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

FORM 10-Q

(Mark One) 
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
  
 For the Quarterly Period Ended June 30, 20172018
 OR
 
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the transition period from ____________ to ____________

Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. 

Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
1-11299
ENTERGY CORPORATION
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
 1-35747
ENTERGY NEW ORLEANS, INC.LLC
(a Louisiana corporation)Texas limited liability company)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-027304082-2212934
     
     
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)
10055 Grogans Mill Road
The Woodlands, Texas 77380
Telephone (409) 981-2000
61-1435798
     
     
1-32718
ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 576-4000
47-4469646
 1-09067
SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777
     
     
1-31508
ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
   
     



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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 registrants were required to submit and post such files).  Yes þ No o

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
 
Large
accelerated
filer
 
Accelerated
filer
 
Non-
accelerated
filer
 
Smaller
reporting
company
 
Emerging
growth
company
Entergy Corporationü        
Entergy Arkansas, Inc.    ü    
Entergy Louisiana, LLC    ü    
Entergy Mississippi, Inc.    ü    
Entergy New Orleans, Inc.LLC    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
Common Stock Outstanding Outstanding at July 31, 20172018
Entergy Corporation($0.01 par value)179,520,021180,855,032

Entergy Corporation, Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc.,LLC, 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, 20162017 and the Quarterly Report for Form 10-Q for the quarter ended March 31, 2017,2018, filed by the individual registrants with the SEC, and should be read in conjunction therewith.



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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2017TABLE OF CONTENTS

 Page Number
  
Part 1.I. Financial Information
 
Entergy Corporation and Subsidiaries 
Notes to Financial Statements
Note 13. Dispositions Revenue Recognition
Entergy Arkansas, Inc. and Subsidiaries 
Entergy Louisiana, LLC and Subsidiaries 

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ENTERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT ON FORM 10-Q
June 30, 2017TABLE OF CONTENTS

 Page Number
  
Entergy Mississippi, Inc. 
Entergy New Orleans, Inc.LLC and Subsidiaries 
Entergy Texas, Inc. and Subsidiaries 
System Energy Resources, Inc. 
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, formula rate proceedings and related 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 in 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’ participation in MISO, including the benefits of continued MISO participation, 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 ofwith respect to 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 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 itsEntergy’s nuclear generating facilities;
increases in costs and capital expenditures that could result from the commitment of substantial human and capital resources required for 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;facilities;
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, especially in light of the planned shutdown or sale of each of these 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;

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FORWARD-LOOKING INFORMATION (Continued)

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;

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FORWARD-LOOKING INFORMATION (Concluded)

changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;
changes in environmental laws and regulations, agency positions or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter, heat, and other regulated air and water emissions, requirements for waste management and disposal and for the remediation of contaminated sites, wetlands protection and permitting, and changes in costs of compliance with these environmental laws and regulations;
changes in laws and regulations, agency positions, or associated litigation related to protected species and associated critical habitat designations;
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, trade/tariff, 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, 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 Northeastnorthern 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;
federal income tax reform, including the enactment of the Tax Cuts and Jobs Act, and its intended and unintended consequences on financial results and future cash flows, including the potential impact to credit ratings, which may affect Entergy’s ability to borrow funds or increase the cost of borrowing in the future;
the effects of Entergy’s strategies to reduce tax payments;payments, especially in light of federal income tax reform;
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 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(i) Entergy’s ability to implement new technologies, (ii) the impact of changes relating to new, developing, or alternative sources of generation;generation such as distributed energy and energy storage, energy efficiency, demand side management, and other measures that reduce load, and (iii) competition from other companies offering products and services to our customers based on new or emerging technologies;
the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, 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, directors, and directors;employees with specialized skills;
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;

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FORWARD-LOOKING INFORMATION (Concluded)

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 and the implementation of decommissioning of such sites following shutdown;
the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by as early as 2021,mid-2022, including the implementation of the planned shutdownshutdowns of Pilgrim, Palisades, Indian Point 2, and Indian Point 3;3, and 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 strategic transactions Entergy may undertake, including mergers, acquisitions, divestitures, or divestitures,restructurings, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of the business following any such strategic transaction.


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DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or AcronymTerm
  
ALJAdministrative Law Judge
ANO 1 and 2Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSCArkansas Public Service Commission
ASUAccounting Standards Update issued by the FASB
BoardBoard of Directors of Entergy Corporation
CajunCajun Electric Power Cooperative, Inc.
capacity factorActual plant output divided by maximum potential plant output for the period
City CouncilCouncil of the City of New Orleans, Louisiana
D.C. CircuitU.S. Court of Appeals for the District of Columbia Circuit
DOEUnited States Department of Energy
EntergyEntergy Corporation and its direct and indirect subsidiaries
Entergy CorporationEntergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States LouisianaEntergy 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 LouisianaEntergy 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 TexasEntergy 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 CommoditiesEntergy’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
EPAUnited States Environmental Protection Agency
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FitzPatrickJames 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-KAnnual Report on Form 10-K for the calendar year ended December 31, 20162017 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand GulfUnit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWhGigawatt-hour(s), which equals one million kilowatt-hours
IndependenceIndependence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment

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DEFINITIONS (Continued)
Abbreviation or AcronymTerm
  
Indian Point 2Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRSInternal Revenue Service
ISOIndependent System Operator
kWKilowatt, which equals one thousand watts
kWhKilowatt-hour(s)
LPSCLouisiana Public Service Commission
MISOMidcontinent Independent System Operator, Inc., a regional transmission organization
MMBtuOne million British Thermal Units
MPSCMississippi Public Service Commission
MWMegawatt(s), which equals one thousand kilowatts
MWhMegawatt-hour(s)
Net debt to net capital ratioGross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operationInstalled capacity owned and operated
NRCNuclear Regulatory Commission
NYPANew York Power Authority
PalisadesPalisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & OtherThe portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
PilgrimPilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPAPurchased power agreement or power purchase agreement
PUCTPublic Utility Commission of Texas
Registrant SubsidiariesEntergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc.,LLC, Entergy Texas, Inc., and System Energy Resources, Inc.
River BendRiver Bend Station (nuclear), owned by Entergy Louisiana
SECSecurities and Exchange Commission
System AgreementAgreement, 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 EnergySystem Energy Resources, Inc.
TWhTerawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales AgreementAgreement, dated as of June 10, 1982, as amended and approved by the 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
UtilityEntergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companiesEntergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas

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DEFINITIONS (Concluded)
Abbreviation or AcronymTerm
  
Vermont YankeeVermont 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 3Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usageElectric usage excluding the effects of deviations from normal weather
White BluffWhite Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas

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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

Second Quarter 20172018 Compared to Second Quarter 20162017

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the second quarter 20172018 to the second quarter 20162017 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)
2nd Quarter 2016 Consolidated Net Income (Loss) 
$380,317
 
$250,874
 
($58,601) 
$572,590
2nd Quarter 2017 Consolidated Net Income (Loss) 
$246,382
 
$223,886
 
($56,900) 
$413,368
                
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) 25,287
 (42,793) (13) (17,519) (179,032) 22,121
 (2) (156,913)
Other operation and maintenance 27,323
 33,768
 (52) 61,039
 31,127
 8,895
 5,114
 45,136
Asset write-offs, impairments, and related charges 
 186,602
 
 186,602
 
 (124,628) 
 (124,628)
Taxes other than income taxes 10,604
 (6,687) 98
 4,015
 1,796
 3,465
 22
 5,283
Depreciation and amortization 8,833
 6,100
 (273) 14,660
 13,564
 (13,350) (57) 157
Other income 16,843
 26,306
 594
 43,743
 (11,092) (3,715) (1,151) (15,958)
Interest expense (9,259) (379) 1,993
 (7,645) 5,208
 2,410
 7,174
 14,792
Other expenses 3,928
 10,986
 
 14,914
 (2,656) (2,963) 
 (5,619)
Income taxes 134,636
 (219,889) (2,886) (88,139) (371,175) 424,800
 2,891
 56,516
                
2nd Quarter 2017 Consolidated Net Income (Loss) 
$246,382
 
$223,886
 
($56,900) 
$413,368
2nd Quarter 2018 Consolidated Net Income (Loss) 
$378,394
 
($56,337) 
($73,197) 
$248,860

(a)Parent & Other includes eliminations, which are primarily intersegment activity.

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

Second quarter 2018 results of operations includes impairment charges of $69 million ($54 million net-of-tax) due to costs being charged directly to expense as a result of the impaired value of the Entergy Wholesale Commodities

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

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 $52 million income tax benefit recognized by Entergy Louisiana, as a result of the settlement of the 2012-2013 IRS audit, associated with the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing. 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. See Note 10 to the financial statements herein for discussion of the IRS audit settlement.

Second quarter 2017 results of operations include a reduction of income tax expense, net of unrecognized tax benefits, of $373 million as a result of a change in the tax elections to treat as corporations for federal income tax purposes two subsidiariesclassification of legal entities that each own an Entergy Wholesale Commodities nuclear power plantplants and $194 million ($126 million net-of-tax) of impairment charges due to costs being charged directly to expense as incurred as a result of the impaired value

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 103 to the financial statements hereinin the Form 10-K for additional discussion of the tax elections and “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.

Second quarter 2016 results of operations include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a tax election to treat as a corporation for federal income tax 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 $59 million ($38 million net-of-tax) due to the effects of recording in second quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 3 to the financial statements in the Form 10-K for additional discussion of the income tax items and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the second quarter 20172018 to the second quarter 2016:2017:
 Amount
 (In Millions)
2016 net revenue
$1,524
Louisiana Act 55 financing savings obligation16
Grand Gulf recovery15
Retail electric price14
Volume/weather(18)
Other(2)
2017 net revenue
$1,549
Return of unprotected excess accumulated deferred income taxes to customers(278)
Grand Gulf recovery(17)
Retail electric price(2)
Volume/weather101
Other17
2018 net revenue
$1,370
    
The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savingsreturn of unprotected excess accumulated deferred income taxes to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from activity at Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and System Energy in response to the 2010-2011 IRS audit settlement on the treatmentenactment of the Louisiana Act 55 financingTax Cuts and Jobs Act.  There is no effect on net income as the reductions in net revenue were offset by reductions in income tax expense.  Entergy New Orleans will begin returning its unprotected excess accumulated deferred income taxes in the third quarter 2018 and Entergy Texas’s proposal for the return of storm costs for Hurricane Gustav and Hurricane Ike.its unprotected excess accumulated deferred income taxes is pending.  See Note 32 to the financial statements herein and in the Form 10-K for additionalfurther discussion of regulatory activity regarding the settlementTax Cuts and benefit sharing.Jobs Act. 

The Grand Gulf recovery variance is primarily due to increased recovery of higherlower operating costs.

The retail electric price variance is primarily due to:

to regulatory charges recorded in the implementationsecond quarter 2018 to reflect the effects of formularegulatory agreements to return the benefits of the lower income tax rate plan rates at Entergy Arkansas, as approvedin 2018 to customers in Louisiana and New Orleans. The decrease was substantially offset by the APSC, effective with the first billing cycle of January 2017;following:
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; and
an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016.

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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis

The retail electric price variance is partially offset by a decreasean increase in formula rate plan revenues for Entergy Louisiana, implementedrates effective with the first billing cycle of January 2018 at Entergy Arkansas, as approved by the APSC;
higher storm damage rider revenues at Entergy Mississippi;
an increase in energy efficiency revenues; and
increases in the distribution cost recovery factor rider rate in September 2016, to reflect2017 at Entergy Texas, as approved by the effects of the termination of the System Agreement.PUCT.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the rate proceedings.regulatory proceedings discussed above.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather. This decrease was partially offset by an increase of 1,068479 GWh, or 4%2%, in billed electricity usage, including an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals industry.effect of more favorable weather on residential and commercial sales and the effect of more favorable weather during the unbilled sales period.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the second quarter 20172018 to the second quarter 2016:2017:
 Amount
 (In Millions)
20162017 net revenue
$293250
Nuclear volume(7461)
FitzPatrick(44)
Nuclear realized price changes57(38
)
Other18(1
)
20172018 net revenue
$250272

As shown in the table above, net revenue for Entergy Wholesale Commodities decreasedincreased by $43$22 million in the second quarter 20172018 as compared to the second quarter 20162017 primarily due to lowerhigher volume in the Entergy Wholesale Commodities nuclear fleet resulting from morefewer refueling outage days in the second quarter 20172018 as compared to the second quarter 2016 and a decrease as a result of the absence of net revenue 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. The decreaseincrease was partially offset by higherlower realized wholesale energy prices and the effect of rising forward power prices on electricity derivative instruments that are not designated as hedging instruments, partially offset by higher capacity prices.

Following are key performance measures for Entergy Wholesale Commodities for the second quarter 20172018 and 2016:2017:
2017 20162018 2017
Owned capacity (MW) (a)3,962 4,8803,962 3,962
GWh billed6,019 7,8667,281 6,019
  
Entergy Wholesale Commodities Nuclear Fleet  
Capacity factor59% 76%86% 59%
GWh billed5,393 7,3086,713 5,393
Average energy and capacity revenue per MWh$51.76 $42.34$41.82 $51.76
Refueling outage days:  
Indian Point 2 7720 
Indian Point 347  47
Pilgrim43  43
Palisades27  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 FitzPatrick sale and Note 14 to the financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale.

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Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $582$598 million for the second quarter 20162017 to $609$629 million for the second quarter 20172018 primarily due to:

an increase of $18$17 million in nuclearfossil-fueled generation expenses primarily due to an overall higher nuclear labor costs, including contract labor,scope of work performed during outages in second quarter 2018 as compared to second quarter 2017;
an increase of $5 million in energy efficiency costs; and
an increase of $5 million in storm damage provisions, primarily dueat Entergy Mississippi. See Note 2 to increased operating costs to position the nuclear fleet to meet its operational goals, partially offset by a decrease in regulatory compliance costs. 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 –Nuclear Mattersfinancial statements herein and in the Form 10-K for a discussion of the 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; andstorm cost recovery.
an increase of $8 million in transmission and distribution expenses due to higher vegetation maintenance costs in second quarter 2017 as compared to second quarter 2016.

Taxes other than income taxesDepreciation and amortization expenses increased primarily due to increasesadditions to plant in ad valorem taxes and local franchise taxes.service.

Other income increaseddecreased primarily due to higher realized gainschanges in second quarter 2017 as compared to second quarter 2016 ondecommissioning trust fund investment activity, including portfolio rebalancing of certain of the decommissioning trust fund investments as a result of portfolio reallocations andfunds in the second quarter 2017. The decrease was partially offset by an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017,2018, which included the St. Charles Power Station project.

Entergy Wholesale Commodities

Other operation and maintenance expenses increased from $171 million for the second quarter 2016 to $204 million for the second quarter 2017 primarily due to the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $42 million, and an increase of $28 million in severance and retention costs in the second quarter 2017 as compared to the second quarter 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation. 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 sale.

The asset write-offs, impairments, and related charges variance is primarily due to impairment charges of $69 million ($54 million net-of-tax) in the second quarter 2018 compared to impairment charges of $194 million ($126 million net-of-tax) of impairment charges in the second quarter 20172017. The impairment charges are 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 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. The increasedecrease in impairment charges in 2017second quarter 2018 is primarily due to the impairment of the Indian PointPalisades expenditures incurred after September 30, 2017 no longer being charged to expense as incurred but recorded as assets and Palisades plants in fourth quarter 2016depreciated or amortized and the timing of nuclear refueling outage spending forat the Pilgrim plant.remaining impaired Entergy Wholesale Commodities nuclear plants. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale

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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.

Other income increased primarily due to higher realized gains in second quarter 2017 as compared to second quarter 2016 on the decommissioning trust fund investments primarily as a result of portfolio reallocations.

Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the decommissioning trust and decommissioning liability for the Indian Point 3 plant 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 fourth quarter 2016. See Note 9 to the financial statements in the Form 10-K for discussion of the revised decommissioning cost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 3, Indian Point 2, and Palisades plants and related assets. See Note 14 to the financial statements in the Form 10-K for a discussion of impairment of long-lived assets.

Depreciation and amortization expenses decreased primarily due to the decision in the third quarter 2017 to continue operating Palisades until May 31, 2022. 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 the impairments and related charges.planned shutdown of Palisades.    

Income Taxes

The effective income tax rate was 884.2% for the second quarter 2018. The difference in the effective income tax rate for the second quarter 2018 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and an IRS audit settlement for the 2012-2013 tax returns. See Notes 2 and 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for a discussion of the IRS audit settlement.

The effective income tax rate was (442.1%) for the second quarter 2017. The difference in the effective income tax rate for the second quarter 2017 versus the federal statutory rate of 35% was primarily due to 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 both permanent and temporary differences under the income tax accounting standards. See Note 10 to the financial statements herein for additional discussion of the tax elections.

The effective income tax rate was (76.9%) for the second quarter 2016. The differencea change in the effective income tax rate for the second quarter 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat 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. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax election and the tax settlements.


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classification of legal entities that own Entergy Wholesale Commodities nuclear power plants, which resulted in both permanent and temporary differences under the income tax accounting standards. See Note 3 to the financial statements in the Form 10-K for further discussion of the change in tax classification.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the six months ended June 30, 20172018 to the six months ended June 30, 20162017 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)
2016 Consolidated Net Income (Loss) 
$579,968
 
$330,430
 
($102,566) 
$807,832
2017 Consolidated Net Income (Loss) 
$414,005
 
$196,689
 
($111,274) 
$499,420
                
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) 54,405
 (14,889) (11) 39,505
 (123,626) (90,167) (12) (213,805)
Other operation and maintenance 80,763
 115,205
 703
 196,671
 61,999
 (85,218) 5,081
 (18,138)
Asset write-offs, impairments, and related charges 
 391,033
 
 391,033
 
 (263,495) 
 (263,495)
Taxes other than income taxes 18,206
 (8,008) 391
 10,589
 17,089
 (3,112) 172
 14,149
Depreciation and amortization 25,283
 2,587
 (216) 27,654
 27,672
 (27,794) 
 (122)
Gain on sale of assets 
 16,270
 
 16,270
 
 (16,270) 
 (16,270)
Other income 26,282
 56,768
 652
 83,702
 458
 (61,088) (1,839) (62,469)
Interest expense (13,233) (41) 3,546
 (9,728) 7,192
 4,232
 10,979
 22,403
Other expenses 10,339
 41,654
 
 51,993
 (2,005) (23,392) 
 (25,397)
Income taxes 125,292
 (350,540) 4,925
 (220,323) (417,443) 502,059
 7,801
 92,417
                
2017 Consolidated Net Income (Loss) 
$414,005
 
$196,689
 
($111,274) 
$499,420
2018 Consolidated Net Income (Loss) 
$596,333
 
($74,116) 
($137,158) 
$385,059

(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 six months ended June 30, 2018 include impairment charges of $142 million ($112 million net-of-tax) due to costs being charged directly to expense as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and a $52 million income tax benefit recognized by Entergy Louisiana, as a result of the settlement of the 2012-2013 IRS audit, associated with the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing. 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. See Note 10 to the financial statements herein for discussion of the IRS audit settlement.

Results of operations for the six months ended June 30, 2017 include impairment charges of $405 million ($263 million net-of-tax) of impairment charges due to costs being charged directly 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 a change in the

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tax elections to treat as corporations for federal income tax purposes two subsidiariesclassification of legal entities that each own an Entergy Wholesale Commodities nuclear power plant.plants. 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 six months ended June 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 as a corporation for federal income tax 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 $59 million ($38 million net-of-tax) due to the effects of recording in second quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 3 to the financial statements in the Form 10-K for additional discussion of the income tax items and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

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elections.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing the six months ended June 30, 20172018 to the six months ended June 30, 2016:2017:
 Amount
 (In Millions)
2016 net revenue
$2,899
Retail electric price45
Grand Gulf recovery27
Louisiana Act 55 financing savings obligation16
Volume/weather(30)
Other(3)
2017 net revenue
$2,954
Return of unprotected excess accumulated deferred income taxes to customers(278)
Grand Gulf recovery(35)
Retail electric price5
Volume/weather159
Other25
2018 net revenue
$2,830

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and System Energy in response to the enactment of the Tax Cuts and Jobs Act.  There is no effect on net income as the reductions in net revenue were offset by reductions in income tax expense.  Entergy New Orleans will begin returning its unprotected excess accumulated deferred income taxes in the third quarter 2018 and Entergy Texas’s proposal for the return of its unprotected excess accumulated deferred income taxes is pending.  See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act. 

The Grand Gulf recovery variance is primarily due to recovery of lower operating costs.

The retail electric price variance is primarily due to:

an increase in base rates effective February 24, 2016 and the implementation of formula rate plan rates effective with the first billing cycle of January 20172018 at Entergy Arkansas, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016;APSC;
an increase in formula rate planenergy efficiency revenues;
higher storm damage rider 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 in March 2016;
the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016,Mississippi; and an increase
increases in the transmissiondistribution cost recovery factor rider rate effective Marchin September 2017 at Entergy Texas, as approved by the PUCT;
an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016; and
an increase in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station in March 2016.PUCT.

The retail electric price variance isincrease was partially offset by a decreaseregulatory charges recorded in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of September 2016,2018 to reflect the effects of regulatory agreements to return the terminationbenefits of the System Agreement.

lower income tax rate in 2018 to customers in Louisiana and New Orleans. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the rate proceedings. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs.

The Louisiana Act 55 financing savings obligation variance results from a regulatory 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 the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.proceedings discussed above.

The volume/weather variance is primarily due to decreasedan increase of 2,725 GWh, or 5%, in billed electricity usage, during the unbilled sales period, including the effect of weather. This decrease was partially offset bymore favorable weather on residential and commercial sales and an increase of 551 GWh, or 1%, in billed electricityindustrial usage. The increase in industrial usage is primarily due to a new customer in the primary metals industry.


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including an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals and industrial gases industries and expansion projects primarily in the chemicals industry.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing the six months ended June 30, 20172018 to the six months ended June 30, 2016:2017:
 Amount
 (In Millions)
20162017 net revenue
$759
Nuclear volume(79)
FitzPatrick(72)
Nuclear fuel expenses37744
FitzPatrick reimbursement agreement(98)
Nuclear realized price changes(11)
Nuclear volume35
Other1(16
)
20172018 net revenue
$744654

As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $15$90 million in the six months endedJune 30, 2017 2018as compared to the six months ended June 30, 20162017 primarily due to lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 and to:

a decrease as a result of the absence of net revenue 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. The decrease was partially offset by a decrease in nuclear fuel expenses primarily related to the impairments of the Pilgrim and Palisades plants and related assets and an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon was reimbursingreimbursed Entergy in the first quarter 2017 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 reimbursement agreement were offset inby other operation and maintenance expenses and taxes other than income taxes and had no material 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 further discussion of the sale of FitzPatrick and the reimbursement agreement.agreement with Exelon; and
lower realized wholesale energy prices, partially offset by higher capacity prices.

The decrease was partially offset by higher volume in the Entergy Wholesale Commodities nuclear fleet resulting from fewer refueling outage days, partially offset by a larger exercise of resupply options, in the six months ended June 30, 2017, provided for in purchase power agreements where Entergy Wholesale Commodities may elect to supply power from another source when the plant is not running.

Following are key performance measures for Entergy Wholesale Commodities for the six months ended June 30, 2017 2018and 2016:2017:
2017 20162018 2017
Owned capacity (MW) (a)3,962 4,8803,962 3,962
GWh billed14,382 17,11214,277 14,382
  
Entergy Wholesale Commodities Nuclear Fleet  
Capacity factor71% 83%85% 71%
GWh billed13,228 15,99613,121 13,228
Average energy and capacity revenue per MWh$53.79 $49.85$49.21 $53.79
Refueling outage days:  
FitzPatrick42  42
Indian Point 2 10233 
Indian Point 366  66
Pilgrim43  43
Palisades27  27


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(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 FitzPatrick sale and Note 14 to the financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $1,096 million for the six months ended June 30, 2016 to $1,177 million for the six months ended June 30, 2017 primarily due to:

an increase of $18 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs 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 regulatory compliance costs. 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 –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. 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 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 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 in the Form 10-K for further discussion of the rate case settlement;
an increase of $11 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016 and an increase in net periodic pension and other postretirement benefits costs as a result of lower discount rates;
an increase of $10 million in transmission and distribution expenses due to higher vegetation maintenance costs in 2017; and
an increase of $5 million in information technology expenses including software maintenance costs and upgrade projects.

Taxes other than income taxes increased primarily due to increases in local franchise taxes and ad valorem taxes.

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 the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 on the decommissioning trust fund investments, including portfolio reallocations, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which included the St. Charles Power Station project.


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Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $1,155 million for the six months ended June 30, 2017 to $1,217 million for the six months ended June 30, 2018 primarily due to:

an increase of $23 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed during outages in 2018 as compared to 2017;
an increase of $13 million in nuclear generation expenses primarily due to a higher scope of work performed during plant outages in 2018 as compared to the same period in 2017 and higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals;
an increase of $13 million in energy efficiency costs;
an increase of $12 million in storm damage provisions, primarily at Entergy Mississippi. See Note 2 to the financial statements herein and in the Form 10-K for discussion of storm cost recovery; and
an increase of $8 million in vegetation maintenance costs.

The increase was partially offset by higher nuclear insurance refunds of $15 million.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes, local franchise taxes, and payroll taxes. Ad valorem taxes increased primarily due to higher assessments. Local franchise taxes increased primarily due to higher revenues in 2018 as compared to 2017.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Entergy Wholesale Commodities

Other operation and maintenance expenses increaseddecreased from $384 million for the six months ended June 30, 2016 to $500$476 million for the six months ended June 30, 2017 to $391 million for the six months ended June 30, 2018 primarily due to:

FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified asto the absence of other operation and maintenance expenses as a result offrom the sales and reimbursement agreements Entergy entered into with Exelon. These costs would have not been incurred absent the sales agreement withFitzPatrick plant, which was sold to Exelon because Entergy planned to shut the plant down in JanuaryMarch 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 effectsale of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $42 million. See Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation; and
an increase of $39 million in severance and retention costs in the six months ended June 30, 2017 as compared to the six months ended June 30, 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 sale.FitzPatrick.

The asset write-offs, impairments, and related charges variance is primarily due to $405impairment charges of $142 million ($263112 million net-of-tax) of impairment charges in the six months ended June 30, 20172018 compared to impairment charges of $405 million ($263 million net-of-tax) in the six months ended June 30, 2017. The impairment charges are 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 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. The increasedecrease in impairment charges in 20172018 is primarily due to the impairment of the Indian PointPalisades expenditures incurred after September 30, 2017 no longer being charged to expense as incurred but recorded as assets and Palisades plants in fourth quarter 2016depreciated or amortized and the timing of nuclear fuelrefueling outage spending and nuclear refueling outagefuel spending forat the Pilgrim plant.remaining impaired Entergy Wholesale Commodities nuclear plants. 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. See Note 14 to the financial statements in the Form 10-K for a discussion of impairment of long-lived assets.

Depreciation and amortization expenses decreased primarily due to the decision in third quarter 2017 to continue operating Palisades until May 31, 2022. 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 the planned shutdown of Palisades.


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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 thewhich included a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See Note 13 to the financial statements herein for a discussion of the sale.

Other income increased primarily due to higher realized gains in the six months ended June 30, 2017 as compared to the six months ended June 30, 2016 on the decommissioning trust fund investments as a result of portfolio reallocations 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 914 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA.sale of FitzPatrick.

Other expenses increasedincome decreased 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 transferlosses on the decommissioning trusts and decommissioning liabilities fortrust fund investments in the Indian Point 3 and FitzPatrick plants to Entergy and revisionssix months ended June 30, 2018 as compared to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point

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2 and Palisades plants as a result of revised decommissioning cost studies in the fourth quarter 2016.six months ended June 30, 2017, including unrealized losses on equity investments, which, prior to 2018, were recorded to other comprehensive income. See Note 9 to the financial statements in the Form 10-Kherein for discussion of the trust transfer agreement with NYPAimplementation of ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” effective January 1, 2018.

Other expenses decreased primarily due to the revisedabsence of decommissioning cost studies. The increaseexpense from the FitzPatrick plant after it was partially offset bysold to Exelon in March 2017 and a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 3, Indian Point 2, and Palisades plants and related assets. See Note 14 to the financial statements in the Form 10-K for discussion of the sale of FitzPatrick and impairments and related charges.

Income Taxes

The effective income tax rate was (160%) for the six months ended June 30, 2018. The difference in the effective income tax rate for the six months ended June 30, 2018 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and an IRS audit settlement for the 2012-2013 tax returns. See Notes 2 and 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for a discussion of the IRS audit settlement.

The effective income tax rate was (193.7%) for the six months ended June 30, 2017. The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to a change in the tax elections to treat as corporations for federal income tax purposes two subsidiariesclassification of legal entities that each own an Entergy Wholesale Commodities nuclear power plant,plants, which resulted in both permanent and temporary differences under the income tax accounting standards and the re-determined tax basis of the FitzPatrick plant as a result of its sale on March 31, 2017. See Note 103 to the financial statements hereinin the Form 10-K for further discussion of the change in tax electionsclassification and the tax benefit associated with the sale of FitzPatrick.

The effective income tax rate was (15.6%) for the six months ended June 30, 2016. The difference in the effective income tax rate for the six months ended June 30, 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat 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. See Note 3 to the financial statements in the Form 10-K for additional discussion of the tax election and the tax settlements.

ANO Damage, Outage, and NRC ReviewsIncome Tax Legislation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -ANO Damage, Outage, and NRC Reviews Income Tax Legislation” in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews,Tax Cuts and the deferral of replacement power costs.Jobs Act enacted in December 2017.  

See Note 2 to the financial statements herein and in the Form 10-K for discussion of proceedings commenced or other responses by Entergy’s regulators to the Tax Act.

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.

Shutdown and Planned Sale of Vermont Yankee

As discussed in the Form 10-K, in December 2014 the Vermont Yankee plant ceased power production and entered its decommissioning phase, and in November 2016, Entergy entered into an agreement to sell 100% of the

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membership interests in Entergy Nuclear Vermont Yankee, LLC to a subsidiary of NorthStar. In March 2018, Entergy and NorthStar entered into a settlement agreement and a Memorandum of Understanding with State of Vermont agencies and other interested parties that set forth the terms on which the agencies and parties support the Vermont Public Utility Commission’s approval of the transaction. The agreements provide additional financial assurance for decommissioning, spent fuel management and site restoration, and detail the site restoration standards that will apply to protect the environment and the health and safety of workers and the public. The provisions of the agreements will become effective upon approval of the transaction by the Vermont Public Utility Commission consistent with the agreements’ terms, the NRC’s approval of the license transfer application, and the closing of the transaction. The Vermont Public Utility Commission and the NRC are expected to issue their decisions in the third or fourth quarter of 2018.

Entergy Nuclear Vermont Yankee has an outstanding credit facility with borrowing capacity of $145 million to pay for dry fuel storage costs. This credit facility is guaranteed by Entergy Corporation. At or before closing, a subsidiary of Entergy will assume the obligations under the existing credit facility or enter into a new credit facility, and Entergy will guarantee the credit facility. At the closing of the sale transaction, NorthStar will pay $1,000 for the membership interests in Entergy Nuclear Vermont Yankee, and NorthStar will cause Entergy Nuclear Vermont Yankee to issue a promissory note to an Entergy affiliate. The amount of the promissory note issued will be equal to the amount drawn under the credit facility or the amount drawn under the new credit facility, plus borrowing fees and costs incurred by Entergy in connection with such facility. The principal amount drawn under the outstanding credit facility was $108 million as of June 30, 2018. The transaction is expected to result in a loss based on the difference between Entergy’s net investment in Entergy Nuclear Vermont Yankee and the sale price plus any agreed adjustments. As of June 30, 2018, the adjusted net investment in Entergy Nuclear Vermont Yankee was $245 million. The primary variables in the ultimate loss are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, financial results from the plant until the closing, and any changes in Entergy’s investment in Entergy Nuclear Vermont Yankee before closing.

Planned Sales of Pilgrim and Palisades

On July 30, 2018, Entergy entered into purchase and sale agreements with Holtec International to sell to a Holtec subsidiary (i) 100% of the equity interests in Entergy Nuclear Generation Company, the owner of Pilgrim, and (ii) 100% of the equity interests in Entergy Nuclear Palisades, LLC, the owner of Palisades and the Big Rock Point Site. The sales of Entergy Nuclear Generation Company and Entergy Nuclear Palisades will include the transfer of each entity’s nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. At the closing of each sale transaction, the Holtec subsidiary will pay $1,000 each (subject to adjustment for net liabilities and other amounts) for the equity interests in Entergy Nuclear Generation Company and Entergy Nuclear Palisades.

The Pilgrim transaction is subject to certain closing conditions, including: the permanent shutdown of Pilgrim and the transfer of all nuclear fuel from the reactor vessel to the spent nuclear fuel pool; NRC approval for the transfer of the operating and the independent spent fuel storage installation licenses; FERC approval for the change in control of the switchyard; receipt of a favorable private letter ruling from the IRS; the market value of the nuclear decommissioning trust for Pilgrim, less the hypothetical income tax on the aggregate unrealized gain of such fund assets at closing, equals or exceeds a specified minimum amount; and, the Palisades purchase and sale agreement has not been terminated due to a breach by Holtec or its subsidiary.

The Palisades transaction is subject to certain closing conditions, including: the permanent shutdown of Palisades and the transfer of all nuclear fuel from the reactor vessel to the spent nuclear fuel pool; NRC regulatory approval for the transfer of the Palisades and Big Rock Point operating and independent spent fuel storage installation licenses; receipt of a favorable private letter ruling from the IRS; the market value of the nuclear decommissioning trust for Palisades, less the hypothetical income tax on the aggregate unrealized gain of such fund assets at closing, equals or exceeds a specified minimum amount; and, the Pilgrim transaction has closed.


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Subject to the above conditions, the Pilgrim transaction is expected to close by the end of 2019 and the Palisades transaction is expected to close by the end of 2022. Each transaction is expected to result in a loss based on the difference between Entergy’s net investment in each subsidiary and the sale price plus any agreed adjustments. As of June 30, 2018, the adjusted net investment in Entergy Nuclear Generation Company was $557 million and the adjusted net investment in Entergy Nuclear Palisades was $131 million. The primary variables in the ultimate loss are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, financial results from plant operations until the closing, and the level of any deferred tax balances at closing.

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$155 million in 2017,2018, of which $66$60 million hadhas been incurred as of June 30, 2017,2018, and a total of approximately $250$215 million from 20182019 through the end of 2021.mid-2022. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $194$69 million for the three months ended June 30, 2017,2018 and $405$142 million for the six months ended June 30, 2017. 2018. These costs arewere charged to expense as incurred as a result of the impaired value of certain 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 over the remaining operating lives of the plants because Entergy expects the value of thosethe plants to continue to be impaired.

In March 2017 the NRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a purchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition

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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 benefit in the first quarter 2017.

Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power PlantsIndian Point

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power PlantsIndian Point” in the Form 10-K for a discussion of the NRC operating licensing proceedings for Indian Point 2 and Indian Point 3 and the settlement reached with New York State.State in January 2017.  Following are updates to that discussion.

In April 2018 the NRC issued a supplement to the final supplemental environmental impact statement, and in August 2018 the NRC issued a supplemental safety evaluation report. The supplements update the environmental record and safety record related to the Indian Point license renewal. The NRC is expected to issue its decision in the Indian Point 2 and Indian Point 3 license renewal proceedings in fourth quarter 2018.

As discussed in the Form 10-K, operations may be extended up to four additional years for each unit by mutual agreement of Entergy and New York State based on an exigent reliability need for Indian Point generation. In accordance with the settlement with New York State, in March 2017FERC-approved tariff of the New York State Department of State issued a concurrence with Indian Point’s new Coastal Zone Management Act (CZMA) consistency certification and, on Entergy’s motion, the U.S. District Court for the Northern District of New York dismissed Entergy’s appeal relatedIndependent System Operator (NYISO), Entergy submitted to the initial Indian Point CZMA consistency certification. Also in March 2017 the Atomic Safety and Licensing BoardNYISO a notice of the NRC granted the motion of New York State and Riverkeeper to withdraw their pending contentionsgenerator deactivation based on the NRC license renewal application and terminated the proceedings.  Subsequent to the issuance of the water quality certification and water discharge permitdates 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 the CZMA concurrence were filed with the NRC in(no later than April 2017.

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 licenses30, 2020 for Indian Point were named.2 and April 30, 2021 for Indian Point 3). In December 2017 the NYISO issued a report stating there will not be a system reliability need following the deactivation of Indian Point. In April 2018 the NYISO issued a determination that the retirement of Indian Point was economically justified and, therefore, did not raise competition concerns.

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.
 

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Capital Structure

Entergy’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy as of June 30, 2018 is primarily due to the net issuance of debt in 2018.
June 30,
2017
 
December 31,
2016
June 30,
2018
 
December 31,
2017
Debt to capital65.5% 64.8%68.5% 67.1%
Effect of excluding securitization bonds(0.8%) (1.0%)(0.6%) (0.8%)
Debt to capital, excluding securitization bonds (a)64.7% 63.8%67.9% 66.3%
Effect of subtracting cash(1.5%) (2.0%)(1.0%) (1.1%)
Net debt to net capital, excluding securitization bonds (a)63.2% 61.8%66.9% 65.2%

(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

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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 includes fronting commitments for the ability to issueissuance of letters of credit against 50%$20 million 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 six months ended June 30, 20172018 was 2.38%3.34% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2017:2018:
Capacity Borrowings 
Letters
of Credit
 
Capacity
Available
 Borrowings 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500 $225 $6 $3,269 $390 $6 $3,104

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. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets.  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$145 million whichthat expires in January 2018.November 2020. As of June 30, 2017, $712018, $108 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the six months ended June 30, 20172018 was 2.44%

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3.26% on the drawn portion of the facility. 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. As of June 30, 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.facility.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $1.5$2 billion. As of June 30, 2017,2018, Entergy Corporation had $1.1 billionapproximately $1,945 million of commercial paper outstanding. The weighted-average interest rate for the six months ended June 30, 20172018 was 1.38%2.31%.

Equity Forward Sale Agreements

In June 2018, Entergy marketed an equity offering of 15.3 million shares of common stock. In lieu of issuing equity at the time of the offering, Entergy entered into forward sale agreements with several counterparties. Settlement of the forward sale agreements is expected to occur on or prior to June 7, 2019. See Note 3 to the financial statements herein for discussion of the equity forwards.

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 20172018 through 2019.2020. Following are updates to the discussion.


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Lake Charles Power Station

In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public 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 and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2020.

New Orleans Power Station
 
InAs discussed in the Form 10-K, 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 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which facility was deactivated effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds.facility. 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 $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans.  In July 2017 the Utility Committee ofMarch 2018 the City Council establishedadopted a procedural schedule that providesresolution approving construction of the 128 MW unit. The targeted commercial operation date is January 2020, subject to receipt of all necessary permits. In April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council a request for rehearing, which was subsequently denied, and a hearing in December 2017 andpetition for judicial review of the City Council’s decision, and also filed a lawsuit challenging the City Council’s approval based on Louisiana’s open meeting law. In May 2018 the City Council announced that it would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in February 2018. The commercial operation date is dependent onpaying certain attendees and speakers in support of the alternative selectedNew Orleans Power Station to attend or speak at certain meetings organized by the City Council. In June 2018, Entergy New Orleans produced documents in response to a City Council and the receipt of other permits and 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,resolution relating to this investigation. The City Council issued a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimonyqualifications for an investigator 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. In June 2017, parties to the proceeding 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 capped at $831 million, subject to certain exclusions such as force majeure events. Also in June 2017,2018 selected two investigators and is in the administrative law judge issued a proposed order and remandedprocess of contracting with them to conduct the proceeding to the PUCT for final decision. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.investigation.

Washington Parish Energy Center

InAs discussed in the Form 10-K, in April 2017, Entergy Louisiana signed a purchase and salean agreement with a subsidiary of Calpine Corporation for the acquisitionconstruction and purchase 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 completed in 2021. Subject to regulatory approvals,In May 2017, Entergy Louisiana will purchasefiled an application with the plant once it is complete forLPSC seeking certification of the plant. In April 2018 the parties reached a settlement recommending certification and cost recovery through the additional capacity mechanism of the formula rate plan, consistent with prior LPSC precedent with respect to the certification and recovery of plants previously acquired by Entergy Louisiana. The LPSC issued an estimated total investment of approximately $261 million, including transmission and other related costs. Inorder approving the settlement in May 2018.


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2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with a hearing in March 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 earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities.  At its July 20172018 meeting, the Board declared a dividend of $0.87$0.89 per share, which is the same quarterly dividend per share that Entergy has paid since the fourth quarter 2016.2017.

Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the six months ended June 30, 20172018 and 20162017 were as follows:
2017 20162018 2017
(In Millions)(In Millions)
Cash and cash equivalents at beginning of period
$1,188
 
$1,351

$781
 
$1,188
      
Cash flow provided by (used in): 
  
 
  
Operating activities820
 1,252
1,080
 820
Investing activities(1,770) (2,266)(1,929) (1,770)
Financing activities697
 659
881
 697
Net decrease in cash and cash equivalents(253) (355)
Net increase (decrease) in cash and cash equivalents32
 (253)
      
Cash and cash equivalents at end of period
$935
 
$996

$813
 
$935

Operating Activities

Net cash flow provided by operating activities decreasedincreased by $432$260 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to:

an increasea decrease of $160$126 million in spending on nuclear refueling outages in 20172018 as compared to the same period in 2016;2017;
lower Entergy Wholesale Commodities net revenue, excluding the effectseverance and retention payments of revenues resulting from the FitzPatrick reimbursement agreement with Exelon,$92 million in 2017 as compared to the same period in 2016, as discussed above.2017. See Note 137 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;
a decrease due to the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 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;
an increase of $94 million in severance and retention paymentscosts 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 ofconnection with management’s strategy to manage and reduce the sizerisk of the Entergy Wholesale Commodities’ merchant fleet; and
Commodities business;
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.refund;
the effect of favorable weather on billed Utility sales in 2018; and
a decrease of $16 million in pension contributions 2018 as compared to the same period in 2017. See MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - “Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.

The increase was partially offset by:

lower Entergy Wholesale Commodities net revenue in 2018 as compared to the same period in 2017 (except for the revenues resulting from the FitzPatrick reimbursement agreement with Exelon), as discussed above. See Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;

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The decrease was partially offset by:the return of unprotected excess accumulated deferred income taxes to Utility customers. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act;

an increase of $28 million in interest paid in 2018 as compared to the same period in 2017 resulting from an increase in interest expense;
income tax payments of $14 million in 2018 compared to income tax refunds of $15 million in 2017 compared to2017. Entergy made income tax payments of $85 million in 2016.2018 for estimated federal income taxes. Entergy received income tax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax paymentslosses; and
proceeds of $23 million received in 2016 related to2017 from the effect of the 2006-2007 IRS audit and for jurisdictionsDOE resulting from litigation regarding spent nuclear fuel storage costs that do not have net operating loss carryovers or jurisdictions in which the utilization of net operating loss carryovers are limited.were previously expensed. See Note 38 to the financial statements in the Form 10-K for a discussion of the income tax audit;
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; and
a decrease of $23 million in spending in 2017 as compared to the same period in 2016 on activities related to the decommissioning of Vermont Yankee, which ceased power production in December 2014.spent nuclear fuel litigation.

Investing Activities

Net cash flow used in investing activities decreased $496increased $159 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to:

an increase of $166 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $123 million in fossil-fueled generation construction expenditures primarily due to higher spending in 2018 on the purchase of the UnionLake Charles Power Station for approximately $948project and an increase of $39 million in March 2016 and nuclear construction expenditures primarily due to a higher scope of work performed on Grand Gulf outage projects in 2018;
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 sale of FitzPatrick.

The decrease was partially offset by:

an increase of $425 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $251 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017, including the St. Charles Power Station project, an increase of $73 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017, and an increase of $61 million in distribution construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016;
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;FitzPatrick; and
proceeds of $25 million received in 2017 compared to proceeds of $89 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 and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.

The increase was partially offset by a decrease of $119 million 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.

Financing Activities

Net cash flow provided by financing activities increased $38$184 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to anlong-term debt activity providing approximately $790 million of cash in 2018 compared to providing approximately $170 million in 2017. Borrowings and repayments of borrowings on Entergy’s long-term credit facility are included in long-term debt activity. The increase was partially offset by a decrease of $372$324 million in net issuances of commercial paper in 20172018 compared to the same period in 2016.

The increase was partially offset by:

long-term debt activity providing approximately $170 million2017 and a net decrease of cash in 2017 compared to providing approximately $437 million of cash in 2016.  Included in the long-term debt activity is $475$104 million in 2017 and $595 million in 2016 for the repayment of borrowings on the Entergy Corporation long-term credit facility; and

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Management's Financial Discussion and Analysis

a decrease of $67 million in 20172018 in short-term borrowings by the nuclear fuel company variable interest entities.

For the details of Entergy’s commercial paper program, the nuclear fuel company variable interest entities’ short-term borrowings, and long-term debt, see Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 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.


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State and Local Rate Regulation and Fuel-Cost Recovery

See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.

Federal Regulation

See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding federal regulatory proceedings.

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 also sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both.  In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk.  Certain hedge volumes have price downside and upside relative to market price movement.  The contracted minimum, expected value, and sensitivities are provided in the table below to show potential variations.  The sensitivities may not reflect the total maximum upside potential from higher market prices.  The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation.  Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of June 30, 2017 (20172018 (2018 represents the remainder of the year):


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Entergy Wholesale Commodities Nuclear Portfolio
 2017 2018 2019 2020 2021 2018 2019 2020 2021 2022
Energy  
Percent of planned generation under contract (a):  
Unit-contingent (b) 89% 76% 41% —% —% 98% 94% 81% 84% 67%
Firm LD (c) 9% 7% —% —% —% 9% —% —% —% —%
Offsetting positions (d) (9%) (10%) —% —% —% (9%) —% —% —% —%
Total 89% 73% 41% —% —% 98% 94% 81% 84% 67%
Planned generation (TWh) (e) (f) 15.0 26.7 18.8 11.7 2.9 14.1 25.5 17.8 9.7 2.8
Average revenue per MWh on contracted volumes:  
Minimum $40.7 $35.9 $35.3 $— $—
Expected based on market prices as of June 30, 2017 $40.7 $35.9 $35.3 $— $—
Sensitivity: -/+ $10 per MWh market price change $40.7-$40.8 $34.9-$36.9 $35.3 $— $—
Expected based on market prices as of June 30, 2018 $33.1 $40.2 $41.7 $57.9 $58.8
  
Capacity  �� 
Percent of capacity sold forward (g):  
Bundled capacity and energy contracts (h) 24% 11% —% —% —% 22% 25% 37% 68% 97%
Capacity contracts (i) 41% 24% 14% —% —% 45% 16% —% —% —%
Total 65% 35% 14% —% —% 67% 41% 37% 68% 97%
Planned net MW in operation (average) (f) 3,568 3,365 2,356 1,384 347 3,568 3,167 2,195 1,158 338
Average revenue under contract per kW per month (applies to capacity contracts only) $8.5 $9.1 $10.5 $— $— $8.8 $7.7 $— $— $—
  
Total Nuclear Energy and Capacity Revenues (j) 
Total Energy and Capacity Revenues (j) 
Expected sold and market total revenue per MWh $47.4 $43.6 $43.9 $44.3 $50.0 $45.8 $46.5 $47.3 $56.3 $47.6
Sensitivity: -/+ $10 per MWh market price change $46.2-$48.6 $41.0-$46.3 $38.0-$49.8 $34.3-$54.3 $40.0-$60.0 $45.8 $45.9-$47.0 $45.8-$48.9 $54.6-$57.9 $44.3-$50.9

(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 the buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(c)Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, the defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products. This also includes option transactions that may expire without being exercised.
(d)Transactions for the purchase of energy, generally to offset a Firm LD transaction.
(e)Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that affect dispatch.
(f)Assumes the 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 planned shutdown of Palisades on May 31, 2022. Assumes NRC license renewals for two units, as follows (with current license expirations in parentheses):

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(f)
Assumes the planned shutdown of Palisades on October 1, 2018, planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, and planned shutdown of Indian Point 3 on April 30, 2021, and reflects the sale of FitzPatrick in March 2017. Assumes NRC license renewals for two units, as follows (with current license expirations in parentheses): Indian Point 2 (September 2013 and now operating under its period of extended operations while its application is pending) and Indian Point 3 (December 2015 and now operating under its period of extended operations while its application is pending). For a discussion regarding the planned shutdown of the Palisades, Pilgrim, Indian Point 2, and Indian Point 3 plants, see “Entergy Wholesale Commodities Exit from the Merchant Power Business” 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
Indian Point 2 (September 2013 and now operating under its period of extended operations while its application is pending) and Indian Point 3 (December 2015 and now operating under its period of extended operations while its application is pending). For a discussion regarding the planned shutdown of the Pilgrim, Indian Point 2, Indian Point 3, and Palisades plants, see “Entergy Wholesale Commodities Exit from the Merchant Power Business” 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 Indian Point” herein and in the Form 10-K.
(g)Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(h)A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(i)A contract for the sale of an installed capacity product in a regional market.
(j)Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on June 30, 20172018 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $19 million$34 thousand for the remainder of 2017.2018. As of June 30, 2016,2017, a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $50$19 million for the remainder of 2016.2017.  A negative $10 per MWh change in the annual average energy price in the markets based on June 30, 20172018 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($17) million34) thousand for the remainder of 2017.2018. As of June 30, 2016,2017, a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($32)17) million for the remainder of 2016.2017.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements.  The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of credit support to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of credit support.  At June 30, 2017,2018, based on power prices at that time, Entergy had liquidity exposure of $116$117 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $8$17 million of posted cash collateral.  In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of June 30, 2017,2018, Entergy would have been required to provide approximately $50$48 million of additional cash or letters of credit under some of the agreements. As of June 30, 2017,2018, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $236$339 million for a $1 per MMBtu increase in gas prices in both the short-andshort- and long-term markets.

As of June 30, 2017,2018, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 20212022 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 is an updateare updates to that discussion.

ANO

See Note 8 to the financial statements in the Form 10-K for discussion of the NRC’s decision in March 2015 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. In June 2018

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Indian Pointthe NRC moved ANO 1 and ANO 2 into the “licensee response column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections to review ANO 1’s and ANO 2’s performance in addressing issues that had previously resulted in classification in Column 4.

During the scheduled refueling and maintenance outage at Indian Point 2Grand Gulf

As discussed in the first quarterForm 10-K, in November 2016 comprehensive inspections were done as partthe NRC placed Grand Gulf in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. In August 2018 the NRC moved Grand Gulf into Column 1 of the aging management programNRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections to review Grand Gulf’s performance in addressing issues that calls for an in-depth inspection of the reactor vessel.  Inspections of more than 2,000 boltshad previously resulted in the reactor’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 serviceclassification in June 2016. In 2016, Entergy evaluated the scope and duration of Indian Point 3’s scheduled refueling outage planned for 2017, which began in March 2017. Based on the results of the 2016 evaluation and analysis, Entergy extended Indian Point 3’s planned 2017 outage duration. Entergy performed the same in-depth inspection of the reactor vessel at Indian Point 3 during Indian Point 3’s spring 2017 refueling and maintenance outage that it performed for Indian PointColumn 2. Based on inspection data, Entergy replaced approximately the same number of bolts at Indian Point 3 that it replaced at Indian Point 2 before returning the plant to service in May 2017.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.

New Accounting Pronouncements

See MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - New Accounting PronouncementsNote 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements. Following are updatesThe following is an update to that discussion.

As discussed inIn February 2016 the Form 10-K,FASB issued ASU No. 2014-09, “Revenue2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from Contractsleases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with Customersa term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 606)842): Land Easement Practical Expedient for Transition to Topic 842,providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. In July 2018 the FASB issued ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements,” which is intended to simplify the transition requirements giving entities the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period presented and provides a practical expedient for the separation of lease and nonlease components for lessors. Entergy plans to adopt ASU 2016-02 along with the practical expedients provided by ASU 2018-01 and 2018-11 when they become effective for Entergy forin the first quarter 2018.2019.  Entergy has selected the modified retrospective transition method. Entergy’s evaluation ofexpects that ASU 2014-09 has not identified any effects that it expects2016-02 will affect materiallyits 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, or cash flows. Entergy continuesflows, and financial statement disclosures, as well as the potential to monitorelect various other practical expedients permitted by the development and finalization of industry-specific application guidance that could have an effect on this assessment.

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.standards.


ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
    
 Three Months Ended Six Months Ended
 2017 2016 2017 2016
 (In Thousands, Except Share Data)
OPERATING REVENUES       
Electric
$2,271,220
 
$2,093,331
 
$4,262,960
 
$4,135,492
Natural gas30,075
 25,121
 73,426
 70,734
Competitive businesses317,255
 344,110
 870,622
 866,189
TOTAL2,618,550
 2,462,562
 5,207,008
 5,072,415
        
OPERATING EXPENSES       
Operation and Maintenance:       
Fuel, fuel-related expenses, and gas purchased for resale395,947
 381,465
 813,513
 886,432
Purchased power416,497
 242,672
 774,264
 504,996
Nuclear refueling outage expenses38,288
 47,045
 80,853
 98,276
Other operation and maintenance820,297
 759,258
 1,687,845
 1,491,174
Asset write-offs, impairments, and related charges193,571
 6,969
 405,362
 14,329
Decommissioning100,296
 76,625
 214,669
 145,253
Taxes other than income taxes153,264
 149,249
 309,616
 299,027
Depreciation and amortization350,328
 335,668
 697,593
 669,939
Other regulatory charges (credits)6,553
 21,353
 (78,749) 22,512
TOTAL2,475,041
 2,020,304
 4,904,966
 4,131,938
        
Gain on sale of assets
 
 16,270
 
        
OPERATING INCOME143,509
 442,258
 318,312
 940,477
        
OTHER INCOME       
Allowance for equity funds used during construction22,376
 13,860
 41,384
 32,792
Interest and investment income80,097
 46,375
 136,646
 79,128
Miscellaneous - net(6,872) (8,377) (1,371) (18,963)
TOTAL95,601
 51,858
 176,659
 92,957
        
INTEREST EXPENSE       
Interest expense173,377
 177,631
 344,466
 351,442
Allowance for borrowed funds used during construction(10,523) (7,132) (19,565) (16,813)
TOTAL162,854
 170,499
 324,901
 334,629
        
INCOME BEFORE INCOME TAXES76,256
 323,617
 170,070
 698,805
        
Income taxes(337,112) (248,973) (329,350) (109,027)
        
CONSOLIDATED NET INCOME413,368
 572,590
 499,420
 807,832
        
Preferred dividend requirements of subsidiaries3,446
 5,276
 6,892
 10,552
        
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
$409,922
 
$567,314
 
$492,528
 
$797,280
        
Earnings per average common share:       
Basic
$2.28
 
$3.17
 
$2.75
 
$4.46
Diluted
$2.27
 
$3.16
 
$2.74
 
$4.45
Dividends declared per common share
$0.87
 
$0.85
 
$1.74
 
$1.70
        
Basic average number of common shares outstanding179,475,346
 178,808,149
 179,405,592
 178,693,342
Diluted average number of common shares outstanding180,234,694
 179,503,582
 180,032,233
 179,233,209
        
See Notes to Financial Statements.       

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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
    
 Three Months Ended Six Months Ended
 2018 2017 2018 2017
 (In Thousands, Except Share Data)
OPERATING REVENUES       
Electric
$2,330,225
 
$2,271,220
 
$4,578,486
 
$4,262,960
Natural gas29,943
 30,075
 86,638
 73,426
Competitive businesses308,602
 317,255
 727,526
 870,622
TOTAL2,668,770
 2,618,550
 5,392,650
 5,207,008
        
OPERATING EXPENSES       
Operation and Maintenance:       
Fuel, fuel-related expenses, and gas purchased for resale465,802
 395,947
 909,098
 813,513
Purchased power417,034
 416,497
 813,058
 774,264
Nuclear refueling outage expenses35,360
 38,288
 78,120
 80,853
Other operation and maintenance840,103
 794,967
 1,623,687
 1,641,825
Asset write-offs, impairments, and related charges68,943
 193,571
 141,867
 405,362
Decommissioning97,605
 100,296
 192,005
 214,669
Taxes other than income taxes158,547
 153,264
 323,765
 309,616
Depreciation and amortization350,485
 350,328
 697,471
 697,593
Other regulatory charges (credits)143,294
 6,553
 186,319
 (78,749)
TOTAL2,577,173
 2,449,711
 4,965,390
 4,858,946
        
Gain on sale of assets
 
 
 16,270
        
OPERATING INCOME91,597
 168,839
 427,260
 364,332
        
OTHER INCOME       
Allowance for equity funds used during construction31,670
 22,376
 60,014
 41,384
Interest and investment income71,134
 80,097
 88,005
 136,646
Miscellaneous - net(48,491) (32,202) (79,849) (47,391)
TOTAL54,313
 70,271
 68,170
 130,639
        
INTEREST EXPENSE       
Interest expense192,314
 173,377
 375,237
 344,466
Allowance for borrowed funds used during construction(14,668) (10,523) (27,933) (19,565)
TOTAL177,646
 162,854
 347,304
 324,901
        
INCOME (LOSS) BEFORE INCOME TAXES(31,736) 76,256
 148,126
 170,070
        
Income taxes(280,596) (337,112) (236,933) (329,350)
        
CONSOLIDATED NET INCOME248,860
 413,368
 385,059
 499,420
        
Preferred dividend requirements of subsidiaries3,439
 3,446
 6,878
 6,892
        
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
$245,421
 
$409,922
 
$378,181
 
$492,528
        
Earnings per average common share:       
Basic
$1.36
 
$2.28
 
$2.09
 
$2.75
Diluted
$1.34
 
$2.27
 
$2.08
 
$2.74
Dividends declared per common share
$0.89
 
$0.87
 
$1.78
 
$1.74
        
Basic average number of common shares outstanding180,823,203
 179,475,346
 180,765,708
 179,405,592
Diluted average number of common shares outstanding182,982,630
 180,234,694
 182,208,328
 180,032,233
        
See Notes to Financial Statements.       

ENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
        
Three Months Ended Six Months EndedThree Months Ended Six Months Ended
2017 2016 2017 20162018 2017 2018 2017
(In Thousands)(In Thousands)
              
Net Income
$413,368
 
$572,590
 
$499,420
 
$807,832

$248,860
 
$413,368
 
$385,059
 
$499,420

              
Other comprehensive income (loss)              
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of $10,684, ($34,576), $10,325, and ($39,777))19,949
 (64,041) 19,421
 (73,547)
Pension and other postretirement liabilities (net of tax expense of $5,839, $2,779, $12,216, and $3,037)10,916
 5,043
 19,548
 12,605
Net unrealized investment gains (net of tax expense of $2,870, $19,515, $42,164, and $37,873)11,696
 20,955
 49,523
 44,024
Foreign currency translation (net of tax benefit of $403, $487, $403, and $640)(748) (904) (748) (1,188)
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of ($17,312), $10,684, $8,037, and $10,325)(65,068) 19,949
 30,359
 19,421
Pension and other postretirement liabilities (net of tax expense of $4,225, $5,839, $8,793, and $12,216)15,565
 10,916
 32,139
 19,548
Net unrealized investment gain (loss) (net of tax expense (benefit) of ($2,842), $2,870, $2,533, and $42,164)(2,641) 11,696
 (35,497) 49,523
Foreign currency translation (net of tax benefit of $-, $403, $-, and $403)
 (748) 
 (748)
Other comprehensive income (loss)41,813
 (38,947) 87,744
 (18,106)(52,144) 41,813
 27,001
 87,744

              
Comprehensive Income455,181
 533,643
 587,164
 789,726
196,716
 455,181
 412,060
 587,164
Preferred dividend requirements of subsidiaries3,446
 5,276
 6,892
 10,552
3,439
 3,446
 6,878
 6,892
Comprehensive Income Attributable to Entergy Corporation
$451,735
 
$528,367
 
$580,272
 
$779,174

$193,277
 
$451,735
 
$405,182
 
$580,272
              
See Notes to Financial Statements.              

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
  2018 2017
  (In Thousands)
OPERATING ACTIVITIES    
Consolidated net income 
$385,059
 
$499,420
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 1,027,609
 1,042,671
Deferred income taxes, investment tax credits, and non-current taxes accrued 88,732
 (324,227)
Asset write-offs, impairments, and related charges 51,503
 220,828
Gain on sale of assets 
 (16,270)
Changes in working capital:    
Receivables (45,515) 6,091
Fuel inventory 8,512
 6,213
Accounts payable 97,464
 9,687
Taxes accrued (8,092) (2,202)
Interest accrued (2,056) (3,947)
Deferred fuel costs (132,263) (127,945)
Other working capital accounts (134,982) (91,505)
Changes in provisions for estimated losses 27,443
 (7,340)
Changes in other regulatory assets 106,712
 62,612
Changes in other regulatory liabilities (247,239) (8,250)
Changes in pensions and other postretirement liabilities (181,278) (180,346)
Other 38,314
 (265,807)
Net cash flow provided by operating activities 1,079,923
 819,683
     
INVESTING ACTIVITIES    
Construction/capital expenditures (1,885,419) (1,719,712)
Allowance for equity funds used during construction 60,335
 41,877
Nuclear fuel purchases (90,321) (209,756)
Proceeds from sale of assets 9,163
 100,000
Insurance proceeds received for property damages 10,523
 26,157
Changes in securitization account 4,754
 10,028
Payments to storm reserve escrow account (2,744) (1,124)
Receipts from storm reserve escrow account 
 8,836
Decrease (increase) in other investments (10,769) 1,705
Litigation proceeds for reimbursement of spent nuclear fuel storage costs 
 25,493
Proceeds from nuclear decommissioning trust fund sales 1,801,170
 1,462,698
Investment in nuclear decommissioning trust funds (1,826,384) (1,516,406)
Net cash flow used in investing activities (1,929,692) (1,770,204)
     
See Notes to Financial Statements.    

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
  2018 2017
  (In Thousands)
FINANCING ACTIVITIES    
Proceeds from the issuance of:    
Long-term debt 3,359,193
 1,036,529
Treasury stock 3,691
 7,819
Retirement of long-term debt (2,569,131) (866,337)
Changes in credit borrowings and commercial paper - net 405,795
 833,957
Other 10,434
 4,305
Dividends paid:    
Common stock (321,821) (312,209)
Preferred stock (6,878) (6,892)
Net cash flow provided by financing activities 881,283
 697,172

    
Net increase (decrease) in cash and cash equivalents 31,514
 (253,349)

    
Cash and cash equivalents at beginning of period 781,273
 1,187,844

    
Cash and cash equivalents at end of period 
$812,787
 
$934,495
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$362,629
 
$334,555
Income taxes 
$14,145
 
($14,673)
     
See Notes to Financial Statements.    


ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
  2017 2016
  (In Thousands)
OPERATING ACTIVITIES    
Consolidated net income 
$499,420
 
$807,832
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 1,042,671
 1,012,753
Deferred income taxes, investment tax credits, and non-current taxes accrued (324,227) (170,026)
Asset write-offs, impairments, and related charges 220,828
 14,329
Gain on sale of assets (16,270) 
Changes in working capital:    
Receivables 6,091
 (57,673)
Fuel inventory 6,213
 9,586
Accounts payable 9,687
 45,412
Taxes accrued (2,202) 7,056
Interest accrued (3,947) (9,543)
Deferred fuel costs (127,945) 3,757
Other working capital accounts (91,505) (121,929)
Changes in provisions for estimated losses (7,340) 1,533
Changes in other regulatory assets 62,612
 109,700
Changes in other regulatory liabilities (8,250) 70,505
Changes in pensions and other postretirement liabilities (180,346) (168,856)
Other (265,807) (302,356)
Net cash flow provided by operating activities 819,683
 1,252,080
     
INVESTING ACTIVITIES    
Construction/capital expenditures (1,719,712) (1,294,498)
Allowance for equity funds used during construction 41,877
 33,152
Nuclear fuel purchases (209,756) (124,107)
Payment for purchase of plant 
 (947,903)
Proceeds from sale of assets 100,000
 
Insurance proceeds received for property damages 26,157
 
Changes in securitization account 10,028
 13,239
Payments to storm reserve escrow account (1,124) (805)
Receipts from storm reserve escrow account 8,836
 
Decreases in other investments 1,705
 57
Litigation proceeds for reimbursement of spent nuclear fuel storage costs 25,493
 89,407
Proceeds from nuclear decommissioning trust fund sales 1,462,698
 1,232,672
Investment in nuclear decommissioning trust funds (1,516,406) (1,267,452)
Net cash flow used in investing activities (1,770,204) (2,266,238)
     
See Notes to Financial Statements.    
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$55,197
 
$56,629
Temporary cash investments 757,590
 724,644
Total cash and cash equivalents 812,787
 781,273
Accounts receivable:    
Customer 662,746
 673,347
Allowance for doubtful accounts (14,545) (13,587)
Other 150,084
 169,377
Accrued unbilled revenues 460,181
 383,813
Total accounts receivable 1,258,466
 1,212,950
Deferred fuel costs 114,293
 95,746
Fuel inventory - at average cost 174,131
 182,643
Materials and supplies - at average cost 752,520
 723,222
Deferred nuclear refueling outage costs 172,608
 133,164
Prepayments and other 249,645
 156,333
TOTAL 3,534,450
 3,285,331
     
OTHER PROPERTY AND INVESTMENTS    
Investment in affiliates - at equity 198
 198
Decommissioning trust funds 7,217,298
 7,211,993
Non-utility property - at cost (less accumulated depreciation) 294,548
 260,980
Other 434,066
 441,862
TOTAL 7,946,110
 7,915,033
     
PROPERTY, PLANT, AND EQUIPMENT    
Electric 47,805,468
 47,287,370
Property under capital lease 620,419
 620,544
Natural gas 477,715
 453,162
Construction work in progress 2,559,790
 1,980,508
Nuclear fuel 866,229
 923,200
TOTAL PROPERTY, PLANT, AND EQUIPMENT 52,329,621
 51,264,784
Less - accumulated depreciation and amortization 21,817,508
 21,600,424
PROPERTY, PLANT, AND EQUIPMENT - NET 30,512,113
 29,664,360
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Other regulatory assets (includes securitization property of $427,427 as of June 30, 2018 and $485,031 as of December 31, 2017) 4,828,973
 4,935,689
Deferred fuel costs 239,397
 239,298
Goodwill 377,172
 377,172
Accumulated deferred income taxes 17,768
 178,204
Other 166,666
 112,062
TOTAL 5,629,976
 5,842,425
     
TOTAL ASSETS 
$47,622,649
 
$46,707,149
     
See Notes to Financial Statements.    

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
  2017 2016
  (In Thousands)
FINANCING ACTIVITIES    
Proceeds from the issuance of:    
Long-term debt 1,036,529
 3,856,768
Treasury stock 7,819
 16,855
Retirement of long-term debt (866,337) (3,420,196)
Changes in credit borrowings and commercial paper - net 833,957
 530,540
Other 4,305
 (10,276)
Dividends paid:    
Common stock (312,209) (303,843)
Preferred stock (6,892) (10,552)
Net cash flow provided by financing activities 697,172
 659,296

    
Net decrease in cash and cash equivalents (253,349) (354,862)

    
Cash and cash equivalents at beginning of period 1,187,844
 1,350,961

    
Cash and cash equivalents at end of period 
$934,495
 
$996,099
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$334,555
 
$410,744
Income taxes 
($14,673) 
$84,607
     
See Notes to Financial Statements.    
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$1,016,908
 
$760,007
Notes payable and commercial paper 1,984,103
 1,578,308
Accounts payable 1,459,432
 1,452,216
Customer deposits 404,880
 401,330
Taxes accrued 206,874
 214,967
Interest accrued 185,916
 187,972
Deferred fuel costs 32,904
 146,522
Obligations under capital leases 1,442
 1,502
Pension and other postretirement liabilities 61,580
 71,612
Current portion of unprotected excess accumulated deferred income taxes 710,108
 
Other 167,926
 221,771
TOTAL 6,232,073
 5,036,207
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 4,434,308
 4,466,503
Accumulated deferred investment tax credits 215,369
 219,634
Obligations under capital leases 21,263
 22,015
Regulatory liability for income taxes-net 1,901,043
 2,900,204
Other regulatory liabilities 1,630,335
 1,588,520
Decommissioning and asset retirement cost liabilities 6,398,980
 6,185,814
Accumulated provisions 505,764
 478,273
Pension and other postretirement liabilities 2,739,407
 2,910,654
Long-term debt (includes securitization bonds of $483,242 as of June 30, 2018 and $544,921 as of December 31, 2017) 14,857,686
 14,315,259
Other 466,189
 393,748
TOTAL 33,170,344
 33,480,624
     
Commitments and Contingencies    
     
Subsidiaries' preferred stock without sinking fund 197,771
 197,803
     
COMMON EQUITY    
Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2018 and in 2017 2,548
 2,548
Paid-in capital 5,429,404
 5,433,433
Retained earnings 8,578,276
 7,977,702
Accumulated other comprehensive loss (613,642) (23,531)
Less - treasury stock, at cost (73,911,771 shares in 2018 and 74,235,135 shares in 2017) 5,374,125
 5,397,637
TOTAL 8,022,461
 7,992,515
     
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 
$47,622,649
 
$46,707,149
     
See Notes to Financial Statements.    


ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$67,238
 
$129,579
Temporary cash investments 867,257
 1,058,265
Total cash and cash equivalents 934,495
 1,187,844
Accounts receivable:    
Customer 579,674
 654,995
Allowance for doubtful accounts (12,947) (11,924)
Other 138,285
 158,419
Accrued unbilled revenues 415,424
 368,677
Total accounts receivable 1,120,436
 1,170,167
Deferred fuel costs 194,245
 108,465
Fuel inventory - at average cost 173,387
 179,600
Materials and supplies - at average cost 695,690
 698,523
Deferred nuclear refueling outage costs 228,300
 146,221
Prepayments and other 252,791
 193,448
TOTAL 3,599,344
 3,684,268
     
OTHER PROPERTY AND INVESTMENTS    
Investment in affiliates - at equity 198
 198
Decommissioning trust funds 6,796,911
 5,723,897
Non-utility property - at cost (less accumulated depreciation) 247,363
 233,641
Other 453,705
 469,664
TOTAL 7,498,177
 6,427,400
     
PROPERTY, PLANT, AND EQUIPMENT    
Electric 45,916,902
 45,191,216
Property under capital lease 618,731
 619,527
Natural gas 426,674
 413,224
Construction work in progress 1,741,867
 1,378,180
Nuclear fuel 958,190
 1,037,899
TOTAL PROPERTY, PLANT, AND EQUIPMENT 49,662,364
 48,640,046
Less - accumulated depreciation and amortization 21,095,139
 20,718,639
PROPERTY, PLANT, AND EQUIPMENT - NET 28,567,225
 27,921,407
   �� 
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Regulatory asset for income taxes - net 769,364
 761,280
Other regulatory assets (includes securitization property of $550,077 as of June 30, 2017 and $600,996 as of December 31, 2016) 4,699,217
 4,769,913
Deferred fuel costs 239,199
 239,100
Goodwill 377,172
 377,172
Accumulated deferred income taxes 115,562
 117,885
Other 141,777
 1,606,009
TOTAL 6,342,291
 7,871,359
     
TOTAL ASSETS 
$46,007,037
 
$45,904,434
     
See Notes to Financial Statements.    

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$702,909
 
$364,900
Notes payable and commercial paper 1,248,969
 415,011
Accounts payable 1,165,699
 1,285,577
Customer deposits 401,089
 403,311
Taxes accrued 178,912
 181,114
Interest accrued 183,282
 187,229
Deferred fuel costs 60,687
 102,753
Obligations under capital leases 2,387
 2,423
Pension and other postretirement liabilities 72,127
 76,942
Other 224,469
 180,836
TOTAL 4,240,530
 3,200,096
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 7,246,612
 7,495,290
Accumulated deferred investment tax credits 221,449
 227,147
Obligations under capital leases 23,179
 24,582
Other regulatory liabilities 1,564,679
 1,572,929
Decommissioning and asset retirement cost liabilities 6,118,860
 5,992,476
Accumulated provisions 474,020
 481,636
Pension and other postretirement liabilities 2,860,479
 3,036,010
Long-term debt (includes securitization bonds of $601,861 as of June 30, 2017 and $661,175 as of December 31, 2016) 14,307,759
 14,467,655
Other 375,429
 1,121,619
TOTAL 33,192,466
 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 5,409,862
 5,417,245
Retained earnings 8,375,890
 8,195,571
Accumulated other comprehensive income (loss) 52,773
 (34,971)
Less - treasury stock, at cost (75,233,350 shares in 2017 and 75,623,363 shares in 2016) 5,470,217
 5,498,584
TOTAL 8,370,856
 8,081,809
     
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 
$46,007,037
 
$45,904,434
     
See Notes to Financial Statements.    
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2018 and 2017
(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, 2016
$—
 
$2,548
 
($5,498,584) 
$5,417,245
 
$8,195,571
 
($34,971) 
$8,081,809
              
Consolidated net income (a)6,892
 
 
 
 492,528
 
 499,420
Other comprehensive income
 
 
 
 
 87,744
 87,744
Common stock issuances related to stock plans
 
 28,367
 (7,383) 
 
 20,984
Common stock dividends declared
 
 
 
 (312,209) 
 (312,209)
Preferred dividend requirements of subsidiaries (a)(6,892) 
 
 
 
 
 (6,892)
              
Balance at June 30, 2017
$—
 
$2,548
 
($5,470,217) 
$5,409,862
 
$8,375,890
 
$52,773
 
$8,370,856
              
Balance at December 31, 2017
$—
 
$2,548
 
($5,397,637) 
$5,433,433
 
$7,977,702
 
($23,531) 
$7,992,515
Implementation of accounting standards
 
 
 
 576,257
 (632,617) (56,360)
Balance at January 1, 2018
$—
 
$2,548
 
($5,397,637) 
$5,433,433
 
$8,553,959
 
($656,148) 
$7,936,155
              
Consolidated net income (a)6,878
 
 
 
 378,181
 
 385,059
Other comprehensive income
 
 
 
 
 27,001
 27,001
Common stock issuances related to stock plans
 
 23,512
 (4,029) 
 
 19,483
Common stock dividends declared
 
 
 
 (321,821) 
 (321,821)
Preferred dividend requirements of subsidiaries (a)(6,878) 
 
 
 
 
 (6,878)
Reclassification pursuant to ASU 2018-02
 
 
 
 (32,043) 15,505
 (16,538)
              
Balance at June 30, 2018
$—
 
$2,548
 
($5,374,125) 
$5,429,404
 
$8,578,276
 
($613,642) 
$8,022,461
              
See Notes to Financial Statements.            
 
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2018 and 2017 include $6.9 million and $6.9 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity.


ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 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)10,552
 
 
 
 797,280
 
 807,832
Other comprehensive loss
 
 
 
 
 (18,106) (18,106)
Common stock issuances related to stock plans
 
 36,877
 (11,212) 
 
 25,665
Common stock dividends declared
 
 
 
 (303,843) 
 (303,843)
Preferred dividend requirements of subsidiaries (a)(10,552) 
 
 
 
 
 (10,552)
              
Balance at June 30, 2016
$—
 
$2,548
 
($5,515,502) 
$5,392,546
 
$9,887,350
 
($9,155) 
$9,757,787
              
              
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)6,892
 
 
 
 492,528
 
 499,420
Other comprehensive income
 
 
 
 
 87,744
 87,744
Common stock issuances related to stock plans
 
 28,367
 (7,383) 
 
 20,984
Common stock dividends declared
 
 
 
 (312,209) 
 (312,209)
Preferred dividend requirements of subsidiaries (a)(6,892) 
 
 
 
 
 (6,892)
              
Balance at June 30, 2017
$—
 
$2,548
 
($5,470,217) 
$5,409,862
 
$8,375,890
 
$52,773
 
$8,370,856
              
See Notes to Financial Statements.            
 
(a) Consolidated net income and preferred dividend requirements of subsidiaries for 2017 and 2016 include $6.9 million and $10.6 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity.


ENTERGY CORPORATION AND SUBSIDIARIESSELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
            
 Three Months Ended Increase/   Three Months Ended Increase/  
Description 2017 2016 (Decrease) % 2018 2017 (Decrease) %

 (Dollars in Millions)   (Dollars in Millions)  
Utility electric operating revenues:                
Residential 
$748
 
$667
 
$81
 12
 
$769
 
$748
 
$21
 3
Commercial 604
 543
 61
 11
 582
 604
 (22) (4)
Industrial 651
 551
 100
 18
 625
 651
 (26) (4)
Governmental 57
 52
 5
 10
 57
 57
 
 
Total retail 2,060
 1,813
 247
 14
Sales for resale 46
 72
 (26) (36)
Other 165
 208
 (43) (21)
Total 
$2,271
 
$2,093
 
$178
 9

        
Utility billed electric energy sales (GWh):        
Residential 7,340
 7,081
 259
 4
Commercial 6,886
 6,777
 109
 2
Industrial 12,209
 11,509
 700
 6
Governmental 609
 609
 
 
Total retail 27,044
 25,976
 1,068
 4
Sales for resale 1,845
 3,579
 (1,734) (48)
Total 28,889
 29,555
 (666) (2)

        
Entergy Wholesale Commodities:        
Operating Revenues 
$317
 
$344
 
($27) (8)
Billed Electric Energy Sales (GWh) 6,019
 7,866
 (1,847) (23)
        
        
 Six Months Ended Increase/  
Description 2017 2016 (Decrease) %

 (Dollars in Millions)  
Utility electric operating revenues:        
Residential 
$1,453
 
$1,411
 
$42
 3
Commercial 1,140
 1,081
 59
 5
Industrial 1,216
 1,111
 105
 9
Governmental 110
 103
 7
 7
Total retail 3,919
 3,706
 213
 6
Total billed retail 2,033
 2,060
 (27) (1)
Sales for resale 124
 127
 (3) (2) 69
 46
 23
 50
Other 220
 302
 (82) (27) 228
 165
 63
 38
Total 
$4,263
 
$4,135
 
$128
 3
 
$2,330
 
$2,271
 
$59
 3

                
Utility billed electric energy sales (GWh):                
Residential 14,977
 15,218
 (241) (2) 7,749
 7,340
 409
 6
Commercial 13,325
 13,288
 37
 
 6,943
 6,886
 57
 1
Industrial 23,326
 22,564
 762
 3
 12,219
 12,209
 10
 
Governmental 1,202
 1,209
 (7) (1) 612
 609
 3
 
Total retail 52,830
 52,279
 551
 1
 27,523
 27,044
 479
 2
Sales for resale 4,867
 6,719
 (1,852) (28) 2,566
 1,845
 721
 39
Total 57,697
 58,998
 (1,301) (2) 30,089
 28,889
 1,200
 4

                
Entergy Wholesale Commodities:                
Operating revenues 
$871
 
$866
 
$5
 1
 
$309
 
$317
 
($8) (3)
Billed electric energy sales (GWh) 14,382
 17,112
 (2,730) (16) 7,281
 6,019
 1,262
 21
        
        
 Six Months Ended Increase/  
Description 2018 2017 (Decrease) %

 (Dollars in Millions)  
Utility electric operating revenues:        
Residential 
$1,661
 
$1,453
 
$208
 14
Commercial 1,178
 1,140
 38
 3
Industrial 1,222
 1,216
 6
 
Governmental 113
 110
 3
 3
Total billed retail 4,174
 3,919
 255
 7
Sales for resale 139
 124
 15
 12
Other 265
 220
 45
 20
Total 
$4,578
 
$4,263
 
$315
 7

        
Utility billed electric energy sales (GWh):        
Residential 17,036
 14,977
 2,059
 14
Commercial 13,675
 13,325
 350
 3
Industrial 23,624
 23,326
 298
 1
Governmental 1,220
 1,202
 18
 1
Total retail 55,555
 52,830
 2,725
 5
Sales for resale 5,810
 4,867
 943
 19
Total 61,365
 57,697
 3,668
 6

        
Entergy Wholesale Commodities:        
Operating revenues 
$728
 
$871
 
($143) (16)
Billed electric energy sales (GWh) 14,277
 14,382
 (105) (1)


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, subsequent NRC reviews, and the deferral of replacement power costs. In June 2018 the NRC moved ANO 1 and ANO 2 into the “licensee response column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections to review ANO 1’s and ANO 2’s performance in addressing issues that had previously resulted in classification in Column 4.

Pilgrim NRC Oversight and Planned Shutdown

See Note 8 to the financial statements in the Form 10-K for a discussion of the NRC’s enhanced inspections of Pilgrim and Entergy’s planned shutdown of Pilgrim no later than June 1,on May 31, 2019.

Spent Nuclear Fuel Litigation

See Note 8 to the financial statements in the Form 10-K for information on Entergy’s spent nuclear fuel litigation.

As discussed in the Form 10-K, 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. Entergy Louisiana received payment from the U.S. Treasury in January 2017.

As discussed in the Form 10-K, 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, including $11 million related to costs previously capitalized and $3 million related to costs previously recorded as other operation and maintenance expense. Entergy Nuclear Palisades recorded a receivable for that amount, and subsequently received payment from the U.S. Treasury in January 2017.

As discussed in the Form 10-K, in October 2016 the U.S. Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case in the amount of $34 million, including $14 million related to costs previously capitalized, $15 million related to costs previously recorded as other operation and maintenance expense, $3 million related to previously recorded decommissioning expense, and $2 million related to costs previously recorded

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as taxes other than income taxes. Entergy Nuclear Indian Point 2 recorded a receivable for that amount, and subsequently received payment from the U.S. 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.
 
ConventionalNon-Nuclear 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 and 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.


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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.


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.

Regulatory activity regarding the Tax Cuts and Jobs Act

See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements in the Form 10-K for discussion of the effects of the enactment in December 2017 of the Tax Cuts and Jobs Act (the Tax Act), including its effects on Entergy’s and the Registrant Subsidiaries’ regulatory asset/liability for income taxes.

After assessing the activity described in more detail below regarding the status of the proposals the Registrant Subsidiaries made to their regulators for the return of unprotected excess accumulated deferred income taxes to customers, in 2018, Entergy and each of the Registrant Subsidiaries are reclassifying from the regulatory liability for income taxes to current liabilities the portion of their unprotected excess accumulated deferred income taxes that they expect to return to customers over the next twelve months.

Entergy Arkansas

See the Form 10-K for a discussion of the activity of the APSC and Entergy Arkansas after enactment of the Tax Act in December 2017. The APSC granted Entergy Arkansas’s request for clarification regarding the APSC’s order issued after enactment of the Tax Act. The APSC stated that its order was not a final determination and that the APSC had made no decision at that time on the appropriate final accounting or ratemaking treatment of the amounts in question. A hearing was held in May 2018 regarding the APSC’s inquiries into the effects of the Tax Act, including Entergy Arkansas’s proposal to utilize its existing formula rate plan rider for its customers to realize the remaining benefits of the Tax Act. In July 2018 the APSC issued an order agreeing with Entergy Arkansas’s proposal to have the effects on current income tax expense flow through Entergy Arkansas’s formula rate plan rider and its treatment of protected and unprotected excess accumulated deferred income taxes. The APSC also directed Entergy Arkansas to submit in the tax adjustment rider proceeding, discussed below, the adjustments to all other riders affected by the Tax Act and to include an amendment for a true up mechanism where a rider affected by the Tax Act does not already contain a true up mechanism.
Consistent with its previously stated intent to return unprotected excess accumulated deferred income taxes to customers as expeditiously as possible, Entergy Arkansas initiated a tariff proceeding in February 2018 proposing to establish a tax adjustment rider to provide retail customers with certain tax benefits associated with the Tax Act. For the residential customer class, the unprotected excess accumulated deferred income taxes will be returned to customers over a 21-month period from April 2018 through December 2019. For all other customer classes, the unprotected excess accumulated deferred income taxes will be returned to customers over a 9-month period from April 2018 through December 2018. A true-up provision also was included, with any over- or under-returned unprotected excess accumulated deferred income taxes to be credited or billed to customers during the billing month of January 2020, with any residual amounts of over- or under-returned unprotected excess accumulated deferred income taxes to be flowed through Entergy Arkansas’s energy cost recovery rider. In March 2018 the APSC approved the tax adjustment rider effective with the first billing cycle of April 2018.

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Entergy Louisiana

See the Form 10-K for a discussion of the activity of the LPSC and Entergy Louisiana after enactment of the Tax Act in December 2017. In July 2018 the LPSC issued a proposed rule requiring utilities to adjust rates prospectively to reflect the lower tax rate (either through a formula rate plan or rate case), refund excess tax expense collected since January 1, 2018 until the lower tax rate is reflected in rates (with the refund occurring over one year), and refund excess accumulated deferred income taxes over two years. Entergy Louisiana believes that its formula rate plan settlement, approved in April 2018 and discussed below, addresses fully its obligations regarding the Tax Act and will seek such confirmation in its comments to the proposed rule.

In the formula rate plan settlement approved by the LPSC in April 2018 the parties agreed that Entergy Louisiana will return to customers one-half of its eligible unprotected excess deferred income taxes from May 2018 through December 2018 and return to customers the other half from January 2019 through August 2022. In addition, the parties agreed that in order to flow back to customers certain other tax benefits created by the Tax Act, Entergy Louisiana would establish a regulatory liability effective January 1, 2018 in the amount of $9.1 million per month until new base rates under the formula rate plan are established, and this regulatory liability will be returned to customers over the next formula rate plan rate-effective period. Entergy Louisiana recorded a $55 million regulatory liability thus far in 2018 pursuant to this provision of the settlement. The LPSC staff and intervenors in the settlement reserved the right to obtain data from Entergy Louisiana to confirm the determination of excess accumulated deferred income taxes resulting from the Tax Act and analysis thereof as part of the formula rate plan review proceeding for the 2017 test year filing, which, as discussed below, Entergy Louisiana filed in June 2018.

Entergy Mississippi

As discussed in the Form 10-K, after enactment of the Tax Act the MPSC ordered utilities, including Entergy Mississippi, that operate under a formula rate plan to file a description by February 26, 2018, of how the Tax Act will be reflected in the formula rate plan under which the utility operates. Entergy Mississippi's plan, as filed with the MPSC on February 26, 2018, included a request to reflect the changes related to the Tax Act in the 2018 formula rate plan filing. Entergy Mississippi filed its 2018 formula rate plan on March 15, 2018 and included a proposal to return all of its unprotected excess accumulated deferred income taxes to customers through rates or in exchange for other assets, or a combination of both, by the end of 2018.

Also, in March 2018 the MPSC issued a subsequent order in its generic tax reform docket ordering utilities, including Entergy Mississippi, to explain the implementation of the utilities tax adjustment clause, or, in the alternative, why the tax adjustment clause is inapplicable; submit an analysis of the ratemaking effects of the Tax Act on current and future revenue requirements for rate schedules that include a gross-up for federal taxes; and make appropriate accounting entries to recognize the removal of excess deferred taxes from the balance of the utility’s accumulated deferred income tax account, or, in the alternative, explain why recording such entries is not appropriate. In April 2018, Entergy Mississippi filed its response to the MPSC stating that the tax adjustment clauses in its base rates are properly implemented through its formula rate plan. Entergy Mississippi also provided analysis of the ratemaking effects of the Tax Act.

In June 2018, Entergy Mississippi and the Mississippi Public Utilities Staff entered into and filed a joint stipulation in Entergy Mississippi’s formula rate plan filing that addressed Entergy Mississippi’s 2018 formula rate plan evaluation report and the ratemaking effects of the Tax Act. In June 2018 the MPSC approved the stipulation, which provides for incorporating the reduction of the statutory federal income tax rate through the formula rate plan and the flow-back of protected excess accumulated deferred income taxes over approximately 40 years through the formula rate plan. The stipulation also provides for the offset of unprotected excess accumulated deferred income taxes of $127.2 million against net utility plant and $2.2 million against other regulatory assets, and the return to customers of the remaining balance of unprotected excess accumulated deferred income taxes as recovery of a portion of fuel oil inventory and customer bill credits over a 3-month period from July 2018 through September 2018, with

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any true-up to be reflected in the November 2018 power management rider submittal. Entergy Mississippi recorded the reduction against net utility plant and other regulatory assets in June 2018.

Entergy New Orleans

As discussed in the Form 10-K, after enactment of the Tax Act the City Council passed a resolution ordering Entergy New Orleans to, effective January 1, 2018, record deferred regulatory liabilities to account for the Tax Act’s effect on Entergy New Orleans’s revenue requirement and to make a filing by mid-March 2018 regarding the Tax Act’s effects on Entergy New Orleans’s operating income and rate base and potential mechanisms for customers to receive benefits of the Tax Act. The City Council’s resolution also directed Entergy New Orleans to request that Entergy Services file with the FERC for revisions of the Unit Power Sales Agreement and MSS-4 replacement tariffs to address the return of excess accumulated deferred income taxes. Entergy has submitted filings of this type to the FERC.

In March 2018, Entergy New Orleans filed its response to that resolution stating that the Tax Act reduced income tax expense from what is presently reflected in rates by approximately $8.2 million annually for electric operations and by approximately $1.3 million annually for gas operations. In the filing, Entergy New Orleans proposed to return to customers from June 2018 through August 2019 the benefits of the reduction in income tax expense and its unprotected excess accumulated deferred income taxes through a combination of bill credits and investments in energy efficiency programs, grid modernization, and Smart City projects. Entergy New Orleans submitted supplemental information in April 2018 and May 2018. Shortly thereafter, Entergy New Orleans and the City Council’s advisors reached an agreement in principle that provides for benefits that will be realized by Entergy New Orleans customers through bill credits starting in July 2018 and offsets to future investments in energy efficiency programs, grid modernization, and Smart City projects, as well as additional benefits related to the filings made at FERC. The agreement in principle was approved by the City Council in June 2018.

Entergy Texas

As discussed below, in May 2018, Entergy Texas filed its 2018 base rate case with the PUCT. Entergy Texas’s proposed rates and revenues reflect the inclusion of the federal income tax reductions due to the Tax Act. In the rate case Entergy Texas proposed to return its unprotected excess accumulated deferred income taxes to customers over a two-year period following PUCT approval.

System Energy

In a filing made with the FERC in March 2018, Entergy proposed revisions to the Unit Power Sales Agreement, among other agreements, to reflect the effects of the Tax Act. In the filing System Energy proposed to return all of its unprotected excess accumulated deferred income taxes to its customers by the end of 2018. In May 2018 the FERC accepted System Energy’s proposed tax revisions with an effective date of June 1, 2018, subject to refund and the outcome of settlement and hearing procedures.  Settlement discussions are ongoing.

Fuel and purchased power cost recovery

Entergy Arkansas

Energy Cost Recovery Rider

In March 2017,2018, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase in the rate from $0.01164$0.01547 per kWh to $0.01547$0.01882 per kWh. The APSC staffArkansas Attorney General filed testimony in March 2017 recommendinga response to Entergy Arkansas’s annual redetermination filing requesting that the redetermined rate should be implemented withAPSC suspend the first billing cycle of April 2017 underproposed tariff to investigate the normal operationamount of the tariff. Accordingly,redetermination or, alternatively, to allow recovery subject to refund. Among the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017reasons the Arkansas Attorney General requested additional informationcited for suspension were questions pertaining to support certainhow Entergy Arkansas forecasted sales and potential implications of the costs included inTax Act. Entergy Arkansas’s 2017 energy cost rate redetermination.

Entergy Louisiana

As discussed inArkansas replied to 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. Discovery commenced in March 2017.

Arkansas Attorney

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General’s filing and stated that, to the extent there are questions pertaining to its load forecasting or the operation of the energy cost recovery rider, those issues exceed the scope of the instant rate redetermination. Entergy Arkansas also stated that potential effects of the Tax Act are appropriately considered in the APSC’s separate proceeding looking at potential implications of the new tax law. The APSC general staff filed a reply to the Arkansas Attorney General’s filing and agreed that Entergy Arkansas’s filing complied with the terms of the energy cost recovery rider. In April 2018 the APSC issued an order declining to suspend Entergy Arkansas’s energy cost recovery rider rate and declining to require further investigation at this time of the issues suggested by the Attorney General in the proceeding. The redetermined rate became effective with the first billing cycle of April 2018. Discovery continues to be conducted by the parties with respect to the redetermined rate.

Entergy Mississippi

Mississippi Attorney General Complaint

As discussed in the Form 10-K the Mississippi attorney generalAttorney General filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power.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 defendants have denied the allegations. In June 2017 the District Court issued a case management order setting a trial date in November 2018. Discovery isended in May 2018. In June 2018, Entergy filed motions for summary judgment, which are currently in progress.pending before the District Court. In July 2018 the Mississippi Attorney General filed briefs opposing the summary judgment.

Entergy Texas

As discussed in the Form 10-K, in July 2015 certain parties filed briefs in an open PUCT 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 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 an application to reconcile its fuel and purchased power costsa 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. The pending appeals did not stay the PUCT’s decision, and Entergy Texas refunded to customers the $10.9 million over a four-month period April 1, 2013 through March 31,beginning with the first billing cycle of July 2016. InThe federal appeal of the PUCT’s January 2016 decision was heard in December 2016, and the Federal District Court granted Entergy Texas entered into a stipulationTexas’s requested relief. In January 2017 the PUCT and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refundan intervenor filed petitions for appeal of the over-recovery balanceFederal District Court ruling to the U.S. Court of $21 million asAppeals for the Fifth Circuit. Oral argument was held before the Fifth Circuit in February 2018. In April 2018 the Fifth Circuit reversed the decision of November 30,the Federal District Court, reinstating the original PUCT decision. The State District Court appeal of the PUCT’s January 2016 to most customers beginning April 2017 through June 2017. The fuel reconciliation settlement was approved by the PUCT in March 2017 and the refunds were made.decision remains pending.

In JuneDecember 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7$30.5 million for the months of December 2016 through April 2017. For most customers, the refunds will flow through bills for the months of JulyMay 2017 through SeptemberOctober 2017. Also in JuneDecember 2017, the PUCT’s administrative law judgeALJ approved the refund on an interim basis. A final decisionFor most customers, the refunds flowed through bills beginning January 2018 and continued through March 2018. The fuel refund was approved by the PUCT in this matter remains pending.March 2018.

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

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.

2017 Formula Rate Plan Filing

In July 2017, Entergy Arkansas filed with the APSC its 2017 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2018 test period to be below the formula rate plan bandwidth.  The filing projected a $129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75%.  Because the projected revenue increase exceeds the four percent annual revenue constraint for each rate class, however, Entergy Arkansas proposed a $70.9 million revenue requirement increase. Entergy Arkansas requested an order approving its proposed formula rate plan adjustment by December 13, 2017. If a final order is not issued by this date, the proposed formula rate plan adjustment will become effective January 2, 2018, subject to refund.

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Advanced Metering Infrastructure (AMI)Filings with the APSC (Entergy Arkansas)

2018 Formula Rate Plan Filing

In July 2018, Entergy Arkansas filed with the APSC its 2018 formula rate plan filing to set its formula rate for the 2019 calendar year. The filing shows Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2019 test period to be below the formula rate plan bandwidth. Additionally, the filing includes the first netting adjustment under the current formula rate plan for the historical test year 2017, which is a comparison of projected costs and sales approved in the 2016 formula rate plan filing to actual 2017 costs and sales data. The filing includes a projected $73.4 millionrevenue deficiency for 2019 and a $95.6 million revenue deficiency for the 2017 historical test year, for a total revenue requirement of $169 million for this filing. By operation of the formula rate plan, Entergy Arkansas’s recovery of the revenue requirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeds the constraint, the resulting increase is limited to four percent of total revenue, which is $65.4 million. Entergy Arkansas recommended that the parties to the proceeding support a hearing date in November 2018 and requested that the APSC issue an order approving the proposed formula rate plan adjustment in December 2018, with the proposed formula rate plan adjustment effective with the first billing cycle of January 2019.

Internal Restructuring

As discussed in the Form 10-K, in September 2016,November 2017, Entergy Arkansas filed an application seeking a finding fromwith the APSC seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy Arkansas to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval by the APSC, the FERC, and the NRC. Entergy Arkansas also filed a notice with the Missouri Public Service Commission in December 2017 out of an abundance of caution, although Entergy Arkansas does not serve any retail customers in Missouri. In April 2018 the Missouri Public Service Commission approved Entergy Arkansas’s deployment of advanced metering infrastructure is in the public interest.filing. 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 Attorney General’s consultant primarily recommended denial of Entergy Arkansas’s application but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal.July 2018, Entergy Arkansas filed rebuttal testimonya settlement, reached by all parties in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017,proceeding, resolving all issues and seeking an APSC decision no later than September 1, 2018. If the appropriate approvals are obtained, Entergy Arkansas andexpects the parties to the proceeding filed a joint motion to suspend the procedural schedule pending the filing with the APSC of an agreement in principlerestructuring will be consummated on all issues.or before December 1, 2018.

Filings with the LPSC (Entergy Louisiana)

Retail Rates - Electric

20142016 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

As discussed in the Form 10-K, in May 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.

Also, 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 does 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 followingRates reflecting the adjustments however, are required under the formula rate plan: The 2016 formula rate plan evaluation report shows a decreaseincluded 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 $3.6 million. Additionally, the formula rate plan evaluation report calls for a decrease in the MISO cost recovery revenue requirement of $40.5 million, from the present level of $46.8 million to $6.3 million. Rates reflecting these adjustments will bewere implemented with the first billing cycle of September 2017, subject to refund, pendingrefund. In September 2017 the review proceedings. Parties have intervenedLPSC issued its report indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report were required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.  In July 2018, Entergy Louisiana and the LPSC staff filed an unopposed joint report setting forth a correction to the annualization calculation, the effect of which was a net $3.5 million revenue requirement reduction, and indicating that there are no outstanding issues with the 2016 formula rate plan report, the supplemental report, or the interim updates.  The LPSC voted to accept and approve the unopposed joint report in the proceedings. No procedural schedule has been established.August 2018.

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

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Waterford 3 Replacement Steam Generator Projectyear; 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.  Several parties intervened in the proceeding and all parties participated in settlement discussions. In April 2018 the LPSC approved an unopposed joint motion filed by Entergy Louisiana and the LPSC staff that settles the matter. The settlement extends the formula rate plan for three years, providing for rates through at least August 2021. In addition to retaining the major features of the traditional formula rate plan, substantive features of the extended formula rate plan include:

See Note 2a mid-point reset of formula rate plan revenues to a 9.95% earned return on common equity for the 2017 test year and for the St. Charles Power Station when it enters commercial operation;
a 9.8% target earned return on common equity for the 2018 and 2019 test years;
narrowing of the common equity bandwidth to plus or minus 60 basis points around the target earned return on common equity;
a cap on potential revenue increase of $35 million for the 2018 evaluation period, and $70 million for the cumulative 2018 and 2019 evaluation periods, on formula rate plan cost of service rate increases (the cap excludes rate changes associated with the transmission recovery mechanism described below and rate changes associated with additional capacity);
a framework for the flow back of certain tax benefits created by the Tax Act to customers, as described in “Regulatory activity regarding the Tax Cuts and Jobs Act” above; and
a transmission recovery mechanism providing for the opportunity to recover certain transmission related expenditures in excess of $100 million annually for projects placed in service up to one month prior to rate change outside of sharing that is designed to operate in a manner similar to the financial statementsadditional capacity mechanism.

2017 Formula Rate Plan Filing

In June 2018, Entergy Louisiana filed its formula rate plan evaluation report for its 2017 calendar year operations. As stated above under “Formula Rate Plan Extension Request” for the 2017 test year there will be a mid-point reset of formula rate plan revenues to a 9.95% earned return on common equity for the 2017 test year. As such, base rider formula rate plan revenue is to be adjusted prospectively to increase or decrease the earned return on equity fully to the approved cost of equity of 9.95%. The 2017 test year evaluation report produced an earned return on equity of 8.16%, due in large part to revenue-neutral realignments to other recovery mechanisms. Without these realignments, the Form 10-Kevaluation report produces an earned return on equity of 9.88% and a resulting base rider formula rate plan revenue increase of $4.8 million. Excluding the Tax Act credits provided for discussionby the tax reform adjustment mechanisms, total formula rate plan revenues will further increase by a total of the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71$98 million as a result of the settlement approved byevaluation report due to adjustments to the LPSC was made to customers in January 2017. Following a review byadditional capacity and MISO cost recovery mechanisms of the parties, an unopposed jointformula rate plan, and implementation of the transmission recovery mechanism. Results of the 2017 evaluation report of proceedings was filed byfiling will be implemented with the LPSC staff and September 2018 billing month.

Entergy Louisiana also included in May 2017. In May 2017its filing a presentation of an initial proposal to combine the LPSC acceptedlegacy Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination would be accomplished on a revenue neutral basis intended not to affect the joint reportrates of proceedings resolving the matter.other customer classes.

Union Power Station and Deactivation or Retirement Decisions for Entergy Louisiana Plants

As discussed in the Form 10-K, 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 the decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three year term permitted by MISO.  This matter is pending before an ALJ, with an evidentiary hearing scheduled in August 2017.

Retail Rates - Gas

2016 Rate Stabilization Plan Filing

In January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37%. As part of the original filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in deferred 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 confirmed Entergy Louisiana’s filing was consistent with the principles 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 pending LPSC consideration in a 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 first billing cycle of May 2017.

In connection with the joint report of proceedings accepted by the LPSC, in May 2017, Entergy Louisiana filed an application to initiate a separate proceeding to recover the deferred 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 through the extraordinary cost provision of the gas rate stabilization plan. A procedural schedule has been established, with a hearing in November 2017.

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

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proposed AMI system,transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three-year term permitted by MISO.  In March 2018 the LPSC adopted the ALJ’s recommended order finding that Entergy Louisiana did not demonstrate that its decision to permanently surrender transmission rights for the mothballed (not retired) Willow Glen 2 and 4 units was reasonable and that Entergy Louisiana should hold customers harmless from increased transmission expenses should those units be reactivated. Because no party or the LPSC suggested that Willow Glen 2 and 4 should be reactivated and because the cost to return those units to service far exceeds the revenue the units were expected to generate in MISO, Entergy Louisiana retired Willow Glen 2 and 4 in March 2018. Entergy Louisiana submitted a compliance filing regarding retirement of Willow Glen 2 and 4, and the LPSC closed the proceeding.

Retail Rates - Gas

2017 Rate Stabilization Plan Filing

In January 2018, Entergy Louisiana filed with modificationsthe LPSC its gas rate stabilization plan for the test year ended September 30, 2017.  The filing of the evaluation report for the test year 2017 reflected an earned return on common equity of 9.06%.  This earned return is below the earnings sharing band of the rate stabilization plan and results in a rate increase of $0.1 million.  Due to the proposed customer charge.enactment of the Tax Act in late-December 2017, Entergy Louisiana did not have adequate time to reflect the effects of this tax legislation in the rate stabilization plan.  In April 2018 Entergy Louisiana filed a supplemental evaluation report for the test year ended September 2017, reflecting the effects of the Tax Act, including a proposal to use the unprotected excess accumulated deferred income taxes to offset storm restoration deferred operation and maintenance costs incurred by Entergy Louisiana in connection with the August 2016 flooding disaster in its gas service area. The supplemental filing reflects an earned return on common equity of 10.79%. As-filed rates from the supplemental filing were implemented, subject to refund, with customers receiving a cost reduction of approximately $0.7 million effective with bills rendered on and after the first billing cycle of May 2018, as well as a $0.2 million reduction in the gas infrastructure rider effective with bills rendered on and after the first billing cycle of July 2017 the LPSC approved the stipulation.2018. The proceeding is currently in its discovery phase. A procedural schedule has not been established.

Filings with the MPSC (Entergy Mississippi)

Formula Rate Plan

In March 2017,2018, Entergy Mississippi submitted its formula rate plan 20172018 test year filing and 20162017 look-back filing showing Entergy Mississippi’s earned return for the historical 20162017 calendar year and projected earned return for the 20172018 calendar year, in large part as a result of the lower federal corporate income tax rate effective in 2018, to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017,2018, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 20162017 look-back filing and 20172018 test year were within the respective formula rate plan bandwidths. In June 20172018 the MPSC approved the stipulation, which resulted in no change in rates. See “Regulatory activity regarding the Tax Cuts and Jobs Act” above for additional discussion regarding the proposed treatment of the effects of the lower federal corporate income tax rate.

Advanced Metering Infrastructure (AMI) FilingInternal Restructuring

As discussed in the Form 10-K, in November 2016,In March 2018, Entergy Mississippi filed an application seeking a finding fromwith 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 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 the City Council

Retail Rates

As discussed in the Form 10-K, in February 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 identify its desired level of funding for the program during this time period and approve a cost recovery mechanism. 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 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. The City Council ordered Entergy New Orleans to submit a supplemental and amended implementation plan for program years 8 and 9 of the Energy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost recovery mechanism for the program for both legacy and Algiers customers. The City Council will not permit Entergy New Orleans to recover lost contribution to fixed costs for program years 7, 8, or 9 of the Energy Smart program.

Internal Restructuring
As 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 that would result in the transfer of substantially all of the assets and operations of Entergy New OrleansMississippi to a new entity, which would ultimately be ownedheld by an existing Entergy subsidiary holding company. In May 2017The restructuring is subject to regulatory review and approval by the City Council adopted a resolution approvingMPSC, the FERC, and the NRC. If the MPSC approves the restructuring by August 2018 and the restructuring closes on or before December 1, 2018, Entergy Mississippi proposed internal restructuring pursuantin its application to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle, Entergy New Orleans will credit retail customers $10$27 million over six years, beginning in 2017, $1.4 million in2019. If the first quarter ofMPSC, the year afterFERC, and the transaction closes, and $117,500 each month inNRC approvals are obtained, Entergy Mississippi expects the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Entergy New Orleans beganrestructuring will be consummated on or before December 1, 2018.

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crediting retail customers in June 2017. Also pursuantIt is currently contemplated that Entergy Mississippi would undertake a multi-step restructuring, which would include the following:

Entergy Mississippi would redeem its outstanding preferred stock, at the aggregate redemption price of approximately $21.2 million, including call premiums, plus accumulated and unpaid dividends, if any.
Entergy Mississippi would convert from a Mississippi corporation to a Texas corporation.
Under the agreement in principle, if FERC approval is received priorTexas Business Organizations Code (TXBOC), Entergy Mississippi will allocate substantially all of its assets to December 31, 2018,a new subsidiary, Entergy New OrleansMississippi Power and Light, LLC, a Texas limited liability company (Entergy Mississippi Power and Light), and Entergy Mississippi Power and Light will provide additional credits to retail customers of $5 million in eachassume substantially all of the years 2018, 2019,liabilities of Entergy Mississippi, in a transaction regarded as a merger under the TXBOC. Entergy Mississippi will remain in existence and 2020.hold the membership interests in Entergy Mississippi Power and Light.
Entergy Mississippi will contribute the membership interests in Entergy Mississippi Power and Light 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 Mississippi Power and Light will be a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.
Entergy Mississippi will change its name to Entergy Utility Enterprises, Inc., and Entergy Mississippi Power and Light will then change its name to Entergy Mississippi, LLC.

Advanced Metering Infrastructure (AMI) FilingUpon the completion of the restructuring, Entergy Mississippi, LLC will hold substantially all of the assets, and will have assumed substantially all of the liabilities, of Entergy Mississippi. Entergy Mississippi may modify or supplement the steps to be taken to effectuate the restructuring.

Filings with the City Council (Entergy New Orleans)

Energy Smart Programs

As discussed in the Form 10-K, in October 2016,September 2017, Entergy New Orleans filed a supplemental plan and proposed several options for an application seekinginterim cost recovery mechanism necessary to recover program costs during the period between when existing funds directed to Energy Smart programs were depleted and when new rates from the anticipated 2018 combined rate case, which will include a finding fromcost recovery mechanism for Energy Smart funding, take effect (estimated to be August 2019). In December 2017 the City Council approved an energy efficiency cost recovery rider as an interim funding mechanism for Energy Smart, subject to verification that no additional funding sources exist. In June 2018 the City Council also approved a resolution recommending that Entergy New Orleans’s deploymentOrleans allocate approximately $13.5 million of advanced electric and gas metering infrastructure is inbenefits resulting from the public interest. In April 2017,Tax Act to Energy Smart. Entergy New Orleans received 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 certain modifications, including the denial of Entergy New Orleans’s proposed customer charge as a cost recovery mechanism. In June 2017 the procedural schedule was suspended to allow for settlement discussions. A settlement status conference is scheduled for August 2017.
Filings with the PUCT
Other Filings

In September 2016, Entergy Texas filed with the PUCT a request to amend its transmission 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 September 2016 the PUCT suspended the effective date of the tariff change to March 2017. 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 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 two other 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. PUCT action on the stipulation and settlement agreement remains pending.

Advanced Metering Infrastructure (AMI) Filing

In its most recent regular session, 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 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 seeking approval of feesa permanent and stable source of funding for Energy Smart as part of its base rate case filed in July 2018.

Base Rate Case
In July 2018, Entergy New Orleans filed its 2018 base rate case with the City Council.  Entergy New Orleans’s application supports a $20 million decrease in total revenue requirement.  Entergy New Orleans’s rates reflect the inclusion of federal income tax reductions due to the Tax Act and the provisions of a previously approved agreement in principle determining how the benefits of the Tax Act would flow.  Entergy New Orleans included cost of service studies for electric and gas operations for the twelve months ending December 31, 2017 and the projected twelve months ending December 31, 2018.  In addition, Entergy New Orleans included capital additions expected to be placed into service for the period through December 31, 2019.  Entergy New Orleans’s request for a change in rates is based on the projected twelve months ending December 31, 2018.  For electric rates, that wouldresults in a proposed decrease of total revenue requirement of approximately $20 million.  For gas rates, that results in a proposed decrease of $129 thousand.

Entergy New Orleans has requested to restructure electric rates to take into account the addition of electric operations in Algiers, such that a single set of rates will be charged to customers who choose to opt outin the City of receiving service throughNew Orleans, including 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. Entergy Texas expects a decision from the PUCT by December 2017.increase

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in its electric customer charges.  Entergy New Orleans’s request also includes:  a 10.75% return on equity; a three-year formula rate plan for electric (with decoupling) and gas operations, each with a 100 basis point bandwidth (i.e., 10.75% +/- 50 basis points); realignment of capacity and long-term service agreement expense from riders to base rates; implementation of riders for 1) contemporaneous recovery of net cost of advanced metering infrastructure, 2) contemporaneous true-up for existing capacity and long-term service agreement expense, as well as new capacity such as power purchase agreements and battery storage (through the purchased power capacity and acquisition cost recovery rider), 3) recovery of distribution grid modernization, gas infrastructure replacement program, and interim energy efficiency, and 4) permanent recovery mechanism for demand-side management activities, including putting into rate base the costs of demand side management activities and contemporaneous recovery of lost contribution to fixed costs; new depreciation rates for electric and gas assets; and proposed implementation of new voluntary customer offerings (such as green power, fixed bill, community solar, pre-pay electric and gas service, and electric vehicle charging infrastructure options).
Filings with the PUCT (Entergy Texas)

2018 Base Rate Case

In May 2018, Entergy Texas filed a base rate case with the PUCT seeking an increase in base rates and rider rates of approximately $166 million, of which $48 million is associated with moving costs currently being collected through riders into base rates such that the total incremental revenue requirement increase is approximately $118 million. Entergy Texas’s proposed rates and revenues reflect the inclusion of federal income tax reductions due to the Tax Act as well as a rider designed to return approximately $202 million of unprotected excess accumulated deferred federal income taxes over a period of two years following PUCT approval. The base rate case is based on a 12-month test year ending December 31, 2017. In addition, Entergy Texas included capital additions placed into service for the period of April 1, 2013 through December 31, 2017, as well as a post-test year adjustment to include capital additions placed in service by June 30, 2018. A hearing on the merits is scheduled in August 2018.

Advanced Metering Infrastructure (AMI) Filings

Entergy Mississippi

See the Form 10-K for discussion of the MPSC order finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a certificate of public convenience and necessity. In June 2018, as part of the order approving the joint stipulation between the Mississippi Public Utilities Staff and Entergy Mississippi addressing Entergy Mississippi’s 2018 formula rate plan evaluation report and the ratemaking effects of the Tax Act, the MPSC approved the acceleration of the recovery of substantially all of Entergy Mississippi’s existing customer meters in anticipation of AMI deployment.

Entergy New Orleans

As discussed in the Form 10-K, in February 2018 the City Council approved Entergy New Orleans’s application seeking a finding that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest.  Deployment of the information technology infrastructure began in 2017 and deployment of the communications network is expected to begin later in 2018. In April 2018 the City Council adopted a resolution directing Entergy New Orleans to explore the options for accelerating the deployment of AMI. In June 2018 the City Council approved a one year acceleration of AMI in its service area for an incremental $4.4 million, bringing the total capital spending related to AMI for Entergy New Orleans to $79.4 million.

System Agreement Cost Equalization Proceedings

See the Form 10-K for a discussion of the litigation involving the System Agreement at the FERC and in federal courts.

Entergy Arkansas Opportunity Sales Proceedings

As discussed in the Form 10-K, in June 2009August 2017 the LPSC filedD.C. Circuit issued a complaint requesting thatdecision denying 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.

In May 2016, Entergy Services filed a request for rehearingappeal of the FERC’s April 2016 order addressingOctober 2011 and February 2014 orders, but also granting the requests for rehearing filed in July 2012. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. The rehearing and clarification requests filed in May 2016 are pending FERC action.

Pursuantby all parties to the procedural schedule established in the case, Entergy Services re-ran intra-system billsappeal 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. The Utility operating companies have the opportunity to challenge the ALJ’s initial decision by filing a brief on exceptions with 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

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remand and agency reconsideration 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 matter was remanded back to the FERC and, in March 2018, the LPSC filed its brief arguing that the FERC should require the Utility operating companies.  This estimate is subjectcompanies to change depending on howissue refunds for the 20-month refund period from September 2001 to May 2003.   In May 2018, Entergy filed its brief arguing that the FERC resolvesshould not require the issues that are still outstandingUtility operating companies to issue refunds for the 20-month refund period from September 2001 to May 2003.

Also as discussed in the case, including its reviewForm 10-K, the hearing on the bandwidth calculation for the seven months June 1, 2005 through December 31, 2005 occurred in July 2016. The presiding judge issued an initial decision in November 2016. In May 2018 the FERC issued an order affirming the initial decision and ordered a comprehensive recalculation of the bandwidth payments/receipts for the seven months June 1, 2005 through December 31, 2005 and a recalculation of the 2006 and 2007 test years as a result of limited revisions. Entergy filed the comprehensive recalculation of the bandwidth payments/receipts for the seven months June 1, 2005 through December 31, 2005 and the 2006 and 2007 test years in July 20172018. The filing shows the additional following payments and receipts among the Utility operating companies:

Payments (Receipts)
(In Millions)
Entergy Arkansas($4)
Entergy Louisiana($23)
Entergy Mississippi$16
Entergy New Orleans$5
Entergy Texas$6

Rough Production Cost Equalization Rates

Consolidated 2011, 2012, 2013, and 2014 Rate Filing Proceedings

As discussed in the Form 10-K, in December 2014 the FERC consolidated the 2011, 2012, 2013, and 2014 rate filings for settlement and hearing procedures. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimony concerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidth calculations for prior years. Hearings occurred in November 2015, and the ALJ issued an initial decision 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. In March 2018 the FERC issued an order affirming the initial decision. In April 2018 the LPSC requested rehearing of the FERC’s March 2018 order affirming the ALJ’s initial decision. Entergy Arkansas’s increased costs will be attributedfiled in May 2018 the bandwidth true-up payments and receipts for the 2011-2014 rate filings (table does not net to zero due to rounding):

Payments (Receipts)
(In Millions)
Entergy Arkansas$3
Entergy Louisiana$3
Entergy Mississippi($1)
Entergy New Orleans$1
Entergy Texas($5)


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Notes to Financial Statements

Interruptible Load Proceedings

See the wholesale portion.  Entergy Arkansas, therefore, recordedForm 10-K for a regulatory assetdiscussion of the interruptible load proceedings. As discussed in the first quarterForm 10-K, the LPSC appealed the April and September 2016 of approximately $75 million, which represents its estimateorders to the D.C. Circuit. In March 2018 the D.C. Circuit issued an order denying the LPSC’s appeal and affirming the FERC’s decision that it would be inequitable to award refunds in the proceeding. In April 2018 the LPSC sought rehearing en banc of the retail portionD.C. Circuit’s order denying the LPSC’s appeal. In May 2018 the D.C. Circuit denied the LPSC’s rehearing request. In August 2018 the LPSC filed with the Supreme Court of the costs.United States a petition for a writ of certiorari to review the judgment of the D.C. Circuit.

ComplaintComplaints Against System Energy

InReturn on Equity Complaints

As discussed in the Form 10-K, 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%. , which was established in a rate proceeding that became final in July 2001.

The APSC and MPSC 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. ActionIn September 2017 the FERC established a refund effective date of January 23, 2017, consolidated the return on equity complaint with the proceeding described in Unit Power Sales Agreement below, and directed the parties to engage in settlement proceedings before an ALJ. The parties have been unable to settle the return on equity issue and a FERC hearing judge was assigned in July 2018. A prehearing conference is scheduled for August 21, 2018. The 15-month refund effective date in connection with the APSC/MPSC complaint expired on April 23, 2018.

In April 2018 the LPSC filed a complaint with the FERC against System Energy seeking an additional fifteen-month refund period.  The LPSC complaint requests similar relief from the FERC with respect to System Energy’s return on equity and also requests the FERC to investigate System Energy’s capital structure.  The APSC, MPSC, and City Council intervened in the proceeding, filed an answer expressing support for the complaint, and asked the FERC to consolidate this proceeding with the proceeding initiated by the complaint of the APSC and MPSC in January 2017. System Energy answered the LPSC complaint in May 2018 and also filed a motion to dismiss the complaint. In July 2018 the LPSC answered System Energy’s motion to dismiss.

Grand Gulf Sale-leaseback Renewal Complaint

In May 2018, the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal in 2015 of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. The complaint alleges that System Energy violated the filed rate and the FERC’s ratemaking and accounting requirements when it included in Unit Power Sales Agreement billings the cost of capital additions associated with the sale-leaseback interest, and that System Energy is double-recovering costs by including both the lease payments and the capital additions in Unit Power Sales Agreement billings. The complaint also claims that System Energy was imprudent in entering into the sale-leaseback renewal because the Utility operating

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companies that purchase Grand Gulf’s output from System Energy could have obtained cheaper capacity and energy in the MISO markets. The complaint further alleges that System Energy violated various other reporting and accounting requirements and should have sought prior FERC approval of the lease renewal. The complaint seeks various forms of relief from the FERC. The complaint seeks refunds for capital addition costs for all years in which they were recorded in allegedly non-formula accounts or, alternatively, the disallowance of the return on equity for the capital additions in those years plus interest. The complaint also asks that the FERC disallow and refund the lease costs of the sale-leaseback renewal on grounds of imprudence, investigate System Energy’s treatment of a DOE litigation payment, and impose certain forward-looking procedural protections, including audit rights for retail regulators of the Unit Power Sales Agreement formula rates. The APSC, MPSC, and City Council have intervened in the proceeding.

In June 2018, System Energy and Entergy Services filed a motion to dismiss and answer to the LPSC complaint denying that System Energy’s treatment of the sale-leaseback renewal and capital additions violated the terms of the filed rate or any other FERC ratemaking, accounting, or legal requirements or otherwise constituted double recovery. The response also argued that the complaint is pending.inconsistent with a FERC-approved settlement to which the LPSC is a party and that explicitly authorizes System Energy to recover its lease payments. Finally, the response argued that both the capital additions and the sale-leaseback renewal were prudent investments and the LPSC complaint fails to justify any disallowance or refunds. The response asked that the FERC dismiss and reject the LPSC complaint without further action, investigation, or hearing, but also offered to submit formula rate protocols for the Unit Power Sales Agreement similar to the procedures used for reviewing transmission rates under the MISO tariff.

Unit Power Sales Agreement

InAs discussed in the Form 10-K, 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 onIn June 2018, System Energy filed with the FERC an uncontested settlement relating to the updated depreciation rates and nuclear decommissioning studies that take into accountcost annual revenue requirements.

Storm Cost Recovery Filings with Retail Regulators

Entergy Mississippi

As discussed in the renewalForm 10-K, Entergy Mississippi has approval from the MPSC to collect a storm damage provision of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested$1.75 million per month. If Entergy Mississippi’s accumulated storm damage provision balance exceeds $15 million, the collection of the storm damage provision ceases until such time that the FERC acceptaccumulated storm damage provision becomes less than $10 million. As of June 30, 2018, Entergy Mississippi’s storm damage provision balance exceeded $15 million. Accordingly the amendments effective October 1, 2017. Action by the FERC is pending.storm damage provision will reset to zero beginning with August 2018 bills.



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NOTE 3.  EQUITY (Entergy Corporation and Entergy Louisiana)

Common Stock

Earnings per Share

The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
For the Three Months Ended June 30,For the Three Months Ended June 30,
2017 20162018 2017
(In Millions, Except Per Share Data)(In Millions, Except Per Share Data)
Basic earnings per shareIncome Shares $/share Income Shares $/shareIncome Shares $/share Income Shares $/share
Net income attributable to Entergy Corporation
$409.9
 179.5
 
$2.28
 
$567.3
 178.8
 
$3.17

$245.4
 180.8
 
$1.36
 
$409.9
 179.5
 
$2.28
Average dilutive effect of:                      
Stock options  0.2
 
   0.2
 
  0.3
 
   0.2
 
Other equity plans  0.5
 (0.01)   0.5
 (0.01)  0.7
 (0.01)   0.5
 (0.01)
Equity forwards  1.2
 (0.01)   
 
Diluted earnings per share
$409.9
 180.2
 
$2.27
 
$567.3
 179.5
 
$3.16

$245.4
 183.0
 
$1.34
 
$409.9
 180.2
 
$2.27

The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 1.1 million for the three months ended June 30, 2018 and approximately 2.5 million for the three months ended June 30, 2017 and approximately 4.1 million for the three months ended June 30, 2016.2017.

For the Six Months Ended June 30,For the Six Months Ended June 30,
2017 20162018 2017
(In Millions, Except Per Share Data)(In Millions, Except Per Share Data)
Basic earnings per shareIncome Shares $/share Income Shares $/shareIncome Shares $/share Income Shares $/share
Net income attributable to Entergy Corporation
$492.5
 179.4
 
$2.75
 
$797.3
 178.7
 
$4.46

$378.2
 180.8
 
$2.09
 
$492.5
 179.4
 
$2.75
Average dilutive effect of:                      
Stock options  0.2
 
   0.1
 
  0.3
 
   0.2
 
Other equity plans  0.4
 (0.01)   0.4
 (0.01)  0.5
 
   0.4
 (0.01)
Equity forwards  0.6
 (0.01)   
 
Diluted earnings per share
$492.5
 180.0
 
$2.74
 
$797.3
 179.2
 
$4.45

$378.2
 182.2
 
$2.08
 
$492.5
 180.0
 
$2.74

The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 1.1 million for the six months ended June 30, 2018 and approximately 3.7 million for the six months ended June 30, 2017 and approximately 5.1 million for the six months ended June 30, 2016.2017.

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.

Equity Forward Sale Agreements

In June 2018, Entergy marketed an equity offering of 15.3 million shares of common stock. In lieu of issuing equity at the time of the offering, Entergy entered into forward sale agreements with various investment banks. No amounts have or will be recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forwards occur. The equity forwards require Entergy to, at its election prior to June 7, 2019, either (i) physically settle the transactions by issuing the total of 15.3 million shares of its common stock to the investment banks

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Notes to Financial Statements

in exchange for net proceeds at the then-applicable forward sale price specified by the agreements (initially $74.45 per share) or (ii) net settle the transactions in whole or in part through the delivery or receipt of cash or shares. The forward sale price is subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreements.

If Entergy elects physical settlement of the forward sale agreements, it expects to use the net proceeds for general corporate purposes, which may include repayment of commercial paper, outstanding loans under Entergy's revolving credit facility, or other debt.

Until settlement of the equity forwards, earnings per share dilution resulting from the agreements, if any, will be determined under the treasury stock method. Share dilution occurs when the average market price of Entergy’s common stock is higher than the average forward sales price. If Entergy had elected to net share settle the forward sale agreements as of June 30, 2018, Entergy would have been required to deliver 1.2 million shares.

Treasury Stock

During the six months ended June 30, 2017,2018, Entergy Corporation issued 390,013323,364 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 six months ended June 30, 2017.2018.

Retained Earnings

On July 28, 2017,27, 2018, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.87$0.89 per share, payable on September 1, 2017,4, 2018, to holders of record as of August 10, 2017.9, 2018.

Entergy implemented ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” effective January 1, 2018. The ASU requires investments in equity securities, excluding those accounted for under the equity method or resulting in consolidation of the investee, to be measured at fair value with changes recognized in net income. Entergy implemented this standard using a modified retrospective method, and recorded an adjustment increasing retained earnings and reducing accumulated other comprehensive income by $633 million 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. See Note 9 to the financial statements herein for further discussion of effects of the new standard.

Entergy implemented ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” effective January 1, 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 implemented this standard using a modified retrospective method, and recorded an adjustment decreasing retained earnings by $56 million as of January 1, 2018 for the cumulative effect of recording deferred tax assets on previously-recognized intra-entity asset transfers.

Entergy adopted ASU No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” in the first quarter 2018. The ASU allows a one-time reclassification from accumulated other comprehensive income to retained earnings for certain tax effects resulting from the Tax Cuts and Jobs Act that would otherwise be stranded in accumulated other comprehensive income.  Entergy’s policy for releasing income tax effects from accumulated other comprehensive income for available-for-sale securities is to use the portfolio approach.  Entergy elected to reclassify the $15.5 million of stranded tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act to retained earnings ($32 million decrease) or the regulatory liability for income taxes ($16.5 million increase). Entergy’s reclassification only includes the effect of the change in the federal corporate income tax rate on accumulated other comprehensive income.

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Comprehensive Income

Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 30, 20172018 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)
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)(In Thousands)
Beginning balance, April 1, 2017
$3,465
 
($460,814) 
$467,561
 
$748
 
$10,960
Beginning balance, April 1, 2018
$50,194
 
($605,491) 
($6,201) 
($561,498)
Other comprehensive income (loss) before reclassifications28,057
 
 33,870
 (748) 61,179
(62,981) 
 (7,509) (70,490)
Amounts reclassified from accumulated other comprehensive income (loss)(8,108) 10,916
 (22,174) 
 (19,366)(2,087) 15,565
 4,868
 18,346
Net other comprehensive income (loss) for the period19,949
 10,916
 11,696
 (748) 41,813
(65,068) 15,565
 (2,641) (52,144)
Ending balance, June 30, 2017
$23,414
 
($449,898) 
$479,257
 
$—
 
$52,773
Ending balance, June 30, 2018
($14,874) 
($589,926) 
($8,842) 
($613,642)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended June 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, April 1, 2016
$96,464
 
($459,042) 
$390,626
 
$1,744
 
$29,792
Beginning balance, April 1, 2017
$3,465
 
($460,814) 
$467,561
 
$748
 
$10,960
Other comprehensive income (loss) before reclassifications(34,138) 
 24,016
 (904) (11,026)28,057
 
 33,870
 (748) 61,179
Amounts reclassified from accumulated other comprehensive income (loss)(29,903) 5,043
 (3,061) 
 (27,921)(8,108) 10,916
 (22,174) 
 (19,366)
Net other comprehensive income (loss) for the period(64,041) 5,043
 20,955
 (904) (38,947)19,949
 10,916
 11,696
 (748) 41,813
Ending balance, June 30, 2016
$32,423
 
($453,999) 
$411,581
 
$840
 
($9,155)
Ending balance, June 30, 2017
$23,414
 
($449,898) 
$479,257
 
$—
 
$52,773


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Notes to Financial Statements

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 30, 20172018 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)
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In Thousands)(In Thousands)
Beginning balance, January 1, 2017
$3,993
 
($469,446) 
$429,734
 
$748
 
($34,971)
       
Ending balance, December 31, 2017
($37,477) 
($531,099) 
$545,045
 
($23,531)
Implementation of accounting standards
 
 (632,617) (632,617)
Beginning balance, January 1, 2018
($37,477) 
($531,099) 
($87,572) 
($656,148)
       
Other comprehensive income (loss) before reclassifications60,665
 
 73,742
 (748) 133,659
8,585
 
 (43,785) (35,200)
Amounts reclassified from accumulated other comprehensive income (loss)(41,244) 19,548
 (24,219) ��
 (45,915)21,774
 32,139
 8,288
 62,201
Net other comprehensive income (loss) for the period19,421
 19,548
 49,523
 (748) 87,744
30,359
 32,139
 (35,497) 27,001
Ending balance, June 30, 2017
$23,414
 
($449,898) 
$479,257
 
$—
 
$52,773
       
Reclassification pursuant to ASU 2018-02(7,756) (90,966) 114,227
 15,505
       
Ending balance, June 30, 2018
($14,874) 
($589,926) 
($8,842) 
($613,642)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the six months ended June 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)
 (In Thousands)
Beginning balance, January 1, 2016
$105,970
 
($466,604) 
$367,557
 
$2,028
 
$8,951
Other comprehensive income (loss) before reclassifications56,169
 
 49,048
 (1,188) 104,029
Amounts reclassified from accumulated other comprehensive income (loss)(129,716) 12,605
 (5,024) 
 (122,135)
Net other comprehensive income (loss) for the period(73,547) 12,605
 44,024
 (1,188) (18,106)
Ending balance, June 30, 2016
$32,423
 
($453,999) 
$411,581
 
$840
 
($9,155)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended June 30, 2017 and 2016:
  Pension and Other
Postretirement Liabilities
  2017 2016
  (In Thousands)
Beginning balance, April 1, 
($48,812) 
($56,675)
Amounts reclassified from accumulated other
comprehensive income (loss)
 (310) (230)
Net other comprehensive income (loss) for the period (310) (230)
Ending balance, June 30, 
($49,122) 
($56,905)

 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 
Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 (In Thousands)
Beginning balance, January 1, 2017
$3,993
 
($469,446) 
$429,734
 
$748
 
($34,971)
Other comprehensive income (loss) before reclassifications60,665
 
 73,742
 (748) 133,659
Amounts reclassified from accumulated other comprehensive income (loss)(41,244) 19,548
 (24,219) 
 (45,915)
Net other comprehensive income (loss) for the period19,421
 19,548
 49,523
 (748) 87,744
Ending balance, June 30, 2017
$23,414
 
($449,898) 
$479,257
 
$—
 
$52,773

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The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended June 30, 2018 and 2017:
  Pension and Other
Postretirement Liabilities
  2018 2017
  (In Thousands)
Beginning balance, April 1, 
($56,950) 
($48,812)
Amounts reclassified from accumulated other
comprehensive income (loss)
 (501) (310)
Net other comprehensive income (loss) for the period (501) (310)
     
Ending balance, June 30, 
($57,451) 
($49,122)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the six months ended June 30, 20172018 and 2016:2017:
 Pension and Other
Postretirement Liabilities
 Pension and Other
Postretirement Liabilities
 2017 2016 2018 2017
 (In Thousands) (In Thousands)
Beginning balance, January 1, 
($48,442) 
($56,412) 
($46,400) 
($48,442)
Amounts reclassified from accumulated other
comprehensive income (loss)
 (680) (493) (1,002) (680)
Net other comprehensive income (loss) for the period (680) (493) (1,002) (680)
    
Reclassification pursuant to ASU 2018-02 (10,049) 
    
Ending balance, June 30, 
($49,122) 
($56,905) 
($57,451) 
($49,122)


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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended June 30, 20172018 and 20162017 are as follows:

Amounts reclassified
from AOCI

Income Statement LocationAmounts reclassified
from AOCI

Income Statement Location
2017 2016 2018 2017 

(In Thousands)
(In Thousands)
Cash flow hedges net unrealized gain (loss)
  

  
Power contracts
$12,695
 
$45,975

Competitive business operating revenues
$2,735
 
$12,695

Competitive business operating revenues
Interest rate swaps(219) 30

Miscellaneous - net(93) (219)
Miscellaneous - net
Total realized gain (loss) on cash flow hedges12,476
 46,005


2,642
 12,476



(4,368) (16,102)
Income taxes(555) (4,368)
Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
$8,108
 
$29,903



$2,087
 
$8,108





  



  

Pension and other postretirement liabilities

  



  

Amortization of prior-service credit
$6,564
 
$7,355

(a)
$5,424
 
$6,564

(a)
Amortization of loss(21,554) (15,177)
(a)(24,808) (21,554)
(a)
Settlement loss(1,765) 

(a)(406) (1,765)
(a)
Total amortization(16,755) (7,822)

(19,790) (16,755)


5,839
 2,779

Income taxes4,225
 5,839

Income taxes
Total amortization (net of tax)
($10,916) 
($5,043)


($15,565) 
($10,916)



  

  
Net unrealized investment gain (loss)
  

  
Realized gain (loss)
$43,479
 
$6,000

Interest and investment income
($7,702) 
$43,479

Interest and investment income

(21,305) (2,939)
Income taxes2,834
 (21,305)
Income taxes
Total realized investment gain (loss) (net of tax)
$22,174
 
$3,061



($4,868) 
$22,174





  



  

Total reclassifications for the period (net of tax)
$19,366
 
$27,921



($18,346) 
$19,366



(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.

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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the six months ended June 30, 2018 and 2017 are as follows:
 
Amounts reclassified
from AOCI
 Income Statement Location
 2018 2017  
 (In Thousands)  
Cash flow hedges net unrealized gain (loss)     
   Power contracts
($27,347) 
$63,922
 Competitive business operating revenues
   Interest rate swaps(215) (469) Miscellaneous - net
Total realized gain (loss) on cash flow hedges(27,562) 63,453
  
 5,788
 (22,209) Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
($21,774) 
$41,244
  
      
Pension and other postretirement liabilities     
   Amortization of prior-service credit
$10,850
 
$13,126
 (a)
   Amortization of loss(49,760) (43,125) (a)
   Settlement loss(2,022) (1,765) (a)
Total amortization(40,932) (31,764)  
 8,793
 12,216
 Income taxes
Total amortization (net of tax)
($32,139) 
($19,548)  
      
Net unrealized investment gain (loss)     
Realized gain (loss)
($13,114) 
$47,489
 Interest and investment income
 4,826
 (23,270) Income taxes
Total realized investment gain (loss) (net of tax)
($8,288) 
$24,219
  
      
Total reclassifications for the period (net of tax)
($62,201) 
$45,915
  

(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.


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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the six months ended June 30, 2017 and 2016 are as follows:
 
Amounts reclassified
from AOCI
 Income Statement Location
 2017 2016  
 (In Thousands)  
Cash flow hedges net unrealized gain (loss)     
   Power contracts
$63,922
 
$199,933
 Competitive business operating revenues
   Interest rate swaps(469) (370) Miscellaneous - net
Total realized gain (loss) on cash flow hedges63,453
 199,563
  
 (22,209) (69,847) Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
$41,244
 
$129,716
  
      
Pension and other postretirement liabilities     
   Amortization of prior-service credit
$13,126
 
$14,710
 (a)
   Amortization of loss(43,125) (30,352) (a)
   Settlement loss(1,765) 
 (a)
Total amortization(31,764) (15,642)  
 12,216
 3,037
 Income taxes
Total amortization (net of tax)
($19,548) 
($12,605)  
      
Net unrealized investment gain (loss)     
Realized gain (loss)
$47,489
 
$9,850
 Interest and investment income
 (23,270) (4,826) Income taxes
Total realized investment gain (loss) (net of tax)
$24,219
 
$5,024
  
      
Total reclassifications for the period (net of tax)
$45,915
 
$122,135
  

(a)These accumulated other comprehensiveinto 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.




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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the three months ended June 30, 20172018 and 20162017 are as follows:
 Amounts reclassified
from AOCI
 Income Statement Location Amounts reclassified
from AOCI
 Income Statement Location
 2017 2016  2018 2017 
 (In Thousands)  (In Thousands) 
Pension and other postretirement liabilities          
Amortization of prior-service credit 
$1,934
 
$1,947
 (a) 
$1,934
 
$1,934
 (a)
Amortization of loss (1,332) (1,573) (a) (1,256) (1,332) (a)
Total amortization 602
 374
  678
 602
 
 (292) (144) Income taxes (177) (292) Income taxes
Total amortization (net of tax) 310
 230
  501
 310
 
          
Total reclassifications for the period (net of tax) 
$310
 
$230
  
$501
 
$310
 

(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) into income for Entergy Louisiana for the six months ended June 30, 20172018 and 20162017 are as follows:
 Amounts reclassified
from AOCI
 Income Statement Location Amounts reclassified
from AOCI
 Income Statement Location
 2017 2016  2018 2017 
 (In Thousands)  (In Thousands) 
Pension and other postretirement liabilities          
Amortization of prior-service credit 
$3,868
 
$3,894
 (a) 
$3,868
 
$3,868
 (a)
Amortization of loss (2,664) (3,142) (a) (2,513) (2,664) (a)
Total amortization 1,204
 752
  1,355
 1,204
 
 (524) (259) Income taxes (353) (524) Income taxes
Total amortization (net of tax) 680
 493
  1,002
 680
 
          
Total reclassifications for the period (net of tax) 
$680
 
$493
  
$1,002
 
$680
 

(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 includes fronting commitments for the ability to issueissuance of letters of credit against 50%$20 million 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 six months ended June 30,

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2017 2018 was 2.38%3.34% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of June 30, 2017.2018.

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Capacity Borrowings 
Letters
of Credit
 
Capacity
Available
 Borrowings 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500 $225 $6 $3,269 $390 $6 $3,104

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$2 billion.  At June 30, 2017,2018, Entergy Corporation had $1.1 billionapproximately $1,945 million of commercial paper outstanding.  The weighted-average interest rate for the six months ended June 30, 20172018 was 1.38%2.31%.

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of June 30, 20172018 as follows:
Company 
Expiration
Date
 
Amount of
Facility
 Interest Rate (a) 
Amount Drawn
as of
June 30, 20172018
 
Letters of Credit
Outstanding as of June 30, 20172018
Entergy Arkansas April 20182019 $20 million (b) 2.48%3.34% $— $—
Entergy Arkansas August 20212022 $150 million (c) 2.48%3.34% $— $—
Entergy Louisiana August 20212022 $350 million (d)(c) 2.48%3.34% $— $4.59.1 million
Entergy Mississippi May 20182019 $37.5 million (e)(d) 2.73%3.59% $— $—
Entergy Mississippi May 20182019 $35 million (e)(d) 2.73%3.59% $— $—
Entergy Mississippi May 2018$20 million (e)2.73%$—$—
Entergy MississippiMay 20182019 $10 million (e)(d) 2.73%3.59% $— $—
Entergy New Orleans November 2018 $25 million (f)(c) 2.70%3.57% $— $0.8 million
Entergy Texas August 20212022 $150 million (g)(c) 2.73%3.59% $— $13.324.4 million

(a)TheFor credit facilities with no borrowings as of June 30, 2018, the interest rate is the estimated interest rate as of June 30, 20172018 that would most likely applyhave been applied 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 issueincludes fronting commitments for the issuance of letters of credit against 50%a portion of the borrowing capacity of the facility.  facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.
(d)The credit facility allows Entergy Louisiana to issue letters of credit against 50% of the borrowing capacity of the facility.  
(e)Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.
(f)The credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility.  
(g)The credit facility allows Entergy Texas to issue letters of credit against 50% of the borrowing capacity of the facility.  


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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.

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 to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of June 30, 2017:2018:

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Company 
Amount of
Uncommitted Facility
 Letter of Credit Fee 
Letters of Credit
Issued as of
June 30, 20172018 (a)
Entergy Arkansas $25 million 0.70% $1.01 million
Entergy Louisiana $125 million 0.70% $36.837.8 million
Entergy Mississippi $40 million 0.70% $7.820.2 million
Entergy New Orleans $15 million 0.75%1.00% $5.67.4 million
Entergy Texas $50 million 0.70% $22.312.5 million

(a)As of June 30, 2017,2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.3$0.6 million for Entergy Arkansas and $0.1$0.2 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 and from other internal short-term borrowing arrangements.  The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings.  Borrowings from internal and external short term borrowings combined may not exceed the FERC-authorized limits.  The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of June 30, 20172018 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
Authorized BorrowingsAuthorized Borrowings
(In Millions)(In Millions)
Entergy Arkansas$250 $14$250 $—
Entergy Louisiana$450 $—$450 $—
Entergy Mississippi$175 $56$175 $63
Entergy New Orleans$100 $—$150 $23
Entergy Texas$200 $39$200 $—
System Energy$200 $—$200 $—

Entergy Nuclear Vermont Yankee Credit FacilitiesFacility

Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $100$145 million whichthat expires in January 2018.November 2020.  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 June 30, 2017, $712018, $108 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the six months ended June 30, 20172018 was 2.44%3.26% on the drawn portion of the facility.

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

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have the ability to issue letters of credit against the credit facility. This facility provides an additional funding source to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee.  As of June 30, 2017, there were no cash borrowings outstanding under the credit facility. The rate as of June 30, 2017that would most likely apply to outstanding borrowings under the facility was 2.72%.

Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)

See Note 17 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 issueissued commercial paper as of June 30, 20172018 as follows:

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Company 
Expiration
Date
 
Amount
of
Facility
 Weighted Average Interest Rate on Borrowings (a) 
Amount
Outstanding as of
June 30, 2017
 
Expiration
Date
 
Amount
of
Facility
 Weighted Average Interest Rate on Borrowings (a) 
Amount
Outstanding as of
June 30, 2018
 
 (Dollars in Millions) 
 (Dollars in Millions)
Entergy Arkansas VIE May 2019 $80 2.39% $31.4 (b) May 2019 $80 3.08% $41.7
Entergy Louisiana River Bend VIE May 2019 $105 2.12% $15.5 May 2019 $105 3.09% $44.8
Entergy Louisiana Waterford VIE May 2019 $85 2.38% $70.8 (c) May 2019 $85 3.07% $45.4
System Energy VIE May 2019 $120 2.42% $103.2 (d) May 2019 $120 3.79% $38.9 (b)

(a)Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel company variable interest entity for Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility.
(b)Includes borrowings on the credit facilityThe total amount outstanding as of June 30, 2018 is commercial paper, and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for Entergy Arkansas VIE as of June 30, 2017 was $14.7 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 June 30, 2017 was $34.5 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 June 30, 2017 was $53.2 million.liability.

The commitment fees on the credit facilities are 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.


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The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of June 30, 20172018 as follows:
Company Description Amount
Entergy Arkansas VIE2.62% Series K due December 2017$60 million
Entergy Arkansas VIE
 3.65% Series L due July 2021
 $90 million
Entergy Arkansas VIE 3.17% Series M due December 2023 $40 million
Entergy Louisiana River Bend VIE 3.25% Series Q due July 2017$75 million
Entergy Louisiana River Bend VIE3.38% Series R due August 2020 $70 million
Entergy Louisiana Waterford VIE3.25% Series G due July 2017$25 million
Entergy Louisiana Waterford VIE 3.92% Series H due February 2021 $40 million
Entergy Louisiana Waterford VIE 3.22% Series I due December 2023 $20 million
System Energy VIE 3.78% Series I due October 2018 $85 million
System Energy VIE3.42% Series J due April 2021$100 million

In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.

Debt Issuances and Retirements

(Entergy Arkansas)

In May 2017,2018, Entergy Arkansas issued $220$250 million of 3.5%4.00% 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 2016.2028. Entergy Arkansas used a portion ofexpects to use the proceeds, from the May 2017 issuancetogether with other funds, to redeem $9.4 million of its 4.72% Series preferred stock, $7 million of its 4.32% Series preferred stock, and $15 million of its 4.56% Series preferred stock; and for general corporate purposes and plans to use the remainder of the proceeds to pay, at maturity, its $54.7 million of 1.55% pollution control revenue refunding bonds due October 2017.purposes.

(Entergy Louisiana)

In May 2017,March 2018, Entergy Louisiana issued $450$750 million of 3.12%4.00% collateral trust mortgage bonds due September 2027.March 2033. Entergy Louisiana used a portion of the proceeds to finance the construction of the St. Charles Power Station, to pay,repay at maturity its $45.3$375 million of Waterford6.0% Series collateral trustfirst mortgage notes,bonds due May 2018; to repay borrowings from the money pool; and for general corporate purposes.

In July 2017 the Entergy Louisiana River Bend nuclear fuel company variable interest entity paid, at maturity,to repay borrowings under its $75 million of 3.25% Series Q notes.

In July 2017 the Entergy Louisiana Waterford nuclear fuel company variable interest entity paid, at maturity, its $25 million of 3.25% Series G notes.

(System Energy)

In February 2017 the System Energy nuclear fuel company variable interest entity paid, at maturity, its $50 million of 4.02% Series H notes.

$350

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million credit facility. The remaining proceeds, together with other funds, are being used to finance the construction of the Lake Charles Power Station and St. Charles Power Station; and for general corporate purposes.

(System Energy)

In March 2018 the System Energy nuclear fuel trust variable interest entity issued $100 million of 3.42% Series J notes due April 2021. The System Energy nuclear fuel trust variable interest entity used the proceeds to purchase additional nuclear fuel.
Fair Value

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of June 30, 20172018 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
$15,010,668
 
$15,239,655

$15,874,594
 
$15,521,205
Entergy Arkansas
$3,064,261
 
$2,942,288

$3,212,424
 
$2,991,503
Entergy Louisiana
$6,246,015
 
$6,484,470

$6,491,723
 
$6,406,225
Entergy Mississippi
$1,121,356
 
$1,137,274

$1,270,559
 
$1,240,643
Entergy New Orleans
$444,159
 
$467,094

$431,795
 
$441,342
Entergy Texas
$1,471,091
 
$1,560,208

$1,548,180
 
$1,581,882
System Energy
$551,296
 
$482,650

$601,662
 
$571,461

(a)The values exclude lease obligations of $34 million at System Energy and long-term DOE obligations of $182$185 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.herein.

The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 20162017 were as follows:
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
(In Thousands)(In Thousands)
Entergy
$14,832,555
 
$14,815,535

$15,075,266
 
$15,367,453
Entergy Arkansas
$2,829,785
 
$2,623,910

$2,952,399
 
$2,865,844
Entergy Louisiana
$5,812,791
 
$5,929,488

$6,144,071
 
$6,389,774
Entergy Mississippi
$1,120,916
 
$1,086,203

$1,270,122
 
$1,285,741
Entergy New Orleans
$448,994
 
$455,459

$436,870
 
$455,968
Entergy Texas
$1,508,407
 
$1,600,156

$1,587,150
 
$1,661,902
System Energy
$551,132
 
$529,520

$551,488
 
$529,119

(a)The values exclude the lease obligations of $57 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $182$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.herein.


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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.


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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 791,900687,400 shares of its common stock under the 2015 Equity Ownership Plan during the first quarter 20172018 with a weighted-average fair value of $6.54$6.99 per option.  As of June 30, 2017,2018, there were options on 6,162,3594,370,733 shares of common stock outstanding with a weighted-average exercise price of $81.65.$74.40.  The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of June 30, 2017.  Because Entergy’s stock price at June 30, 2017 was less than the weighted average exercise price, the2018.  The aggregate intrinsic value of the stock options outstanding as of June 30, 20172018 was zero. The intrinsic value of all “in the money” stock options was $21.5 million as of June 30, 2017.$27.9 million.    

The following table includes financial information for outstanding stock options for the three months ended June 30, 20172018 and 2016:

2017:
   
2017 20162018 2017
(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
$0.4
 
$0.4

$0.3
 
$0.4
Compensation cost capitalized as part of fixed assets and inventory
$0.2
 
$0.2

$0.2
 
$0.2

The following table includes financial information for outstanding stock options for the six months ended June 30, 20172018 and 2016:2017:
2017 20162018 2017
(In Millions)(In Millions)
Compensation expense included in Entergy’s net income
$2.2
 
$2.2

$2.2
 
$2.2
Tax benefit recognized in Entergy’s net income
$0.8
 
$0.8

$0.6
 
$0.8
Compensation cost capitalized as part of fixed assets and inventory
$0.4
 
$0.4

$0.4
 
$0.4

Other Equity Awards

In January 20172018 the Board approved and Entergy granted 379,850333,850 restricted stock awards and 220,450182,408 long-term incentive awards under the 2015 Equity Ownership Plan.  The restricted stock awards were made effective as of January 26, 201725, 2018 and were valued at $70.53$78.08 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. Beginning with the 2018-2020 performance period, a cumulative utility earnings metric has been added to the Long-Term Performance Unit Program to supplement the relative total shareholder return measure that historically has been used in this program with each measure equally weighted.  The performance units were granted effective as of January 26, 201725, 2018 and half were valued at $71.40$78.08 per share.  Entergy considersshare, the closing price of Entergy’s common stock on that date; and half were valued at $86.75 per share based on various factors, primarily market conditions,conditions.  See Note 12 to the financial statements in determining the valueForm 10-K for a description of the performance units.Long-Term Performance Unit Program.  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.

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The following table includes financial information for other outstanding equity awards for the three months ended June 30, 20172018 and 2016:2017:
2017 20162018 2017
(In Millions)(In Millions)
Compensation expense included in Entergy’s net income
$8.2
 
$8.5

$8.7
 
$8.2
Tax benefit recognized in Entergy’s net income
$3.2
 
$3.3

$2.2
 
$3.2
Compensation cost capitalized as part of fixed assets and inventory
$2.2
 
$1.9

$2.5
 
$2.2

The following table includes financial information for other outstanding equity awards for the six months ended June 30, 20172018 and 2016:2017:
2017 20162018 2017
(In Millions)(In Millions)
Compensation expense included in Entergy’s net income
$16.4
 
$16.9

$17.5
 
$16.4
Tax benefit recognized in Entergy’s net income
$6.3
 
$6.5

$4.4
 
$6.3
Compensation cost capitalized as part of fixed assets and inventory
$4.2
 
$3.7

$4.8
 
$4.2


NOTE 6.  RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy implemented ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” effective January 1, 2018. 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 and are presented by Entergy in miscellaneous - net in other income. The amendment regarding the presentation of net benefit cost was required to be applied retrospectively for all periods presented. In addition, the ASU allows only the service cost component of net benefit cost to be eligible for capitalization on a prospective basis. In accordance with the regulatory treatment of net benefit cost of the Registrant Subsidiaries, a regulatory asset/liability will be recorded in other regulatory assets/liabilities for the non-service cost components of net benefit cost that would have been capitalized. The retroactive presentation changes resulted in decreases (increases) in other operation and maintenance expenses and decreases (increases) in other income for the three months ended June 30, 2017, with no change in net income, of $25 million for Entergy, $3.6 million for Entergy Arkansas, $6.2 million for Entergy Louisiana, $0.5 million for Entergy Mississippi, $0.2 million for Entergy New Orleans, $14 thousand for Entergy Texas, and $2.3 million for System Energy. The retroactive presentation changes resulted in decreases (increases) in other operation and maintenance expenses and decreases (increases) in other income for the six months ended June 30, 2017, with no change in net income, of $46 million for Entergy, $6.4 million for Entergy Arkansas, $12.3 million for Entergy Louisiana, $1.1 million for Entergy Mississippi, $0.4 million for Entergy New Orleans, ($0.2) million for Entergy Texas, and $3.3 million for System Energy. The retroactive effect of the change for the year ended December 31, 2017 would be decreases in other operation and maintenance expenses and decreases in other income, with no change in net income, of $108 million for Entergy, $13.7 million for Entergy Arkansas, $27.8 million for Entergy Louisiana, $2.7 million for Entergy Mississippi, $1.3 million for Entergy New Orleans, $0.2 million for Entergy Texas, and $6.2 million for System Energy.  The retroactive effect of the change for the year ended December 31, 2016 would be decreases (increases) in other operation and maintenance expenses and decreases (increases) in other income, with no change in net income, of $71 million for Entergy, $13.4 million for Entergy Arkansas, $26.1 million for Entergy Louisiana, $2.4 million for Entergy Mississippi, $1 million for Entergy New Orleans, ($1.1) million for Entergy Texas, and $5.1 million for System Energy. The retroactive effect of the change for the year ended December 31, 2015 would be decreases in other operation and maintenance expenses and decreases in other income, with no change in net income, of $148 million for Entergy, $30.7

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million for Entergy Arkansas, $50.7 million for Entergy Louisiana, $6.3 million for Entergy Mississippi, $4 million for Entergy New Orleans, $4 million for Entergy Texas, and $10.2 million for System Energy.
Components of Qualified Net Pension Cost

Entergy’s qualified pension cost, including amounts capitalized, for the second quarters of 20172018 and 2016,2017, included the following components:
2017 20162018 2017
(In Thousands)(In Thousands)
Service cost - benefits earned during the period
$33,410
 
$35,811

$38,752
 
$33,410
Interest cost on projected benefit obligation65,206
 65,403
66,854
 65,206
Expected return on assets(102,056) (97,366)(110,535) (102,056)
Amortization of prior service cost65
 270
99
 65
Amortization of loss56,930
 48,824
68,526
 56,930
Net pension costs
$53,555
 
$52,942

$63,696
 
$53,555
    
Entergy’s qualified pension cost, including amounts capitalized, for the six months ended June 30, 20172018 and 2016,2017, included the following components:
 2017 2016
 (In Thousands)
Service cost - benefits earned during the period
$66,820
 
$71,622
Interest cost on projected benefit obligation130,412
 130,806
Expected return on assets(204,112) (194,732)
Amortization of prior service cost130
 540
Amortization of loss113,860
 97,648
Net pension costs
$107,110
 
$105,884


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 2018 2017
 (In Thousands)
Service cost - benefits earned during the period
$77,504
 
$66,820
Interest cost on projected benefit obligation133,708
 130,412
Expected return on assets(221,070) (204,112)
Amortization of prior service cost198
 130
Amortization of loss137,052
 113,860
Net pension costs
$127,392
 
$107,110

The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the second quarters of 20172018 and 2016,2017, included the following components:
2018 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
 Mississippi
 Entergy
New Orleans
 Entergy
Texas
 System
Energy
  (In Thousands)
Service cost - benefits earned during the period 
$6,189
 
$8,446
 
$1,822
 
$673
 
$1,589
 
$1,776
Interest cost on projected benefit obligation 13,004
 14,940
 3,769
 1,813
 3,348
 3,227
Expected return on assets (21,851) (24,809) (6,502) (2,993) (6,523) (4,991)
Amortization of loss 13,412
 14,450
 3,610
 1,954
 2,626
 3,715
Net pension cost 
$10,754
 
$13,027
 
$2,699
 
$1,447
 
$1,040
 
$3,727

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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
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 six months ended June 30, 20172018 and 2016,2017, included the following components:
2017 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$10,180
 
$13,850
 
$2,944
 
$1,250
 
$2,728
 
$3,072
 
$12,378
 
$16,892
 
$3,644
 
$1,346
 
$3,178
 
$3,552
Interest cost on projects benefit obligation 25,888
 29,618
 7,464
 3,582
 6,784
 6,182
 26,008
 29,880
 7,538
 3,626
 6,696
 6,454
Expected return on assets (40,854) (46,034) (12,262) (5,600) (12,360) (9,326) (43,702) (49,618) (13,004) (5,986) (13,046) (9,982)
Amortization of loss 23,280
 24,708
 6,106
 3,316
 4,620
 5,928
 26,824
 28,900
 7,220
 3,908
 5,252
 7,430
Net pension cost 
$18,494
 
$22,142
 
$4,252
 
$2,548
 
$1,772
 
$5,856
 
$21,508
 
$26,054
 
$5,398
 
$2,894
 
$2,080
 
$7,454
2016 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
  (In Thousands)
Service cost - benefits earned during the period 
$10,362
 
$14,098
 
$3,124
 
$1,312
 
$2,832
 
$3,132
Interest cost on projected benefit obligation 26,110
 29,740
 7,622
 3,628
 7,114
 5,984
Expected return on assets (39,544) (44,192) (11,962) (5,374) (12,124) (8,918)
Amortization of loss 21,872
 23,892
 5,970
 3,230
 4,680
 5,208
Net pension cost 
$18,800
 
$23,538
 
$4,754
 
$2,796
 
$2,502
 
$5,406

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
2017 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
  (In Thousands)
Service cost - benefits earned during the period 
$10,180
 
$13,850
 
$2,944
 
$1,250
 
$2,728
 
$3,072
Interest cost on projected benefit obligation 25,888
 29,618
 7,464
 3,582
 6,784
 6,182
Expected return on assets (40,854) (46,034) (12,262) (5,600) (12,360) (9,326)
Amortization of loss 23,280
 24,708
 6,106
 3,316
 4,620
 5,928
Net pension cost 
$18,494
 
$22,142
 
$4,252
 
$2,548
 
$1,772
 
$5,856

Non-Qualified Net Pension Cost

Entergy recognized $8.5$6.6 million and $4.3$8.5 million in pension cost for its non-qualified pension plans in the second quarters of 20172018 and 2016,2017, respectively. Reflected in the pension cost for non-qualified pension plans in the second quarterquarters of 2018 and 2017 is awere settlement charges of $2.4 million and $4 million, settlement charge recognized in June 2017respectively, related to the payment of lump sum benefits out of thisthe plan. Entergy recognized $15.5 million and $13.1 million and $8.5 million in pensions costspension cost for its non-qualified pension plans for the six months ended June 30, 20172018 and 2016,2017, respectively. Reflected in the pension cost for non-qualified pension plans for the six months ended June 30, 2018 and 2017 is awere settlement charges of $6.8 million and $4 million, settlement charge recognized in June 2017respectively, related to the payment of lump sum benefits out of this plan.


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Notes to Financial Statements

The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the second quarters of 2018 and 2017:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 (In Thousands)
2018
$122
 
$46
 
$77
 
$21
 
$270
2017
$267
 
$47
 
$63
 
$18
 
$126

Reflected in Entergy Arkansas’s non-qualified pension costs in the second quarters of 2018 and 2017, were settlement charges of $10 thousand and 2016:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 (In Thousands)
2017
$267
 
$47
 
$63
 
$18
 
$126
2016
$106
 
$59
 
$59
 
$16
 
$127
$163 thousand, respectively, related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs in the second quarter of 2018 were settlement charges of $139 thousand 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 six months ended June 30, 20172018 and 2016:2017:
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
(In Thousands)(In Thousands)
2018
$254
 
$96
 
$157
 
$42
 
$407
2017
$372
 
$96
 
$127
 
$36
 
$253

$372
 
$96
 
$127
 
$36
 
$253
2016
$212
 
$118
 
$118
 
$32
 
$254

Reflected in Entergy Arkansas’s non-qualified pension costs in the second quarter 2017 and for the six months ended June 30, 2018 and 2017, iswere settlement charges of $22 thousand and $163 thousand, respectively, related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs for the six months ended June 30, 2018 were settlement charges recognized in June 2017of $139 thousand related to the payment of lump sum benefits out of the plan.

Components of Net Other Postretirement Benefit Cost

Entergy’s other postretirement benefit cost, including amounts capitalized, for the second quarters of 20172018 and 2016,2017, included the following components:
2017 20162018 2017
(In Thousands)(In Thousands)
Service cost - benefits earned during the period
$6,729
 
$8,073

$6,782
 
$6,729
Interest cost on accumulated postretirement benefit obligation (APBO)13,960
 14,083
12,681
 13,960
Expected return on assets(9,408) (10,455)(10,373) (9,408)
Amortization of prior service credit(10,356) (11,373)(9,251) (10,356)
Amortization of loss5,476
 4,554
3,432
 5,476
Net other postretirement benefit cost
$6,401
 
$4,882

$3,271
 
$6,401

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Notes to Financial Statements


Entergy’s other postretirement benefit cost, including amounts capitalized, for the six months ended June 30, 20172018 and 2016,2017, included the following components:
2017 20162018 2017
(In Thousands)(In Thousands)
Service cost - benefits earned during the period
$13,458
 
$16,146

$13,564
 
$13,458
Interest cost on accumulated postretirement benefit obligation (APBO)27,920
 28,166
25,362
 27,920
Expected return on assets(18,816) (20,910)(20,746) (18,816)
Amortization of prior service credit(20,712) (22,746)(18,502) (20,712)
Amortization of loss10,952
 9,108
6,864
 10,952
Net other postretirement benefit cost
$12,802
 
$9,764

$6,542
 
$12,802

The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the second quarters of 20172018 and 2016,2017, included the following components:
2017 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New Orleans
 Entergy
Texas
 System
Energy
2018 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New Orleans
 Entergy
Texas
 System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$863
 
$1,593
 
$290
 
$142
 
$372
 
$320
 
$793
 
$1,556
 
$321
 
$129
 
$330
 
$306
Interest cost on APBO 2,255
 3,025
 690
 469
 1,124
 559
 1,997
 2,789
 683
 417
 939
 500
Expected return on assets (3,959) 
 (1,200) (1,159) (2,180) (717) (4,342) 
 (1,303) (1,313) (2,446) (783)
Amortization of prior service credit (1,278) (1,934) (456) (186) (579) (378) (1,278) (1,934) (456) (186) (579) (378)
Amortization of loss 1,115
 465
 419
 105
 826
 390
 289
 388
 377
 34
 206
 233
Net other postretirement benefit cost 
($1,004) 
$3,149
 
($257) 
($629) 
($437) 
$174
 
($2,541) 
$2,799
 
($378) 
($919) 
($1,550) 
($122)
2016 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
2017 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$978
 
$1,869
 
$386
 
$156
 
$398
 
$334
 
$863
 
$1,593
 
$290
 
$142
 
$372
 
$320
Interest cost on APBO 2,324
 3,260
 709
 448
 1,039
 529
 2,255
 3,025
 690
 469
 1,124
 559
Expected return on assets (4,464) 
 (1,379) (1,154) (2,394) (814) (3,959) 
 (1,200) (1,159) (2,180) (717)
Amortization of prior service credit (1,368) (1,947) (234) (186) (681) (393) (1,278) (1,934) (456) (186) (579) (378)
Amortization of loss 1,064
 732
 223
 37
 537
 287
 1,115
 465
 419
 105
 826
 390
Net other postretirement benefit cost 
($1,466) 
$3,914
 
($295) 
($699) 
($1,101) 
($57) 
($1,004) 
$3,149
 
($257) 
($629) 
($437) 
$174


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Notes to Financial Statements

The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the six months ended June 30, 20172018 and 2016,2017, included the following components:
2017 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$1,726
 
$3,186
 
$580
 
$284
 
$744
 
$640
 
$1,586
 
$3,112
 
$642
 
$258
 
$660
 
$612
Interest cost on APBO 4,510
 6,050
 1,380
 938
 2,248
 1,118
 3,994
 5,578
 1,366
 834
 1,878
 1,000
Expected return on assets (7,918) 
 (2,400) (2,318) (4,360) (1,434) (8,684) 
 (2,606) (2,626) (4,892) (1,566)
Amortization of prior service credit (2,556) (3,868) (912) (372) (1,158) (756) (2,556) (3,868) (912) (372) (1,158) (756)
Amortization of loss 2,230
 930
 838
 210
 1,652
 780
 578
 776
 754
 68
 412
 466
Net other postretirement benefit cost 
($2,008) 
$6,298
 
($514) 
($1,258) 
($874) 
$348
 
($5,082) 
$5,598
 
($756) 
($1,838) 
($3,100) 
($244)

2016 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
2017 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$1,956
 
$3,738
 
$772
 
$312
 
$796
 
$668
 
$1,726
 
$3,186
 
$580
 
$284
 
$744
 
$640
Interest cost on APBO 4,648
 6,520
 1,418
 896
 2,078
 1,058
 4,510
 6,050
 1,380
 938
 2,248
 1,118
Expected return on assets (8,928) 
 (2,758) (2,308) (4,788) (1,628) (7,918) 
 (2,400) (2,318) (4,360) (1,434)
Amortization of prior service credit (2,736) (3,894) (468) (372) (1,362) (786) (2,556) (3,868) (912) (372) (1,158) (756)
Amortization of loss 2,128
 1,464
 446
 74
 1,074
 574
 2,230
 930
 838
 210
 1,652
 780
Net other postretirement benefit cost 
($2,932) 
$7,828
 
($590) 
($1,398) 
($2,202) 
($114) 
($2,008) 
$6,298
 
($514) 
($1,258) 
($874) 
$348

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 second quarters of 20172018 and 2016:2017:
2017 Qualified
Pension
Costs
 Other
Postretirement
Costs
 Non-Qualified
Pension Costs
 Total
2018 Qualified
Pension
Costs
 Other
Postretirement
Costs
 Non-Qualified
Pension Costs
 Total
 (In Thousands)   (In Thousands)  
Entergy                
Amortization of prior service (cost)/credit 
($65) 
$6,718
 
($89) 
$6,564
 
($99) 
$5,594
 
($71) 
$5,424
Amortization of loss (18,450) (2,202) (902) (21,554) (21,957) (1,933) (918) (24,808)
Settlement loss 
 
 (1,765) (1,765) 
 
 (406) (406)
 
($18,515) 
$4,516
 
($2,756) 
($16,755) 
($22,056) 
$3,661
 
($1,395) 
($19,790)
Entergy Louisiana                
Amortization of prior service credit 
$—
 
$1,934
 
$—
 
$1,934
 
$—
 
$1,934
 
$—
 
$1,934
Amortization of loss (865) (465) (2) (1,332) (867) (387) (2) (1,256)
 
($865) 
$1,469
 
($2) 
$602
 
($867) 
$1,547
 
($2) 
$678

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Notes to Financial Statements

2016
Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total
2017
Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)


(In Thousands)

Entergy















Amortization of prior service (cost)/credit

($270)

$7,738


($113)

$7,355


($65)

$6,718


($89)

$6,564
Amortization of loss
(12,482)
(2,063)
(632)
(15,177)
(18,450)
(2,202)
(902)
(21,554)
Settlement loss




(1,765)
(1,765)



($12,752)

$5,675


($745)

($7,822)

($18,515)

$4,516


($2,756)

($16,755)
Entergy Louisiana















Amortization of prior service credit

$—


$1,947


$—


$1,947


$—


$1,934


$—


$1,934
Amortization of loss
(836)
(732)
(5)
(1,573)
(865)
(465)
(2)
(1,332)



($836)

$1,215


($5)

$374


($865)

$1,469


($2)

$602

Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the six months ended June 30, 20172018 and 2016:2017:
2018
Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)

Entergy







Amortization of prior service (cost)/credit

($198)

$11,189


($141)

$10,850
Amortization of loss
(43,914)
(3,865)
(1,981)
(49,760)
Settlement loss




(2,022)
(2,022)



($44,112)

$7,324


($4,144)

($40,932)
Entergy Louisiana







Amortization of prior service credit

$—


$3,868


$—


$3,868
Amortization of loss
(1,734)
(775)
(4)
(2,513)



($1,734)

$3,093


($4)

$1,355
2017 Qualified
Pension
Costs
 Other
Postretirement
Costs
 Non-Qualified
Pension Costs
 Total
  (In Thousands)  
Entergy        
Amortization of prior service (cost)/credit 
($130) 
$13,435
 
($179) 
$13,126
Amortization of loss (36,899) (4,404) (1,822) (43,125)
Settlement loss 
 
 (1,765) (1,765)
  
($37,029) 
$9,031
 
($3,766) 
($31,764)
Entergy Louisiana        
Amortization of prior service credit 
$—
 
$3,868
 
$—
 
$3,868
Amortization of loss (1,730) (930) (4) (2,664)
  
($1,730) 
$2,938
 
($4) 
$1,204
2016 Qualified
Pension
Costs
 Other
Postretirement
Costs
 Non-Qualified
Pension Costs
 Total
  (In Thousands)  
Entergy        
Amortization of prior service (cost)/credit 
($540) 
$15,476
 
($226) 
$14,710
Amortization of loss (24,964) (4,126) (1,262) (30,352)
  
($25,504) 
$11,350
 
($1,488) 
($15,642)
Entergy Louisiana        
Amortization of prior service credit 
$—
 
$3,894
 
$—
 
$3,894
Amortization of loss (1,672) (1,464) (6) (3,142)
  
($1,672) 
$2,430
 
($6) 
$752


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Notes to Financial Statements

Employer Contributions

Based on current assumptions, Entergy expects to contribute $409.9$352.1 million to its qualified pension plans in 2017.2018.  As of June 30, 2017,2018, Entergy had contributed $176$159.7 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 2017:2018:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands)
Expected 2017 pension contributions
$79,495
 
$87,923
 
$19,146
 
$9,920
 
$17,064
 
$18,180
Pension contributions made through June 2017
$34,507
 
$37,519
 
$8,251
 
$4,361
 
$7,227
 
$8,182
Remaining estimated pension contributions to be made in 2017
$44,988
 
$50,404
 
$10,895
 
$5,559
 
$9,837
 
$9,998
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands)
Expected 2018 pension contributions
$64,062
 
$71,917
 
$14,933
 
$7,250
 
$10,883
 
$13,786
Pension contributions made through June 2018
$29,453
 
$33,066
 
$6,924
 
$3,373
 
$5,433
 
$6,349
Remaining estimated pension contributions to be made in 2018
$34,609
 
$38,851
 
$8,009
 
$3,877
 
$5,450
 
$7,437


NOTE 7.  BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy Corporation

Entergy’s reportable segments as of June 30, 20172018 are Utility and Entergy Wholesale Commodities.  Utility 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.  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 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.  “All Other” includes the parent company, Entergy Corporation, and other business activity.

Entergy’s segment financial information for the second quarters of 20172018 and 20162017 is as follows:    
 Utility 
Entergy
Wholesale
Commodities
 All Other Eliminations Entergy Utility 
Entergy
Wholesale
Commodities
 All Other Eliminations Entergy
 (In Thousands) (In Thousands)
2018          
Operating revenues 
$2,360,208
 
$308,602
 
$—
 
($40) 
$2,668,770
Income taxes 
($240,324) 
($30,144) 
($10,128) 
$—
 
($280,596)
Consolidated net income (loss) 
$378,394
 
($56,337) 
($41,299) 
($31,898) 
$248,860
2017                    
Operating revenues 
$2,301,332
 
$317,255
 
$—
 
($37) 
$2,618,550
 
$2,301,332
 
$317,255
 
$—
 
($37) 
$2,618,550
Income taxes 
$130,851
 
($454,944) 
($13,019) 
$—
 
($337,112) 
$130,851
 
($454,944) 
($13,019) 
$—
 
($337,112)
Consolidated net income (loss) 
$246,382
 
$223,886
 
($25,001) 
($31,899) 
$413,368
 
$246,382
 
$223,886
 
($25,001) 
($31,899) 
$413,368
2016          
Operating revenues 
$2,118,478
 
$344,110
 
$—
 
($26) 
$2,462,562
Income taxes 
($3,785) 
($235,055) 
($10,133) 
$—
 
($248,973)
Consolidated net income (loss) 
$380,317
 
$250,874
 
($26,703) 
($31,898) 
$572,590
          


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Notes to Financial Statements

Entergy’s segment financial information for the six months ended June 30, 20172018 and 20162017 is as follows:
 Utility 
Entergy
Wholesale
Commodities
 All Other Eliminations Entergy Utility 
Entergy
Wholesale
Commodities
 All Other Eliminations Entergy
 (In Thousands) (In Thousands)
2018          
Operating revenues 
$4,665,197
 
$727,526
 
$—
 
($73) 
$5,392,650
Income taxes 
($188,100) 
($31,222) 
($17,611) 
$—
 
($236,933)
Consolidated net income (loss) 
$596,333
 
($74,116) 
($73,361) 
($63,797) 
$385,059
Total assets as of June 30, 2018 
$44,117,784
 
$5,433,618
 
$1,240,106
 
($3,168,859) 
$47,622,649
2017                    
Operating revenues 
$4,336,444
 
$870,622
 
$—
 
($58) 
$5,207,008
 $4,336,444 $870,622 
$—
 ($58) $5,207,008
Income taxes 
$229,343
 
($533,281) 
($25,412) 
$—
 
($329,350) $229,343 ($533,281) ($25,412) 
$—
 ($329,350)
Consolidated net income (loss) 
$414,005
 
$196,689
 
($47,477) 
($63,797) 
$499,420
 
$414,005
 
$196,689
 
($47,477) 
($63,797) 
$499,420
Total assets as of June 30, 2017 
$42,263,832
 
$5,627,284
 
$1,165,157
 
($3,049,236) 
$46,007,037
2016          
Operating revenues 
$4,206,272
 
$866,189
 
$—
 
($46) 
$5,072,415
Income taxes 
$104,051
 
($182,741) 
($30,337) 
$—
 
($109,027)
Consolidated net income (loss) 
$579,968
 
$330,430
 
($38,769) 
($63,797) 
$807,832
Total assets as of December 31, 2016 
$41,098,751
 
$6,696,038
 
$1,283,816
 
($3,174,171) 
$45,904,434
Total assets as of December 31, 2017 $42,978,669 $5,638,009 $1,011,612 ($2,921,141) $46,707,149

The Entergy Wholesale Commodities business is sometimes referred to as the “competitive businesses.”  Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.

As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions in 2016.contributions.

AdditionalTotal restructuring charges for the second quarterquarters of 2018 and 2017 were comprised of the following:
Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total2018 2017
(In Millions)
Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total
Balance as of April 1, 2017
$94
 
$21
 
$115
(In Millions)
Balance as of April 1,
$109
 
$14
 
$123
 
$94
 
$21
 
$115
Restructuring costs accrued42
 
 42
34
 
 34
 42
 
 42
Cash paid out100
 
 100

 
 
 100
 
 100
Balance as of June 30, 2017
$36
 
$21
 
$57
Balance as of June 30,
$143
 
$14
 
$157
 
$36
 
$21
 
$57

In addition, Entergy incurred $194$69 million of impairment charges in the second quarter 2018 and $194 million in the second quarter 2017 of impairment charges 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.

    

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AdditionalTotal restructuring charges for the six months ended June 30, 2018 and 2017 were comprised of the following:
Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total2018 2017
(In Millions)Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total
Balance as of January 1, 2017
$70
 
$21
 
$91
(In Millions)
Balance as of January 1,
$83
 
$14
 
$97
 
$70
 
$21
 
$91
Restructuring costs accrued66
 
 66
60
 
 60
 66
 
 66
Cash paid out100
 
 100

 
 
 100
 
 100
Balance as of June 30, 2017
$36
 
$21
 
$57
Balance as of June 30,
$143
 
$14
 
$157
 
$36
 
$21
 
$57

In addition, Entergy incurred $405$142 million of impairment charges in the six months ended June 30, 2018 and $405 million in the six months ended June 30, 2017 of impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets.

Going forward, Entergy Wholesale Commodities 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 $155 million in 2018, of which $60 million has been incurred as of June 30, 2018, and a total of approximately $215 million from 2019 through mid-2022.

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.


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.


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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

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future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace.  Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies.  Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods.  These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.

Derivatives

Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions.  Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements.  Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rate swaps.  Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments.

Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities.  Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation.  The maximum length of time over which Entergy Wholesale Commodities is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at June 30, 20172018 is approximately 2.5 years.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 89%98% for the remainder of 2017,2018, of which approximately 59%82% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 20172018 is 1514.1 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 June 30, 2017, there were no2018, derivative contracts with seven counterparties were in a liability position.position (approximately $30 million total). In addition to the corporate guarantee, $5 million in cash collateral was required

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to be posted by the Entergy subsidiary to its counterparties and $3 million in cash collateral and $3 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2017, derivative contracts with eight counterparties were in a liability position (approximately $65 million total). In addition to the corporate guarantee, $1 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $3$4 million in cash collateral and $19$34 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

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total volume of natural gas swaps outstanding as of June 30, 20172018 is 34,696,75039,670,000 MMBtu for Entergy, including 29,110,80032,100,000 MMBtu for Entergy Louisiana and 5,585,9507,570,000 MMBtu for Entergy Mississippi. Credit support for these natural gas swaps is covered by master agreements that do not require collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.

During the second quarter 2017,2018, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 20172018 through May 31, 2018.2019. 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 financial 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 financial 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 financial transmission rights. The total volume of financial transmission rights outstanding as of June 30, 20172018 is 106,060108,294 GWh for Entergy, including 24,18824,646 GWh for Entergy Arkansas, 47,17346,135 GWh for Entergy Louisiana, 14,07514,368 GWh for Entergy Mississippi, 5,3165,184 GWh for Entergy New Orleans, and 14,57217,512 GWh for Entergy Texas. Credit support for financial 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 financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of June 30, 20172018 and December 31, 2016.2017. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas and Entergy Mississippi as of June 30, 20172018 and Entergy Arkansas, Entergy Mississippi, and Entergy Texas as of December 31, 2016.2017.

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30, 2018 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.

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Instrument Balance Sheet Location Gross Fair Value (a) Offsetting Position (b) Net Fair Value (c) (d) Business
    (In Millions)  
Derivatives designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $29 ($21) $8 Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $11 ($11) $— Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities
(current portion)
 $34 ($21) $13 Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $30 ($10) $20 Entergy Wholesale Commodities
Derivatives not designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $2 ($2) $— Entergy Wholesale Commodities
Natural gas swaps Prepayments and other $3 $— $3 Utility
Financial transmission rights Prepayments and other $42 $1 $41 Utility and Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities
(current portion)
 $2 ($2) $— Entergy Wholesale Commodities

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The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of June 30,December 31, 2017 are shown in the table below.  Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument Balance Sheet Location Fair Value (a) Offset (b) Net (c) (d) Business
    (In Millions)  
Derivatives designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $40 ($23) $17 Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $19 ($9) $10 Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities
(current portion)
 $15 ($15) $— Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $12 ($10) $2 Entergy Wholesale Commodities
Derivatives not designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $16 ($3) $13 Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $2 ($2) $— Entergy Wholesale Commodities
Financial transmission rights Prepayments and other $61 ($4) $57 Utility and Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities(current portion) $10 ($10) $— 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 $5 $— $5 Utility


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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 Balance Sheet Location Gross Fair Value (a) Offsetting Position (b) Net Fair Value (c) (d) Business
 (In Millions)  (In Millions) 
Derivatives designated as hedging instruments                
Assets:                
Electricity swaps and options Prepayments and other (current portion) $25 ($14) $11 Entergy Wholesale Commodities Prepayments and other (current portion) $19 ($19) $— Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $6 ($6) $— Entergy Wholesale Commodities Other deferred debits and other assets (non-current portion) $19 ($14) $5 Entergy Wholesale Commodities
Liabilities:                
Electricity swaps and options Other current liabilities (current portion) $11 ($10) $1 Entergy Wholesale Commodities Other current liabilities (current portion) $86 ($20) $66 Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $16 ($7) $9 Entergy Wholesale Commodities Other non-current liabilities (non-current portion) $17 ($14) $3 Entergy Wholesale Commodities
Derivatives not designated as hedging instruments                
Assets:                
Electricity swaps and options Prepayments and other (current portion) $18 ($13) $5 Entergy Wholesale Commodities Prepayments and other (current portion) $9 ($9) $— 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 Prepayments and other $22 ($1) $21 Utility and Entergy Wholesale Commodities
Liabilities:                
Electricity swaps and options Other current liabilities (current portion) $18 ($17) $1 Entergy Wholesale Commodities Other current liabilities (current portion) $9 ($8) $1 Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $4 ($4) $— Entergy Wholesale Commodities
Natural gas swaps Other current liabilities $6 $— $6 Utility

(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/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet
(d)Excludes cash collateral in the amount of $5 million posted and $3 million held as of June 30, 2018 and $1 million posted and $4 million held as of December 31, 2017. Also excludes letters of credit in the amount of $1 million posted and $3 million held as of June 30, 20172018 and $2 million posted as of December 31, 2016. Also excludes $19$34 million in letters of credit held as of June 30,December 31, 2017.



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The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended June 30, 20172018 and 20162017 are as follows:
Instrument 
Amount of gain (loss)
recognized in other
comprehensive income
 Income Statement location 
Amount of gain
reclassified from
accumulated other comprehensive income into income (a)
 
Amount of gain (loss)
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)
2018 
Electricity swaps and options ($80) Competitive businesses operating revenues $3
 
2017  
Electricity swaps and options $43 Competitive businesses operating revenues $13 $43 Competitive businesses operating revenues $13
 
2016 
Electricity swaps and options ($53) Competitive businesses operating revenues $46

(a)Before taxes of $4$1 million and $16$4 million for the three months ended June 30, 20172018 and 2016,2017, respectively

The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the six months ended June 30, 20172018 and 20162017 are as follows:
Instrument Amount of gain
recognized in other
comprehensive income
 Income Statement location Amount of gain
reclassified from
accumulated other comprehensive income into income (a)
 Amount of gain recognized in other
comprehensive income
 Income Statement location Amount of gain (loss)
reclassified from
accumulated other comprehensive income into income (a)

 (In Millions) (In Millions) (In Millions) (In Millions)
2018 
Electricity swaps and options $11 Competitive businesses operating revenues ($27)
 
2017  
Electricity swaps and options $93 Competitive businesses operating revenues $64 $93 Competitive businesses operating revenues $64
 
2016 
Electricity swaps and options $86 Competitive businesses operating revenues $200
    
(a)Before taxes of $22($6) million and $70$22 million for the six months ended June 30, 20172018 and 2016,2017, respectively

At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive business operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended June 30, 2018 and 2017 and 2016 was $5($15) million and ($3)$5 million, respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the six months ended June 30, 2018 and 2017 and 2016 was $4($2) million and ($0.3)$4 million, respectively.

Based on market prices as of June 30, 2017,2018, unrealized gains (losses) recorded in AOCIaccumulated other comprehensive income on cash flow hedges relating to power sales totaled $39($17) million of net unrealized gains.losses.  Approximately $30($2) million is expected to be reclassified from AOCIaccumulated other comprehensive income to operating revenues in the next twelve months.  The actual amount reclassified from AOCI, however, could vary due to future changes in market prices.    


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operating revenues in the next twelve months.  The actual amount reclassified from 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 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 for the three months ended June 30, 20172018 and 20162017 are as follows:

Instrument Amount of loss recognized in accumulated other comprehensive income Income Statement
location
 Amount of gain (loss)
recorded in the income statement
  (In Millions)   (In Millions)
2017      
Natural gas swaps $— Fuel, fuel-related expenses, and gas purchased for resale(a)($9)
FTRs $— Purchased power expense(b)$44
Electricity swaps and options ($5)(c)Competitive business operating revenues $—
       
2016      
Natural gas swaps $— Fuel, fuel-related expenses, and gas purchased for resale(a)($6)
FTRs $— Purchased power expense(b)$38
Electricity swaps and options ($10)(c)Competitive business operating revenues ($6)
InstrumentAmount of loss recognized in accumulated other comprehensive incomeIncome Statement
location
Amount of gain (loss)
recorded in the income statement
(In Millions)(In Millions)
2018
Natural gas swaps$—Fuel, fuel-related expenses, and gas purchased for resale(a)$6
Financial transmission rights$—Purchased power expense(b)$41
Electricity swaps and options$—(c)Competitive business operating revenues$1
2017
Natural gas swaps$—Fuel, fuel-related expenses, and gas purchased for resale(a)($9)
Financial transmission rights$—Purchased power expense(b)$44
Electricity swaps and options($5)(c)Competitive business operating revenues$—


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The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the six months ended June 30, 20172018 and 20162017 are as follows:
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)($16)
Financial transmission rights
$—
Purchased power expense(b)$75
Electricity swaps and options $4(c)Competitive business operating revenues $—
       
2016      
Natural gas swaps $— Fuel, fuel-related expenses, and gas purchased for resale(a)($30)
Financial transmission rights $— Purchased power expense(b)$59
Electricity swaps and options $15(c)Competitive business operating revenues ($9)
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)
2018
Natural gas swaps$—Fuel, fuel-related expenses, and gas purchased for resale(a)$6
Financial transmission rights
$—
Purchased power expense(b)$73
Electricity swaps and options$—(c)Competitive business operating revenues$1
2017
Natural gas swaps$—Fuel, fuel-related expenses, and gas purchased for resale(a)($16)
Financial transmission rights$—Purchased power expense(b)$75
Electricity swaps and options$4(c)Competitive business operating revenues$—

(a)Due to regulatory treatment, the natural gas swaps are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)Due to regulatory treatment, the changes in the estimated fair value of financial 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 financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
(c)Amount of gain (loss) recognized in accumulated other comprehensive income from electricity swaps and options de-designated as hedged items.



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The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of June 30, 20172018 are as follows:shown in the table below. Certain investments are subject to master netting agreements and are presented on the balance sheets on a net basis in accordance with accounting guidance for derivatives and hedging.
InstrumentBalance Sheet LocationFair Value (a)Registrant
(In Millions)
Assets:
Financial transmission rightsPrepayments and other$8.3Entergy Arkansas
Financial transmission rightsPrepayments and other$28.3Entergy Louisiana
Financial transmission rightsPrepayments and other$9.1Entergy Mississippi
Financial transmission rightsPrepayments and other$5.2Entergy New Orleans
Financial transmission rightsPrepayments and other$5.5Entergy Texas
Liabilities:
Natural gas swapsOther current liabilities$4.5Entergy Louisiana
Natural gas swapsOther current liabilities$0.8Entergy Mississippi
Instrument Balance Sheet Location Gross Fair Value (a) Offsetting Position (b) Net Fair Value (c) (d) Registrant
    (In Millions)  
Assets:          
Natural gas swaps Prepayments and other $2.7 $— $2.7 Entergy Louisiana
Natural gas swaps Prepayments and other $0.5 $— $0.5 Entergy Mississippi
           
Financial transmission rights Prepayments and other $11.1 ($0.6) $10.5 Entergy Arkansas
Financial transmission rights Prepayments and other $18.5 ($0.3) $18.2 Entergy Louisiana
Financial transmission rights Prepayments and other $4.4 $— $4.4 Entergy Mississippi
Financial transmission rights Prepayments and other $3.0 $— $3.0 Entergy New Orleans
Financial transmission rights Prepayments and other $5.3 ($0.6) $4.7 Entergy Texas

The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 20162017 are as follows:
InstrumentBalance Sheet LocationFair Value (a)Registrant
(In Millions)
Assets:
Natural gas swapsPrepayments and other$10.9Entergy Louisiana
Natural gas swapsPrepayments and other$2.3Entergy Mississippi
Natural gas swapsPrepayments and other$0.2Entergy New Orleans
Financial transmission rightsPrepayments and other$5.4Entergy Arkansas
Financial transmission rightsPrepayments and other$8.5Entergy Louisiana
Financial transmission rightsPrepayments and other$3.2Entergy Mississippi
Financial transmission rightsPrepayments and other$1.1Entergy New Orleans
Financial transmission rightsPrepayments and other$3.1Entergy Texas
Instrument Balance Sheet Location Gross Fair Value (a) Offsetting Position (b) Net Fair Value (c) (d) Registrant
    (In Millions)  
Assets:          
Financial transmission rights Prepayments and other $3.2 ($0.2) $3.0 Entergy Arkansas
Financial transmission rights Prepayments and other $11.0 ($0.8) $10.2 Entergy Louisiana
Financial transmission rights Prepayments and other $2.1 $— $2.1 Entergy Mississippi
Financial transmission rights Prepayments and other $2.2 $— $2.2 Entergy New Orleans
Financial transmission rights Prepayments and other $3.6 ($0.2) $3.4 Entergy Texas
           
Liabilities:          
Natural gas swaps Other current liabilities $5.0 $— $5.0 Entergy Louisiana
Natural gas swaps Other current liabilities $1.2 $— $1.2 Entergy Mississippi
Natural gas swaps Other current liabilities $0.2 $— $0.2 Entergy New Orleans

(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/liabilities presented on the Registrant Subsidiaries’ balance sheets
(d)As of June 30, 2017,2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.3$0.6 million for Entergy Arkansas and $0.1$0.2 million for Entergy Mississippi. As of December 31, 2016,2017, 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.

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credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, $0.1 million for Entergy Mississippi, and $0.05 million for Entergy Texas.

The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended June 30, 20172018 and 20162017 are as follows:
Instrument Income Statement Location Amount of gain
(loss) recorded
in the income statement
 Registrant
    (In Millions)
2018
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$4.9(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$0.9(a)Entergy Mississippi
Financial transmission rightsPurchased power expense$2.1(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$25.8(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$9.8(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$5.2(b)Entergy New Orleans
Financial transmission rightsPurchased power expense($1.8)(b)Entergy Texas
  
2017      
Natural gas swaps Fuel, fuel-related expenses, and gas purchased for resale ($7.6)(a)Entergy Louisiana
Natural gas swaps Fuel, fuel-related expenses, and gas purchased for resale ($1.4)(a)Entergy Mississippi
       
FTRsFinancial transmission rights Purchased power expense $10.5(b)Entergy Arkansas
FTRsFinancial transmission rights Purchased power expense $14.3(b)Entergy Louisiana
FTRsFinancial transmission rights Purchased power expense $8.5(b)Entergy Mississippi
FTRsFinancial transmission rights Purchased power expense $3.4(b)Entergy New Orleans
FTRsFinancial transmission rights Purchased power expense $6.9(b)Entergy Texas
2016
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($4.9)(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.9)(a)Entergy Mississippi
FTRsPurchased power expense$5.5(b)Entergy Arkansas
FTRsPurchased power expense$21.6(b)Entergy Louisiana
FTRsPurchased power expense$3.6(b)Entergy Mississippi
FTRsPurchased power expense$1.4(b)Entergy New Orleans
FTRsPurchased power expense$5.4(b)Entergy Texas




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The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the six months ended June 30, 20172018 and 20162017 are as follows:

Instrument
Income Statement Location
Amount of gain
(loss) recorded
in the income statement

Registrant
    (In Millions)  
2018
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$4.9(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$0.7(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.1)(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$10.1(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$43.4(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$17.6(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$8.4(b)Entergy New Orleans
Financial transmission rightsPurchased power expense($5.3)(b)Entergy Texas
2017   
  
Natural gas swaps Fuel, fuel-related expenses, and gas purchased for resale ($13.7)(a)Entergy Louisiana
Natural gas swaps Fuel, fuel-related expenses, and gas purchased for resale ($2.5)(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 $15.1(b)Entergy Arkansas
Financial transmission rights Purchased power expense $29.5(b)Entergy Louisiana
Financial transmission rights Purchased power expense $11.6(b)Entergy Mississippi
Financial transmission rights Purchased power expense $5.7(b)Entergy New Orleans
Financial transmission rights Purchased power expense $12.1(b)Entergy Texas
2016
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($24.2)(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($5.0)(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.5)(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$13.3(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$32.1(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$4.4(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$1.9(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$6.9(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 financial 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 financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.

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simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates

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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.  

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
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

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estimate of fair value for the asset or liability.  Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants.

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

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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 compared 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 financial 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

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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.


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The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 20172018 and December 31, 2016.2017.  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.
2017 Level 1 Level 2 Level 3 Total
2018 Level 1 Level 2 Level 3 Total
 (In Millions) (In Millions)
Assets:                
Temporary cash investments 
$867
 
$—
 
$—
 
$867
 
$758
 
$—
 
$—
 
$758
Decommissioning trust funds (a):                
Equity securities 469
 
 
 469
 562
 
 
 562
Debt securities 1,032
 1,376
 
 2,408
 1,064
 1,556
 
 2,620
Common trusts (b)       3,920
       4,035
Power contracts 
 
 40
 40
 
 
 8
 8
Securitization recovery trust account 36
 
 
 36
 40
 
 
 40
Escrow accounts 416
 
 
 416
 399
 
 
 399
Gas hedge contracts 3
 
 
 3
Financial transmission rights 
 
 57
 57
 
 
 41
 41
 
$2,820
 
$1,376
 
$97
 
$8,213
 
$2,826
 
$1,556
 
$49
 
$8,466
Liabilities:                
Power contracts 
$—
 
$—
 
$2
 
$2
 
$—
 
$—
 
$33
 
$33
Gas hedge contracts 5
 
 
 5
 
$5
 
$—
 
$2
 
$7

2016 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$1,058
 
$—
 
$—
 
$1,058
Decommissioning trust funds (a):        
Equity securities 480
 
 
 480
Debt securities 985
 1,228
 
 2,213
Common trusts (b)       3,031
Power contracts 
 
 16
 16
Securitization recovery trust account 46
 
 
 46
Escrow accounts 433
 
 
 433
Gas hedge contracts 13
 
 
 13
Financial transmission rights 
 
 21
 21
  
$3,015
 
$1,228
 
$37
 
$7,311
Liabilities:        
Power contracts 
$—
 
$—
 
$11
 
$11

(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements for additional information on the investment portfolios.

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(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 June 30, 2017 and 2016:
 2017 2016
 Power Contracts Financial transmission rights Power Contracts Financial transmission rights
 (In Millions)
Balance as of April 1,
$5
 
$8
 
$183
 
$9
Total gains (losses) for the period (a)       
Included in earnings4
 
 (9) 
Included in OCI43
 
 (53) 
Included as a regulatory liability/asset
 31
 
 20
Issuances of FTRs
 62
 
 55
Purchases
 
 
 
Settlements(14) (44) (55) (38)
Balance as of June 30,
$38
 
$57
 
$66
 
$46

(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($0.1) million for the three months ended June 30, 2017 and ($6) million for the three months ended June 30, 2016.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2017 and 2016:
 2017 2016
 Power Contracts Financial transmission rights Power Contracts Financial transmission rights

(In Millions)
Balance as of January 1,
$5
 
$21
 
$189
 
$23
Total gains (losses) for the period (a)       
Included in earnings4
 
 (9) 
Included in OCI93
 
 86
 
Included as a regulatory liability/asset
 48
 
 27
Issuances of financial transmission rights
 62
 
 55
Purchases
 
 
 
Settlements(64) (74) (200) (59)
Balance as of June 30,
$38
 
$57
 
$66
 
$46

(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $0.3 million for the six months ended June 30, 2017. For the six months ended June 30, 2016, there is no change in unrealized gains or losses included in earnings for derivatives held at the end of the reporting period.


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The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of June 30, 2017:
Transaction Type 
Fair Value
as of
June 30, 2017
 
Significant
Unobservable Inputs
 
Range
from
Average
%
 
Effect on
Fair Value
  (In Millions)      (In Millions)
Power contracts - electricity swaps $38 Unit contingent discount +/-4% $3

The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant
Unobservable
Input
Transaction TypePositionChange to Input
Effect on
Fair Value
Unit contingent discountElectricity swapsSellIncrease (Decrease)Decrease (Increase)

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of June 30, 2017 and December 31, 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
2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Decommissioning trust funds (a):        
Equity securities 
$10.7
 
$—
 
$—
 
$10.7
Debt securities 129.7
 198.3
 
 328.0
Common trusts (b)       545.6
Securitization recovery trust account 3.6
 
 
 3.6
Escrow accounts 4.7
 
 
 4.7
Financial transmission rights 
 
 8.3
 8.3
  
$148.7
 
$198.3
 
$8.3
 
$900.9

2016 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Decommissioning trust funds (a):        
Equity securities 
$3.6
 
$—
 
$—
 
$3.6
Debt securities 112.5
 196.8
 
 309.3
Common trusts (b)       521.8
Securitization recovery trust account 4.1
 
 
 4.1
Escrow accounts 7.1
 
 
 7.1
Financial transmission rights 
 
 5.4
 5.4
  
$127.3
 
$196.8
 
$5.4
 
$851.3


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Entergy Louisiana
2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$211.9
 
$—
 
$—
 
$211.9
Decommissioning trust funds (a):        
Equity securities 11.2
 
 
 11.2
Debt securities 137.5
 326.6
 
 464.1
Common trusts (b)       745.4
Escrow accounts 292.9
 
 
 292.9
Securitization recovery trust account 2.8
 
 
 2.8
Financial transmission rights 
 
 28.3
 28.3
  
$656.3
 
$326.6
 
$28.3
 
$1,756.6
         
Liabilities:        
Gas hedge contracts 
$4.5
 
$—
 
$—
 
$4.5

2016 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$163.9
 
$—
 
$—
 
$163.9
Decommissioning trust funds (a):  
  
  
  
Equity securities 13.9
 
 
 13.9
Debt securities 132.3
 292.5
 
 424.8
Common trusts (b)       702.0
Escrow accounts 305.7
 
 
 305.7
Securitization recovery trust account 2.8
 
 
 2.8
Gas hedge contracts 10.9
 
 
 10.9
Financial transmission rights 
 
 8.5
 8.5
  
$629.5
 
$292.5
 
$8.5
 
$1,632.5

Entergy Mississippi
2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Escrow accounts 
$31.9
 
$—
 
$—
 
$31.9
Financial transmission rights 
 
 9.1
 9.1
  
$31.9
 
$—
 
$9.1
 
$41.0
         
Liabilities:        
Gas hedge contracts 
$0.8
 
$—
 
$—
 
$0.8


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2016 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$76.8
 
$—
 
$—
 
$76.8
Escrow accounts 31.8
 
 
 31.8
Gas hedge contracts 2.3
 
 
 2.3
Financial transmission rights 
 
 3.2
 3.2
  
$110.9
 
$—
 
$3.2
 
$114.1

Entergy New Orleans
2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$60.7
 
$—
 
$—
 
$60.7
Securitization recovery trust account 1.1
 
 
 1.1
Escrow accounts 86.4
 
 
 86.4
Financial transmission rights 
 
 5.2
 5.2
  
$148.2
 
$—
 
$5.2
 
$153.4

2016 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$103.0
 
$—
 
$—
 
$103.0
Securitization recovery trust account 1.7
 
 
 1.7
Escrow accounts 88.6
 
 
 88.6
Gas hedge contracts 0.2
 
 
 0.2
Financial transmission rights 
 
 1.1
 1.1
  
$193.5
 
$—
 
$1.1
 
$194.6

Entergy Texas
2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:
        
Securitization recovery trust account 
$28.7
 
$—
 
$—
 
$28.7
Financial transmission rights 
 
 5.5
 5.5
  
$28.7
 
$—
 
$5.5
 
$34.2

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


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System Energy
2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$337.0
 
$—
 
$—
 
$337.0
Decommissioning trust funds (a):        
Equity securities 1.6
 
 
 1.6
Debt securities 208.9
 113.6
 
 322.5
Common trusts (b)       515.3
  
$547.5
 
$113.6
 
$—
 
$1,176.4

2016 Level 1 Level 2 Level 3 Total
2017 Level 1 Level 2 Level 3 Total
 (In Millions) (In Millions)
Assets:                
Temporary cash investments 
$245.1
 
$—
 
$—
 
$245.1
 
$725
 
$—
 
$—
 
$725
Decommissioning trust funds (a):                
Equity securities 0.3
 
 
 0.3
 526
 
 
 526
Debt securities 248.3
 58.3
 
 306.6
 1,125
 1,425
 
 2,550
Common trusts (b)       473.6
       4,136
Power contracts 
 
 5
 5
Securitization recovery trust account 45
 
 
 45
Escrow accounts 406
 
 
 406
Financial transmission rights 
 
 21
 21
 
$493.7
 
$58.3
 
$—
 
$1,025.6
 
$2,827
 
$1,425
 
$26
 
$8,414
Liabilities:        
Power contracts 
$—
 
$—
 
$70
 
$70
Gas hedge contracts 6
 
 
 6
 
$6
 
$—
 
$70
 
$76

(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2017.
 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New
Orleans
 Entergy
Texas
 (In Millions)
Balance as of April 1,
$0.9
 
$4.1
 
$1.3
 
$0.5
 
$1.0
Issuances of FTRs8.9
 31.0
 9.6
 5.0
 7.1
Gains included as a regulatory liability/asset9.0
 7.5
 6.7
 3.1
 4.3
Settlements(10.5) (14.3) (8.5) (3.4) (6.9)
Balance as of June 30,
$8.3
 
$28.3
 
$9.1
 
$5.2
 
$5.5


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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2016.2018 and 2017:

2018 2017
Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New
Orleans
 Entergy
Texas
Power Contracts Financial transmission rights Power Contracts Financial transmission rights
(In Millions)(In Millions)
Balance as of April 1,
$3.7
 
$3.3
 
$0.9
 
$0.6
 
$0.9

$75
 
$8
 
$5
 
$8
Issuances of FTRs18.8
 18.1
 5.9
 2.8
 9.3
Gains (losses) included as a regulatory liability/asset(3.0) 16.4
 2.4
 
 3.2
Total gains (losses) for the period (a)       
Included in earnings(15) 
 4
 
Included in other comprehensive income(80) 
 43
 
Included as a regulatory liability/asset
 28
 
 31
Issuances of financial transmission rights
 46
 
 62
Settlements(5.5) (21.6) (3.6) (1.4) (5.4)(5) (41) (14) (44)
Balance as of June 30,
$14.0
 
$16.2
 
$5.6
 
$2.0
 
$8.0

($25) 
$41
 
$38
 
$57

(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($0.8) million for the three months ended June 30, 2018 and ($0.1) million for the three months ended June 30, 2017.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2018 and 2017:
 2018 2017
 Power Contracts Financial transmission rights Power Contracts Financial transmission rights

(In Millions)
Balance as of January 1,
($65) 
$21
 
$5
 
$21
Total gains (losses) for the period (a)       
Included in earnings(1) (1) 4
 
Included in other comprehensive income11
 
 93
 
Included as a regulatory liability/asset
 48
 
 48
Issuances of financial transmission rights
 46
 
 62
Settlements30
 (73) (64) (74)
Balance as of June 30,
($25) 
$41
 
$38
 
$57

(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($0.7) million for the six months ended June 30, 2018 and $0.3 million for the six months ended June 30, 2017.


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The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of June 30, 2018:
Transaction Type 
Fair Value
as of
June 30, 2018
 
Significant
Unobservable Inputs
 
Range
from
Average
%
 
Effect on
Fair Value
  (In Millions)      (In Millions)
Power contracts - electricity swaps ($25) Unit contingent discount +/-4% - 4.75% ($3)

The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant
Unobservable
Input
Transaction TypePositionChange to Input
Effect on
Fair Value
Unit contingent discountElectricity swapsSellIncrease (Decrease)Decrease (Increase)

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 June 30, 2018 and December 31, 2017.  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
2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$232.8
 
$—
 
$—
 
$232.8
Decommissioning trust funds (a):        
Equity securities 
$11.3
 
$—
 
$—
 
$11.3
Debt securities 89.1
 252.6
 
 341.7
Common trusts (b)       601.4
Securitization recovery trust account 4.1
 
 
 4.1
Financial transmission rights 
 
 10.5
 10.5
  
$337.3
 
$252.6
 
$10.5
 
$1,201.8

2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Decommissioning trust funds (a):        
Equity securities 
$11.7
 
$—
 
$—
 
$11.7
Debt securities 115.8
 232.4
 
 348.2
Common trusts (b)       585.0
Securitization recovery trust account 3.7
 
 
 3.7
Escrow accounts 2.4
 
 
 2.4
Financial transmission rights 
 
 3.0
 3.0
  
$133.6
 
$232.4
 
$3.0
 
$954.0


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Entergy Louisiana
2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$28.8
 
$—
 
$—
 
$28.8
Decommissioning trust funds (a):        
Equity securities 18.1
 
 
 18.1
Debt securities 141.5
 372.3
 
 513.8
Common trusts (b)       803.0
Escrow accounts 286.7
 
 
 286.7
Securitization recovery trust account 3.4
 
 
 3.4
Gas hedge contracts 2.7
 
 
 2.7
Financial transmission rights 
 
 18.2
 18.2
  
$481.2
 
$372.3
 
$18.2
 
$1,674.7

2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:  ��     
Temporary cash investments 
$30.1
 
$—
 
$—
 
$30.1
Decommissioning trust funds (a):  
  
  
  
Equity securities 15.2
 
 
 15.2
Debt securities 143.3
 350.5
 
 493.8
Common trusts (b)       803.1
Escrow accounts 289.5
 
 
 289.5
Securitization recovery trust account 2.0
 
 
 2.0
Financial transmission rights 
 
 10.2
 10.2
  
$480.1
 
$350.5
 
$10.2
 
$1,643.9
         
Liabilities:        
Gas hedge contracts 
$5.0
 
$—
 
$—
 
$5.0

Entergy Mississippi
2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Escrow accounts 
$32.2
 
$—
 
$—
 
$32.2
Gas hedge contracts 0.5
 
 
 0.5
Financial transmission rights 
 
 4.4
 4.4
  
$32.7
 
$—
 
$4.4
 
$37.1


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2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$4.5
 
$—
 
$—
 
$4.5
Escrow accounts 32.0
 
 
 32.0
Financial transmission rights 
 
 2.1
 2.1
  
$36.5
 
$—
 
$2.1
 
$38.6
         
Liabilities:        
Gas hedge contracts 
$1.2
 
$—
 
$—
 
$1.2

Entergy New Orleans
2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Securitization recovery trust account 
$1.5
 
$—
 
$—
 
$1.5
Escrow accounts 80.1
 
 
 80.1
Financial transmission rights 
 
 3.0
 3.0
  
$81.6
 
$—
 
$3.0
 
$84.6

2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$32.7
 
$—
 
$—
 
$32.7
Securitization recovery trust account 1.5
 
 
 1.5
Escrow accounts 81.9
 
 
 81.9
Financial transmission rights 
 
 2.2
 2.2
  
$116.1
 
$—
 
$2.2
 
$118.3
         
Liabilities:        
Gas hedge contracts 
$0.2
 
$—
 
$—
 
$0.2

Entergy Texas
2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:
        
Temporary cash investments 
$40.4
 
$—
 
$—
 
$40.4
Securitization recovery trust account 31.2
 
 
 31.2
Financial transmission rights 
 
 4.7
 4.7
  
$71.6
 
$—
 
$4.7
 
$76.3


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2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:
        
Temporary cash investments 
$115.5
 
$—
 
$—
 
$115.5
Securitization recovery trust account 37.7
 
 
 37.7
Financial transmission rights 
 
 3.4
 3.4
  
$153.2
 
$—
 
$3.4
 
$156.6

System Energy
2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$258.7
 
$—
 
$—
 
$258.7
Decommissioning trust funds (a):        
Equity securities 5.0
 
 
 5.0
Debt securities 178.7
 145.5
 
 324.2
Common trusts (b)       585.2
  
$442.4
 
$145.5
 
$—
 
$1,173.1

2017 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$287.1
 
$—
 
$—
 
$287.1
Decommissioning trust funds (a):        
Equity securities 3.1
 
 
 3.1
Debt securities 187.2
 143.3
 
 330.5
Common trusts (b)       572.1
  
$477.4
 
$143.3
 
$—
 
$1,192.8

(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.

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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2018.

 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New
Orleans
 Entergy
Texas
 (In Millions)
Balance as of April 1, 2018
$1.8
 
$3.4
 
$0.9
 
$0.7
 
$1.4
Issuances of financial transmission rights11.8
 20.0
 4.5
 3.7
 6.1
Gains included as a regulatory liability/asset(1.0) 20.6
 8.8
 3.8
 (4.6)
Settlements(2.1) (25.8) (9.8) (5.2) 1.8
Balance as of June 30, 2018
$10.5
 
$18.2
 
$4.4
 
$3.0
 
$4.7

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended June 30, 2017.

 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New
Orleans
 Entergy
Texas
 (In Millions)
Balance as of April 1, 2017
$0.9
 
$4.1
 
$1.3
 
$0.5
 
$1.0
Issuances of financial transmission rights8.9
 31.0
 9.6
 5.0
 7.1
Gains included as a regulatory liability/asset9.0
 7.5
 6.7
 3.1
 4.3
Settlements(10.5) (14.3) (8.5) (3.4) (6.9)
Balance as of June 30, 2017
$8.3
 
$28.3
 
$9.1
 
$5.2
 
$5.5

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2018.
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 (In Millions)
Balance as of January 1, 2018
$3.0
 
$10.2
 
$2.1
 
$2.2
 
$3.4
Issuances of financial transmission rights11.8
 20.0
 4.5
 3.7
 6.1
Gains included as a regulatory liability/asset5.8
 31.4
 15.4
 5.5
 (10.1)
Settlements(10.1) (43.4) (17.6) (8.4) 5.3
Balance as of June 30, 2018
$10.5
 
$18.2
 
$4.4
 
$3.0
 
$4.7


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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 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 FTRs8.9
 31.0
 9.6
 5.0
 7.1
Gains included as a regulatory liability/asset9.1
 18.3
 7.9
 4.8
 7.4
Settlements(15.1) (29.5) (11.6) (5.7) (12.1)
Balance as of June 30,
$8.3
 
$28.3
 
$9.1
 
$5.2
 
$5.5

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the six months ended June 30, 2016.
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 (In Millions)
Balance as of January 1,
$7.9
 
$8.5
 
$2.4
 
$1.5
 
$2.2
Issuances of FTRs18.8
 18.1
 5.9
 2.8
 9.3
Gains (losses) included as a regulatory liability/asset0.6
 21.7
 1.7
 (0.4) 3.4
Settlements(13.3) (32.1) (4.4) (1.9) (6.9)
Balance as of June 30,
$14.0
 
$16.2
 
$5.6
 
$2.0
 
$8.0
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 (In Millions)
Balance as of January 1, 2017
$5.4
 
$8.5
 
$3.2
 
$1.1
 
$3.1
Issuances of financial transmission rights8.9
 31.0
 9.6
 5.0
 7.1
Gains (losses) included as a regulatory liability/asset9.1
 18.3
 7.9
 4.8
 7.4
Settlements(15.1) (29.5) (11.6) (5.7) (12.1)
Balance as of June 30, 2017
$8.3
 
$28.3
 
$9.1
 
$5.2
 
$5.5


NOTE 9.  DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)

Entergy holds debt and equity securities classified asand available-for-sale debt securities 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,

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and Palisades.  The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.

See Note 16 toEntergy implemented ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” effective January 1, 2018. The ASU requires investments in equity securities, excluding those accounted for under the financial statementsequity method or resulting in the Form 10-K for discussionconsolidation of the trust transfer agreementinvestee, to be measured at fair value with NYPA to transferchanges recognized in net income. Entergy implemented this ASU using a modified retrospective method, and Entergy recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by $633 million 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. Going forward, unrealized gains and decommissioning liabilities forlosses on investments in equity securities held by the Indian Point 3 and FitzPatrick plants to Entergy. In January 2017, NYPA transferred to Entergy the Indian Point 3nuclear decommissioning trust fundfunds will be recorded in earnings as they occur rather than in other comprehensive income. In accordance with a fair valuethe regulatory treatment 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 salefunds of the FitzPatrick plantRegistrant Subsidiaries, an offsetting amount of unrealized gains/(losses) will continue 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 withinbe recorded in other deferred debits as of December 31, 2016.regulatory liabilities/assets.

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 recordedrecords an offsetting amount of unrealized gains/(losses) in other deferred credits.credits for the excess trust earnings not currently expected to be needed to decommission the plant.  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/(losses) recorded on the equity securities in the trust funds are recognized in earnings. Unrealized gains recorded on the assetsavailable-for-sale debt securities in thesethe trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available-for-sale.equity.  Unrealized losses (where cost exceeds fair market value) on the assetsavailable-for-sale debt securities in thesethe trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other-than-temporaryother than temporary and therefore recorded in earnings. Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The securities held as of June 30, 2017 and December 31, 2016 are summarized as follows:
  
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
  (In Millions)
2017      
Equity Securities 
$4,389
 
$1,857
 
$1
Debt Securities 2,408
 45
 15
Total 
$6,797
 
$1,902
 
$16
  
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 June 30, 2017 are $465 million for Indian Point 1, $591 million for Indian Point 2, $758 million for Indian Point 3, $434 million for Palisades, $1,010 million for Pilgrim, and $595 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.

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Deferred taxes onThe unrealized gains/(losses) are recorded in other comprehensive income forrecognized during 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 $441 millionthree and $399 millionsix months ended June 30, 2018 on equity securities still held as of June 30, 20172018 were $100 million and December 31, 2016,$33 million, respectively.  The amortized cost of debt securities was $2,378 million as of June 30, 2017 and $2,212 million as of December 31, 2016.  As of June 30, 2017, the debt securities have an average coupon rate of approximately 3.21%, an average duration of approximately 6.14 years, and an average maturity of approximately 9.96 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 available-for-sale securities held as of June 30, 2018 and December 31, 2017 are summarized as follows:
  
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
  (In Millions)
2018      
Debt Securities 
$2,620
 
$20
 
$53
       
2017      
Equity Securities 
$4,662
 
$2,131
 
$1
Debt Securities 2,550
 44
 16
Total 
$7,212
 
$2,175
 
$17

The unrealized gains/(losses) above are reported before deferred taxes of $472 million as of December 31, 2017 for equity securities, and ($5) million as of June 30, 2018 and $7 million as of December 31, 2017 for debt securities. The amortized cost of debt securities was $2,653 million as of June 30, 2018 and $2,539 million as of December 31, 2017.  As of June 30, 2018, the debt securities have an average coupon rate of approximately 3.31%, an average duration of approximately 6.77 years, and an average maturity of approximately 10.06 years.
    
The fair value and gross unrealized losses of the available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2017:2018:
Equity Securities Debt Securities Debt Securities
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
(In Millions) (In Millions)
Less than 12 months
$2
 
$1
 
$997
 
$12
 
$1,624
 
$40
More than 12 months
 
 47
 3
 229
 13
Total
$2
 
$1
 
$1,044
 
$15
 
$1,853
 
$53

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, 2016:2017:
Equity Securities Debt SecuritiesEquity 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
$23
 
$1
 
$1,169
 
$26

$8
 
$1
 
$1,099
 
$7
More than 12 months1
 
 20
 1

 
 265
 9
Total
$24
 
$1
 
$1,189
 
$27

$8
 
$1
 
$1,364
 
$16

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2017 and December 31, 2016 are as follows:
 2017 2016
 (In Millions)
less than 1 year
$106
 
$125
1 year - 5 years805
 763
5 years - 10 years795
 719
10 years - 15 years111
 109
15 years - 20 years88
 73
20 years+503
 424
Total
$2,408
 
$2,213

During the three months ended June 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $949 million and $504 million, respectively.  During the three months ended June 30, 2017 and 2016, gross gains

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The fair value of $61debt securities, summarized by contractual maturities, as of June 30, 2018 and December 31, 2017 are as follows:
 2018 2017
 (In Millions)
less than 1 year
$131
 
$74
1 year - 5 years963
 902
5 years - 10 years693
 812
10 years - 15 years148
 147
15 years - 20 years105
 100
20 years+580
 515
Total
$2,620
 
$2,550

During the three months ended June 30, 2018 and 2017, proceeds from the dispositions of securities amounted to $710 million and $10$949 million, respectively.  During the three months ended June 30, 2018 and 2017, gross gains of $1 million and $61 million, respectively, and gross losses of $2$15 million and $2 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

During the six months ended June 30, 20172018 and 2016,2017, proceeds from the dispositions of securities amounted to $1,463$1,801 million and $1,233$1,463 million, respectively.  During the six months ended June 30, 20172018 and 2016,2017, gross gains of $70$2 million and $20$70 million, respectively, and gross losses of $22 million and $7 million, and $5 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of June 30, 2018 are $491 million for Indian Point 1, $621 million for Indian Point 2, $801 million for Indian Point 3, $460 million for Palisades, $1,055 million for Pilgrim, and $585 million for Vermont Yankee. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2017 are $491 million for Indian Point 1, $621 million for Indian Point 2, $798 million for Indian Point 3, $458 million for Palisades, $1,068 million for Pilgrim, and $613 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.

Entergy Arkansas

Entergy Arkansas holds debt and equity securities classified asand available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of June 30, 20172018 and December 31, 20162017 are summarized as follows:
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 (In Millions)
2018      
Debt Securities 
$341.7
 
$0.4
 
$9.9
 (In Millions)      
2017            
Equity Securities 
$556.3
 
$308.0
 
$—
 
$596.7
 
$354.9
 
$—
Debt Securities 328.0
 3.3
 2.3
 348.2
 2.1
 3.0
Total 
$884.3
 
$311.3
 
$2.3
 
$944.9
 
$357.0
 
$3.0
      
2016      
Equity Securities 
$525.4
 
$281.5
 
$—
Debt Securities 309.3
 3.4
 4.2
Total 
$834.7
 
$284.9
 
$4.2


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Notes to Financial Statements

The amortized cost of debt securities was $327$351.2 million as of June 30, 20172018 and $310.1$349.1 million as of December 31, 2016.2017.  As of June 30, 2017,2018, the debt securities have an average coupon rate of approximately 2.53%2.64%, an average duration of approximately 5.834.72 years, and an average maturity of approximately 6.876.38 years.

The unrealized gains/(losses) recognized during the three and six months ended June 30, 2018 on equity securities still held as of June 30, 2018 were $16.8 million and $8.9 million, respectively. 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 the available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2017:2018:
 Equity Securities Debt Securities
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions)
Less than 12 months
$—
 
$—
 
$118.1
 
$1.7
More than 12 months
 
 10.1
 0.6
Total
$—
 
$—
 
$128.2
 
$2.3


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  Debt Securities
  
Fair
Value
 
Gross
Unrealized
Losses
  (In Millions)
Less than 12 months 
$266.6
 
$7.9
More than 12 months 34.4
 2.0
Total 
$301.0
 
$9.9

The fair value and gross unrealized losses of the 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, 2016:2017:
Equity Securities Debt SecuritiesEquity 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
$—
 
$—
 
$146.7
 
$4.2

$—
 
$—
 
$168.0
 
$1.2
More than 12 months
 
 
 

 
 41.4
 1.8
Total
$—
 
$—
 
$146.7
 
$4.2

$—
 
$—
 
$209.4
 
$3.0

The fair value of debt securities, summarized by contractual maturities, as of June 30, 20172018 and December 31, 20162017 are as follows:
2017 20162018 2017
(In Millions)(In Millions)
less than 1 year
$16.8
 
$16.7

$29.5
 
$13.0
1 year - 5 years102.6
 106.2
161.6
 123.4
5 years - 10 years183.5
 161.2
115.4
 180.6
10 years - 15 years4.4
 7.7
3.4
 4.8
15 years - 20 years1.1
 1.0
5.9
 3.4
20 years+19.6
 16.5
25.9
 23.0
Total
$328.0
 
$309.3

$341.7
 
$348.2

During the three months ended June 30, 20172018 and 2016,2017, proceeds from the dispositions of securities amounted to $131.3$86.5 million and $45.2$131.3 million, respectively.  During the three months ended June 30, 20172018 and 2016,2017, gross gains of $11.2$0.01 million and $0.4$11.2 million, respectively, and gross losses of $2.3 million and $0.1 million, and $0.2 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the six months endedJune 30, 2017 and 2016, proceeds from the dispositions ofrelated to available-for-sale securities amounted to $167.3 million and $103.8 million, respectively.  During the six months ended June 30, 2017 and 2016, gross gains of $11.7 million and $1.2 million, respectively, and gross losses of $0.2 million and $0.3 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.


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Notes to Financial Statements

During the six months endedJune 30, 2018 and 2017, proceeds from the dispositions of securities amounted to $121.4 million and $167.3 million, respectively.  During the six months ended June 30, 2018 and 2017, gross gains of $0.1 million and $11.7 million, respectively, and gross losses of $2.4 million and $0.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Entergy Louisiana

Entergy Louisiana holds debt and equity securities classified asand available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of June 30, 20172018 and December 31, 20162017 are summarized as follows:
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 (In Millions)
2018      
Debt Securities 
$513.8
 
$4.7
 
$10.3
 (In Millions)      
2017            
Equity Securities 
$756.6
 
$395.6
 
$—
 
$818.3
 
$461.2
 
$—
Debt Securities 464.1
 10.9
 2.9
 493.8
 10.9
 3.6
Total 
$1,220.7
 
$406.5
 
$2.9
 
$1,312.1
 
$472.1
 
$3.6
      
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 $456.1$519.3 million as of June 30, 20172018 and $421.9$490 million as of December 31, 2016.2017.  As of June 30, 2017,2018, the debt securities have an average coupon rate of approximately 3.79%, an average duration of approximately 5.85.86 years, and an average maturity of approximately 11.4911.64 years.

The unrealized gains/(losses) recognized during the three and six months ended June 30, 2018 on equity securities still held as of June 30, 2018 were $22.2 million and $11.5 million, respectively. 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 the available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2017:2018:
Equity Securities Debt Securities Debt Securities
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
(In Millions) (In Millions)
Less than 12 months
$—
 
$—
 
$164.4
 
$2.4
 
$287.6
 
$6.3
More than 12 months
 
 9.7
 0.5
 75.5
 4.0
Total
$—
 
$—
 
$174.1
 
$2.9
 
$363.1
 
$10.3


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Notes to Financial Statements

The fair value and gross unrealized losses of the 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, 2016:2017:
Equity Securities Debt SecuritiesEquity 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
$—
 
$—
 
$198.8
 
$4.8

$—
 
$—
 
$135.3
 
$1.1
More than 12 months
 
 4.8
 0.2

 
 84.4
 2.5
Total
$—
 
$—
 
$203.6
 
$5.0

$—
 
$—
 
$219.7
 
$3.6

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2018 and December 31, 2017 are as follows:
 2018 2017
 (In Millions)
less than 1 year
$29.5
 
$23.2
1 year - 5 years140.5
 122.8
5 years - 10 years101.7
 109.3
10 years - 15 years53.7
 52.7
15 years - 20 years45.0
 50.7
20 years+143.4
 135.1
Total
$513.8
 
$493.8

During the three months ended June 30, 2018 and 2017, proceeds from the dispositions of securities amounted to $43.9 million and $85 million, respectively.  During the three months ended June 30, 2018 and 2017, gross gains of $0.01 million and $5 million, respectively, and gross losses of $0.4 million and 0.1 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2018 and 2017, proceeds from the dispositions of securities amounted to $169.4 million and $125.6 million, respectively.  During the six months ended June 30, 2018 and 2017, gross gains of $0.5 million and $5 million, respectively, and gross losses of $1.2 million and $0.3 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.


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Notes to Financial Statements

The fair value of debt securities, summarized by contractual maturities, as of June 30, 2017 and December 31, 2016 are as follows:
 2017 2016
 (In Millions)
less than 1 year
$28.5
 
$31.4
1 year - 5 years105.2
 99.1
5 years - 10 years131.9
 122.8
10 years - 15 years44.3
 41.4
15 years - 20 years38.6
 30.9
20 years+115.6
 99.2
Total
$464.1
 
$424.8

During the three months ended June 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $85 million and $69.7 million, respectively.  During the three months ended June 30, 2017 and 2016, gross gains of $5 million and $1.7 million, respectively, and gross losses of $0.1 million and $0.04 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $125.6 million and $123.5 million, respectively.  During the six months ended June 30, 2017 and 2016, gross gains of $5 million and $2.6 million, respectively, and gross losses of $0.3 million and $0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.

System Energy

System Energy holds debt and equity securities classified asand available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of June 30, 20172018 and December 31, 20162017 are summarized as follows:
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 (In Millions)
2018      
Debt Securities 
$324.2
 
$1.6
 
$5.7
 (In Millions)      
2017            
Equity Securities 
$516.9
 
$257.6
 
$—
 
$575.2
 
$308.6
 
$—
Debt Securities 322.5
 3.3
 2.3
 330.5
 4.2
 1.2
Total 
$839.4
 
$260.9
 
$2.3
 
$905.7
 
$312.8
 
$1.2
      
2016      
Equity Securities 
$473.9
 
$221.9
 
$0.1
Debt Securities 306.6
 2.0
 4.5
Total 
$780.5
 
$223.9
 
$4.6

The amortized cost of debt securities was $321.5$328.3 million as of June 30, 20172018 and $309.1$327.5 million as of December 31, 2016.2017.  As of June 30, 2017,2018, the debt securities have an average coupon rate of approximately 2.37%2.93%, an average duration of approximately 6.456.22 years, and an average maturity of approximately 8.849.12 years.

The unrealized gains/(losses) recognized during the three and six months ended June 30, 2018 on equity securities still held as of June 30, 2018 were $16.3 million and $8.5 million, respectively. 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.


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Notes to Financial Statements

The fair value and gross unrealized losses of the available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of June 30, 2017:2018:
Equity Securities Debt Securities Debt Securities
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
(In Millions)(In Millions)
Less than 12 months
$—
 
$—
 
$199.5
 
$2.0
 
$187.0
 
$5.1
More than 12 months
 
 8.6
 0.3
 9.2
 0.6
Total
$—
 
$—
 
$208.1
 
$2.3
 
$196.2
 
$5.7

The fair value and gross unrealized losses of the 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, 2016:2017:
Equity Securities Debt SecuritiesEquity 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
$—
 
$—
 
$220.9
 
$4.4

$—
 
$—
 
$196.9
 
$1.0
More than 12 months
 0.1
 0.8
 0.1

 
 10.4
 0.2
Total
$—
 
$0.1
 
$221.7
 
$4.5

$—
 
$—
 
$207.3
 
$1.2


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Notes to Financial Statements

The fair value of debt securities, summarized by contractual maturities, as of June 30, 20172018 and December 31, 20162017 are as follows:
2017 20162018 2017
(In Millions)(In Millions)
less than 1 year
$8.6
 
$6.6

$9.7
 
$4.1
1 year - 5 years159.6
 188.2
169.2
 173.0
5 years - 10 years86.4
 78.5
71.6
 78.5
10 years - 15 years2.3
 1.3
2.7
 1.0
15 years - 20 years7.8
 7.8
11.3
 6.9
20 years+57.8
 24.2
59.7
 67.0
Total
$322.5
 
$306.6

$324.2
 
$330.5

During the three months ended June 30, 20172018 and 2016,2017, proceeds from the dispositions of securities amounted to $177.7$145.2 million and $100.9$177.7 million, respectively.  During the three months ended June 30, 20172018 and 2016,2017, gross gains of $0.4$0.2 million and $0.9$0.4 million, respectively, and gross losses of $3.9 million and $0.6 million, and $0.1 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

During the six months ended June 30, 20172018 and 2016,2017, proceeds from the dispositions of securities amounted to $253.5$199.4 million and $289.4$253.5 million, respectively.  During the six months ended June 30, 20172018 and 2016,2017, gross gains of $0.5$0.3 million and $2.5$0.5 million, respectively, and gross losses of $4.5 million and $1.3 million, and $0.4 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.


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Notes to Financial Statements

Other-than-temporary impairments and unrealized gains and losses

Entergy evaluates investmentthe available-for-sale debt securities in the Entergy Wholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three and six months ended June 30, 20172018 and 2016.  The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment is 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.2017.  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 record material charges to other income for the three and six months endedJune 30, 2017 and 2016, 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 Audits” and “Other Tax Matters” in Note 3 to the financial statements in the Form 10-K for a discussion of income tax audits, the Tax Cuts and Jobs Act, and other income tax matters involving Entergy. The following are updates to that discussion.

As discussed2012-2013 IRS Audit

The IRS has completed its examination of the 2012 and 2013 tax years and issued its 2012-2013 Revenue Agent Report (RAR) in June 2018. Entergy has agreed to all proposed adjustments contained in the Form 10-K, in the second quarter 2016,RAR. Entergy made a tax election to treat as a corporation for federal income tax 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 receiptRegistrant Subsidiaries recorded the effects 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 resultedthese adjustments in a $44 million income tax benefit in the first quarter 2017.June 2018.

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 plants to new subsidiary corporations for federal income tax purposes, and generated both permanent and temporary differences under the income tax accounting standards. The constructive contributions required the Entergy subsidiary that constructively contributed the assets and liabilities to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in permanent differences. The accrual of the nuclear decommissioning liabilities required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets constructively contributed to the subsidiaries. Recognition of the gain and the increase in tax basis of the assets represents a temporary difference. The permanent differences reduced income tax expense, net of unrecognized tax benefits, by $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

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Notes to Financial Statements

As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax assets. Entergy’s stock-based compensation plans arebenefits of $52 million related to the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing.

The settlement of the above-described item, along with other minor recorded adjustments, decreased Entergy Louisiana’s balance of unrecognized tax benefits from $926 million as of December 31, 2017 to $856 million as of June 30, 2018, net of carryovers for losses and credits.

Tax Cuts and Jobs Act

As discussed in the Form 10-K, the Tax Cuts and Jobs Act limits the deduction for net business interest expense in certain circumstances. The limitation does not apply to interest expense allocable to the Utility. In Notice 2018-28 released on April 2, 2018, the IRS announced that it intends to issue proposed regulations that will provide guidance to assist taxpayers in complying with the new interest provisions under the Tax Cuts and Jobs Act. The notice provides general and limited information of the IRS’s interpretation regarding methodologies that could be used for the allocation of the interest expense limitation. As a result of the new provision contained in the Tax Cuts and Jobs Act, Entergy recorded limitations in 2018 which did not have a material effect on financial position, results of operations, or cash flows.

For a discussion of proceedings commenced or other responses by Entergy’s regulators to the Tax Cuts and Jobs Act, see Note 122 to the financial statements herein and in the Form 10-K.

During the second quarter 2018, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and System Energy began returning unprotected excess accumulated deferred income taxes, associated with the effects of the Tax Cuts and Jobs Act, to their customers through rate riders and other means approved by each operating company’s respective regulatory commission. Return of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. In the second quarter 2018 the return of unprotected excess accumulated deferred income taxes reduced the Registrant Subsidiaries’ regulatory liability for income taxes as follows: Entergy Arkansas, $108 million; Entergy Louisiana, $31 million; Entergy Mississippi, $129 million; and System Entergy, $11 million.


NOTE 11.  PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Construction Expenditures in Accounts Payable

Construction expenditures included in accounts payable at June 30, 20172018 are $198$280 million for Entergy, $47.8$30.3 million for Entergy Arkansas, $55.1$113.5 million for Entergy Louisiana, $5.3$15.2 million for Entergy Mississippi, $1.1$4.8 million for Entergy New Orleans, $15.2$7.1 million for Entergy Texas, and $28.1$53 million for System Energy.  Construction expenditures included in accounts payable at December 31, 20162017 are $253$368 million for Entergy, $40.9$58.8 million for Entergy Arkansas, $114.8$160.4 million for Entergy Louisiana, $11.5$17.1 million for Entergy Mississippi, $2.3$2.5 million for Entergy New Orleans, $9.3$32.8 million for Entergy Texas, and $6.2$33.9 million for System Energy.


NOTE 12.  VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Note 17 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.

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Notes to hold a variable interest in the lessor from which it leased an undivided interest representing approximately 9.3% of the Waterford 3 nuclear plant. After Entergy Louisiana acquired a beneficial interest in the leased assets in March 2016, however, the lessor was no longer considered a variable interest entity. Entergy Louisiana made payments on its lease, including interest, of $9.2 million through March 2016. See Note 10 to the financial statements in the Form 10-K for a discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.Financial Statements

System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 10 to the financial statements in the Form 10-K. System Energy made payments on its lease, including interest, of $8.6 million in the six months ended June 30, 20172018 and $8.6 million in the six months ended June 30, 2016.2017.


NOTE 13.  DISPOSITIONSREVENUE RECOGNITION (Entergy Corporation)Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

In March 2017Revenue Recognition

Entergy implemented ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” effective January 1, 2018. Topic 606 requires entities to “recognize revenue to depict the NRC approvedtransfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The ASU details a five-step model that should be followed to achieve the core principle. This accounting was applied to all contracts using the modified retrospective method, which requires an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date. Because the standard did not result in any material change in how Entergy recognizes revenue, however, no adjustment to retained earnings was required. Similarly, there was no effect on revenues recognized under Topic 606 for the three or six months ended June 30, 2018.

Revenues from electric service and the sale of the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a purchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in additionnatural gas are recognized when services are transferred to the assumption by Exeloncustomer in an amount equal to what Entergy has the right to bill the customer because this amount represents the value of certain liabilities relatedservices provided 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.

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-datecustomers.

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Entergy’s total revenues for the three and six months ended June 30, 2018 were as follows:
  2018
  Three Months Ended Six Months Ended
  (In Thousands)
Utility:    
Residential 
$768,710
 
$1,660,795
Commercial 581,899
 1,177,620
Industrial 624,818
 1,222,004
Governmental 56,823
 113,301
    Total billed retail 2,032,250
 4,173,720
     
Sales for resale (a) 69,212
 138,738
Other electric revenues (b) 219,391
 246,822
Non-customer revenues (c) 9,372
 19,206
    Total electric revenues 2,330,225
 4,578,486
     
Natural gas 29,943
 86,638
     
Entergy Wholesale Commodities:    
Competitive businesses sales (a) 331,562
 740,697
Non-customer revenues (c) (22,960) (13,171)
    Total competitive businesses 308,602
 727,526
     
    Total operating revenues 
$2,668,770
 
$5,392,650


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Notes to Financial Statements

The Registrant Subsidiaries’ total revenues for the three months ended June 30, 2018 were as follows:
2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
  (In Thousands)
           
Residential 
$159,130
 
$267,915
 
$132,730
 
$58,232
 
$150,703
Commercial 93,741
 221,740
 117,351
 54,524
 94,544
Industrial 97,973
 368,678
 46,129
 9,267
 102,771
Governmental 3,766
 16,705
 11,452
 18,448
 6,452
    Total billed retail 354,610

875,038

307,662

140,471

354,470
           
Sales for resale (a) 53,195
 111,801
 11,776
 6,190
 25,177
Other electric revenues (b) 84,102
 70,027
 31,696
 11,623
 23,468
Non-customer revenues (c) 2,698
 4,823
 2,555
 1,318
 371
    Total electric revenues 494,605

1,061,689

353,689

159,602

403,486
           
Natural gas 
 11,099
 
 18,844
 
           
    Total operating revenues 
$494,605


$1,072,788


$353,689


$178,446


$403,486

The Registrant Subsidiaries’ total revenues for the six months ended June 30, 2018 were as follows:
2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
  (In Thousands)
           
Residential 
$394,654
 
$563,433
 
$281,073
 
$122,807
 
$298,828
Commercial 214,375
 446,667
 227,811
 108,796
 179,971
Industrial 209,450
 721,014
 88,629
 16,838
 186,073
Governmental 8,414
 34,015
 22,300
 36,139
 12,433
    Total billed retail 826,893
 1,765,129
 619,813
 284,580
 677,305
           
Sales for resale (a) 119,299
 201,056
 13,769
 19,527
 48,538
Other electric revenues (b) 94,125
 90,529
 30,977
 8,511
 25,733
Non-customer revenues (c) 5,312
 10,081
 4,873
 2,802
 850
    Total electric revenues 1,045,629
 2,066,795
 669,432
 315,420
 752,426
           
Natural gas 
 35,337
 
 51,301
 
           
    Total operating revenues 
$1,045,629
 
$2,102,132
 
$669,432
 
$366,721
 
$752,426

(a)Sales for resale and competitive businesses sales include day-ahead sales of energy in a market administered by an ISO. These sales represent financially binding commitments for the sale of physical energy the next day. These sales are adjusted to actual power generated and delivered in the real time market. Given the short

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duration of these transactions, Entergy does not consider them to be derivatives subject to fair value adjustments, and includes them as part of customer revenues.
(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market and unbilled revenue.
(c)Non-customer revenues include the settlement of financial hedges, occasional sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and late fees.

Electric Revenues

Entergy’s primary source of revenue is from retail electric sales sold under tariff rates approved by regulators in its various jurisdictions. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas. Energy is provided on demand throughout the month, measured by a meter located at the customer’s property. Approved rates vary by customer class due to differing requirements of the customers and market factors involved in fulfilling those requirements. Entergy issues monthly bills to customers at rates approved by regulators for power and related services provided during the previous billing cycle.

To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies record an estimate for energy delivered since the latest billings. The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and market prices of power in the respective jurisdiction. The inputs are revised as needed to approximate actual usage and cost. Each month, estimated unbilled amounts are recorded as unbilled revenue and accounts receivable, and the prior month’s estimate is reversed. Price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the other. This may result in variability of reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

Entergy may record revenue based on rates that are subject to refund. Such revenues are reduced by estimated refund amounts when Entergy believes refunds are probable based on the status of rate proceedings as of the date financial statements are prepared. Because these refunds will be made through a reduction in future rates, and not as a reduction in bills previously issued, they are presented as non-customer revenue in the table above.

System Energy’s only source of revenue is the sale of electric power and capacity generated from its 90% interest in the Grand Gulf nuclear plant to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy issues monthly bills to its affiliated customers equal to its actual operating costs plus a return on common equity approved by the FERC.

Entergy’s Utility operating companies also sell excess power not needed for its own customers, primarily through transactions with MISO, a regional transmission organization that maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. In the MISO market, Entergy offers its generation and bids its load into the market. MISO settles these offers and bids based on locational marginal prices. These represent pricing for energy at a given location based on a market clearing price that takes into account physical limitations on the transmission system, generation, and demand throughout the MISO region. MISO evaluates each market participant’s energy offers and demand bids to economically and reliably dispatch the entire MISO system. Entergy nets purchases and sales within the MISO market and reports in operating revenues when in a net selling position and in operating expenses when in a net purchasing position.

Natural Gas

Entergy Louisiana and Entergy New Orleans also distribute natural gas to retail customers in and around Baton Rouge, Louisiana, and the City of New Orleans, including Algiers, respectively. Gas transferred to customers is measured by a meter at the customer’s property. Entergy issues monthly invoices to customers at rates approved by regulators for the volume of gas transferred to date.

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Competitive Businesses Revenues

The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power and capacity produced by its operating plants to wholesale customers. The majority of Entergy Wholesale Commodities revenues are from Entergy’s nuclear power plants located in the northern United States. Entergy issues monthly invoices to the counterparties for these electric sales at the respective contracted or ISO market rate of electricity and related services provided during the previous month.

Most of the Palisades nuclear plant output is sold under a 15-year PPA with Consumers Energy, executed as part of the acquisition of the plant in 2007 and expiring in 2022. The PPA prices are for a set price per MWh and escalate each year, up to $61.50/MWh in 2022. Entergy issues monthly invoices to Consumers Energy for electric sales based on the actual output of electricity and related services provided during the previous month at the contract price. Additionally, as the PPA pricing was considered below-market at the time of acquisition, a liability was recorded for the fair value of the decommissioning trust fund was $805 million, classified within other deferred debits,below-market PPA, and is being amortized to revenue over the disposition-date fairlife of the agreement.

Practical Expedients and Exceptions

Entergy has elected not to disclose the value of unsatisfied performance obligations for contracts with an original expected term of one year or less, or for revenue recognized in an amount equal to what Entergy has the asset retirement obligation was $727 million, classifiedright to bill the customer for services performed.

Most of Entergy’s contracts, except in a few cases where there are defined minimums or stated terms, are on demand. This results in customer bills that vary each month based on an approved tariff and usage. Entergy imposes monthly or annual minimum requirements on some customers primarily as credit and cost recovery guarantees and not as pricing for unsatisfied performance obligations. These minimums typically expire after the initial term or when specified costs have been recovered. The minimum amounts are part of each month’s bill and recognized as revenue accordingly. Some of the subsidiaries within other non-current liabilities.the Entergy Wholesale Commodities segment have operations and maintenance services contracts that have fixed components and terms longer than one year. The transaction also included property, plant,total fixed consideration related to these unsatisfied performance obligations, however, is not material to Entergy revenues.

Recovery of Fuel Costs

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers. Where the fuel component of revenues is based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and equipmentEntergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The capital costs are based on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on 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 specified 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 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.basis, excluding them from revenues.



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Notes to Financial Statements

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. FollowingThe following is an update to that discussion.

In the secondfirst quarter 2017, System Energy2018, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for Grand GulfRiver Bend as a result of a revised decommissioning cost study. The revised estimate resulted in a $35.9an $85.4 million reductionincrease in its decommissioning cost liability, along with a corresponding reductionincrease in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.

________________

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



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

See “Market and Credit Risk Sensitive Instruments” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

Part I, Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of June 30, 2017,2018, evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO). The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures. Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of each Registrants’ management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended June 30, 20172018 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.


ENTERGY ARKANSAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 20172018 Compared to Second Quarter 20162017

Net income increased $4.7$44 million primarily due to higher net revenue, after excluding the effect of the return of unprotected excess accumulated deferred income taxes to customers which is offset in income taxes, and a lower effective income tax rate, partially offset by lower other income.income and higher other operation and maintenance expenses.

Six Months EndedJune 30, 20172018 Compared to Six Months EndedJune 30, 20162017

Net income remained relatively unchanged, decreasing by $0.3increased $66 million primarily due to higher net revenue and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses, higher nuclear refueling outage expenses,lower other income, and higher depreciation and amortization expenses, substantially offset by higher other income and higher net revenue.expenses.

Net Revenue

Second Quarter 20172018 Compared to Second Quarter 20162017

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 second quarter 2017 to the second quarter 2016:

Amount
(In Millions)
2016 net revenue
$365.7
Retail electric price9.8
Asset retirement obligation(7.8)
Other(1.2)
2017 net revenue
$366.5
The retail electric price variance is primarily due to the implementation of formula rate plan rates, as approved by the APSC, effective with the first billing cycle of January 2017. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

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 reallocations for the ANO 1 decommissioning trust fund.


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Six Months Ended June 30, 2017 Compared to Six Months Ended June 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 six months ended June 30, 2017second quarter 2018 to the six months ended June 30, 2016:second quarter 2017:

 Amount
 (In Millions)
20162017 net revenue
$687.4366.5
Return of unprotected excess accumulated deferred income taxes to customers(107.6)
Retail electric price24.120.1
Opportunity sales7.5
Asset retirement obligation(10.5)
Volume/weather(15.146.7)
Other3.49.9
20172018 net revenue
$696.8335.6

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. There is no effect on net income as the reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to an increase in base rates effective February 24, 2016 and the implementation of formula rate plan rates effective with the first billing cycle of January 2017,2018 and an increase in the energy efficiency rider effective January 2018, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power 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 in the Form 10-K for further discussion of the rate case and formula rate plan filings. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.filing.

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 in the Form 10-K for further discussion
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The asset retirement obligation affects net revenue because Entergy Arkansas, records a regulatory charge or credit for the difference between asset retirement obligation-related expensesInc. 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 reallocations for the ANO 1 decommissioning trust fund.Subsidiaries
Management's Financial Discussion and Analysis

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather.  This decrease was partially offset by an increase of 307331 GWh, or 3%7%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales and an increase in industrial usage. The increase in industrial usage is primarily due to a new customer in the primary metals industry.

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the six months ended June 30, 2018 to the six months ended June 30, 2017:

Amount
(In Millions)
2017 net revenue
$696.8
Volume/weather67.1
Retail electric price42.5
Return of unprotected excess accumulated deferred income taxes to customers(107.6)
Other10.8
2018 net revenue
$709.6

The volume/weather variance is primarily due to an increase of 930 GWh, or 10%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales and an increase in industrial usage. The increase in industrial usage is primarily due to a new customer in the primary metals industry.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of January 2018 and an increase in the energy efficiency rider effective January 2018, each as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. There is no effect on net income as the reduction in net revenue was offset by a reduction in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Other Income Statement Variances

Second Quarter 20172018 Compared to Second Quarter 20162017

Other operation and maintenance expenses decreasedincreased primarily due to:

a decreasean increase of $5.1$5.7 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs;a higher scope of work performed during plant outages in 2018 as compared to the same period in 2017;
higher energy efficiency expenses of $3.8 million due to the timing of recovery from customers in 2017; and
a decrease
an increase of $2.7$1.4 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs, partially offset by higher nuclear labor costs, including contract labor, in second quarter 2017 as compared to second quarter 2016 primarily due to increased operating costs to position the nuclear fleet to meet its operational goals. The decrease in regulatory compliance costs is primarily related to additional NRC inspection

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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.

The decreaseincrease was partially offset by an increasehigher nuclear insurance refunds of $2.7 million in transmission$2.9 million.


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Depreciation and amortization expenses due to higher vegetation maintenance costs in 2017 as compared to the same period in 2016 and an increase of $1.6 million in compensation and benefits costsincreased primarily due to an increaseadditions to plant in net periodic pension and other postretirement benefits costs as a result of a lower discount rate.service.

Other income increaseddecreased primarily due to higher realized gainschanges in 2017 as compared to 2016 on the decommissioning trust fund investments,investment activity, including portfolio reallocationsrebalancing for the ANO 1 decommissioning trust fund.fund in second quarter 2017.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

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 increased primarily due to:

the deferral in first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC as part of the 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;
an increase of $5.4 million in transmission and distribution expenses due to higher vegetation maintenance costs in 2017; and
an increase of $4 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016 and an increase in net periodic pension and other postretirement benefits costs as a result of a lower discount rate.

The increase was partially offset by a decrease of $16.1$8 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, in 2017 compared to the same period in 2016 primarily due to increased operating costs 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.goals;
higher energy efficiency expenses of $7.9 million due to the timing of recovery from customers; and
an increase of $4.2 million in fossil-fueled generation expenses primarily due to a higher scope of work performed during plant outages in 2018 as compared to the same period in 2017.

The increase was partially offset by higher nuclear insurance refunds of $6.5 million.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes, higher local franchisepayroll taxes and an increase in payrollad valorem taxes. Ad valorem taxes increased primarily due to higher assessments and higher millage rates. 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,service.

Other income decreased primarily due to changes in decommissioning trust fund investment activity, including Power Blockportfolio rebalancing for the ANO 1 decommissioning trust fund in 2017.

Interest expense increased primarily due to the issuance of $220 million of 3.5% Series first mortgage bonds in May 2017 and the issuance of $250 million of 4.0% Series first mortgage bonds in May 2018.

Income Taxes

The effective income tax rate was (10,762.6%) for the second quarter 2018. The difference in the effective income tax rate for the second quarter 2018 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, and book and tax differences related to the allowance for equity funds used during construction, partially offset by an IRS audit settlement for the 2012-2013 tax returns. See Notes 2 ofand 10 to the Union Power Station purchased in March 2016. See Note 14financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the Union Power Station purchase.effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for a discussion of the IRS audit settlement.


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Other income increased21% was primarily due to higher realized gains in 2017 as comparedthe amortization of excess accumulated deferred income taxes, and certain book and tax differences related to 2016 onutility plant items. See Notes 2 and 10 to the decommissioning trust fund investments, including portfolio reallocations for the ANO 1 decommissioning trust fund.

Interest expense decreased primarily due to $5.1 million in estimated interest expense recorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Notefinancial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for furthera discussion of the opportunity sales proceeding.

Income Taxeseffects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 38.4% for the second quarter 2017. The difference in the effective income tax rate for the second quarter 2017 versus the federal statutory rate of 35% was primarily due to state income taxes

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and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rate was 40.2% for the six months ended June 30, 2017. The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to state income taxes, a write-off of a stock-based compensation deferred tax asset, and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.

The effective income tax rates were 40.1% for the second quarter 2016 and 40% for the six months ended June 30, 2016. The differences in the effective income tax rates for the second quarter 2016 and the six months ended June 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.

ANO Damage, Outage, and NRC ReviewsIncome Tax Legislation

See the MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Income Tax LegislationANO Damage, Outage,” section of Entergy Corporation and NRC ReviewsSubsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the ANO stator incident, subsequent NRC reviews,Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the deferraluncertainties associated with accounting for the Tax Act. Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements herein and in the Form 10-K contains a discussion of replacement power costs.proceedings commenced or other responses by Entergy and Entergy’s regulators to the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 20172018 and 20162017 were as follows:
2017 20162018 2017
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$20,509
 
$9,135

$6,216
 
$20,509
      
Cash flow provided by (used in):

  


  
Operating activities191,161
 253,703
226,595
 191,161
Investing activities(418,321) (577,426)(392,234) (418,321)
Financing activities209,728
 339,700
392,491
 209,728
Net increase (decrease) in cash and cash equivalents(17,432) 15,977
226,852
 (17,432)
      
Cash and cash equivalents at end of period
$3,077
 
$25,112

$233,068
 
$3,077

Operating Activities

Net cash flow provided by operating activities increased $35.4 million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017 primarily due to the timing of recovery of fuel and purchased power costs and a decrease of $20.5 million in spending on nuclear refueling outages in 2018. The increase was partially offset by the return of unprotected excess accumulated deferred income taxes to customers and the timing of collection of receivables from customers. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.


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Operating Activities

Net cash flow provided by operating activities decreased $62.5 million for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to an increase of $43.8 million in spending on nuclear refueling outages in 2017 and the timing of payments to vendors.

Investing Activities

Net cash flow used in investing activities decreased $159.1$26.1 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016 for approximately $237 million and to:

a decrease of $27.5$49.5 million in transmission construction expenditures primarily due toas a lower scope of non-storm related work performed in 2017. See Note 14 to the financial statements in the Form 10-K for discussionresult of the Union Power Station purchase.

The decrease was partially offset by:

an increase of $56.6 million in nuclear construction expenditures primarily due to a higher scope of work performed on various nuclear projects in 2017;
an increase of $17.8 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017; and
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.cycle;
a decrease of $16.3 million in storm spending;
a decrease of $11.7 million in nuclear construction expenditures primarily due to a lower scope of work performed on various nuclear projects in 2018 as compared to the same period in 2017;
a decrease of $9.4 million in transmission construction expenditures due to a decrease in spending on various transmission projects in 2018 as compared to the same period in 2017; and
a decrease of $9.1 million in fossil-fueled generation construction expenditures due to a decrease in spending on various fossil-fueled generation projects in 2018 as compared to the same period in 2017.

Financing ActivitiesThe decrease was partially offset by money pool activity and an increase of $10.5 million in information technology construction expenditures primarily due to increased spending on various technology projects.

NetIncreases in Entergy Arkansas’s receivable from the money pool are a use of cash flow, providedand Entergy Arkansas’s receivable from the money pool increased by financing activities decreased $130$57.7 million for the six months ended June 30, 20172018. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Arkansas’s cash provided by financing activities increased $182.8 million for the six months ended June 30, 2018 compared to the six months ended June 30, 20162017 primarily due to:

a $200$350 million capital contribution received from Entergy Corporation in March 2016 primarily2018 in anticipation of Entergy Arkansas’s purchasethe return of Power Block 2 of the Union Power Station;
the issuance of $325 million of 3.5% Series first mortgage bonds in January 2016, a portion of the proceeds of which were usedunprotected excess accumulated deferred income taxes to pay, prior to maturity, $175 million of 5.66% Series first mortgage bonds;customers and upcoming planned capital investments; and
net borrowings of $16.8 million in 2018 on the issuance of $55 million of 3.5% Series first mortgage bonds in June 2016.Entergy Arkansas nuclear fuel company variable interest entity.

The decreaseincrease was partially offset by:

the issuance of $220 million of 3.5% Series first mortgage bonds in May 2017;money pool activity; and
net repayments of short-term borrowings of $50 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2018 as compared to net short-term borrowings of $31.4 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2017 compared to net borrowings of $0.9 million in 2016; and
money pool activity.2017.

Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $37.6$166.1 million in 20172018 compared to decreasing by $52.7$37.6 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.2017.

See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.


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Capital Structure

Entergy Arkansas’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table. The increasedecrease in the debt to capital ratio for Entergy Arkansas is primarily due to the issuance of long-term debt$350 million capital contribution from Entergy Corporation in 2017.2018.

June 30,
2017
 
December 31,
2016
June 30,
2018
 
December 31,
2017
Debt to capital56.9% 55.3%52.8% 55.5%
Effect of excluding the securitization bonds(0.4%) (0.4%)(0.3%) (0.3%)
Debt to capital, excluding securitization bonds (a)56.5% 54.9%52.5% 55.2%
Effect of subtracting cash% (0.2%)(1.9%) %
Net debt to net capital, excluding securitization bonds (a)56.5% 54.7%50.6% 55.2%

(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. Following are updates to the information provided in the Form 10-K.

Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
($13,669) ($51,232) $1,453 ($52,742)
June 30,
 2018
 
December 31,
2017
 
June 30,
 2017
 
December 31,
2016
(In Thousands)
$57,708 ($166,137) ($13,669) ($51,232)

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 2018.2019. The $150 million credit facility allows Entergy Arkansas to issueincludes fronting commitments for the issuance of letters of credit against 50%$5 million of the borrowing capacity of the facility. As of June 30, 2017, there were2018, no cash borrowings and no letters of credit were 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 to MISO. As of June 30, 2017,2018, a $1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.


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The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in May 2019.  As of June 30, 2017, $14.7 million in letters of credit to support a like amount of commercial paper issued and $16.72018, $41.7 million in loans were outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity credit facility.entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.
    
State and Local Rate Regulation and Fuel-Cost Recovery

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery.  The following are updates to that discussion.

2016 Formula Rate Plan Filing
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In April 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunction with its 2017 formula rate plan filing, 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.Retail Rates

20172018 Formula Rate Plan Filing

In July 2017,2018, Entergy Arkansas filed with the APSC its 20172018 formula rate plan filing showingto set its formula rate for the 2019 calendar year. The filing shows Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 20182019 test period to be below the formula rate plan bandwidth. Additionally, the filing includes the first netting adjustment under the current formula rate plan for the historical test year 2017, which is a comparison of projected costs and sales approved in the 2016 formula rate plan filing to actual 2017 costs and sales data. The filing includes a projected $73.4 millionrevenue deficiency for 2019 and a $129.7$95.6 million revenue deficiency for the 2017 historical test year, for a total revenue requirement increase to achieveof $169 million for this filing. By operation of the formula rate plan, Entergy Arkansas’s target earned return on common equityrecovery of 9.75%.  Because the projected revenue increase exceeds therequirement is subject to a four percent annual revenue constraint. Because Entergy Arkansas’s revenue requirement in this filing exceeds the constraint, for each rate class, however,the resulting increase is limited to four percent of total revenue, which is $65.4 million. Entergy Arkansas proposedrecommended that the parties to the proceeding support a $70.9 million revenue requirement increase. Entergy Arkansashearing date in November 2018 and requested that the APSC issue an order approving its proposed formula rate plan adjustment by December 13, 2017. If a final order is not issued by this date, the proposed formula rate plan adjustment will becomein December 2018, with the proposed formula rate plan adjustment effective with the first billing cycle of January 2, 2018, subject to refund.2019.

Advanced Metering Infrastructure (AMI) FilingInternal Restructuring

As discussed in the Form 10-K, in September 2016,November 2017, Entergy Arkansas filed an application seeking a finding fromwith the APSC seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy Arkansas to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval by the APSC, the FERC, and the NRC. Entergy Arkansas also filed a notice with the Missouri Public Service Commission in December 2017 out of an abundance of caution, although Entergy Arkansas does not serve any retail customers in Missouri. In April 2018 the Missouri Public Service Commission approved Entergy Arkansas’s deployment of advanced metering infrastructure is in the public interest.filing. 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 Attorney General’s consultant primarily recommended denial of Entergy Arkansas’s application but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal.July 2018, Entergy Arkansas filed rebuttal testimonya settlement, reached by all parties in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017,proceeding, resolving all issues and seeking an APSC decision no later than September 1, 2018. If the appropriate approvals are obtained, Entergy Arkansas andexpects the parties to the proceeding filed a joint motion to suspend the procedural schedule pending the filing with the APSC of an agreement in principlerestructuring will be consummated on all issues.or before December 1, 2018.

Energy Cost Recovery Rider

In March 2017,2018, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase in the rate from $0.01164$0.01547 per kWh to $0.01547$0.01882 per kWh. The APSC staffArkansas Attorney General filed testimony in March 2017 recommendinga response to Entergy Arkansas’s annual redetermination filing requesting that the redetermined rate should be implemented withAPSC suspend the first billing cycleproposed tariff to investigate the amount of April 2017 under the normalredetermination or, alternatively, to allow recovery subject to refund. Among the reasons the Arkansas Attorney General cited for suspension were questions pertaining to how Entergy Arkansas forecasted sales and potential implications of the Tax Cuts and Jobs Act. Entergy Arkansas replied to the Arkansas Attorney General’s filing and stated that, to the extent there are questions pertaining to its load forecasting or the operation of the tariff. Accordingly,energy cost recovery rider, those issues exceed the redeterminedscope of the instant rate went into effectredetermination.

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on March 31, 2017 pursuantEntergy Arkansas also stated that potential effects of the Tax Cuts and Job Act are appropriately considered in the APSC’s separate proceeding looking at potential implications of the new tax law. The APSC general staff filed a reply to the tariff. In July 2017 the Arkansas Attorney General requested additional information to support certainGeneral’s filing and agreed that Entergy Arkansas’s filing complied with the terms of the costs included inenergy cost recovery rider. In April 2018 the APSC issued an order declining to suspend Entergy Arkansas’s 2017 energy cost recovery rider rate redetermination.

Opportunity Sales Proceedings

As discussedand declining to require further investigation of the issues suggested by the Attorney General 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.

In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order addressing the requests for rehearing filed in July 2012. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. The rehearing and clarification requests filed in May 2016 are pending FERC action.

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. The Utility operating companies have the opportunity to challenge the ALJ’s initial decision by filing a brief on exceptions with 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 unknownproceeding at this time. Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, inThe redetermined rate became effective with the first quarter 2016, Entergy Arkansas recorded a liabilitybilling cycle of $87 million, which includes interest, for its estimated increased costs and paymentApril 2018. Discovery continues to be conducted by the other Utility operating companies.  This estimate is subjectparties with respect 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

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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.redetermined rate.

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.

ANO

See Note 8 to the financial statements in the Form 10-K for discussion of the NRC’s decision in March 2015 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. In June 2018 the NRC moved ANO 1 and ANO 2 into the “licensee response column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections to review ANO 1’s and ANO 2’s performance in addressing issues that had previously resulted in classification in the “multiple/repetitive degraded cornerstone column,” or Column 4.

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, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.

ENTERGY ARKANSAS, INC. AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
        
 Three Months Ended Six Months Ended Three Months Ended Six Months Ended
 2017 2016 2017 2016 2018 2017 2018 2017
 (In Thousands) (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES                
Electric 
$496,662
 
$504,252
 
$971,013
 
$969,625
 
$494,605
 
$496,662
 
$1,045,629
 
$971,013
                
OPERATING EXPENSES                
Operation and Maintenance:                
Fuel, fuel-related expenses, and gas purchased for resale 50,691
 88,022
 150,100
 168,959
 106,496
 50,691
 214,802
 150,100
Purchased power 74,552
 49,714
 129,685
 111,518
 64,839
 74,552
 136,811
 129,685
Nuclear refueling outage expenses 17,335
 14,981
 36,954
 30,050
 19,159
 17,335
 42,561
 36,954
Other operation and maintenance 171,821
 173,909
 337,678
 326,815
 177,792
 168,190
 347,150
 331,198
Decommissioning 14,106
 13,301
 28,001
 26,404
 14,985
 14,106
 29,745
 28,001
Taxes other than income taxes 25,128
 22,961
 49,179
 46,047
 24,445
 25,128
 52,350
 49,179
Depreciation and amortization 69,087
 67,115
 136,153
 130,288
 72,701
 69,087
 144,682
 136,153
Other regulatory charges (credits) - net 4,948
 802
 (5,578) 1,719
 (12,313) 4,948
 (15,620) (5,578)
TOTAL 427,668
 430,805
 862,172
 841,800
 468,104
 424,037
 952,481
 855,692
                
OPERATING INCOME 68,994
 73,447
 108,841
 127,825
 26,501
 72,625
 93,148
 115,321
                
OTHER INCOME                
Allowance for equity funds used during construction 5,432
 3,995
 9,782
 8,927
 4,471
 5,432
 8,479
 9,782
Interest and investment income 14,195
 5,770
 21,127
 9,364
 2,478
 14,195
 9,292
 21,127
Miscellaneous - net (57) (1,020) (164) (1,795) (3,881) (3,688) (7,752) (6,644)
TOTAL 19,570
 8,745
 30,745
 16,496
 3,068
 15,939
 10,019
 24,265
                
INTEREST EXPENSE                
Interest expense 28,514
 27,792
 55,766
 60,574
 30,917
 28,514
 60,683
 55,766
Allowance for borrowed funds used during construction (2,552) (2,136) (4,514) (4,851) (2,108) (2,552) (3,998) (4,514)
TOTAL 25,962
 25,656
 51,252
 55,723
 28,809
 25,962
 56,685
 51,252
                
INCOME BEFORE INCOME TAXES 62,602
 56,536
 88,334
 88,598
 760
 62,602
 46,482
 88,334
                
Income taxes 24,052
 22,645
 35,480
 35,413
 (81,796) 24,052
 (72,329) 35,480
                
NET INCOME 38,550
 33,891
 52,854
 53,185
 82,556
 38,550
 118,811
 52,854
                
Preferred dividend requirements 357
 1,718
 714
 3,437
 357
 357
 714
 714
                
EARNINGS APPLICABLE TO COMMON STOCK 
$38,193
 
$32,173
 
$52,140
 
$49,748
 
$82,199
 
$38,193
 
$118,097
 
$52,140
                
See Notes to Financial Statements.                

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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
  2017 2016
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$52,854
 
$53,185
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 198,082
 211,630
Deferred income taxes, investment tax credits, and non-current taxes accrued 38,005
 122,195
Changes in assets and liabilities:    
Receivables 12,092
 (42,371)
Fuel inventory (1,602) 5,093
Accounts payable (29,109) 66,118
Prepaid taxes and taxes accrued 937
 (89,124)
Interest accrued 1,816
 (1,093)
Deferred fuel costs (48,442) (40,847)
Other working capital accounts (32,055) 25,021
Provisions for estimated losses 7,457
 1,142
Other regulatory assets (5,592) 7,048
Pension and other postretirement liabilities (40,637) (45,752)
Other assets and liabilities 37,355
 (18,542)
Net cash flow provided by operating activities 191,161
 253,703
     
INVESTING ACTIVITIES    
Construction expenditures (381,197) (316,569)
Allowance for equity funds used during construction 10,198
 9,229
Payment for purchase of plant 
 (236,969)
Nuclear fuel purchases (92,927) (64,689)
Proceeds from sale of nuclear fuel 51,029
 40,336
Proceeds from nuclear decommissioning trust fund sales 167,329
 103,815
Investment in nuclear decommissioning trust funds (173,324) (112,040)
Change in money pool receivable - net 
 (1,453)
Changes in securitization account 571
 1,017
Other 
 (103)
Net cash flow used in investing activities (418,321) (577,426)
     
FINANCING ACTIVITIES    
Proceeds from the issuance of long-term debt 222,937
 380,141
Retirement of long-term debt (6,799) (181,604)
Capital contribution from parent
 
 200,000
Changes in short-term borrowings - net 31,436
 908
Changes in money pool payable - net (37,563) (52,742)
Dividends paid:    
Preferred stock (714) (3,437)
Other 431
 (3,566)
Net cash flow provided by financing activities 209,728
 339,700
     
Net increase (decrease) in cash and cash equivalents (17,432) 15,977
Cash and cash equivalents at beginning of period 20,509
 9,135
Cash and cash equivalents at end of period 
$3,077
 
$25,112
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid during the period for:    
Interest - net of amount capitalized 
$51,232
 
$58,733
Income taxes 
$—
 
$7,242
     
See Notes to Financial Statements.    

ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$2,741
 
$20,174
Temporary cash investments 336
 335
Total cash and cash equivalents 3,077
 20,509
Securitization recovery trust account 3,569
 4,140
Accounts receivable:    
Customer 96,720
 102,229
Allowance for doubtful accounts (1,084) (1,211)
Associated companies 36,015
 35,286
Other 40,672
 58,153
Accrued unbilled revenues 110,235
 100,193
Total accounts receivable 282,558
 294,650
Deferred fuel costs 145,033
 96,690
Fuel inventory - at average cost 34,362
 32,760
Materials and supplies - at average cost 182,839
 182,600
Deferred nuclear refueling outage costs 109,546
 81,313
Prepayments and other 19,691
 14,293
TOTAL 780,675
 726,955
     
OTHER PROPERTY AND INVESTMENTS    
Decommissioning trust funds 884,308
 834,735
Other 5,536
 7,912
TOTAL 889,844
 842,647
     
UTILITY PLANT    
Electric 10,726,461
 10,488,060
Property under capital lease 637
 716
Construction work in progress 328,037
 304,073
Nuclear fuel 259,901
 307,352
TOTAL UTILITY PLANT 11,315,036
 11,100,201
Less - accumulated depreciation and amortization 4,666,137
 4,635,885
UTILITY PLANT - NET 6,648,899
 6,464,316
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Regulatory asset for income taxes - net 66,024
 62,646
Other regulatory assets (includes securitization property of $35,365 as of June 30, 2017 and $41,164 as of December 31, 2016) 1,430,243
 1,428,029
Deferred fuel costs 66,997
 66,898
Other 16,577
 14,626
TOTAL 1,579,841
 1,572,199
     
TOTAL ASSETS 
$9,899,259
 
$9,606,117
     
See Notes to Financial Statements.    

ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 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 14,696
 
Accounts payable:    
Associated companies 152,723
 239,711
Other 204,921
 185,153
Customer deposits 97,425
 97,512
Taxes accrued 8,131
 7,194
Interest accrued 18,396
 16,580
Other 36,150
 36,557
TOTAL 647,142
 697,407
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 2,224,030
 2,186,623
Accumulated deferred investment tax credits 34,704
 35,305
Other regulatory liabilities 330,797
 305,907
Decommissioning 952,353
 924,353
Accumulated provisions 26,139
 18,682
Pension and other postretirement liabilities 383,543
 424,234
Long-term debt (includes securitization bonds of $41,502 as of June 30, 2017 and $48,139 as of December 31, 2016) 2,949,561
 2,715,085
Other 14,183
 13,854
TOTAL 6,915,310
 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 1,514,744
 1,462,604
TOTAL 2,305,457
 2,253,317
     
TOTAL LIABILITIES AND EQUITY 
$9,899,259
 
$9,606,117
     
See Notes to Financial Statements.    


ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 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 
 
 53,185
 53,185
Capital contribution from parent 
 200,000
 
 200,000
Preferred stock dividends 
 
 (3,437) (3,437)
         
Balance at June 30, 2016 
$470
 
$788,493
 
$1,352,443
 
$2,141,406
         
         
Balance at December 31, 2016 
$470
 
$790,243
 
$1,462,604
 
$2,253,317
         
Net income 
 
 52,854
 52,854
Preferred stock dividends 
 
 (714) (714)
         
Balance at June 30, 2017 
$470
 
$790,243
 
$1,514,744
 
$2,305,457
         
See Notes to Financial Statements.        
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
  2018 2017
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$118,811
 
$52,854
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 221,935
 198,082
Deferred income taxes, investment tax credits, and non-current taxes accrued (32,906) 38,005
Changes in assets and liabilities:    
Receivables (6,091) 12,092
Fuel inventory 12,289
 (1,602)
Accounts payable (25,035) (29,109)
Taxes accrued 66,500
 937
Interest accrued 1,260
 1,816
Deferred fuel costs (5,896) (48,442)
Other working capital accounts (8,750) (32,055)
Provisions for estimated losses 12,453
 7,457
Other regulatory assets 8,587
 (5,592)
Other regulatory liabilities (111,600) 24,890
Pension and other postretirement liabilities (37,601) (40,637)
Other assets and liabilities 12,639
 12,465
Net cash flow provided by operating activities 226,595
 191,161
     
INVESTING ACTIVITIES    
Construction expenditures (350,429) (381,197)
Allowance for equity funds used during construction 8,732
 10,198
Nuclear fuel purchases (23,342) (92,927)
Proceeds from sale of nuclear fuel 30,907
 51,029
Proceeds from nuclear decommissioning trust fund sales 121,440
 167,329
Investment in nuclear decommissioning trust funds (128,598) (173,324)
Change in money pool receivable - net (57,708) 
Changes in securitization account (279) 571
Insurance proceeds 7,043
 
Net cash flow used in investing activities (392,234) (418,321)
     
FINANCING ACTIVITIES    
Proceeds from the issuance of long-term debt 464,544
 222,937
Retirement of long-term debt (206,843) (6,799)
Capital contribution from parent
 350,000
 
Changes in short-term borrowings - net (49,974) 31,436
Changes in money pool payable - net (166,137) (37,563)
Dividends paid:    
Preferred stock (714) (714)
Other 1,615
 431
Net cash flow provided by financing activities 392,491
 209,728
     
Net increase (decrease) in cash and cash equivalents 226,852
 (17,432)
Cash and cash equivalents at beginning of period 6,216
 20,509
Cash and cash equivalents at end of period 
$233,068
 
$3,077
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid during the period for:    
Interest - net of amount capitalized 
$56,900
 
$51,232
     
See Notes to Financial Statements.    

ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$239
 
$6,184
Temporary cash investments 232,829
 32
Total cash and cash equivalents 233,068
 6,216
Securitization recovery trust account 4,027
 3,748
Accounts receivable:    
Customer 108,351
 110,016
Allowance for doubtful accounts (1,086) (1,063)
Associated companies 93,367
 38,765
Other 44,978
 65,209
Accrued unbilled revenues 136,236
 105,120
Total accounts receivable 381,846
 318,047
Deferred fuel costs 69,099
 63,302
Fuel inventory - at average cost 17,069
 29,358
Materials and supplies - at average cost 193,849
 192,853
Deferred nuclear refueling outage costs 61,618
 56,485
Prepayments and other 22,112
 12,108
TOTAL 982,688
 682,117
     
OTHER PROPERTY AND INVESTMENTS    
Decommissioning trust funds 954,400
 944,890
Other 785
 3,160
TOTAL 955,185
 948,050
     
UTILITY PLANT    
Electric 11,252,167
 11,059,538
Construction work in progress 331,715
 280,888
Nuclear fuel 219,762
 277,345
TOTAL UTILITY PLANT 11,803,644
 11,617,771
Less - accumulated depreciation and amortization 4,848,505
 4,762,352
UTILITY PLANT - NET 6,955,139
 6,855,419
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Other regulatory assets (includes securitization property of $21,480 as of June 30, 2018 and $28,583 as of December 31, 2017) 1,558,850
 1,567,437
Deferred fuel costs 67,195
 67,096
Other 16,263
 13,910
TOTAL 1,642,308
 1,648,443
     
TOTAL ASSETS 
$10,535,320
 
$10,134,029
     
See Notes to Financial Statements.    

ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$41,700
 
$—
Short-term borrowings 
 49,974
Accounts payable:    
Associated companies 187,846
 365,915
Other 174,639
 215,942
Customer deposits 98,551
 97,687
Taxes accrued 113,821
 47,321
Interest accrued 19,475
 18,215
Current portion of unprotected excess accumulated deferred income taxes 305,697
 
Other 34,052
 29,922
TOTAL 975,781
 824,976
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 1,165,690
 1,190,669
Accumulated deferred investment tax credits 33,503
 34,104
Regulatory liability for income taxes - net 565,811
 985,823
Other regulatory liabilities 366,306
 363,591
Decommissioning 1,011,589
 981,213
Accumulated provisions 47,182
 34,729
Pension and other postretirement liabilities 315,711
 353,274
Long-term debt (includes securitization bonds of $27,881 as of June 30, 2018 and $34,662 as of December 31, 2017) 3,170,724
 2,952,399
Other 6,822
 5,147
TOTAL 6,683,338
 6,900,949
     
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 2018 and 2017 470
 470
Paid-in capital 1,140,264
 790,264
Retained earnings 1,704,117
 1,586,020
TOTAL 2,844,851
 2,376,754
     
TOTAL LIABILITIES AND EQUITY 
$10,535,320
 
$10,134,029
     
See Notes to Financial Statements.    


ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
       
  Three Months Ended Increase/  
Description 2017 2016 (Decrease) %

 (Dollars In Millions)  
Electric Operating Revenues:      
Residential 
$160
 
$153
 
$7
 5
Commercial 119
 115
 4
 3
Industrial 114
 100
 14
 14
Governmental 5
 4
 1
 25
Total retail 398
 372
 26
 7
Sales for resale:        
Associated companies 31
 25
 6
 24
Non-associated companies 6
 37
 (31) (84)
Other 62
 70
 (8) (11)
Total 
$497
 
$504
 
($7) (1)
         
Billed Electric Energy Sales (GWh):        
Residential 1,462
 1,409
 53
 4
Commercial 1,372
 1,350
 22
 2
Industrial 1,829
 1,582
 247
 16
Governmental 57
 55
 2
 4
Total retail 4,720
 4,396
 324
 7
Sales for resale:        
Associated companies 387
 539
 (152) (28)
Non-associated companies 386
 2,252
 (1,866) (83)
Total 5,493
 7,187
 (1,694) (24)
         
         
  Six Months Ended Increase/  
Description 2017 2016 (Decrease) %
  (Dollars In Millions)  
Electric Operating Revenues:      
Residential 
$343
 
$345
 
($2) (1)
Commercial 225
 225
 
 
Industrial 210
 200
 10
 5
Governmental 9
 8
 1
 13
Total retail 787
 778
 9
 1
Sales for resale:        
Associated companies 63
 (7) 70
 1,000
Non-associated companies 51
 75
 (24) (32)
Other 70
 124
 (54) (44)
Total 
$971
 
$970
 
$1
 
         
Billed Electric Energy Sales (GWh):        
Residential 3,389
 3,433
 (44) (1)
Commercial 2,687
 2,690
 (3) 
Industrial 3,510
 3,158
 352
 11
Governmental 113
 111
 2
 2
Total retail 9,699
 9,392
 307
 3
Sales for resale:        
Associated companies 833
 964
 (131) (14)
Non-associated companies 2,348
 4,808
 (2,460) (51)
Total 12,880
 15,164
 (2,284) (15)
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
     
  Common Equity  
  Common
Stock
 Paid-in
Capital
 Retained
Earnings
 Total
  (In Thousands)
         
Balance at December 31, 2016 
$470
 
$790,243
 
$1,462,604
 
$2,253,317
         
Net income 
 
 52,854
 52,854
Preferred stock dividends 
 
 (714) (714)
         
Balance at June 30, 2017 
$470
 
$790,243
 
$1,514,744
 
$2,305,457
         
         
Balance at December 31, 2017 
$470
 
$790,264
 
$1,586,020
 
$2,376,754
         
Net income 
 
 118,811
 118,811
Capital contribution from parent 
 350,000
 
 350,000
Preferred stock dividends 
 
 (714) (714)
         
Balance at June 30, 2018 
$470
 
$1,140,264
 
$1,704,117
 
$2,844,851
         
See Notes to Financial Statements.        


ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
       
  Three Months Ended Increase/  
Description 2018 2017 (Decrease) %

 (Dollars In Millions)  
Electric Operating Revenues:      
Residential 
$159
 
$160
 
($1) (1)
Commercial 94
 119
 (25) (21)
Industrial 98
 114
 (16) (14)
Governmental 4
 5
 (1) (20)
Total billed retail 355
 398
 (43) (11)
Sales for resale:        
Associated companies 26
 31
 (5) (16)
Non-associated companies 27
 6
 21
 350
Other 87
 62
 25
 40
Total 
$495
 
$497
 
($2) 
         
Billed Electric Energy Sales (GWh):        
Residential 1,644
 1,462
 182
 12
Commercial 1,396
 1,372
 24
 2
Industrial 1,953
 1,829
 124
 7
Governmental 58
 57
 1
 2
Total retail 5,051
 4,720
 331
 7
Sales for resale:        
Associated companies 236
 387
 (151) (39)
Non-associated companies 1,171
 386
 785
 203
Total 6,458
 5,493
 965
 18
         
  Six Months Ended Increase/  
Description 2018 2017 (Decrease) %
  (Dollars In Millions)  
Electric Operating Revenues:      
Residential 
$395
 
$343
 
$52
 15
Commercial 214
 225
 (11) (5)
Industrial 210
 210
 
 
Governmental 8
 9
 (1) (11)
Total billed retail 827
 787
 40
 5
Sales for resale:        
Associated companies 56
 63
 (7) (11)
Non-associated companies 63
 51
 12
 24
Other 100
 70
 30
 43
Total 
$1,046
 
$971
 
$75
 8
         
Billed Electric Energy Sales (GWh):        
Residential 3,973
 3,389
 584
 17
Commercial 2,761
 2,687
 74
 3
Industrial 3,781
 3,510
 271
 8
Governmental 114
 113
 1
 1
Total retail 10,629
 9,699
 930
 10
Sales for resale:        
Associated companies 723
 833
 (110) (13)
Non-associated companies 2,888
 2,348
 540
 23
Total 14,240
 12,880
 1,360
 11

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 20172018 Compared to Second Quarter 20162017

Net income decreased $128.8increased $59.9 million primarily due to the effect of a settlement with the IRS relatedlower effective income tax rate, primarily due to the 2010-2011an IRS audit which resultedsettlement for the 2012-2013 tax returns that is discussed in a $136.1 million reduction of income tax expense in 2016. See Note 310 to the financial statements herein. The increase in the Form 10-K for additional discussion of the settlementincome is partially offset by higher other operation and benefit sharing.maintenance expenses.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Net income decreased $146.1increased $77.1 million primarily due to the effect of a settlement with the IRS relatedlower effective income tax rate, primarily due to the 2010-2011an IRS audit which resultedsettlement for the 2012-2013 tax returns that is discussed in a $136.1 million reduction of income tax expense in 2016. See Note 310 to the financial statements inherein, and higher net revenue, after excluding the Form 10-K for additional discussioneffect of the settlementreturn of unprotected excess accumulated deferred income taxes to customers which is offset in income taxes. The increase was partially offset by higher other operation and benefit sharing.maintenance expenses.

Net Revenue

Second Quarter 20172018 Compared to Second Quarter 20162017

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the second quarter 20172018 to the second quarter 2016:2017:

 Amount
 (In Millions)
2016 net revenue
$608.2
Louisiana Act 55 financing savings obligation16.1
Volume/weather(6.7)
Other5.6
2017 net revenue
$623.2
Return of unprotected excess accumulated deferred income taxes to customers(31.5)
Retail electric price(20.1)
Volume/weather26.1
Other(1.1)
2018 net revenue
$596.6

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savingsreturn of unprotected excess accumulated deferred income taxes to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlementreturn in the second quarter 2018 of unprotected excess accumulated deferred income taxes through changes in the formula rate plan, effective May 2018. There is no effect on net income as the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike.reduction in net revenue was offset by a reduction in income tax expense. See Note 32 to the financial statements herein and in the Form 10-K for additionalfurther discussion of regulatory activity regarding the settlementTax Cuts and benefit sharing.Jobs Act.

The volume/weatherretail electric price variance is primarily due to decreased usage duringa regulatory charge of $27.4 million recorded in second quarter 2018 to reflect the unbilled sales period, including the effecteffects of weather. This decrease was partially offset by an increase of 507 GWh, or 4%, in billed electricity usage, including an increase in industrial usage. The increase in industrial usage is primarily due to an increase in demand from cogeneration customers and an increase in demand for existing customers as well as expansion projectsa provision in the chemicals industry, partially offset by extended seasonal outages forsettlement reached in the formula rate plan extension proceeding to return the benefits of the lower federal income tax rate in 2018 to customers. Partially offsetting the decrease were increases resulting from an existing large refinery customer.

energy efficiency rider effective January 2018, lower Grand Gulf purchased power expenses,

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and a decrease in the storm cost offset rider effective April 2018 for financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan extension proceeding.

The volume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales. The increase was partially offset by a decrease in industrial usage primarily due to decreased demand from cogeneration customers.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing the six months ended June 30, 20172018 to the six months ended June 30, 2016:2017:
 Amount
 (In Millions)
2016 net revenue
$1,172.1
Louisiana Act 55 financing savings obligation16.1
Retail electric price9.3
Volume/weather(11.0)
Other(2.2)
2017 net revenue
$1,184.3
Retail electric price(40.2)
Return of unprotected excess accumulated deferred income taxes to customers(31.5)
Volume/weather50.3
Other7.3
2018 net revenue
$1,170.2

The Louisiana Act 55 financing savings obligationretail electric price variance results fromis primarily due to a regulatory charge of $55 million recorded in 2016 for tax savings2018 to be shared with customers per an agreement approved byreflect the LPSC. The tax savings resulted fromeffects of a provision in the 2010-2011 IRS audit settlement onreached in the treatmentformula rate plan extension proceeding to return the benefits of the Louisiana Act 55lower federal income tax rate in 2018 to customers. Partially offsetting the decrease were increases resulting from an energy efficiency rider effective January 2018, lower Grand Gulf purchased power expenses, and a decrease in the storm cost offset rider effective April 2018 for financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.

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 in March 2016. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan revenues.extension proceeding.

The volume/weather variance is primarily duereturn of unprotected excess accumulated deferred income taxes to decreased usage duringcustomers resulted from the unbilled sales period and the effectreturn in 2018 of less favorable weather on residential sales. This decrease was partially offset by an increase of 328 GWh, or 2%, in industrial usage primarily due to an increase in demand from cogeneration customers and an increase in demand for existing customers as well as expansion projectsunprotected excess accumulated deferred income taxes through changes in the chemicals industry, partially offset by extended seasonal outages for an existing large refinery customer.
Other Income Statement Variances

Second Quarter 2017 Compared to Second Quarter 2016

Other operation and maintenance expenses increased primarily due to:

an increase of $3.8 millionformula rate plan, effective May 2018. There is no effect on net income as the reduction in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs to position the nuclear fleet to meet its operational goals, partiallynet revenue was offset by a lower scope of work performed during plant outagesreduction in the second quarter 2017 as compared to the second 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;
an increase of $2.6 million in transmission and distribution expenses due to higher vegetation maintenance costs;
an increase of $1.9 million due to the effect of recording in 2016 a final court decision in the Entergy Louisiana lawsuit against the DOE related to the River Bend spent nuclear fuel storage costs. The damages awarded included the reimbursement in 2016 of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense;
an increase of $1 million as a result of the amount of transmission costs allocated by MISO.income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further informationdiscussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The volume/weather variance is primarily due to an increase of 746 GWh, or 3%, in billed electricity usage, including the effect of more favorable weather on residential and commercial sales.

Other Income Statement Variances

Second Quarter 2018 Compared to Second Quarter 2017

Other operation and maintenance expenses increased primarily due to an increase of $12 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed during plant outages in 2018 as compared to the recoverysame period in 2017 and an increase of these costs;$3.8 million in loss provisions.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

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several individually insignificant items.Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

TheOther operation and maintenance expenses increased primarily due to:

an increase was partially offset by a decrease of $3.1$19.1 million in loss provisions.fossil-fueled generation expenses primarily due to an overall higher scope of work performed during plant outages in 2018 as compared to the same period in 2017; and
an increase of $10.6 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 2018 as compared to the same period in 2017.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes, local franchise taxes, and payroll taxes. Ad valorem taxes increased primarily due to higher assessments. Local franchise taxes increased primarily due to higher revenues in 2018 as compared to the same period in 2017.
Depreciation and amortization expenses increased primarily due to additions to plant in service.

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 2017,2018, which included the St. Charles Power Station project, and higher realized gainschanges in 2017 on the River Bend decommissioning trust fund investments as a resultinvestment activity, including portfolio rebalancing of portfolio reallocations tocertain of the 30% interestdecommissioning trust funds in River Bend formerly owned by Cajun.2017.

Six Months EndedIncome Taxes

The effective income tax rates were (42.7%) for the second quarter 2018 and (12.7%) for the six months ended June 30, 2017 Compared to Six Months Ended2018. The differences in the effective income tax rates for the second quarter 2018 and the six months ended June 30, 2016

Other operation and maintenance expenses increased primarily due to:

an increase2018 versus the federal statutory rate of $3.9 million in compensation and benefits costs21% were primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016;
an increaseIRS audit settlement for the 2012-2013 tax returns, amortization of $3.5 million in fossil-fueled generation expenses primarily dueexcess accumulated deferred income taxes, book and tax differences related to the purchase of Power Blocks 3non-taxable income distributions earned on preferred membership interests, certain book and 4 oftax differences related to utility plant items, and book and tax differences related to the Union Power Station in March 2016,allowance for equity funds used during construction, partially offset by asbestos loss provisions in 2016;
an increase of $2.9 million in other loss provisions in 2017;
an increase of $2.2 million in information technology expenses including software maintenance costsstate income taxes. See Notes 2 and upgrade projects;
an increase of $2.1 million in transmission expenses primarily due to higher labor costs, including contract labor;
an increase of $2.1 million as a result of the amount of transmission costs allocated by MISO. See Note 210 to the financial statements herein and in the Form 10-K for further information on the recovery of these costs;
an increase of $1.9 million dueNotes 2 and 3 to the effect of recording in 2016 a final court decision in the Entergy Louisiana lawsuit against the DOE related to the River Bend spent nuclear fuel storage costs. The damages awarded included the reimbursement in 2016 of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense; and
an increase of $1.8 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, primarily due to increased operating costs 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 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Mattersfinancial statements in the Form 10-K for a discussion of the increased operating costs to positioneffects and regulatory activity regarding the nuclear fleet to meet its operational goals.

DepreciationTax Cuts 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.Jobs Act. See Note 1410 to the financial statements in the Form 10-Kherein for a discussion of the Union Power Station purchase.

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 2017, which included the St. Charles Power Station project, and higher realized gains in 2017 on the River Bend decommissioning trust fund investments as a result of portfolio reallocations to the 30% interest in River Bend formerly owned by Cajun.

Income TaxesIRS audit settlement.

The effective income tax rates were 31.3% for the second quarter 2017 and 31.3% for the six months ended June 30, 2017. The differences in the effective income tax rates for the second quarter 2017 and the six months ended June 30, 2017 versus the federal statutory rate of 35% were primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes.
Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act. Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements herein and in the Form 10-K contains a discussion of proceedings commenced or other responses by Entergy and Entergy’s regulators to the Tax Act.

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The effective income tax rates were (50.6%) for the second quarter 2016 and (10.7%) for the six months ended June 30, 2016. The differences in the effective income tax rates for the second quarter 2016 and the six months ended June 30, 2016 versus the federal statutory rate of 35% were 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 3 to the financial statements in the Form 10-K for additional discussion of the 2010-2011 IRS audit settlement.

Louisiana Tax Legislation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Louisiana Tax Legislation” in the Form 10-K for a discussion of the Louisiana tax legislation.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 20172018 and 20162017 were as follows:
2017 20162018 2017
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$213,850
 
$35,102

$35,907
 
$213,850
      
Cash flow provided by (used in):      
Operating activities533,755
 440,356
583,192
 533,755
Investing activities(900,210) (859,906)(838,202) (900,210)
Financing activities367,888
 459,253
248,131
 367,888
Net increase in cash and cash equivalents1,433
 39,703
Net increase (decrease) in cash and cash equivalents(6,879) 1,433
      
Cash and cash equivalents at end of period
$215,283
 
$74,805

$29,028
 
$215,283

Operating Activities

Net cash flow provided by operating activities increased $93.4$49.4 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to:

income tax refunds of $116.9 million in 2017 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 effect of the final settlement of the 2006-2007 IRS audit and the effect of net operating loss limitations. 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” in the Form 10-K for a discussion on the net operating loss limitations;
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
the timing of collections from customers and payments to vendors.


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The increase was partially offset by:

a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement and refund; and
a decrease of $63.1 million in spending on nuclear refueling outages.

The increase was partially offset by:

a decrease of $114 million in income tax refunds in 2018 as compared to the same period in 2017. Entergy Louisiana received income tax refunds in 2017 in accordance with an intercompany income tax allocation agreement resulting from the utilization of Entergy Louisiana’s net operating losses;
the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements herein for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act; and
a decrease due to the timing of recovery of fuel and purchased power costs in 2017; and
an increase of $47.8 million in spending on nuclear refueling outages in 2017.costs.

Investing Activities

Net cash flow used in investing activities increased $40.3decreased $62 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to:

an increasea decrease of $205.5$148.9 million in fossil-fueled generation construction expenditures primarily due to higher spending on the St. Charles Power Station project in 2017;
as a result of 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;
money pool activity; and
a decrease of $23.3 million in nuclear construction expenditures primarily due to decreased spending on various nuclear projects.

The decrease was partially offset by an increase of $75.8$87 million in fossil-fueled generation construction expenditures primarily due to higher spending on the Lake Charles Power Station project in 2018 and an increase of $65.5 million

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in transmission construction expenditures due to a higher scope of work performed in 20172018 as compared to the same period in 2016;
an increase of $44.1 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017; and
money pool activity.2017.

The 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 $474 million in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.

IncreasesDecreases in Entergy Louisiana’s receivable from the money pool are a usesource of cash flow, and Entergy Louisiana‘sLouisiana’s receivable from the money pool increaseddecreased by $4.4 million for the six months ended June 30, 2018 compared to increasing by $33 million for the six months ended June 30, 2017 compared to increasing by $0.2 million for the six months ended June 30, 2016.2017. 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 $91.4$119.8 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to to:

the net issuance of $430.4$450 million of long-term debt3.12% collateral trust mortgage bonds in 2017 comparedMay 2017. A portion of the proceeds was used to the net issuancerepay $45.3 million of $568.7 million in 2016. The decrease was partially offset by:

Waterford Series collateral trust mortgage notes;
net repayments of short-term borrowings of $30.7$43.5 million on the nuclear fuel company variable interest entities’ credit facilities in 20172018 compared to net short-term borrowings of $30.7 million in 2017; and
net repayments of $0.9long-term borrowings of $11.8 million on the nuclear fuel company variable interest entities’ credit facilities in 2018 compared to net borrowings of $51.9 million in 2016;2017.

The decrease was partially offset by:

the issuance of $750 million of 4.00% Series first mortgage bonds in March 2018. A portion of the proceeds was used to repay $375 million of 6.0% Series First Mortgage bonds in May 2018; and
a decrease of $14.3$35.3 million ofin common equity distributions primarily as a result of higher construction expenditures and higher nuclear fuel purchases in 2017 as compared to the same period in 2016.distributions.

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.


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Capital Structure

Entergy Louisiana’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Louisiana is primarily due to the issuance of long-term debt in 2017.
 
June 30,
2017
 
December 31,
2016
June 30,
2018
 
December 31,
2017
Debt to capital54.7% 53.4%53.9% 53.8%
Effect of excluding securitization bonds(0.4%) (0.5%)(0.2%) (0.3%)
Debt to capital, excluding securitization bonds (a)54.3% 52.9%53.7% 53.5%
Effect of subtracting cash(0.9%) (0.9%)(0.1%) (0.1%)
Net debt to net capital, excluding securitization bonds (a)53.4% 52.0%53.6% 53.4%
(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.


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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. Following are updates to the information provided in the Form 10-K.

Entergy Louisiana’s receivables from the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
$55,542 $22,503 $6,322 $6,154
June 30,
2018
 
December 31,
2017
 
June 30,
2017
 
December 31,
2016
(In Thousands)
$6,779 $11,173 $55,542 $22,503

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 issueincludes fronting commitments for the issuance of letters of credit against 50%$15 million of the borrowing capacity of the facility. As of June 30, 2017,2018, there were no cash borrowings and $4.5$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 to MISO. As of June 30, 2017,2018, a $36.8$37.8 million letter of credit was outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, one in the amount of $105 million and one in the amount of $85 million, both scheduled to expire in May 2019.  As of June 30, 2017, $15.52018, $44.8 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of June 30, 2017, $34.5 million in letters of credit to support a like amount of commercial paper issued and $36.32018, $45.4 million in loans were outstanding under the credit facility for the Entergy Louisiana Waterford

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nuclear fuel company variable interest entity credit facility.entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.

Lake Charles Power Station

In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public 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 and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2020.

Washington Parish Energy Center

InAs discussed in the Form 10-K, in April 2017, Entergy Louisiana signed a purchase and salean agreement with a subsidiary of Calpine Corporation for the acquisitionconstruction and purchase 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 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,In April 2018 the parties reached a settlement recommending certification and cost recovery through the additional capacity mechanism of the formula rate plan, consistent with a hearingprior LPSC precedent with respect to the certification and recovery of plants previously acquired by Entergy Louisiana. The LPSC issued an order approving the settlement in MarchMay 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

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.

20152016 Formula Rate Plan Filing

As discussed in the Form 10-K, in May 2016,2017, Entergy Louisiana filed its formula rate plan evaluation report for its 20152016 calendar year operations. Rates reflecting the adjustments included in the formula rate plan evaluation report were implemented with the first billing cycle of September 2017, subject to refund. In JuneSeptember 2017 the LPSC staff and Entergy Louisiana filed a jointissued its 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 withindicating that no changes to rates already implemented.

Also, in November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of itsLouisiana’s original 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 does 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.plan evaluation report

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were required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.  In July 2018, Entergy Louisiana and the LPSC staff filed an unopposed joint report setting forth a correction to the annualization calculation, the effect of which was a net $3.5 million revenue requirement reduction, and indicating that there are no outstanding issues with the 2016 formula rate plan report, the supplemental report, or the interim updates.  The LPSC voted to accept and approve the unopposed joint report in August 2018.

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.  Several parties intervened in the proceeding and all parties participated in settlement discussions. In April 2018 the LPSC approved an unopposed joint motion filed by Entergy Louisiana and the LPSC staff that settles the matter. The settlement extends the formula rate plan for three years, providing for rates through at least August 2021. In addition to retaining the major features of the traditional formula rate plan, substantive features of the extended formula rate plan include:

a mid-point reset of formula rate plan revenues to a 9.95% earned return on common equity for the 2017 test year and for the St. Charles Power Station when it enters commercial operation;
a 9.8% target earned return on common equity for the 2018 and 2019 test years;
narrowing of the common equity bandwidth to plus or minus 60 basis points around the target earned return on common equity;
a cap on potential revenue increase of $35 million for the 2018 evaluation period, and $70 million for the cumulative 2018 and 2019 evaluation periods, on formula rate plan cost of service rate increases (the cap excludes rate changes associated with the transmission recovery mechanism described below and rate changes associated with additional capacity);
a framework for the flow back of certain tax benefits created by the Tax Act to customers; and
a transmission recovery mechanism providing for the opportunity to recover certain transmission related expenditures in excess of $100 million annually for projects placed in service up to one month prior to rate change outside of sharing that is designed to operate in a manner similar to the additional capacity mechanism.

2017 Formula Rate Plan Filing

In May 2017,June 2018, Entergy Louisiana filed its formula rate plan evaluation report for its 20162017 calendar year operations. The evaluation report reflects anAs stated above under “Formula Rate Plan Extension Request” for the 2017 test year there will be a mid-point reset of formula rate plan revenues to a 9.95% earned return on common equity of 9.84%.for the 2017 test year. As such, no adjustment to base rider formula rate plan revenue is required.to be adjusted prospectively to increase or decrease the earned return on equity fully to the approved cost of equity of 9.95%. The following adjustments, however, are required under the formula rate plan. The 2016 formula rate plan2017 test year evaluation report showsproduced an earned return on equity of 8.16%, due in large part to revenue-neutral realignments to other recovery mechanisms. Without these realignments, the evaluation report produces an earned return on equity of 9.88% and a decrease inresulting base rider formula rate plan revenue increase of approximately $16.9 million, comprised of a decrease in legacy Entergy Louisiana$4.8 million. Excluding the Tax Act credits provided for by the tax reform adjustment mechanisms, total formula rate plan revenuerevenues will further increase by a total 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 $3.6 million. Additionally, the formula rate plan evaluation report calls for a decrease in the MISO cost recovery revenue requirement of $40.5 million, from the present level of $46.8 million to $6.3 million. Rates reflecting these adjustments will be 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.

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$98 million as a result of the settlement approved byevaluation report due to adjustments to the LPSC was made to customers in January 2017. Following a review byadditional capacity and MISO cost recovery mechanisms of the parties, an unopposed jointformula rate plan, and implementation of the transmission recovery mechanism. Results of the 2017 evaluation report of proceedings was filed byfiling will be implemented with the LPSC staff and September 2018 billing month.

Entergy Louisiana also included in May 2017. In May 2017its filing a presentation of an initial proposal to combine the LPSC acceptedlegacy Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination would be accomplished on a revenue neutral basis intended not to affect the joint reportrates of proceedings resolving the matter.other customer classes.


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Management's Financial Discussion and Analysis

Union Power Station and Deactivation or Retirement Decisions for Entergy Louisiana Plants

As discussed in the Form 10-K, 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 the decision to deactivate Willow Glen 2 and 4. No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three yearthree-year term permitted by MISO.  This matter is pending before an ALJ, with an evidentiary hearing scheduledIn March 2018 the LPSC adopted the ALJ’s recommended order finding that Entergy Louisiana did not demonstrate that its decision to permanently surrender transmission rights for the mothballed (not retired) Willow Glen 2 and 4 units was reasonable and that Entergy Louisiana should hold customers harmless from increased transmission expenses should those units be reactivated. Because no party or the LPSC suggested that Willow Glen 2 and 4 should be reactivated and because the cost to return those units to service far exceeds the revenue the units were expected to generate in August 2017.MISO, Entergy Louisiana retired Willow Glen 2 and 4 in March 2018. Entergy Louisiana submitted a compliance filing regarding retirement of Willow Glen 2 and 4, and the LPSC closed the proceeding.

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. In July 2017 the LPSC approved the stipulation.

Retail Rates - Gas

20162017 Rate Stabilization Plan Filing

In January 2017,2018, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016.2017.  The filing of the evaluation report for the test year 20162017 reflected an earned return on common equity of 6.37%9.06%As part ofThis earned return is below the original filing, pursuant to the extraordinary cost provisionearnings sharing band of the rate stabilization plan and results in a rate increase of $0.1 million.  Due to the enactment of the Tax Act in late-December 2017, Entergy Louisiana soughtdid not have adequate time to recover approximately $1.5 millionreflect the effects of this tax legislation in the rate stabilization plan.  In April 2018 Entergy Louisiana filed a supplemental evaluation report for the test year ended September 2017, reflecting the effects of the Tax Act, including a proposal to use the unprotected excess accumulated deferred income taxes to offset storm restoration deferred operation and maintenance expenses

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costs incurred by Entergy Louisiana LLC and Subsidiaries
Management's Financial Discussion and Analysis

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 recoverconnection with the prudently incurred August 2016 storm restoration costs over ten years, outsideflooding disaster in its gas service area. The supplemental filing reflects an earned return on common equity 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 confirmed Entergy Louisiana’s filing was consistent with the principles 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 removed10.79%. As-filed rates from the rate stabilization plan pending LPSC consideration insupplemental filing were implemented, subject to refund, with customers receiving a separate docket. In April 2017 the LPSC approved a joint reportcost reduction of proceedingsapproximately $0.7 million effective with bills rendered on and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented withafter the first billing cycle of May 2017.

In connection with the joint report of proceedings accepted by the LPSC,2018, as well as a $0.2 million reduction in May 2017, Entergy Louisiana filed an application to initiate a separate proceeding to recover the deferred 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 through the extraordinary cost provision of the gas rate stabilization plan.infrastructure rider effective with bills rendered on and after the first billing cycle of July 2018. The proceeding is currently in its discovery phase. A procedural schedule has not been established with a hearing in November 2017.

Fuel and purchased power cost recovery
As 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. Discovery commenced in March 2017.established.

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 is an update to that discussion.

River Bend’s operating license is currently due to expire in August 2025. In May 2017,
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Entergy Louisiana, filed an application with the NRC for an extension of River Bend’s operating license to 2045.LLC and Subsidiaries
Management's Financial Discussion and Analysis

Environmental Risks

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.

Critical Accounting Estimates

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy 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, and other contingencies. The following is an update to that discussion.

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In the first quarter 2018, Entergy Louisiana LLC and Subsidiaries
Management's Financial Discussion and Analysis
recorded a revision to its estimated decommissioning cost liability for River Bend as a result of a revised decommissioning cost study. The revised estimate resulted in an $85.4 million increase in its decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.


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Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
  Three Months Ended Six Months Ended
  2018 2017 2018 2017
  (In Thousands) (In Thousands)
OPERATING REVENUES        
Electric 
$1,061,689
 
$1,072,126
 
$2,066,795
 
$1,936,202
Natural gas 11,099
 11,308
 35,337
 28,015
TOTAL 1,072,788
 1,083,434
 2,102,132
 1,964,217
         
OPERATING EXPENSES        
Operation and Maintenance:        
Fuel, fuel-related expenses, and gas purchased for resale 200,528
 180,056
 381,309
 334,100
Purchased power 266,614
 282,673
 518,386
 522,500
Nuclear refueling outage expenses 12,671
 12,764
 25,770
 24,949
Other operation and maintenance 250,994
 236,978
 485,374
 454,090
Decommissioning 13,480
 12,283
 26,252
 24,406
Taxes other than income taxes 47,147
 45,076
 98,427
 90,359
Depreciation and amortization 122,177
 116,107
 242,920
 231,737
Other regulatory charges (credits) - net 9,017
 (2,521) 32,214
 (76,708)
TOTAL 922,628
 883,416
 1,810,652
 1,605,433
         
OPERATING INCOME 150,160
 200,018
 291,480
 358,784
         
OTHER INCOME        
Allowance for equity funds used during construction 19,124
 11,109
 36,869
 21,099
Interest and investment income 46,853
 41,919
 90,128
 81,749
Miscellaneous - net (22,770) (8,889) (30,435) (18,031)
TOTAL 43,207
 44,139
 96,562
 84,817
         
INTEREST EXPENSE        
Interest expense 73,582
 68,483
 143,678
 135,798
Allowance for borrowed funds used during construction (9,451) (5,541) (18,214) (10,715)
TOTAL 64,131
 62,942
 125,464
 125,083
         
INCOME BEFORE INCOME TAXES 129,236
 181,215
 262,578
 318,518
         
Income taxes (55,122) 56,736
 (33,374) 99,661
         
NET INCOME 
$184,358
 
$124,479
 
$295,952
 
$218,857
         
See Notes to Financial Statements.        


























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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
     
  Three Months Ended Six Months Ended
  2017 2016 2017 2016
  (In Thousands) (In Thousands)
OPERATING REVENUES        
Electric $1,072,126
 
$989,732
 $1,936,202
 
$1,926,163
Natural gas 11,308
 9,302
 28,015
 28,016
TOTAL 1,083,434
 999,034
 1,964,217
 1,954,179
         
OPERATING EXPENSES        
Operation and Maintenance:        
Fuel, fuel-related expenses, and gas purchased for resale 180,056
 152,340
 334,100
 354,423
Purchased power 282,673
 224,699
 522,500
 416,097
Nuclear refueling outage expenses 12,764
 12,974
 24,949
 25,754
Other operation and maintenance 243,217
 232,957
 466,447
 439,021
Decommissioning 12,283
 11,658
 24,406
 23,166
Taxes other than income taxes 45,076
 44,366
 90,359
 86,728
Depreciation and amortization 116,107
 112,452
 231,737
 222,043
Other regulatory charges (credits) - net (2,521) 13,836
 (76,708) 11,577
TOTAL 889,655
 805,282
 1,617,790
 1,578,809
         
OPERATING INCOME 193,779
 193,752
 346,427
 375,370
         
OTHER INCOME        
Allowance for equity funds used during construction 11,109
 4,506
 21,099
 11,744
Interest and investment income 41,919
 40,251
 81,749
 77,667
Miscellaneous - net (2,650) (1,870) (5,674) (5,615)
TOTAL 50,378
 42,887
 97,174
 83,796
         
INTEREST EXPENSE        
Interest expense 68,483
 70,787
 135,798
 135,863
Allowance for borrowed funds used during construction (5,541) (2,383) (10,715) (6,280)
TOTAL 62,942
 68,404
 125,083
 129,583
         
INCOME BEFORE INCOME TAXES 181,215
 168,235
 318,518
 329,583
         
Income taxes 56,736
 (85,090) 99,661
 (35,348)
         
NET INCOME 
$124,479
 
$253,325
 
$218,857
 
$364,931
         
See Notes to Financial Statements.        
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
    
 Three Months Ended Six Months Ended
 2018 2017 2018 2017
 (In Thousands) (In Thousands)
        
Net Income
$184,358
 
$124,479
 
$295,952
 
$218,857
Other comprehensive loss       
Pension and other postretirement liabilities (net of tax benefit of $177, $292, $353, and $524)(501) (310) (1,002) (680)
Other comprehensive loss(501) (310) (1,002) (680)
Comprehensive Income
$183,857
 
$124,169
 
$294,950
 
$218,177
        
See Notes to Financial Statements.       


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
    
 Three Months Ended Six Months Ended
 2017 2016 2017 2016
 (In Thousands) (In Thousands)
        
Net Income$124,479
 
$253,325
 $218,857
 
$364,931
Other comprehensive loss       
Pension and other postretirement liabilities (net of tax benefit of $292, $144, $524, and $259)(310) (230) (680) (493)
Other comprehensive loss(310) (230) (680) (493)
Comprehensive Income
$124,169
 
$253,095
 
$218,177
 
$364,438
        
See Notes to Financial Statements.       
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
  2018 2017
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$295,952
 
$218,857
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 323,188
 300,805
Deferred income taxes, investment tax credits, and non-current taxes accrued 119,378
 220,492
Changes in working capital:    
Receivables (23,815) 950
Fuel inventory (2,581) 4,534
Accounts payable 17,324
 42,079
Prepaid taxes and taxes accrued (56,076) 52,686
Interest accrued 790
 (2,883)
Deferred fuel costs (68,741) (74,113)
Other working capital accounts (6,053) (61,515)
Changes in provisions for estimated losses 5,803
 (6,108)
Changes in other regulatory assets 42,203
 39,711
Changes in other regulatory liabilities (8,811) (64,293)
Changes in pension and other postretirement liabilities (32,970) (38,175)
Other (22,399) (99,272)
Net cash flow provided by operating activities 583,192
 533,755
     
INVESTING ACTIVITIES    
Construction expenditures (880,785) (755,158)
Allowance for equity funds used during construction 36,869
 21,099
Nuclear fuel purchases (14,740) (156,246)
Proceeds from the sale of nuclear fuel 36,301
 28,884
Receipts from storm reserve escrow account 
 8,836
Payments to storm reserve escrow account (1,984) (802)
Changes to securitization account (1,423) 79
Proceeds from nuclear decommissioning trust fund sales 169,407
 125,600
Investment in nuclear decommissioning trust funds (189,721) (144,768)
Changes in money pool receivable - net 4,394
 (33,039)
Insurance proceeds 3,480
 5,305
Net cash flow used in investing activities (838,202) (900,210)
     
FINANCING ACTIVITIES    
Proceeds from the issuance of long-term debt 1,088,941
 532,219
Retirement of long-term debt (744,222) (101,789)
Changes in short-term borrowings - net (43,540) 30,696
Distributions paid:    
Common equity (56,000) (91,250)
Other 2,952
 (1,988)
Net cash flow provided by financing activities 248,131
 367,888
     
Net increase (decrease) in cash and cash equivalents (6,879) 1,433
Cash and cash equivalents at beginning of period 35,907
 213,850
Cash and cash equivalents at end of period 
$29,028
 
$215,283
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$138,625
 
$134,513
Income taxes 
($2,973) 
($116,937)
     
See Notes to Financial Statements.    

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$195
 
$5,836
Temporary cash investments 28,833
 30,071
Total cash and cash equivalents 29,028
 35,907
Accounts receivable:    
Customer 239,031
 254,308
Allowance for doubtful accounts (9,341) (8,430)
Associated companies 154,965
 143,524
Other 61,832
 60,893
Accrued unbilled revenues 176,347
 153,118
Total accounts receivable 622,834
 603,413
Fuel inventory 42,309
 39,728
Materials and supplies - at average cost 315,966
 299,881
Deferred nuclear refueling outage costs 40,229
 65,711
Prepaid taxes 37,919
 
Prepayments and other 54,143
 34,035
TOTAL 1,142,428
 1,078,675
     
OTHER PROPERTY AND INVESTMENTS    
Investment in affiliate preferred membership interests 1,390,587
 1,390,587
Decommissioning trust funds 1,334,879
 1,312,073
Storm reserve escrow account 286,743
 284,759
Non-utility property - at cost (less accumulated depreciation)��277,814
 245,255
Other 14,620
 18,999
TOTAL 3,304,643
 3,251,673
     
UTILITY PLANT    
Electric 19,976,144
 19,678,536
Natural gas 203,802
 191,899
Construction work in progress 1,593,553
 1,281,452
Nuclear fuel 261,429
 337,402
TOTAL UTILITY PLANT 22,034,928
 21,489,289
Less - accumulated depreciation and amortization 8,686,593
 8,703,047
UTILITY PLANT - NET 13,348,335
 12,786,242
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Other regulatory assets (includes securitization property of $61,519 as of June 30, 2018 and $71,367 as of December 31, 2017) 1,103,639
 1,145,842
Deferred fuel costs 168,122
 168,122
Other 26,786
 18,310
TOTAL 1,298,547
 1,332,274
     
TOTAL ASSETS 
$19,093,953
 
$18,448,864
     
See Notes to Financial Statements.    

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$390,202
 
$675,002
Short-term borrowings 
 43,540
Accounts payable:    
Associated companies 92,792
 126,685
Other 408,990
 404,374
Customer deposits 152,748
 150,623
Taxes accrued 
 18,157
Interest accrued 76,318
 75,528
Deferred fuel costs 2,706
 71,447
Current portion of unprotected excess accumulated deferred income taxes 199,167
 
Other 75,787
 79,037
TOTAL 1,398,710
 1,644,393
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 2,180,827
 2,050,371
Accumulated deferred investment tax credits 119,435
 121,870
Regulatory liability for income taxes - net 494,214
 725,368
Other regulatory liabilities 784,235
 761,059
Decommissioning 1,256,711
 1,140,461
Accumulated provisions 308,251
 302,448
Pension and other postretirement liabilities 715,027
 748,384
Long-term debt (includes securitization bonds of $67,568 as of June 30, 2018 and $77,736 as of December 31, 2017) 6,101,521
 5,469,069
Other 191,042
 176,637
TOTAL 12,151,263
 11,495,667
     
Commitments and Contingencies    
     
EQUITY    
Member's equity 5,601,431
 5,355,204
Accumulated other comprehensive loss (57,451) (46,400)
TOTAL 5,543,980
 5,308,804
     
TOTAL LIABILITIES AND EQUITY 
$19,093,953
 
$18,448,864
     
See Notes to Financial Statements.    


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
  2017 2016
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$218,857
 
$364,931
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 300,805
 301,815
Deferred income taxes, investment tax credits, and non-current taxes accrued 220,492
 (49,661)
Changes in working capital:    
Receivables 950
 (72,931)
Fuel inventory 4,534
 (5,053)
Accounts payable 42,079
 (22,830)
Prepaid taxes and taxes accrued 52,686
 23,850
Interest accrued (2,883) (4,216)
Deferred fuel costs (74,113) 4,093
Other working capital accounts (61,515) (26,514)
Changes in provisions for estimated losses (6,108) 1,734
Changes in other regulatory assets 39,711
 58,429
Changes in other regulatory liabilities (64,293) 30,116
Changes in pension and other postretirement liabilities (38,175) (35,869)
Other (99,272) (127,538)
Net cash flow provided by operating activities 533,755
 440,356
     
INVESTING ACTIVITIES    
Construction expenditures (755,158) (403,387)
Allowance for equity funds used during construction 21,099
 11,744
Payment for purchase of plant 
 (473,956)
Nuclear fuel purchases (156,246) (38,773)
Proceeds from the sale of nuclear fuel 28,884
 64,498
Receipts from storm reserve escrow account 8,836
 
Payments to storm reserve escrow account (802) 
Changes to securitization account 79
 225
Proceeds from nuclear decommissioning trust fund sales 125,600
 123,546
Investment in nuclear decommissioning trust funds (144,768) (143,091)
Changes in money pool receivable - net (33,039) (168)
Insurance proceeds 5,305
 
Changes in other investments - net 
 (544)
Net cash flow used in investing activities (900,210) (859,906)
     
FINANCING ACTIVITIES    
Proceeds from the issuance of long-term debt 532,219
 1,128,580
Retirement of long-term debt (101,789) (559,839)
Changes in credit borrowings - net 30,696
 (888)
Distributions paid:    
Common equity (91,250) (105,500)
Other (1,988) (3,100)
Net cash flow provided by financing activities 367,888
 459,253
     
Net increase in cash and cash equivalents 1,433
 39,703
Cash and cash equivalents at beginning of period 213,850
 35,102
Cash and cash equivalents at end of period 
$215,283
 
$74,805
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$134,513
 
$196,514
Income taxes 
($116,937) 
$62,676
     
See Notes to Financial Statements.    

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$3,419
 
$49,972
Temporary cash investments 211,864
 163,878
Total cash and cash equivalents 215,283
 213,850
Accounts receivable:    
Customer 222,291
 213,517
Allowance for doubtful accounts (7,459) (6,277)
Associated companies 173,665
 155,794
Other 44,855
 54,186
Accrued unbilled revenues 170,863
 159,176
Total accounts receivable 604,215
 576,396
Deferred fuel costs 25,902
 
Fuel inventory 46,204
 50,738
Materials and supplies - at average cost 289,985
 294,421
Deferred nuclear refueling outage costs 94,772
 22,535
Prepaid taxes 57,418
 110,104
Prepayments and other 59,527
 41,687
TOTAL 1,393,306
 1,309,731
     
OTHER PROPERTY AND INVESTMENTS    
Investment in affiliate preferred membership interests 1,390,587
 1,390,587
Decommissioning trust funds 1,220,699
 1,140,707
Storm reserve escrow account 283,451
 291,485
Non-utility property - at cost (less accumulated depreciation) 231,512
 217,494
Other 24,481
 28,844
TOTAL 3,150,730
 3,069,117
     
UTILITY PLANT    
Electric 19,117,749
 18,827,532
Natural gas 178,932
 172,816
Construction work in progress 919,336
 670,201
Nuclear fuel 361,502
 249,807
TOTAL UTILITY PLANT 20,577,519
 19,920,356
Less - accumulated depreciation and amortization 8,530,511
 8,420,596
UTILITY PLANT - NET 12,047,008
 11,499,760
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Regulatory asset for income taxes - net 475,836
 470,480
Other regulatory assets (includes securitization property of $83,050 as of June 30, 2017 and $92,951 as of December 31, 2016) 1,122,991
 1,168,058
Deferred fuel costs 168,122
 168,122
Other 20,420
 16,003
TOTAL 1,787,369
 1,822,663
     
TOTAL ASSETS 
$18,378,413
 
$17,701,271
     
See Notes to Financial Statements.    

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$517,706
 
$200,198
Short-term borrowings 34,490
 3,794
Accounts payable:    
Associated companies 75,909
 82,106
Other 334,472
 358,741
Customer deposits 146,633
 148,601
Interest accrued 72,715
 75,598
Deferred fuel costs 
 48,211
Other 101,702
 80,013
TOTAL 1,283,627
 997,262
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 2,910,546
 2,691,118
Accumulated deferred investment tax credits 124,306
 126,741
Other regulatory liabilities 816,681
 880,974
Decommissioning 1,111,194
 1,082,685
Accumulated provisions 304,664
 310,772
Pension and other postretirement liabilities 741,841
 780,278
Long-term debt (includes securitization bonds of $89,364 as of June 30, 2017 and $99,217 as of December 31, 2016) 5,728,309
 5,612,593
Other 148,536
 137,039
TOTAL 11,886,077
 11,622,200
     
Commitments and Contingencies    
     
EQUITY    
Member's equity 5,257,831
 5,130,251
Accumulated other comprehensive loss (49,122) (48,442)
TOTAL 5,208,709
 5,081,809
     
TOTAL LIABILITIES AND EQUITY 
$18,378,413
 
$17,701,271
     
See Notes to Financial Statements.    
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
    
 Common Equity  
 Member’s
Equity
 
Accumulated
Other
Comprehensive
Loss
 Total
 (In Thousands)
      
Balance at December 31, 2016
$5,130,251
 
($48,442) 
$5,081,809
      
Net income218,857
 
 218,857
Other comprehensive loss
 (680) (680)
Distributions declared on common equity(91,250) 
 (91,250)
Other(27) 
 (27)
      
Balance at June 30, 2017
$5,257,831
 
($49,122) 
$5,208,709
      
      
Balance at December 31, 2017
$5,355,204
 
($46,400) 
$5,308,804
      
Net income295,952
 
 295,952
Other comprehensive loss
 (1,002) (1,002)
Distributions declared on common equity(56,000) 
 (56,000)
Reclassification pursuant to ASU 2018-026,262
 (10,049) (3,787)
Other13
 
 13
      
Balance at June 30, 2018
$5,601,431
 
($57,451) 
$5,543,980
      
See Notes to Financial Statements.     


ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
    
 Common Equity  
 Member’s
Equity
 
Accumulated
Other
Comprehensive
Loss
 Total
 (In Thousands)  
      
Balance at December 31, 2015
$4,793,724
 
($56,412) 
$4,737,312
      
Net income364,931
 
 364,931
Other comprehensive loss
 (493) (493)
Distributions declared on common equity(105,500) 
 (105,500)
Other(15) 
 (15)
      
Balance at June 30, 2016
$5,053,140
 
($56,905) 
$4,996,235
      
      
Balance at December 31, 2016
$5,130,251
 
($48,442) 
$5,081,809
      
Net income218,857
 
 218,857
Other comprehensive loss
 (680) (680)
Distributions declared on common equity(91,250) 
 (91,250)
Other(27) 
 (27)
      
Balance at June 30, 2017
$5,257,831
 
($49,122) 
$5,208,709
      
See Notes to Financial Statements.     


ENTERGY LOUISIANA, LLC AND SUBSIDIARIESSELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
            
 Three Months Ended Increase/   Three Months Ended Increase/  
Description 2017 2016 (Decrease) % 2018 2017 (Decrease) %
 (Dollars In Millions)   (Dollars In Millions)  
Electric Operating Revenues:                
Residential 
$279
 
$246
 
$33
 13
 
$268
 
$279
 
($11) (4)
Commercial 236
 212
 24
 11
 222
 236
 (14) (6)
Industrial 394
 319
 75
 24
 369
 394
 (25) (6)
Governmental 17
 16
 1
 6
 17
 17
 
 
Total retail 926
 793
 133
 17
Total billed retail 876
 926
 (50) (5)
Sales for resale:                
Associated companies 73
 105
 (32) (30) 97
 73
 24
 33
Non-associated companies 16
 18
 (2) (11) 15
 16
 (1) (6)
Other 57
 74
 (17) (23) 74
 57
 17
 30
Total 
$1,072
 
$990
 
$82
 8
 
$1,062
 
$1,072
 
($10) (1)
                
Billed Electric Energy Sales (GWh):                
Residential 3,001
 2,919
 82
 3
 3,104
 3,001
 103
 3
Commercial 2,729
 2,693
 36
 1
 2,738
 2,729
 9
 
Industrial 7,684
 7,294
 390
 5
 7,492
 7,684
 (192) (2)
Governmental 194
 195
 (1) (1) 196
 194
 2
 1
Total retail 13,608
 13,101
 507
 4
 13,530
 13,608
 (78) (1)
Sales for resale:                
Associated companies 1,241
 2,175
 (934) (43) 1,540
 1,241
 299
 24
Non-associated companies 369
 698
 (329) (47) 355
 369
 (14) (4)
Total 15,218
 15,974
 (756) (5) 15,425
 15,218
 207
 1
                
                
 Six Months Ended Increase/   Six Months Ended Increase/  
Description 2017 2016 (Decrease) % 2018 2017 (Decrease) %
 (Dollars In Millions)   (Dollars In Millions)  
Electric Operating Revenues:                
Residential 
$500
 
$500
 
$—
 
 
$563
 
$500
 
$63
 13
Commercial 431
 421
 10
 2
 447
 431
 16
 4
Industrial 719
 645
 74
 11
 721
 719
 2
 
Governmental 32
 32
 
 
 34
 32
 2
 6
Total retail 1,682
 1,598
 84
 5
Total billed retail 1,765
 1,682
 83
 5
Sales for resale:                
Associated companies 135
 194
 (59) (30) 171
 135
 36
 27
Non-associated companies 30
 24
 6
 25
 30
 30
 
 
Other 89
 110
 (21) (19) 101
 89
 12
 13
Total 
$1,936
 
$1,926
 
$10
 1
 
$2,067
 
$1,936
 
$131
 7
                
Billed Electric Energy Sales (GWh):                
Residential 5,853
 5,973
 (120) (2) 6,563
 5,853
 710
 12
Commercial 5,269
 5,259
 10
 
 5,399
 5,269
 130
 2
Industrial 14,645
 14,317
 328
 2
 14,541
 14,645
 (104) (1)
Governmental 387
 394
 (7) (2) 397
 387
 10
 3
Total retail 26,154
 25,943
 211
 1
 26,900
 26,154
 746
 3
Sales for resale:                
Associated companies 2,235
 3,744
 (1,509) (40) 2,554
 2,235
 319
 14
Non-associated companies 664
 986
 (322) (33) 868
 664
 204
 31
Total 29,053
 30,673
 (1,620) (5) 30,322
 29,053
 1,269
 4
                

ENTERGY MISSISSIPPI, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 20172018 Compared to Second Quarter 20162017

Net income decreased $3.9increased $9.9 million primarily due to higher taxes other than income taxes, lower net revenue and a higherlower effective income tax rate, each after excluding the effect of the stipulation related to the effects of the Tax Act, discussed below. The increase is partially offset by lower interest expense.higher other operation and maintenance expenses and higher depreciation and amortization expenses.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Net income decreased $3.9increased $15.6 million primarily due to higher taxes other thannet revenue and a lower effective income taxes, higher depreciation and amortization expenses,tax rate, each after excluding the effect of the stipulation related to the effects of the Tax Act, discussed below. The increase is partially offset by higher other operation and maintenance expenses and a higher effective income tax rate, partially offset by lower interest expense.depreciation and amortization expenses.

Net Revenue

Second Quarter 20172018 Compared to Second Quarter 20162017

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.charges (credits).  Following is an analysis of the change in net revenue comparing the second quarter 20172018 to the second quarter 2016:

2017:
 Amount
 (In Millions)
20162017 net revenue
$176.8174.2
Volume/weatherRegulatory charge resulting from stipulation related to the effects of the Tax Act(8.0127.2)
Retail electric price4.94.2
Volume/weather11.2
Other0.5
20172018 net revenue
$174.262.9
    
The regulatory charge resulting from stipulation related to the effects of the Tax Act is due to the return of unprotected excess accumulated deferred income taxes in June 2018 per an agreement approved by the MPSC in June 2018 that resulted in a reduction in net utility plant of $127.2 million. There is no effect on net income as the regulatory charge is offset by a reduction in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Act.

The retail electric price variance is primarily due to higher storm damage rider revenues. 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 further discussion of the storm damage rider.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather. This decrease was partially offset by an increase of 9679 GWh, or 3%, in billed electricity usage, including the effect of more favorable weather on residential sales and an increase in industrial usage.The increase in industrial usage is primarily due to an increase in usage by the mid to small industrial sector, expansion projects in the pulp and paper industry, and new customers in the wood products industry.
The retail electric price variance is primarily due to a $19.4 million net annual increase in rates, as approved by the MPSC, effective with the first billing cycle of July 2016.  See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan.sales.


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Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

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.charges (credits).  Following is an analysis of the change in net revenue comparing the six months ended June 30, 20172018 to the six months ended June 30, 2016:

2017:
 Amount
 (In Millions)
2016 net revenue
$326.4
Retail electric price11.2
Volume/weather(10.3)
Other1.0
2017 net revenue
$328.3
Regulatory charge resulting from stipulation related to the effects of the Tax Act(127.2)
Retail electric price9.3
Volume/weather16.0
Other1.0
2018 net revenue
$227.4

The regulatory charge resulting from stipulation related to the effects of the Tax Act is due to the return of unprotected excess accumulated deferred income taxes in June 2018 per an agreement approved by the MPSC in June 2018 that resulted in a reduction in net utility plant of $127.2 million. There is no effect on net income as the regulatory charge is offset by a reduction in income tax expense. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to a $19.4 million net annual increase in rates, as approved byhigher storm damage rider revenues. Entergy Mississippi resumed billing the MPSC,storm damage rider effective with the firstSeptember 2017 billing cycle of July 2016.cycle.  See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan.storm damage rider.

The volume/weather variance is primarily due to decreasedan increase of 388 GWh, or 7%, in billed electricity usage, during the billed and unbilled sales periods, including the effect of more favorable weather primarily in theon residential and commercial sectors, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to an increase in usage by the mid to small industrial sector, expansion projects in the pulp and paper industry, and new customers in the wood products industry.sales.

Other Income Statement Variances

Second Quarter 20172018 Compared to Second Quarter 2016

Other operation and maintenance expenses decreased primarily due to a decrease of $1.7 million in storm damage provisions and a decrease of $1.6 million in loss provisions. The decrease was partially offset by an increase of $2 million in fossil-fueled generation expenses primarily due to a higher scope of work done in 2017 as compared to the same period in 2016. See Note 2 to the financial statements in the Form 10-K for a discussion on storm cost recovery.

Taxes other than income taxes increased primarily due to the MPSC’s June 2016 approval of a revised ad valorem tax rider allowing Entergy Mississippi to recover the difference in 2016 ad valorem tax expense and the amount approved in base rates in the 2016 formula rate plan order. See Note 2 in the Form 10-K for further discussion of the ad valorem tax rider.

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.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Other operation and maintenance expenses increased primarily due to an increase of $2.5$4.7 million in fossil-fueled generation expenses primarily due to a higher scope of work done in 2017 as compared to the same period in 2016storm damage provisions and an increase of $1.9$2 million in energy efficiency costs.vegetation maintenance costs. The increase was partially offset by a decrease of $1.7$2.1 million in storm damage provisions.fossil-fueled generation expenses primarily due to lower long-term service agreement costs. See Note 2 to the financial statements herein and in the Form 10-K for a discussion onof storm cost recovery.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

Other operation and maintenance expenses increased primarily due to an increase of $9.9 million in storm damage provisions and an increase of $1.4 million in vegetation maintenance costs. The increase was partially offset by a decrease of $2.1 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs, partially offset by an overall higher scope of work including plant outages. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of storm cost recovery.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Interest expense increased primarily due to the issuance of $150 million of 3.25% Series first mortgage bonds in November 2017.

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Income Taxes other than

The effective income taxes increasedtax rate was 150.1% for the second quarter 2018 and 231.4% for the six months ended June 30, 2018. The differences in the effective income tax rates for the second quarter 2018 and the six months ended June 30, 2018 versus the federal statutory rate of 21% were primarily due to the MPSC’s June 2016 approvalamortization of a revised ad valorem tax rider allowing Entergy Mississippi to recover the difference in 2016 ad valorem tax expenseexcess accumulated deferred income taxes and the amount approved in base rates in the 2016 formula rate plan order.state income taxes. See NoteNotes 2 in the Form 10-K for further discussion of the ad valorem tax rider.
Depreciation and amortization expenses increased primarily due to additions to plants in service.
Interest expense decreased primarily due10 to the refinancing at lower interest rates of certain first mortgage bonds in 2016financial statements herein and the retirement, at maturity, of $125 million of 3.25% Series first mortgage bonds in June 2016. See Note 5Notes 2 and 3 to the financial statements in the Form 10-K for detailsa discussion of long-term debt.

Income Taxesthe effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was 37.6% for the second quarter 2017. The difference in the effective income tax rate for the second 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 39.0% for the six months ended June 30, 2017. The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to state income taxes and a write-off of a stock-based compensation deferred tax asset, partially offset by book and tax differences related to the allowance for equity funds used during construction.

The effective
Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax rate was 32.7%legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the second quarter 2016. The differenceTax Act.Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements herein and in the effective income tax rate forForm 10-K contains a discussion of proceedings commenced or other responses by Entergy and Entergy’s regulators to the second quarter 2016 versus the federal statutory rate of 35% was primarily due to certain book and tax differences related to utility plant items, partially offset by state income taxes.
The effective income tax rate was 35.2% for the six months ended June 30, 2016. The difference in the effective income tax rate for the six months ended June 30, 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 20172018 and 20162017 were as follows:
2017 20162018 2017
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$76,834
 
$145,605

$6,096
 
$76,834
      
Cash flow provided by (used in):      
Operating activities53,839
 77,063
106,818
 53,839
Investing activities(185,687) (128,241)(182,349) (185,687)
Financing activities55,736
 14,126
69,453
 55,736
Net decrease in cash and cash equivalents(76,112) (37,052)(6,078) (76,112)
      
Cash and cash equivalents at end of period
$722
 
$108,553

$18
 
$722


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Management's Financial Discussion and Analysis

Operating Activities

Net cash flow provided by operating activities decreased $23.2increased $53 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to to:

the timing of payments to vendors and vendors;
the timing of recovery of fuel and purchased power costs in 2017 as comparedcosts; and
the timing of collection of storm damage rider revenues. See Note 2 to the same periodfinancial statements herein and in 2016. the Form 10-K for further discussion of the storm damage rider.

The decreaseincrease was partially offset by an increase of $11.5 million in income tax refunds of $15.1 million in 2017 as compared to the same period in 2016.2017. Entergy Mississippi received state income tax refunds of $15.1 million in 2017 and $3.6 million in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resultedagreement resulting from the carryback of net operating losses.

Investing Activities

Net cash flow used in investing activities increased $57.4decreased $3.3 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 2016 primarily due to:

an increase of $41.5 million in transmission construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016;
an increase of $10.4 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2017 as compared to the same period in 2016; and
an increase of $7.4 million in storm spending in 2017.

Financing Activities

Net cash flow provided by financing activities increased $41.6$13.7 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to money pool activity and $24 millionan increase in common stock dividends paid in 2016, partially offset by the net issuance of $39.5 million of long-term debt in 2016. The decrease in dividends paid was primarily because of lower operating cash flow and higher capital expenditures, each discussed above. See Note 5 to the financial statements in the Form 10-Kadvances received from customers for details of long-term debt.transmission projects.

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 $63.4 million for the six months ended June 30, 2018 compared to increasing by $56.3 million for the six months ended June 30, 2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Capital Structure

Entergy Mississippi’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table.
June 30, 2017 December 31, 2016
June 30,
2018
 December 31, 2017
Debt to capital49.2% 50.2%50.2% 51.5%
Effect of subtracting cash% (1.8%)% (0.2%)
Net debt to net capital49.2% 48.4%50.2% 51.3%

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.


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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. Following are updates to the information provided in the Form 10-K.

Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
June 30, 2017 December 31, 2016 June 30, 2016 December 31, 2015
(In Thousands)
($56,299) $10,595 $13,514 $25,930
June 30,
2018
 December 31, 2017 
June 30,
2017
 December 31, 2016
(In Thousands)
($63,394) $1,633 ($56,299) $10,595

See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
    
In May 2018, Entergy Mississippi hasrenewed three of its four separate credit facilities inthrough May 2019, decreasing the aggregate amount of $102.5 million scheduledavailable for borrowing under the credit facilities to expire in May 2018.$82.5 million. No borrowings were outstanding under the credit facilities as of June 30, 2017.2018.  In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of June 30, 2017, a $7.82018, $20.2 million letterletters of credit waswere outstanding under Entergy Mississippi’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

State and Local Rate Regulation and Fuel-Cost Recovery

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of the formula rate plan and fuel and purchased power cost recovery. The following are updates to that discussion.
Mississippi Attorney General Complaint

As discussed in the Form 10-K the Mississippi Attorney General filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The defendants have denied the allegations. In June 2017 the District Court issued a case management order setting a trial date in November 2018. Discovery ended in May 2018. In June 2018, Entergy filed motions for summary judgment, which are currently pending before the District Court. In July 2018 the Mississippi Attorney General filed briefs opposing the summary judgment.

Formula Rate Plan

In March 2017,2018, Entergy Mississippi submitted its formula rate plan 20172018 test year filing and 20162017 look-back filing showing Entergy Mississippi’s earned return for the historical 20162017 calendar year and projected earned return for the 20172018 calendar year, in large part as a result of the lower federal corporate income tax rate effective in 2018, to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017,2018, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 20162017 look-back filing and 20172018 test year were within the respective formula rate plan bandwidths. In June 20172018 the MPSC approved the stipulation, which resulted in no change in rates.See Note 2 to the financial statements herein for additional discussion regarding the proposed treatment of the effects of the lower federal corporate income tax rate.


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Management's Financial Discussion and Analysis

Internal Restructuring

In March 2018, Entergy Mississippi filed an application with the MPSC seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy Mississippi to a new entity, which would ultimately be held by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval by the MPSC, the FERC, and the NRC. If the MPSC approves the restructuring by August 2018 and the restructuring closes on or before December 1, 2018, Entergy Mississippi proposed in its application to credit retail customers $27 million over six years, beginning in 2019. If the MPSC, the FERC, and the NRC approvals are obtained, Entergy Mississippi expects the restructuring will be consummated on or before December 1, 2018.

It is currently contemplated that Entergy Mississippi would undertake a multi-step restructuring, which would include the following:

Entergy Mississippi would redeem its outstanding preferred stock, at the aggregate redemption price of approximately $21.2 million, including call premiums, plus accumulated and unpaid dividends, if any.
Entergy Mississippi would convert from a Mississippi corporation to a Texas corporation.
Under the Texas Business Organizations Code (TXBOC), Entergy Mississippi will allocate substantially all of its assets to a new subsidiary, Entergy Mississippi Power and Light, LLC, a Texas limited liability company (Entergy Mississippi Power and Light), and Entergy Mississippi Power and Light will assume substantially all of the liabilities of Entergy Mississippi, in a transaction regarded as a merger under the TXBOC. Entergy Mississippi will remain in existence and hold the membership interests in Entergy Mississippi Power and Light.
Entergy Mississippi will contribute the membership interests in Entergy Mississippi Power and Light 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 Mississippi Power and Light will be a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.
Entergy Mississippi will change its name to Entergy Utility Enterprises, Inc., and Entergy Mississippi Power and Light will then change its name to Entergy Mississippi, LLC.

Upon the completion of the restructuring, Entergy Mississippi, LLC will hold substantially all of the assets, and will have assumed substantially all of the liabilities, of Entergy Mississippi. Entergy Mississippi may modify or supplement the steps to be taken to effectuate the restructuring.

Advanced Metering Infrastructure (AMI) FilingFilings

As discussed inSee the Form 10-K in November 2016, Entergy Mississippi filed an application seeking a finding fromfor discussion of 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 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 retiredIn June 2018, as part of the order approving the joint stipulation between the Mississippi Public Utilities Staff and Entergy Mississippi addressing Entergy Mississippi’s 2018 formula rate plan evaluation report and the ratemaking effects of the Tax Act, the MPSC approved the acceleration of the recovery of substantially all of Entergy Mississippi’s existing customer meters in anticipation of AMI deployment and also to depreciate those assets using current depreciation rates.deployment.

Mississippi Attorney General ComplaintStorm Cost Recovery Filings with Retail Regulators

As discussed in the Form 10-K, the Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If Entergy Services, andMississippi’s accumulated storm damage provision balance exceeds $15 million, the collection of the storm damage provision ceases until such time that the accumulated storm damage provision becomes less than $10 million. As of June 30, 2018, Entergy Power. The defendants haveMississippi’s storm damage provision balance exceeded $15 million. Accordingly the storm damage provision will reset to zero beginning with August 2018 bills.



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Table of Contents
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis

denied the allegations. In June 2017 the District Court issued a case management order setting a trial date in November 2018. Discovery is currently in progress.
Federal Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation in the Form 10-K for a discussion of federal regulation. 

Nuclear Matters

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a 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 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, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.

ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
     
  Three Months Ended Six Months Ended
  2018 2017 2018 2017
  (In Thousands) (In Thousands)
OPERATING REVENUES        
Electric 
$353,689
 
$291,212
 
$669,432
 
$549,655
         
OPERATING EXPENSES        
Operation and Maintenance:        
Fuel, fuel-related expenses, and gas purchased for resale 65,663
 46,048
 129,191
 85,188
Purchased power 97,154
 75,253
 184,610
 146,323
Other operation and maintenance 64,585
 59,002
 124,043
 113,624
Taxes other than income taxes 23,794
 23,978
 49,188
 47,950
Depreciation and amortization 38,359
 35,442
 76,541
 70,759
Other regulatory charges (credits) - net 127,935
 (4,306) 128,228
 (10,143)
TOTAL 417,490
 235,417
 691,801
 453,701
         
OPERATING INCOME (LOSS) (63,801) 55,795
 (22,369) 95,954
         
OTHER INCOME        
Allowance for equity funds used during construction 2,122
 2,332
 4,100
 4,175
Interest and investment income 
 7
 25
 33
Miscellaneous - net (1,411) (1,086) (1,982) (2,062)
TOTAL 711
 1,253
 2,143
 2,146
         
INTEREST EXPENSE        
Interest expense 14,061
 12,568
 27,966
 25,240
Allowance for borrowed funds used during construction (890) (913) (1,718) (1,633)
TOTAL 13,171
 11,655
 26,248
 23,607
         
INCOME (LOSS) BEFORE INCOME TAXES (76,261) 45,393
 (46,474) 74,493
         
Income taxes (114,503) 17,090
 (107,559) 29,032
         
NET INCOME 38,242
 28,303
 61,085
 45,461
         
Preferred dividend requirements and other 239
 239
 477
 477
         
EARNINGS APPLICABLE TO COMMON STOCK 
$38,003
 
$28,064
 
$60,608
 
$44,984
         
See Notes to Financial Statements.        


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ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
     
  Three Months Ended Six Months Ended
  2017 2016 2017 2016
  (In Thousands) (In Thousands)
OPERATING REVENUES        
Electric 
$291,212
 
$248,138
 
$549,655
 
$511,184
         
OPERATING EXPENSES        
Operation and Maintenance:        
Fuel, fuel-related expenses, and gas purchased for resale 46,048
 (34) 85,188
 61,346
Purchased power 75,253
 74,361
 146,323
 129,744
Other operation and maintenance 59,535
 60,381
 114,708
 111,654
Taxes other than income taxes 23,978
 20,487
 47,950
 43,984
Depreciation and amortization 35,442
 34,010
 70,759
 67,308
Other regulatory credits - net (4,306) (2,957) (10,143) (6,315)
TOTAL 235,950
 186,248
 454,785
 407,721
         
OPERATING INCOME 55,262
 61,890
 94,870
 103,463
         
OTHER INCOME        
Allowance for equity funds used during construction 2,332
 1,345
 4,175
 2,631
Interest and investment income 7
 240
 33
 361
Miscellaneous - net (553) (1,050) (978) (1,755)
TOTAL 1,786
 535
 3,230
 1,237
         
INTEREST EXPENSE        
Interest expense 12,568
 15,258
 25,240
 30,000
Allowance for borrowed funds used during construction (913) (691) (1,633) (1,358)
TOTAL 11,655
 14,567
 23,607
 28,642
         
INCOME BEFORE INCOME TAXES 45,393
 47,858
 74,493
 76,058
         
Income taxes 17,090
 15,664
 29,032
 26,746
         
NET INCOME 28,303
 32,194
 45,461
 49,312
         
Preferred dividend requirements and other 239
 707
 477
 1,414
         
EARNINGS APPLICABLE TO COMMON STOCK 
$28,064
 
$31,487
 
$44,984
 
$47,898
         
See Notes to Financial Statements.        
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
  2018 2017
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$61,085
 
$45,461
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation and amortization 76,541
 70,759
Deferred income taxes, investment tax credits, and non-current taxes accrued 29,577
 31,740
Changes in assets and liabilities:    
Receivables (32,365) (7,952)
Fuel inventory (977) 6,312
Accounts payable 29,476
 (1,398)
Taxes accrued (45,736) (21,361)
Interest accrued (3,792) 40
Deferred fuel costs 6,532
 (13,622)
Other working capital accounts (9,698) (1,473)
Provisions for estimated losses 7,242
 (6,699)
Other regulatory assets (666) (26,958)
Other regulatory liabilities (127,047) (4,237)
Pension and other postretirement liabilities (9,336) (10,692)
Other assets and liabilities 125,982
 (6,081)
Net cash flow provided by operating activities 106,818
 53,839
     
INVESTING ACTIVITIES    
Construction expenditures (187,219) (199,873)
Allowance for equity funds used during construction 4,100
 4,175
Changes in money pool receivable - net 1,633
 10,595
Other (863) (584)
Net cash flow used in investing activities (182,349) (185,687)
     
FINANCING ACTIVITIES    
Changes in money pool payable - net 63,394
 56,299
Dividends paid:    
Preferred stock (477) (477)
Other 6,536
 (86)
Net cash flow provided by financing activities 69,453
 55,736
     
Net decrease in cash and cash equivalents (6,078) (76,112)
Cash and cash equivalents at beginning of period 6,096
 76,834
Cash and cash equivalents at end of period 
$18
 
$722
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$30,490
 
$24,021
Income taxes 
$—
 
($15,087)
     
See Notes to Financial Statements.    


ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
  2017 2016
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$45,461
 
$49,312
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation and amortization 70,759
 67,308
Deferred income taxes, investment tax credits, and non-current taxes accrued 31,740
 21,934
Changes in assets and liabilities:    
Receivables (7,952) (24,273)
Fuel inventory 6,312
 (5,040)
Accounts payable (1,398) 21,359
Taxes accrued (21,361) (20,417)
Interest accrued 40
 (584)
Deferred fuel costs (13,622) 108
Other working capital accounts (1,473) (8,266)
Provisions for estimated losses (6,699) (188)
Other regulatory assets (26,958) (1,913)
Pension and other postretirement liabilities (10,692) (10,922)
Other assets and liabilities (10,318) (11,355)
Net cash flow provided by operating activities 53,839
 77,063
     
INVESTING ACTIVITIES    
Construction expenditures (199,873) (143,171)
Allowance for equity funds used during construction 4,175
 2,631
Changes in money pool receivable - net 10,595
 12,416
Other (584) (117)
Net cash flow used in investing activities (185,687) (128,241)
     
FINANCING ACTIVITIES    
Proceeds from the issuance of long-term debt 
 371,940
Retirement of long-term debt 
 (332,400)
Change in money pool payable - net 56,299
 
Dividends paid:    
Common stock 
 (24,000)
Preferred stock (477) (1,414)
Other (86) 
Net cash flow provided by financing activities 55,736
 14,126
     
Net decrease in cash and cash equivalents (76,112) (37,052)
Cash and cash equivalents at beginning of period 76,834
 145,605
Cash and cash equivalents at end of period 
$722
 
$108,553
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$24,021
 
$29,157
Income taxes 
($15,087) 
($3,561)
     
See Notes to Financial Statements.    
ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$11
 
$1,607
Temporary cash investments 7
 4,489
Total cash and cash equivalents 18
 6,096
Accounts receivable:  
  
Customer 93,751
 72,039
Allowance for doubtful accounts (648) (574)
Associated companies 46,456
 45,081
Other 9,747
 9,738
Accrued unbilled revenues 61,966
 54,256
Total accounts receivable 211,272
 180,540
Deferred fuel costs 25,912
 32,444
Fuel inventory - at average cost 46,583
 45,606
Materials and supplies - at average cost 44,675
 42,571
Prepayments and other 12,034
 7,041
TOTAL 340,494
 314,298
     
OTHER PROPERTY AND INVESTMENTS  
  
Non-utility property - at cost (less accumulated depreciation) 4,584
 4,592
Storm reserve escrow account 32,187
 31,969
TOTAL 36,771
 36,561
     
UTILITY PLANT  
  
Electric 4,557,995
 4,660,297
Property under capital lease 
 125
Construction work in progress 175,039
 149,367
TOTAL UTILITY PLANT 4,733,034
 4,809,789
Less - accumulated depreciation and amortization 1,624,479
 1,681,306
UTILITY PLANT - NET 3,108,555
 3,128,483
     
DEFERRED DEBITS AND OTHER ASSETS  
  
Regulatory assets:  
  
Other regulatory assets 398,575
 397,909
Other 3,398
 2,124
TOTAL 401,973
 400,033
     
TOTAL ASSETS 
$3,887,793
 
$3,879,375
     
See Notes to Financial Statements.  
  

ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT LIABILITIES  
  
Accounts payable:  
  
Associated companies 
$112,877
 
$55,689
Other 111,101
 77,326
Customer deposits 83,348
 83,654
Taxes accrued 37,107
 82,843
Interest accrued 19,109
 22,901
Current portion of unprotected excess accumulated deferred income taxes 35,415
 
Other 9,723
 12,785
TOTAL 408,680
 335,198
     
NON-CURRENT LIABILITIES  
  
Accumulated deferred income taxes and taxes accrued 520,387
 488,806
Accumulated deferred investment tax credits 8,787
 8,867
Regulatory liability for income taxes - net 246,670
 411,011
Asset retirement cost liabilities 9,840
 9,219
Accumulated provisions 52,006
 44,764
Pension and other postretirement liabilities 92,161
 101,498
Long-term debt 1,270,559
 1,270,122
Other 19,844
 11,639
TOTAL 2,220,254
 2,345,926
     
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 2018 and 2017 199,326
 199,326
Capital stock expense and other 167
 167
Retained earnings 1,038,985
 978,377
TOTAL 1,238,478
 1,177,870
     
TOTAL LIABILITIES AND EQUITY 
$3,887,793
 
$3,879,375
     
See Notes to Financial Statements.  
  


ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$715
 
$16
Temporary cash investments 7
 76,818
Total cash and cash equivalents 722
 76,834
Accounts receivable:  
  
Customer 57,539
 51,218
Allowance for doubtful accounts (540) (549)
Associated companies 34,939
 45,973
Other 8,223
 12,006
Accrued unbilled revenues 57,170
 51,327
Total accounts receivable 157,331
 159,975
Deferred fuel costs 20,579
 6,957
Fuel inventory - at average cost 44,560
 50,872
Materials and supplies - at average cost 42,065
 41,146
Prepayments and other 15,742
 8,873
TOTAL 280,999
 344,657
     
OTHER PROPERTY AND INVESTMENTS  
  
Non-utility property - at cost (less accumulated depreciation) 4,600
 4,608
Escrow accounts 31,875
 31,783
TOTAL 36,475
 36,391
     
UTILITY PLANT  
  
Electric 4,409,179
 4,321,214
Property under capital lease 873
 1,590
Construction work in progress 176,623
 118,182
TOTAL UTILITY PLANT 4,586,675
 4,440,986
Less - accumulated depreciation and amortization 1,626,005
 1,602,711
UTILITY PLANT - NET 2,960,670
 2,838,275
     
DEFERRED DEBITS AND OTHER ASSETS  
  
Regulatory assets:  
  
Regulatory asset for income taxes - net 39,337
 38,284
Other regulatory assets 368,118
 342,213
Other 3,549
 2,320
TOTAL 411,004
 382,817
     
TOTAL ASSETS 
$3,689,148
 
$3,602,140
     
See Notes to Financial Statements.  
  

ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT LIABILITIES  
  
Accounts payable:  
  
Associated companies 
$99,489
 
$43,647
Other 73,037
 80,227
Customer deposits 83,928
 84,112
Taxes accrued 42,679
 64,040
Interest accrued 21,693
 21,653
Other 15,465
 9,554
TOTAL 336,291
 303,233
     
NON-CURRENT LIABILITIES  
  
Accumulated deferred income taxes and taxes accrued 892,081
 861,331
Accumulated deferred investment tax credits 8,587
 8,667
Asset retirement cost liabilities 8,967
 8,722
Accumulated provisions 47,741
 54,440
Pension and other postretirement liabilities 98,865
 109,551
Long-term debt 1,121,356
 1,120,916
Other 15,104
 20,108
TOTAL 2,192,701
 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 940,282
 895,298
TOTAL 1,139,775
 1,094,791
     
TOTAL LIABILITIES AND EQUITY 
$3,689,148
 
$3,602,140
     
See Notes to Financial Statements.  
  
ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
    
 Common Equity  
 
Common
Stock
 
Capital Stock
Expense and
Other
 
Retained
Earnings
 Total
 (In Thousands)
        
Balance at December 31, 2016
$199,326
 
$167
 
$895,298
 
$1,094,791
        
Net income
 
 45,461
 45,461
Preferred stock dividends
 
 (477) (477)
        
Balance at June 30, 2017
$199,326
 
$167
 
$940,282
 
$1,139,775
        
        
Balance at December 31, 2017
$199,326
 
$167
 
$978,377
 
$1,177,870
        
Net income
 
 61,085
 61,085
Preferred stock dividends
 
 (477) (477)
        
Balance at June 30, 2018
$199,326
 
$167
 
$1,038,985
 
$1,238,478
        
See Notes to Financial Statements. 
  
  
  


ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 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
 
 49,312
 49,312
Common stock dividends
 
 (24,000) (24,000)
Preferred stock dividends
 
 (1,414) (1,414)
        
Balance at June 30, 2016
$199,326
 
($690)��
$837,312
 
$1,035,948
        
        
Balance at December 31, 2016
$199,326
 
$167
 
$895,298
 
$1,094,791
        
Net income
 
 45,461
 45,461
Preferred stock dividends
 
 (477) (477)
        
Balance at June 30, 2017
$199,326
 
$167
 
$940,282
 
$1,139,775
        
See Notes to Financial Statements. 
  
  
  


ENTERGY MISSISSIPPI, INC.SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
           
 Three Months Ended Increase/   Three Months Ended Increase/  
Description 2017 2016 (Decrease) % 2018 2017 (Decrease) %
 (Dollars In Millions)   (Dollars In Millions)  
Electric Operating Revenues:                
Residential 
$111
 
$88
 
$23
 26
 
$133
 
$111
 
$22
 20
Commercial 101
 81
 20
 25
 117
 101
 16
 16
Industrial 38
 29
 9
 31
 46
 38
 8
 21
Governmental 10
 9
 1
 11
 12
 10
 2
 20
Total retail 260
 207
 53
 26
Total billed retail 308
 260
 48
 18
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 7
 5
 2
 40
 12
 7
 5
 71
Other 24
 36
 (12) (33) 34
 24
 10
 42
Total 
$291
 
$248
 
$43
 17
 
$354
 
$291
 
$63
 22
  
  
  
  
  
  
  
  
Billed Electric Energy Sales (GWh):  
  
  
  
  
  
  
  
Residential 1,135
 1,085
 50
 5
 1,199
 1,135
 64
 6
Commercial 1,142
 1,126
 16
 1
 1,147
 1,142
 5
 
Industrial 618
 587
 31
 5
 627
 618
 9
 1
Governmental 101
 102
 (1) (1) 102
 101
 1
 1
Total retail 2,996
 2,900
 96
 3
 3,075
 2,996
 79
 3
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 312
 243
 69
 28
 407
 312
 95
 30
Total 3,308
 3,143
 165
 5
 3,482
 3,308
 174
 5
               
               
 Six Months Ended Increase/  
 Six Months Ended Increase/  
Description 2017 2016 (Decrease) % 2018 2017 (Decrease) %
 (Dollars In Millions)  
 (Dollars In Millions)  
Electric Operating Revenues:  
  
  
  
  
  
  
  
Residential 
$222
 
$204
 
$18
 9
 
$281
 
$222
 
$59
 27
Commercial 193
 173
 20
 12
 228
 193
 35
 18
Industrial 74
 63
 11
 17
 89
 74
 15
 20
Governmental 19
 19
 
 
 22
 19
 3
 16
Total retail 508
 459
 49
 11
Total billed retail 620
 508
 112
 22
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 12
 10
 2
 20
 13
 12
 1
 8
Other 30
 42
 (12) (29) 36
 30
 6
 20
Total 
$550
 
$511
 
$39
 8
 
$669
 
$550
 
$119
 22
  
  
  
  
  
  
  
  
Billed Electric Energy Sales (GWh):               
Residential 2,325
 2,370
 (45) (2) 2,648
 2,325
 323
 14
Commercial 2,204
 2,205
 (1) 
 2,247
 2,204
 43
 2
Industrial 1,204
 1,136
 68
 6
 1,224
 1,204
 20
 2
Governmental 199
 200
 (1) (1) 201
 199
 2
 1
Total retail 5,932
 5,911
 21
 
 6,320
 5,932
 388
 7
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 493
 375
 118
 31
 600
 493
 107
 22
Total 6,425
 6,286
 139
 2
 6,920
 6,425
 495
 8


ENTERGY NEW ORLEANS, INC.LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 20172018 Compared to Second Quarter 20162017

Net income increased $3$3.4 million primarily due to lower other operation and maintenance expenseshigher net revenue and a lower effective income tax rate, partially offset by higher taxes other than income taxes.operation and maintenance expenses.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Net income increased $2.9$3.3 million primarily due to lower other operation and maintenance expenseshigher net revenue and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses, higher taxes other than income taxes.taxes, and higher depreciation and amortization expenses.

Net Revenue

Second Quarter 20172018 Compared to Second Quarter 20162017

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 changeschange in net revenue comparing the second quarter 20172018 to the second quarter 2016:2017:
 Amount
 (In Millions)
2016 net revenue
$80.4
Retail electric price(2.3)
Other1.2
2017 net revenue
$79.3
Volume/weather4.7
Retail electric price(2.2)
Other1.4
2018 net revenue
$83.2

The volume/weather variance is primarily due to an increase of 11 GWh, or 1%, in billed electricity usage, including the effect of more favorable weather primarily on residential sales and a 1% increase in the average number of 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 a decrease in the revenue requirement related to Power Block 1 of the Union Power Station; and
regulatory charges of $1.6 million recorded in the second quarter 2018 as a result of an agreement with the City Council to return the benefits of the lower federal income tax rate in 2018 to customers.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the credits associated with Entergy New Orleans’s internal restructuring and regulatory proceedings related to the enactment of the Tax Act.


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Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 2018 to six months ended June 30, 2017:
Amount
(In Millions)
2017 net revenue
$149.5
Volume/weather8.3
Net gas revenue3.6
Retail electric price(4.8)
Other1.6
2018 net revenue
$158.2

The volume/weather variance is primarily due to an increase of 139 GWh, or 5%, in billed electricity usage, including the effect of more favorable weather primarily on residential sales and a 1% increase in the average number of electric customers.

The net gas revenue variance is primarily due to the effect of more favorable weather on residential and commercial sales.
The retail electric price variance is primarily due to:

regulatory charges of $3.3 million recorded in 2018 as a result of an agreement with the City Council to return the benefits of the lower federal income tax rate in 2018 to customers; and
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.

See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the credits associated with Entergy New Orleans’s internal restructuring.restructuring and regulatory proceedings related to the enactment of the Tax Act.

Other Income Statement Variances

Second Quarter 2018 Compared to Second Quarter2017

Other operation and maintenance expenses increased primarily due to an increase of $1.1 million in loss provisions and several individually insignificant items.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Net revenue consists of operating revenues net of: 1) fuel, fuel-relatedOther operation and maintenance 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 six months ended June 30, 2017 to the six months ended June 30, 2016:
Amount
(In Millions)
2016 net revenue
$148.4
Retail electric price3.0
Volume/weather(3.1)
Other1.2
2017 net revenue
$149.5
increased primarily due to:

136an increase of $2.4 million in distribution expenses primarily due to an overall higher scope of work performed in 2018 as compared to the same period in 2017;
an increase of $1.5 million in energy efficiency costs;
an increase of $1.5 million in loss provisions; and
several individually insignificant items.


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The retail electric price variance is primarily due to an increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station in March 2016. The increase was partially offset by credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017. See Note 2 to the financial statements in the Form 10-K for further discussion of the purchased power and capacity acquisition cost recovery rider and see Note 2 to the financial statements herein for further discussion of the credits associated with Entergy New Orleans’s internal restructuring.

The volume/weather variance is primarily due to decreased usage during the unbilled sales period, including the effect of weather, and a decrease of 27 GWh, or 1%, in billed electricity usage, primarily in the residential sector.

Other Income Statement Variances

Second Quarter 2017 Compared to Second Quarter 2016

Other operation and maintenance expenses decreased primarily due to:

a decrease of $2.4 million in other loss provisions; and
a decrease of $2 million in fossil-fueled generation expenses primarily due to the deactivation of Michoud Units 2 and 3 effective May 2016 and asbestos loss provisions recorded in second quarter 2016.

Taxes other than income taxes increased primarily due to an increase in local franchise taxes resulting fromprimarily due to higher electric and gas retail revenues in 20172018 as compared to the same period in 2016 and an increase in ad valorem taxes resulting from higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Other operationDepreciation and maintenanceamortization expenses decreased primarily due to:

a decrease of $2.8 million in fossil-fueled generation expenses primarily due to the deactivation of Michoud Units 2 and 3 effective May 2016 and asbestos loss provisions recorded in 2016, partially offset by an increase as a result of the purchase of Power Block 1 of the Union Power Station in March 2016; and
a decrease of $2 million in other loss provisions.

Taxes other than income taxes increased primarily due to an increaseadditions to plant in local franchise taxes resulting from higher electric retail revenues in 2017 as compared to the same period in 2016 and an increase in ad valorem taxes resulting from higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017, partially offset by higher capitalized taxes.service.

Income Taxes

The effective income tax rate was 21.1% for the second quarter 2018. The difference in the effective income tax rate for the second quarter 2018 versus the federal statutory rate of 21% was primarily due to state income taxes and the provision for uncertain tax positions, partially offset by flow-through tax accounting and certain book and tax differences related to utility plant items.

The effective income tax rate was 20.5% for the six months ended June 30, 2018. The difference in the effective income tax rate for the six months ended June 30, 2018 versus the federal statutory rate of 21% was primarily due to flow-through tax accounting and certain book and tax differences related to utility plant items, partially offset by state income taxes and the provision for uncertain tax positions.

The effective income tax rates were 35.8% for the second quarter 2017 and 36.1% for the six months ended June 30, 2017. The differences in the effective income tax rates for the second quarter 2017 and the six 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 rates were 44.5% for the second quarter 2016 and 41.2% for the six months ended June 30, 2016. The differences in the effective income tax rates for the second quarter 2016 and the six months ended June 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.Income Tax Legislation


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Entergy New Orleans, Inc.Corporation and Subsidiaries
Management's Management’s Financial Discussion and Analysis
in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 2 to the financial statements herein and in the Form 10-K contains a discussion of proceedings commenced or other responses by Entergy and Entergy’s regulators to the Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 20172018 and 20162017 were as follows:
2017 20162018 2017
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$103,068
 
$88,876

$32,741
 
$103,068
      
Cash flow provided by (used in):      
Operating activities36,750
 39,268
33,939
 36,750
Investing activities(49,005) (258,036)(71,085) (49,005)
Financing activities(29,284) 154,510
4,431
 (29,284)
Net decrease in cash and cash equivalents(41,539) (64,258)(32,715) (41,539)
      
Cash and cash equivalents at end of period
$61,529
 
$24,618

$26
 
$61,529

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Operating Activities

Net cash flow provided by operating activities decreased $2.5$2.8 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to the timing of payments to vendors and an increase in interest paid in 2017 as compared to 2016. The decrease was substantially offset by the timing of recovery of fuel and purchased power costs, in 2017 as comparedpartially offset by the timing of payments to the same period in 2016 and income tax payments of $2.5 million in 2016 primarily due to payments made for state tax liabilities.vendors.

Investing Activities

Net cash flow used in investing activities decreased $209increased $22.1 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to an increase of $28.3 million in fossil-fueled generation construction expenditures primarily due to higher spending on the purchase of Power Block 1 of the UnionNew Orleans Power Station for approximately $237project in 2018 and an increase of $12.5 million in March 2016,distribution construction expenditures primarily due to a higher scope of work performed in 2018 as compared to the same period in 2017, including investment in the reliability and infrastructure of Entergy New Orleans’s distribution system. The increase was partially offset by money pool activity and an increasea decrease of $7.7$12.7 million in storm spending in 2017. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.spending.

IncreasesDecreases in Entergy New Orleans’s receivable from the money pool are a usesource of cash flow, and Entergy New Orleans’s receivable from the money pool increaseddecreased $12.7 million in 2018 compared to increasing $1.7 million in 2017 compared to decreasing $12.8 million in 2016.2017. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy New Orleans’s financing activities usedprovided $4.4 million of cash for the six months ended June 30, 2018 compared to using $29.3 million of cash for the six months ended June 30, 2017 compared to providing $154.5 million of cash for the six months ended June 30, 2016 primarily due to money pool activity and a decrease of $9.7 million in common equity distributions in 2018 as compared to 2017. Common equity distributions were lower in 2018 primarily as a result of the following activity:

the issuanceconstruction of $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 2024Power Station, as discussed below, and to pay, prior to maturity, its $37.772 million of 5.65% Series first mortgage bonds due September 2029;
a $47.8 million capital contribution received from Entergy Corporation in March 2016 in anticipation of Entergy New Orleans’s purchase of Power Block 1the excess accumulated deferred income taxes to be returned to customers as a result of the Union Power Station.enactment of the Tax Cuts and Jobs Act in December 2017. See Note 142 to the financial statements herein and in the Form 10-K for discussion of regulatory proceedings related to the Union Power Station purchase;enactment of the Tax Cuts and Jobs Act.

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Increases in Entergy New Orleans, Inc.Orleans’s payable from the money pool are a source of cash flow, and Subsidiaries
Management's Financial Discussion and Analysis

$24.2Entergy New Orleans’s payable from the money pool increased $23.1 million in common stock dividends paid in 2017 as compared to $7 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 2016.2018.

See Note 5 to the financial statements in the Form 10-K for more details on long-term debt.

Capital Structure

Entergy New Orleans’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table.
June 30,
2017
 
December 31,
2016
June 30,
2018
 
December 31,
2017
Debt to capital49.8% 50.1%50.1% 51.3%
Effect of excluding securitization bonds(4.9%) (5.2%)(4.4%) (4.7%)
Debt to capital, excluding securitization bonds (a)44.9% 44.9%45.7% 46.6%
Effect of subtracting cash(4.6%) (8.0%)% (2.4%)
Net debt to net capital, excluding securitization bonds (a)40.3% 36.9%45.7% 44.2%

(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, long-term debt, including the currently maturing portion, and the long-term payable due to Entergy Louisiana.an associated company.  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

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useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Uses and Sources of Capital

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.  
        
Entergy New Orleans’s receivables from or (payables to) the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
$15,960 $14,215 $3,007 $15,794
June 30, 2018 
December 31,
2017
 June 30, 2017 
December 31,
2016
(In Thousands)
($23,080) $12,723 $15,960 $14,215

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 issueincludes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of June 30, 2017,2018, 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 to MISO. As of June 30, 2017,2018, a $5.6$7.4 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.

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As discussed in the Form 10-K, in September 2016, Entergy New Orleans Inc.submitted to the City Council a request for authorization for Entergy New Orleans to proceed with annual incremental capital funding of $12.5 million for its gas infrastructure rebuild plan and Subsidiaries
Management's Financial Discussionproposed that recovery of the investment be determined in connection with its next base rate case. The City Council authorized Entergy New Orleans to proceed with its replacement plans and Analysis
established a schedule for proceedings in advance of the rate case intended to provide an opportunity for evaluation of the gas infrastructure plan that would best serve the public interest and the effect on customers of the approval of any such plan. In the course of that proceeding, the City Council’s advisors submitted pre-filed testimony recommending that Entergy New Orleans be allowed to continue with its conditioned-based approach to gas pipeline replacement to replace approximately 238 miles of low pressure pipe at a rate of approximately 25 miles per year. The City Council’s advisors also recommended that Entergy New Orleans be required to adhere to certain reporting requirements and recognized the need to address the sustained level of investment in gas infrastructure on customer bills. In September 2017, Entergy New Orleans filed rebuttal testimony suggesting that its recovery of future investment and customer effects would be addressed in the rate case that Entergy New Orleans was required to file in July 2018. The procedural schedule was suspended in order to allow for amicable resolution of the proceeding.

New Orleans Power Station

InAs discussed in the Form 10-K, 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 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which facility was deactivated effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds.facility. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking

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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 estimateIn March 2018 the City Council adopted a resolution approving construction of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unitunit. The targeted commercial operation date is $210 million.January 2020, subject to receipt of all necessary permits. In addition,April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council a request for rehearing, which was subsequently denied, and a petition for judicial review of the City Council’s decision, and also filed a lawsuit challenging the City Council’s approval based on Louisiana’s open meeting law. In May 2018 the City Council announced that it would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in paying certain attendees and speakers in support of the New Orleans Power Station to attend or speak at certain meetings organized by the City Council. In June 2018, Entergy New Orleans produced documents in response to a City Council resolution relating to this investigation. The City Council issued a request for qualifications for an investigator and in June 2018 selected two investigators and is in the process of contracting with them to conduct the investigation.

Renewables

In July 2018, Entergy New Orleans filed an application renewedwith the City Council requesting approval of three utility-scale solar projects totaling 90 MW.  If approved, the resource additions will allow Entergy New Orleans to make significant progress towards meeting its voluntary commitment to pursuethe City Council to add up to 100 MW of renewable resourcesenergy resources.  The three projects include constructing a self-build solar plant in Orleans Parish with an output of 20 MW, acquiring a 50 MW solar facility in Washington Parish through a build-own-transfer acquisition, and procuring 20 MW of solar power from a project to servebe built in St. James Parish through a power purchase agreement. Entergy New Orleans.  In July 2017Orleans requested City Council approval following a six-month procedural schedule, which, if granted, would allow the Utility Committee ofvarious projects to come online from 2020 to 2021.  

Advanced Metering Infrastructure (AMI) Filings

As discussed in the Form 10-K, in February 2018 the City Council establishedapproved Entergy New Orleans’s application seeking a procedural schedulefinding that provides for a hearingEntergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in Decemberthe public interest.  Deployment of the information technology infrastructure began in 2017 and deployment of the City Council’s decisioncommunications network is expected to begin later in February 2018. The commercial operation date is dependent on the alternative selected byIn April 2018 the City Council andadopted a resolution directing Entergy New Orleans to explore the receiptoptions for accelerating the deployment of other permits and approvals.AMI. In June 2018 the City Council approved a one year acceleration of AMI in its service area for an incremental $4.4 million, bringing the total capital spending related to AMI for Entergy New Orleans to $79.4 million.

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 are updates to that discussion.

Retail Rates

As discussed in the Form 10-K, in February 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 identify its desired level of funding for the program during this time period and approve a cost recovery mechanism. 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 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. The City Council ordered Entergy New Orleans to submit a supplemental and amended implementation plan for program years 8 and 9 of the Energy Smart program (January 2018 through December 2019) in October 2017. Following that filing, the City Council will determine a specific cost recovery mechanism for the program for both legacy and Algiers customers. The City Council will not permit Entergy New Orleans to recover lost contribution to fixed costs for program years 7, 8, or 9 of the Energy Smart program.Programs

Internal Restructuring
As discussed in the Form 10-K, in July 2016,September 2017, Entergy New Orleans filed a supplemental plan and proposed several options for an application withinterim cost recovery mechanism necessary to recover program costs during the City Council seeking authorizationperiod between when existing funds directed to undertakeEnergy Smart programs were depleted and when new rates from the anticipated 2018 combined rate case, which will include a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy New Orleanscost recovery mechanism for Energy Smart funding, take effect (estimated to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company.August 2019). In MayDecember 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuantapproved an energy efficiency cost recovery rider as an interim funding mechanism for Energy Smart, subject to an agreement in principle withverification that no additional funding sources exist. In June 2018 the City Council advisors and certain intervenors. Pursuant to the agreement in principle,also approved a resolution recommending that Entergy New Orleans will credit retail customers $10 million in 2017, $1.4 million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Entergy New Orleans began crediting retail customers in June 2017. Also pursuant to the agreement in principle, if FERC approval is received prior to December 31, 2018, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the years 2018, 2019, and 2020.
allocate approximately $13.5

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Advanced Metering Infrastructure (AMI) Filingmillion of benefits resulting from the Tax Act to Energy Smart. Entergy New Orleans is seeking approval of a permanent and stable source of funding for Energy Smart as part of its base rate case filed in July 2018.

As discussed in the Form 10-K, in October 2016,Base Rate Case
In July 2018, Entergy New Orleans filed its 2018 base rate case with the City Council.  Entergy New Orleans’s application supports a $20 million decrease in total revenue requirement.  Entergy New Orleans’s rates reflect the inclusion of federal income tax reductions due to the Tax Act and the provisions of a previously approved agreement in principle determining how the benefits of the Tax Act would flow.  Entergy New Orleans included cost of service studies for electric and gas operations for the twelve months ending December 31, 2017 and the projected twelve months ending December 31, 2018.  In addition, Entergy New Orleans included capital additions expected to be placed into service for the period through December 31, 2019.  Entergy New Orleans’s request for a change in rates is based on the projected twelve months ending December 31, 2018.  For electric rates, that results in a proposed decrease of total revenue requirement of approximately $20 million.  For gas rates, that results in a proposed decrease of $129 thousand.

Entergy New Orleans has requested to restructure electric rates to take into account the addition of electric operations in Algiers, such that a single set of rates will be charged in the City of New Orleans, including an application seekingincrease in its electric customer charges.  Entergy New Orleans’s request also includes:  a finding10.75% return on equity; a three-year formula rate plan for electric (with decoupling) and gas operations, each with a 100 basis point bandwidth (i.e., 10.75% +/- 50 basis points); realignment of capacity and long-term service agreement expense from riders to base rates; implementation of riders for 1) contemporaneous recovery of net cost of advanced metering infrastructure, 2) contemporaneous true-up for existing capacity and long-term service agreement expense, as well as new capacity such as power purchase agreements and battery storage (through the purchased power capacity and acquisition cost recovery rider), 3) recovery of distribution grid modernization, gas infrastructure replacement program, and interim energy efficiency, and 4) permanent recovery mechanism for demand-side management activities, including putting into rate base the costs of demand side management activities and contemporaneous recovery of lost contribution to fixed costs; new depreciation rates for electric and gas assets; and proposed implementation of new voluntary customer offerings (such as green power, fixed bill, community solar, pre-pay electric and gas service, and electric vehicle charging infrastructure options).

Reliability Investigation

In August 2017 the City Council that Entergy New Orleans’s deploymentestablished a docket to investigate the reliability of advanced electric and gas metering infrastructure is in the public interest. In April 2017, Entergy New Orleans received intervenor testimonydistribution system and to consider implementing certain reliability standards and possible financial penalties for not meeting any such standards. In April 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that was generally supportiveit has been prudent in the management and maintenance of AMI deployment.the reliability of its distribution system. The resolution also called for Entergy New Orleans to file a revised reliability plan addressing the current state of its distribution system and proposing remedial measures for increasing reliability. In June 2018, Entergy New Orleans filed its response to the City Council’s advisors filed testimony in May 2017 recommendingresolution regarding the adoptionprudence of AMI subject to certain modifications, includingits management and maintenance of the denialreliability of its distribution system.  In July 2018, Entergy New Orleans’s proposed customer charge asOrleans filed its revised reliability plan discussing the various reliability programs that it uses to improve distribution system reliability and discussing generally the positive effect that advanced meter deployment and grid modernization can have on future reliability.  Entergy New Orleans will hold a cost recovery mechanism. In June 2017technical conference with the procedural schedule was suspendedCity Council advisors and other parties to allow for settlement discussions. A settlement status conference is scheduled for August 2017.discuss reliability issues and answer questions.

Federal Regulation

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation in the Form 10-K for a discussion of federal regulation. 


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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, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.


ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
        
 Three Months Ended Six Months Ended Three Months Ended Six Months Ended
 2017 2016 2017 2016 2018 2017 2018 2017
 (In Thousands) (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES                
Electric 
$157,455
 
$149,101
 
$299,800
 
$271,542
 
$159,602
 
$157,455
 
$315,420
 
$299,800
Natural gas 18,767
 15,819
 45,411
 42,718
 18,844
 18,767
 51,301
 45,411
TOTAL 176,222
 164,920
 345,211
 314,260
 178,446
 176,222
 366,721
 345,211
                
OPERATING EXPENSES                
Operation and Maintenance:                
Fuel, fuel-related expenses, and gas purchased for resale 22,961
 12,554
 53,036
 23,475
 15,366
 22,961
 39,105
 53,036
Purchased power 73,105
 70,583
 141,464
 139,108
 73,789
 73,105
 156,945
 141,464
Other operation and maintenance 25,296
 28,659
 47,808
 51,501
 28,420
 25,079
 56,719
 47,369
Taxes other than income taxes 13,416
 10,925
 26,262
 22,437
 12,851
 13,416
 27,983
 26,262
Depreciation and amortization 13,020
 13,908
 26,070
 25,672
 13,950
 13,020
 27,697
 26,070
Other regulatory charges - net 818
 1,378
 1,203
 3,274
 6,127
 818
 12,460
 1,203
TOTAL 148,616
 138,007
 295,843
 265,467
 150,503
 148,399
 320,909
 295,404
                
OPERATING INCOME 27,606
 26,913
 49,368
 48,793
 27,943
 27,823
 45,812
 49,807
                
OTHER INCOME                
Allowance for equity funds used during construction 552
 143
 1,002
 456
 1,217
 552
 2,068
 1,002
Interest and investment income 164
 30
 299
 99
 207
 164
 300
 299
Miscellaneous - net 40
 192
 138
 (53) (1,404) (177) (1,741) (301)
TOTAL 756
 365
 1,439
 502
 20
 539
 627
 1,000
                
INTEREST EXPENSE                
Interest expense 5,356
 5,984
 10,699
 10,357
 5,269
 5,356
 10,548
 10,699
Allowance for borrowed funds used during construction (193) (49) (351) (175) (450) (193) (764) (351)
TOTAL 5,163
 5,935
 10,348
 10,182
 4,819
 5,163
 9,784
 10,348
                
INCOME BEFORE INCOME TAXES 23,199
 21,343
 40,459
 39,113
 23,144
 23,199
 36,655
 40,459
                
Income taxes 8,317
 9,500
 14,599
 16,103
 4,875
 8,317
 7,504
 14,599
                
NET INCOME 14,882
 11,843
 25,860
 23,010
 18,269
 14,882
 29,151
 25,860
                
Preferred dividend requirements and other 241
 241
 482
 482
 
 241
 
 482
                
EARNINGS APPLICABLE TO COMMON STOCK 
$14,641
 
$11,602
 
$25,378
 
$22,528
EARNINGS APPLICABLE TO COMMON EQUITY 
$18,269
 
$14,641
 
$29,151
 
$25,378
                
See Notes to Financial Statements.                



ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
For the Six Months Ended June 30, 2018 and 2017For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
 2017 2016 2018 2017
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Net income 
$25,860
 
$23,010
 
$29,151
 
$25,860
Adjustments to reconcile net income to net cash flow provided by operating activities:        
Depreciation and amortization 26,070
 25,672
 27,697
 26,070
Deferred income taxes, investment tax credits, and non-current taxes accrued 14,764
 (2,665) 22,813
 14,764
Changes in assets and liabilities:        
Receivables (5,979) (16,285) (10,930) (5,979)
Fuel inventory (465) 1,822
 1,833
 (465)
Accounts payable (8,761) 6,362
 5,073
 (8,761)
Prepaid taxes and taxes accrued
 38
 36,982
Prepaid taxes
 (10,602) 38
Interest accrued (469) 255
 (459) (469)
Deferred fuel costs 2,087
 (13,664) (27,056) 2,087
Other working capital accounts (11,774) (7,310) (9,524) (11,774)
Provisions for estimated losses (1,794) 1,804
 438
 (1,794)
Other regulatory assets 2,719
 5,799
 11,957
 2,719
Other regulatory liabilities 3,042
 (610)
Pension and other postretirement liabilities (8,049) (8,245) (7,725) (8,049)
Other assets and liabilities 2,503
 (14,269) (1,769) 3,113
Net cash flow provided by operating activities 36,750
 39,268
 33,939
 36,750
        
INVESTING ACTIVITIES        
Construction expenditures (48,683) (37,345) (85,324) (48,683)
Allowance for equity funds used during construction 1,002
 456
 2,068
 1,002
Payment for purchase of plant 
 (236,978)
Investment in affiliates 
 (38)
Changes in money pool receivable - net (1,745) 12,787
 12,723
 (1,745)
Receipts from storm reserve escrow account 
 3
 3
 
Payments to storm reserve escrow account (235) (206) (544) (235)
Changes in securitization account 656
 3,285
 (11) 656
Net cash flow used in investing activities (49,005) (258,036) (71,085) (49,005)
        
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt 
 190,672
Retirement of long-term debt (5,114) (77,094) (5,342) (5,114)
Capital contribution from parent 
 47,750
Change in money pool payable - net 23,080
 
Dividends paid:        
Common stock (24,150) (7,000) (14,500) (24,150)
Preferred stock (482) (482) 
 (482)
Other 462
 664
 1,193
 462
Net cash flow provided by (used in) financing activities (29,284) 154,510
 4,431
 (29,284)
        
Net decrease in cash and cash equivalents (41,539) (64,258) (32,715) (41,539)
Cash and cash equivalents at beginning of period 103,068
 88,876
 32,741
 103,068
Cash and cash equivalents at end of period 
$61,529
 
$24,618
 
$26
 
$61,529
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
Interest - net of amount capitalized 
$10,637
 
$9,435
 
$10,483
 
$10,637
Income taxes 
$—
 
$2,500
        
See Notes to Financial Statements.        


ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSASSETS
June 30, 2017 and December 31, 2016
June 30, 2018 and December 31, 2017June 30, 2018 and December 31, 2017
(Unaudited)
 2017 2016 2018 2017
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents        
Cash 
$862
 
$28
 
$26
 
$30
Temporary cash investments 60,667
 103,040
 
 32,711
Total cash and cash equivalents 61,529
 103,068
 26
 32,741
Securitization recovery trust account
 1,082
 1,738
 1,466
 1,455
Accounts receivable:        
Customer 47,162
 43,536
 58,918
 51,006
Allowance for doubtful accounts (3,074) (3,059) (3,068) (3,057)
Associated companies 18,045
 16,811
 10,013
 22,976
Other 6,891
 5,926
 5,283
 6,471
Accrued unbilled revenues 20,168
 18,254
 25,095
 20,638
Total accounts receivable 89,192
 81,468
 96,241
 98,034
Deferred fuel costs 2,731
 4,818
 19,282
 
Fuel inventory - at average cost 2,306
 1,841
 57
 1,890
Materials and supplies - at average cost 10,494
 8,416
 12,267
 10,381
Prepaid taxes 4,341
 4,379
 37,081
 26,479
Prepayments and other 20,353
 6,587
 17,602
 8,030
TOTAL 192,028
 212,315
 184,022
 179,010
        
OTHER PROPERTY AND INVESTMENTS        
Non-utility property at cost (less accumulated depreciation) 1,016
 1,016
 1,016
 1,016
Storm reserve escrow account 81,672
 81,437
 80,087
 79,546
Other 4,787
 7,160
 
 2,373
TOTAL 87,475
 89,613
 81,103
 82,935
        
UTILITY PLANT        
Electric 1,262,714
 1,258,934
 1,323,666
 1,302,235
Natural gas 247,742
 240,408
 273,913
 261,263
Construction work in progress 38,314
 24,975
 88,104
 46,993
TOTAL UTILITY PLANT 1,548,770
 1,524,317
 1,685,683
 1,610,491
Less - accumulated depreciation and amortization 610,405
 604,825
 647,582
 631,178
UTILITY PLANT - NET 938,365
 919,492
 1,038,101
 979,313
        
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
Deferred fuel costs 4,080
 4,080
 4,080
 4,080
Other regulatory assets (includes securitization property of $77,936 as of June 30, 2017 and $82,272 as of December 31, 2016) 265,387
 268,106
Other regulatory assets (includes securitization property of $66,475 as of June 30, 2018 and $72,095 as of December 31, 2017) 239,476
 251,433
Other 1,522
 963
 1,841
 1,065
TOTAL 270,989
 273,149
 245,397
 256,578
        
TOTAL ASSETS 
$1,488,857
 
$1,494,569
 
$1,548,623
 
$1,497,836
        
See Notes to Financial Statements.        

ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
June 30, 2018 and December 31, 2017June 30, 2018 and December 31, 2017
(Unaudited)
 2017 2016 2018 2017
 (In Thousands) (In Thousands)
CURRENT LIABILITIES        
Payable due to Entergy Louisiana 
$2,104
 
$2,104
Payable due to associated company 
$2,077
 
$2,077
Accounts payable:        
Associated companies 41,981
 39,260
 63,887
 47,472
Other 23,206
 35,920
 43,766
 29,777
Customer deposits 28,773
 28,667
 28,622
 28,442
Interest accrued 4,974
 5,443
 5,028
 5,487
Deferred fuel costs 
 7,774
Current portion of unprotected excess accumulated deferred income taxes 32,464
 
Other 13,006
 11,415
 8,749
 7,351
TOTAL CURRENT LIABILITIES 114,044
 122,809
 184,593
 128,380
        
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued 352,001
 334,953
 305,210
 283,302
Accumulated deferred investment tax credits 559
 622
 2,269
 2,323
Regulatory liability for income taxes - net 5,844
 9,074
 83,499
 119,259
Asset retirement cost liabilities 2,974
 2,875
 3,182
 3,076
Accumulated provisions 86,719
 88,513
 85,521
 85,083
Pension and other postretirement liabilities 28,701
 36,750
 13,013
 20,755
Long-term debt (includes securitization bonds of $79,784 as of June 30, 2017 and $84,776 as of December 31, 2016) 423,632
 428,467
Long-term payable due to Entergy Louisiana 18,423
 18,423
Gas system rebuild insurance proceeds 
 447
Long-term debt (includes securitization bonds of $69,199 as of June 30, 2018 and $74,419 as of December 31, 2017) 413,372
 418,447
Long-term payable due to associated company 16,346
 16,346
Other 8,006
 4,910
 11,419
 5,317
TOTAL NON-CURRENT LIABILITIES 926,859
 925,034
 933,831
 953,908
        
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 222,886
 221,658
EQUITY    
Member's equity 430,199
 415,548
TOTAL 428,174
 426,946
 430,199
 415,548
        
TOTAL LIABILITIES AND EQUITY 
$1,488,857
 
$1,494,569
 
$1,548,623
 
$1,497,836
        
See Notes to Financial Statements.        


ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 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
 
 23,010
 23,010
Capital contribution from parent
 47,750
 
 47,750
Common stock dividends
 
 (7,000) (7,000)
Preferred stock dividends
 
 (482) (482)
        
Balance at June 30, 2016
$33,744
 
$171,544
 
$208,022
 
$413,310
        
        
Balance at December 31, 2016
$33,744
 
$171,544
 
$221,658
 
$426,946
        
Net income
 
 25,860
 25,860
Common stock dividends
 
 (24,150) (24,150)
Preferred stock dividends
 
 (482) (482)
        
Balance at June 30, 2017
$33,744
 
$171,544
 
$222,886
 
$428,174
        
See Notes to Financial Statements. 
  
  
  
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
Member’s Equity
(In Thousands)
Balance at December 31, 2016
$426,946
Net income25,860
Common equity distributions(24,150)
Preferred stock dividends(482)
Balance at June 30, 2017
$428,174
Balance at December 31, 2017
$415,548
Net income29,151
Common equity distributions(14,500)
Balance at June 30, 2018
$430,199
See Notes to Financial Statements.


ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
            
 Three Months Ended Increase/   Three Months Ended Increase/  
Description 2017 2016 (Decrease) % 2018 2017 (Decrease) %
 (Dollars In Millions)   (Dollars In Millions)  
Electric Operating Revenues:                
Residential 
$56
 
$50
 
$6
 12
 
$58
 
$56
 
$2
 4
Commercial 56
 51
 5
 10
 55
 56
 (1) (2)
Industrial 9
 8
 1
 13
 9
 9
 
 
Governmental 19
 17
 2
 12
 18
 19
 (1) (5)
Total retail 140
 126
 14
 11
Total billed retail 140
 140
 
 
Sales for resale:  
  
  
  
  
  
  
  
Associated companies 
 12
 (12) (100)
Non-associated companies 9
 1
 8
 800
 6
 9
 (3) (33)
Other 8
 10
 (2) (20) 14
 8
 6
 75
Total 
$157
 
$149
 
$8
 5
 
$160
 
$157
 
$3
 2
                
Billed Electric Energy Sales (GWh):  
  
  
  
  
  
  
  
Residential 468
 459
 9
 2
 490
 468
 22
 5
Commercial 541
 538
 3
 1
 527
 541
 (14) (3)
Industrial 105
 107
 (2) (2) 111
 105
 6
 6
Governmental 188
 190
 (2) (1) 185
 188
 (3) (2)
Total retail 1,302
 1,294
 8
 1
 1,313
 1,302
 11
 1
Sales for resale:  
  
  
  
  
  
  
  
Associated companies 
 556
 (556) (100)
Non-associated companies 508
 41
 467
 1,139
 310
 508
 (198) (39)
Total 1,810
 1,891
 (81) (4) 1,623
 1,810
 (187) (10)
                
                
 Six Months Ended Increase/  
 Six Months Ended Increase/  
Description 2017 2016 (Decrease) % 2018 2017 (Decrease) %
 (Dollars In Millions)  
 (Dollars In Millions)  
Electric Operating Revenues:    
  
  
    
  
  
Residential 
$109
 
$97
 
$12
 12
 
$123
 
$109
 
$14
 13
Commercial 110
 95
 15
 16
 109
 110
 (1) (1)
Industrial 17
 15
 2
 13
 17
 17
 
 
Governmental 37
 32
 5
 16
 36
 37
 (1) (3)
Total retail 273
 239
 34
 14
Total billed retail 285
 273
 12
 4
Sales for resale:  
  
  
  
  
  
  
  
Associated companies 
 19
 (19) (100)
Non associated companies 18
 1
 17
 1,700
 19
 18
 1
 6
Other 9
 13
 (4) (31) 11
 9
 2
 22
Total 
$300
 
$272
 
$28
 10
 
$315
 
$300
 
$15
 5
                
Billed Electric Energy Sales (GWh):  
  
  
  
  
  
  
  
Residential 924
 958
 (34) (4) 1,067
 924
 143
 15
Commercial 1,056
 1,048
 8
 1
 1,051
 1,056
 (5) 
Industrial 203
 208
 (5) (2) 210
 203
 7
 3
Governmental 372
 368
 4
 1
 366
 372
 (6) (2)
Total retail 2,555
 2,582
 (27) (1) 2,694
 2,555
 139
 5
Sales for resale:  
  
  
  
  
  
  
  
Associated companies 
 798
 (798) (100)
Non-associated companies 1,015
 55
 960
 1,745
 937
 1,015
 (78) (8)
Total 3,570
 3,435
 135
 4
 3,631
 3,570
 61
 2
                
                

ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

Second Quarter 20172018 Compared to Second Quarter 20162017

Net income decreased $3increased $9.7 million primarily due to lowerhigher net revenue higher depreciation and amortization expenses, anda lower effective income tax rate, partially offset by higher other operation and maintenance expenses partially offset by a lower effective income tax rate.and higher depreciation and amortization expenses.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Net income decreased $6.7increased $16.2 million primarily due to higher depreciationnet revenue and amortization expenses,a lower effective income tax rate, partially offset by higher taxes other than income taxes, higher other operation and maintenance expenses, and lower net revenue.higher depreciation and amortization expenses.

Net Revenue

Second Quarter 20172018 Compared to Second Quarter 20162017

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 second quarter 20172018 to the second quarter 2016:2017:

 Amount
 (In Millions)
2016 net revenue
$157.0
Net wholesale revenue(10.9)
Retail electric price6.8
Other0.1
2017 net revenue
$153.0
Volume/weather12.1
Purchased power capacity4.5
Other0.3
2018 net revenue
$169.9
    
The net wholesale revenuevolume/weather variance is primarily due to lower net capacity revenues resulting froman increase of 137 GWh, or 3%, in billed electricity usage, including the terminationeffect of more favorable weather on residential sales and an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the purchased power agreements between Entergy Louisianachemicals and Entergy Texaswood products industries and an increase in August 2016.demand for cogeneration customers and mid-size to small customers.

The retail electric pricepurchased power capacity 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, 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.decreased purchased power capacity costs under Entergy Texas’s purchased power agreements with Entergy Louisiana.


148

Table of Contents
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges.  Following is an analysis of the change in net revenue comparing the six months ended June 30, 20172018 to the six months ended June 30, 2016:2017:


158

Table of Contents
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis

 Amount
 (In Millions)
2016 net revenue
$295.2
Net wholesale revenue(20.9)
Volume/weather9.1
Retail electric price11.3
Other(1.4)
2017 net revenue
$293.3
Volume/weather17.0
Retail electric price7.1
Other(2.5)
2018 net revenue
$314.9
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 volume/weather variance is primarily due to an increase of 524 GWh, or 6%, in billed electricity usage, including the effect of more favorable weather on residential sales and an increase in industrial usage. The increase was partially offset by decreased usage during the unbilled sales period, includingperiod. The increase in industrial usage is primarily due to an increase in demand for mid-size to small customers and new customers in the effect of weather.chemicals and wood products industries.

The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider in September 2016 and an increaseincreases in the transmission cost recovery factor rider rate in March 2017 and the distribution cost recovery factor rider rate in September 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 and the distribution cost recovery factor rider filings.

Other Income Statement Variances

Second Quarter 20172018 Compared to Second Quarter 20162017

Other operation and maintenance expenses increased primarily due to:

to an increase of $2 million in transmission and distribution expenses due to higher vegetation maintenance costs;
an increase of $1.2$2.5 million in fossil-fueled generation expenses primarily due to a higher scope of work doneperformed during plant outages in 20172018 compared to the same period in 2016; and2017.
an increase of $0.7 million in energy efficiency costs.

The increase was partially offset by a $2 million decrease due to lower transmission equalization expenses, as allocated under the System Agreement, as compared to the same period in 2016 primarily as a result of Entergy Texas’s exit from the System Agreement in August 2016.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Six Months Ended June 30, 20172018 Compared to Six Months Ended June 30, 20162017

Other operation and maintenance expenses increased primarily due to:

to an increase of $1.8$2.3 million in transmission and distributionfossil-fueled generation expenses primarily due to a higher vegetation maintenance costs;scope of work performed during plant outages in 2018 compared to the same period in 2017.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Income Taxes

The effective income tax rate was 22% for the second quarter 2018. The difference in the effective income tax rate for the second quarter 2018 versus the federal statutory rate of $1.4 million21% was primarily due to an IRS audit settlement for the 2012-2013 tax returns. See Note 10 to the financial statements herein for a discussion of the IRS audit settlement.

The effective income tax rate was 22.1% for the six months ended June 30, 2018. The difference in customer service costs;the effective income tax rate for the six months ended June 30, 2018 versus the federal statutory rate of 21% was primarily due to a write-off of a stock-based compensation deferred tax asset in 2018.    


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an increase of $1.3 million in fossil-fueled generation expenses primarily due to a higher scope of work done during plant outages in 2017 as compared to the same period in 2016;
an increase of $1.2 million in information technology expenses including software maintenance costs and upgrade projects;
an increase of $0.9 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016; and
an increase of $0.7 million in energy efficiency costs.

The increase was partially offset by a decrease of $4.5 million due to lower transmission equalization expenses, as allocated under the System Agreement, in 2017 as compared to the same period in 2016 primarily as a result of Entergy Texas’s exit from the System Agreement in August 2016.
Depreciation and amortization expenses increased primarily due to additions to plant in service.

Income Taxes

The effective income tax rate was 26.2% for the second quarter 2017. The difference in the effective income tax rate for the second quarter 2017 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions and book and tax differences related to the allowance for equity funds used during construction, partially offset by certain book and tax differences related to utility plant items.

The effective income tax rate was 33% for the six months ended June 30, 2017. The difference in the effective income tax rate for the six months ended June 30, 2017 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions and book and tax differences related to the allowance for equity funds used during construction, 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 effectiveIncome Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax rates were 39.9%legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the second quarter 2016Tax Act, and 39.2% forNote 2 to the six months ended June 30, 2016. The differencesfinancial statements herein and in the effective income tax rates for the second quarter 2016Form 10-K contains a discussion of proceedings commenced or other responses by Entergy and for the six months ended June 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 relatedEntergy’s regulators to the allowance for equity funds used during construction.Tax Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 20172018 and 20162017 were as follows:
 2017 2016
 (In Thousands)
Cash and cash equivalents at beginning of period
$6,181
 
$2,182
    
Cash flow provided by (used in):   
Operating activities132,397
 172,175
Investing activities(140,929) (179,483)
Financing activities3,416
 61,063
Net increase (decrease) in cash and cash equivalents(5,116) 53,755
    
Cash and cash equivalents at end of period
$1,065
 
$55,937


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 2018 2017
 (In Thousands)
Cash and cash equivalents at beginning of period
$115,513
 
$6,181
    
Cash flow provided by (used in):   
Operating activities90,479
 132,397
Investing activities(124,925) (140,929)
Financing activities(40,668) 3,416
Net decrease in cash and cash equivalents(75,114) (5,116)
    
Cash and cash equivalents at end of period
$40,399
 
$1,065

Operating Activities

Net cash flow provided by operating activities decreased $39.8$41.9 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to the timing of recovery of fuel and purchased power costs.

Investing Activities

Net cash flow used in investing activities decreased $38.6$16 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to:

to money pool activity and a decrease of $49$5.2 million in transmissiondistribution construction expenditures primarily due to a lower scope of work performed in 20172018 as compared to the same period in 2016,2017. The decrease was partially offset by by:


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an increase of $14.2 million in baselinefossil-fueled generation construction expenditures primarily due to increased spending on the Montgomery County Power Station and a higher scope of work performed in 20172018 as compared to the same period in 2016;2017; and
money pool activity.

The decrease was partially offset by an increase of $16.2$4.4 million in fossil-fueled generationtransmission construction expenditures primarily due to a higher scope of work performed in 20172018 as compared to the same period in 2016.2017.

Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased by $34.9 million for the six months ended June 30, 2018 compared to decreasing by $0.7 million for the six months ended June 30, 2017 compared to increasing by $7 million for the six months ended June 30, 2016.2017. 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 Texas’s financing activities decreased $57.6used $40.7 million of cash for the six months ended June 30, 2018 compared to providing $3.4 million of cash for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 primarily due to the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016, partially offset by 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 $39.2 million for the six months ended June 30, 2017 compared to decreasing by $22.1 million for the six months ended June 30, 2016.2017.

Capital Structure

Entergy Texas’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table.
June 30,
2017
 December 31, 2016
June 30,
2018
 December 31, 2017
Debt to capital57.2% 58.5%54.2% 55.7%
Effect of excluding the securitization bonds(7.7%) (8.3%)(5.8%) (6.3%)
Debt to capital, excluding securitization bonds (a)49.5% 50.2%48.4% 49.4%
Effect of subtracting cash% (0.1%)(0.8%) (2.5%)
Net debt to net capital, excluding securitization bonds (a)49.5% 50.1%47.6% 46.9%

(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

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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. Following are updates to information provided in the Form 10-K.


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Entergy Texas’s receivables from or (payables to) the money pool were as follows:

June 30,
2017
 
December 31,
2016
 June 30,
2016
 
December 31,
2015
(In Thousands)
($39,222) $681 $7,011 ($22,068)
June 30,
2018
 
December 31,
2017
 
June 30,
2017
 
December 31,
2016
(In Thousands)
$10,001 $44,903 ($39,222) $681

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

Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in August 2021.2022.  The credit facility allows Entergy Texas to issueincludes fronting commitments for the issuance of letters of credit against 50%$30 million of the borrowing capacity of the facility. As of June 30, 2017,2018, there were no cash borrowings and $13.3$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 to MISO. As of June 30, 2017,2018, a $22.3$12.5 million letter of credit was outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.

Montgomery County Power Station

In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process that showed no undue preference to any proposal. In June 2017, parties to the proceeding 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 capped at $831 million, subject to certain exclusions such as force majeure events. Also in June 2017, the administrative law judge issued a proposed order and remanded the proceeding to the PUCT for final decision. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.

State and Local Rate Regulation and Fuel-Cost Recovery

See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.

Fuel and purchased power cost recovery
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As discussed in the Form 10-K, in July 2015 certain parties filed briefs in an open PUCT 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 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. The pending appeals did not stay the PUCT’s decision, and Entergy Texas refunded to customers the $10.9 million over a four-month period beginning with the first billing cycle of July 2016. The federal appeal of the PUCT’s January 2016 decision was heard in December 2016, and the Federal District Court granted Entergy Texas’s requested relief. In January 2017 the PUCT and an intervenor filed petitions for appeal of the Federal District Court ruling to the U.S. Court of Appeals for the Fifth Circuit. Oral argument was held before the Fifth Circuit in February 2018. In April 2018 the Fifth Circuit reversed the decision of the Federal District Court, reinstating the original PUCT decision. The State District Court appeal of the PUCT’s January 2016 decision remains pending.

In December 2017, Entergy Texas filed an application for a fuel refund of approximately $30.5 million for the months of May 2017 through October 2017. Also in December 2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers, the refunds flowed through bills beginning January 2018 and continued through March 2018. The fuel refund was approved by the PUCT in March 2018.

2018 Base Rate Case

In May 2018, Entergy Texas filed a base rate case with the PUCT seeking an increase in base rates and rider rates of approximately $166 million, of which $48 million is associated with moving costs currently being collected through riders into base rates such that the total incremental revenue requirement increase is approximately $118 million. Entergy Texas’s proposed rates and revenues reflect the inclusion of federal income tax reductions due to the Tax Act as well as a rider designed to return approximately $202 million of unprotected excess accumulated deferred

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Retail Rates

federal income taxes over a period of two years following PUCT approval. The base rate case is based on a 12-month test year ending December 31, 2017. In September 2016,addition, Entergy Texas filed with the PUCT a request to amend its transmission 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 September 2016 the PUCT suspended the effective date of the tariff change to March 2017. 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 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 two other parties in the proceeding enteredincluded capital additions placed 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. PUCT action on the stipulation and settlement agreement remains pending.

Fuel and purchased power cost recovery

As discussed in the Form 10-K, in July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costsservice for the period of April 1, 2013 through MarchDecember 31, 2016. In December 2016, Entergy Texas entered into2017, as well as a stipulation 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 in March 2017 and the refunds were made.

In June 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7 million for the months of December 2016 through April 2017. For most customers, the refunds will flow through bills for the months of July 2017 through September 2017. Also in June 2017, the PUCT’s administrative law judge approved the refund on an interim basis. A final decision in this matter remains pending.

Advanced Metering Infrastructure (AMI) Filing

In its most recent regular session, 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 continuepost-test year adjustment to include capital additions placed in rate baseservice by June 30, 2018. A hearing on 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 whichmerits is expected to beginscheduled 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 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 inAugust 2018. Entergy Texas expects a decision from the PUCT by December 2017.
    

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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” in the Form 10-K for further discussion.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 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.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.

ENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
For the Three and Six Months Ended June 30, 2018 and 2017For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
        
 Three Months Ended Six Months Ended Three Months Ended Six Months Ended
 2017 2016 2017 2016 2018 2017 2018 2017
 (In Thousands) (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES                
Electric 
$378,488
 
$412,922
 
$742,415
 
$791,226
 
$403,486
 
$378,488
 
$752,426
 
$742,415
                
OPERATING EXPENSES                
Operation and Maintenance:                
Fuel, fuel-related expenses, and gas purchased for resale 46,142
 71,478
 104,155
 163,882
 57,089
 46,142
 75,795
 104,155
Purchased power 160,325
 167,071
 310,709
 297,483
 150,568
 160,325
 310,260
 310,709
Other operation and maintenance 56,577
 54,135
 110,483
 107,170
 59,848
 56,562
 112,522
 110,246
Taxes other than income taxes 19,251
 18,285
 38,695
 36,595
 20,306
 19,251
 40,709
 38,695
Depreciation and amortization 29,373
 26,495
 57,484
 52,114
 31,141
 29,373
 61,907
 57,484
Other regulatory charges - net 19,033
 17,419
 34,260
 34,674
 25,897
 19,033
 51,514
 34,260
TOTAL 330,701
 354,883
 655,786
 691,918
 344,849
 330,686
 652,707
 655,549
                
OPERATING INCOME 47,787
 58,039
 86,629
 99,308
 58,637
 47,802
 99,719
 86,866
                
OTHER INCOME                
Allowance for equity funds used during construction 1,632
 2,270
 2,913
 4,702
 1,833
 1,632
 3,494
 2,913
Interest and investment income 211
 268
 412
 468
 542
 211
 1,097
 412
Miscellaneous - net (631) (54) (813) (470) (735) (646) (622) (1,050)
TOTAL 1,212
 2,484
 2,512
 4,700
 1,640
 1,197
 3,969
 2,275
                
INTEREST EXPENSE                
Interest expense 21,427
 21,976
 43,235
 43,577
 21,835
 21,427
 43,886
 43,235
Allowance for borrowed funds used during construction (1,001) (1,473) (1,762) (3,054) (1,033) (1,001) (1,971) (1,762)
TOTAL 20,426
 20,503
 41,473
 40,523
 20,802
 20,426
 41,915
 41,473
                
INCOME BEFORE INCOME TAXES 28,573
 40,020
 47,668
 63,485
 39,475
 28,573
 61,773
 47,668
                
Income taxes 7,472
 15,962
 15,713
 24,865
 8,686
 7,472
 13,634
 15,713
                
NET INCOME 
$21,101
 
$24,058
 
$31,955
 
$38,620
 
$30,789
 
$21,101
 
$48,139
 
$31,955
                
See Notes to Financial Statements.                

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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
  2017 2016
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$31,955
 
$38,620
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation and amortization 57,484
 52,114
Deferred income taxes, investment tax credits, and non-current taxes accrued (16,766) (40,175)
Changes in assets and liabilities:    
Receivables (15,969) (37,832)
Fuel inventory (4,813) 14,129
Accounts payable 24,900
 17,883
Prepaid taxes and taxes accrued 23,064
 51,640
Interest accrued (471) (2,719)
Deferred fuel costs 6,144
 54,066
Other working capital accounts 4,132
 2,774
Provisions for estimated losses 83
 (2,126)
Other regulatory assets 45,306
 43,378
Pension and other postretirement liabilities (13,286) (12,850)
Other assets and liabilities (9,366) (6,727)
Net cash flow provided by operating activities 132,397
 172,175
     
INVESTING ACTIVITIES    
Construction expenditures (155,755) (185,945)
Allowance for equity funds used during construction 2,992
 4,761
Insurance proceeds received for property damages 2,431
 
Changes in money pool receivable - net 681
 (7,011)
Changes in securitization account 8,722
 8,712
Net cash flow used in investing activities (140,929) (179,483)
     
FINANCING ACTIVITIES    
Proceeds from the issuance of long-term debt 
 123,605
Retirement of long-term debt (38,134) (36,659)
Change in money pool payable - net 39,222
 (22,068)
Other 2,328
 (3,815)
Net cash flow provided by financing activities 3,416
 61,063
     
Net increase (decrease) in cash and cash equivalents (5,116) 53,755
Cash and cash equivalents at beginning of period 6,181
 2,182
Cash and cash equivalents at end of period 
$1,065
 
$55,937
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$42,430
 
$45,056
Income taxes 
($1,446) 
$3,443
     
See Notes to Financial Statements.    


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$1,036
 
$1,216
Temporary cash investments 29
 4,965
Total cash and cash equivalents 1,065
 6,181
Securitization recovery trust account 28,729
 37,451
Accounts receivable:    
Customer 70,008
 71,803
Allowance for doubtful accounts (791) (828)
Associated companies 40,867
 39,447
Other 13,121
 14,756
Accrued unbilled revenues 56,988
 39,727
Total accounts receivable 180,193
 164,905
Fuel inventory - at average cost 41,990
 37,177
Materials and supplies - at average cost 38,807
 36,631
Prepayments and other 14,585
 18,599
TOTAL 305,369
 300,944
     
OTHER PROPERTY AND INVESTMENTS    
Investments in affiliates - at equity 573
 600
Non-utility property - at cost (less accumulated depreciation) 376
 376
Other 19,018
 18,801
TOTAL 19,967
 19,777
     
UTILITY PLANT    
Electric 4,367,085
 4,274,069
Construction work in progress 135,733
 111,227
TOTAL UTILITY PLANT 4,502,818
 4,385,296
Less - accumulated depreciation and amortization 1,542,664
 1,526,057
UTILITY PLANT - NET 2,960,154
 2,859,239
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Regulatory asset for income taxes - net 105,086
 105,816
Other regulatory assets (includes securitization property of $353,726 as of June 30, 2017 and $384,609 as of December 31, 2016) 695,580
 740,156
Other 8,674
 7,149
TOTAL 809,340
 853,121
     
TOTAL ASSETS 
$4,094,830
 
$4,033,081
     
See Notes to Financial Statements.  
  

ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT LIABILITIES    
Accounts payable:    
Associated companies 
$86,811
 
$47,867
Other 108,341
 77,342
Customer deposits 44,329
 44,419
Taxes accrued 38,415
 15,351
Interest accrued 25,506
 25,977
Deferred fuel costs 60,687
 54,543
Other 11,753
 9,388
TOTAL 375,842
 274,887
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 1,008,466
 1,027,647
Accumulated deferred investment tax credits 12,459
 12,934
Other regulatory liabilities 5,574
 8,502
Asset retirement cost liabilities 6,650
 6,470
Accumulated provisions 7,667
 7,584
Pension and other postretirement liabilities 54,043
 67,313
Long-term debt (includes securitization bonds of $391,212 as of June 30, 2017 and $429,043 as of December 31, 2016) 1,471,091
 1,508,407
Other 52,089
 50,343
TOTAL 2,618,039
 2,689,200
     
Commitments and Contingencies    
     
COMMON EQUITY    
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2017 and 2016 49,452
 49,452
Paid-in capital 481,994
 481,994
Retained earnings 569,503
 537,548
TOTAL 1,100,949
 1,068,994
     
TOTAL LIABILITIES AND EQUITY 
$4,094,830
 
$4,033,081
     
See Notes to Financial Statements.    
ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
  2018 2017
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$48,139
 
$31,955
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation and amortization 61,907
 57,484
Deferred income taxes, investment tax credits, and non-current taxes accrued (19,785) (16,766)
Changes in assets and liabilities:    
Receivables (25,987) (15,969)
Fuel inventory (1,710) (4,813)
Accounts payable 906
 24,900
Taxes accrued 20,439
 23,064
Interest accrued (678) (471)
Deferred fuel costs (37,103) 6,144
Other working capital accounts 9,614
 4,132
Provisions for estimated losses 434
 83
Other regulatory assets 39,592
 45,306
Other regulatory liabilities 10,072
 (2,928)
Pension and other postretirement liabilities (13,330) (13,286)
Other assets and liabilities (2,031) (6,438)
Net cash flow provided by operating activities 90,479
 132,397
     
INVESTING ACTIVITIES    
Construction expenditures (169,856) (155,755)
Allowance for equity funds used during construction 3,562
 2,992
Insurance proceeds received from property damages 
 2,431
Changes in money pool receivable - net 34,902
 681
Changes in securitization account 6,467
 8,722
Net cash flow used in investing activities (124,925) (140,929)
     
FINANCING ACTIVITIES    
Retirement of long-term debt (39,722) (38,134)
Change in money pool payable - net 
 39,222
Other (946) 2,328
Net cash flow provided by (used in) financing activities (40,668) 3,416
     
Net decrease in cash and cash equivalents (75,114) (5,116)
Cash and cash equivalents at beginning of period 115,513
 6,181
Cash and cash equivalents at end of period 
$40,399
 
$1,065
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$43,188
 
$42,430
Income taxes 
($624) 
($1,446)
     
See Notes to Financial Statements.    


ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
    
 Common Equity  
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 Total
 (In Thousands)
        
Balance at December 31, 2015
$49,452
 
$481,994
 
$430,010
 
$961,456
        
Net income
 
 38,620
 38,620
        
Balance at June 30, 2016
$49,452
 
$481,994
 
$468,630
 
$1,000,076
        
        
Balance at December 31, 2016
$49,452
 
$481,994
 
$537,548
 
$1,068,994
        
Net income
 
 31,955
 31,955
        
Balance at June 30, 2017
$49,452
 
$481,994
 
$569,503
 
$1,100,949
        
See Notes to Financial Statements.       
ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$26
 
$32
Temporary cash investments 40,373
 115,481
Total cash and cash equivalents 40,399
 115,513
Securitization recovery trust account 31,216
 37,683
Accounts receivable:    
Customer 76,417
 74,382
Allowance for doubtful accounts (402) (463)
Associated companies 70,105
 90,629
Other 9,488
 9,831
Accrued unbilled revenues 60,538
 50,682
Total accounts receivable 216,146
 225,061
Fuel inventory - at average cost 44,441
 42,731
Materials and supplies - at average cost 39,123
 38,605
Prepayments and other 13,288
 19,710
TOTAL 384,613
 479,303
     
OTHER PROPERTY AND INVESTMENTS    
Investments in affiliates - at equity 470
 457
Non-utility property - at cost (less accumulated depreciation) 376
 376
Other 19,673
 19,235
TOTAL 20,519
 20,068
     
UTILITY PLANT    
Electric 4,653,078
 4,569,295
Construction work in progress 142,181
 102,088
TOTAL UTILITY PLANT 4,795,259
 4,671,383
Less - accumulated depreciation and amortization 1,625,410
 1,579,387
UTILITY PLANT - NET 3,169,849
 3,091,996
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Other regulatory assets (includes securitization property of $277,999 as of June 30, 2018 and $313,123 as of December 31, 2017) 621,806
 661,398
Other 28,460
 26,973
TOTAL 650,266
 688,371
     
TOTAL ASSETS 
$4,225,247
 
$4,279,738
     
See Notes to Financial Statements.  
  

ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$500,000
 
$—
Accounts payable:    
Associated companies 54,017
 59,347
Other 102,657
 126,095
Customer deposits 41,610
 40,925
Taxes accrued 66,098
 45,659
Interest accrued 24,878
 25,556
Deferred fuel costs 30,198
 67,301
Current portion of unprotected excess accumulated deferred income taxes 66,225
 
Other 11,146
 8,132
TOTAL 896,829
 373,015
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 525,129
 544,642
Accumulated deferred investment tax credits 11,596
 11,983
Regulatory liability for income taxes - net 346,647
 412,620
Other regulatory liabilities 16,670
 6,850
Asset retirement cost liabilities 7,026
 6,835
Accumulated provisions 10,549
 10,115
Pension and other postretirement liabilities 4,535
 17,853
Long-term debt (includes securitization bonds of $318,594 as of June 30, 2018 and $358,104 as of December 31, 2017) 1,048,180
 1,587,150
Other 49,780
 48,508
TOTAL 2,020,112
 2,646,556
     
Commitments and Contingencies    
     
COMMON EQUITY    
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2018 and 2017 49,452
 49,452
Paid-in capital 596,994
 596,994
Retained earnings 661,860
 613,721
TOTAL 1,308,306
 1,260,167
     
TOTAL LIABILITIES AND EQUITY 
$4,225,247
 
$4,279,738
     
See Notes to Financial Statements.    


ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
       
  Three Months Ended Increase/  
Description 2017 2016 (Decrease) %
  (Dollars In Millions)  
Electric Operating Revenues:        
Residential 
$143
 
$130
 
$13
 10
Commercial 91
 85
 6
 7
Industrial 95
 94
 1
 1
Governmental 6
 6
 
 
Total retail 335
 315
 20
 6
Sales for resale:        
Associated companies 16
 64
 (48) (75)
Non-associated companies 9
 12
 (3) (25)
Other 18
 22
 (4) (18)
Total 
$378
 
$413
 
($35) (8)
         
Billed Electric Energy Sales (GWh):        
Residential 1,274
 1,209
 65
 5
Commercial 1,102
 1,070
 32
 3
Industrial 1,973
 1,938
 35
 2
Governmental 69
 68
 1
 1
Total retail 4,418
 4,285
 133
 3
Sales for resale:        
Associated companies 425
 1,683
 (1,258) (75)
Non-associated companies 271
 345
 (74) (21)
Total 5,114
 6,313
 (1,199) (19)
         
         
  Six Months Ended Increase/  
Description 2017 2016 (Decrease) %
  (Dollars In Millions)  
Electric Operating Revenues:        
Residential 
$280
 
$265
 
$15
 6
Commercial 181
 169
 12
 7
Industrial 195
 188
 7
 4
Governmental 12
 12
 
 
Total retail 668
 634
 34
 5
Sales for resale:        
Associated companies 29
 117
 (88) (75)
Non-associated companies 14
 18
 (4) (22)
Other 31
 22
 9
 41
Total 
$742
 
$791
 
($49) (6)
         
Billed Electric Energy Sales (GWh):        
Residential 2,487
 2,484
 3
 
Commercial 2,108
 2,087
 21
 1
Industrial 3,763
 3,745
 18
 
Governmental 132
 138
 (6) (4)
Total retail 8,490
 8,454
 36
 
Sales for resale:        
Associated companies 763
 3,105
 (2,342) (75)
Non-associated companies 348
 494
 (146) (30)
Total 9,601
 12,053
 (2,452) (20)
ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
    
 Common Equity  
 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 Total
 (In Thousands)
        
Balance at December 31, 2016
$49,452
 
$481,994
 
$537,548
 
$1,068,994
        
Net income
 
 31,955
 31,955
        
Balance at June 30, 2017
$49,452
 
$481,994
 
$569,503
 
$1,100,949
        
        
Balance at December 31, 2017
$49,452
 
$596,994
 
$613,721
 
$1,260,167
        
Net income
 
 48,139
 48,139
        
Balance at June 30, 2018
$49,452
 
$596,994
 
$661,860
 
$1,308,306
        
See Notes to Financial Statements.       


ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
       
  Three Months Ended Increase/  
Description 2018 2017 (Decrease) %
  (Dollars In Millions)  
Electric Operating Revenues:        
Residential 
$151
 
$143
 
$8
 6
Commercial 95
 91
 4
 4
Industrial 103
 95
 8
 8
Governmental 6
 6
 
 
Total billed retail 355
 335
 20
 6
Sales for resale:        
Associated companies 15
 16
 (1) (6)
Non-associated companies 10
 9
 1
 11
Other 23
 18
 5
 28
Total 
$403
 
$378
 
$25
 7
         
Billed Electric Energy Sales (GWh):        
Residential 1,312
 1,274
 38
 3
Commercial 1,135
 1,102
 33
 3
Industrial 2,036
 1,973
 63
 3
Governmental 72
 69
 3
 4
Total retail 4,555
 4,418
 137
 3
Sales for resale:        
Associated companies 387
 425
 (38) (9)
Non-associated companies 323
 271
 52
 19
Total 5,265
 5,114
 151
 3
         
         
  Six Months Ended Increase/  
Description 2018 2017 (Decrease) %
  (Dollars In Millions)  
Electric Operating Revenues:        
Residential 
$299
 
$280
 
$19
 7
Commercial 180
 181
 (1) (1)
Industrial 186
 195
 (9) (5)
Governmental 12
 12
 
 
Total billed retail 677
 668
 9
 1
Sales for resale:        
Associated companies 28
 29
 (1) (3)
Non-associated companies 20
 14
 6
 43
Other 27
 31
 (4) (13)
Total 
$752
 
$742
 
$10
 1
         
Billed Electric Energy Sales (GWh):        
Residential 2,786
 2,487
 299
 12
Commercial 2,218
 2,108
 110
 5
Industrial 3,868
 3,763
 105
 3
Governmental 142
 132
 10
 8
Total retail 9,014
 8,490
 524
 6
Sales for resale:        
Associated companies 753
 763
 (10) (1)
Non-associated companies 517
 348
 169
 49
Total 10,284
 9,601
 683
 7

SYSTEM ENERGY RESOURCES, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf.  The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.  System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement.  Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.

Second Quarter 20172018 Compared to Second Quarter 20162017

Net income increased $4 million primarily due to:

higher other income primarily due to an increase in the allowance for equity funds used during construction resulting from spending on Grand Gulf outage projects in 2018;
the increase in operating revenues resulting from changes in rate base as compared to the same period in prior year; and
a lower effective income tax rate.

Six Months Ended June 30, 2018 Compared to Six Months Ended June 30, 2017

Net income decreased $5.7increased $6 million primarily due to:

higher other income primarily due to an increase in the allowance for equity funds used during construction resulting from spending on Grand Gulf outage projects in 2018;
the increase in operating revenues resulting from changes in rate base as compared to the same period in prior year; and
a higherlower effective income tax raterate.

Income Tax Legislation

See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for a discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements in the Form 10-K contains additional discussion of the effect of the Tax Act on 2017 results of operations and financial position, the provisions against revenue being recorded in 2017 in connectionof the Tax Act, and the uncertainties associated with accounting for the complaint against System Energy’s return on equity. SeeTax Act. Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements herein and Federal Regulation - Complaint Against System Energy” below for furtherin the Form 10-K contains a discussion of proceedings commenced or other responses by Entergy and Entergy’s regulators to the complaint against System Energy.Tax Act.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016
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Net income decreased $11.4 million primarily due to a higher effective income tax rate in 2017 and provisions against revenue being recorded in 2017 in connection with the complaint against System Energy’s return on equity. See Note 2 to the financial statements herein and “Federal Regulation - Complaint Against System Energy” below for further discussion of the complaint against System Energy.

Liquidity and Capital Resources

Cash Flow

Cash flows for the six months ended June 30, 20172018 and 20162017 were as follows:
2017 20162018 2017
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$245,863
 
$230,661

$287,187
 
$245,863
      
Cash flow provided by (used in):      
Operating activities171,460
 137,292
122,760
 171,460
Investing activities(65,983) (167,749)(158,956) (65,983)
Financing activities(13,740) (61,410)7,786
 (13,740)
Net increase (decrease) in cash and cash equivalents91,737
 (91,867)(28,410) 91,737
      
Cash and cash equivalents at end of period
$337,600
 
$138,794

$258,777
 
$337,600

Operating Activities

Net cash flow provided by operating activities increased $34.2decreased by $48.7 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to a decreasean increase in spending of $33.8$34.2 million on nuclear refueling outages in 20172018 as compared to the same period in 2016.


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2017.

Investing Activities

Net cash flow used in investing activities decreased $101.8increased $93 million for the six months ended June 30, 20172018 compared to the six months ended June 30, 20162017 primarily due to:

to an increase of $136.8 million as a result of 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;cycle and
a decrease an increase of $28.1$76.8 million in nuclear construction expenditures primarily as a result of a higher scope of work performed in 20162018 on Grand Gulf outage projects and lower spending in 2017 on compliance with NRC post-Fukushima requirements.

projects. The decreaseincrease was partially offset by money pool activity.

IncreasesDecreases in System Energy’s receivable from the money pool are a usesource of cash flow and System Energy’s receivable from the money pool increaseddecreased by $47.5 million for the six months ended June 30, 2018 compared to increasing by $54.9 million for the six months ended June 30, 2017 compared to decreasing by $22.2 million for the six months ended June 30, 2016.2017.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow used inSystem Energy’s financing activities decreased $47.7provided $7.8 million of cash for the six months ended June 30, 2018 compared to using $13.7 million of cash for the six months ended June 30, 2017 comparedprimarily due to the six months ended June 30, 2016 primarily due to:following activity:

common stock dividends and distributionsthe issuance in March 2018 of $139 million in 2016 in order to maintain the targeted capital structure; and
the partial repayment caused by System Energy in May 2016 of $22$100 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of3.42% Series J notes by the System Energy.

The decrease was partially offset by:

a decrease in net borrowings of $63.3 million on theEnergy nuclear fuel company variable interest entity’s credit facility in 2017 compared to the same period in 2016; andentity;
the payment in February 2017, at maturity, of $50 million of the System Energy nuclear fuel company variable interest entity’s 4.02% Series H notes.notes;
common stock dividends and distributions of $63.2 million in 2018 in order to maintain the targeted capital structure;
net repayments of long-term borrowings of $50 million in 2018 on the nuclear fuel company variable interest entity’s credit facility; and

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net short-term borrowings of $21 million in the six months ended June 30, 2018 compared to net short-term borrowings of $36.3 million in the six months ended June 30, 2017 on the nuclear fuel company variable interest entity’s credit facility.

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

System Energy’s capitalizationdebt to capital ratio is balanced between equity and debt, as shown in the following table. The decreaseincrease in the debt to capital ratio for System Energy is primarily due to an increasethe issuance in retained earnings.March 2018 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity.
June 30,
2017
 December 31, 2016June 30, 2018 December 31, 2017
Debt to capital43.7% 45.5%48.0% 44.5%
Effect of subtracting cash(18.2%) (12.0%)(12.5%) (16.0%)
Net debt to net capital25.5% 33.5%35.5% 28.5%

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

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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. Following are updates to the information provided in the Form 10-K.

System Energy’s receivables from the money pool were as follows:
June 30,
2017
 
December 31,
2016
 
June 30,
2016
 
December 31,
2015
(In Thousands)
$88,669 $33,809 $17,718 $39,926
June 30,
2018
 
December 31,
2017
 June 30, 2017 
December 31,
2016
(In Thousands)
$64,136 $111,667 $88,669 $33,809

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

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in May 2019. As of June 30, 2017, $53.22018, $38.9 million in letters of credit to support a like amount of commercial paper issued and $50 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.


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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.

ComplaintComplaints Against System Energy

InReturn on Equity Complaints

As discussed in the Form 10-K, 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%. , which was established in a rate proceeding that became final in July 2001.

The APSC and MPSC 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. Action byIn September 2017 the FERC is pending.established a refund effective date of January 23, 2017, consolidated the return on equity complaint with the proceeding described in Unit Power Sales Agreement below, and directed the parties to engage in settlement proceedings before an ALJ. The parties have been unable to settle the return on equity issue and a FERC hearing judge was assigned in July 2018. The 15-month refund effective date in connection with the APSC/MPSC complaint expired on April 23, 2018.

In April 2018 the LPSC filed a complaint with the FERC against System Energy seeking an additional fifteen-month refund period.  The LPSC complaint requests similar relief from the FERC with respect to System Energy’s return on equity and also requests the FERC to investigate System Energy’s capital structure.  System Energy answered the LPSC complaint in May 2018 and also filed a motion to dismiss the complaint.

Grand Gulf Sale-leaseback Renewal Complaint

In May 2018, the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal in 2015 of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1. The complaint alleges that System Energy violated the filed rate and the FERC’s ratemaking and accounting requirements when it included in Unit Power Sales Agreement billings the cost of capital additions associated with the sale-leaseback interest, and that System Energy is double-recovering costs by including both the lease payments and the capital additions in Unit Power Sales Agreement billings. The complaint also claims that System Energy was imprudent in entering into the sale-leaseback renewal because the Utility operating companies that purchase Grand Gulf’s output from System Energy could have obtained cheaper capacity and energy in the MISO markets. The complaint further alleges that System Energy violated various other reporting and accounting requirements and should have sought prior FERC approval of the lease renewal. The complaint seeks various forms of relief from the FERC. The complaint seeks refunds for capital addition costs for all years in which they were recorded in allegedly non-formula accounts or, alternatively, the disallowance of the return on equity for the capital additions in those years plus interest. The complaint also asks that the FERC disallow and refund the lease costs of

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Management's Financial Discussion and Analysis

the sale-leaseback renewal on grounds of imprudence, investigate System Energy’s treatment of a DOE litigation payment, and impose certain forward-looking procedural protections, including audit rights for retail regulators of the Unit Power Sales Agreement formula rates.

In June 2018, System Energy and Entergy Services filed a motion to dismiss and answer to the LPSC complaint denying that System Energy’s treatment of the sale-leaseback renewal and capital additions violated the terms of the filed rate or any other FERC ratemaking, accounting, or legal requirements or otherwise constituted double recovery. The response also argued that the complaint is inconsistent with a FERC-approved settlement to which the LPSC is a party and that explicitly authorizes System Energy to recover its lease payments. Finally, the response argued that both the capital additions and the sale-leaseback renewal were prudent investments and the LPSC complaint fails to justify any disallowance or refunds. The response asked that the FERC dismiss and reject the LPSC complaint without further action, investigation, or hearing, but also offered to submit formula rate protocols for the Unit Power Sales Agreement similar to the procedures used for reviewing transmission rates under the MISO tariff.

Unit Power Sales Agreement

InAs discussed in the Form 10-K, 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 onIn June 2018, System Energy filed with the FERC an uncontested settlement relating to the updated depreciation rates 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. Action by the FERC is pending.cost annual revenue requirements.

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.

As discussed in the Form 10-K, in November 2016 the NRC placed Grand Gulf in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. In August 2018 the NRC moved Grand Gulf into the “licensee response column,” or Column 1, of the NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections to review Grand Gulf’s performance in addressing issues that had previously resulted in classification in Column 2.

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, and other contingencies.

New Accounting Pronouncements

See “New Accounting Pronouncements” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.discussion of new accounting pronouncements.

SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
     
  Three Months Ended Six Months Ended
  2018 2017 2018 2017
  (In Thousands) (In Thousands)
OPERATING REVENUES        
Electric 
$112,456
 
$164,956
 
$260,899
 
$319,743
         
OPERATING EXPENSES        
Operation and Maintenance:        
Fuel, fuel-related expenses, and gas purchased for resale 2,030
 21,660
 30,455
 36,994
Nuclear refueling outage expenses 2,820
 4,387
 6,792
 9,160
Other operation and maintenance 48,695
 51,992
 94,034
 99,454
Decommissioning 8,541
 13,452
 16,998
 26,684
Taxes other than income taxes 6,866
 6,664
 13,963
 13,088
Depreciation and amortization 33,467
 35,187
 66,788
 70,628
Other regulatory credits - net (13,369) (11,421) (22,478) (21,783)
TOTAL 89,050
 121,921
 206,552
 234,225
         
OPERATING INCOME 23,406
 43,035
 54,347
 85,518
         
OTHER INCOME        
Allowance for equity funds used during construction 2,904
 1,318
 5,004
 2,412
Interest and investment income 2,943
 3,723
 9,829
 8,397
Miscellaneous - net (1,794) (2,421) (2,970) (3,488)
TOTAL 4,053
 2,620
 11,863
 7,321
         
INTEREST EXPENSE        
Interest expense 9,656
 9,181
 18,981
 18,300
Allowance for borrowed funds used during construction (736) (322) (1,268) (589)
TOTAL 8,920
 8,859
 17,713
 17,711
         
INCOME BEFORE INCOME TAXES 18,539
 36,796
 48,497
 75,128
         
Income taxes (4,848) 17,446
 2,802
 35,431
         
NET INCOME 
$23,387
 
$19,350
 
$45,695
 
$39,697
         
See Notes to Financial Statements.        

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SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2017 and 2016
(Unaudited)
     
  Three Months Ended Six Months Ended
  2017 2016 2017 2016
  (In Thousands) (In Thousands)
OPERATING REVENUES        
Electric 
$164,956
 
$151,323
 
$319,743
 
$289,016
         
OPERATING EXPENSES        
Operation and Maintenance:        
Fuel, fuel-related expenses, and gas purchased for resale 21,660
 20,394
 36,994
 33,822
Nuclear refueling outage expenses 4,387
 4,905
 9,160
 9,489
Other operation and maintenance 54,310
 35,766
 102,711
 67,926
Decommissioning 13,452
 12,593
 26,684
 24,980
Taxes other than income taxes 6,664
 6,385
 13,088
 12,637
Depreciation and amortization 35,187
 35,384
 70,628
 70,091
Other regulatory credits - net (11,421) (9,124) (21,783) (22,415)
TOTAL 124,239
 106,303
 237,482
 196,530
         
OPERATING INCOME 40,717
 45,020
 82,261
 92,486
         
OTHER INCOME        
Allowance for equity funds used during construction 1,318
 1,602
 2,412
 4,331
Interest and investment income 3,723
 5,124
 8,397
 8,398
Miscellaneous - net (103) (164) (231) (256)
TOTAL 4,938
 6,562
 10,578
 12,473
         
INTEREST EXPENSE        
Interest expense 9,181
 9,382
 18,300
 18,934
Allowance for borrowed funds used during construction (322) (401) (589) (1,097)
TOTAL 8,859
 8,981
 17,711
 17,837
         
INCOME BEFORE INCOME TAXES 36,796
 42,601
 75,128
 87,122
         
Income taxes 17,446
 17,511
 35,431
 36,074
         
NET INCOME 
$19,350
 
$25,090
 
$39,697
 
$51,048
         
See Notes to Financial Statements.        
SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
  2018 2017
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$45,695
 
$39,697
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 109,682
 128,679
Deferred income taxes, investment tax credits, and non-current taxes accrued 7,010
 35,498
Changes in assets and liabilities:    
Receivables 14,093
 10,077
Accounts payable 32,681
 3,469
Prepaid taxes and taxes accrued (7,100) (10,086)
Interest accrued 785
 (609)
Other working capital accounts (64,758) 2,960
Other regulatory assets (16,939) (4,904)
Other regulatory liabilities (12,894) 35,708
Pension and other postretirement liabilities (6,551) (8,116)
Other assets and liabilities 21,056
 (60,913)
Net cash flow provided by operating activities 122,760
 171,460
     
INVESTING ACTIVITIES    
Construction expenditures (105,035) (32,799)
Allowance for equity funds used during construction 5,004
 2,412
Nuclear fuel purchases (99,164) (22,510)
Proceeds from the sale of nuclear fuel 
 60,188
Proceeds from nuclear decommissioning trust fund sales 199,403
 253,487
Investment in nuclear decommissioning trust funds (206,695) (271,901)
Changes in money pool receivable - net 47,531
 (54,860)
Net cash flow used in investing activities (158,956) (65,983)
     
FINANCING ACTIVITIES    
Proceeds from the issuance of long-term debt 99,985
 
Retirement of long-term debt (50,002) (50,001)
Changes in short-term borrowings - net 21,043
 36,289
Common stock dividends and distributions (63,240) 
Other 
 (28)
Net cash flow provided by (used in) financing activities 7,786
 (13,740)
     
Net increase (decrease) in cash and cash equivalents (28,410) 91,737
Cash and cash equivalents at beginning of period 287,187
 245,863
Cash and cash equivalents at end of period 
$258,777
 
$337,600
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid during the period for:    
Interest - net of amount capitalized 
$8,592
 
$17,656
     
See Notes to Financial Statements.    


SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2017 and 2016
(Unaudited)
  2017 2016
  (In Thousands)
OPERATING ACTIVITIES    
Net income 
$39,697
 
$51,048
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 128,679
 123,424
Deferred income taxes, investment tax credits, and non-current taxes accrued 35,498
 83,733
Changes in assets and liabilities:    
Receivables 10,077
 3,731
Accounts payable 3,469
 (3,200)
Prepaid taxes and taxes accrued (10,086) (60,954)
Interest accrued (609) (145)
Other working capital accounts 2,960
 (28,319)
Other regulatory assets (4,904) (9,844)
Pension and other postretirement liabilities (8,116) (9,071)
Other assets and liabilities (25,205) (13,111)
Net cash flow provided by operating activities 171,460
 137,292
     
INVESTING ACTIVITIES    
Construction expenditures (32,799) (57,429)
Allowance for equity funds used during construction 2,412
 4,331
Nuclear fuel purchases (22,510) (130,275)
Proceeds from the sale of nuclear fuel 60,188
 11,467
Proceeds from nuclear decommissioning trust fund sales 253,487
 289,414
Investment in nuclear decommissioning trust funds (271,901) (307,465)
Changes in money pool receivable - net (54,860) 22,208
Net cash flow used in investing activities (65,983) (167,749)
     
FINANCING ACTIVITIES    
Retirement of long-term debt (50,001) (22,001)
Changes in credit borrowings - net 36,289
 99,617
Common stock dividends and distributions 
 (139,000)
Other (28) (26)
Net cash flow used in financing activities (13,740) (61,410)
     
Net increase (decrease) in cash and cash equivalents 91,737
 (91,867)
Cash and cash equivalents at beginning of period 245,863
 230,661
Cash and cash equivalents at end of period 
$337,600
 
$138,794
     
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
Cash paid during the period for:    
Interest - net of amount capitalized 
$17,656
 
$18,494
Income taxes 
$—
 
$3,402
     
See Notes to Financial Statements.    
SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$48
 
$78
Temporary cash investments 258,729
 287,109
Total cash and cash equivalents 258,777
 287,187
Accounts receivable:    
Associated companies 107,799
 170,149
Other 7,252
 6,526
Total accounts receivable 115,051
 176,675
Materials and supplies - at average cost 89,033
 88,424
Deferred nuclear refueling outage costs 67,807
 7,908
Prepayments and other 6,741
 2,489
TOTAL 537,409
 562,683
     
OTHER PROPERTY AND INVESTMENTS    
Decommissioning trust funds 914,377
 905,686
TOTAL 914,377
 905,686
     
UTILITY PLANT    
Electric 4,353,638
 4,327,849
Property under capital lease 588,281
 588,281
Construction work in progress 147,763
 69,937
Nuclear fuel 279,182
 207,513
TOTAL UTILITY PLANT 5,368,864
 5,193,580
Less - accumulated depreciation and amortization 3,227,888
 3,175,018
UTILITY PLANT - NET 2,140,976
 2,018,562
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Other regulatory assets 461,266
 444,327
Other 25,411
 7,629
TOTAL 486,677
 451,956
     
TOTAL ASSETS 
$4,079,439
 
$3,938,887
     
See Notes to Financial Statements.    

SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2018 and December 31, 2017
(Unaudited)
  2018 2017
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$85,005
 
$85,004
Short-term borrowings 38,873
 17,830
Accounts payable:    
Associated companies 9,996
 16,878
Other 121,846
 62,868
Taxes accrued 39,484
 46,584
Interest accrued 14,174
 13,389
Current portion of unprotected excess accumulated deferred income taxes 71,140
 
Other 2,436
 2,434
TOTAL 382,954
 244,987
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 785,699
 776,420
Accumulated deferred investment tax credits 38,767
 39,406
Regulatory liability for income taxes - net 164,202
 246,122
Other regulatory liabilities 453,877
 455,991
Decommissioning 878,661
 861,664
Pension and other postretirement liabilities 115,323
 121,874
Long-term debt 516,657
 466,484
Other 50,035
 15,130
TOTAL 3,003,221
 2,983,091
     
Commitments and Contingencies    
     
COMMON EQUITY    
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2018 and 2017 601,850
 658,350
Retained earnings 91,414
 52,459
TOTAL 693,264
 710,809
     
TOTAL LIABILITIES AND EQUITY 
$4,079,439
 
$3,938,887
     
See Notes to Financial Statements.    


SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT ASSETS    
Cash and cash equivalents:    
Cash 
$555
 
$786
Temporary cash investments 337,045
 245,077
Total cash and cash equivalents 337,600
 245,863
Accounts receivable:    
Associated companies 147,497
 104,390
Other 5,313
 3,637
Total accounts receivable 152,810
 108,027
Materials and supplies - at average cost 84,418
 82,469
Deferred nuclear refueling outage costs 15,867
 24,729
Prepaid taxes 25,968
 15,882
Prepayments and other 8,183
 4,229
TOTAL 624,846
 481,199
     
OTHER PROPERTY AND INVESTMENTS    
Decommissioning trust funds 839,385
 780,496
TOTAL 839,385
 780,496
     
UTILITY PLANT    
Electric 4,304,301
 4,331,668
Property under capital lease 585,084
 585,084
Construction work in progress 61,617
 43,888
Nuclear fuel 199,686
 259,635
TOTAL UTILITY PLANT 5,150,688
 5,220,275
Less - accumulated depreciation and amortization 3,125,020
 3,063,249
UTILITY PLANT - NET 2,025,668
 2,157,026
     
DEFERRED DEBITS AND OTHER ASSETS    
Regulatory assets:    
Regulatory asset for income taxes - net 88,924
 93,127
Other regulatory assets 420,319
 411,212
Other 4,492
 4,652
TOTAL 513,735
 508,991
     
TOTAL ASSETS 
$4,003,634
 
$3,927,712
     
See Notes to Financial Statements.    

SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
June 30, 2017 and December 31, 2016
(Unaudited)
  2017 2016
  (In Thousands)
CURRENT LIABILITIES    
Currently maturing long-term debt 
$3
 
$50,003
Short-term borrowings 53,182
 66,893
Accounts payable:    
Associated companies 6,719
 5,843
Other 48,251
 50,558
Interest accrued 13,440
 14,049
Other 2,958
 2,957
TOTAL 124,553
 190,303
     
NON-CURRENT LIABILITIES    
Accumulated deferred income taxes and taxes accrued 1,142,955
 1,112,865
Accumulated deferred investment tax credits 39,686
 41,663
Other regulatory liabilities 406,570
 370,862
Decommissioning 845,001
 854,202
Pension and other postretirement liabilities 109,734
 117,850
Long-term debt 551,293
 501,129
Other 5,322
 15
TOTAL 3,100,561
 2,998,586
     
Commitments and Contingencies    
     
COMMON EQUITY    
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2017 and 2016 679,350
 679,350
Retained earnings 99,170
 59,473
TOTAL 778,520
 738,823
     
TOTAL LIABILITIES AND EQUITY 
$4,003,634
 
$3,927,712
     
See Notes to Financial Statements.    


SYSTEM ENERGY RESOURCES, INC.STATEMENTS OF CHANGES IN COMMON EQUITY
For the Six Months Ended June 30, 2017 and 2016
For the Six Months Ended June 30, 2018 and 2017For the Six Months Ended June 30, 2018 and 2017
(Unaudited)
      
Common Equity  Common Equity  
Common
Stock
 
Retained
Earnings
 Total
Common
Stock
 
Retained
Earnings
 Total
(In Thousands)
     
Balance at December 31, 2015
$719,350
 
$61,729
 
$781,079
     
Net income
 51,048
 51,048
Common stock dividends and distributions(40,000) (99,000) (139,000)
     
Balance at June 30, 2016
$679,350
 
$13,777
 
$693,127
     (In Thousands)
          
Balance at December 31, 2016
$679,350
 
$59,473
 
$738,823

$679,350
 
$59,473
 
$738,823
          
Net income
 39,697
 39,697

 39,697
 39,697
          
Balance at June 30, 2017
$679,350
 
$99,170
 
$778,520

$679,350
 
$99,170
 
$778,520
          
     
Balance at December 31, 2017
$658,350
 
$52,459
 
$710,809
     
Net income
 45,695
 45,695
Common stock dividends and distributions(56,500) (6,740) (63,240)
     
Balance at June 30, 2018
$601,850
 
$91,414
 
$693,264
     
See Notes to Financial Statements.          



ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

See “PART I, Item 1, Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy.  Also see Note 1 and Note 2 to the financial statements herein and “Item 5, Other Information, Environmental Regulation” below for updates regarding environmental proceedings and regulation.

Item 1A.  Risk Factors

There have been no material changes to the risk factors discussed in “PART I, Item 1A, Risk Factors” in the Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (a)
Period 
Total Number of
Shares Purchased
 
Average Price Paid
per Share
 
Total Number of
Shares Purchased
as Part of a
Publicly
Announced Plan
 
Maximum $
Amount
of Shares that May
Yet be Purchased
Under a Plan (b)
         
4/01/2017-4/2018-4/30/20172018 
 
$—
 
 
$350,052,918
5/01/2017-5/2018-5/31/20172018 
 
$—
 
 
$350,052,918
6/01/2017-6/2018-6/30/20172018 
 
$—
 
 
$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 2017,2018, Entergy withheld 1,05471,229 shares of its common stock at $70.58$76.83 per share, 122,14843,698 shares of its common stock at $70.61$78.29 per share, and 31,24316,691 shares of its common stock at $71.89$78.51 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

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 are updatesis an update to that discussion.  

In March 20172018 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 2017, Entergy soldJune 2018 the FitzPatrick plant to Exelon,NRC moved ANO 1 and as partANO 2 into the “licensee response column,” or Column 1, of the transaction,NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections to review ANO 1’s and ANO 2’s performance in addressing issues that had previously resulted in classification in the FitzPatrick decommissioning trust fund, along with“multiple/repetitive degraded cornerstone column,” or Column 4. In August 2018 the decommissioning obligation for that plant, was transferred to Exelon. The FitzPatrick spent fuel disposal contract was assigned to Exelon as partNRC moved Grand Gulf into Column 1 of the transaction.NRC’s Reactor Oversight Process Action Matrix. This action followed NRC inspections to review Grand Gulf’s performance in addressing issues that had previously resulted in classification in the “regulatory response column,” or Column 2.

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

Regional HazeOzone Nonattainment

In June 2005As discussed in 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 technologyForm 10-K, the Houston-Galveston-Brazoria area was originally classified 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 Plan (SIP) for Arkansas facilities to implement its obligations“moderate” nonattainment under the CAVR.   In April 2012 the EPA finalized a decision addressing the Arkansas Regional Haze SIP, in which it disapproved a large portion1997 8-hour ozone standard with an attainment date of the Arkansas Regional Haze SIP, including the emission limits for NOx and SO2 at White Bluff.    By Court order, the EPA had to issue a final federal implementation plan (FIP) for Arkansas Regional Haze by no later than August 31, 2016.June 15, 2010.  In April 2015 the EPA publishedrevoked the 1997 ozone national ambient air quality standards (NAAQS), and in May 2016 the EPA issued a proposed FIPrule approving a substitute for Arkansas, taking comment on requiring installation of scrubbersthe Houston-Galveston-Brazoria area. This redesignation indicates that the area has attained the revoked 1997 8-hour ozone NAAQS due to permanent and low NOx burners to continue operating both units atenforceable emission reductions and that it will maintain that NAAQS for 10 years from the White Bluff plant and both units at the Independence plant and NOx controls to continue operating the Lake Catherine plant. Entergy filed comments by the deadline in August 2015. Among other comments, including opposition to the EPA’s proposed controls on the Independence units, Entergy proposed to meet more stringent SO2 and NOx limits at both White Bluff and Independence within three years of the effective date of the final FIP andapproval. Final approval, which was effective in December 2016, resulted in the area no longer being subject to ceaseany remaining anti-backsliding or non-attainment new source review requirements associated with the use of coal at the White Bluff units at a later date.

revoked 1997 NAAQS. 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. For some or all of the FIP, Entergy anticipates that Arkansas will submit a SIP to replace the FIP. In 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 toFebruary 2018 the U.S. Court of Appeals for the Eighth Circuit. In February 2017, Entergy, the State of Arkansas, and other parties requested the Court to judicially stay the FIP.  In March 2017D.C. Circuit opined that the EPA grantedviolated the Clean Air Act by revoking the 1997 standard and by creating the process that allowed states to avoid certain anti-backsliding provisions of the Act. Opponents filed a legal challenge to the December 2016 redesignation based on the February 2018 D.C. Circuit decision.

As discussed in part the petitions for reconsideration and stated its intent to stay the FIP compliance deadlines by at least 90 days. Subsequently,Form 10-K, in March 2008 the EPA granted a 90 day stay ofrevised the FIP effective datesNAAQS for ozone, creating the potential for additional counties and parishes in which Entergy operates to be placed in nonattainment status.  In April 2012 the Eighth Circuit grantedEPA released its final non-attainment designations for the government’s motion to hold2008 ozone NAAQS.  In Entergy’s utility service area, the appeal litigation in abeyance pending settlement discussions.Houston-Galveston-Brazoria, Texas; Baton Rouge, Louisiana; and Memphis, Tennessee/Mississippi/Arkansas areas

were designated as in “marginal” nonattainment. In Louisiana, Entergy is working with the Louisiana Department of Environmental Quality (LDEQ)August 2015 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 2017January 2016, the EPA proposed determinations that the Baton Rouge and Memphis areas had attained the 2008 standard. In May 2016 the EPA finalized those determinations and extended the Houston-Galveston-Brazoria area’s attainment date for the 2008 Ozone standard to approveJuly 20, 2016 and reclassified the Baton Rouge area as attainment for ozone under the 2008 8-hour ozone standard. In December 2016 the EPA determined that the Houston-Galveston-Brazoria area had failed to attain the 2008 ozone standard by the 2016 attainment date. This finding reclassified the Houston-Galveston-Brazoria area from marginal to “moderate” and set the attainment deadline as July 20, 2018. In May 2018 the EPA published a majorityproposed rule approving the Houston-Galveston-Brazoria attainment demonstration for the 2008 8-hour ozone standard. Final EPA action remains pending.

As discussed in the Form 10-K, in October 2015 the EPA issued a final rule lowering the primary and secondary NAAQS for ozone to a level of 70 parts per billion. States were required to assess their attainment status and recommend designations to the revisions,EPA. In January 2018 the EPA proposed that the following counties and parishes in Entergy’s service territory be listed as in non-attainment: in Louisiana, Ascension Parish, East Baton Rouge Parish, West Baton Rouge Parish, Iberville Parish, and Livingston Parish; in Texas, Montgomery County. In addition to Lewis Creek in Montgomery County, Texas, Entergy owns or operates fossil-fueled generating units in East Baton Rouge Parish (Louisiana Station) and in Iberville Parish (Willow Glen), Louisiana. In May 2018 the EPA issued its final designations for the 2015 Ozone NAAQS. The following parishes/counties initially were proposed as non-attainment, but designated as attainment in the final rule: in Louisiana, Ascension Parish, East Baton Rouge Parish, West Baton Rouge Parish, Iberville Parish, and Livingston Parish; in Texas, Liberty County and Waller Counties within the Houston-Galveston-Brazoria area. The final designations are effective on August 3, 2018. Entergy will continue to work with state environmental agencies on appropriate methods for assessing attainment and non-attainment with the new standard and, where necessary, in planning for compliance. Following designations by the EPA, states will be required to develop plans intended to return non-attainment areas to a second SIP and EPA review to followcondition of attainment. The timing for that action depends largely on the Nelson plant, withseverity of non-attainment in a final EPA decision expectedgiven area.

Coal Combustion Residuals

As discussed in the fourth quarter 2017. At this time, it is prematureForm 10-K, in December 2016 the Water Infrastructure Improvements for the Nation Act (WIIN Act) was signed into law, which authorizes states to predict what controls, if any, might be required for compliance. Entergy continuesregulate coal ash rather than leaving primary enforcement 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 statescitizen suit actions. States may 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.proposals for a permit program. In January 2014 the EPA issued the proposed New Source Performance Standards rule for new sources. In June 2014 the EPA issued proposed standards for existing power plants.  Entergy has been actively engaged in the rulemaking process, having submitted comments to the EPA in December 2014. The EPA issued the final rules for both new and existing sources in August 2015, and they were published in the Federal Register in October 2015. The existing source rule, also called the Clean Power Plan, requires states to develop compliance plans with the EPA’s emission standards. In February 2016 the U.S. Supreme Court issued a stay halting the effectiveness of the rule until the rule is reviewed by the D.C. Circuit and the U.S. Supreme Court, if 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, suspend, revise, or rescind the Clean Power Plan if appropriate. The EPA 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 JuneSeptember 2017 the EPA submitted a rule, “Reviewagreed to reconsider certain provisions of the Clean Power Plan”CCR (coal combustion residuals) rule in light of the WIIN Act. In March 2018 the EPA published its proposed revisions to the OfficeCCR rule with comments due at the end of Management and Budget to review, which typically takes 60-90 days. The content of this rule has not been made public.

Clean Water Act

The 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basis for the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge of pollutants from point sources to waters of the United States.  The Clean Water Act requires virtually all discharges of pollutants to waters of the United States to be permitted.  Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401 of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, and section 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.

NPDES Permits and Section 401 Water Quality Certifications

NPDES permits are subject to renewal every five years. Consequently, Entergy is currently in various stages of the data evaluation and discharge permitting process for its power plants.


For thirteen years, Entergy participated in an administrative permitting process with the New York State Department of Environmental Conservation (NYSDEC) for renewal of the Indian Point 2 and Indian Point 3 discharge permit. That proceeding recently was settled along with other ongoing proceedings.April 2018. 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 2014,2018 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.released its initial revisions extending certain deadlines and incorporating some risk-based standards.   The case will be heard in the U.S. Court of Appeals for the Second Circuit. Briefing is complete and Entergy expects oral argument to be scheduled in mid- to late-2017.

Federal Jurisdiction of Waters of the United States

In September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federal Clean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the EPA’s release of a draft scientific report on the “connectivity” of waters that the agency said would inform the rulemaking. This report was finalized in January 2015. The final rule was published in the Federal Register in June 2015. The rule could significantly increase the number and types of waters included in the EPA’s and the U.S. Army Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’s operations. 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.release additional revisions in another rulemaking. 

Other Environmental Matters

Entergy Louisiana and Entergy Texas

Several class action and other lawsuits have been filedIn December 2016 a transformer inside the Hartburg, Texas Substation had an internal fault resulting in state and federal courts seeking relief from Entergy Gulf States, Inc. and others for damagesa release of approximately 15,000 gallons of non-PCB mineral oil. Cleanup ensued immediately; however, rain caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Gulf States, Inc.’s premises (see “Litigation” below).

Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, currently is involved in the second phasemuch of the remedial investigation ofoil to spread across the Lake Charles Servicesubstation yard and into a nearby wetland. The Texas Commission on Environmental Quality (TCEQ) and the National Response Center were immediately notified, and TCEQ responded to the site located in Lake Charles, Louisiana.  A

manufactured gas plant (MGP)approximately two hours after the cleanup was initiated. The remediation liability is believed to have operatedestimated at $2.2 million; however, this sitenumber could fluctuate depending on the remediation extent and wetland mitigation requirements. In July 2017, Entergy entered into the Voluntary Cleanup Program with TCEQ. Additional direction is expected 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 propertyTCEQ regarding final remediation requirements for disposal.  The same area also has been used as a landfill.  In 1999, Entergy Gulf States, Inc. signed a second administrative consent order with the EPA to perform a removal action at the site. In 2002 approximately 7,400 tonsNovember 2017 additional soil sampling was completed in the wetland area and in February 2018, a site summary report of contaminated soil and debris were excavated and disposed of from an area within the service center.  In 2003 a capfindings was constructed over the remedial area to prevent the migration of contaminationsubmitted to the surface.  In August 2005TCEQ. The TCEQ responded in June 2018 and has requested an administrative order was issued by the EPA requiring that a 10-yearecological exclusion criteria checklist/Tier II screening-level ecological risk assessment, an additional site assessment, additional soil samples, groundwater study be conducted at this site.  The groundwater monitoring study commenced in January 2006samples, and some additional diagrams and maps. Entergy has developed 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 submittedimplementing a Focused Feasibility Study to the EPA outlining the potential remedies and suggesting installation of a waterloo barrier. The estimated cost for this remedy is approximately $2 million. Entergy is awaiting comments and direction from the EPA on the Focused Feasibility Study and potential remedy selection.  In early 2017 the EPA indicated that the new remedial method (waterloo barrier) may not be necessary. Entergy is continuing discussions with the EPA regarding the ongoing actions at the site.response plan addressing TCEQ’s requests.


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 Six Months Ended Twelve Months Ended Six Months Ended
 December 31, June 30, December 31, June 30,
 2012 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2018
Entergy Arkansas 3.79
 3.62
 3.08
 2.04
 3.32
 2.54 3.62
 3.08
 2.04
 3.32
 2.87
 1.75
Entergy Louisiana 2.61
 3.30
 3.44
 3.36
 3.57
 3.30 3.30
 3.44
 3.36
 3.57
 3.85
 2.79
Entergy Mississippi 2.79
 3.19
 3.23
 3.59
 3.96
 3.86 3.19
 3.23
 3.59
 3.96
 4.49
 (a)
Entergy New Orleans 2.91
 1.85
 3.55
 4.90
 4.61
 4.62 1.85
 3.55
 4.90
 4.61
 4.50
 4.33
Entergy Texas 1.76
 1.94
 2.39
 2.22
 2.92
 2.08 1.94
 2.39
 2.22
 2.92
 2.41
 2.39
System Energy 5.12
 5.66
 4.04
 4.53
 5.39
 5.01 5.66
 4.04
 4.53
 5.39
 4.91
 3.51
 
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 Six Months Ended Twelve Months Ended Six Months Ended
 December 31, June 30, December 31, June 30,
 2012 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2018
Entergy Arkansas 3.36
 3.25
 2.76
 1.85
 3.09
 2.49 3.25
 2.76
 1.85
 3.09
 2.81
 1.72
Entergy Louisiana 2.47
 3.14
 3.28
 3.24
 3.57
 3.30 3.14
 3.28
 3.24
 3.57
 3.85
 2.79
Entergy Mississippi 2.59
 2.97
 3.00
 3.34
 3.71
 3.75 2.97
 3.00
 3.34
 3.71
 4.36
 (b)
Entergy New Orleans 2.63
 1.70
 3.26
 4.50
 4.30
 4.32 1.70
 3.26
 4.50
 4.30
 4.24
 4.33

(a)Earnings, as defined, for the six months ended June 30, 2018 were $46.5 million less than fixed charges, as defined.
(b)Earnings, as defined, for the six months ended June 30, 2018 were $47.1 million less than fixed charges, as defined.

The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.

Item 6.  Exhibits
 4(a) -Eighty-eighth
   
 4(b)10(a) -Eighty-eighth Supplemental Indenture,
   
 4(c)10(b) -Eighth Supplemental Indenture,
   
 4(d)10(c) -Officer’s Certificate No. 8-B-7,
10(d) -
10(e) -
10(f) -
   
 *10(a)10(g) -First
   
 *12(a) -
   
 *12(b) -
   
 *12(c) -
   
 *12(d) -
   
 *12(e) -
   
 *12(f) -
   
 *31(a) -
   
 *31(b) -
   
 *31(c) -
   
 *31(d) -
   
 *31(e) -
   
 *31(f) -
   
 *31(g) -
   
 *31(h) -
   
 *31(i) -
   
 *31(j) -
*31(k) -Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
*31(l) -Rule 13a-14(a)/15d-14(a) Certification for Entergy Texas.
*31(m) -Rule 13a-14(a)/15d-14(a) Certification for System Energy.
*31(n) -Rule 13a-14(a)/15d-14(a) Certification for System Energy.
*32(a) -Section 1350 Certification for Entergy Corporation.
*32(b) -Section 1350 Certification for Entergy Corporation.
*32(c) -Section 1350 Certification for Entergy Arkansas.
   

 *32(d)31(k) -
*31(l) -
*31(m) -
*31(n) -
*32(a) -
*32(b) -
*32(c) -
*32(d) -
   
 *32(e) -
   
 *32(f) -
   
 *32(g) -
   
 *32(h) -
   
 *32(i) -
   
 *32(j) -
   
 *32(k) -
   
 *32(l) -
   
 *32(m) -
   
 *32(n) -
   
 *101 INS -XBRL Instance Document.
   
 *101 SCH -XBRL Taxonomy Extension Schema Document.
   
 *101 PRE -XBRL Taxonomy Presentation Linkbase Document.
   
 *101 LAB -XBRL Taxonomy Label Linkbase Document.
   
 *101 CAL -XBRL Taxonomy Calculation Linkbase Document.
   
 *101 DEF -XBRL Definition Linkbase Document.
___________________________

Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.

*Filed herewith.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.

ENTERGY CORPORATION
ENTERGY ARKANSAS, INC.
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, INC.LLC
ENTERGY TEXAS, INC.
SYSTEM ENERGY RESOURCES, INC.
 
 
/s/ Alyson M. Mount
Alyson M. Mount
Senior Vice President and Chief Accounting Officer
(For each Registrant and for each as
Principal Accounting Officer)


Date:    August 3, 20176, 2018


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