the three months ended March 31, 2016 primarily due to money pool activity.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the six months ended June 30, 2016 and 2015 were as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $145,605 |
| |
| $61,633 |
|
| | | | |
| Cash flow provided by (used in): | | | |
| Operating activities | 77,063 |
| | 174,329 |
|
| Investing activities | (128,241 | ) | | (87,554 | ) |
| Financing activities | 14,126 |
| | (34,001 | ) |
| Net increase (decrease) in cash and cash equivalents | (37,052 | ) | | 52,774 |
|
| | | | |
| Cash and cash equivalents at end of period |
| $108,553 |
| |
| $114,407 |
|
Operating Activities
Net cash flow provided by operating activities decreased $97.3 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to:
decreased recovery of fuel costs in 2016 as compared to the same period in 2015;
timing of collections from customers; and
$15.1 million in insurance proceeds received in the first quarter of 2015 related to the Baxter Wilson plant event. See Note 8 to the financial statements in the Form 10-K for a discussion on the Baxter Wilson plant event.
Investing Activities
Net cash flow used in investing activities increased $40.7 million for the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to:
an increase in transmission construction expenditures primarily due to a higher scope of work done in 2016 as compared to the same period in 2015;
insurance proceeds of $12.7 million received in the first quarter of 2015 related to the Baxter Wilson plant event. See Note 8 to the financial statements in the Form 10-K for a discussion on the Baxter Wilson plant event; and
an increase of $10.7 million due to various technology projects and upgrades.
The increase was partially offset by money pool activity.
DecreasesIncreases in Entergy Mississippi’s receivable frompayable to the money pool are a source of cash flow, and Entergy Mississippi’s receivable frompayable to the money pool decreasedincreased by $12.4$12.3 million for the sixthree months ended June 30, 2016 compared to increasing by $7.1 million for the six months ended June 30, 2015.March 31, 2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Financing Activities
Entergy Mississippi’s financing activities provided $14.1 million of cash for the six months ended June 30, 2016 compared to using $34 million of cash for the six months ended June 30, 2015 primarily due to the net issuance of $39.5 million of long-term debt in 2016 and a decrease of $8.5 million in common stock dividends paid in 2016 as compared to the same period in 2015.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | June 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 50.2 | % | | 49.7 | % | 49.8 | % | | 50.2 | % |
| Effect of subtracting cash | (2.6 | %) | | (3.8 | %) | — | % | | (1.8 | %) |
| Net debt to net capital | 47.6 | % | | 45.9 | % | 49.8 | % | | 48.4 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. Entergy Mississippi 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 Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
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 Mississippi’s uses and sources of capital. Entergy Mississippi seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support planned investments, Entergy Mississippi may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure. Due to the variability in many of the components of operating cash flows as well as the variability in investments, the amount of cash available for dividends can change significantly from year to year.
Following are updates to the information provided in the Form 10-K.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
The current annual amounts of Entergy Mississippi’s planned construction and other capital investments are as follows:
|
| | | | | | | | | | | | |
| | | 2016 | | 2017 | | 2018 |
| | | (In Millions) |
| Planned construction and capital investment: | | | | | | |
| Generation | |
| $30 |
| |
| $40 |
| |
| $50 |
|
| Transmission | | 135 |
| | 140 |
| | 90 |
|
| Distribution | | 135 |
| | 115 |
| | 120 |
|
| Other | | 20 |
| | 20 |
| | 10 |
|
| | |
| $320 |
| |
| $315 |
| |
| $270 |
|
The updated capital plan for 2016-2018 reflects capital plan refinements and includes transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintain reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
June 30, 2016 | | December 31, 2015 | | June 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $13,514 | | $25,930 | | $7,736 | | $644 |
|
| | | | | | |
| March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($12,324) | | $10,595 | | $15,549 | | $25,930 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Mississippi has four separate credit facilities in the aggregate amount of $102.5 million scheduled to expire in May 2017. Entergy Mississippi expects to renew its credit facilities prior to expiration. No borrowings were outstanding under the credit facilities as of June 30, 2016.March 31, 2017. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of June 30, 2016,March 31, 2017, a $26.7$7.1 million letter of credit was outstanding under Entergy Mississippi’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of the formula rate plan and fuel and purchased power cost recovery. The following are updates to that discussion.
Formula Rate Plan
In March 2016, Entergy Mississippi submitted its formula rate plan 2016 test year filing showing Entergy Mississippi’s projected earned return for the 2016 calendar year to be below the formula rate plan bandwidth. The filing showed a $32.6 million rate increase was necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96%, within the formula rate plan bandwidth. In June 2016 the MPSC approved Entergy Mississippi’s joint stipulation with the Mississippi Public Utilities Staff. The joint stipulation provided for a total revenue increase of $23.7 million. The revenue increase includes a $19.4 million increase through the formula rate plan, resulting in a return on common equity point of adjustment of 10.07%. The revenue increase
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
also includes $4.3 million in incremental ad valorem tax expenses to be collected through an updated ad valorem tax adjustment rider. The revenue increase and ad valorem tax adjustment rider were effective with the July 2016 bills.Formula Rate Plan
Fuel and Purchased Power Cost Recovery
Entergy Mississippi had a deferred fuel over-recovery balance of $58.3 million as of May 31, 2015, along with an under-recovery balance of $12.3 million under the power management rider. Pursuant to those tariffs, in July 2015, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider to flow through to customers the approximately $46 million net over-recovery over a six-month period. In August 2015, the MPSC approved the interim adjustments effective with September 2015 bills. In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected through January 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC further ordered, however, that due to the significant change in natural gas price forecasts since Entergy Mississippi’s filing in November 2015, Entergy Mississippi shall file a revised fuel factor with the MPSC no later than February 1, 2016. Pursuant to that order,March 2017, Entergy Mississippi submitted a revised fuel factor. Additionally, becauseits formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s projected over-recovery balanceearned return for the period ending January 31,historical 2016 calendar year and projected earned return for the 2017 was $68 million,calendar year to be within the formula rate plan bandwidth, resulting in February 2016, Entergy Mississippi filed for another interim adjustmentno change in rates. The filing is currently subject to the energy cost factor effective April 2016 to flow through to customers the projected over-recovery balance over a six-month period. That interim adjustment was approved by the MPSC in February 2016 effective for April 2016 bills.review.
Storm Damage Provision and Storm Cost RecoveryAdvanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in February 2015,November 2016, Entergy Mississippi provided notice tofiled an application seeking a finding from the MPSC that Entergy Mississippi’s deployment of advanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff that the storm damage provision would be set to zero effective with the March 2015 billing cycle asand Entergy Mississippi entered into and filed a result ofjoint stipulation supporting Entergy Mississippi’s storm damage provision balance exceeding $15 million as of January 31, 2015, but would return to its current level whenfiling, and the storm damage provision balance becomes less than $10 million. As of April 30, 2016,MPSC issued an order approving the filing without any material changes, finding that Entergy Mississippi’s storm damage provision balance was less than $10 million, thereforedeployment of AMI is in the public interest and granting a certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi resumed billingshall continue to include in rate base the monthly storm damage provision effective with June 2016 bills.remaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates.
Mississippi Attorney General Complaint
As discussed in the Form 10-K, the Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power. The defendants have denied the allegations. Discovery is currently in progress.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” sectionin the Form 10-K for a discussion of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 Mississippi’s accounting for utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits. The following is an update to that discussion.
Entergy Mississippi, Inc.
Management's Financial Discussionbenefits, and Analysis
Taxation and Uncertain Tax Positions
See “Critical Accounting Estimates - Taxation and Uncertain Tax Positions” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $258,443 |
| |
| $263,046 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 39,140 |
| | 61,380 |
|
| Purchased power | | 71,070 |
| | 55,383 |
|
| Other operation and maintenance | | 55,173 |
| | 51,273 |
|
| Taxes other than income taxes | | 23,972 |
| | 23,497 |
|
| Depreciation and amortization | | 35,317 |
| | 33,298 |
|
| Other regulatory credits - net | | (5,837 | ) | | (3,358 | ) |
| TOTAL | | 218,835 |
| | 221,473 |
|
| | | | | |
| OPERATING INCOME | | 39,608 |
| | 41,573 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,843 |
| | 1,286 |
|
| Interest and investment income | | 26 |
| | 121 |
|
| Miscellaneous - net | | (425 | ) | | (705 | ) |
| TOTAL | | 1,444 |
| | 702 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 12,672 |
| | 14,742 |
|
| Allowance for borrowed funds used during construction | | (720 | ) | | (667 | ) |
| TOTAL | | 11,952 |
| | 14,075 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 29,100 |
| | 28,200 |
|
| | | | | |
| Income taxes | | 11,942 |
| | 11,082 |
|
| | | | | |
| NET INCOME | | 17,158 |
| | 17,118 |
|
| | | | | |
| Preferred dividend requirements and other | | 238 |
| | 707 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $16,920 |
| |
| $16,411 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| For the Three and Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $248,138 |
| |
| $344,975 |
| |
| $511,184 |
| |
| $705,790 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | (34 | ) | | 64,208 |
| | 61,346 |
| | 154,819 |
|
| Purchased power | | 74,361 |
| | 95,763 |
| | 129,744 |
| | 187,921 |
|
| Other operation and maintenance | | 60,381 |
| | 65,114 |
| | 111,654 |
| | 130,186 |
|
| Taxes other than income taxes | | 20,487 |
| | 23,117 |
| | 43,984 |
| | 48,137 |
|
| Depreciation and amortization | | 34,010 |
| | 32,599 |
| | 67,308 |
| | 63,429 |
|
| Other regulatory charges (credits) - net | | (2,957 | ) | | 6,088 |
| | (6,315 | ) | | 8,373 |
|
| TOTAL | | 186,248 |
| | 286,889 |
| | 407,721 |
| | 592,865 |
|
| | | | | | | | | |
| OPERATING INCOME | | 61,890 |
| | 58,086 |
| | 103,463 |
| | 112,925 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 1,345 |
| | 610 |
| | 2,631 |
| | 1,381 |
|
| Interest and investment income | | 240 |
| | 27 |
| | 361 |
| | 55 |
|
| Miscellaneous - net | | (1,050 | ) | | (1,130 | ) | | (1,755 | ) | | (1,932 | ) |
| TOTAL | | 535 |
| | (493 | ) | | 1,237 |
| | (496 | ) |
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 15,258 |
| | 14,391 |
| | 30,000 |
| | 28,637 |
|
| Allowance for borrowed funds used during construction | | (691 | ) | | (324 | ) | | (1,358 | ) | | (741 | ) |
| TOTAL | | 14,567 |
| | 14,067 |
| | 28,642 |
| | 27,896 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 47,858 |
| | 43,526 |
| | 76,058 |
| | 84,533 |
|
| | | | | | | | | |
| Income taxes | | 15,664 |
| | 17,247 |
| | 26,746 |
| | 33,319 |
|
| | | | | | | | | |
| NET INCOME | | 32,194 |
| | 26,279 |
| | 49,312 |
| | 51,214 |
|
| | | | | | | | | |
| Preferred dividend requirements and other | | 707 |
| | 707 |
| | 1,414 |
| | 1,414 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $31,487 |
| |
| $25,572 |
| |
| $47,898 |
| |
| $49,800 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $17,158 |
| |
| $17,118 |
|
| Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
| Depreciation and amortization | | 35,317 |
| | 33,298 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 13,505 |
| | (7,095 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | 17,890 |
| | (5,118 | ) |
| Fuel inventory | | 2,672 |
| | (3,244 | ) |
| Accounts payable | | (19,639 | ) | | (3,329 | ) |
| Taxes accrued | | (38,825 | ) | | (24,009 | ) |
| Interest accrued | | (2,953 | ) | | (2,033 | ) |
| Deferred fuel costs | | (5,236 | ) | | 40,350 |
|
| Other working capital accounts | | (578 | ) | | (979 | ) |
| Provisions for estimated losses | | (1,772 | ) | | (2,016 | ) |
| Other regulatory assets | | (10,918 | ) | | 751 |
|
| Pension and other postretirement liabilities | | (4,613 | ) | | (6,015 | ) |
| Other assets and liabilities | | (11,140 | ) | | (7,403 | ) |
| Net cash flow provided by (used in) operating activities | | (9,132 | ) | | 30,276 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (92,087 | ) | | (72,764 | ) |
| Allowance for equity funds used during construction | | 1,843 |
| | 1,286 |
|
| Changes in money pool receivable - net | | 10,595 |
| | 10,381 |
|
| Other | | (42 | ) | | (81 | ) |
| Net cash flow used in investing activities | | (79,691 | ) | | (61,178 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Change in money pool payable - net | | 12,324 |
| | — |
|
| Dividends paid: | | | | |
| Preferred stock | | (238 | ) | | (707 | ) |
| Other | | (50 | ) | | (50 | ) |
| Net cash flow provided by (used in) financing activities | | 12,036 |
| | (757 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (76,787 | ) | | (31,659 | ) |
| Cash and cash equivalents at beginning of period | | 76,834 |
| | 145,605 |
|
| Cash and cash equivalents at end of period | |
| $47 |
| |
| $113,946 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $15,036 |
| |
| $16,137 |
|
| Income taxes | |
| ($15,087 | ) | |
| ($6,175 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $49,312 |
| |
| $51,214 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 67,308 |
| | 63,429 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 21,934 |
| | (25,582 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (24,273 | ) | | 14,406 |
|
| Fuel inventory | | (5,040 | ) | | (7,318 | ) |
| Accounts payable | | 21,359 |
| | (11,972 | ) |
| Taxes accrued | | (20,417 | ) | | 30,554 |
|
| Interest accrued | | (584 | ) | | (3,304 | ) |
| Deferred fuel costs | | 108 |
| | 58,395 |
|
| Other working capital accounts | | (8,266 | ) | | (6,027 | ) |
| Provisions for estimated losses | | (188 | ) | | (203 | ) |
| Other regulatory assets | | (1,913 | ) | | 22,799 |
|
| Pension and other postretirement liabilities | | (10,922 | ) | | (8,971 | ) |
| Other assets and liabilities | | (11,355 | ) | | (3,091 | ) |
| Net cash flow provided by operating activities | | 77,063 |
| | 174,329 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (143,171 | ) | | (89,581 | ) |
| Allowance for equity funds used during construction | | 2,631 |
| | 1,381 |
|
| Insurance proceeds | | — |
| | 12,745 |
|
| Changes in money pool receivable - net | | 12,416 |
| | (7,092 | ) |
| Increase in other investments | | — |
| | (5,000 | ) |
| Other | | (117 | ) | | (7 | ) |
| Net cash flow used in investing activities | | (128,241 | ) | | (87,554 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 371,940 |
| | — |
|
| Retirement of long-term debt | | (332,400 | ) | | — |
|
| Dividends paid: | | | | |
| Common stock | | (24,000 | ) | | (32,500 | ) |
| Preferred stock | | (1,414 | ) | | (1,414 | ) |
| Other | | — |
| | (87 | ) |
| Net cash flow provided by (used in) financing activities | | 14,126 |
| | (34,001 | ) |
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (37,052 | ) | | 52,774 |
|
| Cash and cash equivalents at beginning of period | | 145,605 |
| | 61,633 |
|
| Cash and cash equivalents at end of period | |
| $108,553 |
| |
| $114,407 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $29,157 |
| |
| $30,637 |
|
| Income taxes | |
| ($3,561 | ) | |
| $597 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $40 |
| |
| $16 |
|
| Temporary cash investments | | 7 |
| | 76,818 |
|
| Total cash and cash equivalents | | 47 |
| | 76,834 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 52,724 |
| | 51,218 |
|
| Allowance for doubtful accounts | | (554 | ) | | (549 | ) |
| Associated companies | | 27,529 |
| | 45,973 |
|
| Other | | 6,112 |
| | 12,006 |
|
| Accrued unbilled revenues | | 45,679 |
| | 51,327 |
|
| Total accounts receivable | | 131,490 |
| | 159,975 |
|
| Deferred fuel costs | | 12,193 |
| | 6,957 |
|
| Fuel inventory - at average cost | | 48,200 |
| | 50,872 |
|
| Materials and supplies - at average cost | | 41,833 |
| | 41,146 |
|
| Prepayments and other | | 7,799 |
| | 8,873 |
|
| TOTAL | | 241,562 |
| | 344,657 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,604 |
| | 4,608 |
|
| Escrow accounts | | 31,826 |
| | 31,783 |
|
| TOTAL | | 36,430 |
| | 36,391 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,333,218 |
| | 4,321,214 |
|
| Property under capital lease | | 1,234 |
| | 1,590 |
|
| Construction work in progress | | 154,285 |
| | 118,182 |
|
| TOTAL UTILITY PLANT | | 4,488,737 |
| | 4,440,986 |
|
| Less - accumulated depreciation and amortization | | 1,601,042 |
| | 1,602,711 |
|
| UTILITY PLANT - NET | | 2,887,695 |
| | 2,838,275 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 38,694 |
| | 38,284 |
|
| Other regulatory assets | | 352,721 |
| | 342,213 |
|
| Other | | 5,732 |
| | 2,320 |
|
| TOTAL | | 397,147 |
| | 382,817 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,562,834 |
| |
| $3,602,140 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $53,350 |
| |
| $43,647 |
|
| Other | | 54,982 |
| | 80,227 |
|
| Customer deposits | | 84,619 |
| | 84,112 |
|
| Taxes accrued | | 25,215 |
| | 64,040 |
|
| Interest accrued | | 18,700 |
| | 21,653 |
|
| Other | | 8,351 |
| | 9,554 |
|
| TOTAL | | 245,217 |
| | 303,233 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 873,335 |
| | 861,331 |
|
| Accumulated deferred investment tax credits | | 8,627 |
| | 8,667 |
|
| Asset retirement cost liabilities | | 8,844 |
| | 8,722 |
|
| Accumulated provisions | | 52,668 |
| | 54,440 |
|
| Pension and other postretirement liabilities | | 104,941 |
| | 109,551 |
|
| Long-term debt | | 1,121,139 |
| | 1,120,916 |
|
| Other | | 15,971 |
| | 20,108 |
|
| TOTAL | | 2,185,525 |
| | 2,183,735 |
|
| | | | | |
| Commitments and Contingencies | | |
| | |
|
| | | | | |
| Preferred stock without sinking fund | | 20,381 |
| | 20,381 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2017 and 2016 | | 199,326 |
| | 199,326 |
|
| Capital stock expense and other | | 167 |
| | 167 |
|
| Retained earnings | | 912,218 |
| | 895,298 |
|
| TOTAL | | 1,111,711 |
| | 1,094,791 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,562,834 |
| |
| $3,602,140 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| ASSETS |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $3,276 |
| |
| $1,426 |
|
| Temporary cash investments | | 105,277 |
| | 144,179 |
|
| Total cash and cash equivalents | | 108,553 |
| | 145,605 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 39,890 |
| | 56,685 |
|
| Allowance for doubtful accounts | | (505 | ) | | (718 | ) |
| Associated companies | | 47,985 |
| | 34,964 |
|
| Other | | 7,436 |
| | 8,276 |
|
| Accrued unbilled revenues | | 63,542 |
| | 47,284 |
|
| Total accounts receivable | | 158,348 |
| | 146,491 |
|
| Fuel inventory - at average cost | | 56,313 |
| | 51,273 |
|
| Materials and supplies - at average cost | | 40,180 |
| | 39,491 |
|
| Prepayments and other | | 14,015 |
| | 5,184 |
|
| TOTAL | | 377,409 |
| | 388,044 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,617 |
| | 4,625 |
|
| Escrow accounts | | 31,786 |
| | 41,726 |
|
| TOTAL | | 36,403 |
| | 46,351 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,188,885 |
| | 4,083,933 |
|
| Property under capital lease | | 2,281 |
| | 2,942 |
|
| Construction work in progress | | 103,644 |
| | 114,067 |
|
| TOTAL UTILITY PLANT | | 4,294,810 |
| | 4,200,942 |
|
| Less - accumulated depreciation and amortization | | 1,559,956 |
| | 1,534,522 |
|
| UTILITY PLANT - NET | | 2,734,854 |
| | 2,666,420 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 40,744 |
| | 45,790 |
|
| Other regulatory assets | | 338,040 |
| | 328,681 |
|
| Other | | 5,143 |
| | 2,121 |
|
| TOTAL | | 383,927 |
| | 376,592 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,532,593 |
| |
| $3,477,407 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Currently maturing long-term debt | |
| $— |
| |
| $125,000 |
|
| Accounts payable: | | |
| | |
|
| Associated companies | | 38,899 |
| | 38,496 |
|
| Other | | 63,384 |
| | 51,502 |
|
| Customer deposits | | 83,180 |
| | 81,583 |
|
| Taxes accrued | | 23,044 |
| | 43,461 |
|
| Interest accrued | | 20,247 |
| | 20,831 |
|
| Deferred fuel costs | | 107,862 |
| | 107,754 |
|
| Other | | 12,471 |
| | 22,754 |
|
| TOTAL | | 349,087 |
| | 491,381 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 825,814 |
| | 810,635 |
|
| Accumulated deferred investment tax credits | | 4,565 |
| | 4,645 |
|
| Asset retirement cost liabilities | | 8,484 |
| | 8,252 |
|
| Accumulated provisions | | 47,874 |
| | 48,062 |
|
| Pension and other postretirement liabilities | | 109,292 |
| | 120,217 |
|
| Long-term debt | | 1,091,938 |
| | 920,085 |
|
| Other | | 9,210 |
| | 11,699 |
|
| TOTAL | | 2,097,177 |
| | 1,923,595 |
|
| | | | | |
| Commitments and Contingencies | | |
| | |
|
| | | | | |
| Preferred stock without sinking fund | | 50,381 |
| | 50,381 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2016 and 2015 | | 199,326 |
| | 199,326 |
|
| Capital stock expense and other | | (690 | ) | | (690 | ) |
| Retained earnings | | 837,312 |
| | 813,414 |
|
| TOTAL | | 1,035,948 |
| | 1,012,050 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,532,593 |
| |
| $3,477,407 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $813,414 |
| |
| $1,012,050 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 17,118 |
| | 17,118 |
|
| Preferred stock dividends | — |
| | — |
| | (707 | ) | | (707 | ) |
| | | | | | | | |
| Balance at March 31, 2016 |
| $199,326 |
| |
| ($690 | ) | |
| $829,825 |
| |
| $1,028,461 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $199,326 |
| |
| $167 |
| |
| $895,298 |
| |
| $1,094,791 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 17,158 |
| | 17,158 |
|
| Preferred stock dividends | — |
| | — |
| | (238 | ) | | (238 | ) |
| | | | | | | | |
| Balance at March 31, 2017 |
| $199,326 |
| |
| $167 |
| |
| $912,218 |
| |
| $1,111,711 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2014 |
| $199,326 |
| |
| ($690 | ) | |
| $763,534 |
| |
| $962,170 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 51,214 |
| | 51,214 |
|
| Common stock dividends | — |
| | — |
| | (32,500 | ) | | (32,500 | ) |
| Preferred stock dividends | — |
| | — |
| | (1,414 | ) | | (1,414 | ) |
| | | | | | | | |
| Balance at June 30, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $780,834 |
| |
| $979,470 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $813,414 |
| |
| $1,012,050 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 49,312 |
| | 49,312 |
|
| Common stock dividends | — |
| | — |
| | (24,000 | ) | | (24,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (1,414 | ) | | (1,414 | ) |
| | | | | | | | |
| Balance at June 30, 2016 |
| $199,326 |
| |
| ($690 | ) | |
| $837,312 |
| |
| $1,035,948 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| | ENTERGY MISSISSIPPI, INC. | SELECTED OPERATING RESULTS | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | |
| | |
| | |
| | |
|
| Residential | |
| $88 |
| |
| $119 |
| |
| ($31 | ) | | (26 | ) | |
| $111 |
| |
| $116 |
| |
| ($5 | ) | | (4 | ) |
| Commercial | | 81 |
| | 112 |
| | (31 | ) | | (28 | ) | | 92 |
| | 92 |
| | — |
| | — |
|
| Industrial | | 29 |
| | 41 |
| | (12 | ) | | (29 | ) | | 36 |
| | 34 |
| | 2 |
| | 6 |
|
| Governmental | | 9 |
| | 12 |
| | (3 | ) | | (25 | ) | | 9 |
| | 10 |
| | (1 | ) | | (10 | ) |
| Total retail | | 207 |
| | 284 |
| | (77 | ) | | (27 | ) | | 248 |
| | 252 |
| | (4 | ) | | (2 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 21 |
| | (21 | ) | | (100 | ) | |
| Non-associated companies | | 5 |
| | 3 |
| | 2 |
| | 67 |
| | 5 |
| | 5 |
| | — |
| | — |
|
| Other | | 36 |
| | 37 |
| | (1 | ) | | (3 | ) | | 5 |
| | 6 |
| | (1 | ) | | (17 | ) |
| Total | |
| $248 |
| |
| $345 |
| |
| ($97 | ) | | (28 | ) | |
| $258 |
| |
| $263 |
| |
| ($5 | ) | | (2 | ) |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | | | | | | | |
| Residential | | 1,085 |
| | 1,100 |
| | (15 | ) | | (1 | ) | | 1,190 |
| | 1,285 |
| | (95 | ) | | (7 | ) |
| Commercial | | 1,126 |
| | 1,141 |
| | (15 | ) | | (1 | ) | | 1,062 |
| | 1,079 |
| | (17 | ) | | (2 | ) |
| Industrial | | 587 |
| | 544 |
| | 43 |
| | 8 |
| | 586 |
| | 549 |
| | 37 |
| | 7 |
|
| Governmental | | 102 |
| | 101 |
| | 1 |
| | 1 |
| | 98 |
| | 98 |
| | — |
| | — |
|
| Total retail | | 2,900 |
| | 2,886 |
| | 14 |
| | — |
| | 2,936 |
| | 3,011 |
| | (75 | ) | | (2 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 433 |
| | (433 | ) | | (100 | ) | |
| Non-associated companies | | 243 |
| | 55 |
| | 188 |
| | 342 |
| | 181 |
| | 132 |
| | 49 |
| | 37 |
|
| Total | | 3,143 |
| | 3,374 |
| | (231 | ) | | (7 | ) | | 3,117 |
| | 3,143 |
| | (26 | ) | | (1 | ) |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Six Months Ended | | Increase/ | | |
| |
| Description | | 2016 | | 2015 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | |
| |
| Electric Operating Revenues: | | |
| | |
| | |
| | |
| |
| Residential | |
| $204 |
| |
| $273 |
| |
| ($69 | ) | | (25 | ) | |
| Commercial | | 173 |
| | 225 |
| | (52 | ) | | (23 | ) | |
| Industrial | | 63 |
| | 81 |
| | (18 | ) | | (22 | ) | |
| Governmental | | 19 |
| | 24 |
| | (5 | ) | | (21 | ) | |
| Total retail | | 459 |
| | 603 |
| | (144 | ) | | (24 | ) | |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Associated companies | | — |
| | 43 |
| | (43 | ) | | (100 | ) | |
| Non-associated companies | | 10 |
| | 6 |
| | 4 |
| | 67 |
| |
| Other | | 42 |
| | 54 |
| | (12 | ) | | (22 | ) | |
| Total | |
| $511 |
| |
| $706 |
| |
| ($195 | ) | | (28 | ) | |
| | | |
| | |
| | |
| | |
| |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 2,370 |
| | 2,588 |
| | (218 | ) | | (8 | ) | |
| Commercial | | 2,205 |
| | 2,251 |
| | (46 | ) | | (2 | ) | |
| Industrial | | 1,136 |
| | 1,061 |
| | 75 |
| | 7 |
| |
| Governmental | | 200 |
| | 199 |
| | 1 |
| | 1 |
| |
| Total retail | | 5,911 |
| | 6,099 |
| | (188 | ) | | (3 | ) | |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Associated companies | | — |
| | 907 |
| | (907 | ) | | (100 | ) | |
| Non-associated companies | | 375 |
| | 93 |
| | 282 |
| | 303 |
| |
| Total | | 6,286 |
| | 7,099 |
| | (813 | ) | | (11 | ) | |
ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Algiers Asset Transfer
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Algiers Asset Transfer” in the Form 10-K for a discussion of the Algiers asset transfer on September 1, 2015. The effect of the Algiers transfer has been retrospectively applied to the three and six months ended June 30, 2015 Entergy New Orleans financial statements that are presented in this report.
Results of Operations
Net Income
Second Quarter 2016 Compared to Second Quarter 2015
Net income remained relatively unchanged, increasingdecreasing by $0.9$0.2 million, primarily duefor the first quarter 2017 compared to the first quarter 2016 because higher net revenue and lowerwas offset by higher taxes other operationthan income taxes and maintenance expenses, substantially offset by higher depreciation and amortization expenses, higher interest expense, and a higher effective income tax rate.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Net income remained relatively unchanged, increasing by $0.8 million, primarily due to lower other operation and maintenance expenses and higher net revenue, substantially offset by higher depreciation and amortization expenses, a higher effective income tax rate, and higher interest expense.expenses.
Net Revenue
Second Quarter 2016 Compared to Second Quarter 2015
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 charges (credits).charges. Following is an analysis of the changes in net revenue comparing the secondfirst quarter 20162017 to the secondfirst quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $73.668.0 |
|
| Retail electric price | 10.65.1 |
|
| Net gas revenue | (1.9 | ) |
| Volume/weather | (2.93.1 | ) |
| Other | (0.92.1 | )
|
20162017 net revenue |
| $80.470.2 |
|
The retail electric price variance is primarily due to an increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station. The increase was partially offset by lower storm reserve rider revenues due to the cessation of the storm reserve riderStation in August 2015. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of storm cost recovery.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The volume/weather variance is primarily due to a decrease of 59 GWh, or 4%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales. The decrease is partially offset by a 2% increase in the average number of electric customers.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
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 charges (credits). Following is an analysis of the changes in net revenue comparing the six months ended June 30, 2016 to the six months ended June 30, 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $145.7 |
|
Retail electric price | 13.1 |
|
Net gas revenue | (2.6 | ) |
Volume/weather | (4.8 | ) |
Other | (3.0 | ) |
2016 net revenue |
| $148.4 |
|
The retail electric price variance is primarily due to an increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycle of March 2016, related to the purchase of Power Block 1 of the Union Power Station. The increase was partially offset by lower storm reserve rider revenues due to the cessation of the storm reserve rider in August 2015. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase. See Note 2 to the financial statements in the Form 10-K for further discussion of storm cost recovery.rider.
The net gas revenue variance is primarily due to the effect of less favorable weather, in theprimarily on residential and commercial sectors.sales.
The volume/weather variance is primarily due to a decrease of 12535 GWh, or 5%3%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales. The decrease is partially offset by a 2% increaseprimarily in the average number of electric customers.residential sector.
Other Income Statement Variances
Second Quarter 2016 Compared to Second Quarter 2015
Other operation and maintenance expenses decreased primarily due to:
a decrease of $1.8 millionTaxes other than income taxes increased primarily due to the cessation of storm damage provisionsan increase in August 2015. See Note 2 to the financial statementslocal franchise taxes resulting from higher electric retail revenues in the Form 10-K for further discussion of storm cost recovery;
a decrease of $1.6 million due to lower transmission equalization expenses, as allocated under the System Agreement,2017 as compared to the same period in 2015 primarily as a result of Entergy Mississippi’s exit from the System Agreement in November 2015;2016 and
a decrease of $1.1 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
ad valorem taxes resulting from higher assessments, offset by higher capitalized taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchase of Power Block 1 of the Union Power Station in March 2016, partially offset by the deactivation of Michoud Units 2 and 3 effective May 2016.
Interest expense increased primarily due to the issuance
Entergy New Orleans, Inc. and the issuance of $98.7 million of storm cost recovery bonds in July 2015.Subsidiaries
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Other operationManagement's Financial Discussion and maintenance expenses decreased primarily due to:Analysis
a decrease of $3.6 million primarily due to the cessation of storm damage provisions in August 2015. See Note 2 to the financial statements in the Form 10-K for further discussion of storm cost recovery;
a decrease of $3.1 million due to lower transmission equalization expenses, as allocated under the System Agreement, as compared to the same period in 2015 primarily as a result of Entergy Mississippi’s exit from the System Agreement in November 2015; and
a decrease of $1.2 million in fossil-fueled generation expenses primarily due to an overall lower scope of work done during plant outages in 2016 as compared to the same period in 2015, partially offset by an increase as a result of the purchase of Power Block 1 of the Union Power Station in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchase of Power Block 1 of the Union Power Station in March 2016.
Interest expense increased primarily due to the issuance of $110 million of 5.5% Series first mortgage bonds in March 2016 and the issuance of $98.7 million of storm cost recovery bonds in July 2015.
Income Taxes
The effective income tax rate was 44.5%36.4% for the secondfirst quarter 2016 and 41.2% for the six months ended June 30, 2016.2017. The differencesdifference in the effective income tax ratesrate for the secondfirst quarter 20162017 versus the federal statutory rate of 35% was primarily due to state income taxes, certain book and tax differences related to utility plant items, and a write-off of a stock-based compensation deferred tax asset, partially offset by flow-through tax accounting.
The effective income tax rate was 37.2% for the six months ended June 30,first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% werewas primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by flow-through tax accounting.
The effective income tax rate was 34.4% for the second quarter 2015 and 34.5% for the six months ended June 30, 2015. The differences in the effective income tax rates for the second quarter 2015 and the six months ended June 30, 2015 versus the federal statutory rate of 35% were primarily due to flow-through tax accounting, partially offset by state income taxes and certain book and tax differences related to utility plant items.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the sixthree months ended June 30,March 31, 2017 and 2016 and 2015 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $88,876 |
| |
| $42,389 |
|
| $103,068 |
| |
| $88,876 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 39,268 |
| | 31,861 |
| 5,619 |
| | 4,453 |
|
| Investing activities | (258,036 | ) | | (37,081 | ) | (40,751 | ) | | (242,386 | ) |
| Financing activities | 154,510 |
| | (7,814 | ) | (11,868 | ) | | 155,025 |
|
| Net decrease in cash and cash equivalents | (64,258 | ) | | (13,034 | ) | (47,000 | ) | | (82,908 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $24,618 |
| |
| $29,355 |
|
| $56,068 |
| |
| $5,968 |
|
Operating Activities
Net cash flow provided by operating activities increased $7.4$1.2 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to $3.2 million inincome tax payments made in 2015 related to settlements on asbestos claims and the timing of payments to vendors, offset by an increase of $2.5 million in income taxes paid.2016 primarily due to payments made for state tax liabilities.
Investing Activities
Net cash flow used in investing activities increased $221decreased $201.6 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to the purchase of Power Block 1 of the Union Power Station for approximately $237 million in March 2016.2016, partially offset by money pool activity and an increase of $7 million in storm spending in 2017. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase. The increase was partially offset by money pool activity.
DecreasesIncreases in Entergy New Orleans’s receivable from the money pool are a sourceuse of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $12.8increased $12.1 million in 20162017 compared to increasing $1.5decreasing $15.1 million in 2015.2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Entergy New Orleans’s financing activities provided $154.5used $11.9 million of cash for the sixthree months ended June 30, 2016March 31, 2017 compared to using $7.8providing $155 million of cash for the sixthree months ended June 30, 2015March 31, 2016 primarily due to to:
the net issuance of $113.6$110 million of long-term debt5.50% Series first mortgage bonds in 2016 and March 2016;
a $47.8 million capital contribution received from Entergy Corporation in March 2016 in anticipation of Entergy New Orleans’s purchase of Power Block 1 of the Union Power Station. Station; and
$12.2 million in common stock dividends paid in first quarter 2017. There were no common stock dividends paid in first quarter 2016 in anticipation of the purchase of Power Block 1 of the Union Power Station in March 2016.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
the Union Power Station purchase.
Capital Structure
Entergy New Orleans’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of long term debt in 2016, partially offset by the $47.8 million capital contribution received from Entergy Corporation in March 2016.
| | | | June 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 51.5 | % | | 48.1 | % | 50.2 | % | | 50.1 | % |
| Effect of excluding securitization bonds | (5.5 | %) | | (8.1 | %) | (5.2 | %) | | (5.2 | %) |
| Debt to capital, excluding securitization bonds (a) | 46.0 | % | | 40.0 | % | 45.0 | % | | 44.9 | % |
| Effect of subtracting cash | (1.7 | %) | | (10.0 | %) | (4.1 | %) | | (8.0 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 44.3 | % | | 30.0 | % | 40.9 | % | | 36.9 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans. |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, long-term debt, including the currently maturing portion, and the long-term payable to Entergy Louisiana. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
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 New Orleans’s uses and sources of capital. Entergy New Orleans seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support planned investments, Entergy New Orleans may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure. In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure if financed entirely with debt and reducing dividends, Entergy New Orleans may receive equity contributions to maintain the targeted capital structure.
Following are updates to the information provided in the Form 10-K.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The current annual amounts of Entergy New Orleans’s planned construction and other capital investments are as follows:
|
| | | | | | | | | | | |
| | 2016 | | 2017 | | 2018 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $265 |
| |
| $55 |
| |
| $115 |
|
| Transmission | 5 |
| | 15 |
| | 10 |
|
| Distribution | 35 |
| | 50 |
| | 55 |
|
| Other | 30 |
| | 25 |
| | 25 |
|
| Total |
| $335 |
| |
| $145 |
| |
| $205 |
|
The updated capital plan for 2016-2018 reflects capital plan refinements and includes specific investments such as the Union Power Station purchase in March 2016 and the New Orleans Power Station discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintain reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments.
Entergy New Orleans’s receivables from the money pool were as follows:
|
| | | | | | |
June 30, 2016 | | December 31, 2015 | | June 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $3,007 | | $15,794 | | $1,946 | | $442 |
|
| | | | | | |
| March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $26,315 | | $14,215 | | $735 | | $15,794 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in November 2018. The credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility. As of June 30, 2016,March 31, 2017, there were no cash borrowings and no lettersa $0.8 million letter of credit was outstanding under the facility. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of June 30, 2016,March 31, 2017, a $13.3$1 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Entergy New Orleans has obtained long-term financing authorization from the City Council that extends through June 2018.
New Orleans Power Station
In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 megawattMW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which facility was deactivated effective May 31, 2016. The current estimated cost of the New Orleans Power Station is $216 million. Subject to timely approval by the City Council and receipt of other permits and approvals, commercial operation is estimated to occur by late-2019. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In February 2017, Entergy New Orleans is seekingfiled a motion to temporarily suspend the procedural schedule to allow for further analysis regarding its proposal, and that will provide a Council decision within a timeframe that would support a commercial operation datemotion was granted. A status conference was held in late-2019.
March 2017 wherein the hearing officer suspended the procedural schedule until Entergy New Orleans Inc.files a supplemental and Subsidiariesamending application, currently expected to occur in second quarter 2017. In April 2017, Entergy New Orleans filed a status report with the City Council advising that it was in the process of conducting additional analyses regarding generation needed to meet the future electricity needs of New Orleans and stating that it expects to include in the supplemental and amending application a request for approval of either the original New Orleans Power Station combustion turbine or an alternative proposal for an approximately 126 MW unit, as well as a commitment to pursue up to 100 MW of renewable resources to serve New Orleans.
Management's Financial Discussion and Analysis
State and Local Rate Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation” in the Form 10-K for a discussion of state and local rate regulation. The following is an updateare updates to that discussion.
Retail Rates
As discussed in the Form 10-K, in November 2015February 2017, Entergy New Orleans filed a proposed implementation plan for the Energy Smart program from April 2017 through March 2020. As part of the proposal, Entergy New Orleans requested that the City Council authorized expansionidentify its desired level of funding for the terms of the purchased powerprogram during this time period and capacity acquisitionapprove a cost recovery ridermechanism. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to recovercontinue funding the non-fuel purchased power expense from Ninemile 6,program for Entergy New Orleans’s legacy customers and that the revenue requirement associated withEnergy Smart Algiers program continue to be funded through the purchase of Power Block 1 ofAlgiers fuel adjustment clause, until additional customer funding is required for the Union Power Station, and a credit to customers of $400 thousand monthly beginning June 2016 in recognition of the decrease in other operation and maintenance expenses that would result with the deactivation of Michoud Units 2 and 3. In March 2016,legacy customers. The City Council ordered Entergy New Orleans purchased Power Block 1to submit a supplemental and amended implementation plan for program years 8 and 9 of the Union Power Station for approximately $237 million and initiated recoveryEnergy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
recovery mechanism for the program for both legacy and Algiers customers. The City Council Utility Committee agreedwill not permit Entergy New Orleans to a temporary increase inrecover lost contribution to fixed costs for program years 7, 8, or 9 of the credit to customers to a total of $1.4 million monthly for August 2016 through December 2016.Energy Smart program.
Internal Restructuring
InAs discussed in the Form 10-K, in July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuring whichthat would result in the transfer of substantially all of the assets and operations of Entergy New Orleans to a new entity, which would ultimately be heldowned by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval ofIn May 2017 the City Council andadopted a resolution approving the FERC. If the application is approved byproposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in 2016,principle, Entergy New Orleans has proposed towill credit retail customers $5$10 million in each2017, $1.4 million in the first quarter of the years 2016year after the transaction closes, and 2017. The filing with$117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Additionally, if the FERC has not yet been made, but ifapproves the restructuring is approved by the FERC bytransaction prior to December 31, 2018, Entergy New Orleans has proposed towill credit retail customers $5 million in each of the years 2018, 2019, and 2020. If City Council and FERC approvals are obtained,
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in October 2016, Entergy New Orleans expectsfiled an application seeking a finding from the restructuring will be consummated by December 31, 2017.
It is currently contemplatedCity Council that Entergy New Orleans would undertake a multi-step restructuring, which would includeOrleans’s deployment of advanced electric and gas metering infrastructure is in the following:
public interest. In April 2017, Entergy New Orleans would redeem its outstanding preferred stock atreceived intervenor testimony that is generally supportive of AMI deployment. The City Council’s advisors are scheduled to file testimony in May 2017, and a price of approximately $21 million, which includes an expected call premium of approximately $819,000, plus any accumulated and unpaid dividends.
Entergy New Orleans would convert from a Louisiana corporation to a Texas corporation.
Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans will allocate substantially all of its assets to a new subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), and Entergy New Orleans Power will assume substantially all of the liabilities of Entergy New Orleans, in a transaction regarded as a merger under the TXBOC. Entergy New Orleans will remain in existence and hold the membership interests in Entergy New Orleans Power.
Entergy New Orleans will contribute the membership interests in Entergy New Orleans Power to an affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution, Entergy New Orleans Power will be a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.
Entergy New Orleans will change its name to Entergy New Orleans Holdings, Inc., and Entergy New Orleans Power will then change its name to Entergy New Orleans, LLC.
Upon the completion of the restructuring, Entergy New Orleans, LLC will hold substantially all of the assets, and will have assumed substantially all of the liabilities, of Entergy New Orleans. Entergy New Orleans may modify or supplement the steps to be taken to effectuate the restructuring.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Show Cause Order
Inhearing is currently set for July 2016 the City Council approved the issuance of a show cause order, which directs Entergy New Orleans to make a filing on or before September 29, 2016 to demonstrate the reasonableness of its actions or positions with regard to certain issues in four existing dockets that relate to Entergy New Orleans’s: (i) storm hardening proposal; (ii) 2015 integrated resource plan; (iii) gas infrastructure rebuild proposal; and (iv) proposed sizing of the New Orleans Power Station and its community outreach prior to the filing.2017.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “See“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisin the Form 10-K for further discussion.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
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 New Orleans’s accounting for utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits. The following is an update to that discussion.
Taxationbenefits, and Uncertain Tax Positions
See “Critical Accounting Estimates - Taxation and Uncertain Tax Positions” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
| | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | |
| | | Three Months Ended | | Six Months Ended | | |
| | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | |
| Electric | |
| $149,101 |
| |
| $143,246 |
| |
| $271,542 |
| |
| $264,741 |
| |
| $142,345 |
| |
| $122,441 |
|
| Natural gas | | 15,819 |
| | 17,506 |
| | 42,718 |
| | 52,637 |
| | 26,644 |
| | 26,899 |
|
| TOTAL | | 164,920 |
| | 160,752 |
| | 314,260 |
| | 317,378 |
| | 168,989 |
| | 149,340 |
|
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 12,554 |
| | 16,099 |
| | 23,475 |
| | 37,722 |
| | 30,075 |
| | 10,921 |
|
| Purchased power | | 70,583 |
| | 71,385 |
| | 139,108 |
| | 134,520 |
| | 68,359 |
| | 68,525 |
|
| Other operation and maintenance | | 28,659 |
| | 32,082 |
| | 51,501 |
| | 60,082 |
| | 22,512 |
| | 22,842 |
|
| Taxes other than income taxes | | 10,925 |
| | 11,275 |
| | 22,437 |
| | 23,168 |
| | 12,846 |
| | 11,512 |
|
| Depreciation and amortization | | 13,908 |
| | 10,080 |
| | 25,672 |
| | 21,600 |
| | 13,050 |
| | 11,764 |
|
| Other regulatory charges (credits) - net | | 1,378 |
| | (323 | ) | | 3,274 |
| | (613 | ) | |
| Other regulatory charges - net | | | 385 |
| | 1,896 |
|
| TOTAL | | 138,007 |
| | 140,598 |
| | 265,467 |
| | 276,479 |
| | 147,227 |
| | 127,460 |
|
| | | | | | | | | | | | | |
| OPERATING INCOME | | 26,913 |
| | 20,154 |
| | 48,793 |
| | 40,899 |
| | 21,762 |
| | 21,880 |
|
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 143 |
| | 312 |
| | 456 |
| | 632 |
| | 450 |
| | 313 |
|
| Interest and investment income | | 30 |
| | 13 |
| | 99 |
| | 39 |
| | 135 |
| | 69 |
|
| Miscellaneous - net | | 192 |
| | 248 |
| | (53 | ) | | 612 |
| | 98 |
| | (245 | ) |
| TOTAL | | 365 |
| | 573 |
| | 502 |
| | 1,283 |
| | 683 |
| | 137 |
|
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | 5,984 |
| | 4,266 |
| | 10,357 |
| | 8,607 |
| | 5,343 |
| | 4,373 |
|
| Allowance for borrowed funds used during construction | | (49 | ) | | (144 | ) | | (175 | ) | | (294 | ) | | (158 | ) | | (126 | ) |
| TOTAL | | 5,935 |
| | 4,122 |
| | 10,182 |
| | 8,313 |
| | 5,185 |
| | 4,247 |
|
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 21,343 |
| | 16,605 |
| | 39,113 |
| | 33,869 |
| | 17,260 |
| | 17,770 |
|
| | | | | | | | | | | | | |
| Income taxes | | 9,500 |
| | 5,710 |
| | 16,103 |
| | 11,682 |
| | 6,282 |
| | 6,603 |
|
| | | | | | | | | | | | | |
| NET INCOME | | 11,843 |
| | 10,895 |
| | 23,010 |
| | 22,187 |
| | 10,978 |
| | 11,167 |
|
| | | | | | | | | | | | | |
| Preferred dividend requirements and other | | 241 |
| | 241 |
| | 482 |
| | 482 |
| | 241 |
| | 241 |
|
| | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $11,602 |
| |
| $10,654 |
| |
| $22,528 |
| |
| $21,705 |
| |
| $10,737 |
| |
| $10,926 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $10,978 |
| |
| $11,167 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 13,050 |
| | 11,764 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 7,102 |
| | (9,742 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (2,659 | ) | | (5,346 | ) |
| Fuel inventory | | 1,798 |
| | 1,518 |
|
| Accounts payable | | (11,920 | ) | | (101 | ) |
Prepaid taxes and taxes accrued
| | (1,992 | ) | | 14,187 |
|
| Interest accrued | | 34 |
| | (579 | ) |
| Deferred fuel costs | | 6,096 |
| | (5,288 | ) |
| Other working capital accounts | | (13,106 | ) | | (11,382 | ) |
| Provisions for estimated losses | | (655 | ) | | (532 | ) |
| Other regulatory assets | | 300 |
| | 6,270 |
|
| Pension and other postretirement liabilities | | (3,915 | ) | | (4,102 | ) |
| Other assets and liabilities | | 508 |
| | (3,381 | ) |
| Net cash flow provided by operating activities | | 5,619 |
| | 4,453 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (26,079 | ) | | (17,931 | ) |
| Allowance for equity funds used during construction | | 450 |
| | 313 |
|
| Payment for purchase of plant | | — |
| | (236,944 | ) |
| Investment in affiliates | | — |
| | (38 | ) |
| Changes in money pool receivable - net | | (12,100 | ) | | 15,059 |
|
| Receipts from storm reserve escrow account | | — |
| | 3 |
|
| Payments to storm reserve escrow account | | (110 | ) | | (102 | ) |
| Changes in securitization account | | (2,912 | ) | | (2,746 | ) |
| Net cash flow used in investing activities | | (40,751 | ) | | (242,386 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | (10 | ) | | 106,786 |
|
| Capital contribution from parent | | — |
| | 47,750 |
|
| Dividends paid: | | | | |
| Common stock | | (12,200 | ) | | — |
|
| Preferred stock | | (241 | ) | | (241 | ) |
| Other | | 583 |
| | 730 |
|
| Net cash flow provided by (used in) financing activities | | (11,868 | ) | | 155,025 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (47,000 | ) | | (82,908 | ) |
| Cash and cash equivalents at beginning of period | | 103,068 |
| | 88,876 |
|
| Cash and cash equivalents at end of period | |
| $56,068 |
| |
| $5,968 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $5,043 |
| |
| $4,654 |
|
| Income taxes | |
| $— |
| |
| $2,500 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $23,010 |
| |
| $22,187 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 25,672 |
| | 21,600 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (2,665 | ) | | 10,028 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (16,285 | ) | | (840 | ) |
| Fuel inventory | | 1,822 |
| | 1,938 |
|
| Accounts payable | | 6,362 |
| | 2,313 |
|
| Taxes accrued | | 36,982 |
| | — |
|
| Interest accrued | | 255 |
| | (399 | ) |
| Deferred fuel costs | | (13,664 | ) | | (9,557 | ) |
| Other working capital accounts | | (7,310 | ) | | (6,433 | ) |
| Provisions for estimated losses | | 1,804 |
| | (188 | ) |
| Other regulatory assets | | 5,799 |
| | (24,779 | ) |
| Pension and other postretirement liabilities | | (8,245 | ) | | (6,437 | ) |
| Other assets and liabilities | | (14,269 | ) | | 22,428 |
|
| Net cash flow provided by operating activities | | 39,268 |
| | 31,861 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (37,345 | ) | | (32,659 | ) |
| Allowance for equity funds used during construction | | 456 |
| | 632 |
|
| Payment for purchase of plant | | (236,978 | ) | | — |
|
| Investment in affiliates | | (38 | ) | | — |
|
| Changes in money pool receivable - net | | 12,787 |
| | (1,504 | ) |
| Receipts from storm reserve escrow account | | 3 |
| | 3 |
|
| Payments to storm reserve escrow account | | (206 | ) | | (3,553 | ) |
| Change in securitization account | | 3,285 |
| | — |
|
| Net cash flow used in investing activities | | (258,036 | ) | | (37,081 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 190,672 |
| | — |
|
| Retirement of long-term debt | | (77,094 | ) | | — |
|
| Capital contributions from parent | | 47,750 |
| | — |
|
| Dividends paid: | | | | |
| Common stock | | (7,000 | ) | | (7,250 | ) |
| Preferred stock | | (482 | ) | | (482 | ) |
| Other | | 664 |
| | (82 | ) |
| Net cash flow provided by (used in) financing activities | | 154,510 |
| | (7,814 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (64,258 | ) | | (13,034 | ) |
| Cash and cash equivalents at beginning of period | | 88,876 |
| | 42,389 |
|
| Cash and cash equivalents at end of period | |
| $24,618 |
| |
| $29,355 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $9,435 |
| |
| $8,501 |
|
| Income taxes | |
| $2,500 |
| |
| $40 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | | | |
| Cash | |
| $1,026 |
| |
| $28 |
|
| Temporary cash investments | | 55,042 |
| | 103,040 |
|
| Total cash and cash equivalents | | 56,068 |
| | 103,068 |
|
Securitization recovery trust account
| | 4,650 |
| | 1,738 |
|
| Accounts receivable: | | | | |
| Customer | | 45,409 |
| | 43,536 |
|
| Allowance for doubtful accounts | | (3,090 | ) | | (3,059 | ) |
| Associated companies | | 28,835 |
| | 16,811 |
|
| Other | | 10,688 |
| | 5,926 |
|
| Accrued unbilled revenues | | 14,385 |
| | 18,254 |
|
| Total accounts receivable | | 96,227 |
| | 81,468 |
|
| Deferred fuel costs | | — |
| | 4,818 |
|
| Fuel inventory - at average cost | | 43 |
| | 1,841 |
|
| Materials and supplies - at average cost | | 9,588 |
| | 8,416 |
|
| Prepaid taxes | | 6,371 |
| | 4,379 |
|
| Prepayments and other | | 18,610 |
| | 6,587 |
|
| TOTAL | | 191,557 |
| | 212,315 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Non-utility property at cost (less accumulated depreciation) | | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | 81,547 |
| | 81,437 |
|
| Other | | 4,787 |
| | 7,160 |
|
| TOTAL | | 87,350 |
| | 89,613 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 1,251,117 |
| | 1,258,934 |
|
| Natural gas | | 243,424 |
| | 240,408 |
|
| Construction work in progress | | 34,337 |
| | 24,975 |
|
| TOTAL UTILITY PLANT | | 1,528,878 |
| | 1,524,317 |
|
| Less - accumulated depreciation and amortization | | 600,391 |
| | 604,825 |
|
| UTILITY PLANT - NET | | 928,487 |
| | 919,492 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Deferred fuel costs | | 4,080 |
| | 4,080 |
|
| Other regulatory assets (includes securitization property of $80,152 as of March 31, 2017 and $82,272 as of December 31, 2016) | | 267,806 |
| | 268,106 |
|
| Other | | 1,597 |
| | 963 |
|
| TOTAL | | 273,483 |
| | 273,149 |
|
| | | | | |
| TOTAL ASSETS | |
| $1,480,877 |
| |
| $1,494,569 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Payable due to Entergy Louisiana | |
| $2,104 |
| |
| $2,104 |
|
| Accounts payable: | | | | |
| Associated companies | | 40,414 |
| | 39,260 |
|
| Other | | 21,095 |
| | 35,920 |
|
| Customer deposits | | 28,714 |
| | 28,667 |
|
| Interest accrued | | 5,477 |
| | 5,443 |
|
| Deferred fuel costs | | 1,278 |
| | — |
|
| Other | | 9,084 |
| | 11,415 |
|
| TOTAL CURRENT LIABILITIES | | 108,166 |
| | 122,809 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 342,757 |
| | 334,953 |
|
| Accumulated deferred investment tax credits | | 590 |
| | 622 |
|
| Regulatory liability for income taxes - net | | 7,491 |
| | 9,074 |
|
| Asset retirement cost liabilities | | 2,924 |
| | 2,875 |
|
| Accumulated provisions | | 87,858 |
| | 88,513 |
|
| Pension and other postretirement liabilities | | 32,835 |
| | 36,750 |
|
| Long-term debt (includes securitization bonds of $84,836 as of March 31, 2017 and $84,776 as of December 31, 2016) | | 428,607 |
| | 428,467 |
|
| Long-term payable due to Entergy Louisiana | | 18,423 |
| | 18,423 |
|
| Gas system rebuild insurance proceeds | | — |
| | 447 |
|
| Other | | 5,963 |
| | 4,910 |
|
| TOTAL NON-CURRENT LIABILITIES | | 927,448 |
| | 925,034 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 19,780 |
| | 19,780 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2017 and 2016 | | 33,744 |
| | 33,744 |
|
| Paid-in capital | | 171,544 |
| | 171,544 |
|
| Retained earnings | | 220,195 |
| | 221,658 |
|
| TOTAL | | 425,483 |
| | 426,946 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,480,877 |
| |
| $1,494,569 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | | | |
| Cash | |
| $1,206 |
| |
| $1,068 |
|
| Temporary cash investments | | 23,412 |
| | 87,808 |
|
| Total cash and cash equivalents | | 24,618 |
| | 88,876 |
|
Securitization recovery trust account
| | 1,335 |
| | 4,620 |
|
| Accounts receivable: | | | | |
| Customer | | 43,032 |
| | 34,627 |
|
| Allowance for doubtful accounts | | (843 | ) | | (268 | ) |
| Associated companies | | 13,120 |
| | 23,248 |
|
| Other | | 6,027 |
| | 3,753 |
|
| Accrued unbilled revenues | | 21,321 |
| | 17,799 |
|
| Total accounts receivable | | 82,657 |
| | 79,159 |
|
| Fuel inventory - at average cost | | 90 |
| | 1,912 |
|
| Materials and supplies - at average cost | | 15,273 |
| | 13,244 |
|
| Prepayments and other | | 15,974 |
| | 10,263 |
|
| TOTAL | | 139,947 |
| | 198,074 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Non-utility property at cost (less accumulated depreciation) | | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | 81,206 |
| | 81,002 |
|
| Other | | 7,160 |
| | 3 |
|
| TOTAL | | 89,382 |
| | 82,021 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 1,236,377 |
| | 1,051,239 |
|
| Natural gas | | 235,229 |
| | 232,780 |
|
| Construction work in progress | | 26,119 |
| | 29,027 |
|
| TOTAL UTILITY PLANT | | 1,497,725 |
| | 1,313,046 |
|
| Less - accumulated depreciation and amortization | | 594,956 |
| | 648,081 |
|
| UTILITY PLANT - NET | | 902,769 |
| | 664,965 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Deferred fuel costs | | 4,080 |
| | 4,080 |
|
| Other regulatory assets (includes securitization property of $87,622 as of June 30, 2016 and $91,599 as of December 31, 2015) | | 259,523 |
| | 265,322 |
|
| Other | | 1,458 |
| | 682 |
|
| TOTAL | | 265,061 |
| | 270,084 |
|
| | | | | |
| TOTAL ASSETS | |
| $1,397,159 |
| |
| $1,215,144 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Payable due to Entergy Louisiana | |
| $4,973 |
| |
| $4,973 |
|
| Accounts payable: | | | | |
| Associated companies | | 37,805 |
| | 37,467 |
|
| Other | | 26,164 |
| | 21,471 |
|
| Customer deposits | | 28,471 |
| | 28,392 |
|
| Taxes accrued | | 36,982 |
| | — |
|
| Interest accrued | | 5,164 |
| | 4,909 |
|
| Deferred fuel costs | | 15,357 |
| | 29,021 |
|
| Other | | 11,647 |
| | 6,216 |
|
| TOTAL CURRENT LIABILITIES | | 166,563 |
| | 132,449 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 190,793 |
| | 214,061 |
|
| Accumulated deferred investment tax credits | | 687 |
| | 753 |
|
| Regulatory liability for income taxes - net | | 10,591 |
| | 13,199 |
|
| Asset retirement cost liabilities | | 2,779 |
| | 2,687 |
|
| Accumulated provisions | | 85,991 |
| | 84,187 |
|
| Pension and other postretirement liabilities | | 35,364 |
| | 43,609 |
|
| Long-term debt (includes securitization bonds of $90,002 as of June 30, 2016 and $95,867 as of December 31, 2015) | | 433,595 |
| | 317,380 |
|
| Long-term payable due to Entergy Louisiana | | 20,527 |
| | 20,527 |
|
| Gas system rebuild insurance proceeds | | 7,105 |
| | 12,788 |
|
| Other | | 10,074 |
| | 3,692 |
|
| TOTAL NON-CURRENT LIABILITIES | | 797,506 |
| | 712,883 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 19,780 |
| | 19,780 |
|
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, $4 par value, authorized 10,000,000 shares; issued and outstanding 8,435,900 shares in 2016 and 2015 | | 33,744 |
| | 33,744 |
|
| Paid-in capital | | 171,544 |
| | 123,794 |
|
| Retained earnings | | 208,022 |
| | 192,494 |
|
| TOTAL | | 413,310 |
| | 350,032 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,397,159 |
| |
| $1,215,144 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in
Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $33,744 |
| |
| $123,794 |
| |
| $192,494 |
| |
| $350,032 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 11,167 |
| | 11,167 |
|
| Capital contribution from parent | — |
| | 47,750 |
| | — |
| | 47,750 |
|
| Preferred stock dividends | — |
| | — |
| | (241 | ) | | (241 | ) |
| | | | | | | | |
| Balance at March 31, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $203,420 |
| |
| $408,708 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $221,658 |
| |
| $426,946 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 10,978 |
| | 10,978 |
|
| Common stock dividends | — |
| | — |
| | (12,200 | ) | | (12,200 | ) |
| Preferred stock dividends | — |
| | — |
| | (241 | ) | | (241 | ) |
| | | | | | | | |
| Balance at March 31, 2017 |
| $33,744 |
| |
| $171,544 |
| |
| $220,195 |
| |
| $425,483 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in
Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2014 |
| $33,744 |
| |
| $36,294 |
| |
| $157,987 |
| |
| $228,025 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 22,187 |
| | 22,187 |
|
| Net income attributable to Entergy Louisiana | — |
| | — |
| | (631 | ) | | (631 | ) |
| Common stock dividends | — |
| | — |
| | (7,250 | ) | | (7,250 | ) |
| Preferred stock dividends | — |
| | — |
| | (482 | ) | | (482 | ) |
| | | | | | | | |
| Balance at June 30, 2015 |
| $33,744 |
| |
| $36,294 |
| |
| $171,811 |
| |
| $241,849 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2015 |
| $33,744 |
| |
| $123,794 |
| |
| $192,494 |
| |
| $350,032 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 23,010 |
| | 23,010 |
|
| Capital contributions from parent | — |
| | 47,750 |
| | — |
| | 47,750 |
|
| Common stock dividends | — |
| | — |
| | (7,000 | ) | | (7,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (482 | ) | | (482 | ) |
| | | | | | | | |
| Balance at June 30, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $208,022 |
| |
| $413,310 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS (a) | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $50 |
| |
| $49 |
| |
| $1 |
| | 2 |
| |
| $53 |
| |
| $47 |
| |
| $6 |
| | 13 |
|
| Commercial | | 51 |
| | 47 |
| | 4 |
| | 9 |
| | 54 |
| | 44 |
| | 10 |
| | 23 |
|
| Industrial | | 8 |
| | 8 |
| | — |
| | — |
| | 8 |
| | 7 |
| | 1 |
| | 14 |
|
| Governmental | | 17 |
| | 16 |
| | 1 |
| | 6 |
| | 18 |
| | 15 |
| | 3 |
| | 20 |
|
| Total retail | | 126 |
| | 120 |
| | 6 |
| | 5 |
| | 133 |
| | 113 |
| | 20 |
| | 18 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 12 |
| | 12 |
| | — |
| | — |
| | — |
| | 7 |
| | (7 | ) | | (100 | ) |
| Non-associated companies | | 1 |
| | — |
| | 1 |
| | — |
| | 9 |
| | — |
| | 9 |
| | — |
|
| Other | | 10 |
| | 11 |
| | (1 | ) | | (9 | ) | | — |
| | 2 |
| | (2 | ) | | (100 | ) |
| Total | |
| $149 |
| |
| $143 |
| |
| $6 |
| | 4 |
| |
| $142 |
| |
| $122 |
| |
| $20 |
| | 16 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | | 459 |
| | 490 |
| | (31 | ) | | (6 | ) | | 456 |
| | 499 |
| | (43 | ) | | (9 | ) |
| Commercial | | 538 |
| | 549 |
| | (11 | ) | | (2 | ) | | 515 |
| | 510 |
| | 5 |
| | 1 |
|
| Industrial | | 107 |
| | 116 |
| | (9 | ) | | (8 | ) | | 98 |
| | 101 |
| | (3 | ) | | (3 | ) |
| Governmental | | 190 |
| | 198 |
| | (8 | ) | | (4 | ) | | 184 |
| | 178 |
| | 6 |
| | 3 |
|
| Total retail | | 1,294 |
| | 1,353 |
| | (59 | ) | | (4 | ) | | 1,253 |
| | 1,288 |
| | (35 | ) | | (3 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 556 |
| | 268 |
| | 288 |
| | 107 |
| | — |
| | 242 |
| | (242 | ) | | (100 | ) |
| Non-associated companies | | 41 |
| | 1 |
| | 40 |
| | 4,000 |
| | 507 |
| | 14 |
| | 493 |
| | 3,521 |
|
| Total | | 1,891 |
| | 1,622 |
| | 269 |
| | 17 |
| | 1,760 |
| | 1,544 |
| | 216 |
| | 14 |
|
| | | | | | | | | | | | | | | | | |
| | | Six Months Ended | | Increase/ | | |
| | | | | | | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | |
| |
| Electric Operating Revenues: | | | | |
| | |
| | |
| |
| Residential | |
| $97 |
| |
| $97 |
| |
| $— |
| | — |
| |
| Commercial | | 95 |
| | 88 |
| | 7 |
| | 8 |
| |
| Industrial | | 15 |
| | 14 |
| | 1 |
| | 7 |
| |
| Governmental | | 32 |
| | 29 |
| | 3 |
| | 10 |
| |
| Total retail | | 239 |
| | 228 |
| | 11 |
| | 5 |
| |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Associated companies | | 19 |
| | 21 |
| | (2 | ) | | (10 | ) | |
| Non associated companies | | 1 |
| | — |
| | 1 |
| | — |
| |
| Other | | 13 |
| | 16 |
| | (3 | ) | | (19 | ) | |
| Total | |
| $272 |
| |
| $265 |
| |
| $7 |
| | 3 |
| |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| |
| Residential | | 958 |
| | 1,049 |
| | (91 | ) | | (9 | ) | |
| Commercial | | 1,048 |
| | 1,055 |
| | (7 | ) | | (1 | ) | |
| Industrial | | 208 |
| | 219 |
| | (11 | ) | | (5 | ) | |
| Governmental | | 368 |
| | 384 |
| | (16 | ) | | (4 | ) | |
| Total retail | | 2,582 |
| | 2,707 |
| | (125 | ) | | (5 | ) | |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Associated companies | | 798 |
| | 482 |
| | 316 |
| | 66 |
| |
| Non-associated companies | | 55 |
| | 5 |
| | 50 |
| | 1,000 |
| |
| Total | | 3,435 |
| | 3,194 |
| | 241 |
| | 8 |
| |
| | | | | | | | | | |
| (a) Amounts have been retrospectively adjusted to reflect the effects of the transfer of the Algiers assets for the three and six months ended June 30, 2015. See Note 1 to the financial statements in the Form 10-K for a discussion of the Algiers asset transfer. | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Second Quarter 2016 Compared to Second Quarter 2015
Net income increased $9.2decreased $3.7 million primarily due to lowerhigher depreciation and amortization expense and higher taxes other operation and maintenance expenses andthan income taxes, partially offset by higher net revenue.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Net income increased $7.1 million primarily due to lower other operation and maintenance expenses.
Net Revenue
Second Quarter 2016 Compared to Second Quarter 2015
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 charges. Following is an analysis of the change in net revenue comparing the secondfirst quarter 20162017 to the secondfirst quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $153.5138.2 |
|
| Volume/weather | 4.110.3 |
|
Reserve equalizationPurchased power capacity | 3.07.6 |
|
| Retail electric price | 3.9 |
|
| Net wholesale revenue | (3.318.6 | ) |
| Other | (0.31.1 | ) |
20162017 net revenue |
| $157.0140.3 |
|
The volume/weather variance is primarily due to an increase in usage during the unbilled sales period, partially offset by a decrease of 17997 GWh, or 4%2%, in billed electricity usage, primarily due to an increase in industrial usage, partially offset by the effect of less favorable weather on residential and commercial sales. The increase in industrial usage is primarily due to higher usage by petroleum refining customers.sectors.
The reserve equalizationpurchased power capacity variance is primarily due to a reductiondecreased expenses due to the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in reserve equalization expenseAugust 2016.
The retail electric price variance is primarily due to changesthe implementation of the transmission cost recovery factor rider, as approved by the PUCT and implemented in September 2016. See Note 2 to the financial statements in the Entergy System generation mix compared to the same period in 2015 as a resultForm 10-K for further discussion of the execution of a new purchased power agreement and Entergy Mississippi’s exit from the System Agreement, each in November 2015.transmission cost recovery factor rider filing.
The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas.Texas in August 2016.
Other Income Statement Variances
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from higher assessments, partially offset by higher capitalized taxes, and an increase in local franchise taxes resulting from an increase in gross receipts taxes and city franchise tax.
Other income decreased primarily due to a decrease in the allowance for equity funds used during construction resulting from decreased transmission spending in 2017.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
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 charges. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2016 to the six months ended June 30, 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $297.1 |
|
Volume/weather | (6.2 | ) |
Net wholesale revenue | (1.6 | ) |
Reserve equalization | 8.3 |
|
Other | (2.4 | ) |
2016 net revenue |
| $295.2 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to higher usage by petroleum refining customers.
The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the purchased power agreements between Entergy Louisiana and Entergy Texas.
The reserve equalization variance is primarily due to a reduction in reserve equalization expense primarily due to changes in the Entergy System generation mix compared to the same period in 2015 as a result of the execution of a new purchased power agreement and Entergy Mississippi’s exit from the System Agreement, each in November 2015.
Other Income Statement Variances
Second Quarter 2016 Compared to Second Quarter 2015
Other operation and maintenance expenses decreased primarily due to:
a decrease of $7.6 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done in the prior year;
a decrease of $1.4 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
a decrease of $0.7 million in energy efficiency costs.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Other operation and maintenance expenses decreased primarily due to:
a decrease of $9.6 million in fossil-fueled generation expenses primarily due to an overall higher scope of work done in the prior year;
a decrease of $1.7 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “MANAGEMENT’S DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs; and
a decrease of $1.7 million in energy efficiency costs.
Income Taxes
The effective income tax rate was 39.9%43.2% for the secondfirst quarter 2016 and 39.2% for the six months ended June 30, 2016.2017. The differencesdifference in the effective income tax ratesrate for the secondfirst quarter 20162017 versus the federal statutory rate of 35% was primarily due to a write-off of a stock-based compensation deferred tax asset and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 37.9% for the six months ended June 30,first quarter 2016. The difference in the effective income tax rate for the first quarter 2016 versus the federal statutory rate of 35% werewas primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 38.7% for the second quarter 2015. The difference in the effective income tax rate for the second quarter 2015 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 36% for the six months ended June 30, 2015. The difference in the effective income tax rate for the six months ended June 30, 2015 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items and the provision for uncertain tax positions, partially offset by state income taxes and book and tax differences related to the allowance for equity funds used during construction.
Liquidity and Capital Resources
Cash Flow
Cash flows for the sixthree months ended June 30,March 31, 2017 and 2016 and 2015 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $2,182 |
| |
| $30,441 |
|
| $6,181 |
| |
| $2,182 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 172,175 |
| | 131,842 |
| 59,580 |
| | 75,735 |
|
| Investing activities | (179,483 | ) | | (138,031 | ) | (69,587 | ) | | (88,057 | ) |
| Financing activities | 61,063 |
| | 10,449 |
| 3,914 |
| | 76,473 |
|
| Net increase in cash and cash equivalents | 53,755 |
| | 4,260 |
| |
| Net increase (decrease) in cash and cash equivalents | | (6,093 | ) | | 64,151 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $55,937 |
| |
| $34,701 |
|
| $88 |
| |
| $66,333 |
|
Operating Activities
Net cash flow provided by operating activities increased $40.3decreased $16.2 million for the sixthree months ended June 30, 2016 asMarch 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to increasedthe timing of recovery of fuel and purchased power costs.
$2.7 million in income tax refunds in 2017 as compared to the same period in 2016. Entergy Texas Inc.received income tax refunds of $3.4 million in 2017 and Subsidiaries
Management's Financial Discussion and Analysis
$0.8 million in 2016 in accordance with an intercompany income tax allocation agreement.
Investing Activities
Net cash flow used in investing activities increased $41.5decreased $18.5 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
to a decrease of $28.7 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017 as compared to the same period in 2016 and money pool activity. The decrease was partially offset by cash collateral of $14 million posted in March 2017 to support Entergy Texas’s obligations to MISO and an increase of $6.6 million in transmissiondistribution construction expenditures primarily due to a higher scope of work performed in 20162017 as compared to the same period in 2015;
an increase of $10.7 million due to various technology projects and upgrades in 2016; and
money pool activity.2016.
The increase was partially offset by:
a decrease in fossil-fueled generation construction expenditures primarily due to a decreased scope of work performed during outages in 2016 as compared to the same period in 2015; and
cash collateral of $12 million posted in June 2015 to support Entergy Texas’s obligations to MISO.
IncreasesDecreases in Entergy Texas’s receivable from the money pool are a usesource of cash flow, and Entergy Texas’s receivable from the money pool increaseddecreased by $7$0.7 million for the sixthree months ended June 30, 2016March 31, 2017 compared to increasing by $2$8.9 million for the sixthree months ended June 30, 2015.March 31, 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Net cash flow provided by financing activities increased $50.6decreased $72.6 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to the retirement of $200 million of 3.6% Series first mortgage bonds in June 2015 and the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016, partially offset by the issuance of $250 million of 5.15% Series first mortgage bonds in May 2015 and money pool activity. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
DecreasesIncreases in Entergy Texas’s payable to the money pool are a usesource of cash flow, and Entergy Texas’s payable to the money pool decreasedincreased by $28.9 million for the three months ended March 31, 2017 compared to decreasing by $22.1 million for the sixthree months ended June 30,March 31, 2016.
Capital Structure
Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | June 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 60.6 | % | | 60.2 | % | 57.9 | % | | 58.5 | % |
| Effect of excluding the securitization bonds | (8.7 | %) | | (10.4 | %) | (7.9 | %) | | (8.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 51.9 | % | | 49.8 | % | 50.0 | % | | 50.2 | % |
| Effect of subtracting cash | (1.3 | %) | | — | % | — | % | | (0.1 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 50.6 | % | | 49.8 | % | 50.0 | % | | 50.1 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas. |
Net debt consists of debt less cash and cash equivalents. Debt consists of long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
5 to the financial statements in the Form 10-K. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
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 Texas’s uses and sources of capital. Entergy Texas seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support planned investments, Entergy Texas may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure. Due to the variability in many of the components of operating cash flows as well as the variability in investments, the amount of cash available for dividends can change significantly from year to year.
Following are updates to information provided in the Form 10-K.
The current annual amounts of Entergy Texas’s planned construction and other capital investments are as follows:
|
| | | | | | | | | | | |
| | 2016 | | 2017 | | 2018 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $50 |
| |
| $80 |
| |
| $200 |
|
| Transmission | 100 |
| | 130 |
| | 235 |
|
| Distribution | 115 |
| | 115 |
| | 120 |
|
| Other | 40 |
| | 20 |
| | 10 |
|
| Total |
| $305 |
| |
| $345 |
| |
| $565 |
|
The updated capital plan for 2016-2018 reflects capital plan refinements and includes specific investments such as the self-build option at Entergy Texas’s Lewis Creek site selected in the request for proposal for Long-Term Combined Cycle Turbine Capacity and Energy Resources and Limited-Term Capacity and Energy Resources; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintain reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments.
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
June 30,
2016 | | December 31, 2015 | | June 30,
2015 | | December 31, 2014 |
| (In Thousands) |
| $7,011 | | ($22,068) | | $2,258 | | $306 |
|
| | | | | | |
March 31,
2017 | | December 31, 2016 | | March 31,
2016 | | December 31, 2015 |
| (In Thousands) |
| ($28,941) | | $681 | | $8,938 | | ($22,068) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in August 2020.2021. The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility. As
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
of June 30, 2016,March 31, 2017, there were no cash borrowings and $1.3$4.7 million of letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations underto MISO. As of June 30, 2016,March 31, 2017, a $14.4$27.6 million letter of credit was outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Montgomery County Power Station
In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal that showed no undue preference to any proposal. Discovery has commenced, and a procedural schedule has been established for this proceeding, including an evidentiary hearing in May 2017. In March 2017 an intervenor filed direct testimony generally opposing certification of Montgomery County Power Station and proposed certain conditions if the certification is to be granted. In April 2017, Entergy Texas and the independent monitor filed rebuttal testimony in accordance with the procedural schedule. A PUCT decision regarding the application is expected by October 2017, pursuant to a Texas statute requiring the PUCT to issue a certificate of convenience and necessity within 366 days of the filing. Subject to timely approval by the PUCT and receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
FilingsIn September 2016, Entergy Texas filed with the PUCT
2011 Rate Case
See the Form 10-K for discussion of Entergy Texas’s 2011 rate case. As discussed in the Form 10-K, several parties, including Entergy Texas, appealed various aspects of the PUCT’s order a request to the Travis County District Court. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced in the Form 10-K, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issuedamend its opinion affirming the District Court’s decision on all points. Entergy Texas petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. That petition is pending.
Other Filings
In September 2015, Entergy Texas filed for a transmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider requesting a $13is designed to collect approximately $29.5 million increase, incremental to base rates. Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among other things, MISO charges, vegetation management costs, and bad debt expenses that would reduce the requested increase by approximately $2 million. In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request be reduced by an additional $3.4 million to account for load growth since base rates were last set. A hearing on the merits was held in December 2015. In February 2016 a State Office of Administrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 millionannually from Entergy Texas’s $13retail customers. This amount includes the approximately $10.5 million request, but recommendingannually that Entergy Texas is currently authorized to collect through the PUCT not accept the load growth offset.TCRF rider. In AprilSeptember 2016 the PUCT votedsuspended the effective date of the tariff change to allow Entergy Texas’s TCRF rates to become effective as of April 14,March 2017. In December 2016, when those rates are finally approved, but did not otherwise address the proposal for decision. In May 2016 the PUCT deferred final consideration of Entergy Texas’s TCRF application and opened the record to consider additional evidence to be provided by Entergy Texas and potentially other parties regarding the rate-making treatment of spare transmission-level transformers that are transferred among the Utility operating companies. In June 2016 the PUCT indicated that it would take up inreached a future rulemaking projectsettlement agreeing to the issueamended TCRF annual revenue requirement of whether a load growth adjustment should apply to a TCRF. In July 2016 the PUCT issued an order generally accepting the proposal for decision but declining to adjust the TCRF baseline in two instances as recommended by the ALJ, which results in a total annual allowance of approximately $10.5$29.5 million. The PUCT also ordered its staffapproved the settlement and issued a final order in March 2017. Entergy Texas to track all spare autotransformer transfers going forward so that it could addressimplemented the appropriate accounting treatmentamended TCRF rider beginning with bills covering usage on and prudence of such transfers in Entergy Texas’s next base rate case.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
after March 20, 2017.
Fuel and purchased power cost recovery
As discussed in the Form 10-K, in July 2015 certain parties filed briefs in the open proceeding asserting that Entergy Texas should refund to retail customers an additional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs. In October 2015 an ALJ issued a proposal for decision recommending that the additional $10.9 million in bandwidth remedy payments be refunded to retail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed a motion for rehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy Texas filed a complaint in Federal District Court for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. Both appeals are pending, but the appeals do not stay the PUCT’s decision. The federal appeal is scheduled to be heard in December 2016. In April 2016, Entergy Texas filed with the PUCT an application to refund to customers approximately $56.2 million. The refund resulted from (i) $41.8 million of fuel cost recovery over-collections through February 2016, (ii) the $10.9 million in bandwidth remedy payments, discussed above, that Entergy Texas received related to calendar year 2006 production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008 production costs. In June 2016, Entergy Texas filed an unopposed settlement agreement that added additional over-recovered fuel costs for the months of March and April 2016. The settlement resulted in a $68 million refund. The ALJ approved the refund on an interim basis to be made to most customers over a four-month period beginning with the first billing cycle of July 2016. In July 2016 the PUCT issued an order approving the interim refund.
In July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013 through March 31, 2016. Under a recent PUCT rule change, a fuel reconciliation is required to be filed at least once every three years and outside of a base rate case filing. During the reconciliation period,In December 2016, Entergy Texas incurred approximately $1.77 billionentered into a stipulation and settlement agreement resulting in Texas jurisdictional eligible fuela $6 million disallowance not associated with any particular issue raised and purchased power expenses, neta refund of certain revenues credited to such expenses and other adjustments. Entergy Texas estimates anthe over-recovery balance of approximately $19.3$21 million including interest, which Entergy Texas is requesting authorityas of November 30, 2016, to carry over as themost customers beginning balance for the subsequentApril 2017 through June 2017. The fuel reconciliation period beginning Apri1 2016. Entergy Texas also notes, however, that the $19.3 million over collection is currently being refunded to customers as a portion of the interim fuel refund beginning with the first billing cycle of July 2016, discussed above. Entergy Texas also is requesting a prudence finding for each of the fuel-related contracts and arrangements entered into or modified during the reconciliation period that have not be reviewedsettlement was approved by the PUCT in a prior proceeding. The PUCT has one year to issue a final order in this proceeding.March 2017.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysisin the Form 10-K for further discussion.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits. The following is an update to that discussion.
Taxationbenefits, and Uncertain Tax Positions
See “Critical Accounting Estimates - Taxation and Uncertain Tax Positions” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $363,927 |
| |
| $378,304 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 58,013 |
| | 92,404 |
|
| Purchased power | | 150,384 |
| | 130,412 |
|
| Other operation and maintenance | | 53,906 |
| | 53,035 |
|
| Taxes other than income taxes | | 19,444 |
| | 18,310 |
|
| Depreciation and amortization | | 28,111 |
| | 25,619 |
|
| Other regulatory charges - net | | 15,227 |
| | 17,255 |
|
| TOTAL | | 325,085 |
| | 337,035 |
|
| | | | | |
| OPERATING INCOME | | 38,842 |
| | 41,269 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,281 |
| | 2,432 |
|
| Interest and investment income | | 201 |
| | 200 |
|
| Miscellaneous - net | | (182 | ) | | (416 | ) |
| TOTAL | | 1,300 |
| | 2,216 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 21,808 |
| | 21,601 |
|
| Allowance for borrowed funds used during construction | | (761 | ) | | (1,581 | ) |
| TOTAL | | 21,047 |
| | 20,020 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 19,095 |
| | 23,465 |
|
| | | | | |
| Income taxes | | 8,241 |
| | 8,903 |
|
| | | | | |
| NET INCOME | |
| $10,854 |
| |
| $14,562 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(page left blank intentionally)
|
| | | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three and Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $412,922 |
| |
| $402,921 |
| |
| $791,226 |
| |
| $814,132 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 71,478 |
| | 50,360 |
| | 163,882 |
| | 124,167 |
|
| Purchased power | | 167,071 |
| | 180,843 |
| | 297,483 |
| | 355,048 |
|
| Other operation and maintenance | | 54,135 |
| | 66,062 |
| | 107,170 |
| | 122,587 |
|
| Taxes other than income taxes | | 18,285 |
| | 17,641 |
| | 36,595 |
| | 35,911 |
|
| Depreciation and amortization | | 26,495 |
| | 25,714 |
| | 52,114 |
| | 50,561 |
|
| Other regulatory charges - net | | 17,419 |
| | 18,237 |
| | 34,674 |
| | 37,781 |
|
| TOTAL | | 354,883 |
| | 358,857 |
| | 691,918 |
| | 726,055 |
|
| | | | | | | | | |
| OPERATING INCOME | | 58,039 |
| | 44,064 |
| | 99,308 |
| | 88,077 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 2,270 |
| | 1,317 |
| | 4,702 |
| | 2,541 |
|
| Interest and investment income (loss) | | 268 |
| | (193 | ) | | 468 |
| | (406 | ) |
| Miscellaneous - net | | (54 | ) | | (178 | ) | | (470 | ) | | (114 | ) |
| TOTAL | | 2,484 |
| | 946 |
| | 4,700 |
| | 2,021 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 21,976 |
| | 21,562 |
| | 43,577 |
| | 42,558 |
|
| Allowance for borrowed funds used during construction | | (1,473 | ) | | (862 | ) | | (3,054 | ) | | (1,656 | ) |
| TOTAL | | 20,503 |
| | 20,700 |
| | 40,523 |
| | 40,902 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 40,020 |
| | 24,310 |
| | 63,485 |
| | 49,196 |
|
| | | | | | | | | |
| Income taxes | | 15,962 |
| | 9,420 |
| | 24,865 |
| | 17,715 |
|
| | | | | | | | | |
| NET INCOME | |
| $24,058 |
| |
| $14,890 |
| |
| $38,620 |
| |
| $31,481 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $10,854 |
| |
| $14,562 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 28,111 |
| | 25,619 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (25,678 | ) | | (26,970 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (683 | ) | | 2,118 |
|
| Fuel inventory | | 4,581 |
| | 2,860 |
|
| Accounts payable | | (1,150 | ) | | (17,346 | ) |
| Prepaid taxes and taxes accrued | | 16,110 |
| | 18,871 |
|
| Interest accrued | | (6,816 | ) | | (9,978 | ) |
| Deferred fuel costs | | 20,375 |
| | 54,192 |
|
| Other working capital accounts | | 1,422 |
| | 1,957 |
|
| Provisions for estimated losses | | 663 |
| | 662 |
|
| Other regulatory assets | | 23,762 |
| | 24,310 |
|
| Pension and other postretirement liabilities | | (5,814 | ) | | (6,505 | ) |
| Other assets and liabilities | | (6,157 | ) | | (8,617 | ) |
| Net cash flow provided by operating activities | | 59,580 |
| | 75,735 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (68,765 | ) | | (91,843 | ) |
| Allowance for equity funds used during construction | | 1,320 |
| | 2,460 |
|
| Increase in other investments | | (14,000 | ) | | — |
|
| Changes in money pool receivable - net | | 681 |
| | (8,938 | ) |
| Changes in securitization account | | 11,177 |
| | 10,264 |
|
| Net cash flow used in investing activities | | (69,587 | ) | | (88,057 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 123,786 |
|
| Retirement of long-term debt | | (24,188 | ) | | (23,458 | ) |
| Change in money pool payable - net | | 28,941 |
| | (22,068 | ) |
| Other | | (839 | ) | | (1,787 | ) |
| Net cash flow provided by financing activities | | 3,914 |
| | 76,473 |
|
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (6,093 | ) | | 64,151 |
|
| Cash and cash equivalents at beginning of period | | 6,181 |
| | 2,182 |
|
| Cash and cash equivalents at end of period | |
| $88 |
| |
| $66,333 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $27,986 |
| |
| $30,969 |
|
| Income taxes | |
| ($3,446 | ) | |
| ($756 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $38,620 |
| |
| $31,481 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 52,114 |
| | 50,561 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (40,175 | ) | | (63,659 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (37,832 | ) | | 471 |
|
| Fuel inventory | | 14,129 |
| | (4,287 | ) |
| Accounts payable | | 17,883 |
| | 7,553 |
|
| Prepaid taxes and taxes accrued | | 51,640 |
| | 69,446 |
|
| Interest accrued | | (2,719 | ) | | 447 |
|
| Deferred fuel costs | | 54,066 |
| | 252 |
|
| Other working capital accounts | | 2,774 |
| | 7,209 |
|
| Provisions for estimated losses | | (2,126 | ) | | (1,093 | ) |
| Other regulatory assets | | 43,378 |
| | 53,242 |
|
| Pension and other postretirement liabilities | | (12,850 | ) | | (9,860 | ) |
| Other assets and liabilities | | (6,727 | ) | | (9,921 | ) |
| Net cash flow provided by operating activities | | 172,175 |
| | 131,842 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (185,945 | ) | | (133,344 | ) |
| Allowance for equity funds used during construction | | 4,761 |
| | 2,571 |
|
| Increase in other investments | | — |
| | (12,000 | ) |
| Changes in money pool receivable - net | | (7,011 | ) | | (1,952 | ) |
| Changes in securitization account | | 8,712 |
| | 6,694 |
|
| Net cash flow used in investing activities | | (179,483 | ) | | (138,031 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 123,605 |
| | 247,005 |
|
| Retirement of long-term debt | | (36,659 | ) | | (235,260 | ) |
| Change in money pool payable - net | | (22,068 | ) | | — |
|
| Other | | (3,815 | ) | | (1,296 | ) |
| Net cash flow provided by financing activities | | 61,063 |
| | 10,449 |
|
| | | | | |
| Net increase in cash and cash equivalents | | 53,755 |
| | 4,260 |
|
| Cash and cash equivalents at beginning of period | | 2,182 |
| | 30,441 |
|
| Cash and cash equivalents at end of period | |
| $55,937 |
| |
| $34,701 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $45,056 |
| |
| $40,252 |
|
| Income taxes | |
| $3,443 |
| |
| $3,162 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $59 |
| |
| $1,216 |
|
| Temporary cash investments | | 29 |
| | 4,965 |
|
| Total cash and cash equivalents | | 88 |
| | 6,181 |
|
| Securitization recovery trust account | | 26,274 |
| | 37,451 |
|
| Accounts receivable: | | | | |
| Customer | | 64,907 |
| | 71,803 |
|
| Allowance for doubtful accounts | | (794 | ) | | (828 | ) |
| Associated companies | | 38,832 |
| | 39,447 |
|
| Other | | 15,901 |
| | 14,756 |
|
| Accrued unbilled revenues | | 46,061 |
| | 39,727 |
|
| Total accounts receivable | | 164,907 |
| | 164,905 |
|
| Fuel inventory - at average cost | | 32,596 |
| | 37,177 |
|
| Materials and supplies - at average cost | | 37,456 |
| | 36,631 |
|
| Prepayments and other | | 26,857 |
| | 18,599 |
|
| TOTAL | | 288,178 |
| | 300,944 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 595 |
| | 600 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
|
| Other | | 18,909 |
| | 18,801 |
|
| TOTAL | | 19,880 |
| | 19,777 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,334,548 |
| | 4,274,069 |
|
| Construction work in progress | | 96,598 |
| | 111,227 |
|
| TOTAL UTILITY PLANT | | 4,431,146 |
| | 4,385,296 |
|
| Less - accumulated depreciation and amortization | | 1,528,921 |
| | 1,526,057 |
|
| UTILITY PLANT - NET | | 2,902,225 |
| | 2,859,239 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 105,339 |
| | 105,816 |
|
| Other regulatory assets (includes securitization property of $370,084 as of March 31, 2017 and $384,609 as of December 31, 2016) | | 716,871 |
| | 740,156 |
|
| Other | | 9,269 |
| | 7,149 |
|
| TOTAL | | 831,479 |
| | 853,121 |
|
| | | | | |
| TOTAL ASSETS | |
| $4,041,762 |
| |
| $4,033,081 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | | | |
| Associated companies | |
| $76,272 |
| |
| $47,867 |
|
| Other | | 81,186 |
| | 77,342 |
|
| Customer deposits | | 43,630 |
| | 44,419 |
|
| Taxes accrued | | 31,461 |
| | 15,351 |
|
| Interest accrued | | 19,161 |
| | 25,977 |
|
| Deferred fuel costs | | 74,918 |
| | 54,543 |
|
| Other | | 6,671 |
| | 9,388 |
|
| TOTAL | | 333,299 |
| | 274,887 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 999,737 |
| | 1,027,647 |
|
| Accumulated deferred investment tax credits | | 12,696 |
| | 12,934 |
|
| Other regulatory liabilities | | 6,004 |
| | 8,502 |
|
| Asset retirement cost liabilities | | 6,559 |
| | 6,470 |
|
| Accumulated provisions | | 8,247 |
| | 7,584 |
|
| Pension and other postretirement liabilities | | 61,507 |
| | 67,313 |
|
| Long-term debt (includes securitization bonds of $405,008 as of March 31, 2017 and $429,043 as of December 31, 2016) | | 1,484,583 |
| | 1,508,407 |
|
| Other | | 49,282 |
| | 50,343 |
|
| TOTAL | | 2,628,615 |
| | 2,689,200 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2017 and 2016 | | 49,452 |
| | 49,452 |
|
| Paid-in capital | | 481,994 |
| | 481,994 |
|
| Retained earnings | | 548,402 |
| | 537,548 |
|
| TOTAL | | 1,079,848 |
| | 1,068,994 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $4,041,762 |
| |
| $4,033,081 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $1,300 |
| |
| $2,153 |
|
| Temporary cash investments | | 54,637 |
| | 29 |
|
| Total cash and cash equivalents | | 55,937 |
| | 2,182 |
|
| Securitization recovery trust account | | 29,449 |
| | 38,161 |
|
| Accounts receivable: | | | | |
| Customer | | 58,963 |
| | 61,870 |
|
| Allowance for doubtful accounts | | (556 | ) | | (474 | ) |
| Associated companies | | 80,944 |
| | 42,279 |
|
| Other | | 13,944 |
| | 11,054 |
|
| Accrued unbilled revenues | | 46,472 |
| | 40,195 |
|
| Total accounts receivable | | 199,767 |
| | 154,924 |
|
| Fuel inventory - at average cost | | 32,813 |
| | 46,942 |
|
| Materials and supplies - at average cost | | 36,730 |
| | 34,994 |
|
| Prepayments and other | | 17,235 |
| | 17,975 |
|
| TOTAL | | 371,931 |
| | 295,178 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 605 |
| | 620 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
|
| Other | | 20,667 |
| | 20,186 |
|
| TOTAL | | 21,648 |
| | 21,182 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,103,274 |
| | 3,923,100 |
|
| Construction work in progress | | 158,630 |
| | 210,964 |
|
| TOTAL UTILITY PLANT | | 4,261,904 |
| | 4,134,064 |
|
| Less - accumulated depreciation and amortization | | 1,494,506 |
| | 1,477,529 |
|
| UTILITY PLANT - NET | | 2,767,398 |
| | 2,656,535 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 107,715 |
| | 107,499 |
|
| Other regulatory assets (includes securitization property of $424,606 as of June 30, 2016 and $453,317 as of December 31, 2015) | | 769,268 |
| | 812,862 |
|
| Other | | 6,741 |
| | 5,326 |
|
| TOTAL | | 883,724 |
| | 925,687 |
|
| | | | | |
| TOTAL ASSETS | |
| $4,044,701 |
| |
| $3,898,582 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | | | |
| Associated companies | |
| $96,270 |
| |
| $106,065 |
|
| Other | | 71,430 |
| | 87,421 |
|
| Customer deposits | | 44,981 |
| | 44,537 |
|
| Taxes accrued | | 56,973 |
| | 5,333 |
|
| Interest accrued | | 26,487 |
| | 29,206 |
|
| Deferred fuel costs | | 79,190 |
| | 25,124 |
|
| Other | | 13,678 |
| | 10,363 |
|
| TOTAL | | 389,009 |
| | 308,049 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 964,794 |
| | 1,006,834 |
|
| Accumulated deferred investment tax credits | | 13,384 |
| | 13,835 |
|
| Other regulatory liabilities | | 6,269 |
| | 6,396 |
|
| Asset retirement cost liabilities | | 6,294 |
| | 6,124 |
|
| Accumulated provisions | | 7,193 |
| | 9,319 |
|
| Pension and other postretirement liabilities | | 64,678 |
| | 77,517 |
|
| Long-term debt (includes securitization bonds of $460,675 as of June 30, 2016 and $497,030 as of December 31, 2015) | | 1,539,889 |
| | 1,451,967 |
|
| Other | | 53,115 |
| | 57,085 |
|
| TOTAL | | 2,655,616 |
| | 2,629,077 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2016 and 2015 | | 49,452 |
| | 49,452 |
|
| Paid-in capital | | 481,994 |
| | 481,994 |
|
| Retained earnings | | 468,630 |
| | 430,010 |
|
| TOTAL | | 1,000,076 |
| | 961,456 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $4,044,701 |
| |
| $3,898,582 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $430,010 |
| |
| $961,456 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 14,562 |
| | 14,562 |
|
| | | | | | | | |
| Balance at March 31, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $444,572 |
| |
| $976,018 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $537,548 |
| |
| $1,068,994 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 10,854 |
| | 10,854 |
|
| | | | | | | | |
| Balance at March 31, 2017 |
| $49,452 |
| |
| $481,994 |
| |
| $548,402 |
| |
| $1,079,848 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2014 |
| $49,452 |
| |
| $481,994 |
| |
| $360,385 |
| |
| $891,831 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 31,481 |
| | 31,481 |
|
| | | | | | | | |
| Balance at June 30, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $391,866 |
| |
| $923,312 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $430,010 |
| |
| $961,456 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 38,620 |
| | 38,620 |
|
| | | | | | | | |
| Balance at June 30, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $468,630 |
| |
| $1,000,076 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Six Months Ended June 30, 2016 and 2015 | |
| For the Three Months Ended March 31, 2017 and 2016 | | For the Three Months Ended March 31, 2017 and 2016 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $130 |
| |
| $132 |
| |
| ($2 | ) | | (2 | ) | |
| $137 |
| |
| $135 |
| |
| $2 |
| | 1 |
|
| Commercial | | 85 |
| | 86 |
| | (1 | ) | | (1 | ) | | 90 |
| | 84 |
| | 6 |
| | 7 |
|
| Industrial | | 94 |
| | 88 |
| | 6 |
| | 7 |
| | 100 |
| | 94 |
| | 6 |
| | 6 |
|
| Governmental | | 6 |
| | 6 |
| | — |
| | — |
| | 6 |
| | 6 |
| | — |
| | — |
|
| Total retail | | 315 |
| | 312 |
| | 3 |
| | 1 |
| | 333 |
| | 319 |
| | 14 |
| | 4 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 64 |
| | 69 |
| | (5 | ) | | (7 | ) | | 13 |
| | 53 |
| | (40 | ) | | (75 | ) |
| Non-associated companies | | 12 |
| | 3 |
| | 9 |
| | 300 |
| | 5 |
| | 6 |
| | (1 | ) | | (17 | ) |
| Other | | 22 |
| | 19 |
| | 3 |
| | 16 |
| | 13 |
| | — |
| | 13 |
| | — |
|
| Total | |
| $413 |
| |
| $403 |
| |
| $10 |
| | 2 |
| |
| $364 |
| |
| $378 |
| |
| ($14 | ) | | (4 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,209 |
| | 1,233 |
| | (24 | ) | | (2 | ) | | 1,213 |
| | 1,275 |
| | (62 | ) | | (5 | ) |
| Commercial | | 1,070 |
| | 1,089 |
| | (19 | ) | | (2 | ) | | 1,006 |
| | 1,017 |
| | (11 | ) | | (1 | ) |
| Industrial | | 1,938 |
| | 1,719 |
| | 219 |
| | 13 |
| | 1,790 |
| | 1,807 |
| | (17 | ) | | (1 | ) |
| Governmental | | 68 |
| | 65 |
| | 3 |
| | 5 |
| | 63 |
| | 70 |
| | (7 | ) | | (10 | ) |
| Total retail | | 4,285 |
| | 4,106 |
| | 179 |
| | 4 |
| | 4,072 |
| | 4,169 |
| | (97 | ) | | (2 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 1,683 |
| | 1,484 |
| | 199 |
| | 13 |
| | 338 |
| | 1,422 |
| | (1,084 | ) | | (76 | ) |
| Non-associated companies | | 345 |
| | 32 |
| | 313 |
| | 978 |
| | 77 |
| | 149 |
| | (72 | ) | | (48 | ) |
| Total | | 6,313 |
| | 5,622 |
| | 691 |
| | 12 |
| | 4,487 |
| | 5,740 |
| | (1,253 | ) | | (22 | ) |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Six Months Ended | | Increase/ | | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | | |
| Electric Operating Revenues: | | | | | | | | | |
| Residential | |
| $265 |
| |
| $288 |
| |
| ($23 | ) | | (8 | ) | |
| Commercial | | 169 |
| | 176 |
| | (7 | ) | | (4 | ) | |
| Industrial | | 188 |
| | 179 |
| | 9 |
| | 5 |
| |
| Governmental | | 12 |
| | 12 |
| | — |
| | — |
| |
| Total retail | | 634 |
| | 655 |
| | (21 | ) | | (3 | ) | |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 117 |
| | 127 |
| | (10 | ) | | (8 | ) | |
| Non-associated companies | | 18 |
| | 10 |
| | 8 |
| | 80 |
| |
| Other | | 22 |
| | 22 |
| | — |
| | — |
| |
| Total | |
| $791 |
| |
| $814 |
| |
| ($23 | ) | | (3 | ) | |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 2,484 |
| | 2,692 |
| | (208 | ) | | (8 | ) | |
| Commercial | | 2,087 |
| | 2,136 |
| | (49 | ) | | (2 | ) | |
| Industrial | | 3,745 |
| | 3,328 |
| | 417 |
| | 13 |
| |
| Governmental | | 138 |
| | 131 |
| | 7 |
| | 5 |
| |
| Total retail | | 8,454 |
| | 8,287 |
| | 167 |
| | 2 |
| |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 3,105 |
| | 2,672 |
| | 433 |
| | 16 |
| |
| Non-associated companies | | 494 |
| | 125 |
| | 369 |
| | 295 |
| |
| Total | | 12,053 |
| | 11,084 |
| | 969 |
| | 9 |
| |
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.
Second Quarter 2016 Compared to Second Quarter 2015
Net income changed insignificantly, increasing by $3.2decreased $5.6 million forprimarily due to a higher effective income tax rate in 2017 and provisions against revenue being recorded in 2017 in connection with the second quarter 2016 comparedcomplaint against System Energy’s return on equity. See Note 2 to the second quarter 2015.
Six Months Ended June 30, 2016 Compared to Six Months Ended June 30, 2015
Net income changed insignificantly, increasing by $3.7 million,financial statements herein and “Federal Regulation - Complaint Against System Energy” below for further discussion of the six months ended June 30, 2016 compared to the six months ended June 30, 2015.complaint against System Energy.
Liquidity and Capital Resources
Cash Flow
Cash flows for the sixthree months ended June 30,March 31, 2017 and 2016 and 2015 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $230,661 |
| |
| $223,179 |
|
| $245,863 |
| |
| $230,661 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 137,292 |
| | 149,066 |
| 65,776 |
| | 73,156 |
|
| Investing activities | (167,749 | ) | | (49,867 | ) | (65,068 | ) | | (159,100 | ) |
| Financing activities | (61,410 | ) | | (211,331 | ) | (6,163 | ) | | 110,985 |
|
| Net decrease in cash and cash equivalents | (91,867 | ) | | (112,132 | ) | |
| Net increase (decrease) in cash and cash equivalents | | (5,455 | ) | | 25,041 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $138,794 |
| |
| $111,047 |
|
| $240,408 |
| |
| $255,702 |
|
Operating Activities
Net cash flow provided by operating activities decreased $11.8$7.4 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to timing of payments to vendors and income tax refunds of $6.6 million in 2016 in accordance with an increaseintercompany income tax allocation agreement. The decrease was partially offset by a decrease in spending of $33.4$19.8 million on nuclear refueling outages in 20162017 as compared to the same period in 2015. The decrease was partially offset by:2016.
a decrease of $21.9 million in income tax payments primarily due to the final settlement of amounts outstanding associated with the 2006-2007 IRS audit paid in the first quarter of 2015. See Note 3 to the financial statements in the Form 10-K for a discussion of the income tax audits; and
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
a decrease in interest paid on the Grand Gulf sale-leaseback obligation in 2016 as compared to the same period in 2015 due to renewal of the lease in 2015. See Note 10 to the financial statements in the Form 10-K for details on the Grand Gulf sale-leaseback obligation.
Investing Activities
Net cash flow used in investing activities increased $117.9decreased $94 million for the sixthree months ended June 30, 2016March 31, 2017 compared to the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
an increasea decrease of $21.3 million in nuclear construction expenditures primarily as a result of a higher scope of work performed in 2016 on Grand Gulf outage projects.projects and lower spending in 2017 on compliance with NRC post-Fukushima requirements.
The increasedecrease was partially offset by money pool activity.
DecreasesIncreases in System Energy’s receivable from the money pool are a sourceuse of cash flow and System Energy’s receivable from the money pool decreasedincreased by $22.2$80.7 million for the sixthree months ended June 30, 2016March 31, 2017 compared to increasingdecreasing by $5.1$4.7 million for the sixthree months ended June 30, 2015.March 31, 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow used inSystem Energy’s financing activities decreased $149.9used $6.2 million of cash for the sixthree months ended June 30, 2016March 31, 2017 compared to providing $111 million of cash for the sixthree months ended June 30, 2015March 31, 2016 primarily due to:
to a decrease in net borrowings of $99.6$67.2 million on the nuclear fuel company variable interest entity’s credit facility in 20162017 compared to borrowings of $17.1 million on the nuclear fuel company variable interest entity’s credit facilitysame period in 2015;
redemption2016 and the payment in April 2015,February 2017, at maturity, of $60$50 million of the System Energy nuclear fuel company variable interest entity’s 5.33%4.02% Series G notes; and
the partial repayment caused by System Energy in May 2015 of $35 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of System Energy.
The decrease was partially offset by the partial repayment caused by System Energy in May 2016 of $22 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of System Energy.H notes.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Capital Structure
System Energy’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for System Energy as of June 30, 2016 is primarily due to borrowings of $99.6 million on the System Energy nuclear fuel company variable interest entity’s credit facility and a decrease in retained earnings.
| | | | June 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| Debt to capital | 48.4 | % | | 42.3 | % | 44.6 | % | | 45.5 | % |
| Effect of subtracting cash | (5.9 | %) | | (11.8 | %) | (11.7 | %) | | (12.0 | %) |
| Net debt to net capital | 42.5 | % | | 30.5 | % | 32.9 | % | | 33.5 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition. System Energy 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 System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 System Energy’s uses and sources of capital. System Energy seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support planned investments, System Energy may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure. Due to the variability in many of the components of operating cash flows as well as the variability in investments, the amount of cash available for dividends can change significantly from year to year.
Following are updates to the information provided in the Form 10-K.
The current annual amounts of System Energy’s planned construction and other capital investments are as follows:
|
| | | | | | | | | | | |
| | 2016 | | 2017 | | 2018 |
| | (In Millions) |
| Planned construction and capital investment: | | | | | |
| Generation |
| $90 |
| |
| $50 |
| |
| $65 |
|
| Other | 5 |
| | 5 |
| | 10 |
|
| Total |
| $95 |
| |
| $55 |
| |
| $75 |
|
The updated capital plan for 2016-2018 reflects capital plan refinements and includes specific investments and initiatives such as NRC post-Fukushima requirements and plant improvements.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
System Energy’s receivables from the money pool were as follows:
|
| | | | | | |
June 30, 2016 | | December 31, 2015 | | June 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $17,718 | | $39,926 | | $7,520 | | $2,373 |
|
| | | | | | |
March 31, 2017 | | December 31, 2016 | | March 31, 2016 | | December 31, 2015 |
| (In Thousands) |
| $114,553 | | $33,809 | | $35,198 | | $39,926 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in May 2019. As of June 30, 2016, $99.6March 31, 2017, $110.7 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued by the System Energy nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
Complaint Against System Energy
In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94%. The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017, as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67%. System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The City of New Orleans filed comments in February 2017 supporting the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. Action by the FERC is pending.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.
In June 2012 the U.S. Court
System Energy Resources, Inc.
Management's Financial Discussion and that spent nuclear fuel could be stored at nuclear reactor sites in the interim without significant environmental effects, and remanded the case for further proceedings. The court concluded that the NRC had not satisfied the requirements of the National Environmental Policy Act (NEPA) when it considered environmental effects in reaching these conclusions. The Waste Confidence Decision has been relied upon by NRC license renewal applicants to address some of the issues that the NEPA requires the NRC to address before it issues a renewed license. Certain nuclear opponents filed requests with the NRC asking it to address the issues raised by the court’s decision in the license renewal proceedings for a number of nuclear plants including Grand Gulf. In August 2012 the NRC issued an order stating that it will not issue final licenses dependent upon the Waste Confidence Decision until the D.C. Circuit’s remand is addressed, but also stating that licensing reviews and proceedings should continue to move forward. In September 2014 the NRC published a new final Waste Confidence rule, named Continued Storage of Spent Nuclear Fuel, that for licensing purposes adopts non-site specific findings concerning the environmental impacts of the continued storage of spent nuclear fuel at reactor sites - for 60 years, 100 years and indefinitely - after the reactor’s licensed period of operations. The NRC also issued an order lifting its suspension of licensing proceedings after the final rule’s effective date in October 2014. After the final rule became effective, New York, Connecticut, and Vermont filed a challenge to the rule in the U.S. Court of Appeals. In June 2016 the court denied the challenge.Analysis
Based upon the recent performance history of several units within the Entergy nuclear fleet, Entergy has determined to undertake a nuclear sustainability plan. That plan has not been fully developed, but it will result in increased operating and capital costs associated with operating Entergy’s nuclear plants. Entergy is continuing to determine what specific actions will be part of the nuclear sustainability plan, and an estimate of the costs associated with this plan cannot be made at this time.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits.
Taxationbenefits, and Uncertain Tax Positions
See “Critical Accounting Estimates - Taxation and Uncertain Tax Positions” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.other contingencies.
New Accounting Pronouncements
See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
|
| | | | | | | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| For the Three and Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Six Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $151,323 |
| |
| $163,101 |
| |
| $289,016 |
| |
| $319,140 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 20,394 |
| | 22,943 |
| | 33,822 |
| | 43,416 |
|
| Nuclear refueling outage expenses | | 4,905 |
| | 5,420 |
| | 9,489 |
| | 11,102 |
|
| Other operation and maintenance | | 35,766 |
| | 41,083 |
| | 67,926 |
| | 76,789 |
|
| Decommissioning | | 12,593 |
| | 11,897 |
| | 24,980 |
| | 23,600 |
|
| Taxes other than income taxes | | 6,385 |
| | 6,558 |
| | 12,637 |
| | 13,766 |
|
| Depreciation and amortization | | 35,384 |
| | 37,247 |
| | 70,091 |
| | 74,307 |
|
| Other regulatory credits - net | | (9,124 | ) | | (7,517 | ) | | (22,415 | ) | | (17,094 | ) |
| TOTAL | | 106,303 |
| | 117,631 |
| | 196,530 |
| | 225,886 |
|
| | | | | | | | | |
| OPERATING INCOME | | 45,020 |
| | 45,470 |
| | 92,486 |
| | 93,254 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 1,602 |
| | 2,042 |
| | 4,331 |
| | 3,693 |
|
| Interest and investment income | | 5,124 |
| | 3,250 |
| | 8,398 |
| | 7,463 |
|
| Miscellaneous - net | | (164 | ) | | (217 | ) | | (256 | ) | | (438 | ) |
| TOTAL | | 6,562 |
| | 5,075 |
| | 12,473 |
| | 10,718 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 9,382 |
| | 12,347 |
| | 18,934 |
| | 25,360 |
|
| Allowance for borrowed funds used during construction | | (401 | ) | | (540 | ) | | (1,097 | ) | | (976 | ) |
| TOTAL | | 8,981 |
| | 11,807 |
| | 17,837 |
| | 24,384 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 42,601 |
| | 38,738 |
| | 87,122 |
| | 79,588 |
|
| | | | | | | | | |
| Income taxes | | 17,511 |
| | 16,878 |
| | 36,074 |
| | 32,195 |
|
| | | | | | | | | |
| NET INCOME | |
| $25,090 |
| |
| $21,860 |
| |
| $51,048 |
| |
| $47,393 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $51,048 |
| |
| $47,393 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 123,424 |
| | 136,091 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 83,733 |
| | 6,699 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 3,731 |
| | 2,286 |
|
| Accounts payable | | (3,200 | ) | | (746 | ) |
| Prepaid taxes and taxes accrued | | (60,954 | ) | | (9,355 | ) |
| Interest accrued | | (145 | ) | | (17,070 | ) |
| Other working capital accounts | | (28,319 | ) | | 3,148 |
|
| Other regulatory assets | | (9,844 | ) | | (7 | ) |
| Pension and other postretirement liabilities | | (9,071 | ) | | (6,620 | ) |
| Other assets and liabilities | | (13,111 | ) | | (12,753 | ) |
| Net cash flow provided by operating activities | | 137,292 |
| | 149,066 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (57,429 | ) | | (27,608 | ) |
| Allowance for equity funds used during construction | | 4,331 |
| | 3,693 |
|
| Nuclear fuel purchases | | (130,275 | ) | | (26,831 | ) |
| Proceeds from the sale of nuclear fuel | | 11,467 |
| | 21,263 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 289,414 |
| | 161,977 |
|
| Investment in nuclear decommissioning trust funds | | (307,465 | ) | | (177,214 | ) |
| Changes in money pool receivable - net | | 22,208 |
| | (5,147 | ) |
| Net cash flow used in investing activities | | (167,749 | ) | | (49,867 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Retirement of long-term debt | | (22,001 | ) | | (106,405 | ) |
| Changes in credit borrowings - net | | 99,617 |
| | 17,102 |
|
| Common stock dividends and distributions | | (139,000 | ) | | (122,000 | ) |
| Other | | (26 | ) | | (28 | ) |
| Net cash flow used in financing activities | | (61,410 | ) | | (211,331 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (91,867 | ) | | (112,132 | ) |
| Cash and cash equivalents at beginning of period | | 230,661 |
| | 223,179 |
|
| Cash and cash equivalents at end of period | |
| $138,794 |
| |
| $111,047 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $18,494 |
| |
| $37,929 |
|
| Income taxes | |
| $3,402 |
| |
| $25,304 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $154,787 |
| |
| $137,693 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 15,334 |
| | 13,428 |
|
| Nuclear refueling outage expenses | | 4,773 |
| | 4,584 |
|
| Other operation and maintenance | | 48,401 |
| | 32,160 |
|
| Decommissioning | | 13,232 |
| | 12,387 |
|
| Taxes other than income taxes | | 6,424 |
| | 6,252 |
|
| Depreciation and amortization | | 35,441 |
| | 34,707 |
|
| Other regulatory credits - net | | (10,362 | ) | | (13,291 | ) |
| TOTAL | | 113,243 |
| | 90,227 |
|
| | | | | |
| OPERATING INCOME | | 41,544 |
| | 47,466 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,094 |
| | 2,729 |
|
| Interest and investment income | | 4,674 |
| | 3,274 |
|
| Miscellaneous - net | | (128 | ) | | (92 | ) |
| TOTAL | | 5,640 |
| | 5,911 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 9,119 |
| | 9,552 |
|
| Allowance for borrowed funds used during construction | | (267 | ) | | (696 | ) |
| TOTAL | | 8,852 |
| | 8,856 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 38,332 |
| | 44,521 |
|
| | | | | |
| Income taxes | | 17,985 |
| | 18,563 |
|
| | | | | |
| NET INCOME | |
| $20,347 |
| |
| $25,958 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| ASSETS |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $792 |
| |
| $8,681 |
|
| Temporary cash investments | | 138,002 |
| | 221,980 |
|
| Total cash and cash equivalents | | 138,794 |
| | 230,661 |
|
| Accounts receivable: | | | | |
| Associated companies | | 68,252 |
| | 93,724 |
|
| Other | | 4,107 |
| | 4,574 |
|
| Total accounts receivable | | 72,359 |
| | 98,298 |
|
| Materials and supplies - at average cost | | 81,551 |
| | 87,366 |
|
| Deferred nuclear refueling outage costs | | 34,887 |
| | 5,605 |
|
| Prepaid taxes | | 70,281 |
| | 9,327 |
|
| Prepayments and other | | 6,818 |
| | 1,955 |
|
| TOTAL | | 404,690 |
| | 433,212 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 741,112 |
| | 701,460 |
|
| TOTAL | | 741,112 |
| | 701,460 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,327,329 |
| | 4,253,949 |
|
| Property under capital lease | | 575,027 |
| | 575,027 |
|
| Construction work in progress | | 56,277 |
| | 92,546 |
|
| Nuclear fuel | | 263,116 |
| | 183,706 |
|
| TOTAL UTILITY PLANT | | 5,221,749 |
| | 5,105,228 |
|
| Less - accumulated depreciation and amortization | | 3,013,134 |
| | 2,961,842 |
|
| UTILITY PLANT - NET | | 2,208,615 |
| | 2,143,386 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 94,937 |
| | 98,230 |
|
| Other regulatory assets | | 360,967 |
| | 347,830 |
|
| Other | | 4,864 |
| | 4,757 |
|
| TOTAL | | 460,768 |
| | 450,817 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,815,185 |
| |
| $3,728,875 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| June 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $50,002 |
| |
| $2 |
|
| Short-term borrowings | | 99,617 |
| | — |
|
| Accounts payable: | | | | |
| Associated companies | | 6,939 |
| | 7,391 |
|
| Other | | 22,383 |
| | 34,010 |
|
| Interest accrued | | 14,038 |
| | 14,183 |
|
| Other | | 1,937 |
| | 1,926 |
|
| TOTAL | | 194,916 |
| | 57,512 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,097,454 |
| | 1,019,075 |
|
| Accumulated deferred investment tax credits | | 43,841 |
| | 45,451 |
|
| Other regulatory liabilities | | 353,331 |
| | 337,424 |
|
| Decommissioning | | 828,385 |
| | 803,405 |
|
| Pension and other postretirement liabilities | | 103,193 |
| | 112,264 |
|
| Long-term debt | | 500,924 |
| | 572,665 |
|
| Other | | 14 |
| | — |
|
| TOTAL | | 2,927,142 |
| | 2,890,284 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2016 and 2015 | | 679,350 |
| | 719,350 |
|
| Retained earnings | | 13,777 |
| | 61,729 |
|
| TOTAL | | 693,127 |
| | 781,079 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,815,185 |
| |
| $3,728,875 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $20,347 |
| |
| $25,958 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 61,562 |
| | 58,717 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 18,293 |
| | 49,894 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 13,953 |
| | 9,121 |
|
| Accounts payable | | (3,008 | ) | | 16,257 |
|
| Prepaid taxes and taxes accrued | | (15,032 | ) | | (38,617 | ) |
| Interest accrued | | 295 |
| | 837 |
|
| Other working capital accounts | | (1,111 | ) | | (30,111 | ) |
| Other regulatory assets | | (1,571 | ) | | (8,319 | ) |
| Pension and other postretirement liabilities | | (4,187 | ) | | (4,576 | ) |
| Other assets and liabilities | | (23,765 | ) | | (6,005 | ) |
| Net cash flow provided by operating activities | | 65,776 |
| | 73,156 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (14,096 | ) | | (34,747 | ) |
| Allowance for equity funds used during construction | | 1,094 |
| | 2,729 |
|
| Nuclear fuel purchases | | (21,765 | ) | | (122,320 | ) |
| Proceeds from the sale of nuclear fuel | | 60,188 |
| | — |
|
| Proceeds from nuclear decommissioning trust fund sales | | 75,787 |
| | 188,506 |
|
| Investment in nuclear decommissioning trust funds | | (85,532 | ) | | (197,996 | ) |
| Changes in money pool receivable - net | | (80,744 | ) | | 4,728 |
|
| Net cash flow used in investing activities | | (65,068 | ) | | (159,100 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Retirement of long-term debt | | (50,001 | ) | | (1 | ) |
| Changes in credit borrowings - net | | 43,851 |
| | 111,012 |
|
| Other | | (13 | ) | | (26 | ) |
| Net cash flow provided by (used in) financing activities | | (6,163 | ) | | 110,985 |
|
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (5,455 | ) | | 25,041 |
|
| Cash and cash equivalents at beginning of period | | 245,863 |
| | 230,661 |
|
| Cash and cash equivalents at end of period | |
| $240,408 |
| |
| $255,702 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $8,593 |
| |
| $8,593 |
|
| Income taxes | |
| $— |
| |
| ($6,598 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Six Months Ended June 30, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | |
| Balance at December 31, 2014 |
| $789,350 |
| |
| $81,161 |
| |
| $870,511 |
|
| | | | | | |
| Net income | — |
| | 47,393 |
| | 47,393 |
|
| Common stock dividends | — |
| | (122,000 | ) | | (122,000 | ) |
| | | | | | |
| Balance at June 30, 2015 |
| $789,350 |
| |
| $6,554 |
| |
| $795,904 |
|
| | | | | | |
| | | | | | |
| Balance at December 31, 2015 |
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
|
| | | | | | |
| Net income | — |
| | 51,048 |
| | 51,048 |
|
| Common stock dividends and distributions | (40,000 | ) | | (99,000 | ) | | (139,000 | ) |
| | | | | | |
| Balance at June 30, 2016 |
| $679,350 |
| |
| $13,777 |
| |
| $693,127 |
|
| | | | | | |
| See Notes to Financial Statements. | | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $797 |
| |
| $786 |
|
| Temporary cash investments | | 239,611 |
| | 245,077 |
|
| Total cash and cash equivalents | | 240,408 |
| | 245,863 |
|
| Accounts receivable: | | | | |
| Associated companies | | 170,154 |
| | 104,390 |
|
| Other | | 4,664 |
| | 3,637 |
|
| Total accounts receivable | | 174,818 |
| | 108,027 |
|
| Materials and supplies - at average cost | | 84,032 |
| | 82,469 |
|
| Deferred nuclear refueling outage costs | | 20,100 |
| | 24,729 |
|
| Prepaid taxes | | 30,914 |
| | 15,882 |
|
| Prepayments and other | | 8,408 |
| | 4,229 |
|
| TOTAL | | 558,680 |
| | 481,199 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 815,975 |
| | 780,496 |
|
| TOTAL | | 815,975 |
| | 780,496 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,341,221 |
| | 4,331,668 |
|
| Property under capital lease | | 585,084 |
| | 585,084 |
|
| Construction work in progress | | 44,636 |
| | 43,888 |
|
| Nuclear fuel | | 220,030 |
| | 259,635 |
|
| TOTAL UTILITY PLANT | | 5,190,971 |
| | 5,220,275 |
|
| Less - accumulated depreciation and amortization | | 3,094,345 |
| | 3,063,249 |
|
| UTILITY PLANT - NET | | 2,096,626 |
| | 2,157,026 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 90,931 |
| | 93,127 |
|
| Other regulatory assets | | 414,979 |
| | 411,212 |
|
| Other | | 4,591 |
| | 4,652 |
|
| TOTAL | | 510,501 |
| | 508,991 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,981,782 |
| |
| $3,927,712 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $3 |
| |
| $50,003 |
|
| Short-term borrowings | | 110,744 |
| | 66,893 |
|
| Accounts payable: | | | | |
| Associated companies | | 4,124 |
| | 5,843 |
|
| Other | | 43,094 |
| | 50,558 |
|
| Interest accrued | | 14,344 |
| | 14,049 |
|
| Other | | 2,959 |
| | 2,957 |
|
| TOTAL | | 175,268 |
| | 190,303 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,127,742 |
| | 1,112,865 |
|
| Accumulated deferred investment tax credits | | 40,714 |
| | 41,663 |
|
| Other regulatory liabilities | | 394,263 |
| | 370,862 |
|
| Decommissioning | | 867,434 |
| | 854,202 |
|
| Pension and other postretirement liabilities | | 113,663 |
| | 117,850 |
|
| Long-term debt | | 501,212 |
| | 501,129 |
|
| Other | | 2,316 |
| | 15 |
|
| TOTAL | | 3,047,344 |
| | 2,998,586 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2017 and 2016 | | 679,350 |
| | 679,350 |
|
| Retained earnings | | 79,820 |
| | 59,473 |
|
| TOTAL | | 759,170 |
| | 738,823 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,981,782 |
| |
| $3,927,712 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | |
| Balance at December 31, 2015 |
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
|
| | | | | | |
| Net income | — |
| | 25,958 |
| | 25,958 |
|
| | | | | | |
| Balance at March 31, 2016 |
| $719,350 |
| |
| $87,687 |
| |
| $807,037 |
|
| | | | | | |
| | | | | | |
| Balance at December 31, 2016 |
| $679,350 |
| |
| $59,473 |
| |
| $738,823 |
|
| | | | | | |
| Net income | — |
| | 20,347 |
| | 20,347 |
|
| | | | | | |
| Balance at March 31, 2017 |
| $679,350 |
| |
| $79,820 |
| |
| $759,170 |
|
| | | | | | |
| See Notes to Financial Statements. | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See “PART I, Item 1, Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy. Also see Note 1 and Note 2 to the financial statements herein and “Item 5, Other Information, Environmental Regulation” below for updates regarding environmental proceedings and regulation.
Item 1A. Risk Factors
There have been no material changes to the risk factors discussed in “PART I, Item 1A, Risk Factors” in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (a)
|
| | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Plan | | Maximum $ Amount of Shares that May Yet be Purchased Under a Plan (b) |
| | | | | | | | | |
4/1/01/2016-4/30/20162017-1/31/2017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
5/2/01/2016-5/31/20162017-2/28/2017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
6/3/01/2016-6/30/20162017-3/31/2017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
| Total | | — |
| |
| $— |
| | — |
| | |
In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans. In addition to this authority, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities. In addition, in the first quarter 2016,2017, Entergy withheld 19,399 shares of its common stock at $68.09 per share, 36,4391,054 shares of its common stock at $70.58 per share, and 82,619122,148 shares of its common stock at $71.60$70.61 per share, and 31,243 shares of its common stock at $71.89 per share to pay income taxes due upon vesting of restricted stock granted and payout of performance units as part of its long-term incentive program.
| |
| (a) | See Note 12 to the financial statements in the Form 10-K for additional discussion of the stock-based compensation plans. |
| |
| (b) | Maximum amount of shares that may yet be repurchased relates only to the $500 million plan and does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans. |
Item 5. Other Information
Regulation of the Nuclear Power Industry
Following are updates to the Regulation of the Nuclear Power Industry section of Part I, Item 1 of the Form 10-K.
Nuclear Waste Policy Act of 1982
Spent Nuclear Fuel
See the discussion in Part I, Item 1 in the Form 10-K for information regarding litigation against the DOE related to the DOE's breach of its obligations to remove spent fuel from nuclear sites. The following is an update to that discussion.
In April 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $29 million in favor of Entergy Arkansas and against the DOE in the second round ANO damages case. Also in April 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $44 million in favor of System Energy and against the DOE in the second round Grand Gulf damages case. In June 2015, Entergy Arkansas and System Energy appealed to the U.S. Court of Appeals for the Federal Circuit portions of those decisions relating to cask loading costs. In April 2016, the Federal Circuit issued a decision in both appeals in favor of Entergy Arkansas and System Energy, and remanded the cases back to the U.S. Court of Federal Claims. The U.S. Court of Federal Claims in June 2016 issued a final judgment in the amount of $49 million in favor of System Energy and against the DOE in the second round Grand Gulf damages case and in July 2016 issued a final judgment in the amount of $31 million in favor of Entergy Arkansas and against the DOE in the second round ANO damages case. In December 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $81 million in favor of Entergy Nuclear Indian Point 3 and Entergy Nuclear FitzPatrick in the first round Indian Point 3/FitzPatrick damages case, and Entergy received the payment from the U.S. Treasury in June 2016. In January 2016 the U.S. Court of Federal Claims issued a judgment in the amount of $49 million in favor of Entergy Louisiana and against the DOE in the first round Waterford 3 damages case. In April 2016, Entergy Louisiana appealed to the U.S. Court of Appeals for the Federal Circuit the portion of that decision relating to cask loading costs. After the ANO and Grand Gulf appeal was rendered, the U.S. Court of Appeals for the Federal Circuit remanded the Waterford 3 case back to the U.S. Court of Federal Claims for decision in accordance with the U.S. Court of Appeals ruling on cask loading costs. In April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42 million in favor of Entergy Louisiana and against the DOE in the first round River Bend damages case, reserving the issue of cask loading costs pending resolution of the appeal on the same issues in the Entergy Arkansas and System Energy cases. The appeals period for the partial judgment has ended with no appeals filed, and Entergy Louisiana requested payment from the U.S. Treasury of the $42 million in June 2016. In May 2016, Entergy Nuclear Vermont Yankee and the DOE entered into a stipulation agreement and the U.S. Court of Federal Claims issued a judgment in the amount of $19 million in favor of Entergy Nuclear Vermont Yankee and against the DOE in the second round Vermont Yankee damages case. Entergy received payment from the U.S. Treasury in June 2016. Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.
Nuclear Plant Decommissioning
See the discussion in Part I, Item 1 in the Form 10-K for information regarding decommissioning funding for the nuclear plants. Following is an updateare updates to that discussion.
In March 2016,2017 filings with the NRC were made for certain Entergy subsidiaries’ nuclear plants reporting on decommissioning funding. Those reports showed that decommissioning funding for each of those nuclear plants met the NRC’s financial assurance requirements.
NRC Reactor Oversight Process
See the discussion in Part I, Item 1 in the Form 10-K for information regarding the NRC’s Reactor Oversight Process and the status of each of Entergy’s nuclear plants. In March 20162017, Entergy closed on the NRC notified Entergysale of its decisionthe FitzPatrick plant to place Indian Point 3 inExelon, and as part of the “regulatory response column,” or Column 2,transaction, the FitzPatrick decommissioning trust fund, along with the decommissioning obligation for that plant, was transferred to Exelon. The FitzPatrick spent fuel disposal contract was assigned to Exelon as part of its Reactor Oversight Process Action Matrix.
Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs.transaction.
Environmental Regulation
Following are updates to the Environmental Regulation section of Part I, Item 1 of the Form 10-K.
Clean Air Act and Subsequent Amendments
Potential SO2NonattainmentRegional Haze
TheIn June 2005 the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that potentially could result in a final rule in June 2010 adopting anrequirement to install SO2 1-hour national ambient air quality standardand NOx pollution control technology as Best Available Retrofit Control Technology (BART) to continue operating certain of 75 parts per billion.Entergy’s fossil generation units. The EPA designationsrule leaves certain CAVR determinations to the states.
In Arkansas, the Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Plan (SIP) for counties in attainment and nonattainment were originally due in JuneArkansas facilities to implement its obligations under the CAVR. In April 2012 but the EPA initially indicated thatfinalized a decision addressing the Arkansas Regional Haze SIP, in which it would delay designations except for those areas with existing monitoring data from 2009 to 2011 indicating violationsdisapproved a large portion of the new standard. In August 2013Arkansas Regional Haze SIP, including the EPA issued final designationsemission limits for these areas. In Entergy’s utility service territory, only St. Bernard Parish in Louisiana is designated as non-attainment for theNOx and SO2 1-hour national ambient air quality standard of 75 parts per billion. Entergy does not have a generation asset in that parish. In July 2016at White Bluff. By Court order, the EPA finalized another roundhad to issue a final federal implementation plan (FIP) for Arkansas Regional Haze by no later than August 31, 2016. In April 2015 the EPA published a proposed FIP for Arkansas, taking comment on requiring installation of designations for areas with newly monitored violations ofscrubbers and low NOx burners to continue operating both units at the 2010 standardWhite Bluff plant and those with stationary sources that emit over a threshold amount ofboth units at the Independence plant and NOx controls to continue operating the Lake Catherine plant. Entergy filed comments by the deadline in August 2015. Among other comments, including opposition to the EPA’s proposed controls on the Independence units, Entergy proposed to meet more stringent SO2. Counties and parishesNOx limits at both White Bluff and Independence within three years of the effective date of the final FIP and to cease the use of coal at the White Bluff units in which Entergy owns2027 and operates fossil generating facilities that were included in this round of designations include Independence County and Jefferson County, Arkansas and Calcasieu Parish, Louisiana. Independence County and Calcasieu Parish were designated “unclassifiable,” and Jefferson County was designated “unclassifiable/attainment.” 2028.
In August 2015September 2016 the EPA issued apublished the final data requirement ruleArkansas Regional Haze FIP. In most respects, the EPA finalized its original proposal but shortened the time for compliance for installation of the NOx controls. The FIP requires an emission limitation consistent with SO2 1-hour standard. This rule will guide the processscrubbers at both White Bluff and Independence by October 2021 and NOx controls by April 2018. The EPA declined to be followed by the states and the EPAadopt Entergy’s proposals related to determine the appropriate designationceasing coal use as an alternative to SO2 scrubbers for the remaining unclassified areas in the country. Additional capital projectsWhite Bluff SO2 BART. For some or operational changes may be required to continue operating Entergy facilities in areas eventually designated as in non-attainmentall of the standard or designatedFIP, Entergy anticipates that Arkansas will submit a SIP to replace the FIP. In November 2016, Entergy and other interested parties such as contributing to non-attainment areas.the State of Arkansas filed
Hazardous Air Pollutants
Thepetitions for administrative reconsideration and stay at the EPA releasedas well as petitions for judicial review to the final Mercury and Air Toxics Standard (MATS) rule in December 2011, which has a compliance date, with a widely granted one-year extension, of April 2016. In June 2015 the U.S. Supreme Court reversed a U.S. Court of Appeals for the D.C.Eighth Circuit. In February 2016, Entergy, the State of Arkansas, and other parties requested the Court to judicially stay the FIP. In March 2017 the EPA granted in part the petitions for reconsideration and stated its intent to stay the FIP compliance deadlines by at least 90 days. Subsequently, the Eighth Circuit decisiongranted the government’s motion to hold the appeal litigation in abeyance for 90 days.
In Louisiana, Entergy is working with the Louisiana Department of Environmental Quality (LDEQ) and remandedthe EPA to revise the Louisiana SIP for regional haze, which was disapproved in part in 2012. A proposed federal implementation plan is likely to be issued by the end of June 2017 with finalization in December 2017. At this time, it is premature to predict what controls, if any, might be required for compliance. Entergy continues to monitor the submission and to file comments in the process as appropriate.
New and Existing Source Performance Standards for Greenhouse Gas Emissions
As a part of a climate plan announced in June 2013, the EPA was directed to (i) reissue proposed carbon pollution standards for new power plants by September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollution standards, regulations, or guidelines, as appropriate, for modified, reconstructed, and existing power plants no later than June 1, 2014; (iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirement that states submit to the EPA the implementation plans required under Section 111(d) of the Clean Air Act and its implementing regulations by no later than June 30, 2016. In January 2014 the EPA issued the proposed New Source Performance Standards rule for new sources. In June 2014 the EPA issued proposed standards for existing power plants. Entergy has been actively engaged in the rulemaking process, having submitted comments to the EPA in December 2014. The EPA issued the final rules for both new and existing sources in August 2015, and they were published in the Federal Register in October 2015. The existing source rule, also called the Clean Power Plan, requires states to develop compliance plans with the EPA’s emission standards. In February 2016 the U.S. Supreme Court issued a stay halting the effectiveness of the rule until the rule is reviewed by the D.C. Circuit and the EPA’s finding that it was appropriateU.S. Supreme Court, if review is granted. In March 2017 the current administration issued an executive order entitled “Promoting Energy Independence and necessary to regulate power plants under Clean Air Act section 112, ruling thatEconomic Growth” instructing the EPA must consider costs. Thisto review, suspend, revise, or rescind the Clean Power Plan if appropriate. The EPA finding underpins the MATS rule. In November 2015 the EPA released a Proposed Supplemental Finding that consideration of costs does not alter its previous conclusion that it is appropriate and necessary to regulate hazardous air pollutants from power plants. In December 2015subsequently asked the D.C. Circuit issuedto hold the challenges to the Clean Power Plan and the greenhouse gas new source performance standards in abeyance and signed a rulingnotice of withdrawal of the proposed federal plan, model trading rules and the Clean Energy Incentive Program. EPA Administrator Scott Pruitt also sent a letter to leave the affected governors explaining that states are not currently required to meet Clean Power Plan deadlines, some of which have passed.
Clean Water Act
The 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basis for the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge of pollutants from point sources to waters of the United States. The Clean Water Act requires virtually all discharges of pollutants to waters of the United States to be permitted. Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401 of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, and section 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.
316(b) Cooling Water Intake Structures
The EPA finalized regulations in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in effect whilewater use and corresponding perceived aquatic impacts. Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the EPA finalizes the appropriate and necessary finding to consider costs. In April 2016rule. After litigation, in May 2014 the EPA issued a cost analysis meantnew final 316(b) rule, followed by publication in the Federal Register in August 2014, with the final rule effective in October 2014. Entergy is developing a compliance plan for each affected facility in accordance with the requirements of the final rule.
Entergy filed a petition for review of the final rule as a co-petitioner with the Utility Water Act Group. The case will be heard in the U.S. Court of Appeals for the Second Circuit. Briefing is complete and Entergy expects oral argument to affirmbe scheduled in mid-2017.
Federal Jurisdiction of Waters of the United States
In September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federal Clean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the EPA’s release of a draft scientific report on the “connectivity” of waters that the agency said would inform the rulemaking. This report was finalized in January 2015. The Final Rule was published in the Federal Register in June 2015. The rule could significantly increase the number and types of waters included in the EPA’s and the U.S. Army Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’s operations. Entergy is actively engaged with the EPA and the U.S. Army Corps of Engineers to identify issues that require clarification in expected technical and policy guidance documents. The final rule has been challenged in federal court by several parties, including most states. In August 2015 the District Court for North Dakota issued a preliminary injunction staying the new rule in 13 states. In October 2015 the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the rule. The rule remains in placeEntergy will continue to monitor this rulemaking and effective and additional litigation is likely. Complianceensure compliance with MATS was required byexisting permitting processes. In response to the Clean Air Act within three years, or by 2015, although certain extensions of this deadline were available from state permit authoritiesstay, the EPA and the EPA. Entergy applied for and received a one-year extension for its affected facilities in Arkansas and Louisiana. The required controls have been installed and are operational at Entergy’s White Bluff and Independence units. At Entergy’s Nelson 6 unit, controls continue to be testedU.S. Army Corps resumed nationwide use of the agencies’ regulations as they existed prior to full scale operationAugust 27, 2015. In February 2017 the current administration issued an executive order instructing the EPA and the U.S. Army Corps of Engineers to review the Waters of the United States rule and to confirm regulatory compliance. Operations are being restrictedrevise or rescind, as necessary to maintain compliance throughout this process. Additional expenditures or operational restrictions could be required for compliance depending on the final outcome of testing.
Groundwater at Certain Nuclear Sites
As discussed in the Form 10-K, in February 2016, Entergy disclosed that elevated tritium levels had been detected in samples from several monitoring wells that are part of Indian Point’s groundwater monitoring program. Investigation of the source of elevated tritium has determined that the source is related to a temporary system to process water in preparation for the regularly scheduled refueling outage at Indian Point 2. The system was secured
and is no longer in use and additional measures have been taken to prevent reoccurrence should the system be needed again.appropriate.
Earnings Ratios (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
The Registrant Subsidiaries have calculated ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends/distributions pursuant to Item 503 of Regulation S-K of the SEC as follows:
| | | | | Ratios of Earnings to Fixed Charges | | Ratios of Earnings to Fixed Charges |
| | | Twelve Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | June 30, | | December 31, | | March 31, |
| | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 |
| Entergy Arkansas | | 4.31 | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 2.22 | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 3.32 |
| | 1.92 |
| Entergy Louisiana | | 2.90 | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.31 | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.57 |
| | 3.01 |
| Entergy Mississippi | | 3.55 | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.42 | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.96 |
| | 3.23 |
| Entergy New Orleans | | 4.72 | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.85 | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.61 |
| | 4.09 |
| Entergy Texas | | 2.34 | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.37 | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.92 |
| | 1.86 |
| System Energy | | 3.85 | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.34 | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.39 |
| | 5.11 |
| | | | | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends/Distributions | | Ratios of Earnings to Combined Fixed Charges and Preferred Dividends/Distributions |
| | | Twelve Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | June 30, | | December 31, | | March 31, |
| | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 |
| Entergy Arkansas | | 3.83 | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 2.02 | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 3.09 |
| | 1.88 |
| Entergy Louisiana | | 2.74 | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.27 | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.57 |
| | 3.01 |
| Entergy Mississippi | | 3.27 | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.18 | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.71 |
| | 3.14 |
| Entergy New Orleans | | 4.25 | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.49 | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.30 |
| | 3.83 |
The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.
Item 6. Exhibits
|
| | |
| 4(a) - | Thirty-second Supplemental Indenture, dated as of May 1, 2016, to Entergy Mississippi, Inc. Mortgage and Deed of Trust, dated as of February 1, 1988 (4.05 to Form 8-K filed May 13, 2016 in 1-31508). |
| | |
| 4(b) - | Officer’s Certificate No. 4-B-4, dated May 16, 2016, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015 (4.39 to Form 8-K filed May 19, 2016 in 1-32718). |
| | |
| 4(c) - | Fifth Supplemental Indenture, dated as of May 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015 (4.40 to Form 8-K filed May 19, 2016 in 1-32718). |
| | |
| 4(d) - | Eighty-fifth Supplemental Indenture, dated as of May 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of September 1, 1926 (4.42 to Form 8-K filed May 19, 2016 in 1-32718). |
| | |
| 4(e) - | Twentieth Supplemental Indenture, dated as of May 1, 2016, to Entergy New Orleans Mortgage and Deed of Trust, dated as of May 1, 1987 (4.02 to Form 8-K filed May 24, 2016 in 0-05807). |
| | |
| *4(f) - | Amendment to Amended and Restated Credit Agreement, dated as of June 30, 2016, among Entergy New Orleans, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, and Bank of America, N.A., as Administrative Agent. |
| | |
|
| | |
| | *12(a) - | Entergy Arkansas’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
| | | |
| | *12(b) - | Entergy Louisiana’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Distributions, as defined. |
| | | |
| | *12(c) - | Entergy Mississippi’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
| | | |
| | *12(d) - | Entergy New Orleans’s Computation of Ratios of Earnings to Fixed Charges and of Earnings to Combined Fixed Charges and Preferred Dividends, as defined. |
| | | |
| | *12(e) - | Entergy Texas’s Computation of Ratios of Earnings to Fixed Charges, as defined. |
| | | |
| | *12(f) - | System Energy’s Computation of Ratios of Earnings to Fixed Charges, as defined. |
| | | |
| | *31(a) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
| | | |
| | *31(b) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Corporation. |
| | | |
| | *31(c) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
| | | |
| | *31(d) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Arkansas. |
| | | |
| | *31(e) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
| | | |
| | *31(f) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Louisiana. |
| | | |
| | *31(g) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
| | | |
| | *31(h) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Mississippi. |
| | | |
| | *31(i) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
| | | |
| | *31(j) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
| | | |
| | *31(k) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
| | | |
| | *31(l) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
| | | |
| | *31(m) - | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
| | | |
| | *31(n) - | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
| | | |
| | *32(a) - | Section 1350 Certification for Entergy Corporation. |
| | | |
| | *32(b) - | Section 1350 Certification for Entergy Corporation. |
| | | |
| | *32(c) - | Section 1350 Certification for Entergy Arkansas. |
| | | |
| | *32(d) - | Section 1350 Certification for Entergy Arkansas. |
| | | |
| | *32(e) - | Section 1350 Certification for Entergy Louisiana. |
| | | |
| | *32(f) - | Section 1350 Certification for Entergy Louisiana. |
| | | |
| | *32(g) - | Section 1350 Certification for Entergy Mississippi. |
| | | |
| | *32(h) - | Section 1350 Certification for Entergy Mississippi. |
| | | |
| | *32(i) - | Section 1350 Certification for Entergy New Orleans. |
| | | |
| | *32(j) - | Section 1350 Certification for Entergy New Orleans. |
| | | |
| | *32(k) - | Section 1350 Certification for Entergy Texas. |
| | | |
| | *32(l) - | Section 1350 Certification for Entergy Texas. |
| | | |
|
| | |
| | *32(m) - | Section 1350 Certification for System Energy. |
|
| | |
| | | |
| | *32(n) - | Section 1350 Certification for System Energy. |
| | | |
| | *101 INS - | XBRL Instance Document. |
| | | |
| | *101 SCH - | XBRL Taxonomy Extension Schema Document. |
| | | |
| | *101 PRE - | XBRL Taxonomy Presentation Linkbase Document. |
| | | |
| | *101 LAB - | XBRL Taxonomy Label Linkbase Document. |
| | | |
| | *101 CAL - | XBRL Taxonomy Calculation Linkbase Document. |
| | | |
| | *101 DEF - | XBRL Definition Linkbase Document. |
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
|
|
ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY LOUISIANA, LLC ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. ENTERGY TEXAS, INC. SYSTEM ENERGY RESOURCES, INC. |
| |
| |
| /s/ Alyson M. Mount |
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer) |
Date: August 4, 2016May 5, 2017