UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| | For the Quarterly Period Ended September 30, 20162017 |
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| | For the transition period from ____________ to ____________ |
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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 |
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| 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 |
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| 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 |
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| 1-31508 | ENTERGY MISSISSIPPI, INC. (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 64-0205830 | | | |
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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 þ 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 wasregistrants were required to submit and post such files). Yes þ No o
Indicate by check mark whether theeach 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.
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| | 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 registrants have 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 þ
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| Common Stock Outstanding | | Outstanding at October 31, 20162017 |
| Entergy Corporation | ($0.01 par value) | 179,127,892180,251,407 |
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-K10‑K for the calendar year ended December 31, 20152016 and the Quarterly Reports foron Form 10-Q for the quarters ended March 31, 20162017 and June 30, 2016,2017, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2016TABLE OF CONTENTS
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Part 1.I. Financial Information |
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| Entergy Corporation and Subsidiaries | |
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| Notes to Financial Statements | |
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| Entergy Arkansas, Inc. and Subsidiaries | |
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| Entergy Louisiana, LLC and Subsidiaries | |
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Entergy Mississippi, Inc. | |
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Entergy New Orleans, Inc. and Subsidiaries | |
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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2016TABLE OF CONTENTS
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| Entergy Mississippi, Inc. | |
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| Entergy New Orleans, Inc. and Subsidiaries | |
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| Entergy Texas, Inc. and Subsidiaries | |
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| System Energy Resources, Inc. | |
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| Part II. Other Information |
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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;
long-term risks and uncertainties associated with the termination of the System Agreement pursuant to a settlement agreement approved by FERC in December 2015,2016, including the potential absence of federal authority to 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;
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;
FORWARD-LOOKING INFORMATION (Concluded)
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 2022, including the implementation of the planned shutdown of Pilgrim, Indian Point 2, Indian Point 3, and the planned shutdown or sale of FitzPatrick and the related decommissioning of those plants and Vermont Yankee;Palisades;
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: |
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| 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)
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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)
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| Abbreviation or Acronym | Term |
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| 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. The agreement terminated effective 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)
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| 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.
See Note 7 to the financial statements herein for financial information regarding Entergy’s business segments.
Results of Operations
Third Quarter 20162017 Compared to Third Quarter 20152016
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the third quarter 20162017 to the third quarter 20152016 showing how much the line item increased or (decreased) in comparison to the prior period:
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Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy |
| | | (In Thousands) | | (In Thousands) |
| 3rd Quarter 2015 Consolidated Net Income (Loss) | |
| $364,265 |
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| ($1,031,410 | ) | |
| ($51,088 | ) | |
| ($718,233 | ) | |
| 3rd Quarter 2016 Consolidated Net Income (Loss) | | |
| $447,782 |
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| $8,221 |
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| ($62,799 | ) | |
| $393,204 |
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| Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 108,816 |
| | (13,327 | ) | | (9 | ) | | 95,480 |
| | (47,749 | ) | | (4,637 | ) | | (4 | ) | | (52,390 | ) |
| Other operation and maintenance | | (40,808 | ) | | 18,877 |
| | 2,722 |
| | (19,209 | ) | | 6,617 |
| | (37,089 | ) | | 1,831 |
| | (28,641 | ) |
| Asset write-offs, impairments, and related charges | | — |
| | (1,623,363 | ) | | — |
| | (1,623,363 | ) | | — |
| | (2,620 | ) | | — |
| | (2,620 | ) |
| Taxes other than income taxes | | (9,982 | ) | | 1,003 |
| | (79 | ) | | (9,058 | ) | | 16,064 |
| | (5,694 | ) | | 28 |
| | 10,398 |
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| Depreciation and amortization | | 13,084 |
| | (7,300 | ) | | (226 | ) | | 5,558 |
| | 14,849 |
| | (751 | ) | | 242 |
| | 14,340 |
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| Other income | | 3,002 |
| | 714 |
| | (649 | ) | | 3,067 |
| | 19,674 |
| | 16,574 |
| | (1,624 | ) | | 34,624 |
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| Interest expense | | 4,645 |
| | (1,861 | ) | | 351 |
| | 3,135 |
| | (2,184 | ) | | (41 | ) | | 1,929 |
| | (296 | ) |
| Other expenses | | 4,704 |
| | (228 | ) | | — |
| | 4,476 |
| | 5,584 |
| | (8,860 | ) | | — |
| | (3,276 | ) |
| Income taxes | | 56,658 |
| | 560,628 |
| | 8,285 |
| | 625,571 |
| | (24,956 | ) | | 19,448 |
| | (10,603 | ) | | (16,111 | ) |
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| 3rd Quarter 2016 Consolidated Net Income (Loss) | |
| $447,782 |
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| $8,221 |
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| ($62,799 | ) | |
| $393,204 |
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| 3rd Quarter 2017 Consolidated Net Income (Loss) | | |
| $403,733 |
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| $55,765 |
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| ($57,854 | ) | |
| $401,644 |
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| (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.
Third quarter 2015 results of operations includes $1,642 million ($1,062 million after-tax) of impairment and related charges to write down the carrying values of the FitzPatrick and Pilgrim plants and related assets to their fair values. See Note 1 to the financial statements in the Form 10-K for further discussion of the charges.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the third quarter 2016 2017 to the third quarter 2015:2016:
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| | Amount |
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2015 net revenue |
| $1,750 |
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Retail electric price | 91 |
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Volume/weather | 28 |
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Other | (10 | ) |
| 2016 net revenue |
| $1,859 |
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| Volume/weather | (68 | ) |
| Retail electric price | 17 |
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| Other | 3 |
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| 2017 net revenue |
| $1,811 |
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The volume/weather variance is primarily due to the effect of less favorable weather, partially offset by an increase in industrial, residential, and commercial usage. The increase in industrial usage is primarily due to new customers in the primary metals industry, expansion projects in the chemicals industry, and an increase in demand for existing customers in the chemicals, petroleum refining, and industrial gases industries.
The retail electric price variance is primarily due to:
an increase in basethe implementation of formula rate plan rates at Entergy Arkansas, as approved by the APSC. The new rates wereAPSC, effective February 24, 2016 and began billing with the first billing cycle of April 2016. A significant portionJanuary 2017;
the implementation of the increase is related to the purchase of Power Block 2 of the Union Power Station;
transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT; and
the timing of recovery of purchased power capacity costs at Entergy Louisiana through the formula rate plan mechanism.
The retail electric price variance was partially offset by:
lower storm damage rider revenues at Entergy Mississippi due to resetting the storm damage provision to zero beginning with the November 2016 billing cycle. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle; and
a decrease in the purchased power and capacity acquisition cost recovery rider forat Entergy New Orleans primarily due to credits to customers as approved bypart of the City Council,Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station;
an increase in revenues at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016, and an increase in the storm damage rider; and
an increase in 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.June 2017.
See Note 2 to the financial statements herein and in the Form 10-K 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 in volume during the unbilled period, partially offset by a decrease of 223 GWh, or 1%, in billed electricity usage in the residential, commercial, and industrial sectors. The decrease in industrial usage is primarily due to a decrease in usage by existing customers across various industrial segments, partially offset by new customers and expansion projects, primarily in the chemicals industry.
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the third quarter 2016 to the third quarter 2015:
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| Amount |
| (In Millions) |
2015 net revenue |
| $409 |
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Nuclear realized price changes | (20 | ) |
Rhode Island State Energy Center | (15 | ) |
Nuclear fuel expenses | 17 |
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Other | 5 |
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2016 net revenue |
| $396 |
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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 third quarter 2017 to the third quarter 2016:
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| | | |
| Amount |
| (In Millions) |
| 2016 net revenue |
| $396 |
|
| FitzPatrick sale | (50 | ) |
| Nuclear fuel expenses | 40 |
|
| Other | 6 |
|
| 2017 net revenue |
| $392 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $13$4 million in the third quarter 20162017 as compared to the third quarter 20152016 primarily due to:
lower realized wholesale energy prices, althoughto the averageabsence of net revenue per MWh shown in the table below is slightly higher because it includes revenues from the FitzPatrick reimbursement agreement withplant after it was sold to Exelon the amortization of the Palisades below-market PPA, and Vermont Yankee capacity revenue. The effect of these items on the net revenue variance from third quarter 2015 to third quarter 2016 is minimal;
lower capacity prices; and
the sale of the Rhode Island State Energy Center in December 2015.
The decrease wasMarch 2017, partially offset by a decrease in nuclear fuel amortization expenses primarily related to the impairments of the FitzPatrick, Pilgrim,Indian Point 2, Indian Point 3, and Palisades plants and related assets in the third and fourth quarters of 2015.assets. See Note 113 to the financial statements herein for discussion of the sale of FitzPatrick. See Note 14 to the financial statements in the Form 10-K for discussion of the impairments.impairments and related charges.
Following are key performance measures for Entergy Wholesale Commodities for the third quarter 20162017 and 2015:2016:
|
| | | |
| | 2016 | | 2015 |
| Owned capacity (MW) (a) | 4,880 | | 5,463 |
| GWh billed | 9,372 | | 10,440 |
| Average revenue per MWh | $50.72 | | $49.97 |
| | | | |
| Entergy Wholesale Commodities Nuclear Fleet | | | |
| Capacity factor | 90% | | 92% |
| GWh billed | 8,674 | | 9,125 |
| Average revenue per MWh | $51.01 | | $50.41 |
| Refueling Outage Days: | | | |
| Palisades | — | | 13 |
|
| | | |
| | 2017 | | 2016 |
| Owned capacity (MW) (a) | 3,962 | | 4,880 |
| GWh billed | 8,234 | | 9,372 |
| | | | |
Entergy Wholesale Commodities Nuclear Fleet (b) | | | |
| Capacity factor | 98% | | 90% |
| GWh billed | 7,633 | | 8,674 |
| Average energy and capacity revenue per MWh | $48.82 | | $47.41 |
| |
| (a) | The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017 and Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick and Note 14 to the 583 MW Rhode Island State Energy Centerfinancial statements in December 2015.the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale. |
| |
| (b) | The Entergy Wholesale Commodities nuclear power plants had no refueling outage days in the third quarter 2017 and the third quarter 2016. |
Realized Revenue per MWh Trend and the Entergy Wholesale Commodities BusinessOther Income Statement Items
Utility
Other operation and maintenance expenses increased from $592 million for the third quarter 2016 to $599 million for the third quarter 2017 primarily due to:
the effects of recording in third quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of approximately $14 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Results of Operations - Realized Revenue per MWh for Entergy Wholesale Commodities Nuclear Plants”Note 8 to the financial statements in the Form 10-K for a discussion of the effectsspent nuclear fuel litigation; and
an increase of sustained low natural gas prices and power market structure challenges on market prices for electricity over$11 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position 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 innuclear fleet to meet its operational goals. See “Market and Credit Risk Sensitive Instruments” below, Entergy Wholesale Commodities has sold forward 90% of its planned nuclear energy output for the remainder of 2016 for an expected average contracted energy price of $40.50 per MWh based on market prices at September 30, 2016. In addition, Entergy Wholesale Commodities has sold forward 86% of its planned nuclear energy output for 2017 for an expected average contracted energy price of $43.80 per MWh based on market prices at September 30, 2016.MANAGEMENT’S
The market price trend presents a challenging economic environment 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, the current market design under which the plants operate does not adequately compensate merchant nuclear plants for their environmental and fuel diversity benefits in their regions. Entergy’s strategy in this environment is to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions that reduce the size of its merchant power plant fleet.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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. Entergy originally expected to shut down the FitzPatrick plant at the end of its current fuel cycle in January 2017, but in August 2016, Entergy entered into an agreement to sell the FitzPatrick plant to Exelon Generation Company, LLC. Until the conditions specified in the agreement are satisfied, and as long as the agreement is not terminated, Entergy is preparing for a potential refueling outage in January 2017 and is also continuing preparation for the plant shutdown and decommissioning in the event a sale does not occur. See further detail in “FINANCIAL DISCUSSION AND ANALYSIS –Sale of FitzPatrick” below. Entergy recorded impairment and other related charges in 2015 to write down the carrying values of the FitzPatrick and Pilgrim plants and related assets to their fair values.
Entergy previously shut down the Vermont Yankee nuclear plant in 2014 and, as discussed in Note 15 to the financial statements in the Form 10-K, sold the Rhode Island State Energy Center natural gas-fired plant in December 2015.
After the pending closure of Pilgrim and the pending closure or sale of FitzPatrick, Entergy will have two remaining nuclear power generating facilities in operation in the Entergy Wholesale Commodities business, Indian Point and Palisades. Unlike the three nuclear facilities that Entergy has decided to shut down, Indian Point is a multi-unit site, with both Indian Point 2 and 3 in operation. 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). Indian Point sells power at NYISO Zone G, which is a key supply region for New York City. While all Northeast pricing zones, including NYISO Zone G, have been adversely effected by lower market pricing trends, NYISO Zone G has historically traded at a premium to the NYISO zones where Fitzpatrick sells power. 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 PlantsMatters” in the Form 10-K with updates herein.for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals.
Palisades (811 MW) is similarThe increase was partially offset by a decrease of $13 million in sizefossil-fueled generation expenses primarily due 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 power purchaselower long-term service agreement entered into when the plant was acquired in 2007, that is currently scheduled to expire in 2022. The power purchase agreement prices currently exceed market prices and escalate each year, up to $61.50/MWh in 2022. As discussed in Note 1 to the financial statements in the Form 10-K, however, in the fourth quarter 2015 Entergy concluded that the carrying value of the Palisades plant was impaired and recorded impairment and other related charges to write down the carrying value of the Palisades plant and related assets to their fair value. The fair value of the Palisades plant would have been, and currently would be, significantly lower in the absence of the power purchase agreement that is scheduled to expire in 2022.
If economic conditions or regulatory activities no longer support Entergy’s continued operation of the Indian Point or Palisades plants 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. 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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement Items
Utility
Other operation and maintenance expenses decreased from $633 million for the third quarter 2015 to $592 million for the third quarter 2016 primarily due to:
a decrease of $15$5 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.storm damage provisions. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 62 to the financial statements herein and in the Form 10-K for furthera discussion on storm cost recovery.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes and local franchise taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of benefits costs;
ad valorem taxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher revenues in 2017 as compared to 2016.
Depreciation and amortization expenses increased primarily due to additions to plant in service and the effects of recording in the third quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded includeincluded the reimbursement of approximately $14$8 million of spent nuclear fuel storage costs previously recorded as other operation and maintenancedepreciation expense. See Note 1 to the financial statements herein for discussion of the DOE litigation;
a decrease of $11 million in distribution expenses primarily due to lower vegetation maintenance; and
a decrease of $6 million in energy efficiency costs, including the effects of true-ups.
The decrease was partially offset by a net increase of $10 million primarily due to the deferral of $13 million recorded in September 2015, as approved by the LPSC, as a result of spending in 2015 related to the Entergy Louisiana and Entergy Gulf States Louisiana business combination. 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.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Union Power Station purchased in March 2016.
Entergy Wholesale Commodities
Other operation and maintenance expenses increased from $217 million for the third quarter 2015 to $236 million for the third quarter 2016 primarily due to $22 million in severance and retention costs incurred in the third quarter 2016 related to the planned shutdown of the Pilgrim plant and the planned shutdown or sale of the FitzPatrick plant. See Note 18 to the financial statements in the Form 10-K for discussion of the decisions to cease operations of the plants and “Sale of FitzPatrick” below for an update on the status of the FitzPatrick plant.spent nuclear fuel litigation.
The asset write-offs, impairments, and related charges variance isOther income increased primarily due to $1,642 million ($1,062 million after-tax) of impairmentan increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, including the St. Charles Power Station project, and related chargeshigher realized gains in the third quarter 20152017 as compared to write down the carrying valuesthird quarter 2016 on the decommissioning trust fund investments.
Entergy Wholesale Commodities
Other operation and maintenance expenses decreased from $236 million for the third quarter 2016 to $199 million for the third quarter 2017 primarily due to the absence of other operation and maintenance expenses from the FitzPatrick and Pilgrim plants and related assetsplant after it was sold to their fair values.Exelon in March 2017. See Note 113 to the financial statements in the Form 10-Kherein for a discussion of the impairments and related charges.
Depreciation and amortization expenses decreased primarily due to 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 and a decrease in depreciable asset balances as a result of the sale of FitzPatrick.
Other income increased primarily due to higher realized gains in the Rhode Island State Energy Center in December 2015. See Note 1third quarter 2017 as compared to the financial statements in the Form 10-K for discussion of the impairments and related charges. The decrease was partially offset by the effects of recording the final court decision in third quarter 2015 in2016 on the Palisades lawsuit against the DOE related to spent nuclear fuel disposal. The damages awarded include the reimbursement of approximately $4 million of spent nuclear fuel storage costs previously recorded as depreciation.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
decommissioning trust fund investments.
Income Taxes
The effective income tax rate was 37.6% for the third quarter 2017. The difference in the effective income tax rate for the third quarter 2017 versus the federal statutory rate of 35% was primarily due to 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 39.6% for the third quarter 2016. The difference in the effective income tax rate for the third quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, a valuation allowance recorded on a deferred tax asset, and certain book and tax differences related to utility plant items, partially offset by flow-through tax accounting.
The effective income tax rate was 33.9% for the third quarter 2015. The difference in the effective income tax rate for the third quarter 2015 versus the federal statutory rate
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the nine months ended September 30, 20162017 to the nine months ended September 30, 20152016 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) | |
| $796,051 |
| |
| ($911,525 | ) | |
| ($146,109 | ) | |
| ($261,583 | ) | |
| 2016 Consolidated Net Income (Loss) | | |
| $1,027,751 |
| |
| $338,651 |
| |
| ($165,367 | ) | |
| $1,201,035 |
|
| | | | | | | | | | | | | | | | | |
| Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 109,954 |
| | (131,078 | ) | | (24 | ) | | (21,148 | ) | | 6,657 |
| | (19,524 | ) | | (17 | ) | | (12,884 | ) |
| Other operation and maintenance | | (111,992 | ) | | (21,433 | ) | | 7,407 |
| | (126,018 | ) | | 87,381 |
| | 78,114 |
| | 2,534 |
| | 168,029 |
|
| Asset write-offs, impairments, and related charges | | — |
| | (1,609,034 | ) | | — |
| | (1,609,034 | ) | | — |
| | 388,414 |
| | — |
| | 388,414 |
|
| Taxes other than income taxes | | (14,296 | ) | | (9,346 | ) | | (290 | ) | | (23,932 | ) | | 34,270 |
| | (13,702 | ) | | 419 |
| | 20,987 |
|
| Depreciation and amortization | | 34,907 |
| | (31,462 | ) | | (287 | ) | | 3,158 |
| | 40,131 |
| | 1,837 |
| | 25 |
| | 41,993 |
|
| Gain on sale of assets | | | — |
| | 16,270 |
| | — |
| | 16,270 |
|
| Other income | | 9,837 |
| | (18,040 | ) | | (2,560 | ) | | (10,763 | ) | | 45,956 |
| | 73,341 |
| | (971 | ) | | 118,326 |
|
| Interest expense | | 12,563 |
| | (1,044 | ) | | 6,209 |
| | 17,728 |
| | (15,417 | ) | | (81 | ) | | 5,474 |
| | (10,024 | ) |
| Other expenses | | 15,249 |
| | (37,971 | ) | | — |
| | (22,722 | ) | | 15,924 |
| | 32,794 |
| | — |
| | 48,718 |
|
| Income taxes | | (48,340 | ) | | 310,996 |
| | 3,635 |
| | 266,291 |
| | 100,337 |
| | (331,093 | ) | | (5,678 | ) | | (236,434 | ) |
| | | | | | | | | | | | | | | | | |
| 2016 Consolidated Net Income (Loss) | |
| $1,027,751 |
| |
| $338,651 |
| |
| ($165,367 | ) | |
| $1,201,035 |
| |
| 2017 Consolidated Net Income (Loss) | | |
| $817,738 |
| |
| $252,455 |
| |
| ($169,129 | ) | |
| $901,064 |
|
| |
| (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.
Results of operations for the nine months ended September 30, 2017 include $422 million ($274 million net-of-tax) of impairment charges due to costs being charged to expense as incurred 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 and a reduction of income tax expense, net of unrecognized tax benefits, of $373 million as a result of tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant. 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 and Note 10 to the financial statements herein for additional discussion of the tax elections.
Results of operations for the nine months ended September 30, 2016 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;purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant; 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 $70 million ($44 million net-of-tax) due to the effects of recording in 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 103 to the financial statements hereinin the Form 10-K for additional discussion of the income tax items and Note 18 to the financial statements hereinin the Form 10-K for discussion of the DOE litigation.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Results of operations for the nine months ended September 30, 2015 includes $1,642 million ($1,062 million after-tax) of impairment and related charges to write down the carrying values of the FitzPatrick and Pilgrim plants and related assets to their fair values. See Note 1 to the financial statements in the Form 10-K for further discussion of the charges.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the nine months ended September 30, 20162017 to the nine months ended September 30, 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $4,6484,758 |
|
| Retail electric price | 18462 |
|
Volume/weatherGrand Gulf recovery | (1138 | )
|
| Louisiana Act 55 financing savings obligation | 17 |
|
| Volume/weather | (1799 | ) |
| Other | (4611 | ) |
20162017 net revenue |
| $4,7584,765 |
|
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 cycleimplementation of April 2016. The increase includes an interim baseformula rate adjustment surcharge,plan rates effective with the first billing cycle of April 2016, to recoverJanuary 2017 at Entergy Arkansas, each as approved by the incremental revenue requirement for the period February 24, 2016 through March 31, 2016.APSC. A significant portion of the base rate increase iswas related to the purchase of Power Block 2 of the Union Power Station;Station in March 2016;
the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT;
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;
an increase in 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; and
an increase in revenuesrates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016; and
the timing of recovery of purchased power capacity costs at Entergy Louisiana through the formula rate plan mechanism.
The retail electric price variance is partially offset by a decrease in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of September 2016, and an increase into reflect the storm damage rider.effects of the termination of the System Agreement.
See Note 2 to the financial statements herein and in 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 volume/weatherGrand Gulf recovery variance is primarily due to increased recovery of higher operating costs.
The Louisiana Act 55 financing savings obligation variance results from a decreaseregulatory charge in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of 703 GWh, or 1%,the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in billed electricity usage, partially offset by an increase in volume during the unbilled period. Form 10-K for additional discussion of the settlement and benefit sharing.
The decrease in billed electricity usagevolume/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 growthnew customers in the primary metals and industrial gases industries, an increase in demand for newexisting customers in the chemicals industry, and expansion customers, primarilyprojects 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.
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 nine months ended September 30, 20162017 to the nine months ended September 30, 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $1,286 |
|
Nuclear realized price changes | (136 | ) |
Rhode Island State Energy Center | (41 | ) |
Nuclear volume | (25 | ) |
Nuclear fuel expenses | 67 |
|
Other | 4 |
|
| 2016 net revenue |
| $1,155 |
|
| FitzPatrick sale | (122 | ) |
| Nuclear volume | (76 | ) |
| Nuclear fuel expenses | 76 |
|
| FitzPatrick reimbursement agreement | 98 |
|
| Other | 5 |
|
| 2017 net revenue |
| $1,136 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $131$19 million in the nine months endedSeptember 30, 20162017 as compared to the nine months ended September 30, 20152016 primarily due to:
lower realized wholesale energy pricesto the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017 and lower capacity prices;
the sale of the Rhode Island State Energy Center in December 2015; and
lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more refueling outage days in 2016the nine months ended September 30, 2017 as compared to the same period in 2015, partially offset by fewer unplanned outage days in 2016 as comparednine months ended September 30, 2016. See Note 13 to the same period in 2015. See “Nuclear Matters - Indian Point 2 Outage” belowfinancial statements herein for discussion of the extended Indian Point 2 outage in the second quarter 2016.
sale of FitzPatrick. The decrease was partially offset by a decrease in nuclear fuel amortization expenses primarily related to the impairments of the FitzPatrick, Pilgrim,Indian Point 2, Indian Point 3, and Palisades plants and related assets and an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017. Revenues received from Exelon in 2017 under the thirdreimbursement agreement were offset in other operation and fourth quarters of 2015.maintenance expenses and taxes other than income taxes and had no effect on net income. See Note 114 to the financial statements in the Form 10-K for discussion of the impairments.impairments and related charges. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for further discussion of the reimbursement agreement.
Following are key performance measures for Entergy Wholesale Commodities for the nine months ended September 30, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| Owned capacity (MW) (a) | 4,880 | | 5,463 | 3,962 | | 4,880 |
| GWh billed | 26,484 | | 29,610 | 22,616 | | 26,484 |
| Average revenue per MWh | $50.65 | | $54.16 | |
| | | |
| Entergy Wholesale Commodities Nuclear Fleet | | |
| Capacity factor | 85% | | 90% | 79% | | 85% |
| GWh billed | 24,670 | | 26,298 | 20,861 | | 24,670 |
| Average revenue per MWh | $51.05 | | $53.96 | |
| Refueling Outage Days: | | |
| Average energy and capacity revenue per MWh | | $51.82 | | $48.99 |
| Refueling outage days: | | |
| FitzPatrick | | 42 | | — |
| Indian Point 2 | 102 | | — | — | | 102 |
| Indian Point 3 | — | | 23 | 66 | | — |
| Pilgrim | — | | 34 | 43 | | — |
| Palisades | — | | 13 | 27 | | — |
| |
| (a) | The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017 and Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick and Note 14 to the 583 MW Rhode Island State Energy Centerfinancial statements in December 2015.the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement Items
Utility
Other operation and maintenance expenses decreasedincreased from $1,800 million for the nine months ended September 30, 2015 to $1,688 million for the nine months ended September 30, 2016 to $1,776 million for the nine months ended September 30, 2017 primarily due to:
a decreasean increase of $46$27 million in compensation and benefits costsnuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals and additional training and initiatives to support management’s operational goals at Grand Gulf, partially offset by a decrease in net periodic pension and other postretirement benefitsregulatory compliance costs. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of an increase in the discount rate usedNRC’s March 2015 decision to valuemove ANO into the benefit liabilities and a refinement in“multiple/repetitive degraded cornerstone column” of the approach used to estimate the service cost and interest cost components of pension and other postretirement costs.NRC’s reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - –Critical Accounting Estimates - Qualified Pension and Other Postretirement BenefitsNuclear Matters” in the Form 10-K and Note 6 to the financial statements herein for further discussion of benefits costs;
a decrease of $30 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 the Union Power Station in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase;increased operating costs to position the nuclear fleet to meet its operational goals. See “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;
the deferral in the first quarter 2016 of $8$7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $10$9.9 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. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the rate case settlement;
the effects of recording in 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded includeincluded the reimbursement of approximately $16 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses.expense. See Note 18 to the financial statements hereinin the Form 10-K for discussion of the DOEspent nuclear fuel litigation;
an increase of $13 million in transmission and distribution expenses due to higher vegetation maintenance costs; and
an increase of $11 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in the first quarter 2016.
The increase was partially offset by a decrease of $10$11 million in energy efficiency costs, including the effects of true-ups; and
a decrease of $9 million in distributionfossil-fueled generation expenses primarily due to lower vegetation maintenance.long-term service agreement costs.
The decrease was partially offset by an increase of $29 million in nuclear generation expensesTaxes other than income taxes increased primarily due to an overallincreases in ad valorem taxes and local franchise taxes. Ad valorem taxes increased primarily due to higher scopeassessments, including the assessment of work done during plant outagesad valorem taxes on the Union Power Station beginning in 20162017. Local franchise taxes increased primarily due to higher revenues in 2017 as compared to prior year and higher nuclear labor costs, including contract labor.2016.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including 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 realized gains in 2017 as compared to the same period in 2016 on the decommissioning trust fund investments, including portfolio rebalancing in second quarter 2017, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, including the St. Charles Power Station project.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Other operation and maintenance expenses decreasedincreased from $642 million for the nine months ended September 30, 2015 to $621 million for the nine months ended September 30, 2016 to $698 million for the nine months ended September 30, 2017 primarily due to:
FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified as other operation and maintenance expenses as a result of the effectssale and reimbursement agreements Entergy entered into with Exelon. These costs would have not been incurred absent the sale agreement with Exelon because Entergy planned to shut the plant down in January 2017. The expenses were offset by revenue realized pursuant to the reimbursement agreement and had no effect on net income. 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;
the effect of recording thein 2016 final court decisions in several lawsuitslitigation against the DOE related to spent nuclear fuel storage costs. The damages awarded includefor the reimbursement of approximately $42 million of spent nuclear fuel storage costs, previously recorded aswhich reduced other operation and maintenance expenses.expenses in 2016 by $42 million. See Note 18 to the financial statements in the Form 10-K for discussion of the DOE litigation; and
an increase of $36 million in severance and retention costs in 2017 as compared to the same period in 2016 due to 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.
The increase was partially offset by a decrease due to the absence of other operation and maintenance expenses from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the DOE litigation;sale of FitzPatrick.
a decrease
The asset write-offs, impairments, and related charges variance is primarily due to $422 million ($274 million net-of-tax) of $16 millionimpairment charges in the nine months ended September 30, 2017 due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged to expense as incurred as a result of the saleimpaired value of the Rhode Island State Energy CenterEntergy 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. The increase in December 2015; and
a decrease of $9 millionimpairment charges in compensation and benefits costs2017 is primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increasemanagement’s decisions in the discount rate used to valuefourth quarter 2016 and the benefit liabilitiesresulting impairments of the Indian Point 2, Indian Point 3, and a refinement inPalisades plants and the approach used to estimatetiming of nuclear fuel spending and nuclear refueling outage spending for the service cost and interest cost components of pension and other postretirement costs.impaired Pilgrim plant. 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.
Taxes other than income taxes decreased primarily due to the absence of ad valorem taxes and employment taxes from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick.
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 of FitzPatrick.
Other income increased primarily due to higher realized gains in 2017 as compared to the same period in 2016 on the decommissioning trust fund investments, including the result of portfolio rebalancing in second quarter 2017, and 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 in the Form 10-K for discussion of the trust transfer agreement with NYPA.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
ANALYSIS - Critical Accounting Estimates - Qualified PensionOther 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 decommissioning trusts and Other Postretirement Benefits”decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point 2 and Palisades plants as a result of revised decommissioning cost studies 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 $44 million in severance and retention costs in 2016 related to the planned shutdown of the Pilgrim plant and the planned shutdown or sale of the FitzPatrick plant.fourth quarter 2016. See Note 19 to the financial statements in the Form 10-K for discussion of the decisionstrust transfer agreement with NYPA and the revised decommissioning cost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to cease operationsthe impairments of the plantsIndian Point 2, Indian Point 3, and “Sale of FitzPatrick” below for an update on the status of the FitzPatrick plant.
The asset write-offs, impairments, and related charges variance is primarily due to $1,642 million ($1,062 million after-tax) in 2015 of impairment and related charges to write down the carrying values of the FitzPatrick and PilgrimPalisades plants and related assets to their fair values.assets. See Note 114 to the financial statements in the Form 10-K for discussion of the impairments and related charges.
Depreciation and amortization expenses decreasedIncome Taxes
The effective income tax rate was (10.8%) for the nine months ended September 30, 2017. The difference in the effective income tax rate for the nine months ended September 30, 2017 versus the federal statutory rate of 35% was primarily due to:
decreasesto tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant, which resulted in depreciable asset balancesboth permanent and temporary differences under the income tax accounting standards, and the re-determined tax basis of the FitzPatrick plant as a result of the impairments of the FitzPatrick, Pilgrim, and Palisades plants in the third and fourth quarters of 2015;
the effects of recording the final court decisions in second quarter 2016 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.its sale on March 31, 2017, partially offset by state income taxes. See Note 110 to the financial statements herein for further discussion of the DOE litigation;tax elections and
a decrease in depreciable asset balances as a result of the tax benefit associated with the sale of the Rhode Island State Energy Center in December 2015.
The decrease was partially offset by the effects of recording the final court decision in third quarter 2015 in the Palisades lawsuit against the DOE related to spent nuclear fuel disposal. The damages awarded include the reimbursement of approximately $4 million of spent nuclear fuel storage costs previously recorded as depreciation.
Other income decreased primarily due to lower realized gains on 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 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, partially offset by an increase in decommissioning expense as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016 to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. See Note 1 to the financial statements in the Form 10-K for discussion of the impairments and “Critical Accounting Estimates - Nuclear Decommissioning Costs” below for further discussion of nuclear decommissioning costs.
Income TaxesFitzPatrick.
The effective income tax rate was 11% for the nine months ended September 30, 2016. The difference in the effective income tax rate for the nine months ended September 30, 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 a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant, which 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, partially offset by state income taxes. See Note 103 to the financial statements hereinin the Form 10-K for additional discussion of the tax election and the tax settlements.
ANO Damage, Outage, and NRC Reviews
See “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, subsequent NRC reviews, and the deferral of replacement power costs.
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.
Sale of FitzPatrick
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 effectivetransaction 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 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, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax rate was 31% for the nine months ended September 30, 2015. The differencebenefit in the effective income tax rate for the nine months ended September 30, 2015 versus the federal statutory rate of 35% wasfirst quarter 2017.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
primarily duePlanned Shutdown of Palisades
As discussed in the Form 10-K, most of the Palisades plant output is sold under a power purchase agreement (PPA) with Consumers Energy, entered into when the plant was acquired in 2007, that is scheduled to state income taxesexpire in April 2022. The PPA prices currently exceed market prices and certain book and tax differences relatedescalate each year, up to utility plant items, partially offset$61.50/MWh in 2022. In December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the reversalMichigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of a portion2017 and operating through the end of that fuel cycle.
In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendment transaction, but only granting Consumers Energy recovery of $136.6 million of the provision$172 million requested early termination payment. As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades nuclear power plant permanently in the spring of 2022. As a result of the change in expected operating life of the plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceed the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, and expenditures for uncertain tax positions resulting from the receipt of finalized taxcapital assets incurred at Palisades after September 30, 2017 will no longer be charged to expense as incurred, but will be recorded as assets and interest computations for the 2006-2007 audit from the IRS and book and tax differences related to the allowance for equity funds used during construction.depreciated or amortized. See Note 313 to the financial statements in the Form 10-Kherein for a discussion of the finalized taxupdated calculation of the liability amortization associated with the PPA and interest computationssee Note 14 to the financial statements herein for discussion of the associated asset retirement obligation revision.
Costs Associated with Entergy Wholesale Commodities Strategic Transactions
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 $89 million had been incurred as of September 30, 2017, and approximately $400 million from 2018 through the spring of 2022. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $16 million for the 2006-2007 IRS audit.three months ended September 30, 2017 and $422 million for the nine months ended September 30, 2017. These costs were charged to expense as incurred 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 incur costs associated with nuclear fuel-related spending and expenditures for capital assets and, except for Palisades, expects to continue to charge these costs to expense as incurred because Entergy expects the value of the plants to continue to be impaired.
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 updates 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 bolts and (b) findings of fact and 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 Department of Environmental Conservation’s objectionand Riverkeeper to Entergy’s withdrawn Coastal Zone Management Act consistency certificationwithdraw their pending contentions on federal preemption grounds. Entergy’s complaint requests a determination that 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 to 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Arkansas incurred incremental expenses of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediationlicense renewal application and response costs that may result fromterminated the additional NRC inspection activities, Entergy Arkansas expectsproceedings. Subsequent to incur incremental expenses of approximately $50 million in 2016, of which $37 million was incurred through September 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.
Sale of FitzPatrick
In August 2016, Entergy entered into an asset purchase agreement to sell its 838 MW FitzPatrick plant and transfer certain liabilities to Exelon Generation Company, LLC. The purchase price is $100 million, with an additional $10 million non-refundable signing fee that was paid upon the signingissuance of the agreement. The transaction is contingent upon, among other things, the expiration of the applicable waiting period under the Hart Scott-Rodino Antitrust Improvements Act of 1976, as amended, the receipt of necessary regulatory approvals from the FERC, the NRC,water quality certification and the Public Service Commission of the State of New York (NYPSC), and the receipt of a private letter ruling from the IRS. Early termination of the waiting period under the Hart Scott-Rodino Antitrust Improvements Act of 1976, as amended, was received in September 2016. The asset purchase agreement will automatically terminate on November 23, 2016 if certain conditions are not satisfied or waived. The conditions include the continued effectiveness of the Clean Energy Standards/Zero Emissions Credit program (CES/ZEC), the establishment on acceptable terms of certain long-term agreements with the Energy Research and Development Authority of the State of New York in connection with the CES/ZEC program, and NYPSC approval of the transaction on acceptable terms. Until the specified conditions are satisfied, and as long as the asset purchase agreement is not terminated, Entergy will prepare for a potential refueling outagewater discharge permit in January 2017 by the New York State Department of Environmental Conservation (NYSDEC), in April 2017 the NYSDEC updated its environmental analysis to reflect the early shutdown per the settlement agreement. Both the water quality certification and continue preparations for the plant shutdown and decommissioning in the event a sale does not occur. Entergy has also entered into a reimbursement agreement with Exelon pursuant to which Exelon will reimburse Entergy for specified out-of-pocket costs associatedCZMA concurrence were filed with the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrickNRC in JanuaryApril 2017.
In addition, Entergy entered intoMay 2017 a transfer agreement whereby Exelon will be entitled to all revenues from FitzPatrick’s electricity and capacity sales for the period commencing upon completion of the upcoming refueling outage through the asset purchase agreement closing date, or if the asset purchase agreement is terminated, the duration of the fuel cycle or until FitzPatrick is shut down. If the asset purchase agreement is terminated, a termination fee of up to $35 million will be payable to Entergy under certain circumstances. In October 2016 a group of generators and trade associationsplaintiff filed a complaint in the United States District Court for the Southern District oftwo parallel state court appeals challenging New York challengingState’s actions in signing and implementing the NYPSC’s August 1, 2016 Clean Energy Standard/Zero Emissions Credit order as federally preempted. IfIndian Point settlement with Entergy on the sale is consummated,basis that the State failed to perform sufficient environmental analysis of its actions. All signatories to the settlement agreement, including the Entergy does not expect the transaction to result in a material gain or loss on sale.affiliates that hold NRC licenses for Indian Point, were named.
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.
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Debt to capital | 59.4 | % | | 59.1 | % | 64.6 | % | | 64.8 | % |
| Effect of excluding securitization bonds | (1.1 | %) | | (1.4 | %) | (0.8 | %) | | (1.0 | %) |
| Debt to capital, excluding securitization bonds (a) | 58.3 | % | | 57.7 | % | 63.8 | % | | 63.8 | % |
| Effect of subtracting cash | (2.4 | %) | | (2.7 | %) | (0.9 | %) | | (2.0 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 55.9 | % | | 55.0 | % | 62.9 | % | | 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 2021. Entergy Corporation also has2022. The facility permits the ability to issueissuance of letters of credit against 50% of the total borrowing capacity of the credit facility. The commitment fee is currently 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 nine months ended September 30, 20162017 was 2.24%2.50% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of September 30, 2016:2017:
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $180 | | $6 | | $3,314 | | $150 | | $6 | | $3,344 |
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 has 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 September 30, 2016, $41.52017, $80 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the nine months ended September 30, 2017 was 2.56% on the drawn portion of the facility. Entergy Nuclear Vermont Yankee also has an uncommitted credit facility guaranteed by Entergy Corporation
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
with a borrowing capacity of $85 million, which expires in January 2018. As of September 30, 2016,2017, 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 September 30, 2016,2017, Entergy Corporation had $264 million$1.3 billion of commercial paper outstanding. The weighted-average interest rate for the nine months ended September 30, 20162017 was 1.14%1.45%.
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.
Preliminary Capital Investment Plan Estimate for 2017-20192018-2020
Entergy is developing its capital investment plan for 20172018 through 20192020 and currently anticipates that the Utility will make approximately $10.3$10.7 billion in capital investments during that period and that Entergy Wholesale Commodities will make approximately $0.6$0.4 billion in capital investments, not including nuclear fuel, during that period. The preliminary Utility estimate includes amounts associated with specific investments such as the St.Lake Charles Power Station, the New Orleans Power Station, and the Montgomery County Power Station, each discussed below, and the self-build option at Entergy Louisiana’s Nelson site selected in the request for proposal for Developmental and Existing Capacity and Energy Resources;St. Charles Power Station; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintainenhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; investments in the nuclear fleet operational excellence initiative, as discussed below in “Nuclear Matters”;fleet; and other investments. The preliminary Entergy Wholesale Commodities estimate includes amounts associated with specific investments, such as dry cask storage,the investments in the nuclear fleet, operational excellence initiative, nuclear license renewal, component replacement, software and identified repairs.security, and dry cask storage. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.
St. Charles Power Station
In August 2015, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by the construction of the St. Charles Power Station, a nominal 980 megawatt combined-cycle generating unit, on land adjacent to the existing Little Gypsy plant in St. Charles Parish, Louisiana. It is currently estimated to cost $869 million to construct, including transmission interconnection and other related costs. Testimony was filed by LPSC staff and intervenors, with LPSC staff concluding that the construction of the project serves the public convenience and necessity. Three intervenors contend that Entergy Louisiana has not established that construction of the project is in the public interest, claiming that the request for proposal excluded consideration of certain resources that could be more cost effective, that the request for proposal provided undue preference to the self-build option, and that a 30-year capacity commitment is not warranted by current supply conditions. The request for proposal independent monitor also filed testimony and a report affirming that the St. Charles Power Station was selected through an objective and fair request for proposal that showed no undue preference to any proposal. 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. While awaiting a decision by the LPSC, Entergy Louisiana has taken necessary and appropriate steps to progress the project in order to maintain an ability to achieve commercial operation in mid-2019. Project expenditures have included site clearing and preparation and pre-construction design and procurement activities, primarily focused on procuring long lead time items in order
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
to preserve the project schedule. IfLake Charles Power Station
In November 2016, Entergy Louisiana filed an application with the LPSC was to reject the ALJ recommendationseeking certification that the project servespublic convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 MW combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017 the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in the public interest Entergy Louisiana would suspend project activities as necessary and appropriateauthorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation. Subject to evaluate options regarding the projecttimely receipt of other permits and the recovery of costs for work performedapprovals, commercial operation is estimated to date.occur by mid-2020.
New Orleans Power Station
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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 deactivatedretired effective May 31, 2016. The current estimated costIn January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The application included an updated cost estimate of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unit is $216$210 million. AIn addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans. In August 2017 the City Council established a procedural schedule has been establishedthat provided for a hearing in December 2017 with a City Council decision expected no later than April 2017. Subject to timely approvalin February 2018. In October 2017 several intervenors filed testimony opposing the New Orleans Power Station or, in one case, supporting a slightly smaller configuration of Entergy New Orleans’s alternative proposal. The commercial operation date is dependent on the alternative selected by the City Council and the receipt of other permits and approvals, commercial operation is estimated to occur by late-2019.approvals.
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 megawattMW 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 process that showed no undue preference to any proposal. A PUCT decision regardingIn June 2017, parties to the applicationproceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is expected by Octobercapped at $831 million, subject to certain exclusions such as force majeure events. The costs of the transmission interconnection and network upgrades and other related costs included in the total current estimated cost of the Montgomery County Power Station are not subject to the $831 million cap. Also in June 2017, pursuantthe ALJ issued a proposed order and remanded the proceeding to a Texas statute requiring the PUCT to issue a certificate of convenience and necessity within 366 days offor final decision. In July 2017 the filing.PUCT approved the stipulation. Subject to timely approval by the PUCT andtimely receipt of other permits and approvals, commercial operation is 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 Bogalusa, Louisiana and, subject to permits and approvals, is expected to be
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
completed in 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with a hearing in April 2018.
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 October 20162017 meeting, the Board declared a dividend of $0.87$0.89 per share, an increase from the previous $0.85$0.87 quarterly dividend per share that Entergy has paid since the fourth quarter 2015.2016.
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the nine months ended September 30, 20162017 and 20152016 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 | 2,252 |
| | 2,350 |
| 1,713 |
| | 2,252 |
|
| Investing activities | (2,983 | ) | | (2,186 | ) | (2,828 | ) | | (2,983 | ) |
| Financing activities | 687 |
| | (545 | ) | 473 |
| | 687 |
|
| Net decrease in cash and cash equivalents | (44 | ) | | (381 | ) | (642 | ) | | (44 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $1,307 |
| |
| $1,041 |
|
| $546 |
| |
| $1,307 |
|
Operating Activities
Net cash flow provided by operating activities decreased by $539 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to:
an increase of $182 million in spending on nuclear refueling outages in 2017 as compared to the same period in 2016;
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;
an increase of $95 million in severance and retention payments in 2017 as compared to the same period in 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” above and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet;
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 herein and in the Form 10-K for discussion of the settlement and refund;
proceeds of $23 million received in 2017 compared to proceeds of $64 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation; and
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities decreased $98 million for the nine months ended September 30, 2016 compareda decrease due to the nine months ended September 30, 2015 primarily due to:
lower Entergy Wholesale Commodities net revenue in 2016 as compared to the same period in 2015, as discussed previously;
an increasetiming of $61 million in interest paid in 2016 as compared to the same period in 2015 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 net debt issuances by various Utility operating companies, partially offset by a decrease in interest paid in 2016 on the Grand Gulf sale-leaseback obligation. See Note 11 to the financial statements herein for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets, see Note 4 to the financial statements herein for a discussion of debt issuances, and see Note 10 to the financial statements in the Form 10-K for details of the Grand Gulf sale-leaseback obligation; and
a decrease in the recovery of fuel and purchased power costs in 20162017 as compared to the same period in 2015.2016. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery.
The decrease was partially offset by:
a decreaseincome tax refunds of $68$12 million in pension contributions in 2016. 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;
proceeds of $64 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein for discussion of the DOE litigation;
a decrease of $26 million in spending related to the shutdown of Vermont Yankee, which ceased power production in December 2014;
a decrease of $24 million in spending on nuclear refueling outages in 2016 as2017 compared to the same period in 2015; and
a decrease of $16 million in income tax payments. Entergy made income tax payments of $80 million in 2016 primarily due to state2016. Entergy received income taxestax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related to the correlative effect of the 2006-2007 IRS audit and for jurisdictions that do not have net operating loss carryovers or jurisdictions in which the utilization of net operating loss carryovers are limited. Entergy made income tax payments of $96 million in 2015 primarily as a result of the final settlement of amounts outstanding associated with the 2006-2007 IRS audit. See Note 3 to the financial statements in the Form 10-K for a discussion of the income tax audits.audit; and
a decrease of $76 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. See Note 10 to the financial statements in the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets.
Investing Activities
Net cash flow used in investing activities increased $797decreased $155 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
to the purchase of the Union Power Station for approximately $949 million in March 2016.2016 and proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase and Note 13 to the financial statements herein for a discussion of the Union Power Station purchase; andsale of FitzPatrick.
The decrease was partially offset by:
an increase of $619 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 performed on transmission projects in 2016 as compared to the same period in 2015, an increase$363 million in fossil-fueled generation construction expenditures primarily due to higher spending in 2017 on the St. Charles Power Station project and the Lake Charles Power Station project and a higher scope of work performed on various other fossil projects in 2017, an increase of $107 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017, an increase of $87 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 2015,2016, an increase of $44 million in transmission construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016, and an increase of $42 million in information technology construction expenditures primarily due to various information technology projectsincreased spending on advanced metering infrastructure;
$113 million in funds held on deposit for principal and upgradesinterest payments due October 1, 2017;
proceeds of $25 million received in 2016, partially offset by a decrease in spending related2017 compared to compliance with NRC post-Fukushima requirements.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The increase was partially offset by:
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;
proceeds of $122 million received in 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. Seeand Note 158 to the financial statements in the Form 10-K for further discussion of Entergy’s NYPA value sharing agreements;the DOE litigation; and
fluctuations in nuclear fuel activity because of variations from year to year in the deposittiming and pricing of $64 million into fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.
Entergy New Orleans’s storm reserve escrow accounts in 2015.Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Entergy’sNet cash flow provided by financing activities provided $687decreased $214 million of cash for the nine months ended September 30, 20162017 compared to using $545 million of cash for the nine months ended September 30, 20152016 primarily due to:
long-term debt activity using approximately $309 thousand of cash in 2017 compared to providing approximately $1,279 million of cash in 2016 compared to using approximately $89 million of cash in 2015.2016. Included in the long-term debt activity is $550 million in 2017 and $655 million in 2016 and $170 million in 2015 for the repayment of borrowings on the Entergy Corporation long-term credit facility;
$100 million of common stock repurchased in 2015; and
a net increasedecrease of $93$87 million in 20162017 in short-term borrowings by the nuclear fuel company variable interest entities;entities.
The decrease was partially offset by:
Entergy’s net issuances of $928 million of commercial paper in 2017 compared to net repayments of $158 million of commercial paper in 2016 compared to net issuances2016; and
the redemptions of $180 million of commercial paper in 2015; and
a decrease of $9 million in the repurchase or redemption of preferred stock. In September 2015, Entergy Louisiana redeemed its $100 million 6.95% Series preferred membership interests, of which $16 million was owned by Entergy Louisiana Holdings, an Entergy subsidiary, and Entergy Gulf States Louisiana repurchased its $10 million Series A 8.25% preferred membership interests as part of a multi-step process to effectuate the 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. In September 2016, Entergy Arkansas redeemed itsArkansas’s $75 million of 6.45% Series preferred stock and it’s $10 million of 6.08% Series preferred stock.
stock in 2016.
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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 September 2016 the FERC denied Occidental’s request for rehearing. 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 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.
As discussed in the Form 10-K, in April 2014, Occidental filed a complaint in federal district court for the Middle District of Louisiana against the LPSC and Entergy Louisiana that challenged the January 2014 order issued by the LPSC on grounds similar to those raised in the 2013 complaint and 2014 petition for enforcement that Occidental previously filed at the FERC. The district court complaint also sought damages from Entergy Louisiana and a declaration from the district court that in pursuing the January 2014 order Entergy Louisiana breached an existing agreement with Occidental and an implied covenant of good faith and fair dealing. In October 2016, Occidental voluntarily released its claims against the LPSC and Entergy Louisiana and the parties filed a joint motion to dismiss, which the district court signed and entered.
As discussed in the Form 10-K, in February 2013, Entergy Services, on behalf of the Utility operating companies, made a filing with the FERC requesting to adopt the standard Attachment O formula rate template used by transmission owners to establish transmission rates within MISO. In July 2015, as amended in August and October 2015, Entergy Services, on behalf of the Utility operating companies, filed a settlement at the FERC resolving all issues relating to the Utility operating companies’ Attachment O transmission rates in MISO except for challenges to MISO’s regional through and out rates. In October 2015 the presiding judge certified the settlement as contested to the FERC due to comments opposing the settlement filed by the same parties that have raised issues related to MISO’s through and out rates. In September 2016 the FERC issued an order approving the settlement.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In May 2015 several parties filed a complaint against MISO related to certain charges for transmission service provided by MISO to them when their point-to-point service under the Entergy open access transmission tariff was transitioned to the MISO tariff in December 2013. The complainants request that the FERC order refunds for alleged overcharges since December 2013, or alternatively that the FERC institute a proceeding under Section 206 of the Federal Power Act to address the legality of transmission applicable rates and establish a different fifteen-month refund period from the period established in the FERC’s February 2014 order. In June 2015, another party filed a similar complaint against MISO. MISO filed answers to both complaints asking the FERC to dismiss the complaints, and Entergy filed protests in support of MISO’s answers. Also in June 2015 the FERC issued an order denying rehearing of certain determinations in the February 2014 order regarding MISO’s regional through and out rates. In October 2015 the FERC issued an order denying the complaints filed in May and June 2015, finding that MISO did not violate its tariff and the justness and reasonableness of the rates referenced in the complaints are already being addressed in the proceeding initiated in February 2014, thus rendering the complaints duplicative. In February 2016 a settlement was filed at the FERC to resolve the point-to-point customer concerns, and the FERC approved the settlement in August 2016.
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. In August 2016 the FERC issued an order accepting Entergy’s compliance filing. Also in August 2016 the APSC filed a petition for review of the FERC’s March 2016 and August 2016 orders with the U.S. Court of Appeals for the D.C. Circuit.
Termination of System Agreement
As discussed in the Form 10-K, in December 2014 the FERC issued an order setting the proposed amendment changing the notice period from 96 months to 60 months for settlement judge and hearing procedures. In August 2015, Entergy Services filed a settlement in the FERC dockets addressing the notice period for exiting the System Agreement, including the pending notices of withdrawal filed by Entergy Louisiana and Entergy Texas. The settlement was expressly conditioned on obtaining the necessary FERC and state and local regulatory approvals. By November 2015, all necessary state and local regulatory approvals had been obtained, and in December 2015 the FERC issued an order approving the settlement.
Under the settlement, the System Agreement terminated at the end of August 2016 as to all parties remaining as of that date. The purchase power agreements, referred to as the jurisdictional separation plan PPAs, between Entergy Texas and Entergy Louisiana, as successor to Entergy Gulf States Louisiana, that were put in place for certain legacy gas units at the time of Entergy Gulf States’s separation into Entergy Texas and Entergy Gulf States Louisiana terminated, effective with System Agreement termination. Similarly, the PPA between Entergy Louisiana, as successor to Entergy Gulf States Louisiana, and Entergy Texas for the Calcasieu unit also terminated.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Consistent with the settlement, Entergy New Orleans was established as a separate transmission pricing zone in MISO effective with System Agreement termination, and Entergy New Orleans began making payments to Entergy Louisiana in the amount of $2.2 million annually for a period of 15 years.
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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 September 30, 2016 (20162017 (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 | | 2022 |
| Energy | | |
| Percent of planned generation under contract (a): | | |
| Unit-contingent (b) | | 66% | | 86% | | 40% | | 27% | | 88% | | 98% | | 70% | | 38% | | 70% | | 67% |
| Firm LD (c) | | 44% | | 10% | | —% | | —% | | 9% | | 8% | | —% | | —% | | —% | | —% |
| Offsetting positions (d) | | (20%) | | (10%) | | —% | | —% | | (9%) | | (9%) | | —% | | —% | | —% | | —% |
| Total | | 90% | | 86% | | 40% | | 27% | | 88% | | 97% | | 70% | | 38% | | 70% | | 67% |
| Planned generation (TWh) (e) (f) | | 8.8 | | 27.1 | | 27.7 | | 24.9 | | 7.6 | | 28.0 | | 25.5 | | 17.9 | | 9.7 | | 2.8 |
| Average revenue per MWh on contracted volumes: | | |
| Minimum | | $40.4 | | $43.4 | | $46.8 | | $56.9 | | $39.8 | | $38.9 | | $43.3 | | $55.3 | | $59.8 | | $58.8 |
| Expected based on market prices as of September 30, 2016 | | $40.5 | | $43.8 | | $46.8 | | $56.9 | |
| Expected based on market prices as of September 30, 2017 | | | $39.8 | | $38.9 | | $43.3 | | $55.3 | | $59.8 | | $58.8 |
| Sensitivity: -/+ $10 per MWh market price change | | $40.4-$41.9 | | $43.6-$44.1 | | $46.8 | | $56.9 | | $39.8-$39.9 | | $38.9 | | $43.3 | | $55.3 | | $59.8 | | $58.8 |
| | | |
| Capacity | | |
| Percent of capacity sold forward (g): | | |
| Bundled capacity and energy contracts (h) | | 18% | | 22% | | 22% | | 25% | | 23% | | 22% | | 25% | | 36% | | 69% | | 99% |
| Capacity contracts (i) | | 33% | | 19% | | 20% | | 9% | | 38% | | 21% | | 10% | | —% | | —% | | —% |
| Total | | 51% | | 41% | | 42% | | 34% | | 61% | | 43% | | 35% | | 36% | | 69% | | 99% |
| Planned net MW in operation (average) (f) | | 4,406 | | 3,568 | | 3,568 | | 3,167 | | 3,568 | | 3,568 | | 3,167 | | 2,195 | | 1,158 | | 338 |
| Average revenue under contract per kW per month (applies to capacity contracts only) | | $6.0 | | $5.6 | | $9.4 | | $11.1 | | $8.3 | | $9.1 | | $10.5 | | $— | | $— | | $— |
| | | |
| Total Nuclear Energy and Capacity Revenues (j) | | |
| Expected sold and market total revenue per MWh | | $43.7 | | $51.0 | | $48.8 | | $49.8 | | $44.5 | | $46.7 | | $46.8 | | $49.1 | | $56.3 | | $47.7 |
| Sensitivity: -/+ $10 per MWh market price change | | $42.5-$46.0 | | $49.7-$52.4 | | $43.0-$54.5 | | $42.5-$57.1 | | $43.3-$45.7 | | $46.6-$46.7 | | $43.8-$49.8 | | $43.3-$55.0 | | $53.3-$59.3 | | $44.3-$51.0 |
| |
| (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. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
| |
| (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. |
| |
| (f) | Assumes NRC license renewals for plants with NRC license renewal applications in process. Assumes the sale of FitzPatrick to Exelon in the second quarter 2017, planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, planned shutdown of Indian Point 3 on April 30, 2021, and uninterrupted normal operation at remaining plants.planned shutdown of Palisades in the spring of 2022, 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 sale of the FitzPatrick plant, see “Sale of FitzPatrick” above. For a discussion regarding the planned shutdown of the Pilgrim, plant,Indian Point 2, Indian Point 3, and Palisades plants, see “Results of Operations - Realized Revenue per MWh and Its Effect on the Entergy Wholesale Commodities Exit from the Merchant Power Business” above.above and 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 September 30, 20162017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $20$9 million for the remainder of 2016.2017. As of September 30, 2015,2016, a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $19$20 million for the remainder of 2015.2016. A negative $10 per MWh change in the annual average energy price in the markets based on September 30, 20162017 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($10)9) million for the remainder of 2016.2017. As of September 30, 2015,2016, a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($16)10) 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 September 30, 2016,2017, based on power prices at that time, Entergy had liquidity exposure of $125$105 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $10$9 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 September 30, 2016,2017, Entergy would have been required to provide approximately $50 million of additional cash or letters of credit under some of the agreements. As of September 30, 2016,2017, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $156$295 million for a $1 per MMBtu increase in gas prices in both the short-and long-term markets.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As of September 30, 2016,2017, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 20192022 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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 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,” or 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.
In 2016, Entergy conducted a comprehensive evaluation of the Entergy nuclear fleet and determined that it is necessary to increase investments in its nuclear plants to position the fleet for sustained operational excellence during each plant’s expected operating life. These investments will result in increased operating and capital costs associated with operating Entergy’s nuclear plants going forward. The preliminary estimates of the incremental capital costs for 2017 through 2019 identified through this initiative are estimated to be $870 million for Utility. The preliminary estimates indicate that the incremental capital costs identified through this initiative for Entergy Wholesale Commodities are expected to have a minimal effect on Entergy’s preliminary capital investment plan estimate for 2017 through 2019 due to project reprioritizations and shifts in the timing of project spending during 2017 through 2019. The current estimates of the capital costs identified through this initiative are included in Entergy’s preliminary capital investment plan estimate for 2017 through 2019 given in “Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital” above. The incremental increases in other operation and maintenance expenses identified through this initiative are preliminarily estimated to be approximately $125 million in 2017, $160 million in 2018, and $145 million in 2019 for Utility and approximately $25 million in 2017, $30 million in 2018, and $30 million in 2019 for Entergy Wholesale Commodities. In addition, nuclear refueling outage expenses are expected to increase going forward for both Utility and Entergy Wholesale Commodities.
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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 plan for thatextended Indian Point 3’s planned 2017 outage and currently expects thatduration. Entergy performed the outage will be extended.
Grand Gulf Outage
Grand Gulf began asame 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 September 8, 2016 to replace a heat removal pump. Althoughinspection data, Entergy replaced approximately the pump has beensame number of bolts at Indian Point 3 that it replaced management decided to keepat Indian Point 2 before returning the plant in a maintenance outage until additional training and other steps can be taken to support management’s goal of operational excellence. Grand Gulf is not expected to return to service before mid-Januaryin May 2017. Entergy expects, based on the plant’s recent performance indicators, that the NRC will place Grand Gulf in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. Additionally, on October 31, 2016, the NRC commenced a special inspection to identify the circumstances surrounding the unplanned unavailability of an alternate heat removal system during the September 2016 replacement of the heat removal pump and to evaluate the licensee’s actions to address the causes of the event.
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.
Nuclear Decommissioning Costs
As discussed in Note 9 to the financial statements in the Form 10-K, when Entergy purchased the Indian Point 3 and FitzPatrick plants in 2000 from NYPA, NYPA retained the decommissioning trusts and the decommissioning liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations. NYPA has the right to require the Entergy subsidiaries to assume each of the decommissioning liabilities provided that it assigns the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. If the decommissioning liabilities are retained by NYPA, the Entergy subsidiaries will perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trusts. At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies.
In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. The agreement requires Entergy to make a one-time payment of $8 million to NYPA upon receipt of the decommissioning trusts. Amendments to the original decommissioning agreements eliminated the Entergy subsidiaries’ obligation to make additional license extension payments to NYPA, which had been recorded as a note payable of $35 million. The transaction is contingent upon receiving approval from the NRC. As a result of the agreement with NYPA, in the third quarter 2016 Entergy removed the contract asset from its balance sheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and asset retirement obligations for the decommissioning liabilities. See Note 14 to the financial statements herein for further discussion of the decommissioning agreements with NYPA and the associated asset retirement obligations.
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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 Trend and the Entergy Wholesale Commodities Business” 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.
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 2019.2018. Entergy has selected the modified retrospective transition method. Entergy’s evaluation of ASU 2014-09 has not identified any effects that it expects that ASU 2016-02 will affect its financial position by increasing the assets and liabilities recorded relating to its operating leases. Entergy is evaluating ASU 2016-02 for other effects on its results of operations, financial position, and cash flows.
In March 2016 the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The ASU seeks to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, 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 does not expect ASU 2016-09 to affect materially its results of operations, financial position, or cash flows, other than changes in required financial statement disclosures. Entergy continues to monitor the development and cash flows.finalization of industry-specific application guidance that could have an effect on this assessment.
In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments held at amortized cost and available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreasesAs discussed in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
In October 2016 the FASB issuedForm 10-K, ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.”Inventory” is effective for Entergy for the first quarter 2018. The ASU requires entities to recognize the income tax consequences of intra-entity asset transfers, other than inventory, at the time the transfer occurs. Entergy is evaluating the ASU 2016-16and currently expects to record a cumulative-effect adjustment to retained earnings as of January 1, 2018.
As discussed in the Form 10-K, ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” is effective for Entergy for the first quarter 2018. Unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds will be required
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
to be recorded in earnings rather than in other comprehensive income. In accordance with the regulatory treatment of the decommissioning trust funds of Entergy Arkansas, Entergy Louisiana, and System Energy, an offsetting amount of unrealized gains/losses will continue to be recorded in other regulatory liabilities/assets. Entergy expects to record an adjustment to retained earnings as of January 1, 2018 for the cumulative effect of the unrealized gains and losses on investments in equity securities held by the decommissioning trust funds that do not meet the criteria for regulatory accounting treatment.
In March 2017 the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU requires entities to report the service cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the same line item as other compensation costs arising from services rendered during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. In addition, the ASU allows 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 2018. Entergy does not expect ASU 2017-07 to affect materially its results of operations, financial position, or cash flows.
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges. Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges. In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges. ASU 2017-12 is effective for Entergy for the first quarter 2019, with early adoption permitted. Entergy expects that ASU 2017-12 will affect its statementnet income by eliminating volatility in earnings related to the ineffective portion of financial position by requiring recognition of deferred tax assets or liabilities arising from intra entity asset transfers.designated hedges on nuclear power sales. Entergy is evaluating ASU 2016-162017-12 for other effects on its results of operations, financial position, andor cash flows.
|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF OPERATIONS |
| For the Three and Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | | | | | |
| Electric |
| $2,624,562 |
| |
| $2,825,143 |
| |
| $6,760,054 |
| |
| $7,289,280 |
|
| Natural gas | 24,796 |
| | 24,517 |
| | 95,530 |
| | 111,805 |
|
| Competitive businesses | 475,345 |
| | 521,746 |
| | 1,341,534 |
| | 1,603,643 |
|
| TOTAL | 3,124,703 |
| | 3,371,406 |
| | 8,197,118 |
| | 9,004,728 |
|
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | |
| Operation and Maintenance: | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | 460,990 |
| | 739,449 |
| | 1,347,422 |
| | 1,919,605 |
|
| Purchased power | 375,107 |
| | 449,784 |
| | 880,102 |
| | 1,114,736 |
|
| Nuclear refueling outage expenses | 56,675 |
| | 68,577 |
| | 154,951 |
| | 200,575 |
|
| Other operation and maintenance | 833,176 |
| | 852,385 |
| | 2,324,350 |
| | 2,450,368 |
|
| Asset write-offs, impairments, and related charges | 18,841 |
| | 1,642,204 |
| | 33,170 |
| | 1,642,204 |
|
| Decommissioning | 85,266 |
| | 68,888 |
| | 230,519 |
| | 207,617 |
|
| Taxes other than income taxes | 149,076 |
| | 158,134 |
| | 448,103 |
| | 472,035 |
|
| Depreciation and amortization | 340,399 |
| | 334,841 |
| | 1,010,339 |
| | 1,007,181 |
|
| Other regulatory charges | 33,113 |
| | 22,160 |
| | 55,626 |
| | 35,271 |
|
| TOTAL | 2,352,643 |
| | 4,336,422 |
| | 6,484,582 |
| | 9,049,592 |
|
| | | | | | | | |
| OPERATING INCOME (LOSS) | 772,060 |
| | (965,016 | ) | | 1,712,536 |
| | (44,864 | ) |
| | | | | | | | |
| OTHER INCOME | | | | | | | |
| Allowance for equity funds used during construction | 15,451 |
| | 14,129 |
| | 48,242 |
| | 37,841 |
|
| Interest and investment income | 37,534 |
| | 39,054 |
| | 116,662 |
| | 146,893 |
|
| Miscellaneous - net | (6,740 | ) | | (10,005 | ) | | (25,702 | ) | | (34,769 | ) |
| TOTAL | 46,245 |
| | 43,178 |
| | 139,202 |
| | 149,965 |
|
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | |
| Interest expense | 174,902 |
| | 171,349 |
| | 526,344 |
| | 503,546 |
|
| Allowance for borrowed funds used during construction | (7,707 | ) | | (7,289 | ) | | (24,520 | ) | | (19,450 | ) |
| TOTAL | 167,195 |
| | 164,060 |
| | 501,824 |
| | 484,096 |
|
| | | | | | | | |
| INCOME (LOSS) BEFORE INCOME TAXES | 651,110 |
| | (1,085,898 | ) | | 1,349,914 |
| | (378,995 | ) |
| | | | | | | | |
| Income taxes | 257,906 |
| | (367,665 | ) | | 148,879 |
| | (117,412 | ) |
| | | | | | | | |
| CONSOLIDATED NET INCOME (LOSS) | 393,204 |
| | (718,233 | ) | | 1,201,035 |
| | (261,583 | ) |
| | | | | | | | |
| Preferred dividend requirements of subsidiaries | 5,034 |
| | 4,794 |
| | 15,586 |
| | 14,552 |
|
| | | | | | | | |
| NET INCOME (LOSS) ATTRIBUTABLE TO ENTERGY CORPORATION |
| $388,170 |
| |
| ($723,027 | ) | |
| $1,185,449 |
| |
| ($276,135 | ) |
| | | | | | | | |
| Earnings (loss) per average common share: | | | | | | | |
| Basic |
| $2.17 |
| |
| ($4.04 | ) | |
| $6.63 |
| |
| ($1.54 | ) |
| Diluted |
| $2.16 |
| |
| ($4.04 | ) | |
| $6.60 |
| |
| ($1.54 | ) |
| Dividends declared per common share |
| $0.85 |
| |
| $0.83 |
| |
| $2.55 |
| |
| $2.49 |
|
| | | | | | | | |
| Basic average number of common shares outstanding | 179,023,351 |
| | 179,151,832 |
| | 178,804,148 |
| | 179,442,172 |
|
| Diluted average number of common shares outstanding | 179,990,888 |
| | 179,151,832 |
| | 179,490,060 |
| | 179,442,172 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
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|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three and Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2016 | | 2015 | | 2016 | | 2015 |
| | (In Thousands) | | (In Thousands) |
| | | | | | | | |
| Net Income (Loss) |
| $393,204 |
| |
| ($718,233 | ) | |
| $1,201,035 |
| |
| ($261,583 | ) |
| | | | | | | |
| Other comprehensive income (loss) | | | | | | | |
| Cash flow hedges net unrealized gain (loss) | | | | | | | |
| (net of tax expense (benefit) of $11,172, ($13,010), ($28,605), and ($8,202)) | 20,972 |
| | (23,984 | ) | | (52,575 | ) | | (14,618 | ) |
| Pension and other postretirement liabilities | | | | | | | |
| (net of tax expense of $4,064, $4,166, $7,101, and $11,506) | 5,044 |
| | 7,437 |
| | 17,649 |
| | 23,323 |
|
| Net unrealized investment gains (losses) | | | | | | | |
| (net of tax expense (benefit) of $20,635, ($51,295), $58,508, and ($77,921)) | 21,367 |
| | (53,966 | ) | | 65,391 |
| | (83,843 | ) |
| Foreign currency translation | | | | | | | |
| (net of tax benefit of ($48), ($253), ($688), and ($190)) | (92 | ) | | (469 | ) | | (1,280 | ) | | (353 | ) |
| Other comprehensive income (loss) | 47,291 |
| | (70,982 | ) | | 29,185 |
| | (75,491 | ) |
| | | | | | | |
| Comprehensive Income (Loss) | 440,495 |
| | (789,215 | ) | | 1,230,220 |
| | (337,074 | ) |
| Preferred dividend requirements of subsidiaries | 5,034 |
| | 4,794 |
| | 15,586 |
| | 14,552 |
|
| Comprehensive Income (Loss) Attributable to Entergy Corporation |
| $435,461 |
| |
| ($794,009 | ) | |
| $1,214,634 |
| |
| ($351,626 | ) |
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income (loss) | |
| $1,201,035 |
| |
| ($261,583 | ) |
| Adjustments to reconcile consolidated net income (loss) to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,548,872 |
| | 1,612,690 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 119,603 |
| | (267,984 | ) |
| Asset write-offs, impairments, and related charges | | 33,170 |
| | 1,642,204 |
|
| Changes in working capital: | | | | |
| Receivables | | (270,847 | ) | | (222,311 | ) |
| Fuel inventory | | 28,900 |
| | (7,578 | ) |
| Accounts payable | | 99,933 |
| | (90,309 | ) |
| Taxes accrued | | 29,429 |
| | 108,229 |
|
| Interest accrued | | (13,487 | ) | | (34,368 | ) |
| Deferred fuel costs | | (159,592 | ) | | 165,384 |
|
| Other working capital accounts | | (78,553 | ) | | (133,142 | ) |
| Changes in provisions for estimated losses | | 2,760 |
| | 55,177 |
|
| Changes in other regulatory assets | | 164,716 |
| | 155,244 |
|
| Changes in other regulatory liabilities | | 110,999 |
| | (95,327 | ) |
| Changes in pensions and other postretirement liabilities | | (305,200 | ) | | (307,638 | ) |
| Other | | (259,343 | ) | | 30,957 |
|
| Net cash flow provided by operating activities | | 2,252,395 |
| | 2,349,645 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (2,003,427 | ) | | (1,701,758 | ) |
| Allowance for equity funds used during construction | | 48,807 |
| | 39,428 |
|
| Nuclear fuel purchases | | (160,343 | ) | | (340,262 | ) |
| Payment for purchase of plant | | (949,329 | ) | | — |
|
| Insurance proceeds received for property damages | | — |
| | 12,745 |
|
| Changes in securitization account | | (3,911 | ) | | (8,756 | ) |
| NYPA value sharing payment | | — |
| | (70,790 | ) |
| Payments to storm reserve escrow account | | (1,203 | ) | | (68,956 | ) |
| Decrease (increase) in other investments | | 12,374 |
| | (15,323 | ) |
| Proceeds from nuclear decommissioning trust fund sales | | 1,796,566 |
| | 1,487,759 |
|
| Investment in nuclear decommissioning trust funds | | (1,844,514 | ) | | (1,520,461 | ) |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 122,488 |
| | — |
|
| Net cash flow used in investing activities | | (2,982,492 | ) | | (2,186,374 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three and Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In Thousands, Except Share Data) |
| OPERATING REVENUES | | | | | | | |
| Electric |
| $2,793,798 |
| |
| $2,624,562 |
| |
| $7,056,758 |
| |
| $6,760,054 |
|
| Natural gas | 26,585 |
| | 24,796 |
| | 100,011 |
| | 95,530 |
|
| Competitive businesses | 423,245 |
| | 475,345 |
| | 1,293,867 |
| | 1,341,534 |
|
| TOTAL | 3,243,628 |
| | 3,124,703 |
| | 8,450,636 |
| | 8,197,118 |
|
| | | | | | | | |
| OPERATING EXPENSES | | | | | | | |
| Operation and Maintenance: | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | 612,950 |
| | 460,990 |
| | 1,426,462 |
| | 1,347,422 |
|
| Purchased power | 408,140 |
| | 375,107 |
| | 1,182,404 |
| | 880,102 |
|
| Nuclear refueling outage expenses | 43,273 |
| | 56,675 |
| | 124,126 |
| | 154,951 |
|
| Other operation and maintenance | 804,535 |
| | 833,176 |
| | 2,492,379 |
| | 2,324,350 |
|
| Asset write-offs, impairments, and related charges | 16,221 |
| | 18,841 |
| | 421,584 |
| | 33,170 |
|
| Decommissioning | 95,392 |
| | 85,266 |
| | 310,062 |
| | 230,519 |
|
| Taxes other than income taxes | 159,474 |
| | 149,076 |
| | 469,090 |
| | 448,103 |
|
| Depreciation and amortization | 354,739 |
| | 340,399 |
| | 1,052,332 |
| | 1,010,339 |
|
| Other regulatory charges (credits) | 19,435 |
| | 33,113 |
| | (59,314 | ) | | 55,626 |
|
| TOTAL | 2,514,159 |
| | 2,352,643 |
| | 7,419,125 |
| | 6,484,582 |
|
| | | | | | | | |
| Gain on sale of assets | — |
| | — |
| | 16,270 |
| | — |
|
| | | | | | | | |
| OPERATING INCOME | 729,469 |
| | 772,060 |
| | 1,047,781 |
| | 1,712,536 |
|
| | | | | | | | |
| OTHER INCOME | | | | | | | |
| Allowance for equity funds used during construction | 24,338 |
| | 15,451 |
| | 65,722 |
| | 48,242 |
|
| Interest and investment income | 58,332 |
| | 37,534 |
| | 194,978 |
| | 116,662 |
|
| Miscellaneous - net | (1,801 | ) | | (6,740 | ) | | (3,172 | ) | | (25,702 | ) |
| TOTAL | 80,869 |
| | 46,245 |
| | 257,528 |
| | 139,202 |
|
| | | | | | | | |
| INTEREST EXPENSE | | | | | | | |
| Interest expense | 178,391 |
| | 174,902 |
| | 522,857 |
| | 526,344 |
|
| Allowance for borrowed funds used during construction | (11,492 | ) | | (7,707 | ) | | (31,057 | ) | | (24,520 | ) |
| TOTAL | 166,899 |
| | 167,195 |
| | 491,800 |
| | 501,824 |
|
| | | | | | | | |
| INCOME BEFORE INCOME TAXES | 643,439 |
| | 651,110 |
| | 813,509 |
| | 1,349,914 |
|
| | | | | | | | |
| Income taxes | 241,795 |
| | 257,906 |
| | (87,555 | ) | | 148,879 |
|
| | | | | | | | |
| CONSOLIDATED NET INCOME | 401,644 |
| | 393,204 |
| | 901,064 |
| | 1,201,035 |
|
| | | | | | | | |
| Preferred dividend requirements of subsidiaries | 3,446 |
| | 5,034 |
| | 10,338 |
| | 15,586 |
|
| | | | | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION |
| $398,198 |
| |
| $388,170 |
| |
| $890,726 |
| |
| $1,185,449 |
|
| | | | | | | | |
| Earnings per average common share: | | | | | | | |
| Basic |
| $2.22 |
| |
| $2.17 |
| |
| $4.96 |
| |
| $6.63 |
|
| Diluted |
| $2.21 |
| |
| $2.16 |
| |
| $4.94 |
| |
| $6.60 |
|
| Dividends declared per common share |
| $0.87 |
| |
| $0.85 |
| |
| $2.61 |
| |
| $2.55 |
|
| | | | | | | | |
| Basic average number of common shares outstanding | 179,563,819 |
| | 179,023,351 |
| | 179,458,914 |
| | 178,804,148 |
|
| Diluted average number of common shares outstanding | 180,464,069 |
| | 179,990,888 |
| | 180,163,074 |
| | 179,490,060 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 5,508,461 |
| | 2,205,884 |
|
| Treasury stock | | 33,120 |
| | 24,218 |
|
| Retirement of long-term debt | | (4,229,599 | ) | | (2,295,118 | ) |
| Repurchase of common stock | | — |
| | (99,807 | ) |
| Repurchase/redemption of preferred stock | | (85,283 | ) | | (94,285 | ) |
| Changes in credit borrowings and commercial paper - net | | (60,985 | ) | | 183,627 |
|
| Other | | (6,204 | ) | | (7,102 | ) |
| Dividends paid: | | | | |
| Common stock | | (455,993 | ) | | (447,268 | ) |
| Preferred stock | | (16,947 | ) | | (14,848 | ) |
| Net cash flow provided by (used in) financing activities | | 686,570 |
| | (544,699 | ) |
| | | | |
| Net decrease in cash and cash equivalents | | (43,527 | ) | | (381,428 | ) |
| | | | |
| Cash and cash equivalents at beginning of period | | 1,350,961 |
| | 1,422,026 |
|
| | | | |
| Cash and cash equivalents at end of period | |
| $1,307,434 |
| |
| $1,040,598 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $584,362 |
| |
| $523,489 |
|
| Income taxes | |
| $79,988 |
| |
| $95,779 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
| For the Three and Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Three Months Ended | | Nine Months Ended |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (In Thousands) |
| | | | | | | | |
| Net Income |
| $401,644 |
| |
| $393,204 |
| |
| $901,064 |
| |
| $1,201,035 |
|
| | | | | | | |
| Other comprehensive income (loss) | | | | | | | |
| Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of $7,062, $11,172, $17,387, and ($28,605)) | 13,213 |
| | 20,972 |
| | 32,634 |
| | (52,575 | ) |
| Pension and other postretirement liabilities (net of tax expense of $6,818, $4,064, $19,034, and $7,101) | 12,297 |
| | 5,044 |
| | 31,845 |
| | 17,649 |
|
| Net unrealized investment gains (net of tax expense of $30,644, $20,635, $72,808, and $58,508) | 33,395 |
| | 21,367 |
| | 82,918 |
| | 65,391 |
|
| Foreign currency translation (net of tax benefit of $-, $48, $403, and $688) | — |
| | (92 | ) | | (748 | ) | | (1,280 | ) |
| Other comprehensive income | 58,905 |
| | 47,291 |
| | 146,649 |
| | 29,185 |
|
| | | | | | | |
| Comprehensive Income | 460,549 |
| | 440,495 |
| | 1,047,713 |
| | 1,230,220 |
|
| Preferred dividend requirements of subsidiaries | 3,446 |
| | 5,034 |
| | 10,338 |
| | 15,586 |
|
| Comprehensive Income Attributable to Entergy Corporation |
| $457,103 |
| |
| $435,461 |
| |
| $1,037,375 |
| |
| $1,214,634 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $101,905 |
| |
| $63,497 |
|
| Temporary cash investments | | 1,205,529 |
| | 1,287,464 |
|
| Total cash and cash equivalents | | 1,307,434 |
| | 1,350,961 |
|
| Accounts receivable: | | | | |
| Customer | | 724,970 |
| | 608,491 |
|
| Allowance for doubtful accounts | | (11,387 | ) | | (39,895 | ) |
| Other | | 227,278 |
| | 178,364 |
|
| Accrued unbilled revenues | | 439,596 |
| | 321,940 |
|
| Total accounts receivable | | 1,380,457 |
| | 1,068,900 |
|
| Deferred fuel costs | | 41,686 |
| | — |
|
| Fuel inventory - at average cost | | 188,910 |
| | 217,810 |
|
| Materials and supplies - at average cost | | 918,269 |
| | 873,357 |
|
| Deferred nuclear refueling outage costs | | 217,487 |
| | 211,512 |
|
| Prepayments and other | | 285,792 |
| | 344,872 |
|
| TOTAL | | 4,340,035 |
| | 4,067,412 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investment in affiliates - at equity | | 717 |
| | 4,341 |
|
| Decommissioning trust funds | | 5,671,074 |
| | 5,349,953 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 223,008 |
| | 219,999 |
|
| Other | | 473,964 |
| | 468,704 |
|
| TOTAL | | 6,368,763 |
| | 6,042,997 |
|
| | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 47,486,695 |
| | 44,467,159 |
|
| Property under capital lease | | 609,852 |
| | 952,465 |
|
| Natural gas | | 408,360 |
| | 392,032 |
|
| Construction work in progress | | 1,451,492 |
| | 1,456,735 |
|
| Nuclear fuel | | 1,170,956 |
| | 1,345,422 |
|
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 51,127,355 |
| | 48,613,813 |
|
| Less - accumulated depreciation and amortization | | 21,798,230 |
| | 20,789,452 |
|
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 29,329,125 |
| | 27,824,361 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 777,113 |
| | 775,528 |
|
| Other regulatory assets (includes securitization property of $627,347 as of September 30, 2016 and $714,044 as of December 31, 2015) | | 4,540,895 |
| | 4,704,796 |
|
| Deferred fuel costs | | 239,050 |
| | 238,902 |
|
| Goodwill | | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 123,085 |
| | 54,903 |
|
| Other | | 1,642,943 |
| | 561,610 |
|
| TOTAL | | 7,700,258 |
| | 6,712,911 |
|
| | | | | |
| TOTAL ASSETS | |
| $47,738,181 |
| |
| $44,647,681 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | |
| $901,064 |
| |
| $1,201,035 |
|
| Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,561,565 |
| | 1,548,872 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (90,607 | ) | | 119,603 |
|
| Asset write-offs, impairments, and related charges | | 241,838 |
| | 33,170 |
|
| Gain on sale of assets | | (16,270 | ) | | — |
|
| Changes in working capital: | | | | |
| Receivables | | (198,029 | ) | | (270,847 | ) |
| Fuel inventory | | 20,746 |
| | 28,900 |
|
| Accounts payable | | (75,962 | ) | | 99,933 |
|
| Taxes accrued | | 66,895 |
| | 29,429 |
|
| Interest accrued | | (6,111 | ) | | (13,487 | ) |
| Deferred fuel costs | | (117,636 | ) | | (159,592 | ) |
| Other working capital accounts | | (81,779 | ) | | (78,553 | ) |
| Changes in provisions for estimated losses | | (10,073 | ) | | 2,760 |
|
| Changes in other regulatory assets | | 117,430 |
| | 164,716 |
|
| Changes in other regulatory liabilities | | 22,124 |
| | 110,999 |
|
| Changes in pensions and other postretirement liabilities | | (354,297 | ) | | (305,200 | ) |
| Other | | (268,147 | ) | | (259,343 | ) |
| Net cash flow provided by operating activities | | 1,712,751 |
| | 2,252,395 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (2,622,104 | ) | | (2,003,427 | ) |
| Allowance for equity funds used during construction | | 66,437 |
| | 48,807 |
|
| Nuclear fuel purchases | | (226,054 | ) | | (160,343 | ) |
| Payment for purchase of plant | | — |
| | (949,329 | ) |
| Proceeds from sale of assets | | 100,000 |
| | — |
|
| Insurance proceeds received for property damages | | 26,157 |
| | — |
|
| Changes in securitization account | | (6,494 | ) | | (3,911 | ) |
| Payments to storm reserve escrow account | | (1,925 | ) | | (1,203 | ) |
| Receipts from storm reserve escrow account | | 8,836 |
| | — |
|
| Decreases (increases) in other investments | | (112,217 | ) | | 12,374 |
|
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 25,493 |
| | 122,488 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 1,902,783 |
| | 1,796,566 |
|
| Investment in nuclear decommissioning trust funds | | (1,988,634 | ) | | (1,844,514 | ) |
| Net cash flow used in investing activities | | (2,827,722 | ) | | (2,982,492 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $750,200 |
| |
| $214,374 |
|
| Notes payable and commercial paper | | 433,363 |
| | 494,348 |
|
| Accounts payable | | 1,063,139 |
| | 1,071,798 |
|
| Customer deposits | | 402,794 |
| | 419,407 |
|
| Taxes accrued | | 239,506 |
| | 210,077 |
|
| Interest accrued | | 181,078 |
| | 194,565 |
|
| Deferred fuel costs | | 118,228 |
| | 235,986 |
|
| Obligations under capital leases | | 2,743 |
| | 2,709 |
|
| Pension and other postretirement liabilities | | 59,767 |
| | 62,513 |
|
| Other | | 200,929 |
| | 184,181 |
|
| TOTAL | | 3,451,747 |
| | 3,089,958 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 8,510,946 |
| | 8,306,865 |
|
| Accumulated deferred investment tax credits | | 228,757 |
| | 234,300 |
|
| Obligations under capital leases | | 24,957 |
| | 27,001 |
|
| Other regulatory liabilities | | 1,525,897 |
| | 1,414,898 |
|
| Decommissioning and asset retirement cost liabilities | | 6,101,283 |
| | 4,790,187 |
|
| Accumulated provisions | | 463,466 |
| | 460,727 |
|
| Pension and other postretirement liabilities | | 2,884,903 |
| | 3,187,357 |
|
| Long-term debt (includes securitization bonds of $697,535 as of September 30, 2016 and $774,696 as of December 31, 2015) | | 13,861,703 |
| | 13,111,556 |
|
| Other | | 382,275 |
| | 449,856 |
|
| TOTAL | | 33,984,187 |
| | 31,982,747 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Subsidiaries' preferred stock without sinking fund | | 233,185 |
| | 318,185 |
|
| | | | | |
| 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 |
|
| Paid-in capital | | 5,403,987 |
| | 5,403,758 |
|
| Retained earnings | | 10,123,086 |
| | 9,393,913 |
|
| Accumulated other comprehensive income | | 38,136 |
| | 8,951 |
|
| Less - treasury stock, at cost (75,625,184 shares in 2016 and 76,363,763 shares in 2015) | | 5,498,695 |
| | 5,552,379 |
|
| TOTAL | | 10,069,062 |
| | 9,256,791 |
|
| | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | |
| $47,738,181 |
| |
| $44,647,681 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 1,222,606 |
| | 5,508,461 |
|
| Treasury stock | | 15,121 |
| | 33,120 |
|
| Retirement of long-term debt | | (1,222,915 | ) | | (4,229,599 | ) |
| Repurchase/redemption of preferred stock | | — |
| | (85,283 | ) |
| Changes in credit borrowings and commercial paper - net | | 937,677 |
| | (60,985 | ) |
| Other | | (337 | ) | | (6,204 | ) |
| Dividends paid: | | | | |
| Common stock | | (468,396 | ) | | (455,993 | ) |
| Preferred stock | | (10,338 | ) | | (16,947 | ) |
| Net cash flow provided by financing activities | | 473,418 |
| | 686,570 |
|
| | | | |
| Net decrease in cash and cash equivalents | | (641,553 | ) | | (43,527 | ) |
| | | | |
| Cash and cash equivalents at beginning of period | | 1,187,844 |
| | 1,350,961 |
|
| | | | |
| Cash and cash equivalents at end of period | |
| $546,291 |
| |
| $1,307,434 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $507,912 |
| |
| $584,362 |
|
| Income taxes | |
| ($11,883 | ) | |
| $79,988 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | | | | |
|
|
| Common Shareholders’ Equity |
|
|
| | Subsidiaries’ Preferred Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (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 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (loss) (a) | 14,552 |
| | — |
| | — |
| | — |
| | (276,135 | ) | | — |
| | (261,583 | ) |
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (75,491 | ) | | (75,491 | ) |
| Common stock repurchases | — |
| | — |
| | (99,807 | ) | | — |
| | — |
| | — |
| | (99,807 | ) |
| Preferred stock repurchases / redemptions | (94,000 | ) | | — |
| | — |
| | — |
| | (285 | ) | | — |
| | (94,285 | ) |
| Common stock issuances related to stock plans | — |
| | — |
| | 44,792 |
| | 3,594 |
| | — |
| | — |
| | 48,386 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (447,268 | ) | | — |
| | (447,268 | ) |
| Preferred dividend requirements of subsidiaries (a) | (14,552 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (14,552 | ) |
| | | | | | | | | | | | | | |
| Balance at September 30, 2015 |
| $— |
| |
| $2,548 |
| |
| ($5,552,541 | ) | |
| $5,378,947 |
| |
| $9,445,969 |
| |
| ($117,798 | ) | |
| $9,157,125 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| 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) | 15,586 |
| | — |
| | — |
| | — |
| | 1,185,449 |
| | — |
| | 1,201,035 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 29,185 |
| | 29,185 |
|
| Preferred stock repurchases / redemptions | — |
| | — |
| | — |
| | — |
| | (283 | ) | | — |
| | (283 | ) |
| Common stock issuances related to stock plans | — |
| | — |
| | 53,684 |
| | 229 |
| | — |
| | — |
| | 53,913 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (455,993 | ) | | — |
| | (455,993 | ) |
| Preferred dividend requirements of subsidiaries (a) | (15,586 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (15,586 | ) |
| | | | | | | | | | | | | | |
| Balance at September 30, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,498,695 | ) | |
| $5,403,987 |
| |
| $10,123,086 |
| |
| $38,136 |
| |
| $10,069,062 |
|
| | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| |
| (a) Consolidated net income (loss) and preferred dividend requirements of subsidiaries for 2016 and 2015 include $15.6 million and $9.6 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity. |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $87,297 |
| |
| $129,579 |
|
| Temporary cash investments | | 458,994 |
| | 1,058,265 |
|
| Total cash and cash equivalents | | 546,291 |
| | 1,187,844 |
|
| Accounts receivable: | | | | |
| Customer | | 754,484 |
| | 654,995 |
|
| Allowance for doubtful accounts | | (13,569 | ) | | (11,924 | ) |
| Other | | 152,329 |
| | 158,419 |
|
| Accrued unbilled revenues | | 420,099 |
| | 368,677 |
|
| Total accounts receivable | | 1,313,343 |
| | 1,170,167 |
|
| Deferred fuel costs | | 185,066 |
| | 108,465 |
|
| Fuel inventory - at average cost | | 158,854 |
| | 179,600 |
|
| Materials and supplies - at average cost | | 719,782 |
| | 698,523 |
|
| Deferred nuclear refueling outage costs | | 181,571 |
| | 146,221 |
|
| Prepayments and other | | 366,324 |
| | 193,448 |
|
| TOTAL | | 3,471,231 |
| | 3,684,268 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investment in affiliates - at equity | | 198 |
| | 198 |
|
| Decommissioning trust funds | | 6,982,928 |
| | 5,723,897 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 252,621 |
| | 233,641 |
|
| Other | | 447,349 |
| | 469,664 |
|
| TOTAL | | 7,683,096 |
| | 6,427,400 |
|
| | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 46,190,075 |
| | 45,191,216 |
|
| Property under capital lease | | 618,321 |
| | 619,527 |
|
| Natural gas | | 435,313 |
| | 413,224 |
|
| Construction work in progress | | 2,191,320 |
| | 1,378,180 |
|
| Nuclear fuel | | 905,837 |
| | 1,037,899 |
|
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 50,340,866 |
| | 48,640,046 |
|
| Less - accumulated depreciation and amortization | | 21,380,100 |
| | 20,718,639 |
|
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 28,960,766 |
| | 27,921,407 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 775,148 |
| | 761,280 |
|
| Other regulatory assets (includes securitization property of $513,223 as of September 30, 2017 and $600,996 as of December 31, 2016) | | 4,638,615 |
| | 4,769,913 |
|
| Deferred fuel costs | | 239,248 |
| | 239,100 |
|
| Goodwill | | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 123,953 |
| | 117,885 |
|
| Other | | 129,213 |
| | 1,606,009 |
|
| TOTAL | | 6,283,349 |
| | 7,871,359 |
|
| | | | | |
| TOTAL ASSETS | |
| $46,398,442 |
| |
| $45,904,434 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $869,207 |
| |
| $364,900 |
|
| Notes payable and commercial paper | | 1,352,688 |
| | 415,011 |
|
| Accounts payable | | 1,105,038 |
| | 1,285,577 |
|
| Customer deposits | | 403,262 |
| | 403,311 |
|
| Taxes accrued | | 248,009 |
| | 181,114 |
|
| Interest accrued | | 181,118 |
| | 187,229 |
|
| Deferred fuel costs | | 61,867 |
| | 102,753 |
|
| Obligations under capital leases | | 2,043 |
| | 2,423 |
|
| Pension and other postretirement liabilities | | 64,904 |
| | 76,942 |
|
| Other | | 172,735 |
| | 180,836 |
|
| TOTAL | | 4,460,871 |
| | 3,200,096 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 7,538,630 |
| | 7,495,290 |
|
| Accumulated deferred investment tax credits | | 219,892 |
| | 227,147 |
|
| Obligations under capital leases | | 22,783 |
| | 24,582 |
|
| Other regulatory liabilities | | 1,595,053 |
| | 1,572,929 |
|
| Decommissioning and asset retirement cost liabilities | | 6,116,010 |
| | 5,992,476 |
|
| Accumulated provisions | | 471,383 |
| | 481,636 |
|
| Pension and other postretirement liabilities | | 2,693,751 |
| | 3,036,010 |
|
| Long-term debt (includes securitization bonds of $582,274 as of September 30, 2017 and $661,175 as of December 31, 2016) | | 13,977,522 |
| | 14,467,655 |
|
| Other | | 409,125 |
| | 1,121,619 |
|
| TOTAL | | 33,044,149 |
| | 34,419,344 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Subsidiaries' preferred stock without sinking fund | | 203,185 |
| | 203,185 |
|
| | | | | |
| SHAREHOLDERS' EQUITY | | | | |
| 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 | | 5,420,608 |
| | 5,417,245 |
|
| Retained earnings | | 8,617,901 |
| | 8,195,571 |
|
| Accumulated other comprehensive income (loss) | | 111,678 |
| | (34,971 | ) |
| Less - treasury stock, at cost (75,127,186 shares in 2017 and 75,623,363 shares in 2016) | | 5,462,498 |
| | 5,498,584 |
|
| TOTAL | | 8,690,237 |
| | 8,081,809 |
|
| | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | |
| $46,398,442 |
| |
| $45,904,434 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| SELECTED OPERATING RESULTS |
| For the Three and Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | | | | | |
| | | Three Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % |
| | (Dollars in Millions) | | |
| Utility Electric Operating Revenues: | | | | | | | | |
| Residential | |
| $1,106 |
| |
| $1,188 |
| |
| ($82 | ) | | (7 | ) |
| Commercial | | 678 |
| | 748 |
| | (70 | ) | | (9 | ) |
| Industrial | | 616 |
| | 692 |
| | (76 | ) | | (11 | ) |
| Governmental | | 58 |
| | 62 |
| | (4 | ) | | (6 | ) |
| Total retail | | 2,458 |
| | 2,690 |
| | (232 | ) | | (9 | ) |
| Sales for resale | | 67 |
| | 67 |
| | — |
| | — |
|
| Other | | 100 |
| | 68 |
| | 32 |
| | 47 |
|
| Total | |
| $2,625 |
| |
| $2,825 |
| |
| ($200 | ) | | (7 | ) |
| | | | | | | | |
| Utility Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 11,817 |
| | 11,887 |
| | (70 | ) | | (1 | ) |
| Commercial | | 8,650 |
| | 8,744 |
| | (94 | ) | | (1 | ) |
| Industrial | | 12,017 |
| | 12,087 |
| | (70 | ) | | (1 | ) |
| Governmental | | 703 |
| | 692 |
| | 11 |
| | 2 |
|
| Total retail | | 33,187 |
| | 33,410 |
| | (223 | ) | | (1 | ) |
| Sales for resale | | 2,733 |
| | 2,586 |
| | 147 |
| | 6 |
|
| Total | | 35,920 |
| | 35,996 |
| | (76 | ) | | — |
|
| | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | |
| Operating Revenues | |
| $475 |
| |
| $522 |
| |
| ($47 | ) | | (9 | ) |
| Billed Electric Energy Sales (GWh) | | 9,372 |
| | 10,440 |
| | (1,068 | ) | | (10 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % |
| | (Dollars in Millions) | | |
| Utility Electric Operating Revenues: | | | | | | | | |
| Residential | |
| $2,517 |
| |
| $2,803 |
| |
| ($286 | ) | | (10 | ) |
| Commercial | | 1,759 |
| | 1,928 |
| | (169 | ) | | (9 | ) |
| Industrial | | 1,727 |
| | 1,859 |
| | (132 | ) | | (7 | ) |
| Governmental | | 161 |
| | 169 |
| | (8 | ) | | (5 | ) |
| Total retail | | 6,164 |
| | 6,759 |
| | (595 | ) | | (9 | ) |
| Sales for resale | | 194 |
| | 213 |
| | (19 | ) | | (9 | ) |
| Other | | 402 |
| | 317 |
| | 85 |
| | 27 |
|
| Total | |
| $6,760 |
| |
| $7,289 |
| |
| ($529 | ) | | (7 | ) |
| | | | | | | | |
| Utility Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 27,035 |
| | 28,683 |
| | (1,648 | ) | | (6 | ) |
| Commercial | | 21,938 |
| | 22,370 |
| | (432 | ) | | (2 | ) |
| Industrial | | 34,581 |
| | 33,230 |
| | 1,351 |
| | 4 |
|
| Governmental | | 1,912 |
| | 1,886 |
| | 26 |
| | 1 |
|
| Total retail | | 85,466 |
| | 86,169 |
| | (703 | ) | | (1 | ) |
| Sales for resale | | 9,452 |
| | 7,535 |
| | 1,917 |
| | 25 |
|
| Total | | 94,918 |
| | 93,704 |
| | 1,214 |
| | 1 |
|
| | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | |
| Operating Revenues | |
| $1,342 |
| |
| $1,604 |
| |
| ($262 | ) | | (16 | ) |
| Billed Electric Energy Sales (GWh) | | 26,484 |
| | 29,610 |
| | (3,126 | ) | | (11 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | | |
|
|
| Common Shareholders’ Equity |
|
|
| | Subsidiaries’ Preferred Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (In Thousands) |
| | | | | | | | | | | | | | |
| 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) | 15,586 |
| | — |
| | — |
| | — |
| | 1,185,449 |
| | — |
| | 1,201,035 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 29,185 |
| | 29,185 |
|
| Preferred stock repurchases / redemptions | — |
| | — |
| | — |
| | — |
| | (283 | ) | | — |
| | (283 | ) |
| Common stock issuances related to stock plans | — |
| | — |
| | 53,684 |
| | 229 |
| | — |
| | — |
| | 53,913 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (455,993 | ) | | — |
| | (455,993 | ) |
| Preferred dividend requirements of subsidiaries (a) | (15,586 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (15,586 | ) |
| | | | | | | | | | | | | | |
| Balance at September 30, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,498,695 | ) | |
| $5,403,987 |
| |
| $10,123,086 |
| |
| $38,136 |
| |
| $10,069,062 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| 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) | 10,338 |
| | — |
| | — |
| | — |
| | 890,726 |
| | — |
| | 901,064 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 146,649 |
| | 146,649 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 36,086 |
| | 3,363 |
| | — |
| | — |
| | 39,449 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (468,396 | ) | | — |
| | (468,396 | ) |
| Preferred dividend requirements of subsidiaries (a) | (10,338 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (10,338 | ) |
| | | | | | | | | | | | | | |
| Balance at September 30, 2017 |
| $— |
| |
| $2,548 |
| |
| ($5,462,498 | ) | |
| $5,420,608 |
| |
| $8,617,901 |
| |
| $111,678 |
| |
| $8,690,237 |
|
| | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2017 and 2016 include $10.3 million and $15.6 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 Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | | | |
| | | Three Months Ended | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % |
| | (Dollars in Millions) | | |
| Utility electric operating revenues: | | | | | | | | |
| Residential | |
| $1,107 |
| |
| $1,106 |
| |
| $1 |
| | — |
|
| Commercial | | 721 |
| | 678 |
| | 43 |
| | 6 |
|
| Industrial | | 721 |
| | 616 |
| | 105 |
| | 17 |
|
| Governmental | | 62 |
| | 58 |
| | 4 |
| | 7 |
|
| Total retail | | 2,611 |
| | 2,458 |
| | 153 |
| | 6 |
|
| Sales for resale | | 78 |
| | 67 |
| | 11 |
| | 16 |
|
| Other | | 105 |
| | 100 |
| | 5 |
| | 5 |
|
| Total | |
| $2,794 |
| |
| $2,625 |
| |
| $169 |
| | 6 |
|
| | | | | | | | |
| Utility billed electric energy sales (GWh): | | | | | | | | |
| Residential | | 10,833 |
| | 11,817 |
| | (984 | ) | | (8 | ) |
| Commercial | | 8,271 |
| | 8,650 |
| | (379 | ) | | (4 | ) |
| Industrial | | 12,503 |
| | 12,017 |
| | 486 |
| | 4 |
|
| Governmental | | 682 |
| | 703 |
| | (21 | ) | | (3 | ) |
| Total retail | | 32,289 |
| | 33,187 |
| | (898 | ) | | (3 | ) |
| Sales for resale | | 3,387 |
| | 2,733 |
| | 654 |
| | 24 |
|
| Total | | 35,676 |
| | 35,920 |
| | (244 | ) | | (1 | ) |
| | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | |
| Operating Revenues | |
| $423 |
| |
| $475 |
| |
| ($52 | ) | | (11 | ) |
| Billed Electric Energy Sales (GWh) | | 8,234 |
| | 9,372 |
| | (1,138 | ) | | (12 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % |
| | (Dollars in Millions) | | |
| Utility electric operating revenues: | | | | | | | | |
| Residential | |
| $2,560 |
| |
| $2,517 |
| |
| $43 |
| | 2 |
|
| Commercial | | 1,861 |
| | 1,759 |
| | 102 |
| | 6 |
|
| Industrial | | 1,937 |
| | 1,727 |
| | 210 |
| | 12 |
|
| Governmental | | 172 |
| | 161 |
| | 11 |
| | 7 |
|
| Total retail | | 6,530 |
| | 6,164 |
| | 366 |
| | 6 |
|
| Sales for resale | | 202 |
| | 194 |
| | 8 |
| | 4 |
|
| Other | | 325 |
| | 402 |
| | (77 | ) | | (19 | ) |
| Total | |
| $7,057 |
| |
| $6,760 |
| |
| $297 |
| | 4 |
|
| | | | | | | | |
| Utility billed electric energy sales (GWh): | | | | | | | | |
| Residential | | 25,810 |
| | 27,035 |
| | (1,225 | ) | | (5 | ) |
| Commercial | | 21,595 |
| | 21,938 |
| | (343 | ) | | (2 | ) |
| Industrial | | 35,829 |
| | 34,581 |
| | 1,248 |
| | 4 |
|
| Governmental | | 1,885 |
| | 1,912 |
| | (27 | ) | | (1 | ) |
| Total retail | | 85,119 |
| | 85,466 |
| | (347 | ) | | — |
|
| Sales for resale | | 8,255 |
| | 9,452 |
| | (1,197 | ) | | (13 | ) |
| Total | | 93,374 |
| | 94,918 |
| | (1,544 | ) | | (2 | ) |
| | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | |
| Operating revenues | |
| $1,294 |
| |
| $1,342 |
| |
| ($48 | ) | | (4 | ) |
| Billed electric energy sales (GWh) | | 22,616 |
| | 26,484 |
| | (3,868 | ) | | (15 | ) |
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 $37 million was incurred as of September 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 $20 million was incurred as of September 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.litigation.
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 judgmentdiscussed in the amount of $81 millionForm 10-K, 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.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. Entergy Louisiana received payment from the U.S. Treasury in August 2016. The effects of recording the final judgment in the third quarter 2016 were reductions to plant, nuclear fuel expense, other operation and maintenance expense, and depreciation expense. The River Bend damages awarded 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 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
million. In September 2016 the U.S. Court of Federal Claims issued a further judgment in the River Bend case in the amount of $5 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. EntergyLouisiana received payment from the U.S. Treasury in June 2016.January 2017. The effect of recording the proceeds was a reduction to other operation and maintenance expense and depreciation expense. TheRiver Bend damages awarded included $15$2 million related to costs previously capitalizedrecorded as nuclear fuel expense and $4$3 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.
In June 2016 the U.S. Court of Federal Claims issued a partial judgmentAs discussed in the amount of $49 million in favor of System Energy and against the DOE in the second round Grand Gulf damages case. System Energy received payment from the U.S. Treasury in August 2016. The effects of recording the judgment in the third quarter 2016 were reductions to plant, nuclear fuel expense, other operation and maintenance expense, and depreciation expense. The amounts of Grand Gulf damages awarded related to System Energy’s 90% ownership of Grand Gulf included $16 million related to costs previously capitalized, $19 million related to costs previously recorded as nuclear fuel expense, and $9 million related to costs previously recorded as other operation and maintenance expense. Of the $16 million, System Energy recorded $4 million as a reduction to previously-recorded depreciation expense. System Energy reduced its Grand Gulf plant asset balance by the remaining $12 million.
In July 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $31 million in favor of Entergy Arkansas and against the DOE in the second round ANO damages case. The appeals period for the partial judgment has ended with no appeals filed, and Entergy Arkansas requested payment from the U.S. Treasury of the $31 millionForm 10-K, in September 2016 and recorded a receivable as of September 30, 2016. The primary effects of recording the receivable were reductions to plant, nuclear fuel expense, and other operation and maintenance expense. The ANO damages award included $6 million related to costs previously capitalized, $19 million related to costs previously recorded as nuclear fuel expense, and $6 million related to costs previously recorded as other operation and maintenance expense. Entergy Arkansas reduced its ANO plant asset balance by the $6 million.
In August 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $53 million in favor of Entergy Louisiana and against the DOE in the first round Waterford 3 damages case. 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 $53 million in September 2016 and recorded a receivable as of September 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 Waterford 3 damages award included $41 million related to costs previously capitalized, $10 million related to costs previously recorded as nuclear fuel expense, and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $41 million, Entergy Louisiana recorded $3 million as a reduction to previously-recorded depreciation expense. Entergy Louisiana reduced its Waterford 3 plant asset balance by the remaining $38 million.
In September 2016 the U.S. Supreme Court of Federal Claims issued a judgment in the Entergy Nuclear Palisades case in the amount of $14 million. The Courtmillion, including $11 million related to costs previously issuedcapitalized and $3 million related to costs previously recorded as other operation and maintenance expense. Entergy Nuclear Palisades recorded a partial judgment in the case in thereceivable for that amount, of $21 million, which was paid byand subsequently received payment from the U.S. Treasury in October 2015. The appeals period for the judgment has not yet expired.January 2017.
InAs discussed in the Form 10-K, in October 2016 the U.S. Supreme Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case in the amount of $34 million. The appeals period for the judgment has not yet expired.
million, including $14 million related to costs previously capitalized, $15 million related to costs previously recorded as other operation and maintenance expense,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Management cannot predict the timing or$3 million related to previously recorded decommissioning expense, and $2 million related to costs previously recorded as taxes other than income taxes. Entergy Nuclear Indian Point 2 recorded a receivable for that amount, of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receiptsubsequently received payment from the DOE of the U.S. Court of Federal Claims damage awards.Treasury in January 2017.
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.
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 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.
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 redetermination 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 reflected 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 April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2016, and rates will be effective through June 2017.2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.
Entergy Louisiana
InAs discussed in the Form 10-K, in June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. The audit included a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2014 through
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the period from 2012 through 2015. Discovery commenced in March 2017.
As discussed in the Form 10-K, in April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includesincluded a review of the reasonableness of the charges flowed through the fuel adjustment clause by
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana for the period from 2005 through 2009. TheIn December 2016 the LPSC staff issued its audit reportopened a new docket in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest,order to customers and realignresolve an issue regarding the proper methodology for the recovery of approximately $1 million from Entergy Louisiana’snuclear dry 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 regardingstorage costs. In October 2017 the LPSC staff report and any issues raised by intervenors. One intervenor sought further proceedings regarding certain issues it raised in its comments onapproved the LPSC staff report. Entergy Louisiana filed responses to bothcontinued recovery of 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. The intervenor has stated that it does not intend to pursue these issues further. In October 2016 the LPSC staff filed testimony affirming the recommendation in its audit report that nuclear dry fuel storage costs should be realigned to base rates. 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 auditthrough the fuel adjustment clause, filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review ofresolving the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause foropen issue in 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. In September 2016 the LPSC staff filed testimony stating that is was no longer recommending a disallowance of $3.4 million of the $8.6 million discussed above, but otherwise maintained positions from its report. 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 audit of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. In recognition of the business combination that occurred 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.audit.
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 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 Corporation and Subsidiaries
Notes to Financial Statements
Mississippi Attorney General Complaint
TheAs 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 alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believesThe defendants have denied the complaint is unfounded.allegations. In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S. District Court in Jackson, Mississippi. The Mississippi attorney general moved to remand the matter to state court. In August 2012June 2017 the District Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.a case management order setting a trial date in November 2018. Discovery is currently in progress.
The defendant Entergy companies answered the complaint and filed a counterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the Attorney General’s complaint. In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings.
In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not considered “mass actions” under the Class Action Fairness Act, so as to establish federal subject matter jurisdiction. One day later the Attorney General renewed his motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies responded to that motion reiterating the additional grounds asserted for federal question jurisdiction, and the District Court held oral argument on the renewed motion to remand in February 2014. In April 2015 the District Court entered an order denying the renewed motion to remand, holding that the District Court has federal question subject matter jurisdiction. The Attorney General appealed to the U.S. Fifth Circuit Court of Appeals the denial of the motion to remand. In July 2015 the Fifth Circuit issued an order denying the appeal, and the Attorney General subsequently filed a petition for rehearing of the request for interlocutory appeal, which was also denied. In December 2015 the District Court ordered that the parties submit to the court undisputed and disputed facts that are material to the Entergy defendants’ motion for judgment on the pleadings, as well as supplemental briefs regarding the same. Those filings were made in January 2016.
In September 2016 the Attorney General filed a mandamus petition with the U.S. Fifth Circuit Court of Appeals in which the Attorney General asked the Fifth Circuit to order the chief judge to reassign this case to another judge. The District Court denied the Entergy companies’ motion for judgment on the pleadings. The Entergy companies filed a motion seeking to amend the District Court’s order denying the Entergy companies’ motion for judgment on the pleadings and allowing an interlocutory appeal. The Fifth Circuit granted the Attorney General’s motion for writ of mandamus and directed the chief judge to assign the case to a new judge. The case has now been reassigned, and the Entergy companies’ motion to amend the order remains pending.
Entergy Texas
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-
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 been reviewedsettlement was approved by the PUCT in March 2017 and the refunds were made.
In June 2017, Entergy Texas filed an application for a prior proceeding.fuel refund of approximately $30.7 million for the months of December 2016 through April 2017. For most customers, the refunds flowed through bills for the months of July 2017 through September 2017. The fuel refund was approved by the PUCT has one year to issue a final order in this proceeding.August 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.
Filings with the APSC
20152016 Formula Rate CasePlan 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 2015,2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction 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 aits 2017 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 increasefiling, which was subsequently made in July 2017 and 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.discussed below. In February 2016May 2017 the APSC approved the settlementjoint motion and proposal to review Entergy Arkansas’s supplemental filing on a concurrent schedule with one exceptionthe 2017 formula rate plan filing. In doing so, however, the APSC noted that would reducea determination of whether the retail rate increase proposedsupplemental information supporting certain nuclear expenditures will be considered in the settlement by $5 million. The settlinghearing for the 2017 formula rate plan filing or a separate hearing will be made at a later time. In October 2017, Entergy Arkansas and the 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 madeproceeding filed a compliance filing regarding the new rates that included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016,joint motion 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2016approve a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs.
2017 Formula Rate Plan Filing
In July 2016,2017, Entergy Arkansas filed with the APSC its 20162017 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 20172018 test period to be below the formula rate plan bandwidth. The filing requestedprojected a $67.7$129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75%. Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and the projected annual revenue requirement increase exceeds the four percent, resulting in a proposed increase for the 2017 formula rate plan of $70.9 million. In October 2016,2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments with an updated request forthat projected a $54.4$126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors, as well as three additional adjustments identified as appropriate by Entergy Arkansas. Also inintervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on a revision to the four percent cap calculation. In October 2016,2017, Entergy Arkansas and allthe parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and waive the hearing scheduledproviding for November 2016. The APSC denied the request to waive the hearing, directed certain witnesses to appear, and stated that approvalrecovery of the 2017 and 2018 nuclear costs. The settlement agreement would be addressed by a subsequent order. In November 2016 a hearing was held and the APSC issued an order directing the parties to brief certain issues. The parties to the settlement agreement, who reached agreement on all issues and certain additional provisions related to future filing information, requested an order approving the settlement agreement and thedoes not affect Entergy Arkansas’s proposed $54.4$71.1 million revenue requirement increase and rate adjustment by December 9, 2016.increase. If a final order is not issued by this date,December 13, 2017, the proposed formula rate plan rate adjustment will become effective December 30, 2016,January 2, 2018, subject to refund.
Advanced Metering Infrastructure (AMI) Filing
InAs discussed in the Form 10-K, in September 2016, Entergy Arkansas filed an application seeking an ordera finding from the APSC finding that Entergy Arkansas’s deployment of AMIadvanced metering infrastructure is in the public interest. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. The APSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundationAttorney General’s consultant primarily recommended denial of Entergy Arkansas’s modernized power grid. The filing identified a number quantified and unquantified benefits, andapplication but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal. Entergy Arkansas providedfiled rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a cost benefit analysis showingjoint motion to approve a unanimous settlement agreement. Also in August 2017 supplemental testimony was filed and a settlement hearing was held. In October 2017 the APSC issued an order finding that itsEntergy Arkansas’s AMI deployment is expectedin the public interest and approving the settlement agreement subject to produce a nominal net benefit to customers of $431 million.minor modification. Entergy Arkansas also soughtexpects to continue to include in rate baserecover the remaining book value, approximately $57 million,undepreciated balance of its existing meters that willthrough a regulatory asset to be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Arkansas proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Subject to approval by the APSC, deployment of the communications network is expected to begin in 2018. Entergy Arkansas proposed to include the AMI deployment costs and the quantified benefits in future formula rate plan filings. In order to have certainty around its 2018 projected AMI deployment costs, Entergy Arkansas sought an order from the APSC prior to the hearing on its expected 2017 formula rate plan filing in fourth quarter 2017.amortized over 15 years.
Filings with the LPSC
Retail Rates - Electric
2014 Formula Rate Plan Filing
As discussed in the Form 10-K, in September 2015, Entergy Louisiana filed its formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed an unopposed joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of this proceeding with no changes to rates already implemented.
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. TheIn June 2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of the May 2016 evaluation report, reflects an earned return on common equity of 9.07%. As such,interim updates, and corresponding proceedings with no adjustmentchanges to base formula rate plan revenue is required. The following other adjustments, however, are required under the formula rate plan: an increase in the legacy 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 were implemented with the first billing cycle of September 2016, subject to refund.
rates already implemented.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding did not oppose an extension for this period of time. In June 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was filed and the LPSC approved the stipulation in July 2017.
2016 Formula Rate Plan Filing
In May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflects an earned return on common equity of 9.84%. As such, no adjustment to base formula rate plan revenue is required. The following adjustments, however, are required under the formula rate plan. The 2016 formula rate plan evaluation report shows a decrease in formula rate plan revenue of approximately $16.9 million, comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million, a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million, and a decrease in incremental formula rate plan revenue of $3.7 million. Additionally, the formula rate plan evaluation report calls for a decrease of $40.5 million in the MISO cost recovery revenue requirement from the current level of $46.8 million to $6.3 million. Rates reflecting these adjustments were implemented with the first billing cycle of September 2017, subject to refund, pending the review proceedings. Parties have intervened in the proceedings. No procedural schedule has been established. In September 2017 the LPSC issued its report indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report are required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.
Formula Rate Plan Extension Request
In August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications of its terms. Those modifications include: a one-time resetting of base rates to the midpoint of the band at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidth from a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recover certain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers. Entergy Louisiana has requested that the LPSC consider its request on an expedited basis and render a decision by December 2017, in an effort to maintain Entergy Louisiana’s current cycle for implementing rate adjustments, i.e., September 2018, without the need for filing a full base rate case proceeding.
Waterford 3 Replacement Steam Generator Project
FollowingSee Note 2 to the completionfinancial statements in the Form 10-K for discussion of the Waterford 3 replacement steam generator project the LPSC undertook a prudence review in connection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs. In July 2014 the LPSC Staff filed testimony recommending potential project and replacement power cost disallowances of up to $71 million, citing a need for further explanation or documentation from Entergy Louisiana. An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generator fabricator was imprudent. Entergy Louisiana provided further documentation and explanation requested by the LPSC staff. An evidentiary hearing was held in December 2014. At the hearing the parties maintained the positions reflected in pre-filed testimony. Entergy Louisiana believes that the replacement steam generator costs were prudently incurred and applicable legal principles support their recovery in rates. Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty at the time associated with the resolution of the prudence review. In December 2015 the ALJ issued a proposed recommendation, which was subsequently finalized, concluding that Entergy Louisiana prudently managed the Waterford 3 replacement steam generator project, including the selection, use, and oversight of contractors, and could not reasonably have anticipated the damage to the steam generators. Nevertheless, the ALJ concluded that Entergy Louisiana was liable for the conduct of its contractor and subcontractor and, therefore, recommended a disallowance of $67 million in capital costs. Additionally, the ALJ concluded that Entergy Louisiana did not sufficiently justify the incurrence of $2 million in replacement power costs during the replacement outage. After considering the progress of the proceeding in light of the ALJ recommendation, Entergy Louisiana recorded in the fourth quarter 2015 approximately $77 million in charges, including a $45 million asset write-off and a $32 million regulatory charge, to reflect that a portion of the assets associated with the Waterford 3 replacement steam generator project is no longer probable of recovery. Entergy Louisiana maintains that the ALJ’s recommendation contains significant factual and legal errors.
In October 2016 the parties reached a settlement in this matter. If approved by the LPSC, the settlement effectively would provide for an agreed-upon disallowance of $67 million of plant, which had been previously written off by Entergy Louisiana, as discussed above.proceeding. The settlement would also require a refund to customers of approximately $43$71 million representingas a result of the revenues previously collected associated with the disallowed plant, including interest, and $2 million of replacement power costs. Entergy Louisiana had previously recorded provisions for these refunds. Additionally, under the settlement Entergy Louisiana would provide a one-time credit to customers of approximately $24 million, representing the value of potential future service credits agreed to by the project contractor. The settlement provides that Entergy Louisiana can retain the value associated with these service credits, to the extent they are realized in the future. If the settlement is approved by the LPSC the refunds and one-time credit to customers would bewas made in December 2016.
Ninemile 6
As discussed inJanuary 2017. Following a review by the Form 10-K, in July 2015, Entergy Louisiana submitted to the LPSC a Ninemile 6 compliance filing includingparties, an estimate at completion, inclusiveunopposed joint report 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, to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project. Testimonyproceedings was filed by the 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 andin May 2017. In May 2017 the LPSC staff filed aaccepted the joint motion to suspendreport of proceedings resolving the procedural schedule pending the filing of an uncontested joint stipulated settlement. In October 2016 all parties agreed to a stipulation providing that 100% of Ninemile 6 construction costs was prudently incurred and is eligible for recovery from customers, but reserving the LPSC’s rights to review the prudence of Entergy Louisiana’s actions regarding one element of the project. This stipulation is subject to LPSC approval. matter.
Deactivation or Retirement Decisions for Entergy Corporation and Subsidiaries
Notes to Financial Statements
Louisiana Plants
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. This matter is pending before an ALJ, and a hearing has been scheduled in March 2017No party contests the prudence of the decision to determine, under applicable law, whetherdeactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues
Entergy Corporation and Subsidiaries
Notes to Financial Statements
have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units should be returned to service. into suspended status for the three-year term permitted by MISO. An evidentiary hearing was held in August 2017 and post-hearing briefs were submitted in October 2017. A decision is expected in 2018.
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 whichMay 2017.
In connection with 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 extensionproceedings accepted by the LPSC, test year 2015 is the final year under the current gas rate stabilization plan. In February 2016, however,in May 2017, Entergy Louisiana filed an application to initiate a motion requestingseparate proceeding to extendrecover the termdeferred operation and maintenance expenses of $1.4 million incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016 through the gas rate stabilization plan for an additional three-year term. A procedural schedule has been established, including a hearing in November 2016. The LPSC staff filed testimony supportive of the renewalextraordinary cost provision of the gas rate stabilization plan. The partiesLPSC staff submitted its direct testimony in the proceeding recommending recovery of $0.9 million. The procedural schedule includes a motion indicating that they are working toward development of a settlement that they would seek to have approved athearing in February 2018.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, hearing. 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. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s proposed AMI system, with modifications to the proposed customer charge. The stipulation also confirmed that Entergy Louisiana shall continue to include in rate base the remaining book value of the existing electric meters and also to depreciate those assets using current depreciation rates. In July 2017 the LPSC approved the stipulation.
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.bandwidth, resulting in no change in rates. In June 2016 the MPSC approved2017, Entergy Mississippi’s joint stipulation withMississippi and the Mississippi Public Utilities Staff. The jointStaff entered into a stipulation providedthat confirmed that Entergy Mississippi’s earned returns for a total revenue increase of $23.7 million. The revenue increase includes a $19.4 million increase throughboth the 2016 look-back filing and 2017 test year were within the respective formula rate plan resultingbandwidths. In June 2017 the MPSC approved the stipulation, which resulted in a return on common equity point of adjustment of 10.07%. The revenue increase also includes $4.3 millionno change 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.rates.
Filings with the City Council
As discussed in the Form 10-K, in November 2015 the City Council authorized expansion of the terms of the purchased power and capacity acquisition cost recovery rider to recover the non-fuel purchased power expense from Ninemile 6, the revenue requirement associated with the purchase of Power Block 1 of 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, Entergy New Orleans purchased Power Block 1 of the Union Power Station for approximately $237 million and initiated
Entergy Corporation and Subsidiaries
Notes to Financial Statements
recoveryAdvanced 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 that Entergy Mississippi’s deployment of these costsadvanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting 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 certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall continue to include in rate base the 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.
Filings with March 2016 bills. In July 2016,the City Council
Retail Rates
As discussed in the Form 10-K, in February 2017, Entergy New Orleans andfiled 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 Utility Committee agreed toidentify its desired level of funding for the program during this time period and approve a temporary increase incost recovery mechanism. In April 2017 the Michoud credit to customers to a total of $1.4 million monthlyCity Council approved an implementation plan for August 2016the Energy Smart program from April 2017 through December 2016.2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. In September 2017, Entergy New Orleans filed a supplemental plan and proposed several options for an interim cost recovery mechanism necessary to recover program costs during the period between when existing funds directed to Energy Smart programs are depleted (estimated to be June 2018) and when new rates from the anticipated 2018 combined rate case, which will include a cost recovery mechanism for Energy Smart funding, take effect (estimated to be August 2019). Entergy New Orleans requested that the City Council approve a cost recovery mechanism prior to June 2018.
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. The application provided that if it is approved by the City Councilproposed internal restructuring pursuant to an agreement in 2016, Entergy New Orleans would credit retail customers $5 million in each of the years 2016 and 2017. Intervenors filed direct testimony and comments in September 2016 andprinciple with the City Council advisors filed direct testimonyand certain intervenors. Pursuant to the agreement in October 2016. A hearing at the City Council scheduled for October 2016 has been continued until December 2016. In October 2016,principle, Entergy New Orleans filed its rebuttal testimony and therein agreed that, given the extended procedural schedule, the $5will credit retail customers $10 million in proposed 2016 credits would still be paid, although on a different schedule, if the City Council approved the restructuring after 2016 but before the end of2017, $1.4 million in the first quarter of 2017. The filing with the FERC has not yet been made, but ifyear after the restructuring is approved bytransaction closes, and $117,500 each month in the FERC by December 31,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. Entergy New Orleans has proposedbegan crediting retail customers in June 2017. In June 2017 the FERC approved the transaction and, pursuant to creditthe agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the years 2018, 2019, and 2020. If City Council and FERC approvals are obtained, Entergy New Orleans expects to complete the internal restructuring will be consummated by December 31,in fourth quarter 2017.
It is currently contemplated that Entergy New Orleans would undertake a multi-step restructuring, which would include the following:
Entergy New Orleans would redeem its outstanding preferred stock at 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 Utility Group, 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.
Advanced Metering Infrastructure (AMI) Filing
InAs discussed in the Form 10-K, in October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest. In April 2017, Entergy New Orleans proposedreceived intervenor testimony that was generally supportive of AMI deployment. The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to deploy advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve ascertain modifications, including the foundationdenial of Entergy New Orleans’s modernized power grid. The filing identifiedproposed customer charge as a number of quantified and unquantified benefits, and Entergy New Orleans provided a cost/benefit analysis showing that its combined electriccost recovery mechanism. In June 2017 the procedural schedule was suspended to allow for settlement discussions. A
Entergy Corporation and Subsidiaries
Notes to Financial Statements
status conference was held in October 2017, and gas AMI deployment is expected to produce a nominal net benefit to customers of $101 million. Entergy New Orleans also soughtthe parties set another status conference for February 2018 with the intent to continue to includepursue settlement in rate base the remaining book value, approximately $21 million, of the existing electric meters and also to depreciate those assets using current depreciation rates. Entergy New Orleans proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Subject to approval by the City Council, deployment of the information technology infrastructure is expected to begin in 2017 and deployment of the communications network is expected to begin in 2018. Entergy New Orleans proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019 through 2022. interim.
Filings with the PUCT
Retail Rates
2011 Rate Case
See Note 2 to the financial statements in 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 and other parties petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. In September 2017 the Texas Supreme Court denied the petitions for review. Entergy Texas filed a motion for rehearing of the Texas Supreme Court’s denial of the petition for review. That petitionmotion is pending.
Other Filings
In September 2015, Entergy Texas filed for a transmission cost recovery factor (TCRF) rider requesting a $13 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 million from Entergy Texas’s $13 million request, but recommending that the PUCT not accept the load growth offset. In April 2016 the PUCT voted to allow Entergy Texas’s TCRF rates to become effective as of April 14, 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 in a future rulemaking project the issue 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 million. The PUCT also ordered its staff and Entergy Texas to track all spare autotransformer transfers going forward so that it could address the appropriate accounting treatment and prudence of such transfers in Entergy Texas’s next base rate case. Entergy Texas implemented the TCRF rider beginning with September 2016 bills.
In September 2016, Entergy Texas filed with the PUCT a request to amend its TCRFtransmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider is designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount includes the approximately $10.5 million annually that Entergy Texas is currently authorized to collect through the TCRF rider. In December 2016, Entergy Texas and the PUCT reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million. The PUCT approved the settlement and issued a final order in March 2017. Entergy Texas implemented the amended TCRF rider as discussed above.beginning with bills covering usage on and after March 20, 2017.
In June 2017, Entergy Texas filed an application to amend its distribution cost recovery factor (DCRF) rider by increasing the total collection from $8.65 million to approximately $19 million. In July 2017, Entergy Texas, the PUCT, and the parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million, with the resulting rates effective for usage no later than October 1, 2017. In September 20162017 the PUCT suspendedissued its final order approving the unopposed stipulation and settlement agreement. The amended DCRF rider rates became effective datefor usage on and after September 1, 2017.
Advanced Metering Infrastructure (AMI) Filing
In April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas and directs that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed an application seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Texas’s modernized power grid. The filing identified a number of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment is expected to produce nominal net operational cost savings to customers of $33 million. Entergy Texas also sought to continue to include in rate base the remaining book value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff change to March 2017, which date could further be extended.
recover the reasonable and necessary costs it has and will incur under the deployment plan for the full deployment of advanced meters. Further, Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Texas is seeking approval of fees that would be charged to customers who choose to opt out of receiving service through an advanced meter and instead receive electric service with a non-standard meter. Subject to approval by the PUCT, deployment of the communications network is expected to begin in 2018. In October 2017, Entergy Texas and other parties entered into and filed an unopposed stipulation and settlement agreement. PUCT action on the stipulation and settlement agreement remains pending. Entergy Texas expects a decision from the PUCT by December 2017.
Storm Cost Recovery
Entergy Mississippi
See Note 2 to the financial statements in the Form 10-K for discussion of Entergy Mississippi’s storm damage provision. As of July 31, 2017, the balance in Entergy Mississippi’s accumulated storm damage provision was less than $10 million, therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with September 2017 bills.
System AgreementStorm Cost Equalization ProceedingsRecovery
Rough Production Cost Equalization Rates
2010 Rate Filing Based on Calendar Year 2009 Production CostsEntergy Mississippi
See Note 2 to the financial statements in the Form 10-K for a discussion of this proceeding. InEntergy Mississippi’s storm damage provision. As of July 31, 2017, the balance in Entergy Mississippi’s accumulated storm damage provision was less than $10 million, therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with September 2016 the FERC accepted the February 2016 compliance filing subject to a further compliance filing that is due in November 2016. The further compliance filing is required as a result of an order also issued in September 2016 ruling on the January 2016 rehearing requests filed by the LPSC, the APSC, and Entergy Services. In the order addressing the rehearing requests, the FERC granted the LPSC’s rehearing request and directed that interest be calculated on the payment/receipt amounts based on the 2009 production costs. The FERC also granted the APSC’s and Entergy Services’s rehearing request and ordered the removal of both securitized asset accumulated deferred income taxes and contra-securitization accumulated deferred income taxes from the calculation.2017 bills.
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 were filed in September 2016.
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. In August 2016 the FERC issued an order approving the settlement.
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 the City Council intervened in the proceeding. In July 2016 the FERC accepted the 2016 rates for filing without any further proceedings.
Interruptible Load Proceedings
See the Form 10-K for a discussion of the interruptible load proceeding. In April 2016 the FERC issued an order on remand that addressed the December 2014 decision by the D.C. Circuit 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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. In September 2016 the FERC issued an order denying the LPSC’s request for rehearing and reaffirming its denial of refunds for the 15-month refund effective period.
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. 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 has performed an initial re-run of the intra-system bills for the ten-year period (2000-2009) to attempt 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 discussedSee Note 2 to the financial statements 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 resultfor discussion of Entergy Mississippi’s storm damage provisionprovision. As of July 31, 2017, the balance exceeding $15 million as of January 31, 2015, but would return to its current level when thein Entergy Mississippi’s accumulated 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 2016September 2017 bills. As of September 30, 2016, however, Entergy Mississippi’s storm damage provision balance again exceeded $15 million. In October 2016, Entergy Mississippi provided notice to the Mississippi Public Utilities Staff that the storm damage provision will be reset to zero beginning with the November 2016 billing cycle and continuing until the balance again becomes less than $10 million, at which time it will return to its prior level.
Texas Power Price LawsuitSystem Agreement Cost Equalization Proceedings
See Note 2 to the financial statements in the Form 10-K for a discussion of this lawsuit.the proceedings regarding the System Agreement, including the LPSC’s petition for review of the FERC’s October 2011 and February 2014 orders with the U.S. Court of Appeals for the D.C. Circuit. In August 2017 the D.C. Circuit issued a decision addressing the LPSC’s appeal of the FERC’s October 2011 and February 2014 orders. On the issue of the FERC’s implementation of the prospective remedy as of June 2005 and whether the bandwidth remedy should be extended for an additional 17 months in years 2004-2005, the D.C. Circuit affirmed the FERC’s implementation of the remedy and denied the LPSC’s appeal. On the issue of whether the operating companies should be required to issue refunds for the 20-month period from September 2001 to May 2003, the D.C. Circuit granted the FERC’s request for agency reconsideration and remanded that issue back to the FERC for further proceedings as requested by all parties to the appeal.
Entergy Arkansas Opportunity Sales Proceedings
As discussed in the Form 10-K, in June 2009 the LPSC filed a complaint requesting 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 allocated 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 prohibited sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds.
In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and an 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 August 2013 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order arguing that payments made by Entergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain contracts. 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. In September 2017 the FERC issued an order denying the request for rehearing on the issue of whether any payments by Entergy Arkansas to the other Utility operating companies should be reduced due to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana.
Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the Supreme Court deniedLPSC submitted testimony disputing certain aspects of the plaintiffs’ petitioncalculations, and Entergy Services submitted answering testimony in January 2017. In February 2017 the FERC staff filed testimony and Entergy Services filed responsive testimony. In March 2017 the LPSC filed rebuttal testimony. A hearing was held in May 2017. In July 2017 the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interest to the other Utility operating companies. In August 2017 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individual briefs on exceptions challenging various aspects of the initial decision. In September 2017 the Utility operating companies, the LPSC, the APSC, the MPSC, the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties. The case is pending before the FERC. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.
The effect of the FERC’s decisions thus far in the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies. Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million, which includes interest, for review.its estimated increased costs and payment to the other Utility operating companies. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision. 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. Entergy Arkansas, therefore, recorded a regulatory asset in the first quarter 2016 of approximately $75 million, which represents its estimate of the retail portion of the costs.
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 LPSC and the City Council intervened in the proceeding expressing support for the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. In September 2017 the FERC established a refund effective date of January 23, 2017, consolidated the return on equity complaint proceeding with the proceeding related to System Energy’s Unit Power Sales Agreement amendments, discussed below, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Unit Power Sales Agreement
In August 2017, System Energy submitted to the FERC proposed amendments to 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. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017.
In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to further proceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, the FERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower than proposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of the further settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the rate decrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding related to the complaint filed by the APSC and MPSC, discussed above, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.
NOTE 3. EQUITY (Entergy Corporation and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and System Energy)Louisiana)
Common Stock
Earnings (loss) per Share
The following table presents Entergy’s basic and diluted earnings (loss) per share calculations included on the consolidated statements of operations:income statements:
| | | | For the Three Months Ended September 30, | For the Three Months Ended September 30, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions, Except Per Share Data) | (In Millions, Except Per Share Data) |
| Basic earnings (loss) per share | Income | | Shares | | $/share | | Loss | | Shares | | $/share | |
| Net income (loss) attributable to Entergy Corporation |
| $388.2 |
| | 179.0 |
| |
| $2.17 |
| |
| ($723.0 | ) | | 179.2 |
| |
| ($4.04 | ) | |
| Basic earnings per share | | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation | |
| $398.2 |
| | 179.6 |
| |
| $2.22 |
| |
| $388.2 |
| | 179.0 |
| |
| $2.17 |
|
| Average dilutive effect of: | | | | | | | | | | | | | | | | | | | | | | |
| Stock options | | | 0.3 |
| | — |
| | | | — |
| | — |
| | | 0.2 |
| | — |
| | | | 0.3 |
| | — |
|
| Other equity plans | | | 0.7 |
| | (0.01 | ) | | | | — |
| | — |
| | | 0.7 |
| | (0.01 | ) | | | | 0.7 |
| | (0.01 | ) |
| Diluted earnings (loss) per share |
| $388.2 |
| | 180.0 |
| |
| $2.16 |
| |
| ($723.0 | ) | | 179.2 |
| |
| ($4.04 | ) | |
| Diluted earnings per share | |
| $398.2 |
| | 180.5 |
| |
| $2.21 |
| |
| $388.2 |
| | 180.0 |
| |
| $2.16 |
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 2.5 million for the three months ended September 30, 2017 and approximately 3.5 million for the three months ended September 30, 20162016.
Entergy Corporation and approximately 7.4 million for the three months ended September 30, 2015.Subsidiaries
Notes to Financial Statements
| | | | For the Nine Months Ended September 30, | For the Nine Months Ended September 30, |
| | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions, Except Per Share Data) | (In Millions, Except Per Share Data) |
| Basic earnings (loss) per share | Income | | Shares | | $/share | | Loss | | Shares | | $/share | |
| Net income (loss) attributable to Entergy Corporation |
| $1,185.4 |
| | 178.8 |
| |
| $6.63 |
| |
| ($276.1 | ) | | 179.4 |
| |
| ($1.54 | ) | |
| Basic earnings per share | | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation | |
| $890.7 |
| | 179.5 |
| |
| $4.96 |
| |
| $1,185.4 |
| | 178.8 |
| |
| $6.63 |
|
| Average dilutive effect of: | | | | | | | | | | | | | | | | | | | | | | |
| Stock options | | | 0.2 |
| | (0.01 | ) | | | | — |
| | — |
| | | 0.2 |
| | (0.01 | ) | | | | 0.2 |
| | (0.01 | ) |
| Other equity plans | | | 0.5 |
| | (0.02 | ) | | | | — |
| | — |
| | | 0.5 |
| | (0.01 | ) | | | | 0.5 |
| | (0.02 | ) |
| Diluted earnings (loss) per share |
| $1,185.4 |
| | 179.5 |
| |
| $6.60 |
| |
| ($276.1 | ) | | 179.4 |
| |
| ($1.54 | ) | |
| Diluted earnings per share | |
| $890.7 |
| | 180.2 |
| |
| $4.94 |
| |
| $1,185.4 |
| | 179.5 |
| |
| $6.60 |
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 3.3 million for the nine months ended September 30, 2017 and approximately 4.6 million for the nine months ended September 30, 2016 and approximately 7.4 million for the nine months ended September 30, 2015.2016.
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.
In May 2016, System Energy paid its parent, Entergy Corporation, a $40 million distribution out of its common stock.
Treasury Stock
During the nine months ended September 30, 2016,2017, Entergy Corporation issued 738,579496,177 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 nine months ended September 30, 2016.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Preferred Stock
In September 2016, Entergy Arkansas redeemed $10 million of its 6.08% Series preferred stock and $75 million of its 6.45% Series preferred stock.
In October 2016, Entergy Mississippi redeemed $30 million of its 6.25% Series preferred stock.2017.
Retained Earnings
On October 28, 2016,27, 2017, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.87$0.89 per share, payable on December 1, 2016,2017, to holders of record as of November 10, 2016.9, 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 September 30, 20162017 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, July 1, 2016 |
| $32,423 |
| |
| ($453,999 | ) | |
| $411,581 |
| |
| $840 |
| |
| ($9,155 | ) | |
| Beginning balance, July 1, 2017 | |
| $23,414 |
| |
| ($449,898 | ) | |
| $479,257 |
| |
| $— |
| |
| $52,773 |
|
| Other comprehensive income (loss) before reclassifications | 45,162 |
| | — |
| | 23,039 |
| | (92 | ) | | 68,109 |
| 27,884 |
| | — |
| | 35,630 |
| | — |
| | 63,514 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (24,190 | ) | | 5,044 |
| | (1,672 | ) | | — |
| | (20,818 | ) | (14,671 | ) | | 12,297 |
| | (2,235 | ) | | — |
| | (4,609 | ) |
| Net other comprehensive income (loss) for the period | 20,972 |
| | 5,044 |
| | 21,367 |
| | (92 | ) | | 47,291 |
| 13,213 |
| | 12,297 |
| | 33,395 |
| | — |
| | 58,905 |
|
| Ending balance, September 30, 2016 |
| $53,395 |
| |
| ($448,955 | ) | |
| $432,948 |
| |
| $748 |
| |
| $38,136 |
| |
| Ending balance, September 30, 2017 | |
| $36,627 |
| |
| ($437,601 | ) | |
| $512,652 |
| |
| $— |
| |
| $111,678 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended September 30, 20152016 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, July 1, 2015 |
| $107,484 |
| |
| ($553,903 | ) | |
| $396,818 |
| |
| $2,785 |
| |
| ($46,816 | ) | |
| Beginning balance, July 1, 2016 | |
| $32,423 |
| |
| ($453,999 | ) | |
| $411,581 |
| |
| $840 |
| |
| ($9,155 | ) |
| Other comprehensive income (loss) before reclassifications | 31,620 |
| | — |
| | (50,760 | ) | | (469 | ) | | (19,609 | ) | 45,162 |
| | — |
| | 23,039 |
| | (92 | ) | | 68,109 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (55,604 | ) | | 7,437 |
| | (3,206 | ) | | — |
| | (51,373 | ) | (24,190 | ) | | 5,044 |
| | (1,672 | ) | | — |
| | (20,818 | ) |
| Net other comprehensive income (loss) for the period | (23,984 | ) | | 7,437 |
| | (53,966 | ) | | (469 | ) | | (70,982 | ) | 20,972 |
| | 5,044 |
| | 21,367 |
| | (92 | ) | | 47,291 |
|
| Ending balance, September 30, 2015 |
| $83,500 |
| |
| ($546,466 | ) | |
| $342,852 |
| |
| $2,316 |
| |
| ($117,798 | ) | |
| Ending balance, September 30, 2016 | |
| $53,395 |
| |
| ($448,955 | ) | |
| $432,948 |
| |
| $748 |
| |
| $38,136 |
|
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 20162017 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, January 1, 2016 |
| $105,970 |
| |
| ($466,604 | ) | |
| $367,557 |
| |
| $2,028 |
| |
| $8,951 |
| |
| Beginning balance, January 1, 2017 | |
| $3,993 |
| |
| ($469,446 | ) | |
| $429,734 |
| |
| $748 |
| |
| ($34,971 | ) |
| Other comprehensive income (loss) before reclassifications | 101,071 |
| | — |
| | 72,087 |
| | (1,280 | ) | | 171,878 |
| 88,550 |
| | — |
| | 109,372 |
| | (748 | ) | | 197,174 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (153,646 | ) | | 17,649 |
| | (6,696 | ) | | — |
| | (142,693 | ) | (55,916 | ) | | 31,845 |
| | (26,454 | ) | | — |
| | (50,525 | ) |
| Net other comprehensive income (loss) for the period | (52,575 | ) | | 17,649 |
| | 65,391 |
| | (1,280 | ) | | 29,185 |
| 32,634 |
| | 31,845 |
| | 82,918 |
| | (748 | ) | | 146,649 |
|
| Ending balance, September 30, 2016 |
| $53,395 |
| |
| ($448,955 | ) | |
| $432,948 |
| |
| $748 |
| |
| $38,136 |
| |
| Ending balance, September 30, 2017 | |
| $36,627 |
| |
| ($437,601 | ) | |
| $512,652 |
| |
| $— |
| |
| $111,678 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 20152016 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, January 1, 2015 |
| $98,118 |
| |
| ($569,789 | ) | |
| $426,695 |
| |
| $2,669 |
| |
| ($42,307 | ) | |
| Beginning balance, January 1, 2016 | |
| $105,970 |
| |
| ($466,604 | ) | |
| $367,557 |
| |
| $2,028 |
| |
| $8,951 |
|
| Other comprehensive income (loss) before reclassifications | 99,520 |
| | 13 |
| | (63,210 | ) | | (353 | ) | | 35,970 |
| 101,071 |
| | — |
| | 72,087 |
| | (1,280 | ) | | 171,878 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (114,138 | ) | | 23,310 |
| | (20,633 | ) | | — |
| | (111,461 | ) | (153,646 | ) | | 17,649 |
| | (6,696 | ) | | — |
| | (142,693 | ) |
| Net other comprehensive income (loss) for the period | (14,618 | ) | | 23,323 |
| | (83,843 | ) | | (353 | ) | | (75,491 | ) | (52,575 | ) | | 17,649 |
| | 65,391 |
| | (1,280 | ) | | 29,185 |
|
| Ending balance, September 30, 2015 |
| $83,500 |
| |
| ($546,466 | ) | |
| $342,852 |
| |
| $2,316 |
| |
| ($117,798 | ) | |
| Ending balance, September 30, 2016 | |
| $53,395 |
| |
| ($448,955 | ) | |
| $432,948 |
| |
| $748 |
| |
| $38,136 |
|
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended September 30, 2017 and 2016:
|
| | | | |
| | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance July 1, 2016 | |
| ($56,905 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (232 | ) |
Net other comprehensive income (loss) for the period | | (232 | ) |
Ending balance, September 30, 2016 | |
| ($57,137 | ) |
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 September 30, 2015:
|
| | | | |
| | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance July 1, 2015 |
|
| ($78,431 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) |
| 412 |
|
Net other comprehensive income (loss) for the period |
| 412 |
|
Ending balance, September 30, 2015 |
|
| ($78,019 | ) |
|
| | | | | | | | |
| | | Pension and Other
Postretirement Liabilities |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| Beginning balance, July 1, | |
| ($49,122 | ) | |
| ($56,905 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (370 | ) | | (232 | ) |
| Net other comprehensive income (loss) for the period | | (370 | ) | | (232 | ) |
| Ending balance, September 30, | |
| ($49,492 | ) | |
| ($57,137 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the nine months ended September 30, 2017 and 2016:
|
| | | | |
| | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance, January 1, 2016 | |
| ($56,412 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (725 | ) |
Net other comprehensive income (loss) for the period | | (725 | ) |
Ending balance, September 30, 2016 | |
| ($57,137 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the nine months ended September 30, 2015:
|
| | | | |
| | Pension and Other
Postretirement Liabilities |
| | (In Thousands) |
Beginning balance, January 1, 2015 | |
| ($79,223 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | 1,204 |
|
Net other comprehensive income (loss) for the period | | 1,204 |
|
Ending balance, September 30, 2015 | |
| ($78,019 | ) |
|
| | | | | | | | |
| | | 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) | | (1,050 | ) | | (725 | ) |
| Net other comprehensive income (loss) for the period | | (1,050 | ) | | (725 | ) |
| Ending balance, September 30, | |
| ($49,492 | ) | |
| ($57,137 | ) |
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 September 30, 2017 and 2016 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI
| | Income Statement Location |
| (In Thousands) | | |
Cash flow hedges net unrealized gain (loss) | | | |
Power contracts |
| $37,550 |
| | Competitive business operating revenues |
Interest rate swaps | (334 | ) | | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 37,216 |
| | |
| (13,026 | ) | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $24,190 |
| | |
| | | |
Pension and other postretirement liabilities | | | |
Amortization of prior-service credit |
| $7,354 |
| | (a) |
Amortization of loss | (15,183 | ) | | (a) |
Settlement loss | (1,279 | ) | | (a) |
Total amortization | (9,108 | ) | | |
| 4,064 |
| | Income taxes |
Total amortization (net of tax) |
| ($5,044 | ) | | |
| | | |
Net unrealized investment gain (loss) | | | |
Realized gain (loss) |
| $3,279 |
| | Interest and investment income |
| (1,607 | ) | | Income taxes |
Total realized investment gain (loss) (net of tax) |
| $1,672 |
| | |
| | | |
Total reclassifications for the period (net of tax) |
| $20,818 |
| | |
|
| | | | | | | | | |
| Amounts reclassified
from AOCI |
| Income Statement Location |
| | 2017 | | 2016 | | |
| (In Thousands) |
|
|
| Cash flow hedges net unrealized gain (loss) |
| | |
|
|
| Power contracts |
| $22,756 |
| |
| $37,550 |
|
| Competitive business operating revenues |
| Interest rate swaps | (185 | ) | | (334 | ) |
| Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | 22,571 |
| | 37,216 |
|
|
|
| (7,900 | ) | | (13,026 | ) |
| Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
| $14,671 |
| |
| $24,190 |
|
|
|
|
|
| | |
|
|
| Pension and other postretirement liabilities |
|
| | |
|
|
| Amortization of prior-service credit |
| $6,565 |
| |
| $7,354 |
|
| (a) |
| Amortization of loss | (21,480 | ) | | (15,183 | ) |
| (a) |
| Settlement loss | (4,200 | ) | | (1,279 | ) |
| (a) |
| Total amortization | (19,115 | ) | | (9,108 | ) |
|
|
| 6,818 |
| | 4,064 |
|
| Income taxes |
| Total amortization (net of tax) |
| ($12,297 | ) | |
| ($5,044 | ) |
|
|
|
| | |
|
|
| Net unrealized investment gain (loss) |
| | |
|
|
| Realized gain (loss) |
| $4,382 |
| |
| $3,279 |
|
| Interest and investment income |
| (2,147 | ) | | (1,607 | ) |
| Income taxes |
| Total realized investment gain (loss) (net of tax) |
| $2,235 |
| |
| $1,672 |
|
|
|
|
|
| | |
|
|
| Total reclassifications for the period (net of tax) |
| $4,609 |
| |
| $20,818 |
|
|
|
| |
| (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 September 30, 2015 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI |
| Income Statement Location |
| (In Thousands) |
|
|
Cash flow hedges net unrealized gain (loss) |
|
|
|
Power contracts |
| $86,020 |
|
| Competitive business operating revenues |
Interest rate swaps | (477 | ) |
| Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 85,543 |
|
|
|
| (29,939 | ) |
| Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $55,604 |
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities |
|
|
|
|
Amortization of prior-service credit |
| $5,985 |
|
| (a) |
Amortization of loss | (17,588 | ) |
| (a) |
Total amortization | (11,603 | ) |
|
|
| 4,166 |
|
| Income taxes |
Total amortization (net of tax) |
| ($7,437 | ) |
|
|
|
|
|
|
Net unrealized investment gain (loss) |
|
|
|
Realized gain (loss) |
| $6,286 |
|
| Interest and investment income |
| (3,080 | ) |
| Income taxes |
Total realized investment gain (loss) (net of tax) |
| $3,206 |
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax) |
| $51,373 |
|
|
|
| |
(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 nine months ended September 30, 2017 and 2016 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI |
| Income Statement Location |
| (In Thousands) |
|
|
Cash flow hedges net unrealized gain (loss) |
|
|
|
Power contracts |
| $237,483 |
|
| Competitive business operating revenues |
Interest rate swaps | (1,104 | ) |
| Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 236,379 |
|
|
|
| (82,733 | ) |
| Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $153,646 |
|
|
|
|
|
|
|
|
Pension and other postretirement liabilities |
|
|
|
|
Amortization of prior-service credit |
| $22,064 |
|
| (a) |
Amortization of loss | (45,535 | ) |
| (a) |
Settlement loss | (1,279 | ) |
| (a) |
Total amortization | (24,750 | ) |
|
|
| 7,101 |
|
| Income taxes |
Total amortization (net of tax) |
| ($17,649 | ) |
|
|
|
|
|
|
Net unrealized investment gain (loss) |
|
|
|
Realized gain (loss) |
| $13,129 |
|
| Interest and investment income |
| (6,433 | ) |
| Income taxes |
Total realized investment gain (loss) (net of tax) |
| $6,696 |
|
|
|
|
|
|
|
|
Total reclassifications for the period (net of tax) |
| $142,693 |
|
|
|
|
| | | | | | | | | |
| | Amounts reclassified from AOCI | | Income Statement Location |
| | 2017 | | 2016 | | |
| | (In Thousands) | | |
| Cash flow hedges net unrealized gain (loss) | | | | | |
| Power contracts |
| $86,678 |
| |
| $237,483 |
| | Competitive business operating revenues |
| Interest rate swaps | (654 | ) | | (1,104 | ) | | Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | 86,024 |
| | 236,379 |
| | |
| | (30,108 | ) | | (82,733 | ) | | Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
| $55,916 |
| |
| $153,646 |
| | |
| | | | | | |
| Pension and other postretirement liabilities | | | | | |
| Amortization of prior-service credit |
| $19,691 |
| |
| $22,064 |
| | (a) |
| Amortization of loss | (64,605 | ) | | (45,535 | ) | | (a) |
| Settlement loss | (5,965 | ) | | (1,279 | ) | | (a) |
| Total amortization | (50,879 | ) | | (24,750 | ) | | |
| | 19,034 |
| | 7,101 |
| | Income taxes |
| Total amortization (net of tax) |
| ($31,845 | ) | |
| ($17,649 | ) | | |
| | | | | | |
| Net unrealized investment gain (loss) | | | | | |
| Realized gain (loss) |
| $51,871 |
| |
| $13,129 |
| | Interest and investment income |
| | (25,417 | ) | | (6,433 | ) | | Income taxes |
| Total realized investment gain (loss) (net of tax) |
| $26,454 |
| |
| $6,696 |
| | |
| | | | | | |
| Total reclassifications for the period (net of tax) |
| $50,525 |
| |
| $142,693 |
| | |
| |
| (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 nine months ended September 30, 2015 are as follows:
|
| | | | | |
| Amounts
reclassified
from
AOCI | | Income Statement Location |
| (In Thousands) | | |
Cash flow hedges net unrealized gain (loss) | | | |
Power contracts |
| $177,129 |
| | Competitive business operating revenues |
Interest rate swaps | (1,533 | ) | | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | 175,596 |
| | |
| (61,458 | ) | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) |
| $114,138 |
| | |
| | | |
Pension and other postretirement liabilities | | | |
Amortization of prior-service credit |
| $17,956 |
| | (a) |
Amortization of loss | (52,764 | ) | | (a) |
Total amortization | (34,808 | ) | | |
| 11,498 |
| | Income taxes |
Total amortization (net of tax) |
| ($23,310 | ) | | |
| | | |
Net unrealized investment gain (loss) | | | |
Realized gain (loss) |
| $40,457 |
| | Interest and investment income |
| (19,824 | ) | | Income taxes |
Total realized investment gain (loss) (net of tax) |
| $20,633 |
| | |
| | | |
Total reclassifications for the period (net of tax) |
| $111,461 |
| | |
| |
(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 September 30, 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 | | (1,570 | ) | | (a) |
Total amortization | | 377 |
| | |
| | (145 | ) | | Income taxes |
Total amortization (net of tax) | | 232 |
| | |
| | | | |
Total reclassifications for the period (net of tax) | |
| $232 |
| | |
| |
(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 September 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 |
| (2,536 | ) |
| (a) |
Total amortization |
| (670 | ) |
|
|
|
| 258 |
|
| 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 nine months ended September 30, 2016 are as follows:
|
| | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | (In Thousands) | | |
Pension and other postretirement liabilities | | | | |
Amortization of prior-service credit | |
| $5,841 |
| | (a) |
Amortization of loss | | (4,712 | ) | | (a) |
Total amortization | | 1,129 |
| | |
| | (404 | ) | | Income taxes |
Total amortization (net of tax) | | 725 |
| | |
| | | | |
Total reclassifications for the period (net of tax) | |
| $725 |
| | |
|
| | | | | | | | | | |
| | | 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 | ) | | (1,570 | ) | | (a) |
| Total amortization | | 602 |
| | 377 |
| | |
| | | (232 | ) | | (145 | ) | | Income taxes |
| Total amortization (net of tax) | | 370 |
| | 232 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $370 |
| |
| $232 |
| | |
| |
| (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 nine months ended September 30, 20152017 and 2016 are as follows:
|
| | | | | | |
| | Amounts reclassified
from AOCI | | Income Statement Location |
| | (In Thousands) | | |
Pension and other postretirement liabilities | | | | |
Amortization of prior-service credit | |
| $5,599 |
| | (a) |
Amortization of loss | | (7,606 | ) | | (a) |
Total amortization | | (2,007 | ) | | |
| | 803 |
| | Income taxes |
Total amortization (net of tax) | | (1,204 | ) | | |
| | | | |
Total reclassifications for the period (net of tax) | |
| ($1,204 | ) | | |
|
| | | | | | | | | | |
| | | Amounts reclassified
from AOCI | | Income Statement Location |
| | | 2017 | | 2016 | | |
| | | (In Thousands) | | |
| Pension and other postretirement liabilities | | | | | | |
| Amortization of prior-service credit | |
| $5,802 |
| |
| $5,841 |
| | (a) |
| Amortization of loss | | (3,996 | ) | | (4,712 | ) | | (a) |
| Total amortization | | 1,806 |
| | 1,129 |
| | |
| | | (756 | ) | | (404 | ) | | Income taxes |
| Total amortization (net of tax) | | 1,050 |
| | 725 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $1,050 |
| |
| $725 |
| | |
| |
| (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 2021. Entergy Corporation also has2022. The facility permits the ability to issueissuance of letters of credit against 50% of the total borrowing capacity of the credit facility. The commitment fee is currently 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 nine months ended September 30, 2017 was 2.50% on the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the nine months ended September 30, 2016 was 2.24% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of September 30, 2016.2017.
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $180 | | $6 | | $3,314 | | $150 | | $6 | | $3,344 |
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 September 30, 2016,2017, Entergy Corporation had $264 million$1.3 billion of commercial paper outstanding. The weighted-average interest rate for the nine months ended September 30, 20162017 was 1.14%1.45%.
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of September 30, 20162017 as follows:
|
| | | | | | | | | | |
| Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of September 30, 20162017 | | Letters of Credit Outstanding as of September 30, 20162017 |
| Entergy Arkansas | | April 20172018 | | $20 million (b) | | 1.77%2.49% | | $— | | $— |
| Entergy Arkansas | | August 20212022 | | $150 million (c) | | 1.77%2.49% | | $— | | $— |
| Entergy Louisiana | | August 20212022 | | $350 million (d) | | 1.77%2.49% | | $— | | $6.49.1 million |
| Entergy Mississippi | | May 20172018 | | $37.5 million (e) | | 2.02%2.74% | | $— | | $— |
| Entergy Mississippi | | May 20172018 | | $35 million (e) | | 2.02%2.74% | | $— | | $— |
| Entergy Mississippi | | May 20172018 | | $20 million (e) | | 2.02%2.74% | | $— | | $— |
| Entergy Mississippi | | May 20172018 | | $10 million (e) | | 2.02%2.74% | | $— | | $— |
| Entergy New Orleans | | November 2018 | | $25 million (f) | | 2.27%2.71% | | $— | | $0.8 million |
| Entergy Texas | | August 20212022 | | $150 million (g) | | 2.02%2.74% | | $— | | $4.724.4 million |
| |
| (a) | The interest rate is the rate as of September 30, 20162017 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. |
| |
| (c) | The credit facility allows Entergy Arkansas to issuepermits the issuance of letters of credit against 50% of the borrowing capacity of the facility. |
| |
| (d) | The credit facility allows Entergy Louisiana to issuepermits the issuance of 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. |
| |
| (f) | The credit facility allows Entergy New Orleans to issuepermits the issuance of letters of credit against $10 million of the borrowing capacity of the facility. |
| |
| (g) | The credit facility allows Entergy Texas to issuepermits the issuance of 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 September 30, 2016:2017:
|
| | | | | | |
| Company | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of September 30, 20162017 (a) |
| Entergy Arkansas | | $25 million | | 0.70% | | $1.02 million |
| Entergy Louisiana | | $125 million | | 0.70% | | $16.438.5 million |
| Entergy Mississippi | | $40 million | | 0.70% | | $10.212.8 million |
| Entergy New Orleans | | $15 million | | 0.75% | | $12.97.1 million |
| Entergy Texas | | $50 million | | 0.70% | | $16.019.6 million |
| |
| (a) | As of September 30, 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. See Note 8 to the financial statements herein for discussion of 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, 2017.2019. 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 September 30, 20162017 (aggregating both money poolinternal and external short-term borrowings) for the Registrant Subsidiaries:
| | | | Authorized | | Borrowings | Authorized | | Borrowings |
| | (In Millions) | (In Millions) |
| Entergy Arkansas | $250 | | $49 | $250 | | $95 |
| Entergy Louisiana | $450 | | $— | $450 | | $— |
| Entergy Mississippi | $175 | | $— | $175 | | $106 |
| Entergy New Orleans | $100 | | $— | $100 | | $— |
| Entergy Texas | $200 | | $12 | $200 | | $89 |
| System Energy | $200 | | $— | $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 has 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 0.20% of the undrawn commitment amount. As of September 30, 2016, $41.52017, $80 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the nine months ended September 30, 20162017 was 2.19%2.56% on the drawn portion of the facility.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Nuclear Vermont Yankee also has 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 September 30, 2016,2017, there were no cash borrowings outstanding under the credit facility.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The rate as of September 30, 20162017 that would most likely apply to outstanding borrowings under the facility was 2.27% on the drawn portion of the facility.2.73%.
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 September 30, 2016:2017 as follows:
| | | Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of September 30, 2016 | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of September 30, 2017 |
| | |
| | (Dollars in Millions) | |
| | (Dollars in Millions) |
| Entergy Arkansas VIE | | May 2019 | | $80 | | 2.15% | | $47.4 (b) | | May 2019 | | $80 | | 2.49% | | $23.3 (b) |
| Entergy Louisiana River Bend VIE | | May 2019 | | $105 | | n/a | | $— | | May 2019 | | $105 | | 2.33% | | $78.8 |
| Entergy Louisiana Waterford VIE | | May 2019 | | $85 | | 2.14% | | $42.0 (b) | | May 2019 | | $85 | | 2.55% | | $76.9 (c) |
| System Energy VIE | | May 2019 | | $120 | | 2.13% | | $80.0 (b) | | May 2019 | | $120 | | 2.44% | | $81.8 (d) |
| |
| (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) | Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability.liability and the amount outstanding for Entergy Arkansas VIE as of September 30, 2017 was $8.3 million. |
| |
| (c) | Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for Entergy Louisiana Waterford VIE as of September 30, 2017 was $40.6 million. |
| |
| (d) | Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for System Energy VIE as of September 30, 2017 was $31.8 million. |
The commitment fees on the credit facilities are currently 0.10% of the undrawn commitment amount for the Entergy Arkansas, Entergy Louisiana, and System Energy 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.
The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of September 30, 20162017 as follows:
|
| | | | |
| Company | | Description | | Amount |
| 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 Louisiana River BendArkansas VIE | | 3.25%3.17% Series QM due July 2017December 2023 | | $7540 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 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Debt Issuances and RedemptionsRetirements
(Entergy Corporation)
In August 2016, Entergy Corporation issued $750 million of 2.95% Series senior notes due September 2026. Entergy Corporation used the proceeds to repay a portion of its commercial paper outstanding and to repay borrowings under the Entergy Corporation credit facility, and plans to use the remainder of the proceeds to pay, prior to maturity, its $500 million of 4.7% Series senior notes due January 2017.
(Entergy Arkansas)
In January 2016,May 2017, 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$220 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 and June 2016. In July 2016, Entergy Arkansas used a portion of the proceeds together with other funds, to pay, prior to maturity, its $60 million of 6.38% Series first mortgage bonds due November 2034 andfrom the May 2017 issuance for general corporate purposes.
In July 2016purposes and used the Entergy Arkansas nuclear fuel company variable interest entity redeemed,remainder of the proceeds to pay, at maturity, its $55$54.7 million of 3.23% Series J notes.
In August 2016, Entergy Arkansas issued $410 million of 4.875% Series first mortgage1.55% pollution control revenue refunding bonds due September 2066. Entergy Arkansas used the proceeds, together with other funds, to redeem $10 million of its 6.08% Series preferred stock, to redeem $75 million of its 6.45% Series preferred stock, to pay, prior to maturity, its $225 million of 5.75% Series first mortgage bonds due November 2040, to pay, prior to maturity, its $100 million of 5.9% Series first mortgage bonds due June 2033, and for general corporate purposes.October 2017.
(Entergy Louisiana)
In March 2016,May 2017, Entergy Louisiana issued $200$450 million of 4.95% Series first3.12% collateral trust mortgage bonds due January 2045. These bonds were a further issuance of the 4.95% Series first mortgage bonds issued in November 2014.September 2027. Entergy Louisiana used the proceeds to pay, together with other funds,finance the $60 million cash portionconstruction 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 UnionSt. Charles 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 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 $51.972maturity, its $45.3 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.
In August 2016,July 2017 the Entergy Louisiana issued $270 million of 4.875% Series collateral trust mortgage bonds due September 2066. Entergy Louisiana used the proceeds, together with other funds, to pay, prior to maturity, its $118 million of 6.0% Series first mortgage bonds due March 2040, to pay, prior to maturity, its $150 million of 5.875% Series first mortgage bonds due June 2041, and for general corporate purposes.
In October 2016, Entergy Louisiana issued $400 million of 2.40% Series collateral trust mortgage bonds due October 2026. Entergy Louisiana plans to use the proceeds to repay amounts outstanding of approximately $57 million on its Waterford 3 lessor debt due January 2017 and for general corporate purposes. See Note 11 to the financial statements herein for discussion of Entergy Louisiana’s purchase of the undivided interests in Waterford 3.
(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,River Bend nuclear fuel company variable interest entity paid, 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%3.25% 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.Q notes.
In September 2016,July 2017 the Entergy Mississippi issued $260 million of 4.90% Series first mortgage bonds due October 2066. In October 2016, Entergy Mississippi used the proceeds, together with other funds, to pay, prior toLouisiana Waterford nuclear fuel company variable interest entity paid, at maturity, its $80 million of 6.2% Series first mortgage bonds due April 2040, to pay, prior to maturity, its $150 million of 6.0% Series first mortgage bonds due May 2051, and to redeem $30 million of its 6.25% Series preferred stock.
(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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2016, Entergy New Orleans issued $85 million of 4%3.25% 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.G notes.
(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 September 30, 20162017 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 |
| $14,611,903 |
| |
| $15,424,412 |
|
| $14,846,729 |
| |
| $15,216,502 |
|
| Entergy Arkansas |
| $2,796,059 |
| |
| $2,791,291 |
|
| $3,063,310 |
| |
| $2,979,162 |
|
| Entergy Louisiana |
| $5,407,897 |
| |
| $5,848,345 |
|
| $6,167,496 |
| |
| $6,454,620 |
|
| Entergy Mississippi |
| $1,344,305 |
| |
| $1,409,719 |
|
| $1,121,606 |
| |
| $1,142,048 |
|
| Entergy New Orleans |
| $459,295 |
| |
| $502,194 |
|
| $444,310 |
| |
| $468,770 |
|
| Entergy Texas |
| $1,521,270 |
| |
| $1,683,655 |
|
| $1,451,643 |
| |
| $1,533,790 |
|
| System Energy |
| $551,023 |
| |
| $543,933 |
|
| $551,391 |
| |
| $533,855 |
|
| |
| (a) | The values exclude lease obligations of $34 million at System Energy and long-term DOE obligations of $183 million at Entergy Arkansas, 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
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2016 were as follows:
|
| | | | | | | |
| | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) |
| Entergy |
| $14,832,555 |
| |
| $14,815,535 |
|
| Entergy Arkansas |
| $2,829,785 |
| |
| $2,623,910 |
|
| Entergy Louisiana |
| $5,812,791 |
| |
| $5,929,488 |
|
| Entergy Mississippi |
| $1,120,916 |
| |
| $1,086,203 |
|
| Entergy New Orleans |
| $448,994 |
| |
| $455,459 |
|
| Entergy Texas |
| $1,508,407 |
| |
| $1,600,156 |
|
| System Energy |
| $551,132 |
| |
| $529,520 |
|
| |
| (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 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 and are based on prices derived from inputs such as benchmark yields and reported trades. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2015 were as follows:
|
| | | | | | | |
| | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) |
| Entergy |
| $13,325,930 |
| |
| $13,578,511 |
|
| Entergy Arkansas |
| $2,629,839 |
| |
| $2,498,108 |
|
| Entergy Louisiana |
| $4,836,162 |
| |
| $5,018,786 |
|
| Entergy Mississippi |
| $1,045,085 |
| |
| $1,087,326 |
|
| Entergy New Orleans |
| $342,880 |
| |
| $351,040 |
|
| Entergy Texas |
| $1,451,967 |
| |
| $1,590,616 |
|
| System Energy |
| $572,667 |
| |
| $552,762 |
|
| |
(a) | The values exclude lease obligations of $109 million at Entergy Louisiana and $34 million at System Energy, long-term DOE obligations of $181 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 statementsherein and are based on prices derived from inputs such as benchmark yields and reported trades. |
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 September 30, 2016,2017, there were options on 7,152,0776,055,226 shares of common stock outstanding with a weighted-average exercise price of $84.93.$81.85. 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 September 30, 2016.2017. Because Entergy’s common stock price at September 30, 20162017 was less than the weighted average exercise price, the aggregate intrinsic value of the stock options outstanding as of September 30, 20162017 was zero. The intrinsic value of all “in the money” stock options was $17.7$19.7 million as of September 30, 2016.2017.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for outstanding stock options for the three months ended September 30, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $1.1 |
| |
| $1.1 |
|
| $1.1 |
| |
| $1.1 |
|
| Tax benefit recognized in Entergy’s net income |
| $0.5 |
| |
| $0.4 |
|
| $0.5 |
| |
| $0.5 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.2 |
| |
| $0.1 |
|
| $0.2 |
| |
| $0.2 |
|
The following table includes financial information for outstanding stock options for the nine months ended September 30, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $3.3 |
| |
| $3.2 |
|
| $3.3 |
| |
| $3.3 |
|
| Tax benefit recognized in Entergy’s net income |
| $1.3 |
| |
| $1.2 |
|
| $1.3 |
| |
| $1.3 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.6 |
| |
| $0.5 |
|
| $0.6 |
| |
| $0.6 |
|
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.
The following table includes financial information for other outstanding equity awards for the three months ended September 30, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $8.5 |
| |
| $8.6 |
|
| $7.6 |
| |
| $8.5 |
|
| Tax benefit recognized in Entergy’s net income |
| $3.3 |
| |
| $3.3 |
|
| $3.0 |
| |
| $3.3 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $2.0 |
| |
| $1.8 |
|
| $2.1 |
| |
| $2.0 |
|
The following table includes financial information for other outstanding equity awards for the nine months ended September 30, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $25.4 |
| |
| $24.7 |
|
| $24.1 |
| |
| $25.4 |
|
| Tax benefit recognized in Entergy’s net income |
| $9.8 |
| |
| $9.5 |
|
| $9.3 |
| |
| $9.8 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $5.7 |
| |
| $4.9 |
|
| $6.3 |
| |
| $5.7 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 third 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 |
|
Entergy’s qualified pension cost, including amounts capitalized, for the nine months ended September 30, 20162017 and 2015,2016, included the following components:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Service cost - benefits earned during the period |
| $107,433 |
| |
| $131,286 |
|
| $100,230 |
| |
| $107,433 |
|
| Interest cost on projected benefit obligation | 196,209 |
| | 227,082 |
| 195,618 |
| | 196,209 |
|
| Expected return on assets | (292,098 | ) | | (295,965 | ) | (306,168 | ) | | (292,098 | ) |
| Amortization of prior service cost | 810 |
| | 1,170 |
| 195 |
| | 810 |
|
| Amortization of loss | 146,472 |
| | 176,943 |
| 170,790 |
| | 146,472 |
|
| Special termination benefit | — |
| | 76 |
| |
| Net pension costs |
| $158,826 |
| |
| $240,592 |
|
| $160,665 |
| |
| $158,826 |
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the third quarters of 20162017 and 2015,2016, 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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 projected 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
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the nine months ended September 30, 20162017 and 2015,2016, 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 | |
| $15,543 |
| |
| $21,147 |
| |
| $4,686 |
| |
| $1,968 |
| |
| $4,248 |
| |
| $4,698 |
|
| Interest cost on projected | | | | | | | | | | | | |
| benefit obligation | | 39,165 |
| | 44,610 |
| | 11,433 |
| | 5,442 |
| | 10,671 |
| | 8,976 |
|
| Expected return on assets | | (59,316 | ) | | (66,288 | ) | | (17,943 | ) | | (8,061 | ) | | (18,186 | ) | | (13,377 | ) |
| Amortization of loss | | 32,808 |
| | 35,838 |
| | 8,955 |
| | 4,845 |
| | 7,020 |
| | 7,812 |
|
| Net pension cost | |
| $28,200 |
| |
| $35,307 |
| |
| $7,131 |
| |
| $4,194 |
| |
| $3,753 |
| |
| $8,109 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $15,270 |
| |
| $20,775 |
| |
| $4,416 |
| |
| $1,875 |
| |
| $4,092 |
| |
| $4,608 |
|
| Interest cost on projects benefit obligation | | 38,832 |
| | 44,427 |
| | 11,196 |
| | 5,373 |
| | 10,176 |
| | 9,273 |
|
| Expected return on assets | | (61,281 | ) | | (69,051 | ) | | (18,393 | ) | | (8,400 | ) | | (18,540 | ) | | (13,989 | ) |
| Amortization of loss | | 34,920 |
| | 37,062 |
| | 9,159 |
| | 4,974 |
| | 6,930 |
| | 8,892 |
|
| Net pension cost | |
| $27,741 |
| |
| $33,213 |
| |
| $6,378 |
| |
| $3,822 |
| |
| $2,658 |
| |
| $8,784 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $19,983 |
| |
| $25,797 |
| |
| $5,946 |
| |
| $2,547 |
| |
| $4,935 |
| |
| $5,871 |
|
| Interest cost on projected | | |
| | |
| | |
| | |
| | |
| | |
|
| benefit obligation | | 46,413 |
| | 52,101 |
| | 13,506 |
| | 6,324 |
| | 13,062 |
| | 10,479 |
|
| Expected return on assets | | (60,078 | ) | | (68,103 | ) | | (18,315 | ) | | (8,175 | ) | | (18,666 | ) | | (13,704 | ) |
| Amortization of loss | | 40,692 |
| | 44,853 |
| | 11,172 |
| | 6,039 |
| | 9,714 |
| | 9,792 |
|
| Net pension cost | |
| $47,010 |
| |
| $54,648 |
| |
| $12,309 |
| |
| $6,735 |
| |
| $9,045 |
| |
| $12,438 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $15,543 |
| |
| $21,147 |
| |
| $4,686 |
| |
| $1,968 |
| |
| $4,248 |
| |
| $4,698 |
|
| Interest cost on projected benefit obligation | | 39,165 |
| | 44,610 |
| | 11,433 |
| | 5,442 |
| | 10,671 |
| | 8,976 |
|
| Expected return on assets | | (59,316 | ) | | (66,288 | ) | | (17,943 | ) | | (8,061 | ) | | (18,186 | ) | | (13,377 | ) |
| Amortization of loss | | 32,808 |
| | 35,838 |
| | 8,955 |
| | 4,845 |
| | 7,020 |
| | 7,812 |
|
| Net pension cost | |
| $28,200 |
| |
| $35,307 |
| |
| $7,131 |
| |
| $4,194 |
| |
| $3,753 |
| |
| $8,109 |
|
Non-Qualified Net Pension Cost
Entergy recognized $8$15.8 million and $4.5$8 million in pension cost for its non-qualified pension plans in the third quarters of 20162017 and 2015, respectively. Entergy recognized $16.5 million and $13.4 million in pension costs for its non-qualified pension plans for the nine months ended September 30, 2016, and 2015, respectively. Reflected in the pension cost for non-qualified pension plans in the third quarterquarters of 2017 and 2016, and for the nine months ended September 30, 2016respectively, is a $11.6 million and $3.7 million settlement charge related to the payment of lump sum benefits out of the plan. Entergy recognized $28.9 million and $16.5 million in pensions costs for its non-qualified pension plans for the nine months ended September 30, 2017 and 2016, respectively. Reflected in the pension cost for non-qualified pension plans for the nine months ended September 30, 2017 and 2016, respectively, is a $15.5 million and $3.7 million settlement charge related to the payment of lump sum benefits out of this plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the third quarters of 20162017 and 2015:2016:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| Third quarter 2016 |
| $105 |
| |
| $58 |
| |
| $60 |
| |
| $16 |
| |
| $126 |
|
| Third quarter 2015 |
| $113 |
| |
| $68 |
| |
| $59 |
| |
| $16 |
| |
| $149 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2017 |
| $111 |
| |
| $46 |
| |
| $62 |
| |
| $18 |
| |
| $124 |
|
| 2016 |
| $105 |
| |
| $58 |
| |
| $60 |
| |
| $16 |
| |
| $126 |
|
Reflected in Entergy Arkansas’s non-qualified pension costs in the third quarter of 2017 is $10 thousand in settlement charges related to the payment of lump sum benefits out of the plan.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the nine months ended September 30, 20162017 and 2015:2016:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| Nine months ended September 30, 2016 |
| $317 |
| |
| $176 |
| |
| $179 |
| |
| $48 |
| |
| $380 |
|
| Nine months ended September 30, 2015 |
| $339 |
| |
| $204 |
| |
| $177 |
| |
| $48 |
| |
| $447 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2017 |
| $483 |
| |
| $141 |
| |
| $189 |
| |
| $55 |
| |
| $377 |
|
| 2016 |
| $317 |
| |
| $176 |
| |
| $179 |
| |
| $48 |
| |
| $380 |
|
Reflected in Entergy Arkansas’s non-qualified pension costs for the nine months ended September 30, 2017 is $173 thousand in settlement charges related to the payment of lump sum benefits out of this plan.
Components of Net Other Postretirement Benefit Cost
Entergy’s other postretirement benefit cost, including amounts capitalized, for the third 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’s other postretirement benefit cost, including amounts capitalized, for the nine months ended September 30, 20162017 and 2015,2016, included the following components:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Service cost - benefits earned during the period |
| $24,219 |
| |
| $33,978 |
|
| $20,187 |
| |
| $24,219 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 42,249 |
| | 53,952 |
| 41,880 |
| | 42,249 |
|
| Expected return on assets | (31,365 | ) | | (34,032 | ) | (28,224 | ) | | (31,365 | ) |
| Amortization of prior service credit | (34,119 | ) | | (27,960 | ) | (31,068 | ) | | (34,119 | ) |
| Amortization of loss | 13,662 |
| | 23,679 |
| 16,428 |
| | 13,662 |
|
| Net other postretirement benefit cost |
| $14,646 |
| |
| $49,617 |
|
| $19,203 |
| |
| $14,646 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the third quarters of 20162017 and 2015,2016, 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 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | |
| $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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | ) |
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the nine months ended September 30, 20162017 and 2015,2016, 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 | |
| $2,934 |
| |
| $5,607 |
| |
| $1,158 |
| |
| $468 |
| |
| $1,194 |
| |
| $1,002 |
|
| Interest cost on APBO | | 6,972 |
| | 9,780 |
| | 2,127 |
| | 1,344 |
| | 3,117 |
| | 1,587 |
|
| Expected return on assets | | (13,392 | ) | | — |
| | (4,137 | ) | | (3,462 | ) | | (7,182 | ) | | (2,442 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (4,104 | ) | | (5,841 | ) | | (702 | ) | | (558 | ) | | (2,043 | ) | | (1,179 | ) |
| Amortization of loss | | 3,192 |
| | 2,196 |
| | 669 |
| | 111 |
| | 1,611 |
| | 861 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| ($4,398 | ) | |
| $11,742 |
| |
| ($885 | ) | |
| ($2,097 | ) | |
| ($3,303 | ) | |
| ($171 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $2,589 |
| |
| $4,779 |
| |
| $870 |
| |
| $426 |
| |
| $1,116 |
| |
| $960 |
|
| Interest cost on APBO | | 6,765 |
| | 9,075 |
| | 2,070 |
| | 1,407 |
| | 3,372 |
| | 1,677 |
|
| Expected return on assets | | (11,877 | ) | | — |
| | (3,600 | ) | | (3,477 | ) | | (6,540 | ) | | (2,151 | ) |
| Amortization of prior service credit | | (3,834 | ) | | (5,802 | ) | | (1,368 | ) | | (558 | ) | | (1,737 | ) | | (1,134 | ) |
| Amortization of loss | | 3,345 |
| | 1,395 |
| | 1,257 |
| | 315 |
| | 2,478 |
| | 1,170 |
|
| Net other postretirement benefit cost | |
| ($3,012 | ) | |
| $9,447 |
| |
| ($771 | ) | |
| ($1,887 | ) | |
| ($1,311 | ) | |
| $522 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2015 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned | | | | | | | | | | | | |
| during the period | |
| $5,217 |
| |
| $7,422 |
| |
| $1,521 |
| |
| $615 |
| |
| $1,500 |
| |
| $1,410 |
|
| Interest cost on APBO | | 9,390 |
| | 12,234 |
| | 2,577 |
| | 1,956 |
| | 4,026 |
| | 1,884 |
|
| Expected return on assets | | (14,394 | ) | | — |
| | (4,626 | ) | | (3,603 | ) | | (7,764 | ) | | (2,733 | ) |
| Amortization of prior service | | | | | | | | | | | | |
| credit | | (1,830 | ) | | (5,601 | ) | | (687 | ) | | (531 | ) | | (2,043 | ) | | (1,098 | ) |
| Amortization of loss | | 4,017 |
| | 5,340 |
| | 645 |
| | 354 |
| | 2,055 |
| | 900 |
|
| Net other postretirement | | | | | | | | | | | | |
| benefit cost | |
| $2,400 |
| |
| $19,395 |
| |
| ($570 | ) | |
| ($1,209 | ) | |
| ($2,226 | ) | |
| $363 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $2,934 |
| |
| $5,607 |
| |
| $1,158 |
| |
| $468 |
| |
| $1,194 |
| |
| $1,002 |
|
| Interest cost on APBO | | 6,972 |
| | 9,780 |
| | 2,127 |
| | 1,344 |
| | 3,117 |
| | 1,587 |
|
| Expected return on assets | | (13,392 | ) | | — |
| | (4,137 | ) | | (3,462 | ) | | (7,182 | ) | | (2,442 | ) |
| Amortization of prior service credit | | (4,104 | ) | | (5,841 | ) | | (702 | ) | | (558 | ) | | (2,043 | ) | | (1,179 | ) |
| Amortization of loss | | 3,192 |
| | 2,196 |
| | 669 |
| | 111 |
| | 1,611 |
| | 861 |
|
| Net other postretirement benefit cost | |
| ($4,398 | ) | |
| $11,742 |
| |
| ($885 | ) | |
| ($2,097 | ) | |
| ($3,303 | ) | |
| ($171 | ) |
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 third quarters of 20162017 and 2015:2016:
|
| | | | | | | | | | | | | | | | |
| 2017 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($65 | ) | |
| $6,718 |
| |
| ($88 | ) | |
| $6,565 |
|
| Amortization of loss | | (18,451 | ) | | (2,202 | ) | | (827 | ) | | (21,480 | ) |
| Settlement loss | | — |
| | — |
| | (4,200 | ) | | (4,200 | ) |
| | |
| ($18,516 | ) | |
| $4,516 |
| |
| ($5,115 | ) | |
| ($19,115 | ) |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | |
| $— |
| |
| $1,934 |
| |
| $— |
| |
| $1,934 |
|
| Amortization of loss | | (865 | ) | | (465 | ) | | (2 | ) | | (1,332 | ) |
| | |
| ($865 | ) | |
| $1,469 |
| |
| ($2 | ) | |
| $602 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($270 | ) |
|
| $7,738 |
|
|
| ($114 | ) |
|
| $7,354 |
|
| Amortization of loss |
| (12,482 | ) |
| (2,063 | ) |
| (638 | ) |
| (15,183 | ) |
| Settlement loss |
| — |
|
| — |
|
| (1,279 | ) |
| (1,279 | ) |
|
|
| ($12,752 | ) |
|
| $5,675 |
|
|
| ($2,031 | ) |
|
| ($9,108 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
| Amortization of prior service credit |
|
| $— |
|
|
| $1,947 |
|
|
| $— |
|
|
| $1,947 |
|
| Amortization of loss |
| (836 | ) |
| (732 | ) |
| (2 | ) |
| (1,570 | ) |
|
|
| ($836 | ) |
|
| $1,215 |
|
|
| ($2 | ) |
|
| $377 |
|
|
| | | | | | | | | | | | | | | | |
| 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 | ) |
| (1,780 | ) |
| (5 | ) |
| (2,536 | ) |
|
|
| ($751 | ) |
|
| $87 |
|
|
| ($6 | ) |
|
| ($670 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the nine months ended September 30, 20162017 and 2015:2016:
|
| | | | | | | | | | | | | | | | |
| 2017 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($195 | ) |
|
| $20,152 |
|
|
| ($266 | ) |
|
| $19,691 |
|
| Amortization of loss |
| (55,351 | ) |
| (6,606 | ) |
| (2,648 | ) |
| (64,605 | ) |
| Settlement loss |
| — |
|
| — |
|
| (5,965 | ) |
| (5,965 | ) |
|
|
| ($55,546 | ) |
|
| $13,546 |
|
|
| ($8,879 | ) |
|
| ($50,879 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
| Amortization of prior service credit |
|
| $— |
|
|
| $5,802 |
|
|
| $— |
|
|
| $5,802 |
|
| Amortization of loss |
| (2,594 | ) |
| (1,395 | ) |
| (7 | ) |
| (3,996 | ) |
|
|
| ($2,594 | ) |
|
| $4,407 |
|
|
| ($7 | ) |
|
| $1,806 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($810 | ) | |
| $23,214 |
| |
| ($340 | ) | |
| $22,064 |
|
| Amortization of loss | | (37,446 | ) | | (6,189 | ) | | (1,900 | ) | | (45,535 | ) |
| Settlement loss | | — |
| | — |
| | (1,279 | ) | | (1,279 | ) |
| | |
| ($38,256 | ) | |
| $17,025 |
| |
| ($3,519 | ) | |
| ($24,750 | ) |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service credit | |
| $— |
| |
| $5,841 |
| |
| $— |
| |
| $5,841 |
|
| Amortization of loss | | (2,508 | ) | | (2,196 | ) | | (8 | ) | | (4,712 | ) |
| | |
| ($2,508 | ) | |
| $3,645 |
| |
| ($8 | ) | |
| $1,129 |
|
|
| | | | | | | | | | | | | | | | |
| 2015 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | |
| Entergy | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($1,167 | ) | |
| $19,446 |
| |
| ($323 | ) | |
| $17,956 |
|
| Amortization of loss | | (37,881 | ) | | (13,227 | ) | | (1,656 | ) | | (52,764 | ) |
| | |
| ($39,048 | ) | |
| $6,219 |
| |
| ($1,979 | ) | |
| ($34,808 | ) |
| Entergy Louisiana | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| $— |
| |
| $5,601 |
| |
| ($2 | ) | |
| $5,599 |
|
| Amortization of loss | | (2,253 | ) | | (5,338 | ) | | (15 | ) | | (7,606 | ) |
| | |
| ($2,253 | ) | |
| $263 |
| |
| ($17 | ) | |
| ($2,007 | ) |
Employer Contributions
Based on current assumptions, Entergy expects to contribute $390.1$409.9 million to its qualified pension plans in 2016.2017. As of September 30, 2016,2017, Entergy had contributed $307.6$318 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 |
| $83,001 |
| |
| $84,422 |
| |
| $19,968 |
| |
| $10,709 |
| |
| $15,920 |
| |
| $20,498 |
|
| Pension contributions made | | | | | | | | | | | |
| through September 2016 |
| $65,882 |
| |
| $67,116 |
| |
| $15,981 |
| |
| $8,456 |
| |
| $12,649 |
| |
| $16,120 |
|
| Remaining estimated pension | | | | | | | | | | | |
| contributions to be made in 2016 |
| $17,119 |
| |
| $17,306 |
| |
| $3,987 |
| |
| $2,253 |
| |
| $3,271 |
| |
| $4,378 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
| Expected 2017 pension contributions |
| $79,725 |
| |
| $86,728 |
| |
| $19,063 |
| |
| $9,842 |
| |
| $16,908 |
| |
| $18,307 |
|
| Pension contributions made through September 2017 |
| $62,252 |
| |
| $67,993 |
| |
| $14,922 |
| |
| $7,832 |
| |
| $13,131 |
| |
| $14,498 |
|
| Remaining estimated pension contributions to be made in 2017 |
| $17,473 |
| |
| $18,735 |
| |
| $4,141 |
| |
| $2,010 |
| |
| $3,777 |
| |
| $3,809 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 20162017 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 third quarters of 20162017 and 20152016 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 | | |
| $2,820,421 |
| |
| $423,245 |
| |
| $— |
| |
| ($38 | ) | |
| $3,243,628 |
|
| Income taxes | | |
| $230,647 |
| |
| $25,563 |
| |
| ($14,415 | ) | |
| $— |
| |
| $241,795 |
|
| Consolidated net income (loss) | | |
| $403,733 |
| |
| $55,765 |
| |
| ($25,956 | ) | |
| ($31,898 | ) | |
| $401,644 |
|
| 2016 | | | | | | | | | | | | | | | | | | | | |
| Operating revenues | |
| $2,649,392 |
| |
| $475,345 |
| |
| $— |
| |
| ($34 | ) | |
| $3,124,703 |
| |
| $2,649,392 |
| |
| $475,345 |
| |
| $— |
| |
| ($34 | ) | |
| $3,124,703 |
|
| Income taxes | |
| $255,603 |
| |
| $6,115 |
| |
| ($3,812 | ) | |
| $— |
| |
| $257,906 |
| |
| $255,603 |
| |
| $6,115 |
| |
| ($3,812 | ) | |
| $— |
| |
| $257,906 |
|
| Consolidated net income (loss) | |
| $447,782 |
| |
| $8,221 |
| |
| ($30,901 | ) | |
| ($31,898 | ) | |
| $393,204 |
| |
| $447,782 |
| |
| $8,221 |
| |
| ($30,901 | ) | |
| ($31,898 | ) | |
| $393,204 |
|
| 2015 | | | | | | | | | | | |
| Operating revenues | |
| $2,849,681 |
| |
| $521,746 |
| |
| $— |
| |
| ($21 | ) | |
| $3,371,406 |
| |
| Income taxes | |
| $198,945 |
| |
| ($554,513 | ) | |
| ($12,097 | ) | |
| $— |
| |
| ($367,665 | ) | |
| Consolidated net income (loss) | |
| $364,265 |
| |
| ($1,031,410 | ) | |
| ($19,190 | ) | |
| ($31,898 | ) | |
| ($718,233 | ) | |
| | | | | | | | | | | | |
Entergy’s segment financial information for the nine months ended September 30, 20162017 and 20152016 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 | | |
| $7,156,865 |
| |
| $1,293,867 |
| |
| $— |
| |
| ($96 | ) | |
| $8,450,636 |
|
| Income taxes | | |
| $459,990 |
| |
| ($507,719 | ) | |
| ($39,826 | ) | |
| $— |
| |
| ($87,555 | ) |
| Consolidated net income (loss) | | |
| $817,738 |
| |
| $252,455 |
| |
| ($73,434 | ) | |
| ($95,695 | ) | |
| $901,064 |
|
| Total assets as of September 30, 2017 | | |
| $42,669,606 |
| |
| $5,630,207 |
| |
| $985,466 |
| |
| ($2,886,837 | ) | |
| $46,398,442 |
|
| 2016 | | | | | | | | | | | | | | | | | | | | |
| Operating revenues | |
| $6,855,664 |
| |
| $1,341,534 |
| |
| $— |
| |
| ($80 | ) | |
| $8,197,118 |
| |
| $6,855,664 |
| |
| $1,341,534 |
| |
| $— |
| |
| ($80 | ) | |
| $8,197,118 |
|
| Income taxes | |
| $359,653 |
| |
| ($176,626 | ) | |
| ($34,148 | ) | |
| $— |
| |
| $148,879 |
| |
| $359,653 |
| |
| ($176,626 | ) | |
| ($34,148 | ) | |
| $— |
| |
| $148,879 |
|
| Consolidated net income (loss) | |
| $1,027,751 |
| |
| $338,651 |
| |
| ($69,672 | ) | |
| ($95,695 | ) | |
| $1,201,035 |
| |
| $1,027,751 |
| |
| $338,651 |
| |
| ($69,672 | ) | |
| ($95,695 | ) | |
| $1,201,035 |
|
| Total assets as of September 30, 2016 | |
| $40,542,593 |
| |
| $9,100,779 |
| |
| $1,339,879 |
| |
| ($3,245,070 | ) | |
| $47,738,181 |
| |
| 2015 | | | | | | | | | | | |
| Operating revenues | |
| $7,401,136 |
| |
| $1,603,643 |
| |
| $— |
| |
| ($51 | ) | |
| $9,004,728 |
| |
| Income taxes | |
| $407,993 |
| |
| ($487,622 | ) | |
| ($37,783 | ) | |
| $— |
| |
| ($117,412 | ) | |
| Consolidated net income (loss) | |
| $796,051 |
| |
| ($911,524 | ) | |
| ($50,415 | ) | |
| ($95,695 | ) | |
| ($261,583 | ) | |
| 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 for the third quarter 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 July 1, 2017 |
| $36 |
| |
| $21 |
| |
| $57 |
|
| Restructuring costs accrued | 23 |
| | — |
| | 23 |
|
| Non-cash portion | — |
| | (7 | ) | | (7 | ) |
| Balance as of September 30, 2017 |
| $59 |
| |
| $14 |
| |
| $73 |
|
In addition, Entergy incurred $16 million of impairment charges in the third quarter 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged to expense as incurred 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.
Additional restructuring charges for the nine months ended September 30, 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 | 89 |
| | — |
| | 89 |
|
| Non-cash portion | — |
| | (7 | ) | | (7 | ) |
| Cash paid out | 100 |
| | — |
| | 100 |
|
| Balance as of September 30, 2017 |
| $59 |
| |
| $14 |
| |
| $73 |
|
In addition, Entergy incurred $422 million of impairment charges in the nine months ended September 30, 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets.
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’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 Corporation and Subsidiaries
Notes to Financial Statements
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 Wholesale Commodities is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at September 30, 20162017 is approximately 2.253.5 years. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 90%88% for the remainder of 2016, 2017,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of which approximately 61%31% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts. Total planned generation for the remainder of 20162017 is 97.6 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 depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. As of September 30, 2016,2017, there were no derivative contracts with counterparties in a liability position. In addition to the corporate guarantee, $4 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of September 30, 2016, $4 million in cash collateral and letters of credit in the amount of $49 million were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2015, derivative contracts with two counterparties were in a liability position (approximately $2 million total). As of December 31, 2015, $9$1 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $68$4 million wasin cash collateral and $28 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2016, derivative contracts with three counterparties were in a liability position (approximately $8 million total). In addition to the corporate guarantee, $2 million in cash collateral was required to be posted by the Entergy subsidiary to its 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 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 September 30, 20162017 is 25,604,00027,702,900 MMBtu for Entergy, including 18,780,00021,673,200 MMBtu for Entergy Louisiana, 5,750,0005,042,700 MMBtu for Entergy Mississippi, and 1,074,000987,000 MMBtu for Entergy New Orleans. Credit support for these natural gas swaps is covered by master agreements that do not require collateralizationcollateral based on mark-to-market value, but do carry adequate assurance language that may lead to collateralization requests.requests for collateral.
During the second quarter 2016,2017, Entergy participated in the annual FTRfinancial transmission rights auction process for the MISO planning year of June 1, 20162017 through May 31, 2017. FTRs2018. Financial 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 September 30, 20162017 is 74,49175,621 GWh for Entergy, including 16,85917,014 GWh for Entergy Arkansas, 31,47633,700 GWh for Entergy Louisiana, 12,37410,214 GWh for Entergy Mississippi, 3,6403,839 GWh for Entergy New Orleans, and 9,74510,326 GWh for
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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. 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 September 30, 20162017 and December 31, 2015, respectively.2016. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas and Entergy Mississippi as of September 30, 2017 and December 31, 2016.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of September 30, 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) | | $52 | | ($22) | | $30 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $29 | | ($7) | | $22 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $17 | | ($17) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $7 | | ($7) | | $— | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $11 | | ($3) | | $8 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $1 | | ($1) | | $— | | Entergy Wholesale Commodities |
| Financial transmission rights | | Prepayments and other | | $39 | | ($2) | | $37 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities(current portion) | | $8 | | ($8) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $1 | | ($1) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $1 | | $— | | $1 | | Utility |
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) | | $67 | | ($17) | | $50 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $20 | | ($5) | | $15 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $1 | | ($1) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $2 | | ($2) | | $— | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $42 | | ($17) | | $25 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $6 | | ($1) | | $5 | | Entergy Wholesale Commodities |
| FTRs | | Prepayments and other | | $32 | | ($1) | | $31 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities(current portion) | | $34 | | ($34) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $3 | | ($3) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $1 | | $— | | $1 | | Utility |
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 $4$1 million posted and $4 million held as of September 30, 20162017 and $9$2 million posted and $68 million held as of December 31, 2015.2016. Also excludes $28 million in letters of credit in the amount of $49 million held as of September 30, 2016.2017. |
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 September 30, 20162017 and 20152016 are as follows:
| | | Instrument | | Amount of gain recognized in other comprehensive income | | Income Statement location | | Amount of gain reclassified from AOCI into income (a) | | Amount of gain recognized in other comprehensive income | | Income Statement location | | Amount of gain reclassified from accumulated other comprehensive income into income (a) |
| | | (In Millions) | | (In Millions) | | (In Millions) | | (In Millions) |
| 2017 | | |
| Electricity swaps and options | | | $43 | | Competitive businesses operating revenues | | $23 |
| | | |
| 2016 | | |
| Electricity swaps and options | | $70 | | Competitive businesses operating revenues | | $37 | | $70 | | Competitive businesses operating revenues | | $37 |
| | | |
| 2015 | | |
| Electricity swaps and options | | $49 | | Competitive businesses operating revenues | | $86 | |
| |
| (a) | Before taxes of $13$8 million and $30$13 million for the three months ended September 30, 20162017 and 2015,2016, respectively |
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements of operations for the nine months ended September 30, 20162017 and 20152016 are as follows:
| | | Instrument | | Amount of gain recognized in other comprehensive income | | Income Statement location | | Amount of gain reclassified from AOCI into income (a) | | Amount of gain
recognized in other
comprehensive income | | Income Statement location | | Amount of gain
reclassified from
accumulated other comprehensive income into income (a) |
| | (In Millions) | | (In Millions) | | (In Millions) | | (In Millions) |
| 2017 | | |
| Electricity swaps and options | | | $136 | | Competitive businesses operating revenues | | $87 |
| | | |
| 2016 | | |
| Electricity swaps and options | | $156 | | Competitive businesses operating revenues | | $237 | | $156 | | Competitive businesses operating revenues | | $237 |
| | | |
| 2015 | | |
| Electricity swaps and options | | $154 | | Competitive businesses operating revenues | | $177 | |
| |
| (a) | Before taxes of $83$30 million and $61$83 million for the nine months ended September 30, 20162017 and 2015,2016, 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 September 30, 2017 and 2016 and 2015 was $6.4$2.4 million and ($0.9)$6.4 million, respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the nine months ended September 30, 2017 and 2016 and 2015 was $6.1$6.4 million and $0.1$6.1 million, respectively.
Based on market prices as of September 30, 2016, net2017, unrealized gains recorded in AOCIaccumulated other comprehensive income on cash flow hedges relating to power sales totaled $85 million.$59 million of net unrealized gains. Approximately $66$37 million is expected to be reclassified from AOCIaccumulated other comprehensive income to
Entergy Corporation and Subsidiaries
Notes to Financial Statements
operating revenues in the next twelve months. The actual amount reclassified from AOCI,accumulated other comprehensive income, 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
as the original hedged transaction occurs. From the point of de-designation, the gains or losses on the original hedge 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 income statements of operations for the three months ended September 30, 20162017 and 20152016 are as follows:
|
| | | | | | |
| Instrument | | Amount of loss recognized in AOCIaccumulated 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) | ($3) |
| Financial transmission rights | | $— | | Purchased power expense | (b) | $28 |
| Electricity swaps and options | | ($2) | (c) | Competitive business operating revenues | | $— |
| | | | | | |
| 2016 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25 |
FTRsFinancial transmission rights | | $— | | Purchased power expense | (b) | $37 |
| Electricity swaps and options | | ($9) | (c) | Competitive business operating revenues | | $— |
| | | | | | |
2015 | | | | | | |
Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($13) |
FTRs | | $— | | Purchased power expense | (b) | $51 |
Electricity swaps and options | | $— | (c) | Competitive business operating revenues | | ($3) |
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 nine months ended September 30, 20162017 and 20152016 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) | ($5) |
| FTRs |
| $— |
| Purchased power expense | (b) | $96 |
| Electricity swaps and options | | $6 | (c) | Competitive business operating revenues | | ($9) |
| | | | | | | |
| 2015 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($29) |
| FTRs | | $— | | Purchased power expense | (b) | $130 |
| Electricity swaps and options | | $1 | (c) | Competitive business operating revenues | | ($42) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | |
| Instrument |
| Amount of gain 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) | ($20) |
| Financial transmission rights |
| $— |
| Purchased power expense | (b) | $103 |
| Electricity swaps and options | | $2 | (c) | Competitive business operating revenues | | $— |
| | | | | | | |
| 2016 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($5) |
| Financial transmission rights | | $— | | Purchased power expense | (b) | $96 |
| Electricity swaps and options | | $6 | (c) | Competitive business operating revenues | | ($9) |
| |
| (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 AOCIaccumulated 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 September 30, 2017 are as follows:
|
| | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
| Assets: | | | | | | |
| Financial transmission rights | | Prepayments and other | | $4.4 | | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | | $18.8 | | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | | $5.5 | | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | | $3.5 | | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | | $5.0 | | Entergy Texas |
| | | | | | |
| Liabilities: | | | | | | |
| Natural gas swaps | | Other current liabilities | | $0.7 | | Entergy Louisiana |
| Natural gas swaps | | Other current liabilities | | $0.2 | | Entergy Mississippi |
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: | | | | | | |
FTRsNatural gas swaps | | Prepayments and other | | $8.110.9 | | Entergy ArkansasLouisiana |
FTRsNatural gas swaps | | Prepayments and other | | $12.42.3 | | Entergy LouisianaMississippi |
FTRsNatural gas swaps | | Prepayments and other | | $4.0 | | Entergy Mississippi |
FTRs | | Prepayments and other | | $1.60.2 | | Entergy New Orleans |
FTRs | | Prepayments and other | | $5.1 | | Entergy Texas |
| | | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Other current liabilities | | $0.4 | | Entergy Louisiana |
Natural gas swaps | | Other current liabilities | | $0.1 | | 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: | | | | | | |
FTRsFinancial transmission rights | | Prepayments and other | | $7.95.4 | | Entergy Arkansas |
FTRsFinancial transmission rights | | Prepayments and other | | $8.5 | | Entergy Louisiana |
FTRsFinancial transmission rights | | Prepayments and other | | $2.43.2 | | Entergy Mississippi |
FTRsFinancial transmission rights | | Prepayments and other | | $1.51.1 | | Entergy New Orleans |
FTRsFinancial transmission rights | | Prepayments and other | | $2.23.1 | | 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) | No cash collateral orAs of September 30, 2017, letters of credit were required to be posted with MISO covered financial transmission rights exposure of $0.2 million for FTR exposure asEntergy Arkansas and $0.1 million for Entergy Mississippi. As of September 30, 2016 and December 31, 2015, respectively.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. |
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 September 30, 20162017 and 20152016 are as follows:
|
| | | | | | |
| Instrument | | Income Statement Location | | Amount of gain
(loss) recorded
in the income statement | | Registrant |
| | | | | (In Millions) | | |
| 2017 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($2.6) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.6) | (a) | Entergy Mississippi |
| | | | | | |
| Financial transmission rights | | Purchased power expense | | $4.2 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $9.4 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $4.7 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $1.9 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $7.0 | (b) | Entergy Texas |
| | | | | | |
| 2016 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $19.5 | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $5.3 | (a) | Entergy Mississippi |
| | | | | | | |
FTRsFinancial transmission rights | | Purchased power expense | | $7.1 | (b) | Entergy Arkansas |
FTRsFinancial transmission rights | | Purchased power expense | | $20.4 | (b) | Entergy Louisiana |
FTRsFinancial transmission rights | | Purchased power expense | | $6.7 | (b) | Entergy Mississippi |
FTRsFinancial transmission rights | | Purchased power expense | | $0.9 | (b) | Entergy New Orleans |
FTRsFinancial transmission rights | | Purchased power expense | | $1.8 | (b) | Entergy Texas |
| | | | | | |
2015 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($10.2) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($1.9) | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.4) | (a) | Entergy New Orleans |
| | | | | | |
FTRs | | Purchased power expense | | $13.9 | (b) | Entergy Arkansas |
FTRs | | Purchased power expense | | $17.9 | (b) | Entergy Louisiana |
FTRs | | Purchased power expense | | $6.7 | (b) | Entergy Mississippi |
FTRs | | Purchased power expense | | $1.5 | (b) | Entergy New Orleans |
FTRs | | Purchased power expense | | $10.9 | (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 nine months ended September 30, 20162017 and 20152016 are as follows:
|
| | | | | | |
| Instrument |
| Income Statement Location |
| Amount of gain
(loss) recorded
in the income statement |
| Registrant |
| | | | | (In Millions) | | |
| 2017 | | | |
| | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($16.3) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($3.1) | (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 | | $19.3 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $38.9 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $16.3 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $7.7 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $19.2 | (b) | Entergy Texas |
| | | | | | |
| 2016 | | | |
| | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($4.6) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $0.3 | (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 | | $20.3 | (b) | Entergy Arkansas |
FTRsFinancial transmission rights | | Purchased power expense | | $52.5 | (b) | Entergy Louisiana |
FTRsFinancial transmission rights | | Purchased power expense | | $11.1 | (b) | Entergy Mississippi |
FTRsFinancial transmission rights | | Purchased power expense | | $2.8 | (b) | Entergy New Orleans |
FTRsFinancial transmission rights | | Purchased power expense | | $8.7 | (b) | Entergy Texas |
| | | | | | |
2015 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($23.7) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($4.3) | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.9) | (a) | Entergy New Orleans |
| | | | | | |
FTRs | | Purchased power expense | | $48.6 | (b) | Entergy Arkansas |
FTRs | | Purchased power expense | | $49.7 | (b) | Entergy Louisiana |
FTRs | | Purchased power expense | | $13.9 | (b) | Entergy Mississippi |
FTRs | | Purchased power expense | | $7.5 | (b) | Entergy New Orleans |
FTRs | | Purchased power expense | | $10.7 | (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 FTRsfinancial 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 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 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 Control groups report to the Vice President and Treasurer. The Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Control groups report to the Vice President and Treasurer. The Accounting Policy 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 September 30, 20162017 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 | |
| $1,206 |
| |
| $— |
| |
| $— |
| |
| $1,206 |
| |
| $459 |
| |
| $— |
| |
| $— |
| |
| $459 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 451 |
| | — |
| | — |
| | 451 |
| | 487 |
| | — |
| | — |
| | 487 |
|
| Debt securities | | 1,016 |
| | 1,275 |
| | — |
| | 2,291 |
| | 1,035 |
| | 1,394 |
| | — |
| | 2,429 |
|
| Common trusts (b) | | | | | | | | 2,929 |
| | | | | | | | 4,067 |
|
| Power contracts | | — |
| | — |
| | 95 |
| | 95 |
| | — |
| | — |
| | 60 |
| | 60 |
|
| Securitization recovery trust account | | 54 |
| | — |
| | — |
| | 54 |
| | 53 |
| | — |
| | — |
| | 53 |
|
| Escrow accounts | | 433 |
| | — |
| | — |
| | 433 |
| | 407 |
| | — |
| | — |
| | 407 |
|
| FTRs | | — |
| | — |
| | 31 |
| | 31 |
| |
| Financial transmission rights | | | — |
| | — |
| | 37 |
| | 37 |
|
| | |
| $3,160 |
| |
| $1,275 |
| |
| $126 |
| |
| $7,490 |
| |
| $2,441 |
| |
| $1,394 |
| |
| $97 |
| |
| $7,999 |
|
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | |
| $1 |
| |
| $— |
| |
| $— |
| |
| $1 |
| |
| $1 |
| |
| $— |
| |
| $— |
| |
| $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 | |
| $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. |
| |
| (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 September 30, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | Power Contracts | | FTRs | | Power Contracts | | FTRs | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| | (In Millions) | (In Millions) |
| Balance as of July 1, |
| $66 |
| |
| $46 |
| |
| $204 |
| |
| $67 |
|
| $38 |
| |
| $57 |
| |
| $66 |
| |
| $46 |
|
| Total gains (losses) for the period (a) | | | | | | | | | | | | | | |
| Included in earnings | 6 |
| | — |
| | (2 | ) | | — |
| 2 |
| | — |
| | 6 |
| | — |
|
| Included in OCI | 70 |
| | — |
| | 49 |
| | — |
| |
| Included in other comprehensive income | | 43 |
| | — |
| | 70 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 22 |
| | — |
| | 31 |
| — |
| | 8 |
| | — |
| | 22 |
|
| Settlements | (47 | ) | | (37 | ) | | (88 | ) | | (51 | ) | (23 | ) | | (28 | ) | | (47 | ) | | (37 | ) |
| Balance as of September 30, |
| $95 |
| |
| $31 |
| |
| $163 |
| |
| $47 |
|
| $60 |
| |
| $37 |
| |
| $95 |
| |
| $31 |
|
| |
| (a) | Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $0.4 million for the three months ended September 30, 2017 and $1 million for the three months ended September 30, 2016 and $12 million for the three months ended September 30, 2015.2016. |
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 nine months ended September 30, 20162017 and 2015:2016:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | Power Contracts | | FTRs | | Power Contracts | | FTRs | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| (In Millions) | (In Millions) |
| Balance as of January 1, |
| $189 |
| |
| $23 |
| |
| $215 |
| |
| $47 |
|
| $5 |
| |
| $21 |
| |
| $189 |
| |
| $23 |
|
| Total gains (losses) for the period (a) | | | | | | | | | | | | | | |
| Included in earnings | (3 | ) | | — |
| | (15 | ) | | (1 | ) | 6 |
| | 1 |
| | (3 | ) | | — |
|
| Included in OCI | 156 |
| | — |
| | 154 |
| | — |
| |
| Included in other comprehensive income | | 136 |
| | — |
| | 156 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 49 |
| | — |
| | 51 |
| — |
| | 56 |
| | — |
| | 49 |
|
| Issuances of FTRs | — |
| | 55 |
| | — |
| | 80 |
| |
| Purchases | — |
| | — |
| | 14 |
| | — |
| |
| Issuances of financial transmission rights | | — |
| | 62 |
| | — |
| | 55 |
|
| Settlements | (247 | ) | | (96 | ) | | (205 | ) | | (130 | ) | (87 | ) | | (103 | ) | | (247 | ) | | (96 | ) |
| Balance as of September 30, |
| $95 |
| |
| $31 |
| |
| $163 |
| |
| $47 |
|
| $60 |
| |
| $37 |
| |
| $95 |
| |
| $31 |
|
| |
| (a) | Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $1 million for the nine months ended September 30, 20162017 and $5$1 million for the nine months ended September 30, 2015.2016. |
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 September 30, 2016:2017:
| | | Transaction Type | | Fair Value as of September 30, 2016 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value | | Fair Value as of September 30, 2017 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | | (In Millions) | | (In Millions) | | (In Millions) | | (In Millions) |
| Power contracts - electricity swaps | | $90 | | Unit contingent discount | | +/- | 4% | | $7 | | $60 | | Unit contingent discount | | +/- | 4% | | $5 |
| Power contracts - electricity options | | $5 | | Implied volatility | | +/- | 9% | | $4 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 and liabilities that are accounted for at fair value on a recurring basis as of September 30, 20162017 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 | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | |
| $3.7 |
| |
| $— |
| |
| $— |
| |
| $3.7 |
| |
| $6.7 |
| |
| $— |
| |
| $— |
| |
| $6.7 |
|
| Debt securities | | 103.1 |
| | 215.8 |
| | — |
| | 318.9 |
| | 128.4 |
| | 205.7 |
| | — |
| | 334.1 |
|
| Common trusts (b) | | | | | | | | 501.2 |
| | | | | | | | 569.6 |
|
| Securitization recovery trust account | | 7.7 |
| | — |
| | — |
| | 7.7 |
| | 7.8 |
| | — |
| | — |
| | 7.8 |
|
| Escrow accounts | | 7.1 |
| | — |
| | — |
| | 7.1 |
| | 2.4 |
| | — |
| | — |
| | 2.4 |
|
| FTRs | | — |
| | — |
| | 8.1 |
| | 8.1 |
| |
| Financial transmission rights | | | — |
| | — |
| | 4.4 |
| | 4.4 |
|
| | |
| $121.6 |
| |
| $215.8 |
| |
| $8.1 |
| |
| $846.7 |
| |
| $145.3 |
| |
| $205.7 |
| |
| $4.4 |
| |
| $925.0 |
|
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | |
| $3.0 |
| |
| $— |
| |
| $— |
| |
| $3.0 |
| |
| $3.6 |
| |
| $— |
| |
| $— |
| |
| $3.6 |
|
| Debt securities | | 110.5 |
| | 193.4 |
| | — |
| | 303.9 |
| | 112.5 |
| | 196.8 |
| | — |
| | 309.3 |
|
| Common trusts (b) | | | | | | | | 464.4 |
| | | | | | | | 521.8 |
|
| Securitization recovery trust account | | 4.2 |
| | — |
| | — |
| | 4.2 |
| | 4.1 |
| | — |
| | — |
| | 4.1 |
|
| Escrow accounts | | 12.2 |
| | — |
| | — |
| | 12.2 |
| | 7.1 |
| | — |
| | — |
| | 7.1 |
|
| FTRs | | — |
| | — |
| | 7.9 |
| | 7.9 |
| |
| Financial transmission rights | | | — |
| | — |
| | 5.4 |
| | 5.4 |
|
| | |
| $129.9 |
| |
| $193.4 |
| |
| $7.9 |
| |
| $795.6 |
| |
| $127.3 |
| |
| $196.8 |
| |
| $5.4 |
| |
| $851.3 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $57.6 |
| |
| $— |
| |
| $— |
| |
| $57.6 |
| |
| $45.4 |
| |
| $— |
| |
| $— |
| |
| $45.4 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 5.7 |
| | — |
| | — |
| | 5.7 |
| | 10.8 |
| | — |
| | — |
| | 10.8 |
|
| Debt securities | | 131.5 |
| | 308.6 |
| | — |
| | 440.1 |
| | 145.5 |
| | 333.3 |
| | — |
| | 478.8 |
|
| Common trusts (b) | | | | | | | | 679.0 |
| | | | | | | | 770.4 |
|
| Escrow accounts | | 305.5 |
| | — |
| | — |
| | 305.5 |
| | 288.8 |
| | — |
| | — |
| | 288.8 |
|
| Securitization recovery trust account | | 9.8 |
| | — |
| | — |
| | 9.8 |
| | 9.4 |
| | — |
| | — |
| | 9.4 |
|
| FTRs | | — |
| | — |
| | 12.4 |
| | 12.4 |
| |
| Financial transmission rights | | | — |
| | — |
| | 18.8 |
| | 18.8 |
|
| | |
| $510.1 |
| |
| $308.6 |
| |
| $12.4 |
| |
| $1,510.1 |
| |
| $499.9 |
| |
| $333.3 |
| |
| $18.8 |
| |
| $1,622.4 |
|
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | |
| $0.4 |
| |
| $— |
| |
| $— |
| |
| $0.4 |
| |
| $0.7 |
| |
| $— |
| |
| $— |
| |
| $0.7 |
|
| | | 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 |
| |
| $163.9 |
| |
| $— |
| |
| $— |
| |
| $163.9 |
|
| Decommissioning trust funds (a): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Equity securities | | 7.1 |
| | — |
| | — |
| | 7.1 |
| | 13.9 |
| | — |
| | — |
| | 13.9 |
|
| Debt securities | | 161.1 |
| | 248.8 |
| | — |
| | 409.9 |
| | 132.3 |
| | 292.5 |
| | — |
| | 424.8 |
|
| Common trusts (b) | | | | | | | | 625.3 |
| | | | | | | | 702.0 |
|
| Escrow accounts | | 290.4 |
| | — |
| | — |
| | 290.4 |
| | 305.7 |
| | — |
| | — |
| | 305.7 |
|
| Securitization recovery trust account | | 3.2 |
| | — |
| | — |
| | 3.2 |
| | 2.8 |
| | — |
| | — |
| | 2.8 |
|
| FTRs | | — |
| | — |
| | 8.5 |
| | 8.5 |
| |
| Gas hedge contracts | | | 10.9 |
| | — |
| | — |
| | 10.9 |
|
| Financial transmission rights | | | — |
| | — |
| | 8.5 |
| | 8.5 |
|
| | |
| $496.6 |
| |
| $248.8 |
| |
| $8.5 |
| |
| $1,379.2 |
| |
| $629.5 |
| |
| $292.5 |
| |
| $8.5 |
| |
| $1,632.5 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | |
| $7.0 |
| |
| $— |
| |
| $— |
| |
| $7.0 |
| |
Entergy Mississippi
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $307.3 |
| |
| $— |
| |
| $— |
| |
| $307.3 |
| |
| Escrow accounts | | 31.8 |
| | — |
| | — |
| | 31.8 |
| |
| $31.9 |
| |
| $— |
| |
| $— |
| |
| $31.9 |
|
| FTRs | | — |
| | — |
| | 4.0 |
| | 4.0 |
| |
| Financial transmission rights | | | — |
| | — |
| | 5.5 |
| | 5.5 |
|
| | |
| $339.1 |
| |
| $— |
| |
| $4.0 |
| |
| $343.1 |
| |
| $31.9 |
| |
| $— |
| |
| $5.5 |
| |
| $37.4 |
|
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | |
| $0.1 |
| |
| $— |
| |
| $— |
| |
| $0.1 |
| |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $0.2 |
|
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 |
| |
| $76.8 |
| |
| $— |
| |
| $— |
| |
| $76.8 |
|
| Escrow accounts | | 41.7 |
| | — |
| | — |
| | 41.7 |
| | 31.8 |
| | — |
| | — |
| | 31.8 |
|
| FTRs | | — |
| | — |
| | 2.4 |
| | 2.4 |
| |
| Gas hedge contracts | | | 2.3 |
| | — |
| | — |
| | 2.3 |
|
| Financial transmission rights | | | — |
| | — |
| | 3.2 |
| | 3.2 |
|
| | |
| $185.9 |
| |
| $— |
| |
| $2.4 |
| |
| $188.3 |
| |
| $110.9 |
| |
| $— |
| |
| $3.2 |
| |
| $114.1 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | |
| $1.3 |
| |
| $— |
| |
| $— |
| |
| $1.3 |
| |
Entergy New Orleans
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $37.2 |
| |
| $— |
| |
| $— |
| |
| $37.2 |
| |
| $28.4 |
| |
| $— |
| |
| $— |
| |
| $28.4 |
|
| Securitization recovery trust account | | 5.1 |
| | — |
| | — |
| | 5.1 |
| | 4.7 |
| | — |
| | — |
| | 4.7 |
|
| Escrow accounts | | 88.4 |
| | — |
| | — |
| | 88.4 |
| | 84.2 |
| | — |
| | — |
| | 84.2 |
|
| FTRs | | — |
| | — |
| | 1.6 |
| | 1.6 |
| |
| Financial transmission rights | | | — |
| | — |
| | 3.5 |
| | 3.5 |
|
| | |
| $130.7 |
| |
| $— |
| |
| $1.6 |
| |
| $132.3 |
| |
| $117.3 |
| |
| $— |
| |
| $3.5 |
| |
| $120.8 |
|
| | | 2015 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2016 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $87.8 |
| |
| $— |
| |
| $— |
| |
| $87.8 |
| |
| $103.0 |
| |
| $— |
| |
| $— |
| |
| $103.0 |
|
| Securitization recovery trust account | | 4.6 |
| | — |
| | — |
| | 4.6 |
| | 1.7 |
| | — |
| | — |
| | 1.7 |
|
| Escrow accounts | | 81.0 |
| | — |
| | — |
| | 81.0 |
| | 88.6 |
| | — |
| | — |
| | 88.6 |
|
| FTRs | | — |
| | — |
| | 1.5 |
| | 1.5 |
| |
| Gas hedge contracts | | | 0.2 |
| | — |
| | — |
| | 0.2 |
|
| Financial transmission rights | | | — |
| | — |
| | 1.1 |
| | 1.1 |
|
| | |
| $173.4 |
| |
| $— |
| |
| $1.5 |
| |
| $174.9 |
| |
| $193.5 |
| |
| $— |
| |
| $1.1 |
| |
| $194.6 |
|
| | | | | | | | | | |
| 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: | | | | | | | | | | | | | | | | |
| Securitization recovery trust account | |
| $31.4 |
| |
| $— |
| |
| $— |
| |
| $31.4 |
| |
| $30.8 |
| |
| $— |
| |
| $— |
| |
| $30.8 |
|
| FTRs | | — |
| | — |
| | 5.1 |
| | 5.1 |
| |
| Financial transmission rights | | | — |
| | — |
| | 5.0 |
| | 5.0 |
|
| | |
| $31.4 |
| |
| $— |
| |
| $5.1 |
| |
| $36.5 |
| |
| $30.8 |
| |
| $— |
| |
| $5.0 |
| |
| $35.8 |
|
|
| | | | | | | | | | | | | | | | |
| 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 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | |
| 2015 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
Assets: | | | | | | | | |
| Securitization recovery trust account | |
| $38.2 |
| |
| $— |
| |
| $— |
| |
| $38.2 |
|
| FTRs | | — |
| | — |
| | 2.2 |
| | 2.2 |
|
| | |
| $38.2 |
| |
| $— |
| |
| $2.2 |
| |
| $40.4 |
|
System Energy
|
| | | | | | | | | | | | | | | | |
| 2016 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Temporary cash investments | |
| $190.2 |
| |
| $— |
| |
| $— |
| |
| $190.2 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 1.2 |
| | — |
| | — |
| | 1.2 |
|
| Debt securities | | 246.5 |
| | 62.1 |
| | — |
| | 308.6 |
|
| Common trusts (b) | | | | | | | | 455.1 |
|
| | |
| $437.9 |
| |
| $62.1 |
| |
| $— |
| |
| $955.1 |
|
|
| | | | | | | | | | | | | | | | |
| 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 |
|
| |
(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 September 30, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of July 1, |
| $14.0 |
| |
| $16.2 |
| |
| $5.6 |
| |
| $2.0 |
| |
| $8.0 |
|
| Gains (losses) included as a regulatory liability/asset | 1.2 |
| | 16.6 |
| | 5.1 |
| | 0.5 |
| | (1.1 | ) |
| Settlements | (7.1 | ) | | (20.4 | ) | | (6.7 | ) | | (0.9 | ) | | (1.8 | ) |
| Balance as of September 30, |
| $8.1 |
| |
| $12.4 |
| |
| $4.0 |
| |
| $1.6 |
| |
| $5.1 |
|
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 September 30, 2015.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of July 1, |
| $9.1 |
| |
| $37.3 |
| |
| $4.9 |
| |
| $6.7 |
| |
| $7.9 |
|
| Gains (losses) included as a regulatory liability/asset | 16.5 |
| | 3.0 |
| | 6.1 |
| | (1.2 | ) | | 7.3 |
|
| Settlements | (13.9 | ) | | (17.9 | ) | | (6.7 | ) | | (1.5 | ) | | (10.9 | ) |
| Balance as of September 30, |
| $11.7 |
| |
| $22.4 |
| |
| $4.3 |
| |
| $4.0 |
| |
| $4.3 |
|
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 nine months ended September 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 | 1.7 |
| | 38.3 |
| | 6.8 |
| | 0.1 |
| | 2.3 |
|
| Settlements | (20.3 | ) | | (52.5 | ) | | (11.1 | ) | | (2.8 | ) | | (8.7 | ) |
| Balance as of September 30, |
| $8.1 |
| |
| $12.4 |
| |
| $4.0 |
| |
| $1.6 |
| |
| $5.1 |
|
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 nine months ended September 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 |
| | 48.3 |
| | 5.4 |
| | 7.3 |
| | 11.4 |
|
| Gains (losses) included as a regulatory liability/asset | 52.6 |
| | (1.7 | ) | | 9.4 |
| | 0.1 |
| | (8.7 | ) |
| Settlements | (48.6 | ) | | (49.7 | ) | | (13.9 | ) | | (7.5 | ) | | (10.7 | ) |
| Balance as of September 30, |
| $11.7 |
| |
| $22.4 |
| |
| $4.3 |
| |
| $4.0 |
| |
| $4.3 |
|
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. The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.
As discussed in Note 9 to the financial statements in the Form 10-K, when Entergy purchased the Indian Point 3 and FitzPatrick plants in 2000 from NYPA, NYPA retained the decommissioning trusts and the decommissioning liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations. At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies.
In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. The transaction is contingent upon receiving approval from the NRC. As a result of the agreement with NYPA, in the third quarter 2016, Entergy removed the contract asset from its balance sheet, and recorded receivables of $1.5 billion for the beneficial interests in the decommissioning trust funds and recorded asset retirement obligations for the decommissioning liabilities. At September 30, 2016, the fair value of the decommissioning trust funds held by NYPA was $1.5 billion. The fair value is based on the trust statements received from NYPA and is valued by the fund administrator using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value hierarchy. The receivables for the beneficial interests in the decommissioning trust funds are recorded in other deferred debits on the consolidated balance sheet.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $3,380 |
| |
| $1,568 |
| |
| $1 |
|
| Debt Securities | | 2,291 |
| | 94 |
| | 2 |
|
| Total | |
| $5,671 |
| |
| $1,662 |
| |
| $3 |
|
|
| | | | | | | | | | | | |
| | | 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 $400 million and $342 million as of September 30, 2016 and December 31, 2015, respectively. The amortized cost of debt securities was $2,199 million as of September 30, 2016 and $2,124 million as of December 31, 2015. As of September 30, 2016, the debt securities have an average coupon rate of approximately 3.19%, an average duration of approximately 5.96 years, and an average maturity of approximately 9.39 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 September 30, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $13 |
| |
| $1 |
| |
| $266 |
| |
| $1 |
|
| More than 12 months | — |
| | — |
| | 23 |
| | 1 |
|
| Total |
| $13 |
| |
| $1 |
| |
| $289 |
| |
| $2 |
|
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 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 |
|
The fair value of debt securities, summarized by contractual maturities, as of September 30, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $102 |
| |
| $77 |
|
| 1 year - 5 years | 812 |
| | 857 |
|
| 5 years - 10 years | 743 |
| | 704 |
|
| 10 years - 15 years | 128 |
| | 124 |
|
| 15 years - 20 years | 62 |
| | 50 |
|
| 20 years+ | 444 |
| | 343 |
|
| Total |
| $2,291 |
| |
| $2,155 |
|
During the three months endedSeptember 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $564 million and $539 million, respectively. During the three months ended September 30, 2016 and 2015, gross gains of $6 million and $13 million, respectively, and gross losses of $1 million and $4 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $1,797 million and $1,488 million, respectively. During the nine months ended September 30, 2016 and 2015, gross gains of $26 million and $58 million, respectively, and gross losses of $6 million and $7 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 September 30, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $504.9 |
| |
| $263.4 |
| |
| $— |
|
| Debt Securities | | 318.9 |
| | 10.8 |
| | 0.3 |
|
| Total | |
| $823.8 |
| |
| $274.2 |
| |
| $0.3 |
|
| | | | | | | |
| 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 $308.4 million as of September 30, 2016 and $301.8 million as of December 31, 2015. As of September 30, 2016, the debt securities have an average coupon rate of approximately 2.63%, an average duration of approximately 5.21 years, and an average maturity of approximately 5.97 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 September 30, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $0.9 |
| |
| $— |
| |
| $32.5 |
| |
| $0.3 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
|
| Total |
| $0.9 |
| |
| $— |
| |
| $32.5 |
| |
| $0.3 |
|
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 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 September 30, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $8.8 |
| |
| $1.8 |
|
| 1 year - 5 years | 123.5 |
| | 145.2 |
|
| 5 years - 10 years | 166.1 |
| | 138.5 |
|
| 10 years - 15 years | 9.5 |
| | 2.4 |
|
| 15 years - 20 years | 1.1 |
| | 2.0 |
|
| 20 years+ | 9.9 |
| | 14.0 |
|
| Total |
| $318.9 |
| |
| $303.9 |
|
During the three months endedSeptember 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $61.2 million and $44 million, respectively. During the three months ended September 30, 2016 and 2015, gross gains of $0.4 million and $0.4 million, respectively, and gross losses of $0.04 million and $0.1 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months endedSeptember 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $165 million and $190.8 million, respectively. During the nine months ended September 30, 2016 and 2015, gross gains of $1.6 million and $5.8 million, respectively, and gross losses of $0.3 million and $0.1 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 September 30, 2016 and December 31, 2015 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $684.7 |
| |
| $322.9 |
| |
| $— |
|
| Debt Securities | | 440.1 |
| | 21.4 |
| | 0.4 |
|
| Total | |
| $1,124.8 |
| |
| $344.3 |
| |
| $0.4 |
|
| | | | | | | |
| 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 $419.2 million as of September 30, 2016 and $399.2 million as of December 31, 2015. As of September 30, 2016, the debt securities have an average coupon rate of approximately 3.83%, an average duration of approximately 5.72 years, and an average maturity of approximately 11.39 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 September 30, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $2.3 |
| |
| $— |
| |
| $32.5 |
| |
| $0.2 |
|
| More than 12 months | — |
| | — |
| | 6.5 |
| | 0.2 |
|
| Total |
| $2.3 |
| |
| $— |
| |
| $39.0 |
| |
| $0.4 |
|
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, 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 September 30, 2016 and December 31, 2015 are as follows:
|
| | | | | | | |
| | 2016 | | 2015 |
| | (In Millions) |
| less than 1 year |
| $25.0 |
| |
| $27.1 |
|
| 1 year - 5 years | 102.3 |
| | 124.0 |
|
| 5 years - 10 years | 121.5 |
| | 114.3 |
|
| 10 years - 15 years | 51.0 |
| | 39.3 |
|
| 15 years - 20 years | 31.1 |
| | 26.5 |
|
| 20 years+ | 109.2 |
| | 78.7 |
|
| Total |
| $440.1 |
| |
| $409.9 |
|
During the three months ended September 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $54.7 million and $28.4 million, respectively. During the three months ended September 30, 2016 and 2015, gross gains of $0.4 million and $0.2 million, respectively, and gross losses of $0.1 million and $0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 2016 and 2015, proceeds from the dispositions of securities amounted to $178.2 million and $93.6 million, respectively. During the nine months ended September 30, 2016 and 2015, gross gains of $3 million and $1.7 million, respectively, and gross losses of $0.2 million and $0.3 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 | |
| $144.9 |
| |
| $— |
| |
| $— |
| |
| $144.9 |
|
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | | 2.6 |
| | — |
| | — |
| | 2.6 |
|
| Debt securities | | 198.2 |
| | 131.4 |
| | — |
| | 329.6 |
|
| Common trusts (b) | | | | | | | | 538.4 |
|
| | |
| $345.7 |
| |
| $131.4 |
| |
| $— |
| |
| $1,015.5 |
|
|
| | | | | | | | | | | | | | | | |
| 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 |
|
| |
| (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. |
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 September 30, 2017.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of July 1, |
| $8.3 |
| |
| $28.3 |
| |
| $9.1 |
| |
| $5.2 |
| |
| $5.5 |
|
| Gains included as a regulatory liability/asset | 0.3 |
| | (0.1 | ) | | 1.1 |
| | 0.2 |
| | 6.5 |
|
| Settlements | (4.2 | ) | | (9.4 | ) | | (4.7 | ) | | (1.9 | ) | | (7.0 | ) |
| Balance as of September 30, |
| $4.4 |
| |
| $18.8 |
| |
| $5.5 |
| |
| $3.5 |
| |
| $5.0 |
|
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 three months ended September 30, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of July 1, |
| $14.0 |
| |
| $16.2 |
| |
| $5.6 |
| |
| $2.0 |
| |
| $8.0 |
|
| Gains included as a regulatory liability/asset | 1.2 |
| | 16.6 |
| | 5.1 |
| | 0.5 |
| | (1.1 | ) |
| Settlements | (7.1 | ) | | (20.4 | ) | | (6.7 | ) | | (0.9 | ) | | (1.8 | ) |
| Balance as of September 30, |
| $8.1 |
| |
| $12.4 |
| |
| $4.0 |
| |
| $1.6 |
| |
| $5.1 |
|
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 nine months ended September 30, 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 |
|
| Issuances of financial transmission rights | 8.9 |
| | 31.0 |
| | 9.6 |
| | 5.0 |
| | 7.1 |
|
| Gains included as a regulatory liability/asset | 9.4 |
| | 18.2 |
| | 9.0 |
| | 5.1 |
| | 14.0 |
|
| Settlements | (19.3 | ) | | (38.9 | ) | | (16.3 | ) | | (7.7 | ) | | (19.2 | ) |
| Balance as of September 30, |
| $4.4 |
| |
| $18.8 |
| |
| $5.5 |
| |
| $3.5 |
| |
| $5.0 |
|
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 nine months ended September 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 financial transmission rights | 18.8 |
| | 18.1 |
| | 5.9 |
| | 2.8 |
| | 9.3 |
|
| Gains (losses) included as a regulatory liability/asset | 1.7 |
| | 38.3 |
| | 6.8 |
| | 0.1 |
| | 2.3 |
|
| Settlements | (20.3 | ) | | (52.5 | ) | | (11.1 | ) | | (2.8 | ) | | (8.7 | ) |
| Balance as of September 30, |
| $8.1 |
| |
| $12.4 |
| |
| $4.0 |
| |
| $1.6 |
| |
| $5.1 |
|
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, Indian Point 2, Indian Point 3, Vermont Yankee,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 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 September 30, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $4,554 |
| |
| $1,983 |
| |
| $— |
|
| Debt Securities | | 2,429 |
| | 45 |
| | 14 |
|
| Total | |
| $6,983 |
| |
| $2,028 |
| |
| $14 |
|
|
| | | | | | | | | | | | |
| | | 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 September 30, 2017 are $478 million for Indian Point 1, $607 million for Indian Point 2, $774 million for Indian Point 3, $445 million for Palisades, $1,037 million for Pilgrim, and $601 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 $472 million and $399 million as of September 30, 2017 and December 31, 2016, respectively. The amortized cost of debt securities was $2,398 million as of September 30, 2017 and $2,212 million as of December 31, 2016. As of September 30, 2017, the debt securities have an average coupon rate of approximately 3.21%, an average duration of approximately 6.17 years, and an average maturity of approximately 10.07 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 September 30, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $5 |
| |
| $— |
| |
| $732 |
| |
| $5 |
|
| More than 12 months | — |
| | — |
| | 267 |
| | 9 |
|
| Total |
| $5 |
| |
| $— |
| |
| $999 |
| |
| $14 |
|
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 |
| $23 |
| |
| $1 |
| |
| $1,169 |
| |
| $26 |
|
| More than 12 months | 1 |
| | — |
| | 20 |
| | 1 |
|
| Total |
| $24 |
| |
| $1 |
| |
| $1,189 |
| |
| $27 |
|
The fair value of debt securities, summarized by contractual maturities, as of September 30, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $91 |
| |
| $125 |
|
| 1 year - 5 years | 801 |
| | 763 |
|
| 5 years - 10 years | 789 |
| | 719 |
|
| 10 years - 15 years | 130 |
| | 109 |
|
| 15 years - 20 years | 87 |
| | 73 |
|
| 20 years+ | 531 |
| | 424 |
|
| Total |
| $2,429 |
| |
| $2,213 |
|
During the three months ended September 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $440 million and $564 million, respectively. During the three months ended September 30, 2017 and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2016, gross gains of $9 million and $6 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 nine months ended September 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $1,903 million and $1,797 million, respectively. During the nine months ended September 30, 2017 and 2016, gross gains of $79 million and $26 million, respectively, and gross losses of $9 million and $6 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 September 30, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $576.3 |
| |
| $327.2 |
| |
| $— |
|
| Debt Securities | | 334.1 |
| | 3.1 |
| | 2.3 |
|
| Total | |
| $910.4 |
| |
| $330.3 |
| |
| $2.3 |
|
| | | | | | | |
| 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 $333.3 million as of September 30, 2017 and $310.1 million as of December 31, 2016. As of September 30, 2017, the debt securities have an average coupon rate of approximately 2.53%, an average duration of approximately 5.83 years, and an average maturity of approximately 6.78 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 September 30, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $114.4 |
| |
| $0.6 |
|
| More than 12 months | — |
| | — |
| | 37.3 |
| | 1.7 |
|
| Total |
| $— |
| |
| $— |
| |
| $151.7 |
| |
| $2.3 |
|
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 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 |
|
The fair value of debt securities, summarized by contractual maturities, as of September 30, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $11.8 |
| |
| $16.7 |
|
| 1 year - 5 years | 107.9 |
| | 106.2 |
|
| 5 years - 10 years | 194.4 |
| | 161.2 |
|
| 10 years - 15 years | 2.6 |
| | 7.7 |
|
| 15 years - 20 years | 1.4 |
| | 1.0 |
|
| 20 years+ | 16.0 |
| | 16.5 |
|
| Total |
| $334.1 |
| |
| $309.3 |
|
During the three months endedSeptember 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $51.9 million and $61.2 million, respectively. During the three months ended September 30, 2017 and 2016, gross gains of $0.04 million and $0.4 million, respectively, and gross losses of $0.5 thousand and $0.04 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months endedSeptember 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $219.2 million and $165 million, respectively. During the nine months ended September 30, 2017 and 2016, gross gains of $11.7 million and $1.6 million, respectively, and gross losses of $0.2 million and $0.3 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 September 30, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $781.2 |
| |
| $420.3 |
| |
| $— |
|
| Debt Securities | | 478.8 |
| | 10.9 |
| | 2.8 |
|
| Total | |
| $1,260.0 |
| |
| $431.2 |
| |
| $2.8 |
|
| | | | | | | |
| 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 $470.7 million as of September 30, 2017 and $421.9 million as of December 31, 2016. As of September 30, 2017, the debt securities have an average coupon rate of approximately 3.84%, an average duration of approximately 5.76 years, and an average maturity of approximately 11.6 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 September 30, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $127.3 |
| |
| $1.1 |
|
| More than 12 months | — |
| | — |
| | 51.5 |
| | 1.7 |
|
| Total |
| $— |
| |
| $— |
| |
| $178.8 |
| |
| $2.8 |
|
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 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of September 30, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $27.7 |
| |
| $31.4 |
|
| 1 year - 5 years | 113.2 |
| | 99.1 |
|
| 5 years - 10 years | 117.1 |
| | 122.8 |
|
| 10 years - 15 years | 50.7 |
| | 41.4 |
|
| 15 years - 20 years | 43.4 |
| | 30.9 |
|
| 20 years+ | 126.7 |
| | 99.2 |
|
| Total |
| $478.8 |
| |
| $424.8 |
|
During the three months ended September 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $50.5 million and $54.7 million, respectively. During the three months ended September 30, 2017 and 2016, gross gains of $2.9 million and $0.4 million, respectively, and gross losses of $0.1 million and $0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $176.1 million and $178.2 million, respectively. During the nine months ended September 30, 2017 and 2016, gross gains of $7.9 million and $3 million, respectively, and gross losses of $0.4 million and $0.2 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
System Energy
System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of September 30, 20162017 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) |
| 2017 | | | | | | | |
| Equity Securities | | |
| $541.0 |
| |
| $276.2 |
| |
| $— |
|
| Debt Securities | | | 329.6 |
| | 3.7 |
| | 1.9 |
|
| Total | | |
| $870.6 |
| |
| $279.9 |
| |
| $1.9 |
|
| | | (In Millions) | | | | | | |
| 2016 | | | | | | | | | | | | |
| Equity Securities | |
| $456.3 |
| |
| $205.5 |
| |
| $0.1 |
| |
| $473.9 |
| |
| $221.9 |
| |
| $0.1 |
|
| Debt Securities | | 308.6 |
| | 6.7 |
| | 0.3 |
| | 306.6 |
| | 2.0 |
| | 4.5 |
|
| Total | |
| $764.9 |
| |
| $212.2 |
| |
| $0.4 |
| |
| $780.5 |
| |
| $223.9 |
| |
| $4.6 |
|
| | | | | | | | |
| 2015 | | | | | | | |
| Equity Securities | |
| $423.7 |
| |
| $179.2 |
| |
| $0.3 |
| |
| Debt Securities | | 277.8 |
| | 2.2 |
| | 2.3 |
| |
| Total | |
| $701.5 |
| |
| $181.4 |
| |
| $2.6 |
| |
The amortized cost of debt securities was $302.3$327.8 million as of September 30, 20162017 and $270.7$309.1 million as of December 31, 2015.2016. As of September 30, 2016,2017, the debt securities have an average coupon rate of approximately 1.79%2.44%, an average duration of approximately 5.186.37 years, and an average maturity of approximately 6.328.88 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 September 30, 2016:2017:
| | | | 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 |
| $0.8 |
| |
| $— |
| |
| $81.4 |
| |
| $0.2 |
|
| $— |
| |
| $— |
| |
| $135.6 |
| |
| $1.0 |
|
| More than 12 months | — |
| | 0.1 |
| | 1.0 |
| | 0.1 |
| — |
| | — |
| | 57.5 |
| | 0.9 |
|
| Total |
| $0.8 |
| |
| $0.1 |
| |
| $82.4 |
| |
| $0.3 |
|
| $— |
| |
| $— |
| |
| $193.1 |
| |
| $1.9 |
|
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 |
|
| $— |
| |
| $— |
| |
| $220.9 |
| |
| $4.4 |
|
| More than 12 months | 0.9 |
| | 0.1 |
| | 5.0 |
| | 0.1 |
| — |
| | 0.1 |
| | 0.8 |
| | 0.1 |
|
| Total |
| $9.2 |
| |
| $0.3 |
| |
| $205.4 |
| |
| $2.3 |
|
| $— |
| |
| $0.1 |
| |
| $221.7 |
| |
| $4.5 |
|
The fair value of debt securities, summarized by contractual maturities, as of September 30, 20162017 and December 31, 20152016 are as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $3.0 |
| |
| $2.0 |
|
| $8.7 |
| |
| $6.6 |
|
| 1 year - 5 years | 192.6 |
| | 181.2 |
| 170.7 |
| | 188.2 |
|
| 5 years - 10 years | 76.2 |
| | 63.0 |
| 79.1 |
| | 78.5 |
|
| 10 years - 15 years | 3.5 |
| | 4.4 |
| 4.4 |
| | 1.3 |
|
| 15 years - 20 years | 1.5 |
| | 1.6 |
| 6.5 |
| | 7.8 |
|
| 20 years+ | 31.8 |
| | 25.6 |
| 60.2 |
| | 24.2 |
|
| Total |
| $308.6 |
| |
| $277.8 |
|
| $329.6 |
| |
| $306.6 |
|
During the three months ended September 30, 20162017 and 2015,2016, proceeds from the dispositions of securities amounted to $103.5$54.6 million and $163.4$103.5 million, respectively. During the three months ended September 30, 20162017 and 2015,2016, gross gains of $0.7$0.2 million and $2.4$0.7 million, respectively, and gross losses of $0.06$0.2 million and $0.2$0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 20162017 and 2015,2016, proceeds from the dispositions of securities amounted to $392.9$308.1 million and $325.4$392.9 million, respectively. During the nine months ended September 30, 20162017 and 2015,2016, gross gains of $3.2$0.7 million and $3.2 million, respectively, and gross losses of $0.4$1.5 million and $0.3$0.4 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 nine months ended September 30, 20162017 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-than-temporary impairment of certain equity securitiesother income for the three and nine months ended September 30, 2017 and 2016, and 2015.resulting from the recognition of the other-than-temporary impairment of certain equity securities 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 updates to that discussion.
2010-2011 IRS Audit
The IRS has completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 Revenue Agent Report (RAR) in June 2016. Entergy has agreed to all proposed adjustments containedAs discussed in the RAR.
As a result ofForm 10-K, in the issuance of 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 related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million.
The settlement of 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 December 31, 2015 to $564.7 million as of June 30,second quarter 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 one of the Entergy Wholesale Commodities nuclear power plants as a corporation for federal income tax purposes.purposes its subsidiary that owned the FitzPatrick nuclear power plant. The effect of the election was that the plant and associated assets were deemed to be contributed to a new corporation for federal income tax purposes, which created permanent and temporary differences, as discussed in the Form 10-K. One permanent difference, which increased tax expense in 2016 under the applicable accounting standards, was the reduction to the plant’s tax basis to the extent that it exceeded its fair market value. Entergy sold the FitzPatrick plant on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis, using the closing price as indicative of a higher fair market value for the plant. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.
In the second quarter 2017, Entergy made tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant. This resulted in a constructive contribution of all the assets and liabilities associated with the plantplants to a new subsidiary corporationcorporations for federal income tax purposes, and generated both permanent and temporary differences under the income tax accounting standards. The constructive contributioncontributions required the Entergy subsidiary that constructively contributed the assets and liabilities to recognize the plant’splants’ nuclear decommissioning liabilityliabilities for income tax purposes resulting in permanent differences. The accrual of the nuclear decommissioning liabilityliabilities required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets constructively contributed to the subsidiary.subsidiaries. Recognition of the gain and the increase in tax basis of the assets represents a temporary difference. The permanent differencedifferences reduced income tax expense, net of unrecognized tax benefits, by $238$373 million.
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 all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred
Entergy Corporation and Subsidiaries
Notes to Financial Statements
tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the 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 September 30, 20162017 are $175.8$219 million for Entergy, $21.7$28.6 million for Entergy Arkansas, $75.5$95.5 million for Entergy Louisiana, $4.5$7.2 million for Entergy Mississippi, $1$0.6 million for Entergy New Orleans, $8$18.9 million for Entergy Texas, and $12.7$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 $7.8$9.2 million in the three months ended September 30, 2016 and $7.8 million in the three months ended September 30, 2015. Entergy Louisiana made payments on its lease, including interest, of $16.9 million in the nine months ended September 30, 2016 and $28.8 million in the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
nine months ended September 30, 2015.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.
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 September 30, 20162017 and $14.6$8.6 million in the three months ended September 30, 2015.2016. System Energy made payments on its lease, including interest, of $17.2 million in the nine months ended September 30, 20162017 and $52.3$17.2 million in the nine months ended September 30, 2015.2016.
NOTE 13. ACQUISITIONS AND DISPOSITIONS (Entergy Corporation)
Acquisitions
Palisades Purchase Power Agreement
As discussed in the Form 10-K, Entergy’s purchase of the Palisades plant in 2007 included a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energy for 100% of the plant’s output, excluding any future uprates. Prices under the PPA range from $43.50/MWh in 2007 to $61.50/MWh in 2022, and the average price under the PPA is $51/MWh. For the PPA, which was at below-market prices at the time of the acquisition, Entergy will amortize a liability to revenue over the life of the agreement. The amount that will be amortized each period is based upon the present value, calculated at the date of acquisition, of each year’s difference between revenue under the agreement and revenue based on estimated market prices.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In December 2016, Entergy Arkansas,announced that it had reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018, subject to regulatory approvals. Entergy Louisiana,updated the liability amortization calculation to reflect the expected early termination of the PPA. In September 2017, Entergy and Consumers Energy terminated the PPA amendment agreement, and Entergy New Orleans)announced the decision to continue to operate the plant through the end of the PPA. Based on that decision, the amounts to be amortized to revenue for the next five years will be approximately $2 million for the remainder of 2017, $6 million in 2018, $10 million in 2019, $11 million in 2020, and $12 million in 2021.
Dispositions
FitzPatrick
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, and Entergy Arkansas and Entergy New Orleans each purchased one power block andFitzPatrick plant, resulting in a 25% undivided ownership interest in such related assets. The aggregate purchase pricepre-tax gain on the sale 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 in the first quarter 2017.
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 reimbursed Entergy for each power blockspecified out-of-pocket costs associated with Entergy’s 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.
NOTE 14. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. Following are updates to that discussion.
Entergy expectsIn the second quarter 2017, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $35.9 million reduction in its decommissioning cost liability, along with a corresponding reduction in the related asset retirement cost asset that amounts available in Vermont Yankee’s decommissioning trust fund, including expected earnings, together with the credit facilities entered into in January 2015 that are expected to be repaid with recoveries from DOE litigation related to spent fuel storage, will be sufficientdepreciated over the remaining life of the unit.
In the third quarter 2017, Entergy Wholesale Commodities recorded a revision to cover Vermont Yankee’s expected costsits estimated decommissioning cost liability for Palisades. The revised estimate resulted in a $68.7 million reduction in its decommissioning cost liability, along with a corresponding reduction in the plant asset. The reduction in its estimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning spent fuel management costs, and site restoration. In June 2015cash flows due to the NRC staff issued an exemption from its regulationsdecision to allow Vermont Yankeecontinue to use its decommissioning trust fund to pay for approximately $225 million of estimated future spent fuel management costs that will not be paid for using funds fromoperate the credit facilities. In August 2015, Vermont and two Vermont utilities filed a petition in the U.S. Court of Appeals for the D.C. Circuit challenging the NRC’s issuance of that exemption. If that petition were to result in a final decision denying Vermont Yankee the exemption allowing the use of its decommissioning trust fund to pay for these spent fuel management costs, Vermont Yankee would have to satisfy the NRC that it had a plan to obtain additional funds to enable it to pay for these costsplant until the federal government takes possessionspring of the fuel and removes it from the site. In February 2016 the court dismissed the petition as premature because Vermont and the utilities had requested the NRC to reconsider a number of issues related to Vermont Yankee's use of the decommissioning trust fund including use to pay for spent fuel management expenses pursuant to the exemption granted in June 2015. In October 2016 the NRC denied Vermont's and the utilities' request for a hearing and other relief but directed the NRC staff to conduct an assessment of any environmental impacts associated with the exemption. See Note 1 to the financial statements in the Form 10-K for further discussion regarding the Vermont Yankee plant.
For the Indian Point 3 and FitzPatrick plants purchased in 2000 from NYPA, NYPA retained the decommissioning trusts and the decommissioning liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations. NYPA has the right to require the2022.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy subsidiaries to assume each of the decommissioning liabilities provided that it assigns the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries. Under the original agreements, if the decommissioning liabilities were retained by NYPA, the Entergy subsidiaries would perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trusts. At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies.
In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. The transaction is contingent upon receiving approval from the NRC. As a result of the agreement with NYPA, in the third quarter 2016 Entergy removed the contract asset from its balance sheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and asset retirement obligations for the decommissioning liabilities. The decommissioning and asset retirement cost liabilities on the consolidated balance sheet increased from $4,790 million at December 31, 2015 to $6,101 million at September 30, 2016 primarily due to recording the Indian Point 3 and FitzPatrick asset retirement obligations as a result of the agreement with NYPA.
________________
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 September 30, 2016,2017, 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 September 30, 20162017 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
Third Quarter2016 2017 Compared to Third Quarter2015 2016
Net income decreased $17.5 million primarily due to lower net revenue, higher nuclear refueling outage expenses, a higher effective income tax rate, and higher taxes other than income taxes, partially offset by lower other operation and maintenance expenses.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income increased $54.5decreased $17.8 million primarily due to higher net revenue, lower other operationnuclear refueling outage expenses, higher depreciation and maintenanceamortization expenses, and a lowerhigher effective income tax rate.
Nine Months Ended September 30, 2016Compared toNine Months Ended September 30, 2015
Netrate, higher taxes other than income increased $68.3 million primarily due to higher net revenuetaxes, and lower other operation and maintenance expenses,net revenue, partially offset by higher depreciation and amortization expenses.other income.
Net Revenue
Third Quarter2016 2017 Compared to Third Quarter2015 2016
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 third quarter 20162017 to the third quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $440.5 |
|
Retail electric price | 50.6 |
|
Other | 5.2 |
|
| 2016 net revenue |
| $496.3 |
|
| Volume/weather | (24.6 | ) |
| Retail electric price | 9.7 |
|
| Other | 0.4 |
|
| 2017 net revenue |
| $481.8 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales. The decrease was partially offset by an increase of 168 GWh, or 9%, in industrial usage primarily due to a new customer in the primary metals industry.
The retail electric price variance is primarily due to an increase in basethe implementation of formula rate plan rates, as approved by the APSC. The new base rates wereAPSC, effective February 24, 2016 and began billing with the first billing cycle of April 2016. A significant portion ofJanuary 2017. The increase was partially offset by a decrease in the increase is related toenergy efficiency rider, as approved by the purchase of Power Block 2 of the Union Power Station.APSC, effective January 2017. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the formula rate case. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.plan filing.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
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 nine months ended September 30, 20162017 to the nine months ended September 30, 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $1,082.9 |
|
Retail electric price | 112.2 |
|
Other | (11.4 | ) |
| 2016 net revenue |
| $1,183.7 |
|
| Volume/weather | (40.0 | ) |
| Asset retirement obligation | (11.1 | ) |
| Opportunity sales | 7.5 |
|
| Retail electric price | 34.1 |
|
| Other | 4.4 |
|
| 2017 net revenue |
| $1,178.6 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales during the billed and unbilled sales periods. The decrease was partially offset by an increase of 520 GWh, or 10%, in industrial usage primarily due to a new customer in the primary metals industry.
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 is primarily caused by a decrease in regulatory credits because of an increase in decommissioning trust earnings, including portfolio rebalancing for the ANO 1 decommissioning trust fund.
The opportunity sales variance results from the estimated net revenue effect 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 herein and in the Form 10-K for further discussion of the opportunity sales proceeding.
The retail electric price variance is primarily due to an increase in basethe implementation of formula rate plan 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 periodJanuary 2017 and an increase in base rates effective February 24, 2016, through March 31, 2016.each as approved by the APSC. A significant portion of the base rate increase iswas related to the purchase of Power Block 2 of the Union Power Station.Station in March 2016. The increase was partially offset by decreases in the energy efficiency rider, as approved by the APSC, effective April 2016 and January 2017. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the rate case.case and formula rate plan filings. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase.
Other Income Statement Variances
Third Quarter 20162017 Compared to Third Quarter 20152016
Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages compared to previous outages.
Other operation and maintenance expenses decreased primarily due to:
a decrease of $9.9$8.8 million in distributionnuclear generation expenses primarily due to timing differencesa lower scope of work, including a lower scope of work performed during plant outages, in the vegetation maintenance costs incurred in third quarter 2015;2017 compared to the third quarter 2016, partially offset by higher nuclear labor costs to position the nuclear fleet to meet its operational goals.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals;
a decrease of $5.2 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs; and
a decrease of $4.2 million in energy efficiency costs, including $4.6 million in credits received in the third quarter 2017 related to incentives recognized as a result of participation in energy efficiency programs, and the effects of true ups to the energy efficiency filings in September 2017 for fixed costs to be collected from customers.
The decrease was partially offset by:
the effect of recording in July 2016 the final court decision in a lawsuit against the DOE related to spent nuclear fuel storage costs. The damages awarded includeincluded the reimbursement of $5.5 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 18 to the financial statements herein for discussion of the DOE litigation;
a decrease of $5 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 FINANCIAL 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 Arkansas’s spent nuclear fuel litigation; and
a decrease of $4.3 million in energy efficiency costs.
The decrease was partially offset by an increase of $3.2$2.1 million in fossil-fueled generationtransmission and distribution expenses primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase.higher vegetation maintenance costs.
Taxes other than income taxes decreasedincreased primarily due to a decreasean increase in ad valorem taxes resulting from lower accrualsprimarily due to higher assessments and a decrease in local franchise taxes resulting from lower residential and commercial revenues as compared to the prior year.higher millage rates.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Block 2 of the Union Power Station purchased in March 2016.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
service.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
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 decreased primarily due to:
a decrease of $24.9 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs as compared to the prior year, partially offset by higher nuclear labor costs, including contract labor,to position the nuclear fleet to meet its operational goals. 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. See “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. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals;
a decrease of $7.6 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs; and
a decrease of $7 million in energy efficiency costs, including $4.6 million in credits received in the third quarter 2017 related to incentives recognized as a result of participation in energy efficiency programs, and the effects of true ups to the energy efficiency filings in September 2017 for fixed costs to be collected from customers.
The decrease was partially offset by:
the deferral in the 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. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements hereinin the Form 10-K for further discussion of the rate case settlement;
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
an increase of $11 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs and higher labor costs, including contract labor;
the effect of recording in July 2016 the final court decision in a lawsuit against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of $5.5 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements in the Form 10-K for discussion of Entergy Arkansas’s spent nuclear fuel litigation; and
a decreasean increase of $14.7 $3.2 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 increasedownward revision to estimated incentive compensation expense 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 FINANCIAL 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;first quarter 2016.
a decrease of $13.4 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; and
a decrease of $9.6 million in distribution expenses primarily due to timing differences in the vegetation maintenance costs incurred in 2015.
The decrease was partially offset by an increase of $22.7 million in nuclear generation expenses primarily due to an overall higher scope of work done during plant outages as compared to prior year and $6.5 million in credits received in the second quarter 2015 related to incentives recognized as a result of participation in energy efficiency programs.
Taxes other than income taxes decreasedincreased primarily due to a decreasean increase in payrollad valorem taxes primarily due to higher assessments and a decrease in local franchise taxes resulting from lower residential and commercial revenues as compared to the prior year.higher millage rates.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including 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 2015the same period in 2016 on the decommissioning trust fund investments, including portfolio rebalancing for the ANO 1 decommissioning trust fund.
Income Taxes
The effective income tax rate was 39% for the third quarter 2017. The difference in the effective income tax rate for the third quarter 2017 versus the federal statutory rate of 35% was primarily due to state income taxes.
The effective income tax rate was 39.4% for the nine months ended September 30, 2017. The difference in the effective income tax rate for the nine months ended September 30, 2017 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 an increase inbook and tax differences related to the allowance for equity funds used during construction resulting from increased capital transmission spending in 2016.
Interest expense increased primarily due to:
$5.1 million in estimated interest expense recorded in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements herein for further discussion of the opportunity sales proceeding; and
the net issuance of $230 million of first mortgage bonds in 2016. See Note 4 to the financial statements herein for further discussion of debt issuances and redemptions.
Income Taxesconstruction.
The effective income tax rate was 36.1% for the third quarter 2016. The difference in the effective income tax rate for the third quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by flow-through tax accounting.
The effective income tax rate was 37.4% for the nine months ended September 30, 2016. The difference in the effective income tax rate for the nine months ended September 30, 2016 versus the federal statutory rate of 35%
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by flow-through tax accounting and book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 39.9% for the third quarter 2015. The difference in the effective income tax rate for the third 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.
The effective income tax rate was 38.1% for the nine months ended September 30, 2015. The difference in the effective income tax rate for the nine months ended September 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 IRS 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.
As discussed inreviews, and the Form 10-K, in March 2015 the NRC issued a letter notifying Entergydeferral 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 $37 million was incurred as of September 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.replacement power costs.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 20162017 and 20152016 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 | 473,800 |
| | 408,202 |
| 367,551 |
| | 473,800 |
|
| Investing activities | (774,210 | ) | | (495,777 | ) | (667,841 | ) | | (774,210 | ) |
| Financing activities | 294,686 |
| | (11,570 | ) | 280,245 |
| | 294,686 |
|
| Net decrease in cash and cash equivalents | (5,724 | ) | | (99,145 | ) | (20,045 | ) | | (5,724 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $3,411 |
| |
| $119,360 |
|
| $464 |
| |
| $3,411 |
|
Operating Activities
Net cash flow provided by operating activities increased $65.6decreased $106.2 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
the timingto an increase of payments to vendors;
a decrease of $26.5 million in pension contributions in 2016. 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;
a decrease of $21$46.1 million in spending on nuclear refueling outages in 2016;2017, the timing of payments to vendors, and
a decrease of $10.4 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 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 $17.9 million received in 2016 as compared to $64 million received in 2015. See Note 2 herein and in the Form 10-K for a discussion of the System Agreement proceedings.net income.
Investing Activities
Net cash flow used in investing activities increased $278.4decreased $106.4 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
to the purchase of Power Block 2 of the Union Power Station in March 2016 for approximately $237 million.million and a decrease of $36.9 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the Union Power Station purchase;purchase.
The decrease was partially offset by:
$66 million in funds held on deposit for principal and interest payments due October 1, 2017;
an increase of $13.5$61.6 million in nuclear construction expenditures primarily due to a higher scope of work performed on various information technologynuclear projects and upgrades in 2016; and2017;
an increase of $22.9 million in transmission andfossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017;
an increase of $21 million in distribution construction expenditures primarily due to a higher scope of work performed on various projects in 20162017; and higher storm restoration spending
an increase of $18.6 million in 2016.
The increase 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 and a decrease in nuclearinformation technology construction expenditures primarily due to decreasedincreased spending on compliance with NRC post-Fukushima requirements.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
substation circuit replacement.
Financing Activities
Entergy Arkansas’sNet cash flow provided by financing activities provided $294.7decreased $14.4 million of cash for the nine months ended September 30, 20162017 compared to using $11.6 million of cash for the nine months ended September 30, 20152016 primarily due to the following activity:to:
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; and
the net issuance
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
net borrowings of $35.7$23.3 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 20162017 compared to net repaymentsborrowings of $10.7$35.7 million in 2015; and2016.
The decrease was partially offset by:
the redemptionnet issuance of $215.9 million of long-term debt in 2017 as compared to the net issuance of $156.1 million of long-term debt in 2016;
the redemptions of $75 million of 6.45% Series preferred stock and the redemption of $10 million of 6.08% Series preferred stock in 2016.2016; and
money pool activity.
Increases in Entergy Arkansas’s payable to the money pool are a source of cash flow, and Entergy Arkansas’s payable to the money pool increased by $43.9 million in 2017 compared to decreasing by $3.7 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.
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, partially offset by the issuance of long-term debt in 2016 and the redemption of $75 million of 6.45% Series preferred stock and $10 million of 6.08% Series preferred stock, as discussed above.
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Debt to capital | 55.5 | % | | 56.8 | % | 55.8 | % | | 55.3 | % |
| Effect of excluding the securitization bonds | (0.5 | %) | | (0.6 | %) | (0.3 | %) | | (0.4 | %) |
| Debt to capital, excluding securitization bonds (a) | 55.0 | % | | 56.2 | % | 55.5 | % | | 54.9 | % |
| Effect of subtracting cash | — | % | | (0.1 | %) | — | % | | (0.2 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 55.0 | % | | 56.1 | % | 55.5 | % | | 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.
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 seeksFollowing are updates to optimize its capital structurethe information provided in accordance with its regulatory requirements and to control its cost of capitalthe Form 10-K.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 is developing its capital investment plan for 20172018 through 20192020 and currently anticipates making $2$2.1 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintainenhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; the nuclear fleet operational excellence initiative, as discussed belowinvestments in “Nuclear Matters”;ANO 1 and 2; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Arkansas’s receivables from or (payables to)payables to the money pool were as follows:
|
| | | | | | |
| September 30, 2016 | | December 31, 2015 | | September 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| ($49,073) | | ($52,742) | | $2,435 | | $2,218 |
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $95,114 | | $51,232 | | $49,073 | | $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 2021.2022. Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2017.2018. The $150 million credit facility allows Entergy Arkansas to issuepermits the issuance of letters of credit against 50% of the borrowing capacity of the facility. As of September 30, 2016,2017, 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 September 30, 2016,2017, a $1$2 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 September 30, 2016, $47.42017, $8.3 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued byand $15 million in loans were outstanding under the Entergy Arkansas nuclear fuel company variable interest entity.entity credit facility. 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.
Retail Rates
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, which was subsequently made in July 2017 and is discussed below. In May 2017 the APSC approved the joint motion and proposal to review Entergy Arkansas’s supplemental filing on a concurrent schedule with the 2017 formula rate plan filing. In doing so, however, the APSC noted that a determination of whether the supplemental information supporting certain nuclear expenditures will be considered in the hearing for the 2017 formula rate plan filing or a separate hearing will be made at a later time. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
2015 Rate Caseapprove a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs.
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.
20162017 Formula Rate Plan Filing
In July 2016,2017, Entergy Arkansas filed with the APSC its 20162017 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 20172018 test period to be below the formula rate plan bandwidth. The filing requestedprojected a $67.7$129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75%. Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and the projected annual revenue requirement increase exceeds the four percent, resulting in a proposed increase for the 2017 formula rate plan of $70.9 million. In October 2016,2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments with an updated request forthat projected a $54.4$126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors, as well as three additional adjustments identified as appropriate by Entergy Arkansas. Also inintervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on a revision to the four percent cap calculation. In October 2016,2017, Entergy Arkansas and allthe parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and waive the hearing scheduledproviding for November 2016. The APSC denied the request to waive the hearing, directed certain witnesses to appear, and stated that approvalrecovery of the 2017 and 2018 nuclear costs. The settlement agreement would be addressed by a subsequent order. In November 2016 a hearing was held and the APSC issued an order directing the parties to brief certain issues. The parties to the settlement agreement, who reached agreement on all issues and certain additional provisions related to future filing information, requested an order approving the settlement agreement and thedoes not affect Entergy Arkansas’s proposed $54.4$71.1 million revenue requirement increase and rate adjustment by December 9, 2016.increase. If a final order is not issued by this date,December 13, 2017, the proposed formula rate plan rate adjustment will become effective December 30, 2016,January 2, 2018, subject to refund.
Advanced Metering Infrastructure (AMI) Filing
InAs discussed in the Form 10-K, in September 2016, Entergy Arkansas filed an application seeking an ordera finding from the APSC finding that Entergy Arkansas’s deployment of AMIadvanced metering infrastructure is in the public interest. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. The APSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundationAttorney General’s consultant primarily recommended denial of Entergy Arkansas’s modernized power grid. The filing identified a number quantified and unquantified benefits, andapplication but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal. Entergy Arkansas providedfiled rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a cost benefit analysis showingjoint motion to approve a unanimous settlement agreement. Also in August 2017 supplemental testimony was filed and a settlement hearing was held. In October 2017 the APSC issued an order finding that itsEntergy Arkansas’s AMI deployment is expectedin the public interest and approving the settlement agreement subject to produce a nominal net benefit to customers of $431 million.minor modification. Entergy Arkansas also soughtexpects to continue to include in rate baserecover the remaining book value, approximately $57 million,undepreciated balance of its existing meters that willthrough a regulatory asset to be retired as part of the AMI deployment and also to depreciate
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
those assets using current depreciation rates. Entergy Arkansas proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Subject to approval by the APSC, deployment of the communications network is expected to begin in 2018. Entergy Arkansas proposed to include the AMI deployment costs and the quantified benefits in future formula rate plan filings. In order to have certainty around its 2018 projected AMI deployment costs, Entergy Arkansas sought an order from the APSC prior to the hearing on its expected 2017 formula rate plan filing in fourth quarter 2017.amortized over 15 years.
ProductionEnergy Cost AllocationRecovery Rider
In May 2016,March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate redetermination 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 reflected 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 April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2016, and rates will be effective through June 2017.2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.
Opportunity Sales ProceedingProceedings
SeeAs discussed in 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 requestedfiled a complaint requesting 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 allocateallocated 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 prohibitsprohibited sales to third parties by individual companies absent an offer of a right-of-first-refusalright-of-
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds.
In April 2016 the FERC issued orders addressing the requests for rehearing filed in July 2012 and thean 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 August 2013 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 has performed an initial re-run of the intra-system bills for the ten-year period (2000-2009) to attempt 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
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 addressingarguing that payments made by Entergy Arkansas should be reduced as a result of the requests for rehearing filed in July 2012.timing of the LPSC’s approval of certain contracts. 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. In September 2017 the FERC issued an order denying the request for rehearing on the issue of whether any payments by Entergy Arkansas to the other Utility operating companies should be reduced due to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana.
Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the LPSC submitted testimony disputing certain aspects of the calculations, and Entergy Services submitted answering testimony in January 2017. In February 2017 the FERC staff filed testimony and Entergy Services filed responsive testimony. In March 2017 the LPSC filed rebuttal testimony. A hearing was held in May 2017. In July 2017 the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interest to the other Utility operating companies. In August 2017 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individual briefs on exceptions challenging various aspects of the initial decision. In September 2017 the Utility operating companies, the LPSC, the APSC, the MPSC, the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties. The case is pending before the FERC. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.
The effect of the FERC’s decisions thus far in the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies. Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million, which includes interest, for its estimated increased costs and payment to the other Utility operating companies. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision. 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. Entergy Arkansas, therefore, recorded a regulatory asset in the first quarter 2016 of approximately $75 million, which represents its estimate of the retail portion of the costs.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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. Also see the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
In 2016, Entergy conducted a comprehensive evaluation of the Entergy nuclear fleet and determined that it is necessary to increase investments in its nuclear plants to position the fleet for sustained operational excellence during each plant’s expected operating life. These investments will result in increased operating and capital costs associated with operating Entergy’s nuclear plants going forward. The preliminary estimates of the incremental capital costs for 2017 through 2019 identified through this initiative are estimated to be $290 million for Entergy Arkansas. The current estimates of the capital costs identified through this initiative are included in Entergy Arkansas’s preliminary capital investment plan estimate for 2017 through 2019 given in “Liquidity and Capital Resources - Uses and Sources of Capital” above. The incremental increases in other operation and maintenance expenses identified through this initiative are preliminarily estimated to be approximately $35 million in 2017, $50 million in 2018, and $30 million in 2019 for Entergy Arkansas. In addition, nuclear refueling outage expenses are expected to increase going forward.
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 and Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $654,599 |
| |
| $714,353 |
| |
| $1,624,224 |
| |
| $1,777,415 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 105,147 |
| | 176,164 |
| | 274,106 |
| | 426,351 |
|
| Purchased power | | 52,023 |
| | 105,321 |
| | 163,541 |
| | 285,806 |
|
| Nuclear refueling outage expenses | | 14,554 |
| | 13,603 |
| | 44,604 |
| | 39,109 |
|
| Other operation and maintenance | | 187,294 |
| | 214,536 |
| | 514,109 |
| | 544,446 |
|
| Decommissioning | | 13,504 |
| | 12,713 |
| | 39,908 |
| | 37,508 |
|
| Taxes other than income taxes | | 24,931 |
| | 28,905 |
| | 70,978 |
| | 77,589 |
|
| Depreciation and amortization | | 67,309 |
| | 61,527 |
| | 197,597 |
| | 183,169 |
|
| Other regulatory charges (credits) - net | | 1,177 |
| | (7,652 | ) | | 2,896 |
| | (17,604 | ) |
| TOTAL | | 465,939 |
| | 605,117 |
| | 1,307,739 |
| | 1,576,374 |
|
| | | | | | | | | |
| OPERATING INCOME | | 188,660 |
| | 109,236 |
| | 316,485 |
| | 201,041 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 3,734 |
| | 3,950 |
| | 12,661 |
| | 9,856 |
|
| Interest and investment income | | 5,410 |
| | 4,541 |
| | 14,774 |
| | 18,354 |
|
| Miscellaneous - net | | 812 |
| | (1,036 | ) | | (983 | ) | | (1,724 | ) |
| TOTAL | | 9,956 |
| | 7,455 |
| | 26,452 |
| | 26,486 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 28,152 |
| | 26,360 |
| | 88,726 |
| | 79,264 |
|
| Allowance for borrowed funds used during construction | | (2,000 | ) | | (2,246 | ) | | (6,851 | ) | | (5,321 | ) |
| TOTAL | | 26,152 |
| | 24,114 |
| | 81,875 |
| | 73,943 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 172,464 |
| | 92,577 |
| | 261,062 |
| | 153,584 |
|
| | | | | | | | | |
| Income taxes | | 62,316 |
| | 36,915 |
| | 97,729 |
| | 58,532 |
|
| | | | | | | | | |
| NET INCOME | | 110,148 |
| | 55,662 |
| | 163,333 |
| | 95,052 |
|
| | | | | | | | | |
| Preferred dividend requirements | | 1,476 |
| | 1,718 |
| | 4,913 |
| | 5,155 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $108,672 |
| |
| $53,944 |
| |
| $158,420 |
| |
| $89,897 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $163,333 |
| |
| $95,052 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 319,845 |
| | 303,653 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 163,202 |
| | 4,483 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (116,584 | ) | | (74,495 | ) |
| Fuel inventory | | 28,968 |
| | 140 |
|
| Accounts payable | | 95,116 |
| | 16,193 |
|
| Prepaid taxes and taxes accrued | | (78,879 | ) | | 34,588 |
|
| Interest accrued | | 5,909 |
| | 4,196 |
|
| Deferred fuel costs | | (50,687 | ) | | 106,499 |
|
| Other working capital accounts | | 4,259 |
| | (26,988 | ) |
| Provisions for estimated losses | | 130 |
| | 497 |
|
| Other regulatory assets | | (5,680 | ) | | 35,483 |
|
| Pension and other postretirement liabilities | | (77,823 | ) | | (97,650 | ) |
| Other assets and liabilities | | 22,691 |
| | 6,551 |
|
| Net cash flow provided by operating activities | | 473,800 |
| | 408,202 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (494,071 | ) | | (428,491 | ) |
| Allowance for equity funds used during construction | | 13,134 |
| | 11,394 |
|
| Payment for purchase of plant | | (237,324 | ) | | — |
|
| Nuclear fuel purchases | | (80,716 | ) | | (119,285 | ) |
| Proceeds from sale of nuclear fuel | | 40,336 |
| | 52,281 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 165,038 |
| | 190,759 |
|
| Investment in nuclear decommissioning trust funds | | (176,981 | ) | | (197,787 | ) |
| Changes in money pool receivable - net | | — |
| | (217 | ) |
| Changes in securitization account | | (3,524 | ) | | (4,431 | ) |
| Other | | (102 | ) | | — |
|
| Net cash flow used in investing activities | | (774,210 | ) | | (495,777 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 777,671 |
| | — |
|
| Retirement of long-term debt | | (621,608 | ) | | (6,521 | ) |
Capital contribution from parent
| | 200,000 |
| | — |
|
| Redemption of preferred stock | | (85,283 | ) | | — |
|
| Changes in short-term borrowings - net | | 35,717 |
| | (10,728 | ) |
| Change in money pool payable - net | | (3,669 | ) | | — |
|
| Dividends paid: | | | | |
| Preferred stock | | (6,274 | ) | | (5,155 | ) |
| Other | | (1,868 | ) | | 10,834 |
|
| Net cash flow provided by (used in) financing activities | | 294,686 |
| | (11,570 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (5,724 | ) | | (99,145 | ) |
| Cash and cash equivalents at beginning of period | | 9,135 |
| | 218,505 |
|
| Cash and cash equivalents at end of period | |
| $3,411 |
| |
| $119,360 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
|
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $78,500 |
| |
| $70,902 |
|
| Income taxes | |
| $7,242 |
| |
| $17,592 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $3,394 |
| |
| $9,066 |
|
| Temporary cash investments | | 17 |
| | 69 |
|
| Total cash and cash equivalents | | 3,411 |
| | 9,135 |
|
| Securitization recovery trust account | | 7,728 |
| | 4,204 |
|
| Accounts receivable: | | | | |
| Customer | | 149,798 |
| | 108,636 |
|
| Allowance for doubtful accounts | | (1,605 | ) | | (34,226 | ) |
| Associated companies | | 30,465 |
| | 32,987 |
|
| Other | | 81,260 |
| | 84,216 |
|
| Accrued unbilled revenues | | 122,884 |
| | 73,583 |
|
| Total accounts receivable | | 382,802 |
| | 265,196 |
|
| Deferred fuel costs | | 41,686 |
| | — |
|
| Fuel inventory - at average cost | | 33,721 |
| | 62,689 |
|
| Materials and supplies - at average cost | | 179,018 |
| | 169,919 |
|
| Deferred nuclear refueling outage costs | | 44,291 |
| | 67,834 |
|
| Prepaid taxes | | 109,170 |
| | 30,291 |
|
| Prepayments and other | | 18,899 |
| | 15,145 |
|
| TOTAL | | 820,726 |
| | 624,413 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 823,816 |
| | 771,313 |
|
| Other | | 7,914 |
| | 12,895 |
|
| TOTAL | | 831,730 |
| | 784,208 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 10,314,236 |
| | 9,536,802 |
|
| Property under capital lease | | 751 |
| | 844 |
|
| Construction work in progress | | 324,877 |
| | 388,075 |
|
| Nuclear fuel | | 245,251 |
| | 286,341 |
|
| TOTAL UTILITY PLANT | | 10,885,115 |
| | 10,212,062 |
|
| Less - accumulated depreciation and amortization | | 4,578,460 |
| | 4,349,809 |
|
| UTILITY PLANT - NET | | 6,306,655 |
| | 5,862,253 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 71,853 |
| | 61,438 |
|
| Other regulatory assets (includes securitization property of $44,320 as of September 30, 2016 and $54,450 as of December 31, 2015) | | 1,329,038 |
| | 1,333,773 |
|
| Deferred fuel costs | | 66,848 |
| | 66,700 |
|
| Other | | 16,692 |
| | 14,989 |
|
| TOTAL | | 1,484,431 |
| | 1,476,900 |
|
| | | | | |
| TOTAL ASSETS | |
| $9,443,542 |
| |
| $8,747,774 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $— |
| |
| $55,000 |
|
| Short-term borrowings | | 47,408 |
| | 11,690 |
|
| Accounts payable: | | | | |
| Associated companies | | 186,791 |
| | 110,464 |
|
| Other | | 161,929 |
| | 177,758 |
|
| Customer deposits | | 97,046 |
| | 118,340 |
|
| Interest accrued | | 25,792 |
| | 19,883 |
|
| Deferred fuel costs | | — |
| | 8,853 |
|
| Other | | 53,654 |
| | 45,219 |
|
| TOTAL | | 572,620 |
| | 547,207 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,153,146 |
| | 1,982,812 |
|
| Accumulated deferred investment tax credits | | 35,605 |
| | 36,506 |
|
| Other regulatory liabilities | | 292,545 |
| | 242,913 |
|
| Decommissioning | | 912,254 |
| | 872,346 |
|
| Accumulated provisions | | 5,682 |
| | 5,552 |
|
| Pension and other postretirement liabilities | | 381,333 |
| | 459,153 |
|
| Long-term debt (includes securitization bonds of $54,884 as of September 30, 2016 and $61,249 as of December 31, 2015) | | 2,796,059 |
| | 2,574,839 |
|
| Other | | 13,154 |
| | 18,438 |
|
| TOTAL | | 6,589,778 |
| | 6,192,559 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Preferred stock without sinking fund | | 31,350 |
| | 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 | | 790,243 |
| | 588,493 |
|
| Retained earnings | | 1,459,081 |
| | 1,302,695 |
|
| TOTAL | | 2,249,794 |
| | 1,891,658 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $9,443,542 |
| |
| $8,747,774 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED INCOME STATEMENTS |
| For the Three and Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $673,226 |
| |
| $654,599 |
| |
| $1,644,239 |
| |
| $1,624,224 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 133,254 |
| | 105,147 |
| | 283,354 |
| | 274,106 |
|
| Purchased power | | 63,423 |
| | 52,023 |
| | 193,108 |
| | 163,541 |
|
| Nuclear refueling outage expenses | | 22,988 |
| | 14,554 |
| | 59,942 |
| | 44,604 |
|
| Other operation and maintenance | | 175,013 |
| | 187,294 |
| | 512,691 |
| | 514,109 |
|
| Decommissioning | | 14,320 |
| | 13,504 |
| | 42,321 |
| | 39,908 |
|
| Taxes other than income taxes | | 29,259 |
| | 24,931 |
| | 78,438 |
| | 70,978 |
|
| Depreciation and amortization | | 70,433 |
| | 67,309 |
| | 206,586 |
| | 197,597 |
|
| Other regulatory charges (credits) - net | | (5,219 | ) | | 1,177 |
| | (10,797 | ) | | 2,896 |
|
| TOTAL | | 503,471 |
| | 465,939 |
| | 1,365,643 |
| | 1,307,739 |
|
| | | | | | | | | |
| OPERATING INCOME | | 169,755 |
| | 188,660 |
| | 278,596 |
| | 316,485 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 4,140 |
| | 3,734 |
| | 13,922 |
| | 12,661 |
|
| Interest and investment income | | 6,738 |
| | 5,410 |
| | 27,865 |
| | 14,774 |
|
| Miscellaneous - net | | 183 |
| | 812 |
| | 19 |
| | (983 | ) |
| TOTAL | | 11,061 |
| | 9,956 |
| | 41,806 |
| | 26,452 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 31,010 |
| | 28,152 |
| | 86,776 |
| | 88,726 |
|
| Allowance for borrowed funds used during construction | | (1,944 | ) | | (2,000 | ) | | (6,458 | ) | | (6,851 | ) |
| TOTAL | | 29,066 |
| | 26,152 |
| | 80,318 |
| | 81,875 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 151,750 |
| | 172,464 |
| | 240,084 |
| | 261,062 |
|
| | | | | | | | | |
| Income taxes | | 59,112 |
| | 62,316 |
| | 94,592 |
| | 97,729 |
|
| | | | | | | | | |
| NET INCOME | | 92,638 |
| | 110,148 |
| | 145,492 |
| | 163,333 |
|
| | | | | | | | | |
| Preferred dividend requirements | | 357 |
| | 1,476 |
| | 1,071 |
| | 4,913 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $92,281 |
| |
| $108,672 |
| |
| $144,421 |
| |
| $158,420 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 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 | | — |
| | — |
| | 95,052 |
| | 95,052 |
|
| Preferred stock dividends | | — |
| | — |
| | (5,155 | ) | | (5,155 | ) |
| | | | | | | | | |
| Balance at September 30, 2015 | |
| $470 |
| |
| $588,471 |
| |
| $1,325,193 |
| |
| $1,914,134 |
|
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2015 | |
| $470 |
| |
| $588,493 |
| |
| $1,302,695 |
| |
| $1,891,658 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 163,333 |
| | 163,333 |
|
| Capital contribution from parent | | — |
| | 200,000 |
| | — |
| | 200,000 |
|
| Capital stock redemption | | — |
| | 1,750 |
| | (2,034 | ) | | (284 | ) |
| Preferred stock dividends | | — |
| | — |
| | (4,913 | ) | | (4,913 | ) |
| | | | | | | | | |
| Balance at September 30, 2016 | |
| $470 |
| |
| $790,243 |
| |
| $1,459,081 |
| |
| $2,249,794 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $145,492 |
| |
| $163,333 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 311,725 |
| | 319,845 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 78,390 |
| | 163,202 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (45,180 | ) | | (116,584 | ) |
| Fuel inventory | | 10,089 |
| | 28,968 |
|
| Accounts payable | | (78,396 | ) | | 95,116 |
|
| Prepaid taxes and taxes accrued | | 15,367 |
| | (78,879 | ) |
| Interest accrued | | 12,436 |
| | 5,909 |
|
| Deferred fuel costs | | (53,664 | ) | | (50,687 | ) |
| Other working capital accounts | | (6,762 | ) | | 4,259 |
|
| Provisions for estimated losses | | 10,094 |
| | 130 |
|
| Other regulatory assets | | (4,680 | ) | | (5,680 | ) |
| Pension and other postretirement liabilities | | (73,107 | ) | | (77,823 | ) |
| Other assets and liabilities | | 45,747 |
| | 22,691 |
|
| Net cash flow provided by operating activities | | 367,551 |
| | 473,800 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (558,985 | ) | | (494,071 | ) |
| Allowance for equity funds used during construction | | 14,521 |
| | 13,134 |
|
| Payment for purchase of plant | | — |
| | (237,324 | ) |
| Nuclear fuel purchases | | (95,289 | ) | | (80,716 | ) |
| Proceeds from sale of nuclear fuel | | 51,029 |
| | 40,336 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 219,223 |
| | 165,038 |
|
| Investment in nuclear decommissioning trust funds | | (228,740 | ) | | (176,981 | ) |
| Changes in securitization account | | (3,619 | ) | | (3,524 | ) |
| Change in other investments | | (65,981 | ) | | — |
|
| Other | | — |
| | (102 | ) |
| Net cash flow used in investing activities | | (667,841 | ) | | (774,210 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 222,717 |
| | 777,671 |
|
| Retirement of long-term debt | | (6,803 | ) | | (621,608 | ) |
Capital contribution from parent
| | — |
| | 200,000 |
|
| Redemption of preferred stock | | — |
| | (85,283 | ) |
| Changes in short-term borrowings - net | | 23,257 |
| | 35,717 |
|
| Changes in money pool payable - net | | 43,882 |
| | (3,669 | ) |
| Dividends paid: | | | | |
| Preferred stock | | (1,071 | ) | | (6,274 | ) |
| Other | | (1,737 | ) | | (1,868 | ) |
| Net cash flow provided by financing activities | | 280,245 |
| | 294,686 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (20,045 | ) | | (5,724 | ) |
| Cash and cash equivalents at beginning of period | | 20,509 |
| | 9,135 |
|
| Cash and cash equivalents at end of period | |
| $464 |
| |
| $3,411 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
|
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $70,321 |
| |
| $78,500 |
|
| Income taxes | |
| $— |
| |
| $7,242 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $127 |
| |
| $20,174 |
|
| Temporary cash investments | | 337 |
| | 335 |
|
| Total cash and cash equivalents | | 464 |
| | 20,509 |
|
| Securitization recovery trust account | | 7,759 |
| | 4,140 |
|
| Accounts receivable: | | | | |
| Customer | | 140,147 |
| | 102,229 |
|
| Allowance for doubtful accounts | | (1,531 | ) | | (1,211 | ) |
| Associated companies | | 35,455 |
| | 35,286 |
|
| Other | | 52,109 |
| | 58,153 |
|
| Accrued unbilled revenues | | 113,650 |
| | 100,193 |
|
| Total accounts receivable | | 339,830 |
| | 294,650 |
|
| Deferred fuel costs | | 150,206 |
| | 96,690 |
|
| Fuel inventory - at average cost | | 22,671 |
| | 32,760 |
|
| Materials and supplies - at average cost | | 191,199 |
| | 182,600 |
|
| Deferred nuclear refueling outage costs | | 80,769 |
| | 81,313 |
|
| Prepayments and other | | 81,322 |
| | 14,293 |
|
| TOTAL | | 874,220 |
| | 726,955 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 910,369 |
| | 834,735 |
|
| Other | | 3,162 |
| | 7,912 |
|
| TOTAL | | 913,531 |
| | 842,647 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 10,823,675 |
| | 10,488,060 |
|
| Property under capital lease | | 598 |
| | 716 |
|
| Construction work in progress | | 365,938 |
| | 304,073 |
|
| Nuclear fuel | | 236,447 |
| | 307,352 |
|
| TOTAL UTILITY PLANT | | 11,426,658 |
| | 11,100,201 |
|
| Less - accumulated depreciation and amortization | | 4,721,860 |
| | 4,635,885 |
|
| UTILITY PLANT - NET | | 6,704,798 |
| | 6,464,316 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 67,228 |
| | 62,646 |
|
| Other regulatory assets (includes securitization property of $31,448 as of September 30, 2017 and $41,164 as of December 31, 2016) | | 1,428,127 |
| | 1,428,029 |
|
| Deferred fuel costs | | 67,046 |
| | 66,898 |
|
| Other | | 16,126 |
| | 14,626 |
|
| TOTAL | | 1,578,527 |
| | 1,572,199 |
|
| | | | | |
| TOTAL ASSETS | |
| $10,071,076 |
| |
| $9,606,117 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $114,700 |
| |
| $114,700 |
|
| Short-term borrowings | | 8,257 |
| | — |
|
| Accounts payable: | | | | |
| Associated companies | | 237,246 |
| | 239,711 |
|
| Other | | 142,160 |
| | 185,153 |
|
| Customer deposits | | 97,432 |
| | 97,512 |
|
| Taxes accrued | | 22,561 |
| | 7,194 |
|
| Interest accrued | | 29,016 |
| | 16,580 |
|
| Other | | 34,329 |
| | 36,557 |
|
| TOTAL | | 685,701 |
| | 697,407 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,265,375 |
| | 2,186,623 |
|
| Accumulated deferred investment tax credits | | 34,404 |
| | 35,305 |
|
| Other regulatory liabilities | | 349,380 |
| | 305,907 |
|
| Decommissioning | | 966,674 |
| | 924,353 |
|
| Accumulated provisions | | 28,776 |
| | 18,682 |
|
| Pension and other postretirement liabilities | | 351,046 |
| | 424,234 |
|
| Long-term debt (includes securitization bonds of $41,578 as of September 30, 2017 and $48,139 as of December 31, 2016) | | 2,948,610 |
| | 2,715,085 |
|
| Other | | 12,022 |
| | 13,854 |
|
| TOTAL | | 6,956,287 |
| | 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 | | 1,607,025 |
| | 1,462,604 |
|
| TOTAL | | 2,397,738 |
| | 2,253,317 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $10,071,076 |
| |
| $9,606,117 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| SELECTED OPERATING RESULTS |
| For the Three and Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | | | | | |
| | | Three Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % |
| | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | |
| Residential | |
| $275 |
| |
| $280 |
| |
| ($5 | ) | | (2 | ) |
| Commercial | | 151 |
| | 162 |
| | (11 | ) | | (7 | ) |
| Industrial | | 137 |
| | 152 |
| | (15 | ) | | (10 | ) |
| Governmental | | 5 |
| | 5 |
| | — |
| | — |
|
| Total retail | | 568 |
| | 599 |
| | (31 | ) | | (5 | ) |
| Sales for resale: | | | | | | | | |
| Associated companies | | 26 |
| | 32 |
| | (6 | ) | | (19 | ) |
| Non-associated companies | | 30 |
| | 59 |
| | (29 | ) | | (49 | ) |
| Other | | 31 |
| | 24 |
| | 7 |
| | 29 |
|
| Total | |
| $655 |
| |
| $714 |
| |
| ($59 | ) | | (8 | ) |
| | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 2,485 |
| | 2,478 |
| | 7 |
| | — |
|
| Commercial | | 1,822 |
| | 1,826 |
| | (4 | ) | | — |
|
| Industrial | | 1,906 |
| | 1,952 |
| | (46 | ) | | (2 | ) |
| Governmental | | 68 |
| | 66 |
| | 2 |
| | 3 |
|
| Total retail | | 6,281 |
| | 6,322 |
| | (41 | ) | | (1 | ) |
| Sales for resale: | | | | | | | | |
| Associated companies | | 463 |
| | 606 |
| | (143 | ) | | (24 | ) |
| Non-associated companies | | 1,632 |
| | 2,269 |
| | (637 | ) | | (28 | ) |
| Total | | 8,376 |
| | 9,197 |
| | (821 | ) | | (9 | ) |
| | | | | | | | | |
| | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | |
| Residential | |
| $620 |
| |
| $661 |
| |
| ($41 | ) | | (6 | ) |
| Commercial | | 376 |
| | 392 |
| | (16 | ) | | (4 | ) |
| Industrial | | 337 |
| | 361 |
| | (24 | ) | | (7 | ) |
| Governmental | | 13 |
| | 14 |
| | (1 | ) | | (7 | ) |
| Total retail | | 1,346 |
| | 1,428 |
| | (82 | ) | | (6 | ) |
| Sales for resale: | | | | | | | | |
| Associated companies | | 19 |
| | 93 |
| | (74 | ) | | (80 | ) |
| Non-associated companies | | 105 |
| | 167 |
| | (62 | ) | | (37 | ) |
| Other | | 154 |
| | 89 |
| | 65 |
| | 73 |
|
| Total | |
| $1,624 |
| |
| $1,777 |
| |
| ($153 | ) | | (9 | ) |
| | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 5,918 |
| | 6,449 |
| | (531 | ) | | (8 | ) |
| Commercial | | 4,512 |
| | 4,615 |
| | (103 | ) | | (2 | ) |
| Industrial | | 5,064 |
| | 5,175 |
| | (111 | ) | | (2 | ) |
| Governmental | | 179 |
| | 177 |
| | 2 |
| | 1 |
|
| Total retail | | 15,673 |
| | 16,416 |
| | (743 | ) | | (5 | ) |
| Sales for resale: | | | | | | | | |
| Associated companies | | 1,427 |
| | 1,713 |
| | (286 | ) | | (17 | ) |
| Non-associated companies | | 6,440 |
| | 6,597 |
| | (157 | ) | | (2 | ) |
| Total | | 23,540 |
| | 24,726 |
| | (1,186 | ) | | (5 | ) |
|
| | | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 30, 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 | | — |
| | — |
| | 163,333 |
| | 163,333 |
|
| Capital contribution from parent | | — |
| | 200,000 |
| | — |
| | 200,000 |
|
| Capital stock redemption | | — |
| | 1,750 |
| | (2,034 | ) | | (284 | ) |
| Preferred stock dividends | | — |
| | — |
| | (4,913 | ) | | (4,913 | ) |
| | | | | | | | | |
| Balance at September 30, 2016 | |
| $470 |
| |
| $790,243 |
| |
| $1,459,081 |
| |
| $2,249,794 |
|
| | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2016 | |
| $470 |
| |
| $790,243 |
| |
| $1,462,604 |
| |
| $2,253,317 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 145,492 |
| | 145,492 |
|
| Preferred stock dividends | | — |
| | — |
| | (1,071 | ) | | (1,071 | ) |
| | | | | | | | | |
| Balance at September 30, 2017 | |
| $470 |
| |
| $790,243 |
| |
| $1,607,025 |
| |
| $2,397,738 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY ARKANSAS, INC. AND SUBSIDIARIES |
| SELECTED OPERATING RESULTS |
| For the Three and Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | | | |
| | | Three Months Ended | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % |
| | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | |
| Residential | |
| $254 |
| |
| $275 |
| |
| ($21 | ) | | (8 | ) |
| Commercial | | 150 |
| | 151 |
| | (1 | ) | | (1 | ) |
| Industrial | | 145 |
| | 137 |
| | 8 |
| | 6 |
|
| Governmental | | 6 |
| | 5 |
| | 1 |
| | 20 |
|
| Total retail | | 555 |
| | 568 |
| | (13 | ) | | (2 | ) |
| Sales for resale: | | | | | | | | |
| Associated companies | | 33 |
| | 26 |
| | 7 |
| | 27 |
|
| Non-associated companies | | 45 |
| | 30 |
| | 15 |
| | 50 |
|
| Other | | 40 |
| | 31 |
| | 9 |
| | 29 |
|
| Total | |
| $673 |
| |
| $655 |
| |
| $18 |
| | 3 |
|
| | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 2,236 |
| | 2,485 |
| | (249 | ) | | (10 | ) |
| Commercial | | 1,723 |
| | 1,822 |
| | (99 | ) | | (5 | ) |
| Industrial | | 2,074 |
| | 1,906 |
| | 168 |
| | 9 |
|
| Governmental | | 67 |
| | 68 |
| | (1 | ) | | (1 | ) |
| Total retail | | 6,100 |
| | 6,281 |
| | (181 | ) | | (3 | ) |
| Sales for resale: | | | | | | | | |
| Associated companies | | 483 |
| | 463 |
| | 20 |
| | 4 |
|
| Non-associated companies | | 2,026 |
| | 1,632 |
| | 394 |
| | 24 |
|
| Total | | 8,609 |
| | 8,376 |
| | 233 |
| | 3 |
|
| | | | | | | | | |
| | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | |
| Residential | |
| $597 |
| |
| $620 |
| |
| ($23 | ) | | (4 | ) |
| Commercial | | 375 |
| | 376 |
| | (1 | ) | | — |
|
| Industrial | | 355 |
| | 337 |
| | 18 |
| | 5 |
|
| Governmental | | 15 |
| | 13 |
| | 2 |
| | 15 |
|
| Total retail | | 1,342 |
| | 1,346 |
| | (4 | ) | | — |
|
| Sales for resale: | | | | | | | | |
| Associated companies | | 96 |
| | 19 |
| | 77 |
| | 405 |
|
| Non-associated companies | | 96 |
| | 105 |
| | (9 | ) | | (9 | ) |
| Other | | 110 |
| | 154 |
| | (44 | ) | | (29 | ) |
| Total | |
| $1,644 |
| |
| $1,624 |
| |
| $20 |
| | 1 |
|
| | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | |
| Residential | | 5,625 |
| | 5,918 |
| | (293 | ) | | (5 | ) |
| Commercial | | 4,410 |
| | 4,512 |
| | (102 | ) | | (2 | ) |
| Industrial | | 5,584 |
| | 5,064 |
| | 520 |
| | 10 |
|
| Governmental | | 180 |
| | 179 |
| | 1 |
| | 1 |
|
| Total retail | | 15,799 |
| | 15,673 |
| | 126 |
| | 1 |
|
| Sales for resale: | | | | | | | | |
| Associated companies | | 1,316 |
| | 1,427 |
| | (111 | ) | | (8 | ) |
| Non-associated companies | | 4,374 |
| | 6,440 |
| | (2,066 | ) | | (32 | ) |
| Total | | 21,489 |
| | 23,540 |
| | (2,051 | ) | | (9 | ) |
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 nine months ended September 30, 2015 Entergy Louisiana financial statements that are presented in this report.
Results of Operations
Net Income
Third Quarter 20162017 Compared to Third Quarter 20152016
Net income increased $2.4decreased $3.2 million primarily due to higher net revenueother operation and lowermaintenance expenses and higher taxes other than income taxes, partially offset by a higher effective income tax rate, higher depreciation and amortization expenses, and higher interest expense.other income.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
Net income increased $132.2decreased $149.3 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 and lower other operation and maintenance expenses. The increase was partially offset by higher depreciation and amortization expenses and higher interest expense.in 2016. See Note 103 to the financial statements hereinin the Form 10-K for additional discussion of the settlement and benefit sharing.
Net Revenue
Third Quarter 20162017 Compared to Third Quarter 20152016
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.charges (credits). Following is an analysis of the change in net revenue comparing the third quarter 20162017 to the third quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $701.7719.8 |
|
| Volume/weather | (20.6 | ) |
| Retail electric price | 16.213.8 |
|
Volume/weatherOther | 6.74.4 |
|
Net wholesale2017 net revenue | (2.9
| )$717.4 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales. The decrease was partially offset by an increase of 282 GWh, or 4%, in industrial usage primarily due to an increase in demand for existing customers as well as expansion projects in the chemicals industry.
The retail electric price variance is primarily due to the timing of recovery of purchased power capacity costs through the formula rate plan mechanism.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
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 nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
Transmission equalization | (3.5 | ) | |
Other | 1.6Amount |
|
(In Millions) |
| 2016 net revenue |
| $719.81,891.8 |
|
| Retail electric price | 23.1 |
|
| Louisiana Act 55 financing savings obligation | 17.2 |
|
| Volume/weather | (31.6 | ) |
| Other | 1.2 |
|
| 2017 net revenue |
| $1,901.7 |
|
The retail electric price variance is primarily due to an increase in 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 and the timing of recovery of purchased power costs through the formula rate plan mechanism. See Note 2 to the financial statements herein and in the Form 10-K for further discussion.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The volume/weather variance is primarily due to an increase in volume during the unbilled period, partially offset by the effect of less favorable weather on residential sales.
The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the termination of the purchased power agreement between Entergy Louisiana and Entergy Texas.
The transmission equalization variance is primarily due to changes in transmission investments.
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 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 nine months ended September 30, 2016 to the nine months ended September 30, 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $1,893.6 |
|
Retail electric price | 32.3 |
|
Louisiana Act 55 financing savings obligation | (17.2 | ) |
Volume/weather | (14.5 | ) |
Other | (2.4 | ) |
2016 net revenue |
| $1,891.8 |
|
The retail electric price variance is primarily due to an increase in 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. See Note 2 to the financial statements herein for further discussion.revenues.
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted 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 103 to the financial statements hereinin the Form 10-K for additional discussion of the settlement and benefit sharing.
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales and decreased usage during the unbilled sales period. This decrease was partially offset by an increase of 610 GWh, or 3%, in industrial usage primarily due to an increase in demand for existing customers, expansion projects in the chemicals industry, and an increase in volume during the unbilled period. The increase in industrial usage is primarily due to increased demand from newfor cogeneration customers, and expansion projects, primarily in the chemicals and transportation industries.partially offset by an extended seasonal outage for an existing large refinery customer.
Other Income Statement Variances
Third Quarter 20162017 Compared to Third Quarter 20152016
Other operation and maintenance expenses increased primarily due to an increase of $10.4 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals and a higher scope of work performed during plant outages in the third quarter 2017 as compared to the third quarter 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals.
Taxes other than income taxes decreasedincreased primarily due to increases in ad valorem taxes, local franchise fees, and state franchise taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017. Local franchise fees increased primarily due to higher revenues in the third quarter 2017 as compared to the third quarter 2016. State franchise taxes increased primarily due to a decreasechange in the Louisiana franchise tax law which became effective for 2017.
Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in the third quarter 2017 as compared to the third quarter 2016, which
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
included the St. Charles Power Station project, and higher realized gains in the third quarter 2017 as compared to the third quarter 2016 on the River Bend and Waterford 3 decommissioning trust fund investments.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Other operation and maintenance expenses increased primarily due to:
an increase of $12.3 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals, partially offset by a lower scope of work performed during plant outages in 2017 as compared to the same period in 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals;
an increase of $4.3 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016;
an increase of $3.6 million in fossil-fueled generation expenses primarily due to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016, partially offset by asbestos loss provisions in 2016;
an increase of $3.5 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financial statements herein and in the Form 10-K for further information on the recovery of these costs;
an increase of $3.4 million in other loss provisions; and
an increase of $2.1 million in transmission expenses primarily due to higher labor costs, including contract labor.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes, resulting from lower accruals and a decrease in local franchise fees, state franchise taxes, and payroll taxes. Ad valorem taxes increased primarily due to lower residential and commercialhigher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017. Local franchise fees increased primarily due to higher revenues in 2017 as compared to prior year.2016. State franchise taxes increased primarily due to a change in the Louisiana franchise tax law which became effective for 2017.
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 2016.2016 and the effects of recording in third quarter 2016 final court decisions in the River Bend and Waterford 3 lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $6 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
Interest expenseOther income increased primarily due to an increase in the issuanceallowance for equity funds used during construction due to higher construction work in Marchprogress in 2017 as compared to the same period in 2016, of $425 million of 3.25% Series collateralwhich included the St. Charles Power Station project, and higher realized gains in 2017 as compared to the same period in 2016 on the River Bend decommissioning trust mortgage bondsfund investments, including portfolio rebalancing to the 30% interest in River Bend formerly owned by Cajun.
Interest expense decreased primarily due to an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2017 as compared to the same period in 2016, which included the St. Charles Power Station project.
Income Taxes
The effective income tax rates were 33.6% for the third quarter 2017 and 32.4% for the nine months ended September 30, 2017. The differences in the effective income tax rates for the third quarter 2017 and the issuance in March 2016nine months ended September 30, 2017 versus the federal statutory rate of $200 million of 4.95% Series first mortgage bonds,35% were primarily due to book and tax differences
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 the refinancing at lower interest rates of certain first mortgage bonds. See Note 4 to the financial statements herein for further discussion of debt issuances and redemptions.
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015
Other operation and maintenance expenses decreased primarily due to:
a decrease of $18.9 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 FINANCIAL 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 $11.3 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.
The decrease was partially offset by an increase of $7.2 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor.
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.
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, partially offset by the refinancing at lower interest rates of certain first mortgage bonds. See Note 4 to the financial statements herein for more discussion of debt issuances and redemptions.
Income Taxesstate income taxes.
The effective income tax rate was 34.4% for the third quarter 2016. The difference in the effective income tax rate for the third quarter 2016 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 10.4% for the nine months ended September 30, 2016. The difference in the effective income tax rate for the nine months ended September 30, 2016 versus the federal statutory rate of 35% was 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, partially offset by state income taxes. See Note 103 to the financial statements hereinin the Form 10-K for additional discussion of the 2010-2011 IRS audit settlement.
The effective income tax rate was 31.5% for the third quarter 2015. The difference in the effective income tax rate for the third quarter 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, partially offset by state income taxes.
The effective income tax rate was 30.2% for the nine months ended September 30, 2015. The difference in the effective income tax rate for the nine months ended September 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
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 IRS 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 passed and 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:
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.
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 combined 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 expenditures, and other operating expenses. These temporary provisions are currently scheduled to be in place through mid-2018.legislation.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $35,102 |
| |
| $320,516 |
|
| $213,850 |
| |
| $35,102 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 877,945 |
| | 823,894 |
| 927,176 |
| | 877,945 |
|
| Investing activities | (1,138,425 | ) | | (692,050 | ) | (1,379,365 | ) | | (1,138,425 | ) |
| Financing activities | 320,457 |
| | (188,642 | ) | 293,862 |
| | 320,457 |
|
| Net increase (decrease) in cash and cash equivalents | 59,977 |
| | (56,798 | ) | (158,327 | ) | | 59,977 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $95,079 |
| |
| $263,718 |
|
| $55,523 |
| |
| $95,079 |
|
Operating Activities
Net cash flow provided by operating activities increased $54.1$49.2 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
a decreaseincome tax refunds of $26.4$116.9 million in income tax payments in 2016. Entergy Louisiana made2017 compared to income tax payments of $62.7 million in 2016. Entergy Louisiana received income tax refunds in 2017 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 Entergy 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 abovelimitations. See Note 3 to the financial statements in the Form 10-K for a discussion of the audit. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Louisiana Tax Legislation”. Entergy Louisiana made income tax payments of $89.1 million in 2015 asthe Form 10-K for a discussion on the net operating loss limitations; and
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets.
The increase was partially offset by:
a refund to customers in January 2017 of approximately $71 million as a result of adjustments associated with the settlement ofapproved by the IRS audit ofLPSC related to the 2008-2009 tax years.Waterford 3 replacement steam generator project. See Note 32 to the financial statements herein and in the Form 10-K for a discussion of the audits;settlement and refund;
an increase of $64 million in spending on nuclear refueling outages;
a decrease due to the timing of recovery of fuel and purchased power costs; and
proceeds of $25.1 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein for a discussion of the DOE litigation;
a decrease of $19.2 million in spending on nuclear refueling outages in 2016; and
an increase in the recovery of fuel costs in 2016 as a result of higher fuel rates. See Note 28 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery.
The increase was partially offset by an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets. See Note 11 to the financial statements herein for a discussion of the purchase of a beneficial interest in the Waterford 3 leased assets.DOE litigation.
Investing Activities
Net cash flow used in investing activities increased $446.4$240.9 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
the purchasean increase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $475$297.1 million in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase;
an increase in fossil-fueled generation construction expenditures primarily due to higher spending on the St. Charles Power Station projectand Lake Charles Power Station projects in 2016;
cash proceeds of $58.4 million in 2015 from the transfer of Algiers assets to Entergy New Orleans in September 2015. See Note 2 to the financial statements in the Form 10-K for further discussion of the transfer;
an increase of $31.9 million in transmission construction expenditures due to a higher scope of work performed in 2016 as compared to the same period in 2015; and
an increase of $17.6 million due to various information technology projects and upgrades in 2016.
The increase was partially offset by:
2017;
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;
an increase of $95.3 million in transmission construction expenditures due to a higher scope of work performed in 2017 as compared to the same period in 2016;
an increase of $60.7 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017;
money pool activity;
$33.3 million in funds held on deposit for interest payments due October 1, 2017;
an increase of $25.8 million in information technology construction expenditures due to increased spending on advanced metering infrastructure;
an increase of $17.3 million in distribution construction expenditures due to increased spending on digital technology improvements within the customer contact centers; and
proceeds of $17.3 million received in August 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 and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation; and
a decrease in nuclear construction expenditures primarily due to a decreased spending on compliance with NRC post-Fukushima requirements.litigation.
Financing ActivitiesThe increase was partially offset by the purchase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $475 million in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
Increases in Entergy Louisiana’s financing activities provided $320.5 millionreceivable from the money pool are a use of cash flow, and Entergy Louisiana‘s receivable from the money pool increased by $50.4 million for the nine months ended September 30, 20162017 compared to using $188.6increasing by $3.3 million of cash for the nine months ended September 30, 20152016. 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 provided by financing activities decreased $26.6 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to the following activity:
net issuance of $350.5 million of long-term debt in 2017 compared to the net issuance of $557.7 million of long-term debt in 2016 compared to the net retirement of $28.8 million of long-term debt in 2015;
the redemption in September 2015 of $100 million of 6.95% Series preferred membership interests in the connection with the 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;
2016.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
an increaseThe decrease was partially offset by:
a decrease of $115$123.8 million inof common equity distributions primarily as a result of higher construction expenditures and higher nuclear fuel purchases in 2016. Equity distributions were lower2017 as compared to the same period in 2015 in anticipation of the purchase of Power Blocks 3 and 4 of the Union Power Station;2016; and
net repayments of borrowings of $18.4$36.8 million on the nuclear fuel company variable interest entity’sentities’ credit facilityfacilities in 20162017 compared to net borrowingsrepayments of $72$18.4 million in 2015.2016.
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.
Capital Structure
Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Debt to capital | 51.8 | % | | 50.8 | % | 53.5 | % | | 53.4 | % |
| Effect of excluding securitization bonds | (0.5 | %) | | (0.6 | %) | (0.4 | %) | | (0.5 | %) |
| Debt to capital, excluding securitization bonds (a) | 51.3 | % | | 50.2 | % | 53.1 | % | | 52.9 | % |
| Effect of subtracting cash | (0.5 | %) | | (0.2 | %) | (0.2 | %) | | (0.9 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 50.8 | % | | 50.0 | % | 52.9 | % | | 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.
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 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 Louisiana 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 Louisiana may receive equity contributions to maintain the targeted capital structure. Following are updates to the information provided in the Form 10-K.
Entergy Louisiana is developing its capital investment plan for 20172018 through 20192020 and currently anticipates making $4.7$4.1 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments, such as the St. Charles Power Station and the Lake Charles Power Station, discussed below; the self-build option at Entergy Louisiana’s Nelson site selected in the RFP for Development and Existing Capacity and Energy Resources; transmission projects to enhance reliability, reduce congestion, and enable economic growth; environmental compliance spending, distribution spending to maintainenhance reliability and improve service to customers, including initial investment to support
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
advanced metering; resource planning, including potential generation projects; system improvements; the nuclear fleet operational excellence initiative, as discussed belowinvestments in “Nuclear Matters”;River Bend and Waterford 3; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Louisiana’s receivables from the money pool were as follows:
|
| | | | | | |
September 30, 2016 | | December 31, 2015 | | September 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $9,428 | | $6,154 | | $5,734 | | $2,815 |
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $72,899 | | $22,503 | | $9,428 | | $6,154 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in August 2021.2022. The credit facility allows Entergy Louisiana to issuepermits the issuance of letters of credit against 50% of the borrowing capacity of the facility. As of September 30, 2016,2017, there were no cash borrowings and $6.4$9.1 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 September 30, 2016,2017, a $16.4$38.5 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.
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 September 30, 2016, $422017, $78.8 million in letters of creditloans 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. As of September 30, 2017, $40.6 million in letters of credit to support a like amount of commercial paper issued and $36.3 million in loans were outstanding under the Entergy Louisiana Waterford nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.
In October 2016 Entergy Louisiana issued $400 million of 2.40% Series collateral trust mortgage bonds due October 2026. Entergy Louisiana plans to use the proceeds to repay amounts outstanding of approximately $57.5 million of its Waterford 3 lessor debt due January 2017 and for general corporate purposes.
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, with LPSC staff concluding thatIn May 2017 the construction ofparties to the project serves the public convenience and necessity. Three intervenors contend that Entergy Louisiana has not establishedproceeding agreed to an uncontested stipulation finding that construction of the project is in the public interest, claiming that the request for proposal excluded consideration of certain resources that could be more cost effective, that the request for proposal provided undue preference to the self-build option, and that a 30-year capacity commitment is not warranted by current supply conditions. The request for proposal independent monitor also filed testimony and a report affirming that the St. Charles Power Station was selected through an objective and fair request for proposal that showed no undue preference to any proposal. 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.Lake Charles Power Station is in the public interest. While awaiting a decision byinterest and authorizing an in-service rate recovery plan. In July 2017 the LPSC Entergy Louisiana has taken necessaryissued an order unanimously approving the stipulation. Subject to the timely receipt of other permits and appropriate steps to progress the project in order to maintain an ability to achieveapprovals, commercial operation in mid-2019. Project expenditures have included site clearing and preparationis estimated to occur by mid-2020.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Washington Parish Energy Center
In April 2017, Entergy Louisiana signed a purchase and pre-construction designsale 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 Bogalusa, Louisiana and, procurement activities, primarily focused on procuring long lead time itemssubject to permits and approvals, is expected to be completed in order2021. Subject to preserveregulatory approvals, Entergy Louisiana will purchase the project schedule. Ifplant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC was to rejectseeking certification of the ALJ recommendation that the project serves the public interest, Entergy Louisiana would suspend project activities as necessary and appropriate to evaluate options regarding the project and the recovery of costs for work performed to date. plant. A procedural schedule has been established, with a hearing in April 2018.
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
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 revenue is required. The following other adjustments, however, are required under the formula rate plan: an increase in the legacy 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 were implemented with the first billing cycle of September 2016, subject to refund.
Waterford 3 Replacement Steam Generator Project
Following the completion of the Waterford 3 replacement steam generator project, the LPSC undertook a prudence review in connection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs. In July 2014 the LPSC Staff filed testimony recommending potential project and replacement power cost disallowances of up to $71 million, citing a need for further explanation or documentation from Entergy Louisiana. An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generator fabricator was imprudent. Entergy Louisiana provided further documentation and explanation requested by the LPSC staff. An evidentiary hearing was held in December 2014. At the hearing the parties maintained the positions reflected in pre-filed testimony. Entergy Louisiana believes that the replacement steam generator costs were prudently incurred and applicable legal principles support their recovery in rates. Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty at the time associated with the resolution of the prudence review. In December 2015 the ALJ issued a proposed recommendation, which was subsequently finalized, concluding that Entergy Louisiana prudently managed the Waterford 3 replacement steam generator project, including the selection, use, and oversight of contractors, and could not reasonably have anticipated the damage to the steam generators. Nevertheless, the ALJ concluded that Entergy Louisiana was liable for the conduct of its contractor and subcontractor and, therefore, recommended a disallowance of $67 million in capital costs. Additionally, the ALJ concluded that Entergy Louisiana did not sufficiently justify the incurrence of $2 million in replacement power costs during the replacement outage. After considering the progress of the proceeding in light of the ALJ recommendation, Entergy Louisiana recorded in the fourth quarter 2015 approximately $77 million in charges, including a $45 million asset write-off and a $32 million regulatory charge, to reflect that a portion of the assets associated with the Waterford 3 replacement steam generator project is no longer probable of recovery. Entergy Louisiana maintains that the ALJ’s recommendation contains significant factual and legal errors.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
In October 2016 the parties reached a settlement in this matter. If approved by the LPSC, the settlement effectively would provide for an agreed-upon disallowance of $67 million of plant, which had been previously written off by Entergy Louisiana, as discussed above. The settlement would also require a refund to customers of approximately $43 million, representing the revenues previously collected associated with the disallowed plant, including interest, and $2 million of replacement power costs. Entergy Louisiana had previously recorded provisions for these refunds. Additionally, under the settlement, Entergy Louisiana would provide a one-time credit to customers of approximately $24 million, representing the value of potential future service credits agreed to by the project contractor. The settlement provides that Entergy Louisiana can retain the value associated with these service credits, to the extent they are realized in the future. If the settlement is approved by the LPSC, the refunds and one-time credit to customers would be made in December 2016.Retail Rates - Electric
Ninemile 62014 Formula Rate Plan Filing
As discussed in the Form 10-K, in JulySeptember 2015, Entergy Louisiana submitted tofiled its formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. In June 2017 the LPSC a Ninemile 6 compliance filing includingstaff and Entergy Louisiana filed an estimate at completion, inclusiveunopposed joint report 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, to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project. Testimony filedproceedings, which was accepted by the LPSC staff generally supportsin June 2017, finalizing the prudenceresults of the management of the project and recovery of the costs incurredthis proceeding with no changes 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. In October 2016 all parties agreed to a stipulation providing that 100% of Ninemile 6 construction costs was prudently incurred and is eligible for recovery from customers, but reserving the LPSC’s rights to review the prudence of Entergy Louisiana’s actions regarding one element of the project. This stipulation is subject to LPSC approval.rates already implemented.
Union Power Station2015 Formula Rate Plan Filing
As discussed in the Form 10-K, in OctoberMay 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of the May 2016 evaluation report, interim updates, and corresponding proceedings with no changes to rates already implemented.
In November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding did not oppose an extension for this period of time. In June 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was filed and the LPSC approved a settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station. stipulation in July 2017.
2016 Formula Rate Plan Filing
In March 2016,May 2017, Entergy Louisiana acquired Power Blocks 3 and 4filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflects an earned return on common equity of 9.84%. As such, no adjustment to base formula rate plan revenue is required. The following adjustments, however, are required under the Union Power Station for an aggregate purchase priceformula rate plan. The 2016 formula rate plan evaluation report shows a decrease in formula rate plan revenue of approximately $474$16.9 million, comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million, a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million, and implemented ratesa decrease in incremental formula rate plan revenue of $3.7 million. Additionally, the formula rate plan evaluation report calls for a decrease of $40.5 million in the MISO cost recovery revenue requirement from the current level of $46.8 million to collect the estimated first-year revenue requirement$6.3 million. Rates reflecting these adjustments were implemented with the first billing cycle of March 2016.September 2017, subject to refund, pending the review proceedings. Parties have intervened in the proceedings. No procedural schedule has been established. In September 2017 the LPSC issued its report indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report are required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.
Formula Rate Plan Extension Request
In August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications of its terms. Those modifications include: a one-time resetting of base rates to the midpoint of the band at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidth from a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recover certain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers. Entergy Louisiana has requested that the LPSC consider its request on an expedited basis and render a decision by December 2017, in an effort to maintain Entergy Louisiana’s current cycle for implementing rate adjustments, i.e., September 2018, without the need for filing a full base rate case proceeding.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Waterford 3 Replacement Steam Generator Project
See Note 2 to the financial statements in the Form 10-K for 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 was made in January 2017. Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staff and Entergy Louisiana in May 2017. In May 2017 the LPSC accepted the joint report of proceedings resolving the matter.
Deactivation or Retirement Decisions for Entergy Louisiana Plants
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. This matter is pending before an ALJ, and a hearing has been scheduled in March 2017No party contests the prudence of the decision to determine, under applicable law, whetherdeactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units should be returned to service.into suspended status for the three-year term permitted by MISO. An evidentiary hearing was held in August 2017 and post-hearing briefs were submitted in October 2017. A decision is expected in 2018.
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. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s proposed AMI system, with modifications to the proposed customer charge. The stipulation also confirmed that Entergy Louisiana shall continue to include in rate base the remaining book value of the existing electric meters and also to depreciate those assets using current depreciation rates. In July 2017 the LPSC approved the stipulation.
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 requestingMay 2017.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
In connection with the joint report of proceedings accepted by the LPSC, in May 2017, Entergy Louisiana filed an application to extendinitiate a separate proceeding to recover the termdeferred operation and maintenance expenses of $1.4 million incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016 through the gas rate stabilization plan for an additional three-year term. A procedural schedule has been established, including a hearing in November 2016. The LPSC staff filed testimony supportive of the renewalextraordinary cost provision of the gas rate stabilization plan. The partiesLPSC staff submitted its direct testimony in the proceeding recommending recovery of $0.9 million. The procedural schedule includes a motion indicating that they are working toward development of a settlement that they would seek to have approved at the November 2016 hearing.hearing in February 2018.
Fuel and purchased power cost recovery
InAs discussed in the Form 10-K, in June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. The audit included a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2014 through 2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the period from 2012 through 2015. Discovery commenced in March 2017.
As discussed in the Form 10-K, in April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includesincluded a review of the reasonableness of the charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. TheIn December 2016 the LPSC staff issued its audit reportopened a new docket in January 2013. The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million, plus interest,order to customers and realignresolve the issue regarding the proper methodology for the recovery of approximately $1 million from Entergy Louisiana’snuclear dry 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 regardingstorage costs. In October 2017 the LPSC staff report and any issues raised by intervenors. One intervenor sought further proceedings regarding certain issues it raised in its comments onapproved the LPSC staff report. Entergy Louisiana filed responses to bothcontinued recovery of 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. The intervenor has stated that it does not intend to pursue these issues further. In October 2016 the LPSC staff filed testimony affirming the recommendation in its audit report that nuclear dry fuel storage costs should be realigned to base rates. 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 auditthrough the fuel adjustment clause, filings of Entergy Gulf States Louisiana and its affiliates. The audit includes a review ofresolving the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause foropen issue in 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. In September 2016 the LPSC staff filed testimony stating that is was no longer recommending a disallowance of $3.4 million of the $8.6 million discussed above, but otherwise maintained positions from its report. 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 audit of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. In recognition of the business combination that occurred 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.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
audit.
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 updatesis an update to that discussion. Also see the “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Waterford 3’sRiver Bend’s operating license is currently due to expire in December 2024.August 2025. In March 2016,May 2017, Entergy Louisiana filed an application with the NRC for an extension of Waterford 3’sRiver Bend’s operating license to 2044.
2045. 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 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 opponentsOctober 2017 an intervenor filed requests with the NRC asking ita petition to addressintervene and request for a hearing on the issues raisedRiver Bend license renewal application. As provided by NRC procedure, a panel of the court’s decisionAtomic Safety and Licensing Board has been designated to determine whether the intervenor’s three proposed contentions, or allegations of errors or omissions 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 reviewsapplication, are admissible and, proceedings should continueif so, 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.
In 2016, Entergy conducted a comprehensive evaluation of the Entergy nuclear fleet and determined that it is necessary to increase investments in its nuclear plants to position the fleet for sustained operational excellence during each plant’s expected operating life. These investments will result in increased operating and capital costs associated with operating Entergy’s nuclear plants going forward. The preliminary estimates of the incremental capital costs for 2017 through 2019 identified through this initiative are estimated to be $315 million for Entergy Louisiana. The current estimates of the capital costs identified through this initiative are included in Entergy Louisiana’s capital investment plan preliminary estimate for 2017 through 2019 given in “Liquidity and Capital Resources - Uses and Sources of Capital” above. The incremental increases in other operation and maintenance expenses identified through this initiative are preliminarily estimated to be approximately $55 million in 2017, $75 million in 2018, and $75 million in 2019 for Entergy Louisiana. In addition, nuclear refueling outage expenses are expected to increase going forward.on any admitted contentions.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Entergy Louisiana, LLC 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 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
Management's Financial Discussion and Analysis
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| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | | | | | |
| Electric | |
| $1,240,217 |
| |
| $1,289,642 |
| |
| $3,166,380 |
| |
| $3,398,781 |
| | $1,280,475 |
| |
| $1,240,217 |
| | $3,216,677 |
| |
| $3,166,380 |
|
| Natural gas | | 9,235 |
| | 8,840 |
| | 37,251 |
| | 43,491 |
| | 10,019 |
| | 9,235 |
| | 38,034 |
| | 37,251 |
|
| TOTAL | | 1,249,452 |
| | 1,298,482 |
| | 3,203,631 |
| | 3,442,272 |
| | 1,290,494 |
| | 1,249,452 |
| | 3,254,711 |
| | 3,203,631 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 261,979 |
| | 250,482 |
| | 616,402 |
| | 647,131 |
| | 301,584 |
| | 261,979 |
| | 635,684 |
| | 616,402 |
|
| Purchased power | | 261,212 |
| | 341,198 |
| | 677,309 |
| | 901,957 |
| | 273,325 |
| | 261,212 |
| | 795,825 |
| | 677,309 |
|
| Nuclear refueling outage expenses | | 12,894 |
| | 11,248 |
| | 38,648 |
| | 34,187 |
| | 13,616 |
| | 12,894 |
| | 38,565 |
| | 38,648 |
|
| Other operation and maintenance | | 229,717 |
| | 231,333 |
| | 668,738 |
| | 700,411 |
| | 238,249 |
| | 229,717 |
| | 704,696 |
| | 668,738 |
|
| Decommissioning | | 11,812 |
| | 10,936 |
| | 34,978 |
| | 32,365 |
| | 12,444 |
| | 11,812 |
| | 36,850 |
| | 34,978 |
|
| Taxes other than income taxes | | 38,129 |
| | 44,143 |
| | 124,857 |
| | 128,204 |
| | 45,059 |
| | 38,129 |
| | 135,418 |
| | 124,857 |
|
| Depreciation and amortization | | 114,251 |
| | 109,562 |
| | 336,294 |
| | 327,188 |
| | 117,923 |
| | 114,251 |
| | 349,660 |
| | 336,294 |
|
| Other regulatory charges (credits) - net | | 6,507 |
| | 5,144 |
| | 18,084 |
| | (451 | ) | | (1,795 | ) | | 6,507 |
| | (78,503 | ) | | 18,084 |
|
| TOTAL | | 936,501 |
| | 1,004,046 |
| | 2,515,310 |
| | 2,770,992 |
| | 1,000,405 |
| | 936,501 |
| | 2,618,195 |
| | 2,515,310 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | 312,951 |
| | 294,436 |
| | 688,321 |
| | 671,280 |
| | 290,089 |
| | 312,951 |
| | 636,516 |
| | 688,321 |
|
| | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 6,735 |
| | 5,499 |
| | 18,479 |
| | 15,194 |
| | 13,393 |
| | 6,735 |
| | 34,492 |
| | 18,479 |
|
| Interest and investment income | | 38,731 |
| | 37,632 |
| | 116,398 |
| | 112,429 |
| | 42,662 |
| | 38,731 |
| | 124,411 |
| | 116,398 |
|
| Miscellaneous - net | | (4,429 | ) | | (2,976 | ) | | (10,044 | ) | | (7,764 | ) | | (2,957 | ) | | (4,429 | ) | | (8,631 | ) | | (10,044 | ) |
| TOTAL | | 41,037 |
| | 40,155 |
| | 124,833 |
| | 119,859 |
| | 53,098 |
| | 41,037 |
| | 150,272 |
| | 124,833 |
|
| | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | | | |
| Interest expense | | 68,396 |
| | 64,417 |
| | 204,259 |
| | 194,701 |
| | 69,518 |
| | 68,396 |
| | 205,316 |
| | 204,259 |
|
| Allowance for borrowed funds used during construction | | (3,455 | ) | | (3,034 | ) | | (9,735 | ) | | (8,527 | ) | | (6,713 | ) | | (3,455 | ) | | (17,428 | ) | | (9,735 | ) |
| TOTAL | | 64,941 |
| | 61,383 |
| | 194,524 |
| | 186,174 |
| | 62,805 |
| | 64,941 |
| | 187,888 |
| | 194,524 |
|
| | | | | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 289,047 |
| | 273,208 |
| | 618,630 |
| | 604,965 |
| | 280,382 |
| | 289,047 |
| | 598,900 |
| | 618,630 |
|
| | | | | | | | | | | | | | | | | |
| Income taxes | | 99,541 |
| | 86,068 |
| | 64,193 |
| | 182,735 |
| | 94,098 |
| | 99,541 |
| | 193,759 |
| | 64,193 |
|
| | | | | | | | | | | | | | | | | |
| NET INCOME | | 189,506 |
| | 187,140 |
| | 554,437 |
| | 422,230 |
| |
| $186,284 |
| |
| $189,506 |
| |
| $405,141 |
| |
| $554,437 |
|
| | | | | | | | | | | | | | | | | |
| Preferred dividend requirements and other | | — |
| | 1,850 |
| | — |
| | 5,737 |
| |
| | | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON EQUITY | |
| $189,506 |
| |
| $185,290 |
| |
| $554,437 |
| |
| $416,493 |
| |
| | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | For the Three and Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | Three Months Ended | | Nine Months Ended |
| | 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
| | (In Thousands) | | (In Thousands) | (In Thousands) | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Net Income |
| $189,506 |
| |
| $187,140 |
| |
| $554,437 |
| |
| $422,230 |
| $186,284 |
| |
| $189,506 |
| | $405,141 |
| |
| $554,437 |
|
| Other comprehensive income (loss) | | | | | | | | |
| Pension and other postretirement liabilities | | | | | | | | |
| (net of tax expense (benefit) of ($145), $258, ($404), and $803) | (232 | ) | | 412 |
| | (725 | ) | | 1,204 |
| |
| Other comprehensive income (loss) | (232 | ) | | 412 |
| | (725 | ) | | 1,204 |
| |
| Other comprehensive loss | | | | | | | | |
| Pension and other postretirement liabilities (net of tax benefit of $232, $145, $756, and $404) | | (370 | ) | | (232 | ) | | (1,050 | ) | | (725 | ) |
| Other comprehensive loss | | (370 | ) | | (232 | ) | | (1,050 | ) | | (725 | ) |
| Comprehensive Income |
| $189,274 |
| |
| $187,552 |
| |
| $553,712 |
| |
| $423,434 |
|
| $185,914 |
| |
| $189,274 |
| |
| $404,091 |
| |
| $553,712 |
|
| | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Nine Months Ended September 30, 2016 and 2015 | |
| For the Nine Months Ended September 30, 2017 and 2016 | | For the Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $554,437 |
| |
| $422,230 |
| |
| $405,141 |
| |
| $554,437 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 462,007 |
| | 451,967 |
| | 458,963 |
| | 462,007 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 155,996 |
| | 4,574 |
| | 303,397 |
| | 155,996 |
|
| Changes in working capital: | | | | | | | | |
| Receivables | | (159,517 | ) | | (137,129 | ) | | (92,610 | ) | | (159,517 | ) |
| Fuel inventory | | (1,578 | ) | | (650 | ) | | 7,643 |
| | (1,578 | ) |
| Accounts payable | | (18,420 | ) | | 2,500 |
| | 31,865 |
| | (18,420 | ) |
| Prepaid taxes and taxes accrued | | (55,780 | ) | | 179,275 |
| | 97,138 |
| | (55,780 | ) |
| Interest accrued | | 7,531 |
| | 2,227 |
| | 9,149 |
| | 7,531 |
|
| Deferred fuel costs | | (6,091 | ) | | (21,311 | ) | | (37,753 | ) | | (6,091 | ) |
| Other working capital accounts | | (2,503 | ) | | (38,176 | ) | | (49,266 | ) | | (2,503 | ) |
| Changes in provisions for estimated losses | | 1,658 |
| | (4,747 | ) | | (6,331 | ) | | 1,658 |
|
| Changes in other regulatory assets | | 73,920 |
| | 78,809 |
| | 60,014 |
| | 73,920 |
|
| Changes in other regulatory liabilities | | | (72,060 | ) | | 30,847 |
|
| Changes in pension and other postretirement liabilities | | (63,735 | ) | | (52,046 | ) | | (70,489 | ) | | (63,735 | ) |
| Other | | (69,980 | ) | | (63,629 | ) | | (117,625 | ) | | (100,827 | ) |
| Net cash flow provided by operating activities | | 877,945 |
| | 823,894 |
| | 927,176 |
| | 877,945 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (675,248 | ) | | (568,812 | ) | | (1,177,121 | ) | | (675,248 | ) |
| Allowance for equity funds used during construction | | 18,479 |
| | 15,194 |
| | 34,492 |
| | 18,479 |
|
| Payment for purchase of plant | | (474,670 | ) | | — |
| | — |
| | (474,670 | ) |
| Nuclear fuel purchases | | (49,219 | ) | | (216,721 | ) | | (159,637 | ) | | (49,219 | ) |
| Proceeds from the sale of nuclear fuel | | 64,498 |
| | 54,595 |
| | 28,884 |
| | 64,498 |
|
| Receipts from storm reserve escrow account | | | 8,836 |
| | — |
|
| Payments to storm reserve escrow account | | — |
| | (206 | ) | | (1,422 | ) | | (823 | ) |
| Changes to securitization account | | (6,649 | ) | | (6,837 | ) | | (6,538 | ) | | (6,649 | ) |
| Proceeds from nuclear decommissioning trust fund sales | | 178,183 |
| | 93,580 |
| | 176,056 |
| | 178,183 |
|
| Investment in nuclear decommissioning trust funds | | (206,976 | ) | | (118,341 | ) | | (204,500 | ) | | (206,976 | ) |
| Changes in money pool receivable - net | | (3,274 | ) | | (2,919 | ) | | (50,396 | ) | | (3,274 | ) |
| Insurance proceeds | | | 5,305 |
| | — |
|
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 17,274 |
| | — |
| | — |
| | 17,274 |
|
| Changes in other investments - net | | (823 | ) | | — |
| | (33,324 | ) | | — |
|
| Proceeds from sale of assets | | — |
| | 58,417 |
| |
| Net cash flow used in investing activities | | (1,138,425 | ) | | (692,050 | ) | | (1,379,365 | ) | | (1,138,425 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | 1,389,315 |
| | — |
| | 646,850 |
| | 1,389,315 |
|
| Retirement of long-term debt | | (831,632 | ) | | (28,819 | ) | | (296,359 | ) | | (831,632 | ) |
| Redemption of preferred stock | | — |
| | (10,284 | ) | |
| Redemption of preferred membership interests | | — |
| | (100,002 | ) | |
| Changes in credit borrowings - net | | (18,385 | ) | | 72,020 |
| | 36,762 |
| | (18,385 | ) |
| Distributions paid: | | | | | | | | |
| Common equity | | (215,000 | ) | | (100,000 | ) | | (91,250 | ) | | (215,000 | ) |
| Preferred membership interests | | — |
| | (6,082 | ) | |
| Other | | (3,841 | ) | | (15,475 | ) | | (2,141 | ) | | (3,841 | ) |
| Net cash flow provided by (used in) financing activities | | 320,457 |
| | (188,642 | ) | |
| Net cash flow provided by financing activities | | | 293,862 |
| | 320,457 |
|
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | 59,977 |
| | (56,798 | ) | | (158,327 | ) | | 59,977 |
|
| Cash and cash equivalents at beginning of period | | 35,102 |
| | 320,516 |
| | 213,850 |
| | 35,102 |
|
| Cash and cash equivalents at end of period | |
| $95,079 |
| |
| $263,718 |
| |
| $55,523 |
| |
| $95,079 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | |
| Cash paid (received) during the period for: | | | | | |
| Interest - net of amount capitalized | |
| $251,196 |
| |
| $186,865 |
| |
| $189,896 |
| |
| $251,196 |
|
| Income taxes | |
| $62,676 |
| |
| $89,123 |
| |
| ($116,937 | ) | |
| $62,676 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | September 30, 2016 and December 31, 2015 | |
| September 30, 2017 and December 31, 2016 | | September 30, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $37,460 |
| |
| $348 |
| |
| $10,143 |
| |
| $49,972 |
|
| Temporary cash investments | | 57,619 |
| | 34,754 |
| | 45,380 |
| | 163,878 |
|
| Total cash and cash equivalents | | 95,079 |
| | 35,102 |
| | 55,523 |
| | 213,850 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 253,637 |
| | 179,051 |
| | 288,237 |
| | 213,517 |
|
| Allowance for doubtful accounts | | (6,656 | ) | | (4,209 | ) | | (7,677 | ) | | (6,277 | ) |
| Associated companies | | 127,871 |
| | 94,418 |
| | 190,048 |
| | 155,794 |
|
| Other | | 108,213 |
| | 56,793 |
| | 58,933 |
| | 54,186 |
|
| Accrued unbilled revenues | | 188,797 |
| | 143,079 |
| | 174,379 |
| | 159,176 |
|
| Total accounts receivable | | 671,862 |
| | 469,132 |
| | 703,920 |
| | 576,396 |
|
| Fuel inventory | | 49,623 |
| | 48,045 |
| | 43,095 |
| | 50,738 |
|
| Materials and supplies - at average cost | | 313,764 |
| | 282,688 |
| | 297,545 |
| | 294,421 |
|
| Deferred nuclear refueling outage costs | | 29,566 |
| | 66,984 |
| | 83,207 |
| | 22,535 |
|
| Prepaid taxes | | | 12,966 |
| | 110,104 |
|
| Prepayments and other | | 42,887 |
| | 28,294 |
| | 85,303 |
| | 41,687 |
|
| TOTAL | | 1,202,781 |
| | 930,245 |
| | 1,281,559 |
| | 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 | | 1,124,821 |
| | 1,042,293 |
| | 1,260,022 |
| | 1,140,707 |
|
| Storm reserve escrow account | | 291,245 |
| | 290,422 |
| | 284,071 |
| | 291,485 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 209,969 |
| | 206,293 |
| | 236,802 |
| | 217,494 |
|
| Other | | 28,882 |
| | 14,776 |
| | 18,837 |
| | 28,844 |
|
| TOTAL | | 3,045,504 |
| | 2,944,371 |
| | 3,190,319 |
| | 3,069,117 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 19,038,635 |
| | 17,629,077 |
| | 19,237,157 |
| | 18,827,532 |
|
| Natural gas | | 169,241 |
| | 159,252 |
| | 182,704 |
| | 172,816 |
|
| Property under capital lease | | — |
| | 341,514 |
| |
| Construction work in progress | | 547,968 |
| | 420,874 |
| | 1,225,066 |
| | 670,201 |
|
| Nuclear fuel | | 266,085 |
| | 386,524 |
| | 339,749 |
| | 249,807 |
|
| TOTAL UTILITY PLANT | | 20,021,929 |
| | 18,937,241 |
| | 20,984,676 |
| | 19,920,356 |
|
| Less - accumulated depreciation and amortization | | 8,764,536 |
| | 8,302,774 |
| | 8,622,235 |
| | 8,420,596 |
|
| UTILITY PLANT - NET | | 11,257,393 |
| | 10,634,467 |
| | 12,362,441 |
| | 11,499,760 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 474,622 |
| | 478,243 |
| | 480,257 |
| | 470,480 |
|
| Other regulatory assets (includes securitization property of $97,805 as of September 30, 2016 and $114,701 as of December 31, 2015) | | 1,147,575 |
| | 1,217,874 |
| |
| Other regulatory assets (includes securitization property of $76,520 as of September 30, 2017 and $92,951 as of December 31, 2016) | | | 1,098,267 |
| | 1,168,058 |
|
| Deferred fuel costs | | 168,122 |
| | 168,122 |
| | 168,122 |
| | 168,122 |
|
| Other | | 16,846 |
| | 14,125 |
| | 17,374 |
| | 16,003 |
|
| TOTAL | | 1,807,165 |
| | 1,878,364 |
| | 1,764,020 |
| | 1,822,663 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $17,312,843 |
| |
| $16,387,447 |
| |
| $18,598,339 |
| |
| $17,701,271 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | September 30, 2016 and December 31, 2015 | |
| September 30, 2017 and December 31, 2016 | | September 30, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $200,198 |
| |
| $29,372 |
| |
| $675,002 |
| |
| $200,198 |
|
| Short-term borrowings | | 41,971 |
| | 60,356 |
| | 40,555 |
| | 3,794 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 91,071 |
| | 165,419 |
| | 85,920 |
| | 82,106 |
|
| Other | | 317,672 |
| | 276,280 |
| | 347,338 |
| | 358,741 |
|
| Customer deposits | | 149,293 |
| | 146,555 |
| | 149,274 |
| | 148,601 |
|
| Taxes accrued | | 69,362 |
| | 125,142 |
| |
| Interest accrued | | 81,911 |
| | 74,380 |
| | 84,747 |
| | 75,598 |
|
| Deferred fuel costs | | 59,143 |
| | 65,234 |
| | 10,458 |
| | 48,211 |
|
| Other | | 90,792 |
| | 79,982 |
| | 88,525 |
| | 80,013 |
|
| TOTAL | | 1,101,413 |
| | 1,022,720 |
| | 1,481,819 |
| | 997,262 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,657,512 |
| | 2,506,956 |
| | 2,998,156 |
| | 2,691,118 |
|
| Accumulated deferred investment tax credits | | 127,996 |
| | 131,760 |
| | 123,088 |
| | 126,741 |
|
| Regulatory liability for income taxes - net | | — |
| | 2,473 |
| |
| Other regulatory liabilities | | 849,470 |
| | 818,623 |
| | 808,914 |
| | 880,974 |
|
| Decommissioning | | 1,068,709 |
| | 1,027,862 |
| | 1,125,732 |
| | 1,082,685 |
|
| Accumulated provisions | | 311,940 |
| | 310,282 |
| | 304,441 |
| | 310,772 |
|
| Pension and other postretirement liabilities | | 769,240 |
| | 833,185 |
| | 709,396 |
| | 780,278 |
|
| Long-term debt (includes securitization bonds of $110,783 as of September 30, 2016 and $120,549 as of December 31, 2015) | | 5,207,699 |
| | 4,806,790 |
| |
| Long-term payables - associated companies | | 134 |
| | 1,073 |
| |
| Long-term debt (includes securitization bonds of $89,430 as of September 30, 2017 and $99,217 as of December 31, 2016) | | | 5,492,494 |
| | 5,612,593 |
|
| Other | | 142,728 |
| | 188,411 |
| | 159,711 |
| | 137,039 |
|
| TOTAL | | 11,135,428 |
| | 10,627,415 |
| | 11,721,932 |
| | 11,622,200 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Member's equity | | 5,133,139 |
| | 4,793,724 |
| | 5,444,080 |
| | 5,130,251 |
|
| Accumulated other comprehensive loss | | (57,137 | ) | | (56,412 | ) | | (49,492 | ) | | (48,442 | ) |
| TOTAL | | 5,076,002 |
| | 4,737,312 |
| | 5,394,588 |
| | 5,081,809 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $17,312,843 |
| |
| $16,387,447 |
| |
| $18,598,339 |
| |
| $17,701,271 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | For the Nine Months Ended September 30, 2016 and 2015 | |
| For the Nine Months Ended September 30, 2017 and 2016 | | For the Nine Months Ended September 30, 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) | | | |
| | | | | | | | | |
| Balance at December 31, 2014 |
| $110,000 |
| |
| $4,316,210 |
| |
| ($79,223 | ) | |
| $4,346,987 |
| |
| | | | | | | | | |
| Net income | — |
| | 422,230 |
| | — |
| | 422,230 |
| |
| Other comprehensive income | — |
| | — |
| | 1,204 |
| | 1,204 |
| |
| Preferred stock redemptions | (110,000 | ) | | — |
| | — |
| | (110,000 | ) | |
| Distributions declared on common equity | — |
| | (100,000 | ) | | — |
| | (100,000 | ) | |
| Distributions declared on preferred membership interests | — |
| | (5,737 | ) | | — |
| | (5,737 | ) | |
| Other | — |
| | (313 | ) | | — |
| | (313 | ) | |
| | | | | | | | | |
| Balance at September 30, 2015 |
| $— |
| |
| $4,632,390 |
| |
| ($78,019 | ) | |
| $4,554,371 |
| |
| | | | | | | | | (In Thousands) |
| | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $— |
| |
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
|
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
|
| | | | | | | | | | | | | |
| Net income | — |
| | 554,437 |
| | — |
| | 554,437 |
| 554,437 |
| | — |
| | 554,437 |
|
| Other comprehensive loss | — |
| | — |
| | (725 | ) | | (725 | ) | — |
| | (725 | ) | | (725 | ) |
| Distributions declared on common equity | — |
| | (215,000 | ) | | — |
| | (215,000 | ) | (215,000 | ) | | — |
| | (215,000 | ) |
| Other | — |
| | (22 | ) | | — |
| | (22 | ) | (22 | ) | | — |
| | (22 | ) |
| | | | | | | | | | | | | |
| Balance at September 30, 2016 |
| $— |
| |
| $5,133,139 |
| |
| ($57,137 | ) | |
| $5,076,002 |
|
| $5,133,139 |
| |
| ($57,137 | ) | |
| $5,076,002 |
|
| | | | | | | | | | | | | |
| | | | | | | |
| Balance at December 31, 2016 | |
| $5,130,251 |
| |
| ($48,442 | ) | |
| $5,081,809 |
|
| | | | | | | |
| Net income | | 405,141 |
| | — |
| | 405,141 |
|
| Other comprehensive loss | | — |
| | (1,050 | ) | | (1,050 | ) |
| Distributions declared on common equity | | (91,250 | ) | | — |
| | (91,250 | ) |
| Other | | (62 | ) | | — |
| | (62 | ) |
| | | | | | | |
| Balance at September 30, 2017 | |
| $5,444,080 |
| |
| ($49,492 | ) | |
| $5,394,588 |
|
| | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | SELECTED OPERATING RESULTS (a) | | For the Three and Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 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) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $413 |
| |
| $443 |
| |
| ($30 | ) | | (7 | ) | |
| $411 |
| |
| $413 |
| |
| ($2 | ) | | — |
|
| Commercial | | 273 |
| | 292 |
| | (19 | ) | | (7 | ) | | 285 |
| | 273 |
| | 12 |
| | 4 |
|
| Industrial | | 361 |
| | 388 |
| | (27 | ) | | (7 | ) | | 428 |
| | 361 |
| | 67 |
| | 19 |
|
| Governmental | | 18 |
| | 18 |
| | — |
| | — |
| | 19 |
| | 18 |
| | 1 |
| | 6 |
|
| Total retail | | 1,065 |
| | 1,141 |
| | (76 | ) | | (7 | ) | | 1,143 |
| | 1,065 |
| | 78 |
| | 7 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 116 |
| | 111 |
| | 5 |
| | 5 |
| | 69 |
| | 116 |
| | (47 | ) | | (41 | ) |
| Non-associated companies | | 13 |
| | 5 |
| | 8 |
| | — |
| | 23 |
| | 13 |
| | 10 |
| | 77 |
|
| Other | | 46 |
| | 33 |
| | 13 |
| | 39 |
| | 45 |
| | 46 |
| | (1 | ) | | (2 | ) |
| Total | |
| $1,240 |
| |
| $1,290 |
| |
| ($50 | ) | | (4 | ) | |
| $1,280 |
| |
| $1,240 |
| |
| $40 |
| | 3 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 4,635 |
| | 4,804 |
| | (169 | ) | | (4 | ) | | 4,301 |
| | 4,635 |
| | (334 | ) | | (7 | ) |
| Commercial | | 3,363 |
| | 3,465 |
| | (102 | ) | | (3 | ) | | 3,228 |
| | 3,363 |
| | (135 | ) | | (4 | ) |
| Industrial | | 7,345 |
| | 7,442 |
| | (97 | ) | | (1 | ) | | 7,627 |
| | 7,345 |
| | 282 |
| | 4 |
|
| Governmental | | 208 |
| | 194 |
| | 14 |
| | 7 |
| | 208 |
| | 208 |
| | — |
| | — |
|
| Total retail | | 15,551 |
| | 15,905 |
| | (354 | ) | | (2 | ) | | 15,364 |
| | 15,551 |
| | (187 | ) | | (1 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 2,360 |
| | 2,158 |
| | 202 |
| | 9 |
| | 1,164 |
| | 2,360 |
| | (1,196 | ) | | (51 | ) |
| Non-associated companies | | 335 |
| | 179 |
| | 156 |
| | 87 |
| | 616 |
| | 335 |
| | 281 |
| | 84 |
|
| Total | | 18,246 |
| | 18,242 |
| | 4 |
| | — |
| | 17,144 |
| | 18,246 |
| | (1,102 | ) | | (6 | ) |
| | | | | | | | | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | | | | | | | | | |
| | | | Nine Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $913 |
| |
| $1,030 |
| |
| ($117 | ) | | (11 | ) | |
| $911 |
| |
| $913 |
| |
| ($2 | ) | | — |
|
| Commercial | | 694 |
| | 759 |
| | (65 | ) | | (9 | ) | | 716 |
| | 694 |
| | 22 |
| | 3 |
|
| Industrial | | 1,006 |
| | 1,074 |
| | (68 | ) | | (6 | ) | | 1,147 |
| | 1,006 |
| | 141 |
| | 14 |
|
| Governmental | | 50 |
| | 51 |
| | (1 | ) | | (2 | ) | | 51 |
| | 50 |
| | 1 |
| | 2 |
|
| Total retail | | 2,663 |
| | 2,914 |
| | (251 | ) | | (9 | ) | | 2,825 |
| | 2,663 |
| | 162 |
| | 6 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 310 |
| | 314 |
| | (4 | ) | | (1 | ) | | 204 |
| | 310 |
| | (106 | ) | | (34 | ) |
| Non-associated companies | | 37 |
| | 29 |
| | 8 |
| | 28 |
| | 53 |
| | 37 |
| | 16 |
| | 43 |
|
| Other | | 156 |
| | 142 |
| | 14 |
| | — |
| | 135 |
| | 156 |
| | (21 | ) | | (13 | ) |
| Total | |
| $3,166 |
| |
| $3,399 |
| |
| ($233 | ) | | (7 | ) | |
| $3,217 |
| |
| $3,166 |
| |
| $51 |
| | 2 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 10,608 |
| | 11,428 |
| | (820 | ) | | (7 | ) | | 10,154 |
| | 10,608 |
| | (454 | ) | | (4 | ) |
| Commercial | | 8,622 |
| | 8,922 |
| | (300 | ) | | (3 | ) | | 8,497 |
| | 8,622 |
| | (125 | ) | | (1 | ) |
| Industrial | | 21,662 |
| | 20,757 |
| | 905 |
| | 4 |
| | 22,272 |
| | 21,662 |
| | 610 |
| | 3 |
|
| Governmental | | 602 |
| | 571 |
| | 31 |
| | 5 |
| | 595 |
| | 602 |
| | (7 | ) | | (1 | ) |
| Total retail | | 41,494 |
| | 41,678 |
| | (184 | ) | | — |
| | 41,518 |
| | 41,494 |
| | 24 |
| | — |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 6,104 |
| | 5,839 |
| | 265 |
| | 5 |
| | 3,399 |
| | 6,104 |
| | (2,705 | ) | | (44 | ) |
| Non-associated companies | | 1,321 |
| | 577 |
| | 744 |
| | 129 |
| | 1,280 |
| | 1,321 |
| | (41 | ) | | (3 | ) |
| Total | | 48,919 |
| | 48,094 |
| | 825 |
| | 2 |
| | 46,197 |
| | 48,919 |
| | (2,722 | ) | | (6 | ) |
| | | | | | | | | | | | | | | | | |
(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 nine months ended September 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
Third Quarter 20162017 Compared to Third Quarter2015 2016
Net income increased $10remained relatively unchanged, decreasing by $0.1 million, primarily due to higherbecause lower net revenue partiallywas substantially offset by higherlower other operation and maintenance expenses.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
Net income increased $8.1decreased $3.9 million primarily due to lower net revenue and higher depreciation and amortization expenses, partially offset by lower other operation and maintenance expenses and a lower effective income tax rate, partially offset by higher depreciation and amortization expenses and lower net revenue.interest expense.
Net Revenue
Third Quarter 20162017 Compared to Third 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. Following is an analysis of the change in net revenue comparing the third quarter 2016 to the third quarter 2015:
|
| | | |
| Amount |
| (In Millions) |
2015 net revenue |
| $191.3 |
|
Retail electric price | 17.4 |
|
Volume/weather | 6.5 |
|
Other | (0.5 | ) |
2016 net revenue |
| $214.7 |
|
The retail electric price variance is primarily due to a $19.4 million net annual increase in revenues, as approved by the MPSC, effective with the first billing cycle of July 2016, and an increase in the storm damage rider. See Note 2 to the financial statements herein for more discussion on the formula rate plan and the storm damage rider.
The volume/weather variance is primarily due to an increase of 60 GWh, or 1%, in billed electricity usage, including an increase in industrial usage and an increase in volume during the unbilled period, partially offset by the effect of less favorable weather on residential and commercial sales. The increase in industrial usage is primarily due to new customers and expansion projects, primarily in the pulp and paper industry, and an increase in existing industrial customer usage, primarily in the primary metals industry.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 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 nine months ended September 30, 2016third quarter 2017 to the nine months ended September 30, 2015:third quarter 2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $546.0214.7 |
|
Reserve equalizationVolume/weather | (2.8 | ) |
Net wholesale revenue | (2.59.3 | ) |
| Retail electric price | 5.1(5.0 | ) |
| Other | 0.9 |
|
Other2017 net revenue |
| $201.3 |
|
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 residential and commercial usage resulting from a 1% increase in the average number of residential and commercial customers.
The retail electric price variance is primarily due to lower storm damage rider revenues due to resetting the storm damage provision to zero beginning with the November 2016 billing cycle. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle. The decrease was partially offset by an increase in the energy efficiency rider. See Note 2 to the financial statements herein and in the Form 10-K for further discussion on the storm damage rider.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
| | | |
| Amount |
| (4.6 | )In Millions) |
| 2016 net revenue |
| $541.2 |
|
| Volume/weather | (19.6 | ) |
| Retail electric price | 6.6 |
|
| Other | 1.4 |
|
| 2017 net revenue |
| $529.6 |
|
The reserve equalization revenuevolume/weather variance is primarily due to the absenceeffect of reserve equalization revenue as compared to the same periodless favorable weather on residential and commercial sales, partially offset by an increase of 40 GWh, or 2%, in 2015 resulting from Entergy Mississippi’s exit from the System Agreementindustrial usage. The increase in November 2015.
The net wholesale revenue varianceindustrial usage is primarily due to Entergy Mississippi’s exit fromexpansion projects in the System Agreementpulp and paper industry, an increase in November 2015.usage by the mid to small industrial sector, and new customers in the wood products industry, partially offset by a decrease in demand for existing customers.
The retail electric price variance is primarily due to a $19.4 million net annual increase in revenues,rates, as approved by the MPSC, effective with the first billing cycle of July 2016 and an increase in the energy efficiency rider. The increase was partially offset by lower storm damage rider.rider revenues due to resetting the storm damage provision to zero beginning with the November 2016 billing cycle. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle. See Note 2 to the financial statements herein and in the Form 10-K for morefurther discussion onof the formula rate plan and the storm damage rider.
Other Income Statement Variances
Third Quarter 20162017 Compared to Third Quarter2015 2016
Other operation and maintenance expenses increaseddecreased primarily due to an increasea decrease of $6.8$6.1 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs and a decrease of $4.8 million in storm damage provisions and an increase of $2.1 million in distribution expenses primarily due to higher vegetation maintenance.provisions. See Note 2 to the financial statements herein and in the Form 10-K for a discussion ofon storm cost recovery.
The decrease was partially offset by an increase of $1.6 million in energy efficiency costs.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
Other operation and maintenance expenses decreased primarily due to:
a decrease of $14.8$6.6 million in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for a discussion on storm cost recovery; and
a decrease of $3.6 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs, partially offset by a lowerhigher scope of work done during plant outages in 20162017 as compared to the same period in 2015;
a decrease of $2.9 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 FINANCIAL 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; and2016.
a $2.6 million loss recognized in 2015 on the disposition of plant components.
The decrease was partially offset by an increase of $5.1$3.5 million in storm damage provisions and an increase of $4.8 million in distribution expenses primarily due to higher vegetation maintenance. See Note 2 to the financial statements in the Form 10-K for a discussion of storm cost recovery.energy efficiency costs.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Depreciation and amortization expenses increased primarily due to additions to plantplants in service.
Interest expense decreased primarily due to the refinancing at lower interest rates of certain first mortgage bonds in 2016 and the retirement, at maturity, of $125 million of 3.25% Series first mortgage bonds in June 2016. See Note 5 to the financial statements in the Form 10-K for details of long-term debt.
Income Taxes
The effective income tax rate was 37.8% for the third quarter 2017. The difference in the effective income tax rate for the third quarter 2017 versus the federal statutory rate of 35% was primarily due to 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 38.4% for the nine months ended September 30, 2017. The difference in the effective income tax rate for the nine months ended September 30, 2017 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rates were 38.6% for the third quarter 2016 and 36.9% for the nine months ended September 30, 2016. The differencesdifference in the effective income tax rates for the third quarter 2016 and the nine months ended September 30, 2016 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.
The effective income tax rate was 39.2% for the third quarter 2015 and 39.3% for the nine months ended September 30, 2015. The differences in the effective income tax rates for the third quarter 2015 and the nine months ended September 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 nine months ended September 30, 20162017 and 20152016 were as follows:
| | | | 2016 | | 2015 | 2017 | | 2016 |
| | (In Thousands) | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $145,605 |
| |
| $61,633 |
|
| $76,834 |
| |
| $145,605 |
|
| | | | | | | |
| Cash flow provided by (used in): | | | | | | |
| Operating activities | 141,960 |
| | 306,255 |
| 129,314 |
| | 141,960 |
|
| Investing activities | (244,814 | ) | | (134,964 | ) | (300,966 | ) | | (244,814 | ) |
| Financing activities | 265,513 |
| | (38,461 | ) | 94,867 |
| | 265,513 |
|
| Net increase in cash and cash equivalents | 162,659 |
| | 132,830 |
| |
| Net increase (decrease) in cash and cash equivalents | | (76,785 | ) | | 162,659 |
|
| | | | | | | |
| Cash and cash equivalents at end of period |
| $308,264 |
| |
| $194,463 |
|
| $49 |
| |
| $308,264 |
|
Operating Activities
Net cash flow provided by operating activities decreased $164.3$12.6 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
decreasedto the timing of recovery of fuel and purchased power costs in 20162017 as compared to the same period in 2015;
2016 and the timing of collections from customers;
$15.3 million in insurance proceeds received in 2015 relatedpayments 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
a decrease of $6.5 million in pension contributions in 2016. 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.
vendors. The decrease was partially offset by income tax refunds of $15.1 million in 2017 compared to income tax payments of $3.9 million in 2016. Entergy Mississippi received state income tax refunds of $15.1 million in 2017 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the timingcarryback of payments to vendors.net operating losses.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $109.9$56.2 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
an increase of $53.1 million in transmission construction expenditures primarily due to a higher scope of work performed in 20162017 as compared to the same period in 2015;
money pool activity;
insurance proceeds of $12.9 million received in 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;2016;
an increase of $10.4$18.5 million in fossil-fueled generation construction expenditures primarily due to various information technology projects and upgrades;a higher scope of work performed in 2017 as compared to the same period in 2016;
an increase of $13.1 million in storm spending in 2017 as compared to the same period in 2016; and
an increase of $9.1 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. 2016.
IncreasesThe increase was partially offset by money pool activity.
Decreases in Entergy Mississippi’s receivable from the money pool are a usesource of cash flow, and Entergy Mississippi’s receivable from the money pool increased bydecreased $10.6 million for the nine months ended September 30, 2017 compared to increasing $25 million for the nine months ended September 30, 2016 compared to increasing by $3.6 million for the nine months ended September 30, 2015.2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Entergy Mississippi’sNet cash flow provided by financing activities provided $265.5decreased $170.6 million of cash for the nine months ended September 30, 20162017 compared to using $38.5 million of cash for the nine months ended September 30, 20152016 primarily due to the net issuance of $291.6 million of long-term debt in 2016, partially offset by money pool activity and a decrease of $12.3$13.5 million in common stock dividends paid in 20162017 as compared to the same period in 2015.
2016. The decrease in dividends paid was primarily because of lower operating cash flow and higher capital expenditures, each discussed above. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details onof long-term debt.
Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow, and Entergy Mississippi’s payable to the money pool increased by $106.2 million for the nine months ended September 30, 2017.
Capital Structure
Entergy Mississippi’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.
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Debt to capital | 54.3 | % | | 49.7 | % | 48.4 | % | | 50.2 | % |
| Effect of subtracting cash | (6.5 | %) | | (3.8 | %) | — | % | | (1.8 | %) |
| Net debt to net capital | 47.8 | % | | 45.9 | % | 48.4 | % | | 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.
Entergy Mississippi, 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 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 is developing its capital investment plan for 20172018 through 20192020 and currently anticipates making $1$1.3 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintainenhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects,projects; system improvements,improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
September 30, 2016 | | December 31, 2015 | | September 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $50,916 | | $25,930 | | $4,260 | | $644 |
|
| | | | | | |
| September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($106,180) | | $10,595 | | $50,916 | | $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 2017.2018. No borrowings were outstanding under the credit facilities as of September 30, 2016.2017. 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 September 30, 2016,2017, a $10.2$12.8 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.
In October 2016, Entergy Mississippi used the proceeds from the September 2016 issuance of $260 million of 4.90% Series first mortgage bonds due October 2066, together with other funds, to pay, prior to maturity, its $80 million of 6.2% Series first mortgage bonds due April 2040, to pay, prior to maturity, its $150 million of 6.0% Series first mortgage bonds due May 2051, and to redeem $30 million of its 6.25% Series preferred stock.
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 2017, Entergy Mississippi submitted its formula rate plan 2017 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 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 2016 look-back filing and 2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSC approved the stipulation, which resulted in no change in rates.
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 that Entergy Mississippi’s deployment of advanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without any material
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Formula Rate Plan
In March 2016, Entergy Mississippi submitted its formula rate plan 2016 test year filing showingchanges, finding that Entergy Mississippi’s projected earned return fordeployment of AMI is in the 2016 calendar year to be below the formula rate plan bandwidth. The filing showedpublic interest and granting a $32.6 million rate increase was necessary to reset Entergy Mississippi’s earned return on common equity to the specified pointcertificate 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 also includes $4.3 million in incremental ad valorem tax expenses to be collected through an updated ad valorem tax adjustment rider. The revenue increasepublic convenience and ad valorem tax adjustment rider were effective with the July 2016 bills.
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.necessity. The MPSC further ordered, however,order also confirmed 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 withcontinue to include in rate base the MPSC no later than February 1, 2016. Pursuantremaining book value of existing meters that will be retired as part of the AMI deployment and also 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.depreciate those assets using current depreciation rates.
Mississippi Attorney General Complaint
TheAs 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 alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. Entergy believesThe defendants have denied the complaint is unfounded.allegations. In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S. District Court in Jackson, Mississippi. The Mississippi attorney general moved to remand the matter to state court. In August 2012June 2017 the District Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.a case management order setting a trial date in November 2018. Discovery is currently in progress.
The defendant Entergy companies answered the complaint and filed a counterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act. In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the Attorney General’s complaint. In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings.
In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not considered “mass actions” under the Class Action Fairness Act, so as to establish federal subject matter jurisdiction. One day later the Attorney General renewed his motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
responded to that motion reiterating the additional grounds asserted for federal question jurisdiction, and the District Court held oral argument on the renewed motion to remand in February 2014. In April 2015 the District Court entered an order denying the renewed motion to remand, holding that the District Court has federal question subject matter jurisdiction. The Attorney General appealed to the U.S. Fifth Circuit Court of Appeals the denial of the motion to remand. In July 2015 the Fifth Circuit issued an order denying the appeal, and the Attorney General subsequently filed a petition for rehearing of the request for interlocutory appeal, which was also denied. In December 2015 the District Court ordered that the parties submit to the court undisputed and disputed facts that are material to the Entergy defendants’ motion for judgment on the pleadings, as well as supplemental briefs regarding the same. Those filings were made in January 2016.
In September 2016 the Attorney General filed a mandamus petition with the U.S. Fifth Circuit Court of Appeals in which the Attorney General asked the Fifth Circuit to order the chief judge to reassign this case to another judge. The District Court denied the Entergy companies’ motion for judgment on the pleadings. The Entergy companies filed a motion seeking to amend the District Court’s order denying the Entergy companies’ motion for judgment on the pleadings and allowing an interlocutory appeal. The Fifth Circuit granted the Attorney General’s motion for writ of mandamus and directed the chief judge to assign the case to a new judge. The case has now been reassigned, and the Entergy companies’ motion to amend the order remains pending.
Storm Damage Provision and Storm Cost Recovery
As discussed inSee 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 resultfor discussion of Entergy Mississippi’s storm damage provisionprovision. As of July 31, 2017, the balance exceeding $15 million as of January 31, 2015, but would return to its current level when thein Entergy Mississippi’s accumulated 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 2016September 2017 bills. As of September 30, 2016, however, Entergy Mississippi’s storm damage provision balance again exceeded $15 million. In October 2016, Entergy Mississippi provided notice to the Mississippi Public Utilities Staff that the storm damage provision will be reset to zero beginning with the November 2016 billing cycle and continuing until the balance again becomes less than $10 million, at which time it will return to its prior level.
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 and Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $349,197 |
| |
| $309,739 |
| |
| $898,852 |
| |
| $820,923 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 61,681 |
| | 3,444 |
| | 146,869 |
| | 64,790 |
|
| Purchased power | | 90,086 |
| | 87,070 |
| | 236,409 |
| | 216,814 |
|
| Other operation and maintenance | | 57,491 |
| | 67,155 |
| | 172,199 |
| | 178,809 |
|
| Taxes other than income taxes | | 23,568 |
| | 24,837 |
| | 71,518 |
| | 68,821 |
|
| Depreciation and amortization | | 36,176 |
| | 34,438 |
| | 106,935 |
| | 101,746 |
|
| Other regulatory charges (credits) - net | | (3,840 | ) | | 4,483 |
| | (13,983 | ) | | (1,832 | ) |
| TOTAL | | 265,162 |
| | 221,427 |
| | 719,947 |
| | 629,148 |
|
| | | | | | | | | |
| OPERATING INCOME | | 84,035 |
| | 88,312 |
| | 178,905 |
| | 191,775 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 2,566 |
| | 1,441 |
| | 6,741 |
| | 4,072 |
|
| Interest and investment income | | — |
| | 129 |
| | 33 |
| | 490 |
|
| Miscellaneous - net | | (54 | ) | | (849 | ) | | (1,032 | ) | | (2,604 | ) |
| TOTAL | | 2,512 |
| | 721 |
| | 5,742 |
| | 1,958 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 12,713 |
| | 13,866 |
| | 37,953 |
| | 43,866 |
|
| Allowance for borrowed funds used during construction | | (1,048 | ) | | (741 | ) | | (2,681 | ) | | (2,099 | ) |
| TOTAL | | 11,665 |
| | 13,125 |
| | 35,272 |
| | 41,767 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 74,882 |
| | 75,908 |
| | 149,375 |
| | 151,966 |
|
| | | | | | | | | |
| Income taxes | | 28,337 |
| | 29,296 |
| | 57,369 |
| | 56,042 |
|
| | | | | | | | | |
| NET INCOME | | 46,545 |
| | 46,612 |
| | 92,006 |
| | 95,924 |
|
| | | | | | | | | |
| Preferred dividend requirements and other | | 238 |
| | 707 |
| | 715 |
| | 2,121 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $46,307 |
| |
| $45,905 |
| |
| $91,291 |
| |
| $93,803 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| For the Three and Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $309,739 |
| |
| $410,743 |
| |
| $820,923 |
| |
| $1,116,533 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 3,444 |
| | 89,512 |
| | 64,790 |
| | 244,331 |
|
| Purchased power | | 87,070 |
| | 120,697 |
| | 216,814 |
| | 308,618 |
|
| Other operation and maintenance | | 67,155 |
| | 60,504 |
| | 178,809 |
| | 190,690 |
|
| Taxes other than income taxes | | 24,837 |
| | 24,082 |
| | 68,821 |
| | 72,219 |
|
| Depreciation and amortization | | 34,438 |
| | 32,459 |
| | 101,746 |
| | 95,888 |
|
| Other regulatory charges (credits) - net | | 4,483 |
| | 9,225 |
| | (1,832 | ) | | 17,598 |
|
| TOTAL | | 221,427 |
| | 336,479 |
| | 629,148 |
| | 929,344 |
|
| | | | | | | | | |
| OPERATING INCOME | | 88,312 |
| | 74,264 |
| | 191,775 |
| | 187,189 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 1,441 |
| | 713 |
| | 4,072 |
| | 2,094 |
|
| Interest and investment income | | 129 |
| | 50 |
| | 490 |
| | 105 |
|
| Miscellaneous - net | | (849 | ) | | (743 | ) | | (2,604 | ) | | (2,675 | ) |
| TOTAL | | 721 |
| | 20 |
| | 1,958 |
| | (476 | ) |
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 13,866 |
| | 14,527 |
| | 43,866 |
| | 43,164 |
|
| Allowance for borrowed funds used during construction | | (741 | ) | | (376 | ) | | (2,099 | ) | | (1,117 | ) |
| TOTAL | | 13,125 |
| | 14,151 |
| | 41,767 |
| | 42,047 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 75,908 |
| | 60,133 |
| | 151,966 |
| | 144,666 |
|
| | | | | | | | | |
| Income taxes | | 29,296 |
| | 23,557 |
| | 56,042 |
| | 56,876 |
|
| | | | | | | | | |
| NET INCOME | | 46,612 |
| | 36,576 |
| | 95,924 |
| | 87,790 |
|
| | | | | | | | | |
| Preferred dividend requirements and other | | 707 |
| | 707 |
| | 2,121 |
| | 2,121 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $45,905 |
| |
| $35,869 |
| |
| $93,803 |
| |
| $85,669 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $92,006 |
| |
| $95,924 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 106,935 |
| | 101,746 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 65,204 |
| | 43,201 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (31,085 | ) | | (39,253 | ) |
| Fuel inventory | | 8,059 |
| | 412 |
|
| Accounts payable | | (2,644 | ) | | 25,200 |
|
| Taxes accrued | | (5,815 | ) | | (765 | ) |
| Interest accrued | | (2,366 | ) | | (2,349 | ) |
| Deferred fuel costs | | (27,344 | ) | | (79,671 | ) |
| Other working capital accounts | | (279 | ) | | (1,910 | ) |
| Provisions for estimated losses | | (10,274 | ) | | 5,221 |
|
| Other regulatory assets | | (33,323 | ) | | 18,851 |
|
| Pension and other postretirement liabilities | | (18,863 | ) | | (18,871 | ) |
| Other assets and liabilities | | (10,897 | ) | | (5,776 | ) |
| Net cash flow provided by operating activities | | 129,314 |
| | 141,960 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (313,910 | ) | | (223,643 | ) |
| Allowance for equity funds used during construction | | 6,741 |
| | 4,072 |
|
| Changes in money pool receivable - net | | 10,595 |
| | (24,986 | ) |
| Change in other investments | | (3,185 | ) | | — |
|
| Other | | (1,207 | ) | | (257 | ) |
| Net cash flow used in investing activities | | (300,966 | ) | | (244,814 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 624,034 |
|
| Retirement of long-term debt | | — |
| | (332,400 | ) |
| Change in money pool payable - net | | 106,180 |
| | — |
|
| Dividends paid: | | | | |
| Common stock | | (10,500 | ) | | (24,000 | ) |
| Preferred stock | | (715 | ) | | (2,121 | ) |
| Other | | (98 | ) | | — |
|
| Net cash flow provided by financing activities | | 94,867 |
| | 265,513 |
|
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (76,785 | ) | | 162,659 |
|
| Cash and cash equivalents at beginning of period | | 76,834 |
| | 145,605 |
|
| Cash and cash equivalents at end of period | |
| $49 |
| |
| $308,264 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $38,549 |
| |
| $44,209 |
|
| Income taxes | |
| ($15,087 | ) | |
| $3,878 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $95,924 |
| |
| $87,790 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 101,746 |
| | 95,888 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 43,201 |
| | (9,178 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (39,253 | ) | | 4,628 |
|
| Fuel inventory | | 412 |
| | (6,627 | ) |
| Accounts payable | | 25,200 |
| | (14,918 | ) |
| Taxes accrued | | (765 | ) | | 52,202 |
|
| Interest accrued | | (2,349 | ) | | (5,241 | ) |
| Deferred fuel costs | | (79,671 | ) | | 81,084 |
|
| Other working capital accounts | | (1,910 | ) | | (6,528 | ) |
| Provisions for estimated losses | | 5,221 |
| | (1,670 | ) |
| Other regulatory assets | | 18,851 |
| | 46,016 |
|
| Pension and other postretirement liabilities | | (18,871 | ) | | (22,345 | ) |
| Other assets and liabilities | | (5,776 | ) | | 5,154 |
|
| Net cash flow provided by operating activities | | 141,960 |
| | 306,255 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (223,643 | ) | | (146,410 | ) |
| Allowance for equity funds used during construction | | 4,072 |
| | 2,094 |
|
| Insurance proceeds | | — |
| | 12,932 |
|
| Changes in money pool receivable - net | | (24,986 | ) | | (3,616 | ) |
| Other | | (257 | ) | | 36 |
|
| Net cash flow used in investing activities | | (244,814 | ) | | (134,964 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 624,034 |
| | — |
|
| Retirement of long-term debt | | (332,400 | ) | | — |
|
| Dividends paid: | | | | |
| Common stock | | (24,000 | ) | | (36,250 | ) |
| Preferred stock | | (2,121 | ) | | (2,121 | ) |
| Other | | — |
| | (90 | ) |
| Net cash flow provided by (used in) financing activities | | 265,513 |
| | (38,461 | ) |
| | | | | |
| Net increase in cash and cash equivalents | | 162,659 |
| | 132,830 |
|
| Cash and cash equivalents at beginning of period | | 145,605 |
| | 61,633 |
|
| Cash and cash equivalents at end of period | |
| $308,264 |
| |
| $194,463 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $44,209 |
| |
| $46,449 |
|
| Income taxes | |
| $3,878 |
| |
| $2,597 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $42 |
| |
| $16 |
|
| Temporary cash investments | | 7 |
| | 76,818 |
|
| Total cash and cash equivalents | | 49 |
| | 76,834 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 81,898 |
| | 51,218 |
|
| Allowance for doubtful accounts | | (669 | ) | | (549 | ) |
| Associated companies | | 34,417 |
| | 45,973 |
|
| Other | | 8,835 |
| | 12,006 |
|
| Accrued unbilled revenues | | 55,983 |
| | 51,327 |
|
| Total accounts receivable | | 180,464 |
| | 159,975 |
|
| Deferred fuel costs | | 34,301 |
| | 6,957 |
|
| Fuel inventory - at average cost | | 42,813 |
| | 50,872 |
|
| Materials and supplies - at average cost | | 44,100 |
| | 41,146 |
|
| Prepayments and other | | 14,555 |
| | 8,873 |
|
| TOTAL | | 316,282 |
| | 344,657 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,596 |
| | 4,608 |
|
| Escrow accounts | | 31,894 |
| | 31,783 |
|
| TOTAL | | 36,490 |
| | 36,391 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,454,890 |
| | 4,321,214 |
|
| Property under capital lease | | 502 |
| | 1,590 |
|
| Construction work in progress | | 234,116 |
| | 118,182 |
|
| TOTAL UTILITY PLANT | | 4,689,508 |
| | 4,440,986 |
|
| Less - accumulated depreciation and amortization | | 1,651,270 |
| | 1,602,711 |
|
| UTILITY PLANT - NET | | 3,038,238 |
| | 2,838,275 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 40,367 |
| | 38,284 |
|
| Other regulatory assets | | 373,453 |
| | 342,213 |
|
| Other | | 3,710 |
| | 2,320 |
|
| TOTAL | | 417,530 |
| | 382,817 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,808,540 |
| |
| $3,602,140 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $147,147 |
| |
| $43,647 |
|
| Other | | 75,915 |
| | 80,227 |
|
| Customer deposits | | 83,682 |
| | 84,112 |
|
| Taxes accrued | | 58,225 |
| | 64,040 |
|
| Interest accrued | | 19,287 |
| | 21,653 |
|
| Other | | 13,589 |
| | 9,554 |
|
| TOTAL | | 397,845 |
| | 303,233 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 926,123 |
| | 861,331 |
|
| Accumulated deferred investment tax credits | | 8,811 |
| | 8,667 |
|
| Asset retirement cost liabilities | | 9,092 |
| | 8,722 |
|
| Accumulated provisions | | 44,166 |
| | 54,440 |
|
| Pension and other postretirement liabilities | | 90,696 |
| | 109,551 |
|
| Long-term debt | | 1,121,606 |
| | 1,120,916 |
|
| Other | | 14,238 |
| | 20,108 |
|
| TOTAL | | 2,214,732 |
| | 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 | | 976,089 |
| | 895,298 |
|
| TOTAL | | 1,175,582 |
| | 1,094,791 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,808,540 |
| |
| $3,602,140 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| ASSETS |
| September 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $961 |
| |
| $1,426 |
|
| Temporary cash investments | | 307,303 |
| | 144,179 |
|
| Total cash and cash equivalents | | 308,264 |
| | 145,605 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 56,699 |
| | 56,685 |
|
| Allowance for doubtful accounts | | (687 | ) | | (718 | ) |
| Associated companies | | 85,361 |
| | 34,964 |
|
| Other | | 8,328 |
| | 8,276 |
|
| Accrued unbilled revenues | | 61,029 |
| | 47,284 |
|
| Total accounts receivable | | 210,730 |
| | 146,491 |
|
| Fuel inventory - at average cost | | 50,861 |
| | 51,273 |
|
| Materials and supplies - at average cost | | 40,396 |
| | 39,491 |
|
| Prepayments and other | | 8,380 |
| | 5,184 |
|
| TOTAL | | 618,631 |
| | 388,044 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,612 |
| | 4,625 |
|
| Escrow accounts | | 31,816 |
| | 41,726 |
|
| TOTAL | | 36,428 |
| | 46,351 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,223,311 |
| | 4,083,933 |
|
| Property under capital lease | | 1,936 |
| | 2,942 |
|
| Construction work in progress | | 137,717 |
| | 114,067 |
|
| TOTAL UTILITY PLANT | | 4,362,964 |
| | 4,200,942 |
|
| Less - accumulated depreciation and amortization | | 1,582,162 |
| | 1,534,522 |
|
| UTILITY PLANT - NET | | 2,780,802 |
| | 2,666,420 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 39,243 |
| | 45,790 |
|
| Other regulatory assets | | 318,777 |
| | 328,681 |
|
| Other | | 2,920 |
| | 2,121 |
|
| TOTAL | | 360,940 |
| | 376,592 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,796,801 |
| |
| $3,477,407 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Currently maturing long-term debt | |
| $— |
| |
| $125,000 |
|
| Accounts payable: | | |
| | |
|
| Associated companies | | 37,869 |
| | 38,496 |
|
| Other | | 70,443 |
| | 51,502 |
|
| Customer deposits | | 83,479 |
| | 81,583 |
|
| Taxes accrued | | 42,696 |
| | 43,461 |
|
| Interest accrued | | 18,482 |
| | 20,831 |
|
| Deferred fuel costs | | 28,083 |
| | 107,754 |
|
| Other | | 12,906 |
| | 22,754 |
|
| TOTAL | | 293,958 |
| | 491,381 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 840,514 |
| | 810,635 |
|
| Accumulated deferred investment tax credits | | 7,441 |
| | 4,645 |
|
| Asset retirement cost liabilities | | 8,602 |
| | 8,252 |
|
| Accumulated provisions | | 53,283 |
| | 48,062 |
|
| Pension and other postretirement liabilities | | 101,338 |
| | 120,217 |
|
| Long-term debt | | 1,344,305 |
| | 920,085 |
|
| Other | | 15,126 |
| | 11,699 |
|
| TOTAL | | 2,370,609 |
| | 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 | | 883,217 |
| | 813,414 |
|
| TOTAL | | 1,081,853 |
| | 1,012,050 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,796,801 |
| |
| $3,477,407 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 30, 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 | — |
| | — |
| | 95,924 |
| | 95,924 |
|
| Common stock dividends | — |
| | — |
| | (24,000 | ) | | (24,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (2,121 | ) | | (2,121 | ) |
| | | | | | | | |
| Balance at September 30, 2016 |
| $199,326 |
| |
| ($690 | ) | |
| $883,217 |
| |
| $1,081,853 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $199,326 |
| |
| $167 |
| |
| $895,298 |
| |
| $1,094,791 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 92,006 |
| | 92,006 |
|
| Common stock dividends | — |
| | — |
| | (10,500 | ) | | (10,500 | ) |
| Preferred stock dividends | — |
| | — |
| | (715 | ) | | (715 | ) |
| | | | | | | | |
| Balance at September 30, 2017 |
| $199,326 |
| |
| $167 |
| |
| $976,089 |
| |
| $1,175,582 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 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 | — |
| | — |
| | 87,790 |
| | 87,790 |
|
| Common stock dividends | — |
| | — |
| | (36,250 | ) | | (36,250 | ) |
| Preferred stock dividends | — |
| | — |
| | (2,121 | ) | | (2,121 | ) |
| | | | | | | | |
| Balance at September 30, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $812,953 |
| |
| $1,011,589 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $813,414 |
| |
| $1,012,050 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 95,924 |
| | 95,924 |
|
| Common stock dividends | — |
| | — |
| | (24,000 | ) | | (24,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (2,121 | ) | | (2,121 | ) |
| | | | | | | | |
| Balance at September 30, 2016 |
| $199,326 |
| |
| ($690 | ) | |
| $883,217 |
| |
| $1,081,853 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| | ENTERGY MISSISSIPPI, INC. | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 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) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $141 |
| |
| $182 |
| |
| ($41 | ) | | (23 | ) | |
| $158 |
| |
| $141 |
| |
| $17 |
| | 12 |
|
| Commercial | | 102 |
| | 137 |
| | (35 | ) | | (26 | ) | | 121 |
| | 102 |
| | 19 |
| | 19 |
|
| Industrial | | 34 |
| | 45 |
| | (11 | ) | | (24 | ) | | 41 |
| | 34 |
| | 7 |
| | 21 |
|
| Governmental | | 10 |
| | 13 |
| | (3 | ) | | (23 | ) | | 11 |
| | 10 |
| | 1 |
| | 10 |
|
| Total retail | | 287 |
| | 377 |
| | (90 | ) | | (24 | ) | | 331 |
| | 287 |
| | 44 |
| | 15 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 23 |
| | (23 | ) | | (100 | ) | |
| Non-associated companies | | 11 |
| | 3 |
| | 8 |
| | 267 |
| | 4 |
| | 11 |
| | (7 | ) | | (64 | ) |
| Other | | 12 |
| | 8 |
| | 4 |
| | 50 |
| | 14 |
| | 12 |
| | 2 |
| | 17 |
|
| Total | |
| $310 |
| |
| $411 |
| |
| ($101 | ) | | (25 | ) | |
| $349 |
| |
| $310 |
| |
| $39 |
| | 13 |
|
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | | 1,955 |
| | 1,935 |
| | 20 |
| | 1 |
| | 1,747 |
| | 1,955 |
| | (208 | ) | | (11 | ) |
| Commercial | | 1,477 |
| | 1,494 |
| | (17 | ) | | (1 | ) | | 1,407 |
| | 1,477 |
| | (70 | ) | | (5 | ) |
| Industrial | | 693 |
| | 638 |
| | 55 |
| | 9 |
| | 665 |
| | 693 |
| | (28 | ) | | (4 | ) |
| Governmental | | 128 |
| | 126 |
| | 2 |
| | 2 |
| | 118 |
| | 128 |
| | (10 | ) | | (8 | ) |
| Total retail | | 4,253 |
| | 4,193 |
| | 60 |
| | 1 |
| | 3,937 |
| | 4,253 |
| | (316 | ) | | (7 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 447 |
| | (447 | ) | | (100 | ) | |
| Non-associated companies | | 384 |
| | 100 |
| | 284 |
| | 284 |
| | 251 |
| | 384 |
| | (133 | ) | | (35 | ) |
| Total | | 4,637 |
| | 4,740 |
| | (103 | ) | | (2 | ) | | 4,188 |
| | 4,637 |
| | (449 | ) | | (10 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| | Nine Months Ended | | Increase/ | | |
|
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| | (Dollars In Millions) | | |
|
| Electric Operating Revenues: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | |
| $345 |
| |
| $455 |
| |
| ($110 | ) | | (24 | ) | |
| $380 |
| |
| $345 |
| |
| $35 |
| | 10 |
|
| Commercial | | 275 |
| | 362 |
| | (87 | ) | | (24 | ) | | 314 |
| | 275 |
| | 39 |
| | 14 |
|
| Industrial | | 97 |
| | 126 |
| | (29 | ) | | (23 | ) | | 115 |
| | 97 |
| | 18 |
| | 19 |
|
| Governmental | | 29 |
| | 37 |
| | (8 | ) | | (22 | ) | | 30 |
| | 29 |
| | 1 |
| | 3 |
|
| Total retail | | 746 |
| | 980 |
| | (234 | ) | | (24 | ) | | 839 |
| | 746 |
| | 93 |
| | 12 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 66 |
| | (66 | ) | | (100 | ) | |
| Non-associated companies | | 21 |
| | 9 |
| | 12 |
| | 133 |
| | 16 |
| | 21 |
| | (5 | ) | | (24 | ) |
| Other | | 54 |
| | 62 |
| | (8 | ) | | (13 | ) | | 44 |
| | 54 |
| | (10 | ) | | (19 | ) |
| Total | |
| $821 |
| |
| $1,117 |
| |
| ($296 | ) | | (26 | ) | |
| $899 |
| |
| $821 |
| |
| $78 |
| | 10 |
|
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 4,325 |
| | 4,523 |
| | (198 | ) | | (4 | ) | | 4,072 |
| | 4,325 |
| | (253 | ) | | (6 | ) |
| Commercial | | 3,682 |
| | 3,745 |
| | (63 | ) | | (2 | ) | | 3,611 |
| | 3,682 |
| | (71 | ) | | (2 | ) |
| Industrial | | 1,829 |
| | 1,699 |
| | 130 |
| | 8 |
| | 1,869 |
| | 1,829 |
| | 40 |
| | 2 |
|
| Governmental | | 328 |
| | 325 |
| | 3 |
| | 1 |
| | 317 |
| | 328 |
| | (11 | ) | | (3 | ) |
| Total retail | | 10,164 |
| | 10,292 |
| | (128 | ) | | (1 | ) | | 9,869 |
| | 10,164 |
| | (295 | ) | | (3 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 1,354 |
| | (1,354 | ) | | (100 | ) | |
| Non-associated companies | | 759 |
| | 193 |
| | 566 |
| | 293 |
| | 744 |
| | 759 |
| | (15 | ) | | (2 | ) |
| Total | | 10,923 |
| | 11,839 |
| | (916 | ) | | (8 | ) | | 10,613 |
| | 10,923 |
| | (310 | ) | | (3 | ) |
ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 20162017 Compared to Third Quarter 20152016
Net income increased $4.5decreased $5.2 million primarily due to higherlower net revenue and lowerhigher taxes other operation and maintenance expenses, partially offset by higher depreciation and amortization expenses.than income taxes.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
Net income increased $5.4decreased $2.3 million primarily due to lower net revenue and higher taxes other than income taxes, partially offset by lower other operation and maintenance expenses and higher net revenue, partially offset by higher depreciation and amortization expenses, higher interest expense, and a higherlower effective income tax rate.
Net Revenue
Third Quarter 20162017 Compared to Third Quarter 20152016
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 changes in net revenue comparing the third quarter 20162017 to the third quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
20152016 net revenue |
| $88.696.0 |
|
| Retail electric price | 10.8(4.8 | ) |
| Volume/weather | (3.3 | ) |
| Other | 0.4 |
|
Other | (3.4 | ) |
20162017 net revenue |
| $96.088.3 |
|
The retail electric price variance is primarily due to an increasea decrease in the purchased power and capacity acquisition cost recovery rider primarily due to credits to customers as approved bypart of the City Council,Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station.June 2017. See Note 132 to the financial statements herein and in the Form 10-K for further discussion of the Union Power Station purchase.credits associated with Entergy New Orleans’s internal restructuring.
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 residential and commercial usage resulting from a 1% increase in the average number of residential and commercial electric customers.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
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 changes in net revenue comparing the nine months ended September 30, 20162017 to the nine months ended September 30, 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $234.3 |
|
Retail electric price | 26.0 |
|
Net gas revenue | (3.1 | ) |
Volume/weather | (5.3 | ) |
Other | (7.5 | ) |
| 2016 net revenue |
| $244.4 |
|
| Volume/weather | (6.4 | ) |
| Retail electric price | (1.7 | ) |
| Other | 1.5 |
|
| 2017 net revenue |
| $237.8 |
|
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 residential and commercial usage resulting from a 1% increase in the average number of residential and commercial electric customers.
The retail electric price variance is primarily due to a decrease in the purchased power and capacity acquisition cost recovery rider primarily due to credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017. The decrease was partially offset by 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 stormthe purchased power and capacity acquisition cost recovery.
The net gas revenue variance is primarily duerecovery rider and see Note 2 to the effect of less favorable weather on residentialfinancial statements herein and commercial sales.
The volume/weather variance is primarily due to a decrease of 185 GWh, or 4%, in billed electricity usage, including the effect of less favorable weather on residential sales, partially offset by a 2% increase in the average numberForm 10-K for further discussion of electric customers.the credits associated with Entergy New Orleans’s internal restructuring.
Other Income Statement Variances
Third Quarter 20162017 Compared to Third Quarter 20152016
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes and higher local franchise taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher electric retail revenues in the third quarter 2017 as compared to the third quarter 2016.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Other operation and maintenance expenses decreased primarily due to to:
a decrease of $1.8$2.9 million due to lower transmission equalizationin fossil-fueled generation 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.
Depreciation and amortization expenses increased primarily due to additions to plant in service, includingthe deactivation of Michoud Units 2 and 3 effective May 2016 and higher outages costs at Power Block 1 of the Union Power Station purchased in March 2016.
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015
Other operation and maintenance expenses decreased primarily due to a decrease of $4.9 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 2017;
a decrease of $4.4$2.1 million in loss provisions;
a decrease of $1.1 million due to lower write-offs of uncollectible customer accounts; and
a decrease of $1 million in energy efficiency costs.
The decrease was partially offset by an increase of $3.2 million in distribution expenses 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.higher labor costs, including contract labor, and higher vegetation maintenance.
Depreciation and amortization expensesTaxes other than income taxes increased primarily due to additionshigher local franchise taxes and an increase in ad valorem taxes. Local franchise taxes increased primarily due to planthigher electric retail revenues in service, including Power Block 1 of the Union Power Station purchased in March 2016.
2017 as compared
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Interest expenseto the same period in 2016. Ad valorem taxes increased primarily due to higher assessments, including the issuanceassessment of $110 million of 5.50% Series first mortgage bondsArkansas ad valorem taxes on the Union Power Station beginning in March 2016 and the issuance of $98.7 million of storm cost recovery bonds in July 2015. See Note 4 to the financial statements herein for further discussion of debt issuances and redemptions.2017.
Income Taxes
The effective income tax rates were 36.6% for the third quarter 2017 and 36.3% for the nine months ended September 30, 2017. The differences in the effective income tax rates for the third quarter 2017 and the nine months ended June 30, 2017 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, partially offset by flow-through tax accounting.
The effective income tax rate was 36.5% for the third quarter 2016 and 38.9% for the nine months ended September 30, 2016. The differences in the effective income tax rates for the third quarter 2016 and the nine months ended September 30, 2016 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, partially offset by flow-through tax accounting.
The effective income tax rate was 37.7% for the third quarter 2015 and 36% for the nine months ended September 30, 2015. The differences in the effective income tax rates for the third quarter 2015 and the nine months ended September 30, 2015 versus the federal statutory rate of 35% were primarily due to state income taxes, certain book and tax differences related to utility plant items, and the provision for uncertain tax positions, partially offset by flow-through tax accounting.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 20162017 and 20152016 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 | 92,823 |
| | 83,454 |
| 84,240 |
| | 92,823 |
|
| Investing activities | (290,944 | ) | | (133,489 | ) | (116,704 | ) | | (290,944 | ) |
| Financing activities | 147,134 |
| | 28,919 |
| (41,722 | ) | | 147,134 |
|
| Net decrease in cash and cash equivalents | (50,987 | ) | | (21,116 | ) | (74,186 | ) | | (50,987 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $37,889 |
| |
| $21,273 |
|
| $28,882 |
| |
| $37,889 |
|
Operating Activities
Net cash flow provided by operating activities increased $9.4decreased $8.6 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
an increaseto the timing of payments to vendors and lower net revenue in net revenue;
$3.2 million in payments made in 2015 related2017 as compared to settlements on asbestos claims; and
a decrease of $2.4 million in pension contributionsthe same period in 2016. See "MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Critical Accounting Estimates"The decrease was substantially offset by the timing of recovery of fuel and purchased power costs in the Form 10-K and Note 62017 as compared to the financial statements herein for a discussion of qualified pensionsame period in 2016 and other postretirement benefits funding.
The increase in cash flow was partially offset by an increaseincome tax payments of $8.5 million in income taxes paid.2016. Entergy New Orleans made income tax payments of $8.5 million in 2016 primarily due to state income taxes resulting from the effect of net operating loss limitations recently enacted by the state of Louisiana.
Investing Activities
Net cash flow used in investing activities decreased $174.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to the purchase of Power Block 1 of the Union Power Station for approximately $237 million in March 2016, partially offset by money pool activity. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
Increases in Entergy New Orleans’s receivable from the money pool are a use of cash flow, and Entergy New Orleans’s receivable from the money pool increased $32.1 million in 2017 compared to decreasing $9.6 million in
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $157.5 million for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 primarily due to the purchase of Power Block 1 of the Union Power Station for approximately $237 million in March 2016. See Note 13 to the financial statements herein for discussion of the Union Power Station purchase. The increase was partially offset by a deposit of $63.9 million into the storm reserve escrow account in July 2015 and money pool activity. See Note 5 to the financial statements in the Form 10-K for a discussion of the issuance in July 2015 of securitization bonds to recover storm costs.
Decreases in Entergy New Orleans’s receivable from the money pool are a source of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $9.6 million in 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 provided byEntergy New Orleans’s financing activities increased $118.2used $41.7 million of cash for the nine months ended September 30, 2017 compared to providing $147.1 million of cash for the nine months ended September 30, 2016 comparedprimarily due to the nine months ended September 30, 2015 primarily due to:following activity:
the issuance of $100$110 million of 5.50% Series first mortgage bonds in March 2016;
the issuance of $85 million of 4% Series first mortgage bonds in May 2016. 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 and to pay, prior to maturity, its $37.772 million of 5.65% Series first mortgage bonds due September 2029;
the purchase of Entergy Louisiana’s Algiers assets in September 2015. The cash portion of the purchase is reflected as a repayment of a long-term payable due to Entergy Louisiana in the cash flow statement. See Note 2 to the financial statements in the Form 10-K for further discussion of the Algiers asset transfer and accounting for the transaction; and
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. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase; and
The increase was offset by the issuance of $98.7 million of storm costs recovery bonds in July 2015 and an increase of $6.8$36.1 million in common stock dividends paid in 2017 as compared to $14 million in common stock dividends paid in 2016. 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.
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.
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Debt to capital | 50.5 | % | | 48.1 | % | 49.4 | % | | 50.1 | % |
| Effect of excluding securitization bonds | (5.4 | %) | | (8.1 | %) | (4.9 | %) | | (5.2 | %) |
| Debt to capital, excluding securitization bonds (a) | 45.1 | % | | 40.0 | % | 44.5 | % | | 44.9 | % |
| Effect of subtracting cash | (2.7 | %) | | (10.0 | %) | (2.0 | %) | | (8.0 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 42.4 | % | | 30.0 | % | 42.5 | % | | 36.9 | % |
| |
| (a) | Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans. |
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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.
Entergy New Orleans, 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 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 is developing its capital investment plan for 20172018 through 20192020 and currently anticipates making $500$585 million in capital investments during that period. The estimate includes amounts associated with specific investments such as the New Orleans Power Station discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintainenhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy New Orleans’s receivables from the money pool were as follows:
|
| | | | | | |
September 30, 2016 | | December 31, 2015 | | September 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $6,172 | | $15,794 | | $452 | | $442 |
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $46,282 | | $14,215 | | $6,172 | | $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 issuepermits the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of September 30, 2016,2017, there were no cash borrowings and a $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 September 30, 2016,2017, a $12.9$7.1 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, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 deactivatedretired effective May 31, 2016. The current estimated costIn January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The application included an updated cost estimate of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unit is $216$210 million. AIn addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans. In August 2017 the City Council established a procedural schedule has been establishedthat provided for a hearing in December 2017 with a City Council decision expected no later than April 2017. Subject to timely approvalin February 2018. In October 2017 several intervenors filed testimony opposing the New Orleans Power Station or, in one case, supporting a slightly smaller configuration of Entergy New Orleans’s alternative proposal. The commercial operation date is dependent on the alternative selected by the City Council and the receipt of other permits and approvals, commercial operation is estimated to occur by late-2019.approvals.
Entergy New Orleans, Inc. and Subsidiaries
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.legacy customers. In March 2016,September 2017, Entergy New Orleans purchased Power Block 1 offiled a supplemental plan and proposed several options for an interim cost recovery mechanism necessary to recover program costs during the Union Power Stationperiod between when existing funds directed to Energy Smart programs are depleted (estimated to be June 2018) and when new rates from the anticipated 2018 combined rate case, which will include a cost recovery mechanism for approximately $237 million and initiated recovery of these costs with March 2016 bills. In July 2016,Energy Smart funding, take effect (estimated to be August 2019). Entergy New Orleans andrequested that the City Council Utility Committee agreedapprove a cost recovery mechanism prior to a temporary increase in the Michoud credit to customers to a total of $1.4 million monthly for August 2016 through December 2016.June 2018.
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. The application provided that if it is approved by the City Councilproposed internal restructuring pursuant to an agreement in 2016, Entergy New Orleans would credit retail customers $5 million in each of the years 2016 and 2017. Intervenors filed direct testimony and comments in September 2016 andprinciple with the City Council advisors filed direct testimonyand certain intervenors. Pursuant to the agreement in October 2016. A hearing at the City Council scheduled for October 2016 has been continued until December 2016. In October 2016,principle, Entergy New Orleans filed its rebuttal testimony and therein agreed that, given the extended procedural schedule, the $5will credit retail customers $10 million in proposed 2016 credits would still be paid, although on a different schedule, if the City Council approved the restructuring after 2016 but before the end of2017, $1.4 million in the first quarter of 2017. The filing with the FERC has not yet been made, but ifyear after the restructuring is approved bytransaction closes, and $117,500 each month in the FERC by December 31,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. Entergy New Orleans has proposedbegan crediting retail customers in June 2017. In June 2017 the FERC approved the transaction and, pursuant to creditthe agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the years 2018, 2019, and 2020. If City Council and FERC approvals are obtained, Entergy New Orleans expects to complete the internal restructuring will be consummated by December 31,in fourth quarter 2017.
It is currently contemplated that Entergy New Orleans would undertake a multi-step restructuring, which would include the following:
Entergy New Orleans would redeem its outstanding preferred stock at 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.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 Utility Group, 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.
Advanced Metering Infrastructure (AMI) Filing
InAs discussed in the Form 10-K, in October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest. In April 2017, Entergy New Orleans proposedreceived intervenor testimony that was generally supportive of AMI deployment. The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to deploy advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve ascertain modifications, including the foundationdenial of Entergy New Orleans’s modernized power grid. The filing identifiedproposed customer charge as a number of quantifiedcost recovery mechanism. In June 2017 the procedural schedule was suspended to allow for settlement discussions. A status conference was held in October 2017, and unquantified benefits, and Entergy New Orleans provided a cost/benefit analysis showing that its combined electric and gas AMI deployment is expected to produce a nominal net benefit to customers of $101 million. Entergy New Orleans also soughtthe parties set another status conference for February 2018 with the intent to continue to includepursue settlement in rate base the remaining book value, approximately $21 million, of the existing electric meters and also to depreciate those assets using current depreciation rates. Entergy New Orleans proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Subject to approval by the City Council, deployment of the information technology infrastructure is expected to begin in 2017 and deployment of the communications network is expected to begin in 2018. Entergy New Orleans proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019 through 2022.
Show Cause Order
In 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. In September 2016, Entergy New Orleans filed its response to the City Council’s show cause order. The City Council has not established any further procedural schedule with regard to this proceeding.interim.
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 “Nuclear Matters” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Nuclear Matters” in the Form 10-K for further discussion of 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 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 Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | | | | | |
| Electric | |
| $185,775 |
| |
| $194,056 |
| |
| $457,317 |
| |
| $458,796 |
| |
| $182,451 |
| |
| $185,775 |
| |
| $482,251 |
| |
| $457,317 |
|
| Natural gas | | 15,561 |
| | 15,677 |
| | 58,279 |
| | 68,314 |
| | 16,566 |
| | 15,561 |
| | 61,977 |
| | 58,279 |
|
| TOTAL | | 201,336 |
| | 209,733 |
| | 515,596 |
| | 527,110 |
| | 199,017 |
| | 201,336 |
| | 544,228 |
| | 515,596 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 19,231 |
| | 44,085 |
| | 42,706 |
| | 81,807 |
| | 26,082 |
| | 19,231 |
| | 79,118 |
| | 42,706 |
|
| Purchased power | | 82,581 |
| | 75,107 |
| | 221,689 |
| | 209,626 |
| | 79,137 |
| | 82,581 |
| | 220,601 |
| | 221,689 |
|
| Other operation and maintenance | | 27,251 |
| | 29,792 |
| | 78,752 |
| | 89,872 |
| | 26,448 |
| | 27,251 |
| | 74,256 |
| | 78,752 |
|
| Taxes other than income taxes | | 13,409 |
| | 13,134 |
| | 35,846 |
| | 36,302 |
| | 15,135 |
| | 13,409 |
| | 41,397 |
| | 35,846 |
|
| Depreciation and amortization | | 13,047 |
| | 10,929 |
| | 38,719 |
| | 32,529 |
| | 13,286 |
| | 13,047 |
| | 39,356 |
| | 38,719 |
|
| Other regulatory charges - net | | 3,538 |
| | 1,952 |
| | 6,812 |
| | 1,340 |
| | 5,514 |
| | 3,538 |
| | 6,717 |
| | 6,812 |
|
| TOTAL | | 159,057 |
| | 174,999 |
| | 424,524 |
| | 451,476 |
| | 165,602 |
| | 159,057 |
| | 461,445 |
| | 424,524 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | 42,279 |
| | 34,734 |
| | 91,072 |
| | 75,634 |
| | 33,415 |
| | 42,279 |
| | 82,783 |
| | 91,072 |
|
| | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 311 |
| | 389 |
| | 767 |
| | 1,022 |
| | 654 |
| | 311 |
| | 1,656 |
| | 767 |
|
| Interest and investment income | | 58 |
| | 15 |
| | 157 |
| | 53 |
| | 222 |
| | 58 |
| | 521 |
| | 157 |
|
| Miscellaneous - net | | (92 | ) | | (81 | ) | | (144 | ) | | 532 |
| | 39 |
| | (92 | ) | | 177 |
| | (144 | ) |
| TOTAL | | 277 |
| | 323 |
| | 780 |
| | 1,607 |
| | 915 |
| | 277 |
| | 2,354 |
| | 780 |
|
| | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | | | |
| Interest expense | | 5,373 |
| | 4,480 |
| | 15,730 |
| | 13,086 |
| | 5,313 |
| | 5,373 |
| | 16,012 |
| | 15,730 |
|
| Allowance for borrowed funds used during construction | | (116 | ) | | (177 | ) | | (291 | ) | | (471 | ) | | (229 | ) | | (116 | ) | | (580 | ) | | (291 | ) |
| TOTAL | | 5,257 |
| | 4,303 |
| | 15,439 |
| | 12,615 |
| | 5,084 |
| | 5,257 |
| | 15,432 |
| | 15,439 |
|
| | | | | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 37,299 |
| | 30,754 |
| | 76,413 |
| | 64,626 |
| | 29,246 |
| | 37,299 |
| | 69,705 |
| | 76,413 |
|
| | | | | | | | | | | | | | | | | |
| Income taxes | | 13,598 |
| | 11,591 |
| | 29,701 |
| | 23,275 |
| | 10,717 |
| | 13,598 |
| | 25,316 |
| | 29,701 |
|
| | | | | | | | | | | | | | | | | |
| NET INCOME | | 23,701 |
| | 19,163 |
| | 46,712 |
| | 41,351 |
| | 18,529 |
| | 23,701 |
| | 44,389 |
| | 46,712 |
|
| | | | | | | | | | | | | | | | | |
| Preferred dividend requirements and other | | 241 |
| | 241 |
| | 724 |
| | 724 |
| | 241 |
| | 241 |
| | 724 |
| | 724 |
|
| | | | | | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $23,460 |
| |
| $18,922 |
| |
| $45,988 |
| |
| $40,627 |
| |
| $18,288 |
| |
| $23,460 |
| |
| $43,665 |
| |
| $45,988 |
|
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
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|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $44,389 |
| |
| $46,712 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 39,356 |
| | 38,719 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 30,834 |
| | 132,201 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (17,030 | ) | | (17,409 | ) |
| Fuel inventory | | (490 | ) | | (215 | ) |
| Accounts payable | | (4,950 | ) | | 7,088 |
|
Prepaid taxes
| | (4,484 | ) | | (87,763 | ) |
| Interest accrued | | 546 |
| | 1,172 |
|
| Deferred fuel costs | | 4,258 |
| | (16,671 | ) |
| Other working capital accounts | | (6,750 | ) | | 735 |
|
| Provisions for estimated losses | | (1,702 | ) | | 678 |
|
| Other regulatory assets | | 10,093 |
| | 6,837 |
|
| Pension and other postretirement liabilities | | (13,793 | ) | | (13,673 | ) |
| Other assets and liabilities | | 3,963 |
| | (5,588 | ) |
| Net cash flow provided by operating activities | | 84,240 |
| | 92,823 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (81,143 | ) | | (63,161 | ) |
| Allowance for equity funds used during construction | | 1,656 |
| | 767 |
|
| Payment for purchase of plant | | — |
| | (237,335 | ) |
| Investment in affiliates | | — |
| | (38 | ) |
| Changes in money pool receivable - net | | (32,067 | ) | | 9,622 |
|
| Receipts from storm reserve escrow account | | — |
| | 3 |
|
| Payments to storm reserve escrow account | | (406 | ) | | (300 | ) |
| Changes in securitization account | | (2,990 | ) | | (502 | ) |
| Change in other investments | | (1,754 | ) | | — |
|
| Net cash flow used in investing activities | | (116,704 | ) | | (290,944 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 190,697 |
|
| Retirement of long-term debt | | (5,114 | ) | | (77,094 | ) |
| Capital contribution from parent | | — |
| | 47,750 |
|
| Dividends paid: | | | | |
| Common stock | | (36,100 | ) | | (14,000 | ) |
| Preferred stock | | (724 | ) | | (724 | ) |
| Other | | 216 |
| | 505 |
|
| Net cash flow provided by (used in) financing activities | | (41,722 | ) | | 147,134 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (74,186 | ) | | (50,987 | ) |
| Cash and cash equivalents at beginning of period | | 103,068 |
| | 88,876 |
|
| Cash and cash equivalents at end of period | |
| $28,882 |
| |
| $37,889 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $14,668 |
| |
| $13,613 |
|
| Income taxes | |
| $— |
| |
| $8,500 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2016 and 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $46,712 |
| |
| $41,351 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 38,719 |
| | 32,529 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 132,201 |
| | 14,620 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (17,409 | ) | | (10,830 | ) |
| Fuel inventory | | (215 | ) | | 1,295 |
|
| Accounts payable | | 7,088 |
| | 8,585 |
|
Prepaid taxes and taxes accrued
| | (87,763 | ) | | 13,604 |
|
| Interest accrued | | 1,172 |
| | (287 | ) |
| Deferred fuel costs | | (16,671 | ) | | 4,829 |
|
| Other working capital accounts | | 735 |
| | (5,362 | ) |
| Provisions for estimated losses | | 678 |
| | 64,479 |
|
| Other regulatory assets | | 6,837 |
| | (83,437 | ) |
| Pension and other postretirement liabilities | | (13,673 | ) | | (13,999 | ) |
| Other assets and liabilities | | (5,588 | ) | | 16,077 |
|
| Net cash flow provided by operating activities | | 92,823 |
| | 83,454 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (63,161 | ) | | (64,280 | ) |
| Allowance for equity funds used during construction | | 767 |
| | 1,022 |
|
| Payment for purchase of plant | | (237,335 | ) | | — |
|
| Investment in affiliates | | (38 | ) | | — |
|
| Changes in money pool receivable - net | | 9,622 |
| | (10 | ) |
| Receipts from storm reserve escrow account | | 3 |
| | 6 |
|
| Payments to storm reserve escrow account | | (300 | ) | | (68,793 | ) |
| Change in securitization account | | (502 | ) | | (1,434 | ) |
| Net cash flow used in investing activities | | (290,944 | ) | | (133,489 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 190,697 |
| | 95,436 |
|
| Retirement of long-term debt | | (77,094 | ) | | — |
|
| Capital contributions from parent | | 47,750 |
| | — |
|
| Repayment of long-term payable due to Entergy Louisiana | | — |
| | (58,417 | ) |
| Dividends paid: | | | | |
| Common stock | | (14,000 | ) | | (7,250 | ) |
| Preferred stock | | (724 | ) | | (724 | ) |
| Other | | 505 |
| | (126 | ) |
| Net cash flow provided by financing activities | | 147,134 |
| | 28,919 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (50,987 | ) | | (21,116 | ) |
| Cash and cash equivalents at beginning of period | | 88,876 |
| | 42,389 |
|
| Cash and cash equivalents at end of period | |
| $37,889 |
| |
| $21,273 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $13,613 |
| |
| $9,710 |
|
| Income taxes | |
| $8,500 |
| |
| $40 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | | | |
| Cash | |
| $518 |
| |
| $28 |
|
| Temporary cash investments | | 28,364 |
| | 103,040 |
|
| Total cash and cash equivalents | | 28,882 |
| | 103,068 |
|
Securitization recovery trust account
| | 4,728 |
| | 1,738 |
|
| Accounts receivable: | | | | |
| Customer | | 57,440 |
| | 43,536 |
|
| Allowance for doubtful accounts | | (3,140 | ) | | (3,059 | ) |
| Associated companies | | 49,213 |
| | 16,811 |
|
| Other | | 4,928 |
| | 5,926 |
|
| Accrued unbilled revenues | | 22,124 |
| | 18,254 |
|
| Total accounts receivable | | 130,565 |
| | 81,468 |
|
| Deferred fuel costs | | 560 |
| | 4,818 |
|
| Fuel inventory - at average cost | | 2,331 |
| | 1,841 |
|
| Materials and supplies - at average cost | | 10,682 |
| | 8,416 |
|
| Prepaid taxes | | 8,863 |
| | 4,379 |
|
| Prepayments and other | | 15,515 |
| | 6,587 |
|
| TOTAL | | 202,126 |
| | 212,315 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Non-utility property at cost (less accumulated depreciation) | | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | 81,843 |
| | 81,437 |
|
| Other | | 2,414 |
| | 7,160 |
|
| TOTAL | | 85,273 |
| | 89,613 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 1,276,279 |
| | 1,258,934 |
|
| Natural gas | | 252,608 |
| | 240,408 |
|
| Construction work in progress | | 49,885 |
| | 24,975 |
|
| TOTAL UTILITY PLANT | | 1,578,772 |
| | 1,524,317 |
|
| Less - accumulated depreciation and amortization | | 621,488 |
| | 604,825 |
|
| UTILITY PLANT - NET | | 957,284 |
| | 919,492 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Deferred fuel costs | | 4,080 |
| | 4,080 |
|
| Other regulatory assets (includes securitization property of $74,586 as of September 30, 2017 and $82,272 as of December 31, 2016) | | 258,013 |
| | 268,106 |
|
| Other | | 890 |
| | 963 |
|
| TOTAL | | 262,983 |
| | 273,149 |
|
| | | | | |
| TOTAL ASSETS | |
| $1,507,666 |
| |
| $1,494,569 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 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 | | 42,408 |
| | 39,260 |
|
| Other | | 26,110 |
| | 35,920 |
|
| Customer deposits | | 28,734 |
| | 28,667 |
|
| Interest accrued | | 5,989 |
| | 5,443 |
|
| Other | | 9,291 |
| | 11,415 |
|
| TOTAL CURRENT LIABILITIES | | 114,636 |
| | 122,809 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 369,688 |
| | 334,953 |
|
| Accumulated deferred investment tax credits | | 528 |
| | 622 |
|
| Regulatory liability for income taxes - net | | 4,133 |
| | 9,074 |
|
| Asset retirement cost liabilities | | 3,024 |
| | 2,875 |
|
| Accumulated provisions | | 86,811 |
| | 88,513 |
|
| Pension and other postretirement liabilities | | 22,957 |
| | 36,750 |
|
| Long-term debt (includes securitization bonds of $79,844 as of September 30, 2017 and $84,776 as of December 31, 2016) | | 423,783 |
| | 428,467 |
|
| Long-term payable due to Entergy Louisiana | | 18,423 |
| | 18,423 |
|
| Gas system rebuild insurance proceeds | | — |
| | 447 |
|
| Other | | 9,392 |
| | 4,910 |
|
| TOTAL NON-CURRENT LIABILITIES | | 938,739 |
| | 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 | | 229,223 |
| | 221,658 |
|
| TOTAL | | 434,511 |
| | 426,946 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,507,666 |
| |
| $1,494,569 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2016 and December 31, 2015 |
| (Unaudited) |
| | | 2016 | | 2015 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents | | | | |
| Cash | |
| $644 |
| |
| $1,068 |
|
| Temporary cash investments | | 37,245 |
| | 87,808 |
|
| Total cash and cash equivalents | | 37,889 |
| | 88,876 |
|
Securitization recovery trust account
| | 5,122 |
| | 4,620 |
|
| Accounts receivable: | | | | |
| Customer | | 51,467 |
| | 34,627 |
|
| Allowance for doubtful accounts | | (1,499 | ) | | (268 | ) |
| Associated companies | | 10,043 |
| | 23,248 |
|
| Other | | 4,180 |
| | 3,753 |
|
| Accrued unbilled revenues | | 22,755 |
| | 17,799 |
|
| Total accounts receivable | | 86,946 |
| | 79,159 |
|
| Fuel inventory - at average cost | | 2,127 |
| | 1,912 |
|
| Materials and supplies - at average cost | | 8,993 |
| | 13,244 |
|
| Prepaid taxes | | 90,457 |
| | 2,694 |
|
| Prepayments and other | | 10,877 |
| | 7,569 |
|
| TOTAL | | 242,411 |
| | 198,074 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Non-utility property at cost (less accumulated depreciation) | | 1,016 |
| | 1,016 |
|
| Storm reserve escrow account | | 81,299 |
| | 81,002 |
|
| Other | | 7,160 |
| | 3 |
|
| TOTAL | | 89,475 |
| | 82,021 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 1,251,039 |
| | 1,051,239 |
|
| Natural gas | | 239,118 |
| | 232,780 |
|
| Construction work in progress | | 24,863 |
| | 29,027 |
|
| TOTAL UTILITY PLANT | | 1,515,020 |
| | 1,313,046 |
|
| Less - accumulated depreciation and amortization | | 606,343 |
| | 648,081 |
|
| UTILITY PLANT - NET | | 908,677 |
| | 664,965 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Deferred fuel costs | | 4,080 |
| | 4,080 |
|
| Other regulatory assets (includes securitization property of $84,345 as of September 30, 2016 and $91,599 as of December 31, 2015) | | 258,485 |
| | 265,322 |
|
| Other | | 931 |
| | 682 |
|
| TOTAL | | 263,496 |
| | 270,084 |
|
| | | | | |
| TOTAL ASSETS | |
| $1,504,059 |
| |
| $1,215,144 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 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 | | 39,066 |
| | 37,467 |
|
| Other | | 26,419 |
| | 21,471 |
|
| Customer deposits | | 28,507 |
| | 28,392 |
|
| Interest accrued | | 6,081 |
| | 4,909 |
|
| Deferred fuel costs | | 12,350 |
| | 29,021 |
|
| Other | | 13,012 |
| | 6,216 |
|
| TOTAL CURRENT LIABILITIES | | 130,408 |
| | 132,449 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 327,389 |
| | 214,061 |
|
| Accumulated deferred investment tax credits | | 655 |
| | 753 |
|
| Regulatory liability for income taxes - net | | 9,231 |
| | 13,199 |
|
| Asset retirement cost liabilities | | 2,827 |
| | 2,687 |
|
| Accumulated provisions | | 84,865 |
| | 84,187 |
|
| Pension and other postretirement liabilities | | 29,936 |
| | 43,609 |
|
| Long-term debt (includes securitization bonds of $90,147 as of September 30, 2016 and $95,867 as of December 31, 2015) | | 433,795 |
| | 317,380 |
|
| Long-term payable due to Entergy Louisiana | | 20,527 |
| | 20,527 |
|
| Gas system rebuild insurance proceeds | | 3,904 |
| | 12,788 |
|
| Other | | 10,972 |
| | 3,692 |
|
| TOTAL NON-CURRENT LIABILITIES | | 924,101 |
| | 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 | | 224,482 |
| | 192,494 |
|
| TOTAL | | 429,770 |
| | 350,032 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,504,059 |
| |
| $1,215,144 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 30, 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 | — |
| | — |
| | 46,712 |
| | 46,712 |
|
| Capital contribution from parent | — |
| | 47,750 |
| | — |
| | 47,750 |
|
| Common stock dividends | — |
| | — |
| | (14,000 | ) | | (14,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (724 | ) | | (724 | ) |
| | | | | | | | |
| Balance at September 30, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $224,482 |
| |
| $429,770 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $221,658 |
| |
| $426,946 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 44,389 |
| | 44,389 |
|
| Common stock dividends | — |
| | — |
| | (36,100 | ) | | (36,100 | ) |
| Preferred stock dividends | — |
| | — |
| | (724 | ) | | (724 | ) |
| | | | | | | | |
| Balance at September 30, 2017 |
| $33,744 |
| |
| $171,544 |
| |
| $229,223 |
| |
| $434,511 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 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 | — |
| | — |
| | 41,351 |
| | 41,351 |
|
| Net income attributable to Entergy Louisiana | — |
| | — |
| | (2,203 | ) | | (2,203 | ) |
| Common stock dividends | — |
| | — |
| | (7,250 | ) | | (7,250 | ) |
| Preferred stock dividends | — |
| | — |
| | (724 | ) | | (724 | ) |
| | | | | | | | |
| Balance at September 30, 2015 |
| $33,744 |
| |
| $36,294 |
| |
| $189,161 |
| |
| $259,199 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2015 |
| $33,744 |
| |
| $123,794 |
| |
| $192,494 |
| |
| $350,032 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 46,712 |
| | 46,712 |
|
| Capital contributions from parent | — |
| | 47,750 |
| | — |
| | 47,750 |
|
| Common stock dividends | — |
| | — |
| | (14,000 | ) | | (14,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (724 | ) | | (724 | ) |
| | | | | | | | |
| Balance at September 30, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $224,482 |
| |
| $429,770 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 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) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $80 |
| |
| $79 |
| |
| $1 |
| | 1 |
| |
| $82 |
| |
| $80 |
| |
| $2 |
| | 3 |
|
| Commercial | | 60 |
| | 57 |
| | 3 |
| | 5 |
| | 63 |
| | 60 |
| | 3 |
| | 5 |
|
| Industrial | | 9 |
| | 9 |
| | — |
| | — |
| | 9 |
| | 9 |
| | — |
| | — |
|
| Governmental | | 20 |
| | 19 |
| | 1 |
| | 5 |
| | 21 |
| | 20 |
| | 1 |
| | 5 |
|
| Total retail | | 169 |
| | 164 |
| | 5 |
| | 3 |
| | 175 |
| | 169 |
| | 6 |
| | 4 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 11 |
| | 25 |
| | (14 | ) | | (56 | ) | | — |
| | 11 |
| | (11 | ) | | (100 | ) |
| Non-associated companies | | 1 |
| | — |
| | 1 |
| | — |
| | 3 |
| | 1 |
| | 2 |
| | 200 |
|
| Other | | 5 |
| | 5 |
| | — |
| | — |
| | 4 |
| | 5 |
| | (1 | ) | | (20 | ) |
| Total | |
| $186 |
| |
| $194 |
| |
| ($8 | ) | | (4 | ) | |
| $182 |
| |
| $186 |
| |
| ($4 | ) | | (2 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | | 752 |
| | 786 |
| | (34 | ) | | (4 | ) | | 711 |
| | 752 |
| | (41 | ) | | (5 | ) |
| Commercial | | 652 |
| | 660 |
| | (8 | ) | | (1 | ) | | 634 |
| | 652 |
| | (18 | ) | | (3 | ) |
| Industrial | | 125 |
| | 132 |
| | (7 | ) | | (5 | ) | | 119 |
| | 125 |
| | (6 | ) | | (5 | ) |
| Governmental | | 224 |
| | 234 |
| | (10 | ) | | (4 | ) | | 217 |
| | 224 |
| | (7 | ) | | (3 | ) |
| Total retail | | 1,753 |
| | 1,812 |
| | (59 | ) | | (3 | ) | | 1,681 |
| | 1,753 |
| | (72 | ) | | (4 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 272 |
| | 597 |
| | (325 | ) | | (54 | ) | | — |
| | 272 |
| | (272 | ) | | (100 | ) |
| Non-associated companies | | 28 |
| | 2 |
| | 26 |
| | 1,300 |
| | 255 |
| | 28 |
| | 227 |
| | 811 |
|
| Total | | 2,053 |
| | 2,411 |
| | (358 | ) | | (15 | ) | | 1,936 |
| | 2,053 |
| | (117 | ) | | (6 | ) |
| | | | | | | | | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| | | | | | | | |
| | | | Nine Months Ended | | Increase/ | | |
|
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | |
| | (Dollars In Millions) | | |
|
| Electric Operating Revenues: | | | | |
| | |
| | |
| | | | |
| | |
| | |
|
| Residential | |
| $177 |
| |
| $177 |
| |
| $— |
| | — |
| |
| $191 |
| |
| $177 |
| |
| $14 |
| | 8 |
|
| Commercial | | 155 |
| | 144 |
| | 11 |
| | 8 |
| | 173 |
| | 155 |
| | 18 |
| | 12 |
|
| Industrial | | 24 |
| | 23 |
| | 1 |
| | 4 |
| | 26 |
| | 24 |
| | 2 |
| | 8 |
|
| Governmental | | 52 |
| | 49 |
| | 3 |
| | 6 |
| | 58 |
| | 52 |
| | 6 |
| | 12 |
|
| Total retail | | 408 |
| | 393 |
| | 15 |
| | 4 |
| | 448 |
| | 408 |
| | 40 |
| | 10 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 30 |
| | 48 |
| | (18 | ) | | (38 | ) | | — |
| | 30 |
| | (30 | ) | | (100 | ) |
| Non associated companies | | 2 |
| | — |
| | 2 |
| | — |
| | 21 |
| | 2 |
| | 19 |
| | 950 |
|
| Other | | 17 |
| | 18 |
| | (1 | ) | | (6 | ) | | 13 |
| | 17 |
| | (4 | ) | | (24 | ) |
| Total | |
| $457 |
| |
| $459 |
| |
| ($2 | ) | | — |
| |
| $482 |
| |
| $457 |
| |
| $25 |
| | 5 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | | 1,710 |
| | 1,835 |
| | (125 | ) | | (7 | ) | | 1,635 |
| | 1,710 |
| | (75 | ) | | (4 | ) |
| Commercial | | 1,700 |
| | 1,715 |
| | (15 | ) | | (1 | ) | | 1,690 |
| | 1,700 |
| | (10 | ) | | (1 | ) |
| Industrial | | 333 |
| | 352 |
| | (19 | ) | | (5 | ) | | 322 |
| | 333 |
| | (11 | ) | | (3 | ) |
| Governmental | | 592 |
| | 618 |
| | (26 | ) | | (4 | ) | | 589 |
| | 592 |
| | (3 | ) | | (1 | ) |
| Total retail | | 4,335 |
| | 4,520 |
| | (185 | ) | | (4 | ) | | 4,236 |
| | 4,335 |
| | (99 | ) | | (2 | ) |
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | 1,070 |
| | 1,079 |
| | (9 | ) | | (1 | ) | | — |
| | 1,070 |
| | (1,070 | ) | | (100 | ) |
| Non-associated companies | | 83 |
| | 8 |
| | 75 |
| | 938 |
| | 1,270 |
| | 83 |
| | 1,187 |
| | 1,430 |
|
| Total | | 5,488 |
| | 5,607 |
| | (119 | ) | | (2 | ) | | 5,506 |
| | 5,488 |
| | 18 |
| | — |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 20162017 Compared to Third Quarter 20152016
Net income increased $12.8decreased $16.5 million primarily due to lower net revenue, higher taxes other operation and maintenance expensesthan income taxes, and higher net revenue.depreciation and amortization expenses.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
Net income increased $20.0decreased $23.2 million primarily due to lower net revenue, higher depreciation and amortization expenses, higher taxes other than income taxes, and higher other operation and maintenance expenses, and higher net revenue.partially offset by a lower effective income tax rate.
Net Revenue
Third Quarter 20162017 Compared to Third Quarter 20152016
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 third quarter 20162017 to the third quarter 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $196.3 |
|
Purchased power capacity | 5.6 |
|
Reserve equalization | 3.9 |
|
Transmission revenue | 2.3 |
|
Net wholesale revenue | (8.2 | ) |
Other | 3.5 |
|
| 2016 net revenue |
| $203.4 |
|
| Volume/weather | (10.1 | ) |
| Net wholesale revenue | (9.8 | ) |
| Purchased power capacity | (3.7 | ) |
| Transmission revenue | (3.3 | ) |
| Retail electric price | 6.3 |
|
| Other | (1.3 | ) |
| 2017 net revenue |
| $181.5 |
|
The purchased power capacityvolume/weather variance is primarily due to decreased expenses due to the terminationeffect of less favorable weather on residential and commercial sales and the effects of the purchased power agreements between Entergy Louisiana and Entergy Texasoutages caused by Hurricane Harvey, partially offset by an increase in August 2016 as well as capacity cost changes for ongoing purchased power capacity contracts.
The reserve equalization variance is primarily due toresidential usage resulting from a reduction in reserve equalization expense primarily due to changes1% increase in the Entergy System generation mix compared to the same periodaverage number of residential customers and an increase in 2015 as a result of the execution of a new purchased power agreement and Entergy Mississippi’s exit from the System Agreement, eachindustrial usage. The increase in November 2015, and Entergy Texas’s exit from the System Agreement in August 2016.
The transmission revenue varianceindustrial usage is primarily due to an increase in Attachment O rates charged by MISOdemand for mid to transmissionsmall customers and cogeneration customers.
The net wholesale revenue variance is primarily due to lower net capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.
The purchased power capacity variance is primarily due to increased expenses due to capacity cost changes for ongoing purchased power capacity contracts.
172
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The transmission revenue variance is primarily due to a decrease in the amount of transmission revenues allocated by MISO.
The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider in September 2016 and an increase in the transmission cost recovery factor rider rate in March 2017, each as approved by the PUCT. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission cost recovery factor rider filings.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
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 nine months ended September 30, 20162017 to the nine months ended September 30, 2015:2016:
|
| | | |
| | Amount |
| | (In Millions) |
2015 net revenue |
| $493.5 |
|
Reserve equalization | 12.2 |
|
Purchased power capacity | 3.5 |
|
Transmission revenue | 2.9 |
|
Net wholesale revenue | (9.8 | ) |
Volume/weather | (4.3 | ) |
Other | 0.6 |
|
| 2016 net revenue |
| $498.6 |
|
| Net wholesale revenue | (30.7 | ) |
| Purchased power capacity | (5.5 | ) |
| Transmission revenue | (4.1 | ) |
| Retail electric | 16.0 |
|
| Other | 0.5 |
|
| 2017 net revenue |
| $474.8 |
|
The reserve equalizationnet wholesale revenue 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 exitlower net capacity revenues resulting from the System Agreement, each in November 2015, and Entergy Texas’s exit from the System Agreement in August 2016.
The purchased power capacity variance is primarily due to decreased expenses due to the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016 as well as2016.
The purchased power capacity variance is primarily due to increased expenses due to capacity cost changes for ongoing purchased power capacity contracts.
The transmission revenue variance is primarily due to an increasea decrease in Attachment O rates chargedthe amount of transmission revenues allocated by MISO to transmission customers.MISO.
The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the purchased power agreements between Entergy Louisiana and Entergy Texas which was terminated in August 2016.
The volume/weatherretail electric price variance is primarily due to the effectimplementation of less favorable weather on residential sales, partially offset bythe transmission cost recovery factor rider in September 2016 and an increase in industrial usage. The increasethe transmission cost recovery factor rider rate in industrial usage is primarily dueMarch 2017, each as approved by the PUCT. See Note 2 to higher usagethe financial statements herein and in the petroleum refining industry.Form 10-K for further discussion of the transmission cost recovery factor rider filings.
Other Income Statement Variances
Third Quarter 20162017 Compared to Third Quarter 20152016
Other operation and maintenance expenses decreased primarily due to:
the write-off in the third quarter 2015 of $4.3 million of previously deferred rate case expenses and acquisition costs related to the proposed Union Power Station acquisition upon Entergy Texas’s withdrawal of its 2015 rate case and dismissal of its Certificate of Convenience and Necessity filing. See Note 2 to the financial statements in the Form 10-K for further discussion on the withdrawal of the 2015 rate case;
a decrease of $2.9 million in transmission expensesTaxes other than income taxes increased primarily due to lower transmission equalization expenses, as allocated under the System Agreement, as comparedan increase in ad valorem taxes resulting from higher assessments and a true-up to the same periodsales and use tax accruals recorded in 2015 as a result of Entergy Mississippi’s exit2016 resulting from the System Agreementan audit settlement.
Depreciation and amortization expenses increased primarily due to additions to plant in November 2015 and Entergy Texas’s exit from the System Agreement in August 2016;service.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
a decreaseNine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Other operation and maintenance expenses increased primarily due to:
an increase of $2$2.6 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs;
an increase of $1.8 million in customer service costs primarily due to higher write-offs of uncollectible customer accounts;
an increase of $1.6 million in fossil-fueled generation expenses primarily due to an overall lowera higher scope of work done during plant outages in 20162017 as compared to the same period in 2015;
a decrease of $1.8 million in energy efficiency costs; and2016;
a decreasean increase of $1.5$1.2 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of the amount of transmission costs allocated by MISO; and
an increase of $1.1 million in the discount rate used to value the benefit liabilitiesinformation technology expenses including software maintenance costs 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 FINANCIAL 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.
upgrade projects.
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015
Other operation and maintenance expenses decreased primarily due to:
The increase was partially offset by a decrease of $11.3$4.5 million in fossil-fueled generation expenses primarily due to an overall lower scopethe termination of work done in 2016 as compared to the same period in 2015;
the write-off in the third quarter 2015 of $4.3 million of previously deferred rate case expenses and acquisition costs related to the proposed Union Power Station acquisition upon Entergy Texas’s withdrawal of its 2015 rate case and dismissal of its Certificate of Convenience and Necessity filing. See Note 2 to the financial statements in the Form 10-K for further discussion on the withdrawal of the 2015 rate case;
a decrease of $4 million in transmission expenses primarily due to lower transmission equalization expenses, as allocated under the System Agreement, as compared to the same period in 2015 as a result of Entergy Mississippi’s exit from the System Agreement in November 2015 and Entergy Texas’s exit from the System Agreement in August 2016;2016.
a decrease of $3.5 million in energy efficiency costs; and
a decrease of $3.2 million in compensation and benefits costsTaxes other than income taxes increased 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 liabilitiesad valorem taxes resulting from higher assessments 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 FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits” in the Form 10-K and Note 6true-up to the financial statements herein for further discussion of benefits costs.
sales and use tax accruals recorded in 2016 resulting from an audit settlement.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Income Taxes
The effective income tax rate was 35.9% for the third quarter 2017. The difference in the effective income tax rate for the third quarter 2017 versus the federal statutory rate of 35% was primarily due to 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 34.6% for the nine months ended September 30, 2017. The difference in the effective income tax rate for the nine months ended September 30, 2017 versus the federal statutory rate of 35% was primarily due to 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, partially offset by certain book and tax differences related to utility plant items and a write-off of a stock-based compensation deferred tax asset.
The effective income tax rates were 36.2% for the third quarter 2016 and 37.4% for the nine months ended September 30, 2016. The differences in the effective income tax rates for the third quarter 2016 and for the nine months ended September 30, 2016 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, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 35.2% for the third quarter 2015. The difference in the effective income tax rate for the third 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 the provision for uncertain tax positions.
The effective income tax rate was 35.5% for the nine months ended September 30, 2015. The difference in the effective income tax rate for the nine months ended September 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 provision for uncertain tax positions.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 20162017 and 20152016 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 | 196,698 |
| | 185,725 |
| 192,954 |
| | 196,698 |
|
| Investing activities | (251,366 | ) | | (202,464 | ) | (228,582 | ) | | (251,366 | ) |
| Financing activities | 53,829 |
| | (8,522 | ) | 30,949 |
| | 53,829 |
|
| Net decrease in cash and cash equivalents | (839 | ) | | (25,261 | ) | (4,679 | ) | | (839 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $1,343 |
| |
| $5,180 |
|
| $1,502 |
| |
| $1,343 |
|
Operating Activities
Net cash flow provided by operating activities increased $11decreased $3.7 million for the nine months ended September 30, 2016 as2017 compared to the nine months ended September 30, 20152016 primarily due to increaseddecreased net income.
The decrease was partially offset by:
the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016;
income tax refunds of $1.4 million in 2017 compared to income tax payments of $3.4 million in 2016 in accordance with an intercompany income tax allocation agreement; and
a decrease of $4.5$3.3 million in pension contributionsinterest paid in 2017 as compared to the same period in 2016.
Investing Activities
Net cash flow used in investing activities decreased $22.8 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to a decrease of $55.7 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017 as compared to the same period in 2016, partially offset by an increase in baseline work performed in 2017 as compared to the same period in 2016. 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 increasedecrease was partially offset by an increase of $4.8$24.3 million in interest paidfossil-fueled generation construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016 and an increase of $9.4 million in distribution construction expenditures primarily due to increased spending on digital technology improvements within the customer contact centers.
Financing Activities
Net cash flow provided by financing activities decreased $22.9 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016, and the timing of collections from customers.
Investing Activities
Net cash flow used in investing activities increased $48.9 million for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 primarily due to an increase in transmission and distribution construction expenditures primarily due to a higher scope of work performed in 2016 as compared to the same period in 2015 and an increase of $6.5 million due to various information technology projects and upgrades in 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 plant outages in 2016 as compared to the same period in 2015.
Financing Activities
Entergy Texas’s financing activities provided $53.8 million of cash for the nine months ended September 30, 2016 compared to using $8.5 million of cash for the nine months ended September 30, 2015 primarily due to the following activity:
the retirement of $200 million of 3.6% Series first mortgage bonds in June 2015;
the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016;
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.
Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased by $89.3 million for the nine months ended September 30, 2017 compared to decreasing
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased by $9.7 million for the nine months ended September 30, 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Capital Structure
Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital ratio for Entergy Texas is primarily due to the increase in retained earnings.
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Debt to capital | 59.0 | % | | 60.2 | % | 56.0 | % | | 58.5 | % |
| Effect of excluding the securitization bonds | (8.5 | %) | | (10.4 | %) | (7.4 | %) | | (8.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 50.5 | % | | 49.8 | % | 48.6 | % | | 50.2 | % |
| Effect of subtracting cash | — | % | | — | % | — | % | | (0.1 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 50.5 | % | | 49.8 | % | 48.6 | % | | 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 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. 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 Texas may receive equity contributions to maintain the targeted capital structure. Following are updates to information provided in the Form 10-K.
Entergy Texas is developing its capital investment plan for 20172018 through 20192020 and currently anticipates making $1.6$1.9 billion in capital investments during that period. The estimate includes amounts associated with specific investments such as the Montgomery County Power Station discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintainenhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
September 30,
2016 | | December 31, 2015 | | September 30,
2015 | | December 31, 2014 |
| (In Thousands) |
| ($12,399) | | ($22,068) | | $82 | | $306 |
|
| | | | | | |
September 30,
2017 | | December 31, 2016 | | September 30,
2016 | | December 31, 2015 |
| (In Thousands) |
| ($89,312) | | $681 | | ($12,399) | | ($22,068) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in August 2021.2022. The credit facility allows Entergy Texas to issuepermits the issuance of letters of credit against 50% of the borrowing capacity of the facility. As of September 30, 2016,2017, there were no cash borrowings and $4.7$24.4 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 September 30, 2016,2017, a $16.0$19.6 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 megawattMW 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 process that showed no undue preference to any proposal. A PUCT decision regardingIn June 2017, parties to the applicationproceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is expected by Octobercapped at $831 million, subject to certain exclusions such as force majeure events. The costs of the transmission interconnection and network upgrades and other related costs included in the total current estimated cost of the Montgomery County Power Station are not subject to the $831 million cap. Also in June 2017, pursuantthe ALJ issued a proposed order and remanded the proceeding to a Texas statute requiring the PUCT to issue a certificate of convenience and necessity within 366 days offor final decision. In July 2017 the filing.PUCT approved the stipulation. Subject to timely approval by the PUCT andtimely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.
Hurricane Harvey
In August 2017, Hurricane Harvey caused extensive damage to Entergy Texas’s service area. The storm resulted in widespread power outages and significant damage primarily to distribution infrastructure. Total restoration costs for the repair and/or replacement of Entergy Texas’s electric facilities damaged by Hurricane Harvey are currently estimated to be in the range of $75 million to $105 million. Based on current progress, management expects total restoration costs to be towards the lower end of the range. Entergy Texas is considering all reasonable avenues to recover storm-related costs from Hurricane Harvey, including, but not limited to, securitization or other alternative financing and traditional retail recovery on an interim and permanent basis. Storm cost recovery or financing will be subject to review by applicable regulatory authorities.
Entergy Texas has recorded accounts payable for the estimated costs incurred that were necessary to return customers to service. Entergy Texas recorded corresponding regulatory assets of approximately $13.1 million and construction work in progress of approximately $25.9 million. Entergy Texas recorded the regulatory assets in accordance with its accounting policies and based on the historic treatment of such costs in its service area because management believes that recovery through some form of regulatory mechanism is probable. Because Entergy Texas has not gone through the regulatory process regarding these storm costs, there is an element of risk, and Entergy Texas is unable to predict with certainty the degree of success it may have in its recovery initiatives, the amount of restoration costs that it may ultimately recover, or the timing of such recovery.
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.
Filings with the PUCT
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Retail Rates
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 and other parties petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. In September 2017 the Texas Supreme Court denied the petitions for review. Entergy Texas filed a motion for rehearing of the Texas Supreme Court’s denial of the petition for review. That petitionmotion is pending.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Other Filings
In September 2015, Entergy Texas filed for a transmission cost recovery factor (TCRF) rider requesting a $13 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 million from Entergy Texas’s $13 million request, but recommending that the PUCT not accept the load growth offset. In April 2016 the PUCT voted to allow Entergy Texas’s TCRF rates to become effective as of April 14, 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 in a future rulemaking project the issue 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 million. The PUCT also ordered its staff and Entergy Texas to track all spare autotransformer transfers going forward so that it could address the appropriate accounting treatment and prudence of such transfers in Entergy Texas’s next base rate case. Entergy Texas implemented the TCRF rider beginning with September 2016 bills.
In September 2016, Entergy Texas filed with the PUCT a request to amend its TCRFtransmission cost recovery factor (TCRF) rider. The proposed amended TCRF rider is designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount includes the approximately $10.5 million annually that Entergy Texas is currently authorized to collect through the TCRF rider. In December 2016, Entergy Texas and the PUCT reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million. The PUCT approved the settlement and issued a final order in March 2017. Entergy Texas implemented the amended TCRF rider as discussed above.beginning with bills covering usage on and after March 20, 2017.
In June 2017, Entergy Texas filed an application to amend its distribution cost recovery factor (DCRF) rider by increasing the total collection from $8.65 million to approximately $19 million. In July 2017, Entergy Texas, the PUCT, and the parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million, with the resulting rates effective for usage no later than October 1, 2017. In September 20162017 the PUCT suspendedissued its final order approving the unopposed stipulation and settlement agreement. The amended DCRF rider rates became effective date of the tariff change to March 2017, which date could further be extended.for usage on and after September 1, 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. UnderIn December 2016, Entergy Texas entered into a recentstipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million as of November 30, 2016, to most customers beginning April 2017 through June 2017. The fuel reconciliation settlement was approved by the PUCT rule change,in March 2017 and the refunds were made.
In June 2017, Entergy Texas filed an application for a fuel reconciliation is requiredrefund of approximately $30.7 million for the months of December 2016 through April 2017. For most customers, the refunds flowed through bills for the months of July 2017 through September 2017. The fuel refund was approved by the PUCT in August 2017.
Advanced Metering Infrastructure (AMI) Filing
In April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to beEntergy Texas and directs that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed at least once every three yearsan application seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design and outside ofbuild a base rate case filing. During the reconciliation period, Entergy Texassecure and reliable network to support such communications; and implement support
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
incurred approximately $1.77 billion in Texas jurisdictional eligible fuelsystems. AMI is intended to serve as the foundation of Entergy Texas’s modernized power grid. The filing identified a number of quantified and purchased power expenses, net of certain revenues credited to such expenses and other adjustments.unquantified benefits, with Entergy Texas estimates an over-recovery balanceshowing that its AMI deployment is expected to produce nominal net operational cost savings to customers of $33 million. Entergy Texas also sought to continue to include in rate base the remaining book value, approximately $19.3$41 million including interest,at December 31, 2016, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff to recover the reasonable and necessary costs it has and will incur under the deployment plan for the full deployment of advanced meters. Further, Entergy Texas is requesting authority to carry over as the beginning balance for the subsequent reconciliation period beginning Apri1 2016. Entergy Texas also notes, however,seeking approval of fees that the $19.3 million over collection is currently being refundedwould be charged to customers aswho choose to opt out of receiving service through an advanced meter and instead receive electric service with 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 been reviewednon-standard meter. Subject to approval by the PUCT, deployment of the communications network is expected to begin in 2018. In October 2017, Entergy Texas and other parties entered into and filed an unopposed stipulation and settlement agreement. PUCT action on the stipulation and settlement agreement remains pending. Entergy Texas expects a prior proceeding. Thedecision from the PUCT has one year to issue a final order in this proceeding.by December 2017.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
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” sectionin the Form 10-K for 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 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 and Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | | | | | |
| Electric | |
| $442,085 |
| |
| $498,249 |
| |
| $1,233,311 |
| |
| $1,312,381 |
| |
| $432,909 |
| |
| $442,085 |
| |
| $1,175,324 |
| |
| $1,233,311 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 21,919 |
| | 72,850 |
| | 185,801 |
| | 197,017 |
| | 60,292 |
| | 21,919 |
| | 164,447 |
| | 185,801 |
|
| Purchased power | | 189,213 |
| | 202,864 |
| | 486,696 |
| | 557,912 |
| | 163,532 |
| | 189,213 |
| | 474,241 |
| | 486,696 |
|
| Other operation and maintenance | | 50,536 |
| | 65,253 |
| | 157,706 |
| | 187,840 |
| | 51,917 |
| | 50,536 |
| | 162,400 |
| | 157,706 |
|
| Taxes other than income taxes | | 17,486 |
| | 18,644 |
| | 54,081 |
| | 54,555 |
| | 20,811 |
| | 17,486 |
| | 59,506 |
| | 54,081 |
|
| Depreciation and amortization | | 27,412 |
| | 25,795 |
| | 79,526 |
| | 76,356 |
| | 29,788 |
| | 27,412 |
| | 87,272 |
| | 79,526 |
|
| Other regulatory charges - net | | 27,555 |
| | 26,219 |
| | 62,229 |
| | 64,000 |
| | 27,619 |
| | 27,555 |
| | 61,879 |
| | 62,229 |
|
| TOTAL | | 334,121 |
| | 411,625 |
| | 1,026,039 |
| | 1,137,680 |
| | 353,959 |
| | 334,121 |
| | 1,009,745 |
| | 1,026,039 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | 107,964 |
| | 86,624 |
| | 207,272 |
| | 174,701 |
| | 78,950 |
| | 107,964 |
| | 165,579 |
| | 207,272 |
|
| | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 1,472 |
| | 1,371 |
| | 6,174 |
| | 3,912 |
| | 1,849 |
| | 1,472 |
| | 4,762 |
| | 6,174 |
|
| Interest and investment income (loss) | | 221 |
| | (5 | ) | | 689 |
| | (411 | ) | |
| Interest and investment income | | | 244 |
| | 221 |
| | 656 |
| | 689 |
|
| Miscellaneous - net | | (256 | ) | | (133 | ) | | (726 | ) | | (247 | ) | | 1,298 |
| | (256 | ) | | 485 |
| | (726 | ) |
| TOTAL | | 1,437 |
| | 1,233 |
| | 6,137 |
| | 3,254 |
| | 3,391 |
| | 1,437 |
| | 5,903 |
| | 6,137 |
|
| | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | | | |
| Interest expense | | 22,416 |
| | 21,917 |
| | 65,993 |
| | 64,475 |
| | 21,714 |
| | 22,416 |
| | 64,949 |
| | 65,993 |
|
| Allowance for borrowed funds used during construction | | (954 | ) | | (886 | ) | | (4,008 | ) | | (2,542 | ) | | (1,134 | ) | | (954 | ) | | (2,896 | ) | | (4,008 | ) |
| TOTAL | | 21,462 |
| | 21,031 |
| | 61,985 |
| | 61,933 |
| | 20,580 |
| | 21,462 |
| | 62,053 |
| | 61,985 |
|
| | | | | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 87,939 |
| | 66,826 |
| | 151,424 |
| | 116,022 |
| | 61,761 |
| | 87,939 |
| | 109,429 |
| | 151,424 |
|
| | | | | | | | | | | | | | | | | |
| Income taxes | | 31,806 |
| | 23,512 |
| | 56,671 |
| | 41,227 |
| | 22,173 |
| | 31,806 |
| | 37,886 |
| | 56,671 |
|
| | | | | | | | | | | | | | | | | |
| NET INCOME | |
| $56,133 |
| |
| $43,314 |
| |
| $94,753 |
| |
| $74,795 |
| |
| $39,588 |
| |
| $56,133 |
| |
| $71,543 |
| |
| $94,753 |
|
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Nine Months Ended September 30, 2016 and 2015 | |
| For the Nine Months Ended September 30, 2017 and 2016 | | For the Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $94,753 |
| |
| $74,795 |
| |
| $71,543 |
| |
| $94,753 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | 79,526 |
| | 76,356 |
| | 87,272 |
| | 79,526 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (7,605 | ) | | (50,401 | ) | | 36,252 |
| | (7,605 | ) |
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | (40,678 | ) | | (22,160 | ) | | (30,030 | ) | | (40,678 | ) |
| Fuel inventory | | 268 |
| | (3,098 | ) | | (7,371 | ) | | 268 |
|
| Accounts payable | | (74 | ) | | (7,401 | ) | | 24,711 |
| | (74 | ) |
| Prepaid taxes and taxes accrued | | 55,121 |
| | 86,361 |
| | 1,122 |
| | 55,121 |
|
| Interest accrued | | (9,453 | ) | | (7,172 | ) | | (7,207 | ) | | (9,453 | ) |
| Deferred fuel costs | | (6,472 | ) | | (6,524 | ) | | (3,134 | ) | | (6,472 | ) |
| Other working capital accounts | | (9,786 | ) | | (4,656 | ) | | (8,455 | ) | | (9,786 | ) |
| Provisions for estimated losses | | (3,318 | ) | | (3,878 | ) | | (1,460 | ) | | (3,318 | ) |
| Other regulatory assets | | 69,324 |
| | 87,314 |
| | 59,549 |
| | 69,324 |
|
| Pension and other postretirement liabilities | | (21,092 | ) | | (22,396 | ) | | (22,978 | ) | | (21,092 | ) |
| Other assets and liabilities | | (3,816 | ) | | (11,415 | ) | | (6,860 | ) | | (3,816 | ) |
| Net cash flow provided by operating activities | | 196,698 |
| | 185,725 |
| | 192,954 |
| | 196,698 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (264,394 | ) | | (210,595 | ) | | (243,226 | ) | | (264,394 | ) |
| Allowance for equity funds used during construction | | 6,266 |
| | 3,961 |
| | 4,879 |
| | 6,266 |
|
| Changes in money pool receivable - net | | — |
| | 224 |
| |
| Insurance proceeds received for property damages | | | 2,431 |
| | — |
|
| Change in money pool receivable - net | | | 681 |
| | — |
|
| Changes in securitization account | | 6,762 |
| | 3,946 |
| | 6,653 |
| | 6,762 |
|
| Net cash flow used in investing activities | | (251,366 | ) | | (202,464 | ) | | (228,582 | ) | | (251,366 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | 123,502 |
| | 246,617 |
| | — |
| | 123,502 |
|
| Retirement of long-term debt | | (55,764 | ) | | (253,645 | ) | | (58,076 | ) | | (55,764 | ) |
| Change in money pool payable - net | | (9,669 | ) | | — |
| |
| Changes in money pool payable - net | | | 89,312 |
| | (9,669 | ) |
| Other | | (4,240 | ) | | (1,494 | ) | | (287 | ) | | (4,240 | ) |
| Net cash flow provided by (used in) financing activities | | 53,829 |
| | (8,522 | ) | |
| Net cash flow provided by financing activities | | | 30,949 |
| | 53,829 |
|
| | | | | | | | | |
| Net decrease in cash and cash equivalents | | (839 | ) | | (25,261 | ) | | (4,679 | ) | | (839 | ) |
| Cash and cash equivalents at beginning of period | | 2,182 |
| | 30,441 |
| | 6,181 |
| | 2,182 |
|
| Cash and cash equivalents at end of period | |
| $1,343 |
| |
| $5,180 |
| |
| $1,502 |
| |
| $1,343 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | |
| Cash paid (received) during the period for: | | | | | |
| Interest - net of amount capitalized | |
| $73,570 |
| |
| $69,005 |
| |
| $70,237 |
| |
| $73,570 |
|
| Income taxes | |
| $3,443 |
| |
| $3,162 |
| |
| ($1,446 | ) | |
| $3,443 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | September 30, 2016 and December 31, 2015 | |
| September 30, 2017 and December 31, 2016 | | September 30, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $1,314 |
| |
| $2,153 |
| |
| $1,472 |
| |
| $1,216 |
|
| Temporary cash investments | | 29 |
| | 29 |
| | 30 |
| | 4,965 |
|
| Total cash and cash equivalents | | 1,343 |
| | 2,182 |
| | 1,502 |
| | 6,181 |
|
| Securitization recovery trust account | | 31,399 |
| | 38,161 |
| | 30,798 |
| | 37,451 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 86,623 |
| | 61,870 |
| | 86,860 |
| | 71,803 |
|
| Allowance for doubtful accounts | | (939 | ) | | (474 | ) | | (552 | ) | | (828 | ) |
| Associated companies | | 51,390 |
| | 42,279 |
| | 41,002 |
| | 39,447 |
|
| Other | | 14,397 |
| | 11,054 |
| | 12,982 |
| | 14,756 |
|
| Accrued unbilled revenues | | 44,131 |
| | 40,195 |
| | 53,962 |
| | 39,727 |
|
| Total accounts receivable | | 195,602 |
| | 154,924 |
| | 194,254 |
| | 164,905 |
|
| Fuel inventory - at average cost | | 46,674 |
| | 46,942 |
| | 44,548 |
| | 37,177 |
|
| Materials and supplies - at average cost | | 37,725 |
| | 34,994 |
| | 40,294 |
| | 36,631 |
|
| Prepayments and other | | 25,342 |
| | 17,975 |
| | 24,194 |
| | 18,599 |
|
| TOTAL | | 338,085 |
| | 295,178 |
| | 335,590 |
| | 300,944 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investments in affiliates - at equity | | 599 |
| | 620 |
| | 538 |
| | 600 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
| | 376 |
| | 376 |
|
| Other | | 20,907 |
| | 20,186 |
| | 19,126 |
| | 18,801 |
|
| TOTAL | | 21,882 |
| | 21,182 |
| | 20,040 |
| | 19,777 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 4,218,696 |
| | 3,923,100 |
| | 4,431,291 |
| | 4,274,069 |
|
| Construction work in progress | | 139,189 |
| | 210,964 |
| | 153,679 |
| | 111,227 |
|
| TOTAL UTILITY PLANT | | 4,357,885 |
| | 4,134,064 |
| | 4,584,970 |
| | 4,385,296 |
|
| Less - accumulated depreciation and amortization | | 1,544,349 |
| | 1,477,529 |
| | 1,566,743 |
| | 1,526,057 |
|
| UTILITY PLANT - NET | | 2,813,536 |
| | 2,656,535 |
| | 3,018,227 |
| | 2,859,239 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 107,349 |
| | 107,499 |
| | 104,915 |
| | 105,816 |
|
| Other regulatory assets (includes securitization property of $400,875 as of September 30, 2016 and $453,317 as of December 31, 2015) | | 743,688 |
| | 812,862 |
| |
| Other regulatory assets (includes securitization property of $330,669 as of September 30, 2017 and $384,609 as of December 31, 2016) | | | 681,508 |
| | 740,156 |
|
| Other | | 4,608 |
| | 5,326 |
| | 8,303 |
| | 7,149 |
|
| TOTAL | | 855,645 |
| | 925,687 |
| | 794,726 |
| | 853,121 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $4,029,148 |
| |
| $3,898,582 |
| |
| $4,168,583 |
| |
| $4,033,081 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | |
| | |
| | |
| | |
|
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | September 30, 2016 and December 31, 2015 | |
| September 30, 2017 and December 31, 2016 | | September 30, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Accounts payable: | | | | | | | | |
| Associated companies | |
| $65,675 |
| |
| $106,065 |
| |
| $142,695 |
| |
| $47,867 |
|
| Other | | 93,026 |
| | 87,421 |
| | 106,117 |
| | 77,342 |
|
| Customer deposits | | 44,469 |
| | 44,537 |
| | 44,141 |
| | 44,419 |
|
| Taxes accrued | | 60,454 |
| | 5,333 |
| | 16,473 |
| | 15,351 |
|
| Interest accrued | | 19,753 |
| | 29,206 |
| | 18,770 |
| | 25,977 |
|
| Deferred fuel costs | | 18,652 |
| | 25,124 |
| | 51,409 |
| | 54,543 |
|
| Other | | 10,712 |
| | 10,363 |
| | 10,445 |
| | 9,388 |
|
| TOTAL | | 312,741 |
| | 308,049 |
| | 390,050 |
| | 274,887 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 998,037 |
| | 1,006,834 |
| | 1,061,320 |
| | 1,027,647 |
|
| Accumulated deferred investment tax credits | | 13,159 |
| | 13,835 |
| | 12,221 |
| | 12,934 |
|
| Other regulatory liabilities | | 7,106 |
| | 6,396 |
| | 7,002 |
| | 8,502 |
|
| Asset retirement cost liabilities | | 6,381 |
| | 6,124 |
| | 6,742 |
| | 6,470 |
|
| Accumulated provisions | | 6,001 |
| | 9,319 |
| | 6,124 |
| | 7,584 |
|
| Pension and other postretirement liabilities | | 56,456 |
| | 77,517 |
| | 44,359 |
| | 67,313 |
|
| Long-term debt (includes securitization bonds of $441,721 as of September 30, 2016 and $497,030 as of December 31, 2015) | | 1,521,270 |
| | 1,451,967 |
| |
| Long-term debt (includes securitization bonds of $371,422 as of September 30, 2017 and $429,043 as of December 31, 2016) | | | 1,451,643 |
| | 1,508,407 |
|
| Other | | 51,788 |
| | 57,085 |
| | 48,585 |
| | 50,343 |
|
| TOTAL | | 2,660,198 |
| | 2,629,077 |
| | 2,637,996 |
| | 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 2016 and 2015 | | 49,452 |
| | 49,452 |
| |
| 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 |
| | 481,994 |
| | 481,994 |
|
| Retained earnings | | 524,763 |
| | 430,010 |
| | 609,091 |
| | 537,548 |
|
| TOTAL | | 1,056,209 |
| | 961,456 |
| | 1,140,537 |
| | 1,068,994 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $4,029,148 |
| |
| $3,898,582 |
| |
| $4,168,583 |
| |
| $4,033,081 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY | | For the Nine Months Ended September 30, 2016 and 2015 | |
| For the Nine Months Ended September 30, 2017 and 2016 | | For the Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total | 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 | — |
| | — |
| | 74,795 |
| | 74,795 |
| |
| | | | | | | | | |
| Balance at September 30, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $435,180 |
| |
| $966,626 |
| |
| | | | | | | | | (In Thousands) |
| | | | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $430,010 |
| |
| $961,456 |
|
| $49,452 |
| |
| $481,994 |
| |
| $430,010 |
| |
| $961,456 |
|
| | | | | | | | | | | | | | | |
| Net income | — |
| | — |
| | 94,753 |
| | 94,753 |
| — |
| | — |
| | 94,753 |
| | 94,753 |
|
| | | | | | | | | | | | | | | |
| Balance at September 30, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $524,763 |
| |
| $1,056,209 |
|
| $49,452 |
| |
| $481,994 |
| |
| $524,763 |
| |
| $1,056,209 |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | |
| Balance at December 31, 2016 | |
| $49,452 |
| |
| $481,994 |
| |
| $537,548 |
| |
| $1,068,994 |
|
| | | | | | | | | |
| Net income | | — |
| | — |
| | 71,543 |
| | 71,543 |
|
| | | | | | | | | |
| Balance at September 30, 2017 | |
| $49,452 |
| |
| $481,994 |
| |
| $609,091 |
| |
| $1,140,537 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 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) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $196 |
| |
| $208 |
| |
| ($12 | ) | | (6 | ) | |
| $202 |
| |
| $196 |
| |
| $6 |
| | 3 |
|
| Commercial | | 91 |
| | 103 |
| | (12 | ) | | (12 | ) | | 101 |
| | 91 |
| | 10 |
| | 11 |
|
| Industrial | | 75 |
| | 98 |
| | (23 | ) | | (23 | ) | | 97 |
| | 75 |
| | 22 |
| | 29 |
|
| Governmental | | 6 |
| | 7 |
| | (1 | ) | | (14 | ) | | 6 |
| | 6 |
| | — |
| | — |
|
| Total retail | | 368 |
| | 416 |
| | (48 | ) | | (12 | ) | | 406 |
| | 368 |
| | 38 |
| | 10 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 52 |
| | 74 |
| | (22 | ) | | (30 | ) | | 18 |
| | 52 |
| | (34 | ) | | (65 | ) |
| Non-associated companies | | 13 |
| | 1 |
| | 12 |
| | 1,200 |
| | 4 |
| | 13 |
| | (9 | ) | | (69 | ) |
| Other | | 9 |
| | 7 |
| | 2 |
| | 29 |
| | 5 |
| | 9 |
| | (4 | ) | | (44 | ) |
| Total | |
| $442 |
| |
| $498 |
| |
| ($56 | ) | | (11 | ) | |
| $433 |
| |
| $442 |
| |
| ($9 | ) | | (2 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,989 |
| | 1,952 |
| | 37 |
| | 2 |
| | 1,839 |
| | 1,989 |
| | (150 | ) | | (8 | ) |
| Commercial | | 1,336 |
| | 1,325 |
| | 11 |
| | 1 |
| | 1,279 |
| | 1,336 |
| | (57 | ) | | (4 | ) |
| Industrial | | 1,948 |
| | 1,923 |
| | 25 |
| | 1 |
| | 2,018 |
| | 1,948 |
| | 70 |
| | 4 |
|
| Governmental | | 75 |
| | 74 |
| | 1 |
| | 1 |
| | 73 |
| | 75 |
| | (2 | ) | | (3 | ) |
| Total retail | | 5,348 |
| | 5,274 |
| | 74 |
| | 1 |
| | 5,209 |
| | 5,348 |
| | (139 | ) | | (3 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 1,187 |
| | 1,707 |
| | (520 | ) | | (30 | ) | | 386 |
| | 1,187 |
| | (801 | ) | | (67 | ) |
| Non-associated companies | | 354 |
| | 36 |
| | 318 |
| | 883 |
| | 238 |
| | 354 |
| | (116 | ) | | (33 | ) |
| Total | | 6,889 |
| | 7,017 |
| | (128 | ) | | (2 | ) | | 5,833 |
| | 6,889 |
| | (1,056 | ) | | (15 | ) |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | | | Nine Months Ended | | Increase/ | | |
| Description | | 2016 | | 2015 | | (Decrease) | | % | | 2017 | | 2016 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $461 |
| |
| $496 |
| |
| ($35 | ) | | (7 | ) | |
| $482 |
| |
| $461 |
| |
| $21 |
| | 5 |
|
| Commercial | | 260 |
| | 279 |
| | (19 | ) | | (7 | ) | | 282 |
| | 260 |
| | 22 |
| | 8 |
|
| Industrial | | 263 |
| | 277 |
| | (14 | ) | | (5 | ) | | 292 |
| | 263 |
| | 29 |
| | 11 |
|
| Governmental | | 18 |
| | 19 |
| | (1 | ) | | (5 | ) | | 18 |
| | 18 |
| | — |
| | — |
|
| Total retail | | 1,002 |
| | 1,071 |
| | (69 | ) | | (6 | ) | | 1,074 |
| | 1,002 |
| | 72 |
| | 7 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 169 |
| | 201 |
| | (32 | ) | | (16 | ) | | 47 |
| | 169 |
| | (122 | ) | | (72 | ) |
| Non-associated companies | | 31 |
| | 11 |
| | 20 |
| | 182 |
| | 18 |
| | 31 |
| | (13 | ) | | (42 | ) |
| Other | | 31 |
| | 29 |
| | 2 |
| | 7 |
| | 36 |
| | 31 |
| | 5 |
| | 16 |
|
| Total | |
| $1,233 |
| |
| $1,312 |
| |
| ($79 | ) | | (6 | ) | |
| $1,175 |
| |
| $1,233 |
| |
| ($58 | ) | | (5 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 4,473 |
| | 4,644 |
| | (171 | ) | | (4 | ) | | 4,326 |
| | 4,473 |
| | (147 | ) | | (3 | ) |
| Commercial | | 3,423 |
| | 3,461 |
| | (38 | ) | | (1 | ) | | 3,387 |
| | 3,423 |
| | (36 | ) | | (1 | ) |
| Industrial | | 5,693 |
| | 5,251 |
| | 442 |
| | 8 |
| | 5,781 |
| | 5,693 |
| | 88 |
| | 2 |
|
| Governmental | | 213 |
| | 205 |
| | 8 |
| | 4 |
| | 205 |
| | 213 |
| | (8 | ) | | (4 | ) |
| Total retail | | 13,802 |
| | 13,561 |
| | 241 |
| | 2 |
| | 13,699 |
| | 13,802 |
| | (103 | ) | | (1 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 4,292 |
| | 4,379 |
| | (87 | ) | | (2 | ) | | 1,149 |
| | 4,292 |
| | (3,143 | ) | | (73 | ) |
| Non-associated companies | | 848 |
| | 161 |
| | 687 |
| | 427 |
| | 586 |
| | 848 |
| | (262 | ) | | (31 | ) |
| Total | | 18,942 |
| | 18,101 |
| | 841 |
| | 5 |
| | 15,434 |
| | 18,942 |
| | (3,508 | ) | | (19 | ) |
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.
Third Quarter 20162017 Compared to Third Quarter 20152016
Net income changed insignificantly, decreasing by $2.9$1.8 million, for the third quarter 20162017 compared to the third quarter 2015.2016.
Nine Months Ended September 30, 20162017 Compared to Nine Months Ended September 30, 20152016
Net income remained relatively flat, increasing by $0.8decreased $13.1 million primarily due to provisions against revenue being recorded in 2017 in connection with the complaint against System Energy’s return on equity, lower other regulatory credits, and a higher effective income tax rate in 2017. See “Federal Regulation - Complaint Against System Energy” below for further discussion of the complaint against System Energy. System Energy records a regulatory debit or credit for the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015.difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The decrease in regulatory credits is primarily caused by decreases in depreciation and accretion expenses.
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 20162017 and 20152016 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 | 234,759 |
| | 239,841 |
| 279,485 |
| | 234,759 |
|
| Investing activities | (193,271 | ) | | (61,017 | ) | (259,598 | ) | | (193,271 | ) |
| Financing activities | (80,987 | ) | | (247,924 | ) | (120,783 | ) | | (80,987 | ) |
| Net decrease in cash and cash equivalents | (39,499 | ) | | (69,100 | ) | (100,896 | ) | | (39,499 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $191,162 |
| |
| $154,079 |
|
| $144,967 |
| |
| $191,162 |
|
Operating Activities
Net cash flow provided by operating activities decreased $5.1increased $44.7 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to an increasea decrease in spending of $35.6$36.1 million on nuclear refueling outages in 20162017 as compared to the same period in 20152016 and a decrease in net revenue resulting from a lower rate base in 2016 as compared to the same period in 2015.
timing of collection of receivables,
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
The decrease was partially offset by:
by proceeds of $28.4 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein for a discussion of the DOE litigation;
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 38 to the financial statements in the Form 10-K for a discussion of the income tax audits; and
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.DOE litigation.
Investing Activities
Net cash flow used in investing activities increased $132.3$66.3 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
money pool activity;
proceeds of $15.8 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation; and
$9.1 million in funds held on deposit for interest payments due October 1, 2017.
The increase 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 services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
an increasea decrease of $15.9 million in nuclear construction expenditures primarily as a result of a higher scope of work performed in 2016 on Grand Gulf outage projects partially offset by decreasedand lower spending in 20162017 on compliance with NRC post-Fukushima requirements.
The increase was partially offset by:
proceeds of $15.8 million received in August 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; and
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 $202.7 million for the nine months ended September 30, 2017 compared to decreasing by $8.4 million for the nine months ended September 30, 2016 compared to increasing by $1 million for the nine months ended September 30, 2015.2016. 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 in financing activities decreased $166.9increased $39.8 million for the nine months ended September 30, 20162017 compared to the nine months ended September 30, 20152016 primarily due to:
a decrease in net borrowings of $80$65.2 million on the nuclear fuel company variable interest entity’s credit facility in 20162017 as compared to net repayments of $5.8 million on the nuclear fuel company variable interest entity’s credit facilitysame period in 2015;2016; and
the redemptionpayment 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.H notes.
The decreaseincrease was partially offset by by:
a decrease in common stock dividends and distributions of $53.4 million in 2017 compared to 2016 in order to maintain the targeted capital structure; and
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.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 is primarily due to borrowings of $80 million on the System Energy nuclear fuel company variable interest entity’s credit facility and common stock dividends and distributions in May 2016.
| | | | September 30, 2016 | | December 31, 2015 | September 30, 2017 | | December 31, 2016 |
| Debt to capital | 46.9 | % | | 42.3 | % | 45.0 | % | | 45.5 | % |
| Effect of subtracting cash | (8.8 | %) | | (11.8 | %) | (7.0 | %) | | (12.0 | %) |
| Net debt to net capital | 38.1 | % | | 30.5 | % | 38.0 | % | | 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.
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.
System Energy is developing its capital investment plan for 20172018 through 20192020 and currently anticipates making $440$515 million in capital investments during that period. The estimate includes amounts associated with specific investments and initiatives such as the nuclear fleet operational excellence initiative, as discussed belowinvestments in “Nuclear Matters,” and plant improvements.Grand Gulf.
System Energy’s receivables from the money pool were as follows:
|
| | | | | | |
September 30, 2016 | | December 31, 2015 | | September 30, 2015 | | December 31, 2014 |
| (In Thousands) |
| $31,511 | | $39,926 | | $3,376 | | $2,373 |
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $236,467 | | $33,809 | | $31,511 | | $39,926 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 September 30, 2016, $802017, $31.8 million in letters of credit were outstanding under the credit facility to support a like amount of commercial paper issued byand $50 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity.entity credit facility. 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.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 LPSC and the City Council intervened in the proceeding expressing support for the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. In September 2017 the FERC established a refund effective date of January 23, 2017, consolidated the return on equity complaint proceeding with the proceeding related to System Energy’s Unit Power Sales Agreement amendments, discussed below, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.
Unit Power Sales Agreement
In August 2017, System Energy submitted to the FERC proposed amendments to 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. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017.
In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to further proceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, the FERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower than proposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of the further settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the rate decrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding related to the complaint filed by the APSC and MPSC, discussed above, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.
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 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 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.
In 2016, Entergy conducted a comprehensive evaluation of the Entergy nuclear fleet and determined that it is necessary to increase investments in its nuclear plants to position the fleet for sustained operational excellence during each plant’s expected operating life. These investments will result in increased operating and capital costs associated with operating Entergy’s nuclear plants going forward. The preliminary estimates of the incremental capital costs for 2017 through 2019 identified through this initiative are estimated to be $265 million for System Energy. The current estimates of the capital costs identified through this initiative are included in System Energy’s capital investment plan preliminary estimate for 2017 through 2019 given in “Liquidity and Capital Resources - Uses and Sources of Capital” above. The incremental increases in other operation and maintenance expenses identified through this initiative are preliminarily estimated to be approximately $35 million in 2017, $35 million in 2018, and $40 million in 2019 for System Energy. In addition, nuclear refueling outage expenses are expected to increase going forward.
Grand Gulf Outage
Grand Gulf began a maintenance outage on September 8, 2016 to replace a heat removal pump. Although the pump has been replaced, management decided to keep the plant in a maintenance outage until additional training and other steps can be taken to support management’s goal of operational excellence. Grand Gulf is not expected to return to service before mid-January 2017. Entergy expects, based on the plant’s recent performance indicators, that the NRC will place Grand Gulf in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. Additionally, on October 31, 2016, the NRC commenced a special inspection to identify the circumstances surrounding the unplanned unavailability of an alternate heat removal system during the September 2016 replacement of the heat removal pump and to evaluate the licensee’s actions to address the causes of the event.
System Energy Resources, Inc.
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 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 Nine Months Ended September 30, 2016 and 2015 | |
| For the Three and Nine Months Ended September 30, 2017 and 2016 | | For the Three and Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | | | | | |
| Electric | |
| $114,039 |
| |
| $155,899 |
| |
| $403,056 |
| |
| $475,039 |
| |
| $156,106 |
| |
| $114,039 |
| |
| $475,849 |
| |
| $403,056 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | (7,393 | ) | | 22,984 |
| | 26,429 |
| | 66,400 |
| | 16,170 |
| | (7,393 | ) | | 53,164 |
| | 26,429 |
|
| Nuclear refueling outage expenses | | 4,958 |
| | 5,244 |
| | 14,448 |
| | 16,346 |
| | 4,435 |
| | 4,958 |
| | 13,595 |
| | 14,448 |
|
| Other operation and maintenance | | 32,867 |
| | 39,520 |
| | 100,793 |
| | 116,309 |
| | 51,392 |
| | 32,867 |
| | 154,103 |
| | 100,793 |
|
| Decommissioning | | 12,802 |
| | 12,095 |
| | 37,782 |
| | 35,695 |
| | 8,290 |
| | 12,802 |
| | 34,974 |
| | 37,782 |
|
| Taxes other than income taxes | | 6,256 |
| | 6,497 |
| | 18,894 |
| | 20,263 |
| | 6,679 |
| | 6,256 |
| | 19,767 |
| | 18,894 |
|
| Depreciation and amortization | | 30,811 |
| | 35,091 |
| | 100,902 |
| | 109,398 |
| | 34,524 |
| | 30,811 |
| | 105,152 |
| | 100,902 |
|
| Other regulatory credits - net | | (10,148 | ) | | (12,667 | ) | | (32,564 | ) | | (29,761 | ) | | (2,843 | ) | | (10,148 | ) | | (24,626 | ) | | (32,564 | ) |
| TOTAL | | 70,153 |
| | 108,764 |
| | 266,684 |
| | 334,650 |
| | 118,647 |
| | 70,153 |
| | 356,129 |
| | 266,684 |
|
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | 43,886 |
| | 47,135 |
| | 136,372 |
| | 140,389 |
| | 37,459 |
| | 43,886 |
| | 119,720 |
| | 136,372 |
|
| | | | | | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 1,758 |
| | 2,252 |
| | 6,089 |
| | 5,945 |
| | 1,736 |
| | 1,758 |
| | 4,148 |
| | 6,089 |
|
| Interest and investment income | | 4,233 |
| | 4,732 |
| | 12,631 |
| | 12,195 |
| | 6,624 |
| | 4,233 |
| | 15,021 |
| | 12,631 |
|
| Miscellaneous - net | | (109 | ) | | (129 | ) | | (365 | ) | | (567 | ) | | (130 | ) | | (109 | ) | | (361 | ) | | (365 | ) |
| TOTAL | | 5,882 |
| | 6,855 |
| | 18,355 |
| | 17,573 |
| | 8,230 |
| | 5,882 |
| | 18,808 |
| | 18,355 |
|
| | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | | | | | |
| Interest expense | | 9,186 |
| | 10,404 |
| | 28,119 |
| | 35,764 |
| | 9,169 |
| | 9,186 |
| | 27,469 |
| | 28,119 |
|
| Allowance for borrowed funds used during construction | | (440 | ) | | (595 | ) | | (1,536 | ) | | (1,571 | ) | | (425 | ) | | (440 | ) | | (1,014 | ) | | (1,536 | ) |
| TOTAL | | 8,746 |
| | 9,809 |
| | 26,583 |
| | 34,193 |
| | 8,744 |
| | 8,746 |
| | 26,455 |
| | 26,583 |
|
| | | | | | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 41,022 |
| | 44,181 |
| | 128,144 |
| | 123,769 |
| | 36,945 |
| | 41,022 |
| | 112,073 |
| | 128,144 |
|
| | | | | | | | | | | | | | | | | |
| Income taxes | | 18,652 |
| | 18,958 |
| | 54,726 |
| | 51,153 |
| | 16,362 |
| | 18,652 |
| | 51,793 |
| | 54,726 |
|
| | | | | | | | | | | | | | | | | |
| NET INCOME | |
| $22,370 |
| |
| $25,223 |
| |
| $73,418 |
| |
| $72,616 |
| |
| $20,583 |
| |
| $22,370 |
| |
| $60,280 |
| |
| $73,418 |
|
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
(page left blank intentionally)
| | SYSTEM ENERGY RESOURCES, INC. | STATEMENTS OF CASH FLOWS | | For the Nine Months Ended September 30, 2016 and 2015 | |
| For the Nine Months Ended September 30, 2017 and 2016 | | For the Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $73,418 |
| |
| $72,616 |
| |
| $60,280 |
| |
| $73,418 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 176,571 |
| | 203,761 |
| | 184,625 |
| | 176,571 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 73,829 |
| | 181,430 |
| | 44,017 |
| | 73,829 |
|
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | 9,084 |
| | 7,800 |
| | 21,147 |
| | 9,084 |
|
| Accounts payable | | (2,217 | ) | | (3,480 | ) | | 2,344 |
| | (2,217 | ) |
| Prepaid taxes and taxes accrued | | (30,063 | ) | | (159,911 | ) | | 2,956 |
| | (30,063 | ) |
| Interest accrued | | 406 |
| | (17,522 | ) | | 401 |
| | 406 |
|
| Other working capital accounts | | (22,051 | ) | | (2,710 | ) | | 7,605 |
| | (22,051 | ) |
| Other regulatory assets | | (12,392 | ) | | (4,145 | ) | | 1,196 |
| | (12,392 | ) |
| Pension and other postretirement liabilities | | (15,789 | ) | | (17,759 | ) | | (14,665 | ) | | (15,789 | ) |
| Other assets and liabilities | | (16,037 | ) | | (20,239 | ) | | (30,421 | ) | | (16,037 | ) |
| Net cash flow provided by operating activities | | 234,759 |
| | 239,841 |
| | 279,485 |
| | 234,759 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (71,471 | ) | | (48,756 | ) | | (60,041 | ) | | (71,471 | ) |
| Allowance for equity funds used during construction | | 6,089 |
| | 5,945 |
| | 4,148 |
| | 6,089 |
|
| Nuclear fuel purchases | | (137,248 | ) | | (51,645 | ) | | (24,239 | ) | | (137,248 | ) |
| Proceeds from the sale of nuclear fuel | | 11,467 |
| | 57,681 |
| | 60,188 |
| | 11,467 |
|
| Changes in other investments - net | | | (9,061 | ) | | — |
|
| Proceeds from nuclear decommissioning trust fund sales | | 392,926 |
| | 325,367 |
| | 308,134 |
| | 392,926 |
|
| Investment in nuclear decommissioning trust funds | | (419,255 | ) | | (348,606 | ) | | (336,069 | ) | | (419,255 | ) |
| Changes in money pool receivable - net | | 8,415 |
| | (1,003 | ) | | (202,658 | ) | | 8,415 |
|
Litigation proceeds for reimbursement of spent nuclear fuel storage costs
| | 15,806 |
| | — |
| | — |
| | 15,806 |
|
| Net cash flow used in investing activities | | (193,271 | ) | | (61,017 | ) | | (259,598 | ) | | (193,271 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Retirement of long-term debt | | (22,002 | ) | | (111,310 | ) | | (50,003 | ) | | (22,002 | ) |
| Changes in credit borrowings - net | | 80,041 |
| | (5,836 | ) | | 14,858 |
| | 80,041 |
|
| Common stock dividends and distributions | | (139,000 | ) | | (130,750 | ) | | (85,610 | ) | | (139,000 | ) |
| Other | | (26 | ) | | (28 | ) | | (28 | ) | | (26 | ) |
| Net cash flow used in financing activities | | (80,987 | ) | | (247,924 | ) | | (120,783 | ) | | (80,987 | ) |
| | | | | | | | | |
| Net decrease in cash and cash equivalents | | (39,499 | ) | | (69,100 | ) | | (100,896 | ) | | (39,499 | ) |
| Cash and cash equivalents at beginning of period | | 230,661 |
| | 223,179 |
| | 245,863 |
| | 230,661 |
|
| Cash and cash equivalents at end of period | |
| $191,162 |
| |
| $154,079 |
| |
| $144,967 |
| |
| $191,162 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $27,087 |
| |
| $47,664 |
| |
| $26,251 |
| |
| $27,087 |
|
| Income taxes | |
| $3,402 |
| |
| $25,304 |
| |
| $— |
| |
| $3,402 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | BALANCE SHEETS | ASSETS | | September 30, 2016 and December 31, 2015 | |
| September 30, 2017 and December 31, 2016 | | September 30, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $988 |
| |
| $8,681 |
| |
| $47 |
| |
| $786 |
|
| Temporary cash investments | | 190,174 |
| | 221,980 |
| | 144,920 |
| | 245,077 |
|
| Total cash and cash equivalents | | 191,162 |
| | 230,661 |
| | 144,967 |
| | 245,863 |
|
| Accounts receivable: | | | | | | | | |
| Associated companies | | 79,582 |
| | 93,724 |
| | 284,724 |
| | 104,390 |
|
| Other | | 1,217 |
| | 4,574 |
| | 4,814 |
| | 3,637 |
|
| Total accounts receivable | | 80,799 |
| | 98,298 |
| | 289,538 |
| | 108,027 |
|
| Materials and supplies - at average cost | | 82,334 |
| | 87,366 |
| | 86,719 |
| | 82,469 |
|
| Deferred nuclear refueling outage costs | | 29,840 |
| | 5,605 |
| | 11,713 |
| | 24,729 |
|
| Prepaid taxes | | 39,390 |
| | 9,327 |
| | 12,926 |
| | 15,882 |
|
| Prepayments and other | | 4,801 |
| | 1,955 |
| | 14,450 |
| | 4,229 |
|
| TOTAL | | 428,326 |
| | 433,212 |
| | 560,313 |
| | 481,199 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Decommissioning trust funds | | 764,903 |
| | 701,460 |
| | 870,610 |
| | 780,496 |
|
| TOTAL | | 764,903 |
| | 701,460 |
| | 870,610 |
| | 780,496 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 4,315,805 |
| | 4,253,949 |
| | 4,308,864 |
| | 4,331,668 |
|
| Property under capital lease | | 575,027 |
| | 575,027 |
| | 585,084 |
| | 585,084 |
|
| Construction work in progress | | 63,010 |
| | 92,546 |
| | 80,343 |
| | 43,888 |
|
| Nuclear fuel | | 258,363 |
| | 183,706 |
| | 188,956 |
| | 259,635 |
|
| TOTAL UTILITY PLANT | | 5,212,205 |
| | 5,105,228 |
| | 5,163,247 |
| | 5,220,275 |
|
| Less - accumulated depreciation and amortization | | 3,039,533 |
| | 2,961,842 |
| | 3,155,691 |
| | 3,063,249 |
|
| UTILITY PLANT - NET | | 2,172,672 |
| | 2,143,386 |
| | 2,007,556 |
| | 2,157,026 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 93,277 |
| | 98,230 |
| | 86,515 |
| | 93,127 |
|
| Other regulatory assets | | 365,175 |
| | 347,830 |
| | 416,628 |
| | 411,212 |
|
| Other | | 4,921 |
| | 4,757 |
| | 4,421 |
| | 4,652 |
|
| TOTAL | | 463,373 |
| | 450,817 |
| | 507,564 |
| | 508,991 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $3,829,274 |
| |
| $3,728,875 |
| |
| $3,946,043 |
| |
| $3,927,712 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | BALANCE SHEETS | LIABILITIES AND EQUITY | | September 30, 2016 and December 31, 2015 | |
| September 30, 2017 and December 31, 2016 | | September 30, 2017 and December 31, 2016 |
(Unaudited) | | | | 2016 | | 2015 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $50,003 |
| |
| $2 |
| |
| $4 |
| |
| $50,003 |
|
| Short-term borrowings | | 80,041 |
| | — |
| | 31,751 |
| | 66,893 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 7,328 |
| | 7,391 |
| | 10,325 |
| | 5,843 |
|
| Other | | 24,736 |
| | 34,010 |
| | 44,958 |
| | 50,558 |
|
| Interest accrued | | 14,589 |
| | 14,183 |
| | 14,450 |
| | 14,049 |
|
| Other | | 1,928 |
| | 1,926 |
| | 2,958 |
| | 2,957 |
|
| TOTAL | | 178,625 |
| | 57,512 |
| | 104,446 |
| | 190,303 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,088,503 |
| | 1,019,075 |
| | 1,147,913 |
| | 1,112,865 |
|
| Accumulated deferred investment tax credits | | 42,652 |
| | 45,451 |
| | 39,726 |
| | 41,663 |
|
| Other regulatory liabilities | | 365,302 |
| | 337,424 |
| | 424,381 |
| | 370,862 |
|
| Decommissioning | | 841,187 |
| | 803,405 |
| | 853,291 |
| | 854,202 |
|
| Pension and other postretirement liabilities | | 96,475 |
| | 112,264 |
| | 103,185 |
| | 117,850 |
|
| Long-term debt | | 501,020 |
| | 572,665 |
| | 551,387 |
| | 501,129 |
|
| Other | | 13 |
| | — |
| | 8,221 |
| | 15 |
|
| TOTAL | | 2,935,152 |
| | 2,890,284 |
| | 3,128,104 |
| | 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 2016 and 2015 | | 679,350 |
| | 719,350 |
| |
| 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 | | 36,147 |
| | 61,729 |
| | 34,143 |
| | 59,473 |
|
| TOTAL | | 715,497 |
| | 781,079 |
| | 713,493 |
| | 738,823 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,829,274 |
| |
| $3,728,875 |
| |
| $3,946,043 |
| |
| $3,927,712 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | SYSTEM ENERGY RESOURCES, INC. | STATEMENTS OF CHANGES IN COMMON EQUITY | | For the Nine Months Ended September 30, 2016 and 2015 | |
| For the Nine Months Ended September 30, 2017 and 2016 | | For the Nine Months Ended September 30, 2017 and 2016 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) | |
| | | | | | | |
| Balance at December 31, 2014 |
| $789,350 |
| |
| $81,161 |
| |
| $870,511 |
| |
| | | | | | | |
| Net income | — |
| | 72,616 |
| | 72,616 |
| |
| Common stock dividends | — |
| | (130,750 | ) | | (130,750 | ) | |
| | | | | | | |
| Balance at September 30, 2015 |
| $789,350 |
| |
| $23,027 |
| |
| $812,377 |
| |
| | | | | | | (In Thousands) |
| | | | | | | | | | | |
| Balance at December 31, 2015 |
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
|
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
|
| | | | | | | | | | | |
| Net income | — |
| | 73,418 |
| | 73,418 |
| — |
| | 73,418 |
| | 73,418 |
|
| Common stock dividends and distributions | (40,000 | ) | | (99,000 | ) | | (139,000 | ) | (40,000 | ) | | (99,000 | ) | | (139,000 | ) |
| | | | | | | | | | | |
| Balance at September 30, 2016 |
| $679,350 |
| |
| $36,147 |
| |
| $715,497 |
|
| $679,350 |
| |
| $36,147 |
| |
| $715,497 |
|
| | | | | | | | | | | |
| | | | | | | |
| Balance at December 31, 2016 | |
| $679,350 |
| |
| $59,473 |
| |
| $738,823 |
|
| | | | | | | |
| Net income | | — |
| | 60,280 |
| | 60,280 |
|
| Common stock dividends | | — |
| | (85,610 | ) | | (85,610 | ) |
| | | | | | | |
| Balance at September 30, 2017 | |
| $679,350 |
| |
| $34,143 |
| |
| $713,493 |
|
| | | | | | | |
| 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) |
| | | | | | | | | |
7/01/2016-7/2017-7/31/20162017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
8/01/2016-8/2017-8/31/20162017 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
9/01/2016-9/2017-9/30/20162017 | | — |
| |
| $— |
| | — |
| |
| $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 are updates 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 Entergy received the payment from the U.S. Treasury in August 2016. In July 2016 the U.S. Court of Federal Claims 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, and Entergy requested payment from the U.S. Treasury in September 2016.
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 August 2016 the U.S. Court of Federal Claims issued a final judgment in the Waterford 3 case in the amount of $53 million, and Entergy Louisiana requested payment from the U.S. Treasury in October 2016.
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. Entergy Louisiana received payment from the U.S. Treasury in August 2016. In September 2016 the U.S. Court of Federal Claims issued a further judgment in the River Bend case in the amount of $5 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.
In September 2016 the U.S. Court of Federal Claims issued a judgment in the Entergy Nuclear Palisades case in the amount of $14 million. The U.S. Court of Federal Claims had previously issued a partial judgment in the amount of $21 million, which was paid by the U.S. Treasury in October 2015.
In October 2016 the U.S. Supreme Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case in the amount of $34 million.
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 20162017 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 sold the NRC notified Entergy of its decisionFitzPatrick plant to place Indian Point 3 in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. Entergy expects, based on the plant’s recent performance indicators, that the NRC will place Grand Gulf in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. Additionally, on October 31, 2016, the NRC commenced a special inspection to identify the circumstances surrounding the unplanned unavailability of an alternate heat removal system during the September 2016 replacementExelon, and as part of the heat removal pump andtransaction, the FitzPatrick decommissioning trust fund, along with the decommissioning obligation for that plant, was transferred to evaluate the licensee’s actionsExelon. The FitzPatrick spent fuel disposal contract was assigned to address the causesExelon as part of the event. 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 SO2Nonattainment
The EPA issued a final rule in June 2010 adopting an SO2 1-hour national ambient air quality standard of 75 parts per billion. The EPA designations for counties in attainment and nonattainment were originally due in June 2012, but the EPA initially indicated that it would delay designations except for those areas with existing monitoring data from 2009 to 2011 indicating violations of the new standard. In August 2013 the EPA issued final designations for these areas. In Entergy’s utility service territory, only St. Bernard Parish in Louisiana is designated as non-attainment for the 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 2016 the EPA finalized another round of designations for areas with newly monitored violations of the 2010 standard and those with stationary sources that emit over a threshold amount of SO2. Counties and parishes in which Entergy owns 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.” In August 2015 the EPA issued a final data requirement rule for the SO2 1-hour standard. This rule will guide the process to be followed by the states and the EPA to determine the appropriate designation for the remaining unclassified areas in the country. Additional capital projects or operational changes may be required to continue operating Entergy facilities in areas eventually designated as in non-attainment of the standard or designated as contributing to non-attainment areas.
Hazardous Air Pollutants
The EPA released 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. Circuit decision and remanded to the D.C. Circuit the EPA’s finding that it was appropriate and necessary to regulate power plants under Clean Air Act section 112, ruling that the EPA must consider costs. This 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 2015 the D.C. Circuit issued a ruling to leave the rule in effect while the EPA finalizes the appropriate and necessary finding to consider costs. In April 2016 the EPA issued a cost analysis meant to affirm the rule. The rule remains in place and effective and additional litigation is likely. The required controls have been installed and are operational at all affected Entergy units.
Regional Haze
In June 2005 the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that potentially could result in a requirement to install SO2 and NOx pollution control technology as Best Available Retrofit Control Technology (BART) to continue operating certain of Entergy’s fossil generation units. The rule leaves certain CAVR determinations to the states.
In Arkansas, the Arkansas Department of Environmental Quality (ADEQ) prepared a State Implementation Planstate implementation plan (SIP) for Arkansas facilities to implement its obligations under the CAVR. In April 2012 the EPA finalized a decision addressing the Arkansas Regional Haze SIP, in which it disapproved a large portion of the Arkansas Regional Haze SIP, including the emission limits for NOx and SO2 at White Bluff. The EPA must either approve a revised SIP issued by Arkansas or issue a Federal Implementation Plan (FIP). By Court order, the EPA had to issue a final FIPfederal 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 scrubbers and low NOx burners to continue operating both units at the White Bluff plant and both units at the Independence plant and NOx controls to continue operating the Lake Catherine plant. Entergy filed commentcomments 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 and NOx 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 2027 and 2028. After the close of the comment period, Entergy provided additional information regarding current visibility conditions as well asat a proposal to cease to use coal in 2025/2026 and operate one unit at 50% capacity in 2025.later date.
In September 2016 the EPA published the final Arkansas 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 scrubbers at both White Bluff and Independence by October 2021 and NOx controls by April 2018. The EPA declined to adopt Entergy’s proposals related to ceasing coal use as an alternative to SO2 scrubbers for White Bluff SO2 BART . Entergy as well as other interested parties such as the State of Arkansas continue to review the FIP and associated documents and options available going forward.BART. For some or all of the FIP, Entergy anticipates that Arkansas will submit after coordination with interested stakeholders a state plan (SIP)SIP to replace the FIP. PetitionsIn November 2016, Entergy and other interested parties, such as the State of Arkansas, filed
petitions for administrative reconsideration and stay at the EPA as well as petitions for judicial review to the U.S. Court of Appeals for the Eighth CircuitCircuit. In February 2017, 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 EPA granted a 90 day stay of the FIP effective dates and the EPA now has proposed approval of (i) an extension of these NOx limit deadlines to January 2020 and (ii) a state implementation for NOx controls that allows compliance with the provisions of the Cross-State Air Pollution Rule to satisfy the NOx regional haze provisions for White Bluff, Independence, and Lake Catherine. Arkansas published a proposed replacement state plan in October 2017. This plan is under review, and comments are due to the state in November 2016.January 2018. The Eighth Circuit granted the government’s motion to hold the appeal litigation in abeyance and has directed the parties to file status reports in December 2017.
In Louisiana, Entergy is working with the LDEQLouisiana Department of Environmental Quality (LDEQ) and the EPA to revise the Louisiana SIP for regional haze, which was disapproved in part in 2012. The LDEQ submitted a revised SIP in February 2017. In May 2017 the EPA proposed to approve a majority of the revisions. In September 20152017 the Sierra Club filed suit againstEPA issued a proposed SIP approval for the Nelson plant, requiring an emission limitation consistent with the use of low-sulfur coal, with a compliance date three years from the effective date of the final EPA approval. The EPA’s final approval decision is expected in the fourth quarter 2017. 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 plans for compliance with the EPA’s emission standards. In February 2016 the U.S. DistrictSupreme Court in Washington, D.C. for failure either to approveissued a revised SIP issued by Louisiana or issue a FIP within two yearsstay halting the effectiveness of the partial Louisiana SIP disapproval.rule until the rule is reviewed by the D.C. Circuit and by the U.S. Supreme Court, if further review is granted. In March 2017 the current administration issued an executive order entitled “Promoting Energy Independence and Economic Growth” instructing the EPA to review and then to suspend, revise, or rescind the Clean Power Plan, if appropriate. The suit requestsEPA subsequently asked the D.C. Circuit to hold the challenges to the Clean Power Plan and the greenhouse gas new source performance standards in abeyance and signed a notice of withdrawal of the proposed federal plan, model trading rules, and the Clean Energy Incentive Program. The court placed the litigation in abeyance in April 2017. The EPA Administrator also sent a letter to the affected governors explaining that states are not currently required to meet Clean Power Plan deadlines, some of which have passed. In October 2017 the EPA announced a proposed rule that would repeal the Clean Power Plan on the grounds that it exceeds the EPA’s statutory authority under the Clean Air Act. The EPA also asked the D.C. Circuit to continue to hold the litigation over the Clean Power Plan in abeyance “pending the conclusion of rulemaking” and stated to the court that the U.S. District Court orderagency intends to issue “in the near future” an advance notice of proposed rulemaking seeking comments on replacing the Clean Power Plan. Also in October 2017, the EPA Administratorsubmitted its draft advance notice of proposed rulemaking to issue a regional hazethe Office of Management and interstate transport FIPBudget for Louisiana by a certain date. This would set the timing for a final approval of a revised SIP issued by Louisiana or a FIP issued by the EPA. At this time, it is premature to predict what controls, if any, might be required for compliance.review, which typically takes 60-90 days.
Groundwater at Certain Nuclear SitesClean Water Act
As discussed inThe 1972 amendments to the Form 10-K, in February 2016, Entergy disclosed that elevated tritium levels had been detected in samplesFederal 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 several monitoring wells that are part of Indian Point’s groundwater monitoring program. Investigationpoint sources to waters of the sourceUnited States. The Clean Water Act requires virtually all discharges of elevated tritium has determined thatpollutants to waters of the sourceUnited 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.
NPDES Permits and Section 401 Water Quality Certifications
NPDES permits are subject to renewal every five years. Consequently, Entergy is related to a temporary system tocurrently in various stages of the data evaluation and discharge permitting process waterfor its power plants.
For thirteen years, Entergy participated 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. In June 2016, Indian Point detected trace amounts of cobalt 58 in a single well. This was associatedan administrative permitting process with the draining and disassemblyNew York State Department of a temporary heat exchanger operated in supportEnvironmental Conservation (NYSDEC) for renewal of the Indian Point 2 outage.and Indian Point 3 discharge permit. That proceeding recently was settled, along with other ongoing proceedings. In May 2017 a plaintiff filed two parallel state court appeals challenging New York State’s actions in signing and implementing the Indian Point settlement with Entergy on the basis that the State failed to perform sufficient environmental analysis of its actions. All signatories to the settlement agreement, including the Entergy affiliates that hold NRC licenses for Indian Point, were named. For a discussion of the recent Indian Point settlement, see “Entergy Wholesale Commodities Authorization to Operate Its Nuclear Power Plants” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
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 water 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 rule. After litigation, in May 2014, the EPA issued a new 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 U.S. Court of Appeals for the Second Circuit heard oral argument in September 2017. No decision is expected before the first quarter 2018.
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. 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. Entergy will continue to monitor this rulemaking and ensure compliance with existing permitting processes. In response to the stay, the EPA and the U.S. Army Corps of Engineers resumed nationwide use of the agencies’ regulations as they existed prior to August 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 revise or rescind, as appropriate. In June 2017 the EPA and the U.S. Army Corps of Engineers released a proposed rule that rescinds the June 2015 rule and recodifies the definition of “waters of the U.S.” that was in effect prior to the 2015 rule. The administration is expected to propose a definition of “waters of the U.S.” at a later date.
Coal Combustion Residuals
See the Form 10-K for discussion of the coal combustion residuals rule (CCR rule) and the Water Infrastructure Improvements for the Nation Act (WIIN Act). In September 2017 the EPA agreed to reconsider certain provisions of the CCR rule in light of the WIIN Act. The EPA has not yet initiated a new round of rulemaking and has not extended the existing mid-October 2017 groundwater monitoring deadline. Entergy met the existing monitoring deadline, is monitoring state agency actions, and will participate in the regulatory development process.
Other Environmental Matters
Entergy Louisiana and Entergy Texas
Several class action and other lawsuits have been filed in state and federal courts seeking relief from Entergy Gulf States, Inc. and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Gulf States, Inc.’s premises.
Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, currently is involved in the second phase of the remedial investigation of the Lake Charles Service Center site, located in Lake Charles, Louisiana. A manufactured gas plant (MGP) is believed to have operated at this site from approximately 1916 to 1931. Coal tar, a by-product of the distillation process employed at MGPs, apparently was routed to a portion of the property for disposal. The same area also has been used as a landfill. In May 20151999, Entergy Gulf States, Inc. signed a transformersecond administrative consent order with the EPA to perform a removal action at the Indian Point facility failed, resulting insite. In 2002 approximately 7,400 tons of contaminated soil and debris were excavated and disposed of from an area within the service center. In 2003 a fire andcap was constructed over the releaseremedial area to prevent the migration of non-PCB oilcontamination to the ground surface. The fireIn August 2005 an administrative order was extinguishedissued by the facility’s fire deluge system. No injuries occurred dueEPA requiring that a 10-year groundwater study be conducted at this site. The groundwater monitoring study commenced in January 2006 and is continuing. The EPA released the second Five Year Review in 2015. The EPA indicated that the current remediation technique was insufficient and that Entergy would need to utilize other remediation technologies on the site. In July 2015, Entergy submitted a Focused Feasibility Study to the transformer failure or company response. AnEPA outlining the potential remedies and suggesting installation of a waterloo barrier. The estimated 3,000 gallons of oil were released into the facility’s discharge canalcost for this remedy is approximately $2 million. Entergy is awaiting comments and the environment surrounding the transformer and discharge canal, including the Hudson River, as a result of the failure, fire, and fire suppression. Once the fire was extinguished, Indian Point personnel and contractors began recovering free-productdirection from the damaged transformer,EPA on the transformer containment moat,Focused Feasibility Study and potential remedy selection. In early 2017 the area surroundingEPA indicated that the transformer. The United States Coast Guard designated Entergy as the responsible party under the Oil Pollution Act of 1990new remedial method, a waterloo barrier, may not be necessary and assessed a $1,000 civil penalty for the discharge of oil into navigable waters. As required, Entergy established a claims process including a voluntary hotline. Entergy received no reportsrequested revisions to the voluntary hotline or claims underFocused Feasibility Study. The EPA plans to provide comments on the established claims process. Additional on-site remedial work including subsurface investigation continues, andrevised 2017 Focused Feasibility Study in the State of New York and/ornext Five Year Review in 2020. Entergy is continuing discussions with the EPA may assess a penalty due toregarding the release of oil to waters ofongoing actions at the state. In September 2016, Indian Point personnel identified an oil sheen in the discharge canal. Further investigation revealed that an estimated 600 gallons of lubricating oil had leaked from the Indian Point Unit 3 turbine system. The leaking component has been taken out of service and no oil has been discovered in the Hudson River. In October 2016 the New York Department of Environmental Conservation issued two notices of violation, one for each of these events, and a proposed order on consent for the 2015 event. Negotiations with the state are ongoing, and Entergy has recorded a provision for the potential outcome of this matter.site.
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 | | Nine Months Ended |
| | | December 31, | | September 30, | | December 31, | | September 30, |
| | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 |
| Entergy Arkansas | | 4.31 | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 2.88 | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 3.32 |
| | 3.70 |
| Entergy Louisiana | | 2.90 | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.34 | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.57 |
| | 3.86 |
| Entergy Mississippi | | 3.55 | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.72 | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.96 |
| | 4.82 |
| Entergy New Orleans | | 4.72 | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 5.02 | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.61 |
| | 5.17 |
| Entergy Texas | | 2.34 | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.60 | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.92 |
| | 2.66 |
| System Energy | | 3.85 | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.41 | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.39 |
| | 4.99 |
| | | | | 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 | | Nine Months Ended |
| | | December 31, | | September 30, | | December 31, | | September 30, |
| | | 2011 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 |
| Entergy Arkansas | | 3.83 | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 2.63 | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 3.09 |
| | 3.62 |
| Entergy Louisiana | | 2.74 | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.34 | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.57 |
| | 3.86 |
| Entergy Mississippi | | 3.27 | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.45 | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.71 |
| | 4.68 |
| Entergy New Orleans | | 4.25 | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.66 | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.30 |
| | 4.83 |
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
|
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| | *4(a) - | Officer’s Certificate for Entergy Corporation relating to 2.95% Senior Notes due September 1, 2026 (4.02 to Form 8-K filed August 19, 2016 in 1-11299). |
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| 4(b) - | Seventy-ninth Supplemental Indenture, dated as of August 1, 2016, to Entergy Arkansas, Inc. Mortgage and Deed of Trust, dated as of October 1, 1944 (4.05 to Form 8-K filed August 16, 2016 in 1-10764). |
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| 4(c) - | Officer’s Certificate No. 6-B-5, dated August 1, 2016, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015 (4.39 to Form 8-K filed August 17, 2016 in 1-32718). |
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| 4(d) - | Officer’s Certificate No. 7-B-6, dated September 15, 2016, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, dated as of November 1, 2015 (4.40 to Form 8-K filed October 4, 2016 in 1-32718). |
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| 4(e) - | Sixth Supplemental Indenture, dated as of August 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015 (4.40 to Form 8-K filed August 17, 2016 in 1-32718). |
| | |
| 4(f) - | Seventh Supplemental Indenture, dated as of September 15, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of November 1, 2015 (4.41 to Form 8-K filed October 4, 2016 in 1-32718). |
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| 4(g) - | Eighty-sixth Supplemental Indenture, dated as of August 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of April 1, 1944 (4.33 to Form 8-K filed August 17, 2016 in 1-32718). |
| | |
| 4(h) - | Eighty-seventh Supplemental Indenture, dated as of September 15, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of April 1, 1944 (4.43 to Form 8-K filed October 4, 2016 in 1-32718). |
| | |
| 4(i) - | Eighty-sixth Supplemental Indenture, dated as of August 1, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of September 1, 1926 (4.42 to Form 8-K filed August 17, 2016 in 1-32718). |
| | |
| 4(j) - | Eighty-seventh Supplemental Indenture, dated as of September 15, 2016, to Entergy Louisiana Mortgage and Deed of Trust, dated as of September 1, 1926 (4.42 to Form 8-K filed October 4, 2016 in 1-32718). |
| | |
| 4(k) - | Thirty-third Supplemental Indenture, dated as of September 1, 2016, to Entergy Mississippi, Inc. Mortgage and Deed of Trust, dated as of February 1, 1988 (4.16 to Form 8-K filed September 15, 2016 in 1-31508). |
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| *4(l) - | Extension Agreement, dated as of August 8, 2016,7, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Corporation, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
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|
| | |
| | *4(m)4(b) - | Amendment, dated as of August 8, 2016,October 17, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Corporation, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | | |
| | *4(n)4(c) - | Extension Agreement, dated as of August 8, 2016,October 17, 2017, pursuant to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Corporation, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | |
| *4(d) - | Extension Agreement, dated as of August 7, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Arkansas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | | |
| | *4(o)4(e) - | Amendment, dated as of August 8, 2016,October 17, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Arkansas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | | |
| | *4(p)4(f) - | Extension Agreement, dated as of August 8, 2016,October 17, 2017, pursuant to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Arkansas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | |
| *4(g) - | Extension Agreement, dated as of August 7, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Louisiana, LLC, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | | |
| | *4(q)4(h) - | Amendment, dated as of August 8, 2016,October 17, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Louisiana, LLC, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | | |
| | *4(r)4(i) - | Extension Agreement, dated as of August 8, 2016,October 17, 2017, pursuant to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Louisiana, LLC, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
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| *4(j) - | Amendment, dated as of September 26, 2017, to Amended and Restated Credit Agreement, dated as of June 30, 2016, as amended, among Entergy New Orleans, as the Borrower, the banks and other financial institutions party thereto as Lenders, and Bank of America, N.A., as Administrative Agent. |
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| *4(k) - | Extension Agreement, dated as of August 7, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Texas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
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| | *4(s)4(l) - | Amendment, dated as of August 8, 2016,October 17, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Texas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
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| *4(m) - | Amendment, dated as of October 17, 2017, pursuant to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Texas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
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| | *12(a) - | |
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| | *12(b) - | |
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| | *12(c) - | |
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| | *12(d) - | |
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| | *12(e) - | |
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| | *12(f) - | |
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| | *31(a) - | |
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| | *31(b) - | |
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| | *31(c) - | |
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| | *31(d) - | |
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| | *31(e) - | |
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| | *31(f) - | |
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| | *31(g) - | |
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| | *31(h) - | |
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| *31(i) - | |
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| *31(j) - | |
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| *31(k) - | |
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| *31(l) - | |
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| *31(m) - | |
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| *31(n) - | |
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| *32(a) - | |
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| *32(b) - | |
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| *32(c) - | |
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| *32(d) - | |
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| *32(e) - | |
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| *32(f) - | |
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| *32(g) - | |
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| *32(h) - | |
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| *32(i) - | |
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| *32(j) - | |
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| *32(k) - | |
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| *32(l) - | |
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| | *31(i) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
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| *31(j) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy New Orleans. |
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| *31(k) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
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| *31(l) - | Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas. |
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| *31(m) - | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
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| *31(n) - | Rule 13a-14(a)/15d-14(a) Certification for System Energy. |
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| *32(a) - | Section 1350 Certification for Entergy Corporation. |
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| *32(b) - | Section 1350 Certification for Entergy Corporation. |
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| *32(c) - | Section 1350 Certification for Entergy Arkansas. |
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| *32(d) - | Section 1350 Certification for Entergy Arkansas. |
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| *32(e) - | Section 1350 Certification for Entergy Louisiana. |
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| *32(f) - | Section 1350 Certification for Entergy Louisiana. |
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| *32(g) - | Section 1350 Certification for Entergy Mississippi. |
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| *32(h) - | Section 1350 Certification for Entergy Mississippi. |
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| *32(i) - | Section 1350 Certification for Entergy New Orleans. |
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| *32(j) - | Section 1350 Certification for Entergy New Orleans. |
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| *32(k) - | Section 1350 Certification for Entergy Texas. |
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| *32(l) - | Section 1350 Certification for Entergy Texas. |
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| *32(m) - | |
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| | *32(n) - | |
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| | *101 INS - | XBRL Instance Document. |
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| | *101 SCH - | XBRL Taxonomy Extension Schema Document. |
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| | *101 PRE - | XBRL Taxonomy Presentation Linkbase Document. |
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| | *101 LAB - | XBRL Taxonomy Label Linkbase Document. |
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| | *101 CAL - | XBRL Taxonomy Calculation Linkbase Document. |
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| | *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.
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ENTERGY CORPORATION ENTERGY ARKANSAS, INC. ENTERGY LOUISIANA, LLC ENTERGY MISSISSIPPI, INC. ENTERGY NEW ORLEANS, INC. ENTERGY TEXAS, INC. SYSTEM ENERGY RESOURCES, INC. |
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| /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: November 4, 20163, 2017