UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| | For the Quarterly Period Ended September 30, 2017March 31, 2018 |
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| | For the transition period from ____________ to ____________ |
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Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. | |
Commission File Number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No. |
| 1-11299 | ENTERGY CORPORATION (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 72-1229752 | | 1-35747 | ENTERGY NEW ORLEANS, INC.LLC (a Louisiana corporation)Texas limited liability company) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3700 72-027304082-2212934
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| 1-10764 | ENTERGY ARKANSAS, INC. (an Arkansas corporation) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 71-0005900 | | 1-34360 | ENTERGY TEXAS, INC. (a Texas corporation) 10055 Grogans Mill Road The Woodlands, Texas 77380 Telephone (409) 981-2000 61-1435798 |
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| 1-32718 | ENTERGY LOUISIANA, LLC (a Texas limited liability company) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 576-4000 47-4469646 | | 1-09067 | SYSTEM ENERGY RESOURCES, INC. (an Arkansas corporation) 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 72-0752777 |
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| 1-31508 | ENTERGY MISSISSIPPI, INC. (a Mississippi corporation) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 64-0205830 | | | |
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Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the 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, 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.
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| | Large accelerated filer | | Accelerated filer | | Non- accelerated filer | | Smaller reporting company | | Emerging growth company |
| Entergy Corporation | ü | | | | | | | | |
| Entergy Arkansas, Inc. | | | | | ü | | | | |
| Entergy Louisiana, LLC | | | | | ü | | | | |
| Entergy Mississippi, Inc. | | | | | ü | | | | |
Entergy New Orleans, Inc.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
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| Common Stock Outstanding | | Outstanding at October 31, 2017April 30, 2018 |
| Entergy Corporation | ($0.01 par value) | 180,251,407180,823,624 |
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‑K for the calendar year ended December 31, 2016 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
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| Part I. Financial Information |
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| Entergy Corporation and Subsidiaries | |
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| Notes to Financial Statements | |
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| Entergy Arkansas, Inc. and Subsidiaries | |
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| Entergy Louisiana, LLC and Subsidiaries | |
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| Entergy Mississippi, Inc. | |
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Entergy New Orleans, Inc.LLC and Subsidiaries | |
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| Entergy Texas, Inc. and Subsidiaries | |
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| System Energy Resources, Inc. | |
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| Part II. Other Information |
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FORWARD-LOOKING INFORMATION
In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements. Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct. Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made. Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Forward-looking statements involve a number of risks and uncertainties. There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management’s Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):
resolution of pending and future rate cases, 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;
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;
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, 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;
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 2022,mid-2022, including the implementation of the planned shutdownshutdowns of Pilgrim, Indian Point 2, Indian Point 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.
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are defined below: |
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| Abbreviation or Acronym | Term |
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| ALJ | Administrative Law Judge |
| ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas |
| APSC | Arkansas Public Service Commission |
| ASU | Accounting Standards Update issued by the FASB |
| Board | Board of Directors of Entergy Corporation |
| Cajun | Cajun Electric Power Cooperative, Inc. |
| capacity factor | Actual plant output divided by maximum potential plant output for the period |
| City Council | Council of the City of New Orleans, Louisiana |
| D.C. Circuit | U.S. Court of Appeals for the District of Columbia Circuit |
| DOE | United States Department of Energy |
| Entergy | Entergy Corporation and its direct and indirect subsidiaries |
| Entergy Corporation | Entergy Corporation, a Delaware corporation |
| Entergy Gulf States, 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 Louisiana | Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana. |
| Entergy Louisiana | Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes. |
| Entergy Texas | Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires. |
| Entergy Wholesale Commodities | Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers |
| EPA | United States Environmental Protection Agency |
| FASB | Financial Accounting Standards Board |
| FERC | Federal Energy Regulatory Commission |
| FitzPatrick | James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017 |
| Form 10-K | Annual Report on Form 10-K for the calendar year ended December 31, 20162017 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries |
| Grand Gulf | Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy |
| GWh | Gigawatt-hour(s), which equals one million kilowatt-hours |
| Independence | Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC |
Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
DEFINITIONS (Continued)
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| Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| Indian Point 3 | Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| IRS | Internal Revenue Service |
| ISO | Independent System Operator |
| kW | Kilowatt, which equals one thousand watts |
| kWh | Kilowatt-hour(s) |
| LPSC | Louisiana Public Service Commission |
| MISO | Midcontinent Independent System Operator, Inc., a regional transmission organization |
| MMBtu | One million British Thermal Units |
| MPSC | Mississippi Public Service Commission |
| MW | Megawatt(s), which equals one thousand kilowatts |
| MWh | Megawatt-hour(s) |
| Net debt to net capital ratio | Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents |
| Net MW in operation | Installed capacity owned and operated |
| NRC | Nuclear Regulatory Commission |
| NYPA | New York Power Authority |
| Palisades | Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| Parent & Other | The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation |
| Pilgrim | Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment |
| PPA | Purchased power agreement or power purchase agreement |
| PUCT | Public Utility Commission of Texas |
| Registrant Subsidiaries | Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc.,LLC, Entergy Texas, Inc., and System Energy Resources, Inc. |
| River Bend | River Bend Station (nuclear), owned by Entergy Louisiana |
| SEC | Securities and Exchange Commission |
| System Agreement | Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016. |
| System Energy | System Energy Resources, Inc. |
| TWh | Terawatt-hour(s), which equals one billion kilowatt-hours |
| Unit Power Sales Agreement | Agreement, dated as of June 10, 1982, as amended and approved by 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 |
| Utility | Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
| Utility operating companies | Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
DEFINITIONS (Concluded)
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| Vermont Yankee | Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 |
| Waterford 3 | Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana |
| weather-adjusted usage | Electric usage excluding the effects of deviations from normal weather |
| White Bluff | White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas |
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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
ThirdFirst Quarter 20172018 Compared to ThirdFirst Quarter 20162017
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the thirdfirst quarter 20172018 to the thirdfirst quarter 20162017 showing how much the line item increased or (decreased) in comparison to the prior period:
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Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy |
| | | (In Thousands) | | (In Thousands) |
| 3rd Quarter 2016 Consolidated Net Income (Loss) | |
| $447,782 |
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| $8,221 |
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| ($62,799 | ) | |
| $393,204 |
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| 2017 Consolidated Net Income (Loss) | | |
| $167,623 |
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| ($27,196 | ) | |
| ($54,376 | ) | |
| $86,051 |
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| Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | (47,749 | ) | | (4,637 | ) | | (4 | ) | | (52,390 | ) | | 55,485 |
| | (112,287 | ) | | (8 | ) | | (56,810 | ) |
| Other operation and maintenance | | 6,617 |
| | (37,089 | ) | | 1,831 |
| | (28,641 | ) | | 30,871 |
| | (94,110 | ) | | (32 | ) | | (63,271 | ) |
| Asset write-offs, impairments, and related charges | | — |
| | (2,620 | ) | | — |
| | (2,620 | ) | | — |
| | (138,867 | ) | | — |
| | (138,867 | ) |
| Taxes other than income taxes | | 16,064 |
| | (5,694 | ) | | 28 |
| | 10,398 |
| | 15,293 |
| | (6,578 | ) | | 150 |
| | 8,865 |
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| Depreciation and amortization | | 14,849 |
| | (751 | ) | | 242 |
| | 14,340 |
| | 14,187 |
| | (14,444 | ) | | 57 |
| | (200 | ) |
| Gain on sale of assets | | | — |
| | (16,270 | ) | | — |
| | (16,270 | ) |
| Other income | | 19,674 |
| | 16,574 |
| | (1,624 | ) | | 34,624 |
| | 11,550 |
| | (57,372 | ) | | (689 | ) | | (46,511 | ) |
| Interest expense | | (2,184 | ) | | (41 | ) | | 1,929 |
| | (296 | ) | | 1,984 |
| | 1,823 |
| | 3,804 |
| | 7,611 |
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| Other expenses | | 5,584 |
| | (8,860 | ) | | — |
| | (3,276 | ) | | 651 |
| | (20,429 | ) | | — |
| | (19,778 | ) |
| Income taxes | | (24,956 | ) | | 19,448 |
| | (10,603 | ) | | (16,111 | ) | | (46,268 | ) | | 77,259 |
| | 4,909 |
| | 35,900 |
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| 3rd Quarter 2017 Consolidated Net Income (Loss) | |
| $403,733 |
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| $55,765 |
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| ($57,854 | ) | |
| $401,644 |
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| 2018 Consolidated Net Income (Loss) | | |
| $217,940 |
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| ($17,779 | ) | |
| ($63,961 | ) | |
| $136,200 |
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| (a) | Parent & Other includes eliminations, which are primarily intersegment activity. |
Refer to “ENTERGY CORPORATION AND SUBSIDIARIES - SELECTED OPERATING RESULTS” for further information with respect to operating statistics.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
First quarter 2018 results of operations includes impairment charges of $73 million ($58 million net-of-tax) and first quarter 2017 results of operations includes impairment charges of $212 million ($138 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. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the thirdfirst quarter 20172018 to the thirdfirst quarter 2016:2017:
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| | Amount |
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20162017 net revenue |
| $1,8591,404 |
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| Volume/weather | (6858 | )
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| Retail electric price | 177 |
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| Grand Gulf recovery | (18 | ) |
| Other | 39 |
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20172018 net revenue |
| $1,8111,460 |
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The volume/weather variance is primarily due to an increase of 2,246 GWh, or 9%, in billed electricity usage, including the effect of lessmore favorable weather partially offset byon residential and commercial sales and an increase in industrial residential, and commercial usage. The increase in industrial usage is primarily due to new customers in the primary metals industry, expansion projects in the chemicals industry, and an increase in demand for existing customers in the chemicals, petroleum refining industry and industrial gases industries.a new customer in the primary metals industry.
The retail electric price variance is primarily due to:
the implementation ofan increase in formula rate plan rates at Entergy Arkansas, as approved by the APSC, effective with the first billing cycle of January 2017;
the implementation of the transmission cost recovery factor rider2018 at Entergy Texas, effective September 2016, and an increaseArkansas, as approved by the APSC;
increases in the transmission cost recovery factor rider rate effectivein March 2017 and the distribution cost recovery factor rider rate in September 2017 at Entergy Texas, each as approved by the PUCT; and
an increase in energy efficiency rider revenues.
The increase was partially offset by regulatory charges recorded in the timingfirst quarter 2018 to reflect the effects of recovery of purchased power capacity costs ata provision in the settlement reached in Entergy Louisiana through theLouisiana’s formula rate plan mechanism.
The retail electric price variance was partially offset by:
lower storm damage rider revenues at Entergy Mississippi due to resetting the storm damage provision to zero beginning with the November 2016 billing cycle. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle; and
a decrease in the purchased power and capacity acquisition cost recovery rider at Entergy New Orleans 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.extension proceeding.
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 Grand Gulf recovery variance is primarily due to recovery of lower operating costs in the first quarter 2018 as compared to the first quarter 2017.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the thirdfirst quarter 20172018 to the thirdfirst quarter 2016:2017:
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| | Amount |
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2016 net revenue |
| $396 |
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FitzPatrick sale | (50 | ) |
Nuclear fuel expenses | 40 |
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Other | 6 |
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| 2017 net revenue |
| $392494 |
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| FitzPatrick reimbursement agreement | (98 | ) |
| Nuclear volume | (26 | ) |
| Nuclear realized price changes | 27 |
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| Other | (15 | ) |
| 2018 net revenue |
| $382 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $4$112 million in the thirdfirst quarter 20172018 as compared to the third quarter 2016 primarily due to the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017, partially offset by a decrease in nuclear fuel expenses primarily related to the impairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick. See Note 14 to the financial statements in the Form 10-K for discussion of the impairments and related charges.
Following are key performance measures for Entergy Wholesale Commodities for the third quarter2017 and 2016:
|
| | | |
| | 2017 | | 2016 |
| Owned capacity (MW) (a) | 3,962 | | 4,880 |
| GWh billed | 8,234 | | 9,372 |
| | | | |
Entergy Wholesale Commodities Nuclear Fleet (b) | | | |
| Capacity factor | 98% | | 90% |
| GWh billed | 7,633 | | 8,674 |
| Average energy and capacity revenue per MWh | $48.82 | | $47.41 |
| |
(a) | The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017 and Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick and Note 14 to the financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale. |
| |
(b) | The Entergy Wholesale Commodities nuclear power plants had no refueling outage days in the third quarter 2017 and the third quarter 2016. |
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $592 million for the third quarter 2016 to $599 million for the thirdfirst quarter 2017 primarily due to:
the effects of recording in third quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of approximately $14 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation; and
an increase of $11 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. See “MANAGEMENT’S
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 increase was partially offset by a decrease of $13 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs and a decrease of $5 million in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for a discussion on storm cost recovery.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes and local franchise taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of ad valorem taxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher revenues in 2017 as compared to 2016.
Depreciation and amortization expenses increased primarily due to additions to plant in service and the effects of recording in the third quarter 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of approximately $8 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
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, including the St. Charles Power Station project, and higher realized gains in the third quarter 2017 as compared to the third quarter 2016 on the decommissioning trust fund investments.
Entergy Wholesale Commodities
Other operation and maintenance expenses decreased from $236 million for the third quarter 2016 to $199 million for the third quarter 2017 primarily due to the absence of other operation and maintenance expenses from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick.
Other income increased primarily due to higher realized gains in the third quarter 2017 as compared to the third quarter 2016 on the decommissioning trust fund investments.
Income Taxes
The effective income tax rate was 37.6% for the third quarter 2017. The difference in the effective income tax rate for the third quarter 2017 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 39.6% for the third quarter 2016. The difference in the effective income tax rate for the third quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, a valuation allowance recorded on a deferred tax asset, and certain book and tax differences related to utility plant items, partially offset by flow-through tax accounting.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016 showing how much the line item increased or (decreased) in comparison to the prior period:
|
| | | | | | | | | | | | | | | | |
| | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy |
| | | (In Thousands) |
| 2016 Consolidated Net Income (Loss) | |
| $1,027,751 |
| |
| $338,651 |
| |
| ($165,367 | ) | |
| $1,201,035 |
|
| | | | | | | | | |
| Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) | | 6,657 |
| | (19,524 | ) | | (17 | ) | | (12,884 | ) |
| Other operation and maintenance | | 87,381 |
| | 78,114 |
| | 2,534 |
| | 168,029 |
|
| Asset write-offs, impairments, and related charges | | — |
| | 388,414 |
| | — |
| | 388,414 |
|
| Taxes other than income taxes | | 34,270 |
| | (13,702 | ) | | 419 |
| | 20,987 |
|
| Depreciation and amortization | | 40,131 |
| | 1,837 |
| | 25 |
| | 41,993 |
|
| Gain on sale of assets | | — |
| | 16,270 |
| | — |
| | 16,270 |
|
| Other income | | 45,956 |
| | 73,341 |
| | (971 | ) | | 118,326 |
|
| Interest expense | | (15,417 | ) | | (81 | ) | | 5,474 |
| | (10,024 | ) |
| Other expenses | | 15,924 |
| | 32,794 |
| | — |
| | 48,718 |
|
| Income taxes | | 100,337 |
| | (331,093 | ) | | (5,678 | ) | | (236,434 | ) |
| | | | | | | | | |
| 2017 Consolidated Net Income (Loss) | |
| $817,738 |
| |
| $252,455 |
| |
| ($169,129 | ) | |
| $901,064 |
|
| |
(a) | Parent & Other includes eliminations, which are primarily intersegment activity. |
Refer to “ENTERGY CORPORATION AND SUBSIDIARIES -SELECTED OPERATING RESULTS” for further information with respect to operating statistics.
Results of operations for the nine months ended September 30, 2017 include $422 million ($274 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and a reduction of income tax expense, net of unrecognized tax benefits, of $373 million as a result of tax elections to treat as corporations for federal income tax purposes two subsidiaries that each own an Entergy Wholesale Commodities nuclear power plant. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and Note 10 to the financial statements herein for additional discussion of the tax elections.
Results of operations for the nine months ended September 30, 2016 include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a tax election to treat 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 $70 million ($44 million net-of-tax) due to the effects of recording in 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Net Revenue
Utility
Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
| | | |
| Amount |
| (In Millions) |
2016 net revenue |
| $4,758 |
|
Retail electric price | 62 |
|
Grand Gulf recovery | 38 |
|
Louisiana Act 55 financing savings obligation | 17 |
|
Volume/weather | (99 | ) |
Other | (11 | ) |
2017 net revenue |
| $4,765 |
|
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 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;
the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT;
an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016; and
the timing of recovery of purchased power capacity costs at Entergy Louisiana through the formula rate plan mechanism.
The retail electric price variance is partially offset by a decrease in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of September 2016, to reflect the effects of the termination of the System Agreement.
See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the rate proceedings. See Note 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.
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals and industrial gases industries, an increase in demand for existing customers in the chemicals industry, and expansion projects in the chemicals industry.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities
Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
| | | |
| Amount |
| (In Millions) |
2016 net revenue |
| $1,155 |
|
FitzPatrick sale | (122 | ) |
Nuclear volume | (76 | ) |
Nuclear fuel expenses | 76 |
|
FitzPatrick reimbursement agreement | 98 |
|
Other | 5 |
|
2017 net revenue |
| $1,136 |
|
As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by $19 million in the nine months endedSeptember 30, 2017 as compared to the nine months ended September 30, 2016 primarily due to the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017 and lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick. The decrease was partially offset by a decrease in nuclear fuel expenses primarily related to the impairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets and an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy 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 effect on net income. income; and
lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more unplanned outage days in first quarter 2018 as compared to first quarter 2017.
The decrease was partially offset by higher realized wholesale energy prices and higher capacity prices in the first quarter 2018.
See Note 14 to the financial statements in the Form 10-K for discussion of the impairmentssale of FitzPatrick and related charges. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for further discussion of the reimbursement agreement.agreement with Exelon.
Following are key performance measures for Entergy Wholesale Commodities for the nine months ended September 30, 2017first quarter2018 and 2016:2017:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| Owned capacity (MW) (a) | 3,962 | | 4,880 | 3,962 | | 4,800 |
| GWh billed | 22,616 | | 26,484 | 7,885 | | 8,363 |
| | | |
| Entergy Wholesale Commodities Nuclear Fleet | | |
| Capacity factor | 79% | | 85% | 83% | | 80% |
| GWh billed | 20,861 | | 24,670 | 6,408 | | 7,835 |
| Average energy and capacity revenue per MWh | $51.82 | | $48.99 | $56.96 | | $55.15 |
| Refueling outage days: | | |
| FitzPatrick | 42 | | — | — | | 42 |
| Indian Point 2 | — | | 102 | 13 | | — |
| Indian Point 3 | 66 | | — | — | | 19 |
| Pilgrim | 43 | | — | |
| Palisades | 27 | | — | |
| |
| (a) | The reduction in ownedOwned capacity is due to Entergy’s sale offor the first quarter 2017 includes the 838 MW FitzPatrick plant, which was sold to Exelon in March 2017 and Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016.2017. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick and Note 14 to the financial statements in the Form 10-K for discussion of the Top Deer Wind Ventures, LLC sale.sale of FitzPatrick. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement Items
Utility
Other operation and maintenance expenses increased from $1,688$557 million for the nine months ended September 30, 2016first quarter 2017 to $1,776$588 million for the nine months ended September 30, 2017first quarter 2018 primarily due to:
an increase of $27$19 million in nuclear generation expenses primarily due toa higher scope of work performed during plant outages in first quarter 2018 as compared to first quarter 2017 and higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals and additional training and initiatives to support management’s operational goals at Grand Gulf, partially offset by a decrease in 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;goals;
the deferralan increase of $9 million in theenergy efficiency costs;
an increase of $6 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in first quarter 20162018 as compared to first quarter 2017; and
an increase of $7.7$6 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. storm damage provisions. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;storm cost recovery.
the effects of recording in 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of approximately $16 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation;
an increase of $13 million in transmission and distribution expenses due to higher vegetation maintenance costs; and
an increase of $11 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in the first quarter 2016.
The increase was partially offset by a decreasehigher nuclear insurance refunds of $11 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs.$8 million.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes, and local franchise taxes, and payroll taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of ad valorem taxes on the Union Power Station beginning in 2017.assessments. Local franchise taxes increased primarily due to higher revenues in 2017first quarter 2018 as compared to 2016.first quarter 2017.
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.service.
Other income increased primarily due to higher realized gains in 2017 as compared to the same period in 2016 on the decommissioning trust fund investments, including portfolio rebalancing in second quarter 2017, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, including2018, which included the St. Charles Power Station project.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
certain of the decommissioning trust funds.
Entergy Wholesale Commodities
Other operation and maintenance expenses increaseddecreased from $621$285 million for the nine months ended September 30, 2016first quarter 2017 to $698$191 million for the nine months ended September 30, 2017first quarter 2018 primarily due to:
FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified as other operation and maintenance expenses as a result of the sale and reimbursement agreements Entergy entered into with Exelon. These costs would have not been incurred absent the sale agreement with Exelon because Entergy planned to shut the plant down in January 2017. The expenses were offset by revenue realized pursuant to the reimbursement agreement and had no effect on net income. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;
the effect of recording 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 $36 million in severance and retention costs in 2017 as compared to the same period in 2016 due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
The increase was partially offset by a decrease due to the absence of other operation and maintenance expenses from the FitzPatrick plant, after itwhich was sold to Exelon in March 2017. See Note 1314 to the financial statements hereinin the Form 10-K for discussion of the sale of FitzPatrick.
The asset write-offs, impairments, and related charges variance is primarily due to $422impairment charges of $73 million ($27458 million net-of-tax) ofin the first quarter 2018 compared to impairment charges of $212 million ($138 million net-of-tax) in the nine months ended September 30, 2017first quarter 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 increaseSee “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in impairment charges in 2017 isthe Form 10-K for discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
Depreciation and amortization expenses decreased primarily due to management’s decisionsthe decision in the fourththird quarter 2016 and the resulting impairments of the Indian Point 2, Indian Point 3, and2017 to continue operating Palisades plants and the timing of nuclear fuel spending and nuclear refueling outage spending for the impaired Pilgrim plant.until May 31, 2022. 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 sizeplanned shutdown of the Entergy Wholesale Commodities’ merchant fleet.Palisades.
Taxes other than income taxes decreased primarily due to the absence
Entergy Corporation and employment taxes from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 13 to the financial statements herein for discussion of the sale of FitzPatrick.Subsidiaries
Management's Financial Discussion and Analysis
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 of FitzPatrick.
Other income increased primarily due to higher realized gains in 2017 as compared to the same period in 2016 on the decommissioning trust fund investments, including the result of portfolio rebalancing in second quarter 2017, and the increase in value from year-end realized upon the receipt from NYPA of the decommissioning trust funds for the Indian Point 3 and FitzPatrick plants in January 2017. See Note 914 to the financial statements in the Form 10-K for discussion of the trust transfer agreement with NYPA.sale of FitzPatrick.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 liabilitiestrust fund investments in first quarter 2018, including unrealized losses on equity investments that were previously recorded to other comprehensive income for the Indian Point 3 and FitzPatrick plantsperiods prior 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 2016.2018. 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 the revised decommissioning cost studies. The increase was partially offset by a reduction in deferred refueling outage amortization costs relatedMeasurement of Financial Assets and Financial Liabilities” effective January 1, 2018.
Other expenses decreased primarily due to the impairmentsabsence of decommissioning expense from the Indian Point 2, Indian Point 3, and Palisades plants and related assets.FitzPatrick plant after it was sold to Exelon in March 2017. See Note 14 to the financial statements in the Form 10-K for discussion of the impairments and related charges.sale of FitzPatrick.
Income Taxes
The effective income tax rate was (10.8%)24.3% for the nine months ended September 30,first quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to state income taxes, a write-off of a stock-based compensation deferred tax asset, and the provision for uncertain tax positions, partially offset by 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.
The effective income tax rate was 8.3% for the first quarter 2017. The difference in the effective income tax rate for the nine months ended September 30,first 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, and the re-determined tax basis of the FitzPatrick plant as a result of itsthe sale onto Exelon in March 31, 2017 and book and tax differences related to the allowance for equity funds used during construction, partially offset by a write-off of a stock-based compensation deferred tax asset, state income taxes. See Note 10taxes, certain book and tax differences related to the financial statements herein for further discussion of the tax electionsutility plant items, and the tax benefit associated with the sale of FitzPatrick.
The effective income tax rate was 11% for the nine months ended September 30, 2016. The difference in the effective income tax rate for the nine months ended September 30, 2016 versus the federal statutory rate of 35% was primarily due to a tax election to treat as a corporation for federal income tax purposes a subsidiary that owns an Entergy Wholesale Commodities nuclear power plant, which resulted in reduced income tax expense and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016, partially offset by state income taxes.positions. See Note 3 to the financial statements in the Form 10-K for additionalfurther discussion of the tax electionbenefit associated with the sale of FitzPatrick and the write-off of the stock-based compensation deferred tax settlements.asset.
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 Jobs Act enacted in December 2017. See Note 2 to the deferralfinancial statements herein and in the Form 10-K for discussion of replacement power costs.proceedings commenced or other responses by Entergy’s regulators to the Tax Cuts and Jobs 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 FitzPatrickVermont Yankee
In March 2017 the NRC approved the sale of the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment, to Exelon. The transaction closed in March 2017 for a purchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the 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 10the 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 the financial statements herein, as a resultsell 100% of the salemembership interests in Entergy Nuclear Vermont Yankee, LLC to a subsidiary of FitzPatrick,NorthStar. In March 2018, Entergy re-determinedand NorthStar entered into a settlement agreement and a Memorandum of Understanding with State of Vermont agencies and other interested parties that set forth the plant’s tax basis, resulting in a $44 million income tax benefit interms on which the first quarter 2017.
agencies and parties support the Vermont Public Utility
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Planned ShutdownCommission’s approval of Palisades
As discussedthe 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 Form 10-K, mostthird or fourth quarter of the Palisades plant output is sold under a power purchase agreement (PPA) with Consumers Energy, entered into when the plant was acquired in 2007, that is scheduled to expire in April 2022. The PPA prices currently exceed market prices and escalate each year, up to $61.50/MWh in 2022. In December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the Michigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle.
In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendment transaction, but only granting Consumers Energy recovery of $136.6 million of the $172 million requested early termination payment. As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades nuclear power plant permanently in the spring of 2022. As a result of the change in expected operating life of the plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceed the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets incurred at Palisades after September 30, 2017 will no longer be charged to expense as incurred, but will be recorded as assets and depreciated or amortized. See Note 13 to the financial statements herein for discussion of the updated calculation of the liability amortization associated with the PPA and see Note 14 to the financial statements herein for discussion of the associated asset retirement obligation revision.
Costs Associated with Entergy Wholesale Commodities Strategic Transactions
Entergy expects to incur employee retention and severance expenses associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet of approximately $110$165 million in 2017,2018, of which $89$26 million hadhas been incurred as of September 30, 2017,March 31, 2018, and approximately $400$205 million from 20182019 through the spring of 2022.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 $16$73 million for the three months ended September 30, 2017 and $422 million for the nine months ended September 30, 2017.March 31, 2018. These costs were 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 because Entergy expects the value of the plants to continue to be impaired.
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. Following are updatesState in January 2017. The following is an update to that discussion.
In accordance withApril 2018 the settlement with New York State, in March 2017 the New York State Department of StateNRC issued a concurrence with Indian Point’s new Coastal Zone Management Act (CZMA) consistency certification and, on Entergy’s motion,supplement to the U.S. District Court forfinal supplemental environmental impact statement. The supplement updates the Northern District of New York dismissed Entergy’s appealenvironmental record related to the initial Indian Point CZMA consistency certification. Alsolicense renewal. The NRC is expected to issue its decision in March 2017 the Atomic Safety and Licensing Board of the NRC granted the motion of New York State and Riverkeeper to withdraw their pending contentions on
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
the NRC license renewal application and terminated the proceedings. Subsequent to the issuance of the water quality certification and water discharge permit in January 2017 by the New York State Department of Environmental Conservation (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 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 licenses for2 and Indian Point were named.3 license renewal proceedings in fourth quarter 2018.
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.
Capital Structure
Entergy’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy as of March 31, 2018 is primarily due to the net issuance of debt in 2018.
| | | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 64.6 | % | | 64.8 | % | 68.4 | % | | 67.1 | % |
| Effect of excluding securitization bonds | (0.8 | %) | | (1.0 | %) | (0.7 | %) | | (0.8 | %) |
| Debt to capital, excluding securitization bonds (a) | 63.8 | % | | 63.8 | % | 67.7 | % | | 66.3 | % |
| Effect of subtracting cash | (0.9 | %) | | (2.0 | %) | (1.6 | %) | | (1.1 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 62.9 | % | | 61.8 | % | 66.1 | % | | 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. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2022. The facility permitsincludes fronting commitments for the issuance 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 ninethree months ended September 30, 2017March 31, 2018 was 2.50%3.31% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of September 30, 2017:
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
March 31, 2018:
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $150 | | $6 | | $3,344 | | $1,125 | | $6 | | $2,369 |
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 September 30, 2017, $80March 31, 2018, $118 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the ninethree months ended September 30, 2017March 31, 2018 was 2.56%3.10% 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 September 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 September 30, 2017,March 31, 2018, Entergy Corporation had $1.3 billion$655 million of commercial paper outstanding. The weighted-average interest rate for the ninethree months ended September 30, 2017March 31, 2018 was 1.45%1.88%.
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.
Preliminary Capital Investment Plan Estimate for 2018-2020
Entergy is developing its capital investment plan for 2018 through 2020 and currently anticipates that the Utility will make approximately $10.7 billion in capital investments during that period and that Entergy Wholesale Commodities will make approximately $0.4 billion in capital investments, not including nuclear fuel, during that period. The preliminary Utility estimate includes amounts associated with specific investments such as the Lake Charles Power Station, New Orleans Power Station, and Montgomery County Power Station, each discussed below, and the St. Charles Power Station; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; investments in the nuclear fleet; and other investments. The preliminary Entergy Wholesale Commodities estimate includes amounts associated with specific investments, such as the investments in the nuclear fleet, component replacement, software and security, and dry cask storage. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 was retired 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 August 2017March 2018 the City Council establishedadopted a procedural schedule that provided for a hearing in December 2017 with a City Council decision expected in February 2018.resolution approving construction of the 128 MW unit. The targeted commercial operation date is January 2020, subject to receipt of all necessary permits. In October 2017 severalApril 2018 intervenors filed testimony opposing the construction of the New Orleans Power Station or, in one case, supporting a slightly smaller configuration of Entergy New Orleans’s alternative proposal. The commercial operation date is dependent on the alternative selected byfiled with the City Council a request for rehearing, which was subsequently denied, and a petition for judicial review of the receipt of other permitsCity Council’s decision, and approvals. also filed a lawsuit challenging the City Council’s approval based on Louisiana’s open meeting law.
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. The costs of the transmission interconnection and network upgrades and other related costs included in the total current estimated cost of the Montgomery County Power Station are not subject to the $831 million cap. Also in June 2017, the ALJ 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.
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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
completed in 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with athe deadlines extended and the hearing continued from June 2018 to August 2018 in order to allow the parties an opportunity to reach settlement. In April 2018.2018 the parties filed an unopposed joint motion for consideration of proposed stipulation by the LPSC seeking approval of the signed settlement agreement at the May 16, 2018 LPSC Business and Executive Session. The settlement recommends 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.
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 October 2017April 2018 meeting, the Board declared a dividend of $0.89 per share, an increase fromwhich is the previous $0.87same 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 ninethree months ended September 30,March 31, 2018 and 2017 and 2016 were as follows:
| | | | 2017 | | 2016 | 2018 | | 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 activities | 1,713 |
| | 2,252 |
| 557 |
| | 529 |
|
| Investing activities | (2,828 | ) | | (2,983 | ) | (974 | ) | | (812 | ) |
| Financing activities | 473 |
| | 687 |
| 841 |
| | 178 |
|
| Net decrease in cash and cash equivalents | (642 | ) | | (44 | ) | |
| Net increase (decrease) in cash and cash equivalents | | 424 |
| | (105 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $546 |
| |
| $1,307 |
|
| $1,205 |
| |
| $1,083 |
|
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Operating Activities
Net cash flow provided by operating activities decreasedincreased by $539$28 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to:
an increase of $182 million in spending on nuclear refueling outages in 2017 as compared to the same period in 2016;
lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in 2017 as compared to the same period in 2016, as discussed above. See Note 13 to the financial statements herein and Note 14 to the financial statements in the Form 10-K for discussion of the reimbursement agreement;
an increase of $95 million in severance and retention payments in 2017 as compared to the same period in 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” above and in the Form 10-K for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet;
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the settlement and refund;
a decrease of $35 million in spending on nuclear refueling outages in 2018 as compared to the same period in 2017; and
the effect of favorable weather on billed Utility sales.
The increase was partially offset by:
lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in 2018 as compared to the same period in 2017, as discussed above. See 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 2018 as compared to the same period in 2017. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
proceeds of $23 million received in first quarter 2017 compared to proceeds of $64 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements in the Form 10-K for discussion of the DOEspent nuclear fuel litigation; and
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
a decrease due toof $14 million in income tax refunds in the timing of recovery of fuel and purchased power costs in 2017first quarter 2018 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.
The decrease was partially offset by:
first quarter 2017. Entergy received income tax refunds in 2018 resulting from overpayment of $12 million in 2017 compared tostate income tax payments of $80 million in 2016. Entergytaxes and received income tax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related to the effect of the 2006-2007 IRS audit and for jurisdictions that do not have net operating loss carryovers or jurisdictions in which the utilization of net operating loss carryovers are limited. See Note 3 to the financial statements in the Form 10-K for a discussion of the income tax audit; and
a decrease of $76 million in interest paid in 2017 as compared to the same period in 2016 primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets. See Note 10 to the financial statements in the Form 10-K for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets.
Investing Activities
Net cash flow used in investing activities decreased $155increased $162 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to:
an increase of $137 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 $83 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 $949project and an increase of $35 million in March 2016transmission construction expenditures primarily due to a higher scope of work performed on transmission projects in 2018 as compared to 2017; and
proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase and Note 13 to the financial statements herein for a discussion of the sale of FitzPatrick.
The decreaseincrease was partially offset by:
an increaseby a decrease of $619 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $363 million in fossil-fueled generation construction expenditures primarily due to higher spending in 2017 on the St. Charles Power Station project and the Lake Charles Power Station project and a higher scope of work performed on various other fossil projects in 2017, an increase of $107$88 million in nuclear construction expenditures primarilyfuel purchases due to increased spending on various nuclear projects in 2017, an increase of $87 million in distribution construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016, an increase of $44 million in transmission construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016, and an increase of $42 million in information technology construction expenditures primarily due to increased spending on advanced metering infrastructure;
$113 million in funds held on deposit for principal and interest payments due October 1, 2017;
proceeds of $25 million received in 2017 compared to proceeds of $122 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation; 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 services deliveries, and the timing of cash payments during the nuclear fuel cycle.
Financing Activities
Net cash flow provided by financing activities increased $663 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 primarily due to long-term debt activity providing approximately $1,772 million of cash in 2018 compared to using approximately $575 million of cash in 2017. Included in the long-term debt activity is $915 million in 2018 for borrowings on the Entergy Corporation long-term credit facility and $475 million in 2017 for the repayment of borrowings on the Entergy Corporation long-term credit facility. The increase was partially offset by Entergy’s net repayments of $812 million of commercial paper in 2018 compared
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Financing Activities
Net cash flow provided by financing activities decreased $214 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to:
long-term debt activity using approximately $309 thousandnet issuances of cash in 2017 compared to providing approximately $1,279$744 million of cash in 2016. Included in the long-term debt activity is $550 millioncommercial paper in 2017 and $655a net decrease of $126 million in 2016 for the repayment of borrowings on the Entergy Corporation long-term credit facility; and
a decrease of $87 million in 20172018 in short-term borrowings by the nuclear fuel company variable interest entities.
The decrease was partially offset by:
Entergy’s net issuances of $928 million of commercial paper in 2017 compared to net repayments of $158 million of commercial paper in 2016; and
the redemptions of Entergy Arkansas’s $75 million of 6.45% Series preferred stock and $10 million of 6.08% Series preferred stock in 2016.
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.
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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
both. In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. Certain hedge volumes have price downside and upside relative to market price movement. The contracted minimum, expected value, and sensitivities are provided in the table below to show potential variations. The sensitivities may not reflect the total maximum upside potential from higher market prices. The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation. Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of September 30, 2017 (2017March 31, 2018 (2018 represents the remainder of the year):
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Wholesale Commodities Nuclear Portfolio
| | | | | 2017 | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 | | 2018 | | 2019 | | 2020 | | 2021 | | 2022 |
| Energy | | |
| Percent of planned generation under contract (a): | | |
| Unit-contingent (b) | | 88% | | 98% | | 70% | | 38% | | 70% | | 67% | | 98% | | 91% | | 60% | | 78% | | 67% |
| Firm LD (c) | | 9% | | 8% | | —% | | —% | | —% | | —% | | 9% | | —% | | —% | | —% | | —% |
| Offsetting positions (d) | | (9%) | | (9%) | | —% | | —% | | —% | | —% | | (9%) | | —% | | —% | | —% | | —% |
| Total | | 88% | | 97% | | 70% | | 38% | | 70% | | 67% | | 98% | | 91% | | 60% | | 78% | | 67% |
| Planned generation (TWh) (e) (f) | | 7.6 | | 28.0 | | 25.5 | | 17.9 | | 9.7 | | 2.8 | | 20.7 | | 25.5 | | 17.9 | | 9.7 | | 2.8 |
| Average revenue per MWh on contracted volumes: | | |
| Minimum | | $39.8 | | $38.9 | | $43.3 | | $55.3 | | $59.8 | | $58.8 | |
| Expected based on market prices as of September 30, 2017 | | $39.8 | | $38.9 | | $43.3 | | $55.3 | | $59.8 | | $58.8 | |
| Sensitivity: -/+ $10 per MWh market price change | | $39.8-$39.9 | | $38.9 | | $43.3 | | $55.3 | | $59.8 | | $58.8 | |
| Expected based on market prices as of March 31, 2018 | | | $32.6 | | $40.6 | | $44.6 | | $58.6 | | $58.8 |
| | | |
| Capacity | | |
| Percent of capacity sold forward (g): | | |
| Bundled capacity and energy contracts (h) | | 23% | | 22% | | 25% | | 36% | | 69% | | 99% | | 22% | | 25% | | 36% | | 69% | | 99% |
| Capacity contracts (i) | | 38% | | 21% | | 10% | | —% | | —% | | —% | | 46% | | 13% | | —% | | —% | | —% |
| Total | | 61% | | 43% | | 35% | | 36% | | 69% | | 99% | | 68% | | 38% | | 36% | | 69% | | 99% |
| Planned net MW in operation (average) (f) | | 3,568 | | 3,568 | | 3,167 | | 2,195 | | 1,158 | | 338 | | 3,568 | | 3,167 | | 2,195 | | 1,158 | | 338 |
| Average revenue under contract per kW per month (applies to capacity contracts only) | | $8.3 | | $9.1 | | $10.5 | | $— | | $— | | $— | | $8.2 | | $9.1 | | $— | | $— | | $— |
| | | |
| Total Nuclear Energy and Capacity Revenues (j) | | |
| Total Energy and Capacity Revenues (j) | | |
| Expected sold and market total revenue per MWh | | $44.5 | | $46.7 | | $46.8 | | $49.1 | | $56.3 | | $47.7 | | $44.5 | | $46.1 | | $45.7 | | $53.9 | | $47.6 |
| Sensitivity: -/+ $10 per MWh market price change | | $43.3-$45.7 | | $46.6-$46.7 | | $43.8-$49.8 | | $43.3-$55.0 | | $53.3-$59.3 | | $44.3-$51.0 | | $44.4-$44.5 | | $45.2-$47.0 | | $42.1-$49.4 | | $51.7-$56.1 | | $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. |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
| |
| (c) | Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, 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 in the spring of 2022, and reflects the sale of FitzPatrick in March 2017.on May 31, 2022. Assumes NRC license renewals for two units, as follows (with current license expirations in parentheses): |
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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” above and in the Form 10-K. For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “Entergy Wholesale Commodities Authorizations to Operate Its Nuclear Power Plants” above and in the Form 10-K.
| |
| (g) | Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions. |
| |
| (h) | A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold. |
| |
| (i) | A contract for the sale of an installed capacity product in a regional market. |
| |
| (j) | Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues. |
Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on September 30, 2017March 31, 2018 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of $9$1.4 million for the remainder of 2017.2018. As of September 30, 2016,March 31, 2017, a positive $10 per MWh change would have had a corresponding effect on pre-tax income of $20$22 million for the remainder of 2016.2017. A negative $10 per MWh change in the annual average energy price in the markets based on September 30, 2017March 31, 2018 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax net income of ($9)1.4) million for the remainder of 2017.2018. As of September 30, 2016,March 31, 2017, a negative $10 per MWh change would have had a corresponding effect on pre-tax income of ($10)19) 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 September 30, 2017,March 31, 2018, based on power prices at that time, Entergy had liquidity exposure of $105$126 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $9$8 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of September 30, 2017,March 31, 2018, Entergy would have been required to provide approximately $50$64 million of additional cash or letters of credit under some of the agreements. As of September 30, 2017,March 31, 2018, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $295$319 million for a $1 per MMBtu increase in gas prices in both the short-andshort- and long-term markets.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
As of September 30, 2017,March 31, 2018, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 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 update to that discussion.
Indian Point
During the scheduled refueling and maintenance outage at Indian Point 2 in the first quarter 2016, comprehensive inspections were done as part of the aging management program that calls for an in-depth inspection of the reactor vessel. Inspections of more than 2,000 bolts 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 service 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 Point 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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 Pronouncements”Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements. Following are updates to that discussion.
As discussed in the Form 10-K, ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” is effective for Entergy for the first quarter 2018. Entergy has selected the modified retrospective transition method. Entergy’s evaluation of ASU 2014-09 has not identified any effects that it expects will affect materially its results of operations, financial position, or cash flows, other than changes in required financial statement disclosures. Entergy continues to monitor the development and finalization of industry-specific application guidance that could have an effect on this assessment.
As discussed in the Form 10-K, ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” is effective for Entergy for the first quarter 2018. The ASU requires entities to recognize the income tax consequences of intra-entity asset transfers, other than inventory, at the time the transfer occurs. Entergy is evaluating the ASU and currently expects to record a cumulative-effect adjustment to retained earnings as of January 1, 2018.
As discussed in the Form 10-K, ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” is effective for Entergy for the first quarter 2018. Unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds will be required
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
to be recorded in earnings rather than in other comprehensive income. In accordance with the regulatory treatment of the decommissioning trust funds of Entergy Arkansas, Entergy Louisiana, and System Energy, an offsetting amount of unrealized gains/losses will continue to be recorded in other regulatory liabilities/assets. Entergy expects to record an adjustment to retained earnings as of January 1, 2018 for the cumulative effect of the unrealized gains and losses on investments in equity securities held by the decommissioning trust funds that do not meet the criteria for regulatory accounting treatment.
In March 2017 the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU requires entities to report the service cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the same line item as other compensation costs arising from services rendered during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. In addition, the ASU allows only the service cost component of net benefit cost to be eligible for capitalization. ASU 2017-07 is effective for Entergy for the first quarter 2018. Entergy does not expect ASU 2017-07 to affect materially its results of operations, financial position, or cash flows.
In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges. Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges. In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges. ASU 2017-12 is effective for Entergy for the first quarter 2019, with early adoption permitted. Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales. Entergy is evaluating ASU 2017-12 for other effects on its results of operations, financial position, or cash flows.
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | |
| | Three Months Ended | | Nine Months Ended | | |
| | 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 | |
| | (In Thousands, Except Share Data) | (In Thousands, Except Share Data) | |
| OPERATING REVENUES | | | | | | | | | | | |
| Electric |
| $2,793,798 |
| |
| $2,624,562 |
| |
| $7,056,758 |
| |
| $6,760,054 |
|
| $2,248,262 |
| |
| $1,991,740 |
| |
| Natural gas | 26,585 |
| | 24,796 |
| | 100,011 |
| | 95,530 |
| 56,695 |
| | 43,351 |
| |
| Competitive businesses | 423,245 |
| | 475,345 |
| | 1,293,867 |
| | 1,341,534 |
| 418,924 |
| | 553,367 |
| |
| TOTAL | 3,243,628 |
| | 3,124,703 |
| | 8,450,636 |
| | 8,197,118 |
| 2,723,881 |
| | 2,588,458 |
| |
| | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | 612,950 |
| | 460,990 |
| | 1,426,462 |
| | 1,347,422 |
| 443,296 |
| | 417,566 |
| |
| Purchased power | 408,140 |
| | 375,107 |
| | 1,182,404 |
| | 880,102 |
| 396,023 |
| | 357,768 |
| |
| Nuclear refueling outage expenses | 43,273 |
| | 56,675 |
| | 124,126 |
| | 154,951 |
| 42,760 |
| | 42,564 |
| |
| Other operation and maintenance | 804,535 |
| | 833,176 |
| | 2,492,379 |
| | 2,324,350 |
| 783,585 |
| | 846,856 |
| |
| Asset write-offs, impairments, and related charges | 16,221 |
| | 18,841 |
| | 421,584 |
| | 33,170 |
| 72,924 |
| | 211,791 |
| |
| Decommissioning | 95,392 |
| | 85,266 |
| | 310,062 |
| | 230,519 |
| 94,400 |
| | 114,374 |
| |
| Taxes other than income taxes | 159,474 |
| | 149,076 |
| | 469,090 |
| | 448,103 |
| 165,218 |
| | 156,353 |
| |
| Depreciation and amortization | 354,739 |
| | 340,399 |
| | 1,052,332 |
| | 1,010,339 |
| 347,065 |
| | 347,265 |
| |
| Other regulatory charges (credits) | 19,435 |
| | 33,113 |
| | (59,314 | ) | | 55,626 |
| 42,946 |
| | (85,302 | ) | |
| TOTAL | 2,514,159 |
| | 2,352,643 |
| | 7,419,125 |
| | 6,484,582 |
| 2,388,217 |
| | 2,409,235 |
| |
| | | | | | | | | | | | |
| Gain on sale of assets | — |
| | — |
| | 16,270 |
| | — |
| — |
| | 16,270 |
| |
| | | | | | | | | | | | |
| OPERATING INCOME | 729,469 |
| | 772,060 |
| | 1,047,781 |
| | 1,712,536 |
| 335,664 |
| | 195,493 |
| |
| | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | |
| Allowance for equity funds used during construction | 24,338 |
| | 15,451 |
| | 65,722 |
| | 48,242 |
| 28,343 |
| | 19,008 |
| |
| Interest and investment income | 58,332 |
| | 37,534 |
| | 194,978 |
| | 116,662 |
| 16,870 |
| | 56,549 |
| |
| Miscellaneous - net | (1,801 | ) | | (6,740 | ) | | (3,172 | ) | | (25,702 | ) | (31,356 | ) | | (15,189 | ) | |
| TOTAL | 80,869 |
| | 46,245 |
| | 257,528 |
| | 139,202 |
| 13,857 |
| | 60,368 |
| |
| | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | |
| Interest expense | 178,391 |
| | 174,902 |
| | 522,857 |
| | 526,344 |
| 182,923 |
| | 171,089 |
| |
| Allowance for borrowed funds used during construction | (11,492 | ) | | (7,707 | ) | | (31,057 | ) | | (24,520 | ) | (13,265 | ) | | (9,042 | ) | |
| TOTAL | 166,899 |
| | 167,195 |
| | 491,800 |
| | 501,824 |
| 169,658 |
| | 162,047 |
| |
| | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | 643,439 |
| | 651,110 |
| | 813,509 |
| | 1,349,914 |
| 179,863 |
| | 93,814 |
| |
| | | | | | | | | | | | |
| Income taxes | 241,795 |
| | 257,906 |
| | (87,555 | ) | | 148,879 |
| 43,663 |
| | 7,763 |
| |
| | | | | | | | | | | | |
| CONSOLIDATED NET INCOME | 401,644 |
| | 393,204 |
| | 901,064 |
| | 1,201,035 |
| 136,200 |
| | 86,051 |
| |
| | | | | | | | | | | | |
| Preferred dividend requirements of subsidiaries | 3,446 |
| | 5,034 |
| | 10,338 |
| | 15,586 |
| 3,439 |
| | 3,446 |
| |
| | | | | | | | | | | | |
| NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION |
| $398,198 |
| |
| $388,170 |
| |
| $890,726 |
| |
| $1,185,449 |
|
| $132,761 |
| |
| $82,605 |
| |
| | | | | | | | | | | | |
| Earnings per average common share: | | | | | | | | | | | |
| Basic |
| $2.22 |
| |
| $2.17 |
| |
| $4.96 |
| |
| $6.63 |
|
| $0.73 |
| |
| $0.46 |
| |
| Diluted |
| $2.21 |
| |
| $2.16 |
| |
| $4.94 |
| |
| $6.60 |
|
| $0.73 |
| |
| $0.46 |
| |
| Dividends declared per common share |
| $0.87 |
| |
| $0.85 |
| |
| $2.61 |
| |
| $2.55 |
|
| $0.89 |
| |
| $0.87 |
| |
| | | | | | | | | | | | |
| Basic average number of common shares outstanding | 179,563,819 |
| | 179,023,351 |
| | 179,458,914 |
| | 178,804,148 |
| 180,707,575 |
| | 179,335,063 |
| |
| Diluted average number of common shares outstanding | 180,464,069 |
| | 179,990,888 |
| | 180,163,074 |
| | 179,490,060 |
| 181,431,968 |
| | 179,842,053 |
| |
| | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | |
| | ENTERGY CORPORATION AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | |
| | Three Months Ended | | Nine Months Ended | |
| | 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | (In Thousands) |
| | | | | | | | | | | |
| Net Income |
| $401,644 |
| |
| $393,204 |
| |
| $901,064 |
| |
| $1,201,035 |
|
| $136,200 |
| |
| $86,051 |
|
| | | | | | | | | | |
| Other comprehensive income (loss) | | | | | | | | |
| Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of $7,062, $11,172, $17,387, and ($28,605)) | 13,213 |
| | 20,972 |
| | 32,634 |
| | (52,575 | ) | |
| Pension and other postretirement liabilities (net of tax expense of $6,818, $4,064, $19,034, and $7,101) | 12,297 |
| | 5,044 |
| | 31,845 |
| | 17,649 |
| |
| Net unrealized investment gains (net of tax expense of $30,644, $20,635, $72,808, and $58,508) | 33,395 |
| | 21,367 |
| | 82,918 |
| | 65,391 |
| |
| Foreign currency translation (net of tax benefit of $-, $48, $403, and $688) | — |
| | (92 | ) | | (748 | ) | | (1,280 | ) | |
| Other comprehensive income | | | | |
| Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of $25,349 and ($359)) | | 95,427 |
| | (528 | ) |
| Pension and other postretirement liabilities (net of tax expense of $4,568 and $6,377) | | 16,574 |
| | 8,632 |
|
| Net unrealized investment gain (loss) (net of tax expense of $5,375 and $39,294) | | (32,856 | ) | | 37,827 |
|
| Other comprehensive income | 58,905 |
| | 47,291 |
| | 146,649 |
| | 29,185 |
| 79,145 |
| | 45,931 |
|
| | | | | | | | | | |
| Comprehensive Income | 460,549 |
| | 440,495 |
| | 1,047,713 |
| | 1,230,220 |
| 215,345 |
| | 131,982 |
|
| Preferred dividend requirements of subsidiaries | 3,446 |
| | 5,034 |
| | 10,338 |
| | 15,586 |
| 3,439 |
| | 3,446 |
|
| Comprehensive Income Attributable to Entergy Corporation |
| $457,103 |
| |
| $435,461 |
| |
| $1,037,375 |
| |
| $1,214,634 |
|
| $211,906 |
| |
| $128,536 |
|
| | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | |
| $136,200 |
| |
| $86,051 |
|
| Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 525,181 |
| | 531,373 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 104,607 |
| | 16,497 |
|
| Asset write-offs, impairments, and related charges | | 25,800 |
| | 145,026 |
|
| Gain on sale of assets | | — |
| | (16,270 | ) |
| Changes in working capital: | | | | |
| Receivables | | 131,150 |
| | 156,201 |
|
| Fuel inventory | | (16,261 | ) | | 6,465 |
|
| Accounts payable | | (68,857 | ) | | (47,682 | ) |
| Taxes accrued | | (56,301 | ) | | (58,832 | ) |
| Interest accrued | | (10,011 | ) | | (13,921 | ) |
| Deferred fuel costs | | (76,238 | ) | | (7,389 | ) |
| Other working capital accounts | | (28,004 | ) | | (7,324 | ) |
| Changes in provisions for estimated losses | | 10,744 |
| | (4,031 | ) |
| Changes in other regulatory assets | | 84,349 |
| | 47,497 |
|
| Changes in other regulatory liabilities | | (31,380 | ) | | (18,324 | ) |
| Changes in pensions and other postretirement liabilities | | (97,418 | ) | | (86,430 | ) |
| Other | | (76,168 | ) | | (199,514 | ) |
| Net cash flow provided by operating activities | | 557,393 |
| | 529,393 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (931,479 | ) | | (794,448 | ) |
| Allowance for equity funds used during construction | | 28,512 |
| | 19,254 |
|
| Nuclear fuel purchases | | (49,647 | ) | | (137,613 | ) |
| Proceeds from sale of assets | | — |
| | 100,000 |
|
| Insurance proceeds received for property damages | | 1,582 |
| | 20,909 |
|
| Changes in securitization account | | (7,063 | ) | | (963 | ) |
| Payments to storm reserve escrow account | | (1,175 | ) | | (480 | ) |
| Receipts from storm reserve escrow account | | — |
| | 8,836 |
|
| Increases in other investments | | (406 | ) | | (10,377 | ) |
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | — |
| | 25,493 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 1,091,332 |
| | 513,750 |
|
| Investment in nuclear decommissioning trust funds | | (1,106,094 | ) | | (556,161 | ) |
| Net cash flow used in investing activities | | (974,438 | ) | | (811,800 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 2,505,726 |
| | 236,198 |
|
| Treasury stock | | 1,952 |
| | 2,448 |
|
| Retirement of long-term debt | | (734,000 | ) | | (811,690 | ) |
| Changes in credit borrowings and commercial paper - net | | (773,177 | ) | | 908,378 |
|
| Other | | 5,193 |
| | 1,810 |
|
| Dividends paid: | | | | |
| Common stock | | (160,887 | ) | | (156,073 | ) |
| Preferred stock | | (3,439 | ) | | (3,446 | ) |
| Net cash flow provided by financing activities | | 841,368 |
| | 177,625 |
|
| | | | |
| Net increase (decrease) in cash and cash equivalents | | 424,323 |
| | (104,782 | ) |
| | | | |
| Cash and cash equivalents at beginning of period | | 781,273 |
| | 1,187,844 |
|
| | | | |
| Cash and cash equivalents at end of period | |
| $1,205,596 |
| |
| $1,083,062 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $185,606 |
| |
| $178,134 |
|
| Income taxes | |
| ($4,297 | ) | |
| ($18,044 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Consolidated net income | |
| $901,064 |
| |
| $1,201,035 |
|
| Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 1,561,565 |
| | 1,548,872 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (90,607 | ) | | 119,603 |
|
| Asset write-offs, impairments, and related charges | | 241,838 |
| | 33,170 |
|
| Gain on sale of assets | | (16,270 | ) | | — |
|
| Changes in working capital: | | | | |
| Receivables | | (198,029 | ) | | (270,847 | ) |
| Fuel inventory | | 20,746 |
| | 28,900 |
|
| Accounts payable | | (75,962 | ) | | 99,933 |
|
| Taxes accrued | | 66,895 |
| | 29,429 |
|
| Interest accrued | | (6,111 | ) | | (13,487 | ) |
| Deferred fuel costs | | (117,636 | ) | | (159,592 | ) |
| Other working capital accounts | | (81,779 | ) | | (78,553 | ) |
| Changes in provisions for estimated losses | | (10,073 | ) | | 2,760 |
|
| Changes in other regulatory assets | | 117,430 |
| | 164,716 |
|
| Changes in other regulatory liabilities | | 22,124 |
| | 110,999 |
|
| Changes in pensions and other postretirement liabilities | | (354,297 | ) | | (305,200 | ) |
| Other | | (268,147 | ) | | (259,343 | ) |
| Net cash flow provided by operating activities | | 1,712,751 |
| | 2,252,395 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction/capital expenditures | | (2,622,104 | ) | | (2,003,427 | ) |
| Allowance for equity funds used during construction | | 66,437 |
| | 48,807 |
|
| Nuclear fuel purchases | | (226,054 | ) | | (160,343 | ) |
| Payment for purchase of plant | | — |
| | (949,329 | ) |
| Proceeds from sale of assets | | 100,000 |
| | — |
|
| Insurance proceeds received for property damages | | 26,157 |
| | — |
|
| Changes in securitization account | | (6,494 | ) | | (3,911 | ) |
| Payments to storm reserve escrow account | | (1,925 | ) | | (1,203 | ) |
| Receipts from storm reserve escrow account | | 8,836 |
| | — |
|
| Decreases (increases) in other investments | | (112,217 | ) | | 12,374 |
|
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 25,493 |
| | 122,488 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 1,902,783 |
| | 1,796,566 |
|
| Investment in nuclear decommissioning trust funds | | (1,988,634 | ) | | (1,844,514 | ) |
| Net cash flow used in investing activities | | (2,827,722 | ) | | (2,982,492 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $57,921 |
| |
| $56,629 |
|
| Temporary cash investments | | 1,147,675 |
| | 724,644 |
|
| Total cash and cash equivalents | | 1,205,596 |
| | 781,273 |
|
| Accounts receivable: | | | | |
| Customer | | 616,653 |
| | 673,347 |
|
| Allowance for doubtful accounts | | (14,515 | ) | | (13,587 | ) |
| Other | | 163,039 |
| | 169,377 |
|
| Accrued unbilled revenues | | 316,624 |
| | 383,813 |
|
| Total accounts receivable | | 1,081,801 |
| | 1,212,950 |
|
| Deferred fuel costs | | 83,445 |
| | 95,746 |
|
| Fuel inventory - at average cost | | 198,904 |
| | 182,643 |
|
| Materials and supplies - at average cost | | 741,677 |
| | 723,222 |
|
| Deferred nuclear refueling outage costs | | 112,365 |
| | 133,164 |
|
| Prepayments and other | | 231,946 |
| | 156,333 |
|
| TOTAL | | 3,655,734 |
| | 3,285,331 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investment in affiliates - at equity | | 198 |
| | 198 |
|
| Decommissioning trust funds | | 7,115,686 |
| | 7,211,993 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 289,074 |
| | 260,980 |
|
| Other | | 433,868 |
| | 441,862 |
|
| TOTAL | | 7,838,826 |
| | 7,915,033 |
|
| | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 47,515,661 |
| | 47,287,370 |
|
| Property under capital lease | | 620,419 |
| | 620,544 |
|
| Natural gas | | 462,756 |
| | 453,162 |
|
| Construction work in progress | | 2,347,660 |
| | 1,980,508 |
|
| Nuclear fuel | | 857,893 |
| | 923,200 |
|
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 51,804,389 |
| | 51,264,784 |
|
| Less - accumulated depreciation and amortization | | 21,701,715 |
| | 21,600,424 |
|
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 30,102,674 |
| | 29,664,360 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Other regulatory assets (includes securitization property of $455,148 as of March 31, 2018 and $485,031 as of December 31, 2017) | | 4,851,338 |
| | 4,935,689 |
|
| Deferred fuel costs | | 239,347 |
| | 239,298 |
|
| Goodwill | | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 21,144 |
| | 178,204 |
|
| Other | | 195,290 |
| | 112,062 |
|
| TOTAL | | 5,684,291 |
| | 5,842,425 |
|
| | | | | |
| TOTAL ASSETS | |
| $47,281,525 |
| |
| $46,707,149 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of: | | | | |
| Long-term debt | | 1,222,606 |
| | 5,508,461 |
|
| Treasury stock | | 15,121 |
| | 33,120 |
|
| Retirement of long-term debt | | (1,222,915 | ) | | (4,229,599 | ) |
| Repurchase/redemption of preferred stock | | — |
| | (85,283 | ) |
| Changes in credit borrowings and commercial paper - net | | 937,677 |
| | (60,985 | ) |
| Other | | (337 | ) | | (6,204 | ) |
| Dividends paid: | | | | |
| Common stock | | (468,396 | ) | | (455,993 | ) |
| Preferred stock | | (10,338 | ) | | (16,947 | ) |
| Net cash flow provided by financing activities | | 473,418 |
| | 686,570 |
|
| | | | |
| Net decrease in cash and cash equivalents | | (641,553 | ) | | (43,527 | ) |
| | | | |
| Cash and cash equivalents at beginning of period | | 1,187,844 |
| | 1,350,961 |
|
| | | | |
| Cash and cash equivalents at end of period | |
| $546,291 |
| |
| $1,307,434 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $507,912 |
| |
| $584,362 |
|
| Income taxes | |
| ($11,883 | ) | |
| $79,988 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $1,260,008 |
| |
| $760,007 |
|
| Notes payable and commercial paper | | 805,131 |
| | 1,578,308 |
|
| Accounts payable | | 1,260,718 |
| | 1,452,216 |
|
| Customer deposits | | 403,072 |
| | 401,330 |
|
| Taxes accrued | | 158,667 |
| | 214,967 |
|
| Interest accrued | | 177,961 |
| | 187,972 |
|
| Deferred fuel costs | | 58,032 |
| | 146,522 |
|
| Obligations under capital leases | | 1,419 |
| | 1,502 |
|
| Pension and other postretirement liabilities | | 63,612 |
| | 71,612 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | 912,103 |
| | — |
|
| Other | | 131,949 |
| | 221,771 |
|
| TOTAL | | 5,232,672 |
| | 5,036,207 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 4,452,168 |
| | 4,466,503 |
|
| Accumulated deferred investment tax credits | | 217,502 |
| | 219,634 |
|
| Obligations under capital leases | | 21,632 |
| | 22,015 |
|
| Regulatory liability for income taxes-net | | 1,981,963 |
| | 2,900,204 |
|
| Other regulatory liabilities | | 1,563,278 |
| | 1,588,520 |
|
| Decommissioning and asset retirement cost liabilities | | 6,328,664 |
| | 6,185,814 |
|
| Accumulated provisions | | 489,026 |
| | 478,273 |
|
| Pension and other postretirement liabilities | | 2,821,236 |
| | 2,910,654 |
|
| Long-term debt (includes securitization bonds of $520,253 as of March 31, 2018 and $544,921 as of December 31, 2017) | | 15,591,628 |
| | 14,315,259 |
|
| Other | | 409,014 |
| | 393,748 |
|
| TOTAL | | 33,876,111 |
| | 33,480,624 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Subsidiaries' preferred stock without sinking fund | | 197,799 |
| | 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 | | 5,417,263 |
| | 5,433,433 |
|
| Retained earnings | | 8,493,790 |
| | 7,977,702 |
|
| Accumulated other comprehensive loss | | (561,498 | ) | | (23,531 | ) |
| Less - treasury stock, at cost (73,953,521 shares in 2018 and 74,235,135 shares in 2017) | | 5,377,160 |
| | 5,397,637 |
|
| TOTAL | | 7,974,943 |
| | 7,992,515 |
|
| | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | |
| $47,281,525 |
| |
| $46,707,149 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $87,297 |
| |
| $129,579 |
|
| Temporary cash investments | | 458,994 |
| | 1,058,265 |
|
| Total cash and cash equivalents | | 546,291 |
| | 1,187,844 |
|
| Accounts receivable: | | | | |
| Customer | | 754,484 |
| | 654,995 |
|
| Allowance for doubtful accounts | | (13,569 | ) | | (11,924 | ) |
| Other | | 152,329 |
| | 158,419 |
|
| Accrued unbilled revenues | | 420,099 |
| | 368,677 |
|
| Total accounts receivable | | 1,313,343 |
| | 1,170,167 |
|
| Deferred fuel costs | | 185,066 |
| | 108,465 |
|
| Fuel inventory - at average cost | | 158,854 |
| | 179,600 |
|
| Materials and supplies - at average cost | | 719,782 |
| | 698,523 |
|
| Deferred nuclear refueling outage costs | | 181,571 |
| | 146,221 |
|
| Prepayments and other | | 366,324 |
| | 193,448 |
|
| TOTAL | | 3,471,231 |
| | 3,684,268 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investment in affiliates - at equity | | 198 |
| | 198 |
|
| Decommissioning trust funds | | 6,982,928 |
| | 5,723,897 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 252,621 |
| | 233,641 |
|
| Other | | 447,349 |
| | 469,664 |
|
| TOTAL | | 7,683,096 |
| | 6,427,400 |
|
| | | | | |
| PROPERTY, PLANT, AND EQUIPMENT | | | | |
| Electric | | 46,190,075 |
| | 45,191,216 |
|
| Property under capital lease | | 618,321 |
| | 619,527 |
|
| Natural gas | | 435,313 |
| | 413,224 |
|
| Construction work in progress | | 2,191,320 |
| | 1,378,180 |
|
| Nuclear fuel | | 905,837 |
| | 1,037,899 |
|
| TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 50,340,866 |
| | 48,640,046 |
|
| Less - accumulated depreciation and amortization | | 21,380,100 |
| | 20,718,639 |
|
| PROPERTY, PLANT, AND EQUIPMENT - NET | | 28,960,766 |
| | 27,921,407 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 775,148 |
| | 761,280 |
|
| Other regulatory assets (includes securitization property of $513,223 as of September 30, 2017 and $600,996 as of December 31, 2016) | | 4,638,615 |
| | 4,769,913 |
|
| Deferred fuel costs | | 239,248 |
| | 239,100 |
|
| Goodwill | | 377,172 |
| | 377,172 |
|
| Accumulated deferred income taxes | | 123,953 |
| | 117,885 |
|
| Other | | 129,213 |
| | 1,606,009 |
|
| TOTAL | | 6,283,349 |
| | 7,871,359 |
|
| | | | | |
| TOTAL ASSETS | |
| $46,398,442 |
| |
| $45,904,434 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $869,207 |
| |
| $364,900 |
|
| Notes payable and commercial paper | | 1,352,688 |
| | 415,011 |
|
| Accounts payable | | 1,105,038 |
| | 1,285,577 |
|
| Customer deposits | | 403,262 |
| | 403,311 |
|
| Taxes accrued | | 248,009 |
| | 181,114 |
|
| Interest accrued | | 181,118 |
| | 187,229 |
|
| Deferred fuel costs | | 61,867 |
| | 102,753 |
|
| Obligations under capital leases | | 2,043 |
| | 2,423 |
|
| Pension and other postretirement liabilities | | 64,904 |
| | 76,942 |
|
| Other | | 172,735 |
| | 180,836 |
|
| TOTAL | | 4,460,871 |
| | 3,200,096 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 7,538,630 |
| | 7,495,290 |
|
| Accumulated deferred investment tax credits | | 219,892 |
| | 227,147 |
|
| Obligations under capital leases | | 22,783 |
| | 24,582 |
|
| Other regulatory liabilities | | 1,595,053 |
| | 1,572,929 |
|
| Decommissioning and asset retirement cost liabilities | | 6,116,010 |
| | 5,992,476 |
|
| Accumulated provisions | | 471,383 |
| | 481,636 |
|
| Pension and other postretirement liabilities | | 2,693,751 |
| | 3,036,010 |
|
| Long-term debt (includes securitization bonds of $582,274 as of September 30, 2017 and $661,175 as of December 31, 2016) | | 13,977,522 |
| | 14,467,655 |
|
| Other | | 409,125 |
| | 1,121,619 |
|
| TOTAL | | 33,044,149 |
| | 34,419,344 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| Subsidiaries' preferred stock without sinking fund | | 203,185 |
| | 203,185 |
|
| | | | | |
| SHAREHOLDERS' EQUITY | | | | |
| Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788 shares in 2017 and in 2016 | | 2,548 |
| | 2,548 |
|
| Paid-in capital | | 5,420,608 |
| | 5,417,245 |
|
| Retained earnings | | 8,617,901 |
| | 8,195,571 |
|
| Accumulated other comprehensive income (loss) | | 111,678 |
| | (34,971 | ) |
| Less - treasury stock, at cost (75,127,186 shares in 2017 and 75,623,363 shares in 2016) | | 5,462,498 |
| | 5,498,584 |
|
| TOTAL | | 8,690,237 |
| | 8,081,809 |
|
| | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | |
| $46,398,442 |
| |
| $45,904,434 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| ENTERGY CORPORATION AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| For the Three Months Ended March 31, 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) | 3,446 |
| | — |
| | — |
| | — |
| | 82,605 |
| | — |
| | 86,051 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 45,931 |
| | 45,931 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 22,083 |
| | (19,166 | ) | | — |
| | — |
| | 2,917 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (156,073 | ) | | — |
| | (156,073 | ) |
| Preferred dividend requirements of subsidiaries (a) | (3,446 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (3,446 | ) |
| | | | | | | | | | | | | | |
| Balance at March 31, 2017 |
| $— |
| |
| $2,548 |
| |
| ($5,476,501 | ) | |
| $5,398,079 |
| |
| $8,122,103 |
| |
| $10,960 |
| |
| $8,057,189 |
|
| | | | | | | | | | | | | | |
| 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) | 3,439 |
| | — |
| | — |
| | — |
| | 132,761 |
| | — |
| | 136,200 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 79,145 |
| | 79,145 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 20,477 |
| | (16,170 | ) | | — |
| | — |
| | 4,307 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (160,887 | ) | | — |
| | (160,887 | ) |
| Preferred dividend requirements of subsidiaries (a) | (3,439 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (3,439 | ) |
| Reclassification pursuant to ASU 2018-02 | — |
| | — |
| | — |
| | — |
| | (32,043 | ) | | 15,505 |
| | (16,538 | ) |
| | | | | | | | | | | | | | |
| Balance at March 31, 2018 |
| $— |
| |
| $2,548 |
| |
| ($5,377,160 | ) | |
| $5,417,263 |
| |
| $8,493,790 |
| |
| ($561,498 | ) | |
| $7,974,943 |
|
| | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2018 and 2017 include $3.4 million and $3.4 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 Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | | |
|
|
| Common Shareholders’ Equity |
|
|
| | Subsidiaries’ Preferred Stock | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | (In Thousands) |
| | | | | | | | | | | | | | |
| Balance at December 31, 2015 |
| $— |
| |
| $2,548 |
| |
| ($5,552,379 | ) | |
| $5,403,758 |
| |
| $9,393,913 |
| |
| $8,951 |
| |
| $9,256,791 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 15,586 |
| | — |
| | — |
| | — |
| | 1,185,449 |
| | — |
| | 1,201,035 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 29,185 |
| | 29,185 |
|
| Preferred stock repurchases / redemptions | — |
| | — |
| | — |
| | — |
| | (283 | ) | | — |
| | (283 | ) |
| Common stock issuances related to stock plans | — |
| | — |
| | 53,684 |
| | 229 |
| | — |
| | — |
| | 53,913 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (455,993 | ) | | — |
| | (455,993 | ) |
| Preferred dividend requirements of subsidiaries (a) | (15,586 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (15,586 | ) |
| | | | | | | | | | | | | | |
| Balance at September 30, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,498,695 | ) | |
| $5,403,987 |
| |
| $10,123,086 |
| |
| $38,136 |
| |
| $10,069,062 |
|
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Balance at December 31, 2016 |
| $— |
| |
| $2,548 |
| |
| ($5,498,584 | ) | |
| $5,417,245 |
| |
| $8,195,571 |
| |
| ($34,971 | ) | |
| $8,081,809 |
|
| | | | | | | | | | | | | | |
| Consolidated net income (a) | 10,338 |
| | — |
| | — |
| | — |
| | 890,726 |
| | — |
| | 901,064 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 146,649 |
| | 146,649 |
|
| Common stock issuances related to stock plans | — |
| | — |
| | 36,086 |
| | 3,363 |
| | — |
| | — |
| | 39,449 |
|
| Common stock dividends declared | — |
| | — |
| | — |
| | — |
| | (468,396 | ) | | — |
| | (468,396 | ) |
| Preferred dividend requirements of subsidiaries (a) | (10,338 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (10,338 | ) |
| | | | | | | | | | | | | | |
| Balance at September 30, 2017 |
| $— |
| |
| $2,548 |
| |
| ($5,462,498 | ) | |
| $5,420,608 |
| |
| $8,617,901 |
| |
| $111,678 |
| |
| $8,690,237 |
|
| | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for 2017 and 2016 include $10.3 million and $15.6 million, respectively, of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented within equity. |
| | ENTERGY CORPORATION AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | (Dollars in Millions) | | | | (Dollars in Millions) | | |
| Utility electric operating revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $1,107 |
| |
| $1,106 |
| |
| $1 |
| | — |
| |
| $892 |
| |
| $705 |
| |
| $187 |
| | 27 |
|
| Commercial | | 721 |
| | 678 |
| | 43 |
| | 6 |
| | 596 |
| | 536 |
| | 60 |
| | 11 |
|
| Industrial | | 721 |
| | 616 |
| | 105 |
| | 17 |
| | 597 |
| | 565 |
| | 32 |
| | 6 |
|
| Governmental | | 62 |
| | 58 |
| | 4 |
| | 7 |
| | 57 |
| | 53 |
| | 4 |
| | 8 |
|
| Total retail | | 2,611 |
| | 2,458 |
| | 153 |
| | 6 |
| |
| Sales for resale | | 78 |
| | 67 |
| | 11 |
| | 16 |
| |
| Other | | 105 |
| | 100 |
| | 5 |
| | 5 |
| |
| Total | |
| $2,794 |
| |
| $2,625 |
| |
| $169 |
| | 6 |
| |
| | | | | | | | | |
| Utility billed electric energy sales (GWh): | | | | | | | | | |
| Residential | | 10,833 |
| | 11,817 |
| | (984 | ) | | (8 | ) | |
| Commercial | | 8,271 |
| | 8,650 |
| | (379 | ) | | (4 | ) | |
| Industrial | | 12,503 |
| | 12,017 |
| | 486 |
| | 4 |
| |
| Governmental | | 682 |
| | 703 |
| | (21 | ) | | (3 | ) | |
| Total retail | | 32,289 |
| | 33,187 |
| | (898 | ) | | (3 | ) | |
| Sales for resale | | 3,387 |
| | 2,733 |
| | 654 |
| | 24 |
| |
| Total | | 35,676 |
| | 35,920 |
| | (244 | ) | | (1 | ) | |
| | | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | | |
| Operating Revenues | |
| $423 |
| |
| $475 |
| |
| ($52 | ) | | (11 | ) | |
| Billed Electric Energy Sales (GWh) | | 8,234 |
| | 9,372 |
| | (1,138 | ) | | (12 | ) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | |
| | (Dollars in Millions) | | | |
| Utility electric operating revenues: | | | | | | | | | |
| Residential | |
| $2,560 |
| |
| $2,517 |
| |
| $43 |
| | 2 |
| |
| Commercial | | 1,861 |
| | 1,759 |
| | 102 |
| | 6 |
| |
| Industrial | | 1,937 |
| | 1,727 |
| | 210 |
| | 12 |
| |
| Governmental | | 172 |
| | 161 |
| | 11 |
| | 7 |
| |
| Total retail | | 6,530 |
| | 6,164 |
| | 366 |
| | 6 |
| |
| Total billed retail | | | 2,142 |
| | 1,859 |
| | 283 |
| | 15 |
|
| Sales for resale | | 202 |
| | 194 |
| | 8 |
| | 4 |
| | 69 |
| | 78 |
| �� | (9 | ) | | (12 | ) |
| Other | | 325 |
| | 402 |
| | (77 | ) | | (19 | ) | | 37 |
| | 55 |
| | (18 | ) | | (33 | ) |
| Total | |
| $7,057 |
| |
| $6,760 |
| |
| $297 |
| | 4 |
| |
| $2,248 |
| |
| $1,992 |
| |
| $256 |
| | 13 |
|
| | | | | | | | | | | | | | | | |
| Utility billed electric energy sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 25,810 |
| | 27,035 |
| | (1,225 | ) | | (5 | ) | | 9,287 |
| | 7,637 |
| | 1,650 |
| | 22 |
|
| Commercial | | 21,595 |
| | 21,938 |
| | (343 | ) | | (2 | ) | | 6,732 |
| | 6,439 |
| | 293 |
| | 5 |
|
| Industrial | | 35,829 |
| | 34,581 |
| | 1,248 |
| | 4 |
| | 11,405 |
| | 11,117 |
| | 288 |
| | 3 |
|
| Governmental | | 1,885 |
| | 1,912 |
| | (27 | ) | | (1 | ) | | 608 |
| | 593 |
| | 15 |
| | 3 |
|
| Total retail | | 85,119 |
| | 85,466 |
| | (347 | ) | | — |
| | 28,032 |
| | 25,786 |
| | 2,246 |
| | 9 |
|
| Sales for resale | | 8,255 |
| | 9,452 |
| | (1,197 | ) | | (13 | ) | | 3,244 |
| | 3,022 |
| | 222 |
| | 7 |
|
| Total | | 93,374 |
| | 94,918 |
| | (1,544 | ) | | (2 | ) | | 31,276 |
| | 28,808 |
| | 2,468 |
| | 9 |
|
| | | | | | | | | | | | | | | | |
| Entergy Wholesale Commodities: | | | | | | | | | | | | | | | | |
| Operating revenues | |
| $1,294 |
| |
| $1,342 |
| |
| ($48 | ) | | (4 | ) | |
| $419 |
| |
| $553 |
| |
| ($134 | ) | | (24 | ) |
| Billed electric energy sales (GWh) | | 22,616 |
| | 26,484 |
| | (3,868 | ) | | (15 | ) | | 7,885 |
| | 8,363 |
| | (478 | ) | | (6 | ) |
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.
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. The River Bend damages awarded included $2 million related to costs previously recorded as nuclear fuel expense and $3 million related to costs previously recorded as other operation and maintenance expense.
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,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
$3 million related to previously recorded decommissioning expense, and $2 million related to costs previously recorded as taxes other than income taxes. Entergy Nuclear Indian Point 2 recorded a receivable for that amount, 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.
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 proposals the Registrant Subsidiaries have made to their regulators for the return of unprotected excess accumulated deferred income taxes to customers, in the first quarter 2018, Entergy and each of the Registrant Subsidiaries reclassified 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 states that its order was not a final determination and that the APSC has made no decision at this time on the appropriate final accounting or ratemaking treatment of the amounts in question.
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 docket 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.
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. At the March 2018 LPSC Business and Executive Session, the LPSC staff provided a report on the tax-related rulemaking and invited additional interventions and comments before a proposed rule is issued. The LPSC staff commented that the proposed rule would likely set forth a generic mechanism that can be used by utilities to reflect the effects of the Tax Act in rates and a process by which utilities can propose utility specific treatment, if desired.
See the “Formula Rate Plan Extension Request” discussion below. 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 $27 million regulatory liability in the first quarter 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 upcoming 2017 test year filing.
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.
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. 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. 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.
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 proposes to return all of its unprotected excess accumulated deferred income taxes to its customers by the end of 2018.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 Arkansas Attorney General filed a response to Entergy Arkansas’s annual redetermination filing requesting that the APSC suspend the proposed tariff to investigate the amount of the redetermination 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 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 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 testimonya 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 of the issues suggested by the Attorney General in March 2017 recommending that the proceeding at this time. The redetermined rate should be implementedbecame effective with the first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.
Entergy Louisiana
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. The audit included a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2014 through
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the period from 2012 through 2015. Discovery commenced in March 2017.
As discussed in the Form 10-K, in April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit included a review of the reasonableness of the charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. In December 2016 the LPSC opened a new docket in order to resolve an issue regarding the proper methodology for the recovery of nuclear dry fuel storage costs. In October 2017 the LPSC approved the continued recovery of the nuclear dry fuel storage costs through the fuel adjustment clause, resolving the open issue in the audit.
Entergy Mississippi
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, breach of good faith and fair dealing, and requesting an accounting and restitution. The complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand. 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 is currently in progress.
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’s requested relief. In January 2017 the PUCT and an intervenor filed petitions for appeal to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held before the U.S. Court of Appeals for the Fifth Circuit in February 2018. In April 2018 the U.S. Court of Appeals for the Fifth Circuit reversed the decision of the Federal District Court, reinstating the original PUCT decision. Entergy Texas entered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refundis considering its legal options. The State District Court appeal of the over-recovery balance of $21 million as of November 30,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 May 2017 through October 2017. Also in December 2016 through April 2017.2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers, the refunds flowed through bills for the months of July 2017beginning January 2018 and continued through September 2017.March 2018. The fuel refund was approved by the PUCT in August 2017.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. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to
Entergy Corporation and Subsidiaries
Notes to Financial Statements
approve a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs.
2017 Formula Rate Plan Filing
In July 2017, Entergy Arkansas filedFilings 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%. Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and the projected annual revenue requirement increase exceeds the four percent, resulting in a proposed increase for the 2017 formula rate plan of $70.9 million. In October 2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments that projected a $126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on a revision to the four percent cap calculation. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs. The settlement agreement does not affect Entergy Arkansas’s proposed $71.1 million revenue requirement increase. If a final order is not issued by December 13, 2017, the proposed formula rate plan adjustment will become effective January 2, 2018, subject to refund.(Entergy Arkansas)
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 infiling. If the public interest. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. The APSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas 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. Entergy Arkansas filed rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement. Also in August 2017 supplemental testimony was filed and a settlement hearing was held. In October 2017 the APSC issued an order finding that Entergy Arkansas’s AMI deployment is in the public interest and approving the settlement agreement subject to a minor modification.appropriate approvals are obtained, Entergy Arkansas expects to recover the undepreciated balance of its existing meters through a regulatory asset torestructuring will be amortized over 15 years.consummated on or before December 1, 2018.
Filings with the LPSC (Entergy Louisiana)
Retail Rates - Electric
2014 Formula Rate Plan Filing
As discussed in the Form 10-K, in September 2015, Entergy Louisiana filed its formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed an unopposed joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of this proceeding with no changes to rates already implemented.
2015 Formula Rate Plan Filing
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding did not oppose an extension for this period of time. In June 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was filed and the LPSC approved the stipulation in July 2017.
2016 Formula Rate Plan Filing
In May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflects an earned return on common equity of 9.84%. As such, no adjustment to base formula rate plan revenue is required. The following adjustments, however, are required under the formula rate plan. The 2016 formula rate plan evaluation report shows a decrease in formula rate plan revenue of approximately $16.9 million, comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million, a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million, and a decrease in incremental formula rate plan revenue of $3.7 million. Additionally, the formula rate plan evaluation report calls for a decrease of $40.5 million in the MISO cost recovery revenue requirement from the current level of $46.8 million to $6.3 million. Rates reflecting these adjustments were implemented with the first billing cycle of September 2017, subject to refund, pending the review proceedings. Parties have intervened in the proceedings. No procedural schedule has been established. In September 2017 the LPSC issued its report indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report are required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.
Formula Rate Plan Extension Request
In August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications of its terms. Those modifications include: a one-time resetting of base rates to the midpoint of the band at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidth from a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recover certain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers. Entergy Louisiana has requested thatSeveral parties intervened in the proceeding and all parties participated in settlement discussions. In April 2018 the LPSC consider its request on an expedited basis and render a decision by December 2017, in an effort to maintain Entergy Louisiana’s current cycle for implementing rate adjustments, i.e., September 2018, without the need for filing a full base rate case proceeding.
Waterford 3 Replacement Steam Generator Project
See Note 2 to the financial statements in the Form 10-K for discussion of the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made in January 2017. Following a review by the parties, an unopposed joint report of proceedings wasmotion filed by Entergy Louisiana and the LPSC staff and Entergy Louisiana in May 2017.that settles the matter. The settlement extends the formula rate plan for three years, providing for rates through at least August 2021. In May 2017addition to retaining the LPSC acceptedmajor features of the joint reporttraditional formula rate plan, substantive features of proceedings resolving the matter.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 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 additional capacity mechanism.
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/
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three-year term permitted by MISO. An evidentiary hearingIn 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 heldreasonable 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 2017MISO, Entergy Louisiana retired Willow Glen 2 and post-hearing briefs were submitted4 in October 2017. A decision is expected inMarch 2018.
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 of $1.4 million incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016 through the extraordinary cost provision of the gas rate stabilization plan. The LPSC staff submitted its direct testimony in the proceeding recommending recovery of $0.9 million. The procedural schedule includes a hearing in February 2018.
Advanced Metering Infrastructure (AMI) FilingMississippi
As discussed in the Form 10-K, in November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s proposed AMI system, with modifications to the proposed customer charge. The stipulation also confirmed that Entergy Louisiana shall continue to include in rate base the remaining book valueafter enactment of the existing electric meters and also to depreciate those assets using current depreciation rates. In July 2017Tax Act the LPSC approved the stipulation.
Filings with the MPSC
Formula Rate Plan
In March 2017, ordered utilities, including Entergy Mississippi, submitted itsthat operate under a formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return forto file a description by February 26, 2018, of how the historical 2016 calendar year and projected earned return for the 2017 calendar year toTax Act will be withinreflected in the formula rate plan bandwidth, resultingunder 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 no change in rates. In June 2017, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 2016 look-back filing and 2017 test year were within the respective2018 formula rate plan bandwidths. In June 2017filing. 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 approvedissued a subsequent order in its generic tax reform docket ordering utilities, including Entergy Mississippi, to explain the stipulation, which resultedimplementation of the utilities tax adjustment clause, or, in no changethe 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 rates.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.
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. 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. 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.
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 proposes to return all of its unprotected excess accumulated deferred income taxes to its customers by the end of 2018.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Advanced Metering Infrastructure (AMI) FilingFuel and purchased power cost recovery
As discussedEntergy Arkansas
Energy Cost Recovery Rider
In March 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 Form 10-K,rate from $0.01547 per kWh to $0.01882 per kWh. The Arkansas Attorney General filed a response to Entergy Arkansas’s annual redetermination filing requesting that the APSC suspend the proposed tariff to investigate the amount of the redetermination 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 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 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 November 2016, Entergy Mississippithe APSC’s separate proceeding looking at potential implications of the new tax law. The APSC general staff filed an application seeking a finding fromreply to the MPSCArkansas Attorney General’s filing and agreed that Entergy Mississippi’s deploymentArkansas’s filing complied with the terms of advanced metering infrastructure is in the public interest.energy cost recovery rider. In May 2017April 2018 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSCAPSC issued an order approvingdeclining to suspend Entergy Arkansas’s energy cost recovery rider rate and declining to require further investigation of the filing without any material changes, finding that Entergy Mississippi’s deployment of AMI isissues suggested by the Attorney General in the public interest and granting a certificateproceeding at this time. The redetermined rate became effective with the first billing cycle 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.April 2018.
Filings with the City Council
Retail RatesEntergy 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 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 to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held before the U.S. Court of Appeals for the Fifth Circuit in February 2018. In April 2018 the U.S. Court of Appeals for the Fifth Circuit reversed the decision of the Federal District Court, reinstating the original PUCT decision. Entergy Texas is considering its legal options. The State District Court appeal of the PUCT’s January 2016 decision remains pending.
In December 2017, Entergy New OrleansTexas filed an application for a proposed implementation planfuel refund of approximately $30.5 million for the Energy Smart program from Aprilmonths of May 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 AprilOctober 2017. Also in December 2017, the City CouncilPUCT’s ALJ 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. In September 2017, Entergy New Orleans filed a supplemental plan and proposed several options forrefund on an interim cost recovery mechanism necessarybasis. 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.
Retail Rate Proceedings
See Note 2 to recover program costs during the period between when existing funds directedfinancial statements in the Form 10-K for detailed information regarding retail rate proceedings involving the Utility operating companies. The following are updates to Energy Smart programs are depleted (estimatedthat information.
Entergy Corporation and Subsidiaries
Notes to be June 2018) and when new rates fromFinancial Statements
Filings with the anticipated 2018 combined rate case, which will include a cost recovery mechanism for Energy Smart funding, take effect (estimated to be August 2019). Entergy New Orleans requested that the City Council approve a cost recovery mechanism prior to June 2018.APSC (Entergy Arkansas)
Internal Restructuring
As discussed in the Form 10-K, in July 2016,November 2017, Entergy New OrleansArkansas filed an application with the City CouncilAPSC seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy New OrleansArkansas to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. In May 2017The restructuring is subject to regulatory review and approval by the City Council adoptedAPSC, the FERC, and the NRC. Entergy Arkansas also filed a resolution approving the proposed internal restructuring pursuant to an agreement in principlenotice with the City Council advisors and certain intervenors. Pursuant to the agreementMissouri Public Service Commission in principle,December 2017 out of an abundance of caution, although 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 creditingArkansas does not serve any retail customers in June 2017.Missouri. In JuneApril 2018 the Missouri Public Service Commission approved Entergy Arkansas’s filing. If the appropriate approvals are obtained, Entergy Arkansas expects the restructuring will be consummated on or before December 1, 2018.
Filings with the LPSC (Entergy Louisiana)
Retail Rates - Electric
Formula Rate Plan Extension Request
In August 2017, Entergy Louisiana filed a request with the FERC approved the transaction and, pursuantLPSC 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 agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in eachmidpoint 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, 2018, 2019, and 2020. Entergy New Orleans expectsproviding for rates through at least August 2021. In addition to completeretaining the internal restructuring in fourth quarter 2017.major features of the traditional formula rate plan, substantive features of the extended formula rate plan include:
Advanced Metering Infrastructure (AMI) Filinga 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 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 additional capacity mechanism.
Union Power Station and Deactivation or Retirement Decisions for Entergy Louisiana Plants
As discussed in the Form 10-K, in Octoberas 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 New Orleans filed an application seekingLouisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a finding from the City Council thattechnical conference in March 2016 where Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest. In April 2017, 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. ALouisiana presented information on its deactivation/
Entergy Corporation and Subsidiaries
Notes to Financial Statements
retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. 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 conferencefor 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 heldreasonable 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 October 2017,MISO, Entergy Louisiana retired Willow Glen 2 and the parties set another status conference for February 2018 with the intent to continue to pursue settlement4 in the interim.
Filings with the PUCTMarch 2018.
Retail Rates
2011 Rate Case
See Note 2 to the financial statements in the Form 10-K for discussion of Entergy Texas’s 2011 rate case. As discussed in the Form 10-K, several parties, including Entergy Texas, appealed various aspects of the PUCT’s order to the Travis County District Court. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced in the Form 10-K, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issued its opinion affirming the District Court’s decision on all points. Entergy Texas and other parties petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. In September 2017 the Texas Supreme Court denied the petitions for review. Entergy Texas filed a motion for rehearing of the Texas Supreme Court’s denial of the petition for review. That motion is pending.
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 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 parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million, with the resulting rates effective for usage no later than October 1, 2017. In September 2017 the PUCT issued its final order approving the unopposed stipulation and settlement agreement. The amended DCRF rider rates became effective for usage on and after September 1, 2017.
Advanced Metering Infrastructure (AMI) Filing
In April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas and directs that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed an application seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Texas’s modernized power grid. The filing identified a number of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment is expected to produce nominal net operational cost savings to customers of $33 million. Entergy Texas also sought to continue to include in rate base the remaining book value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Texas is seeking approval of fees that would be charged to customers who choose to opt out of receiving service through an advanced meter and instead receive electric service with a non-standard meter. Subject to approval by the PUCT, deployment of the communications network is expected to begin in 2018. In October 2017, Entergy Texas and other parties entered into and filed an unopposed stipulation and settlement agreement. PUCT action on the stipulation and settlement agreement remains pending. Entergy Texas expects a decision from the PUCT by December 2017.
Storm Cost Recovery
Entergy Mississippi
See Note 2 to the financial statementsAs 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 discussionother 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’s storm damage provision. AsMississippi, to explain the implementation of July 31, 2017,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 Entergy Mississippi’s accumulated storm damage provision was less than $10 million, thereforethe alternative, explain why recording such entries is not appropriate. In April 2018, Entergy Mississippi resumed billingfiled its response to the monthly storm damage provisionMPSC 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.
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. 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. The City Council’s resolution also directed Entergy New Orleans to request that Entergy Services file with September 2017 bills.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.
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 proposes to return all of its unprotected excess accumulated deferred income taxes to its customers by the end of 2018.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fuel and purchased power cost recovery
Entergy Arkansas
Energy Cost EqualizationRecovery Rider
In March 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 $0.01547 per kWh to $0.01882 per kWh. The Arkansas Attorney General filed a response to Entergy Arkansas’s annual redetermination filing requesting that the APSC suspend the proposed tariff to investigate the amount of the redetermination 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 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 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 of the issues suggested by the Attorney General in the proceeding at this time. The redetermined rate became effective with the first billing cycle of April 2018.
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 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 to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held before the U.S. Court of Appeals for the Fifth Circuit in February 2018. In April 2018 the U.S. Court of Appeals for the Fifth Circuit reversed the decision of the Federal District Court, reinstating the original PUCT decision. Entergy Texas is considering its legal options. 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.
Retail Rate Proceedings
See Note 2 to the financial statements in the Form 10-K for detailed information regarding retail rate proceedings involving the Utility operating companies. The following are updates to that information.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the APSC (Entergy Arkansas)
Internal Restructuring
As discussed in the Form 10-K, in November 2017, Entergy Arkansas filed an application with the APSC seeking authorization to undertake a discussionrestructuring that would result in the transfer of substantially all of the proceedingsassets 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 filing. If the appropriate approvals are obtained, Entergy Arkansas expects the restructuring will be consummated on or before December 1, 2018.
Filings with the LPSC (Entergy Louisiana)
Retail Rates - Electric
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 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 additional capacity mechanism.
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/
Entergy Corporation and Subsidiaries
Notes to Financial Statements
retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. 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. 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.
Retail Rates - Gas
2017 Rate Stabilization Plan Filing
In January 2018, Entergy Louisiana filed with the 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 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%. If the as-filed rates from the supplemental filing are accepted by the LPSC, customers will receive 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 prospective reduction in the gas infrastructure rider effective with bills rendered on and after the first billing cycle of July 2018.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan
In March 2018, Entergy Mississippi submitted its formula rate plan 2018 test year filing and 2017 look-back filing showing Entergy Mississippi’s earned return for the historical 2017 calendar year and projected earned return for the 2018 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. The filing is currently subject to MPSC review. 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.
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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) Filings
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. Entergy New Orleans is required to report its findings to the City Council by June 2018.
System Agreement includingCost Equalization Proceedings
As discussed in the LPSC’s petition for review of the FERC’s October 2011 and February 2014 orders with the U.S. Court of Appeals for the D.C. Circuit. InForm 10-K, in August 2017 the D.C. Circuit issued a decision addressingdenying the LPSC’s appeal of the FERC’s October 2011 and February 2014 orders. Onorders, but also granting the issue ofrequest by all parties to the FERC’s implementation of the prospective remedy as of June 2005appeal for remand and whether the bandwidth remedy should be extended for an additional 17 months in years 2004-2005, the D.C. Circuit affirmed the FERC’s implementation of the remedy and denied the LPSC’s appeal. Onagency 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 D.C. Circuit granted the FERC’s request for agency reconsideration and2003. The matter was remanded that issue back to the FERC for further proceedings as requested by all partiesand, in March 2018, the LPSC filed at the FERC its initial brief addressing the issue that the D.C. Circuit remanded back to the appeal.FERC in August 2017. In its brief, the LPSC argued that the FERC should require the Utility operating companies to issue refunds for the 20-month refund period from September 2001 to May 2003.
Entergy Arkansas Opportunity SalesRough Production Cost Equalization Rates
Consolidated 2011, 2012, 2013, and 2014 Rate Filing Proceedings
As discussed in the Form 10-K, in June 2009December 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 adirect testimony concerning its complaint requestingproceeding that is consolidated with the FERC determine thatrate filings, challenging certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisionscomponents 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 beginningpending bandwidth calculations for prior years. Hearings occurred in 2002 and requests refunds.
In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and an ALJ’s August 2013 initial decision. The first order denies Entergy’s request for rehearing and affirms FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s August 2013 initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20%. The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order arguing that payments made by Entergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain contracts. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSCNovember 2015, and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. In September 2017 the FERC issued an order denying the request for rehearing on the issue of whether any payments by Entergy Arkansas to the other Utility operating companies should be reduced due to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana.
Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the LPSC submitted testimony disputing certain aspects of the calculations, and Entergy Services submitted answering testimony in January 2017. In February 2017 the FERC staff filed testimony and Entergy Services filed responsive testimony. In March 2017 the LPSC filed rebuttal testimony. A hearing was held in May 2017. In July 2017 the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interestin July 2016. In the initial decision, the ALJ generally agreed with Entergy’s bandwidth calculations with one exception on the accounting related to the other Utility operating companies.Waterford 3 sale/leaseback. In August 2017March 2018 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individual briefs on exceptions challenging various aspects ofissued an order affirming the initial decision. In September 2017April 2018 the LPSC requested rehearing of the FERC’s March 2018 order affirming the ALJ’s initial decision. Based on the March 2018 FERC order, the following preliminary estimated payments/receipts were recorded in March 2018 among the Utility operating companies,companies:
|
| |
| Payments (Receipts) |
| (In Millions) |
| Entergy Arkansas | $6 |
| Entergy New Orleans | $2 |
| Entergy Texas | ($8) |
Entergy Services expects to file in May 2018 the bandwidth true-up payments and receipts for the 2011-2014 rate filings.
Interruptible Load Proceedings
See the Form 10-K for a discussion of the interruptible load proceedings. As discussed in the Form 10-K, the LPSC appealed the APSC,April and September 2016 orders to the MPSC,D.C. Circuit. In March 2018 the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties. The case is pending before the FERC. No payments will be made or received by the Utility operating companies until the FERC issuesD.C. Circuit issued an order reviewingdenying the initialLPSC’s appeal and affirming the FERC’s decision and Entergy submits a subsequent filingthat it would be inequitable to comply with that order.
The effectaward refunds in the proceeding. In April 2018 the LPSC sought rehearing en banc of the FERC’s decisions thus far inD.C. Circuit’s order denying the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies. Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million, which includes interest, for its estimated increased costs and payment to the other Utility operating companies. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Entergy Arkansas, therefore, recorded a regulatory asset in the first quarter 2016 of approximately $75 million, which represents its estimate of the retail portion of the costs.LPSC’s appeal.
Complaint Against System Energy
InAs discussed in the Form 10-K, in January 2017 the APSC and the MPSC filed a complaint withrequesting that the FERC againstestablish proceedings to investigate 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 currentEnergy’s return on equity under the Unit Power Sales Agreement, is 10.94%. The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equityestablish a refund effective date, and establish a new and 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.equity. In September 2017 the FERC established a refund effective date of January 23, 2017, consolidated the return on equity complaint proceeding with the proceeding related to System Energy’s described in “Unit Power Sales Agreement amendments, discussed below,” in the Form 10-K, and directed the parties to engage in settlement proceedings before an ALJ. IfSettlement discussions are ongoing. The refund effective date in connection with the parties failAPSC/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 comeSystem Energy’s return on equity and also requests the FERC to an agreement during settlement proceedings, a prehearing conference will be heldinvestigate System Energy’s capital structure and application of System Energy’s allowed depreciation rates to establish a procedural schedule for hearing proceedings.plant additions associated with the Grand Gulf sale/leaseback transactions. System Energy expects to answer the LPSC complaint in May 2018.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Unit Power Sales Agreement
In August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017.
In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to further proceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, the FERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower than proposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of the further settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the rate decrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding related to the complaint filed by the APSC and MPSC, discussed above, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.
NOTE 3. EQUITY (Entergy Corporation and Entergy 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 September 30, |
| | 2017 | | 2016 |
| | (In Millions, Except Per Share Data) |
| Basic earnings per share | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation |
| $398.2 |
| | 179.6 |
| |
| $2.22 |
| |
| $388.2 |
| | 179.0 |
| |
| $2.17 |
|
| Average dilutive effect of: | | | | | | | | | | | |
| Stock options | | | 0.2 |
| | — |
| | | | 0.3 |
| | — |
|
| Other equity plans | | | 0.7 |
| | (0.01 | ) | | | | 0.7 |
| | (0.01 | ) |
| Diluted earnings per share |
| $398.2 |
| | 180.5 |
| |
| $2.21 |
| |
| $388.2 |
| | 180.0 |
| |
| $2.16 |
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 2.5 million for the three months ended September 30, 2017 and approximately 3.5 million for the three months ended September 30, 2016.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | For the Nine Months Ended September 30, | For the Three Months Ended March 31, |
| | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions, Except Per Share Data) | (In Millions, Except Per Share Data) |
| Basic earnings per share | Income | | Shares | | $/share | | Income | | Shares | | $/share | Income | | Shares | | $/share | | Income | | Shares | | $/share |
| Net income attributable to Entergy Corporation |
| $890.7 |
| | 179.5 |
| |
| $4.96 |
| |
| $1,185.4 |
| | 178.8 |
| |
| $6.63 |
|
| $132.8 |
| | 180.7 |
| |
| $0.73 |
| |
| $82.6 |
| | 179.3 |
| |
| $0.46 |
|
| Average dilutive effect of: | | | | | | | | | | | | | | | | | | | | | | |
| Stock options | | | 0.2 |
| | (0.01 | ) | | | | 0.2 |
| | (0.01 | ) | | | 0.2 |
| | — |
| | | | 0.1 |
| | — |
|
| Other equity plans | | | 0.5 |
| | (0.01 | ) | | | | 0.5 |
| | (0.02 | ) | | | 0.5 |
| | — |
| | | | 0.4 |
| | — |
|
| Diluted earnings per share |
| $890.7 |
| | 180.2 |
| |
| $4.94 |
| |
| $1,185.4 |
| | 179.5 |
| |
| $6.60 |
|
| $132.8 |
| | 181.4 |
| |
| $0.73 |
| |
| $82.6 |
| | 179.8 |
| |
| $0.46 |
|
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 3.34 million for the ninethree months ended September 30, 2017March 31, 2018 and approximately 4.64.9 million for the ninethree months ended September 30, 2016.March 31, 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.
Treasury Stock
During the ninethree months ended September 30, 2017,March 31, 2018, Entergy Corporation issued 496,177281,614 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 ninethree months ended September 30, 2017.March 31, 2018.
Retained Earnings
On October 27, 2017,April 11, 2018, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.89 per share, payable on DecemberJune 1, 2017,2018, to holders of record as of November 9, 2017.May 10, 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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.
Comprehensive Income
Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended September 30, 2017March 31, 2018 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, July 1, 2017 |
| $23,414 |
| |
| ($449,898 | ) | |
| $479,257 |
| |
| $— |
| |
| $52,773 |
| |
| | | | | | | | | |
| 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 reclassifications | 27,884 |
| | — |
| | 35,630 |
| | — |
| | 63,514 |
| 71,566 |
| | — |
| | 838 |
| | 72,404 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (14,671 | ) | | 12,297 |
| | (2,235 | ) | | — |
| | (4,609 | ) | 23,861 |
| | 16,574 |
| | (33,694 | ) | | 6,741 |
|
| Net other comprehensive income (loss) for the period | 13,213 |
| | 12,297 |
| | 33,395 |
| | — |
| | 58,905 |
| 95,427 |
| | 16,574 |
| | (32,856 | ) | | 79,145 |
|
| Ending balance, September 30, 2017 |
| $36,627 |
| |
| ($437,601 | ) | |
| $512,652 |
| |
| $— |
| |
| $111,678 |
| |
| | | | | | | | | |
| Reclassification pursuant to ASU 2018-02 | | (7,756 | ) | | (90,966 | ) | | 114,227 |
| | 15,505 |
|
| | | | | | | | | |
| Ending balance, March 31, 2018 | |
| $50,194 |
| |
| ($605,491 | ) | |
| ($6,201 | ) | |
| ($561,498 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended September 30, 2016 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, July 1, 2016 |
| $32,423 |
| |
| ($453,999 | ) | |
| $411,581 |
| |
| $840 |
| |
| ($9,155 | ) |
| Other comprehensive income (loss) before reclassifications | 45,162 |
| | — |
| | 23,039 |
| | (92 | ) | | 68,109 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (24,190 | ) | | 5,044 |
| | (1,672 | ) | | — |
| | (20,818 | ) |
| Net other comprehensive income (loss) for the period | 20,972 |
| | 5,044 |
| | 21,367 |
| | (92 | ) | | 47,291 |
|
| Ending balance, September 30, 2016 |
| $53,395 |
| |
| ($448,955 | ) | |
| $432,948 |
| |
| $748 |
| |
| $38,136 |
|
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30,March 31, 2017 by component:
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2017 |
| $3,993 |
| |
| ($469,446 | ) | |
| $429,734 |
| |
| $748 |
| |
| ($34,971 | ) |
| Other comprehensive income (loss) before reclassifications | 88,550 |
| | — |
| | 109,372 |
| | (748 | ) | | 197,174 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (55,916 | ) | | 31,845 |
| | (26,454 | ) | | — |
| | (50,525 | ) |
| Net other comprehensive income (loss) for the period | 32,634 |
| | 31,845 |
| | 82,918 |
| | (748 | ) | | 146,649 |
|
| Ending balance, September 30, 2017 |
| $36,627 |
| |
| ($437,601 | ) | |
| $512,652 |
| |
| $— |
| |
| $111,678 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2016 by component: |
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2017 |
| $3,993 |
| |
| ($469,446 | ) | |
| $429,734 |
| |
| $748 |
| |
| ($34,971 | ) |
| Other comprehensive income (loss) before reclassifications | 32,608 |
| | — |
| | 39,872 |
| | — |
| | 72,480 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (33,136 | ) | | 8,632 |
| | (2,045 | ) | | — |
| | (26,549 | ) |
| Net other comprehensive income (loss) for the period | (528 | ) | | 8,632 |
| | 37,827 |
| | — |
| | 45,931 |
|
| Ending balance, March 31, 2017 |
| $3,465 |
| |
| ($460,814 | ) | |
| $467,561 |
| |
| $748 |
| |
| $10,960 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | Foreign currency translation | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) |
| Beginning balance, January 1, 2016 |
| $105,970 |
| |
| ($466,604 | ) | |
| $367,557 |
| |
| $2,028 |
| |
| $8,951 |
|
| Other comprehensive income (loss) before reclassifications | 101,071 |
| | — |
| | 72,087 |
| | (1,280 | ) | | 171,878 |
|
| Amounts reclassified from accumulated other comprehensive income (loss) | (153,646 | ) | | 17,649 |
| | (6,696 | ) | | — |
| | (142,693 | ) |
| Net other comprehensive income (loss) for the period | (52,575 | ) | | 17,649 |
| | 65,391 |
| | (1,280 | ) | | 29,185 |
|
| Ending balance, September 30, 2016 |
| $53,395 |
| |
| ($448,955 | ) | |
| $432,948 |
| |
| $748 |
| |
| $38,136 |
|
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended September 30, 2017March 31, 2018 and 2016:2017:
| | | | | Pension and Other
Postretirement Liabilities | | Pension and Other
Postretirement Liabilities |
| | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| Beginning balance, July 1, | |
| ($49,122 | ) | |
| ($56,905 | ) | |
| Beginning balance, January 1, | | |
| ($46,400 | ) | |
| ($48,442 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (370 | ) | | (232 | ) | | (501 | ) | | (370 | ) |
| Net other comprehensive income (loss) for the period | | (370 | ) | | (232 | ) | | (501 | ) | | (370 | ) |
| Ending balance, September 30, | |
| ($49,492 | ) | |
| ($57,137 | ) | |
| | | | | | |
| Reclassification pursuant to ASU 2018-02 | | | (10,049 | ) | | — |
|
| | | | | | |
| Ending balance, March 31, | | |
| ($56,950 | ) | |
| ($48,812 | ) |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | |
| | | Pension and Other
Postretirement Liabilities |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| Beginning balance, January 1, | |
| ($48,442 | ) | |
| ($56,412 | ) |
Amounts reclassified from accumulated other
comprehensive income (loss) | | (1,050 | ) | | (725 | ) |
| Net other comprehensive income (loss) for the period | | (1,050 | ) | | (725 | ) |
| Ending balance, September 30, | |
| ($49,492 | ) | |
| ($57,137 | ) |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended September 30,March 31, 2018 and 2017 and 2016 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) |
|
| Cash flow hedges net unrealized gain (loss) |
| | |
|
| | |
|
| Power contracts |
| $22,756 |
| |
| $37,550 |
|
| Competitive business operating revenues |
| ($30,082 | ) | |
| $51,227 |
|
| Competitive business operating revenues |
| Interest rate swaps | (185 | ) | | (334 | ) |
| Miscellaneous - net | (122 | ) | | (250 | ) |
| Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | 22,571 |
| | 37,216 |
|
|
| (30,204 | ) | | 50,977 |
|
|
|
| (7,900 | ) | | (13,026 | ) |
| Income taxes | 6,343 |
| | (17,841 | ) |
| Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
| $14,671 |
| |
| $24,190 |
|
|
|
| ($23,861 | ) | |
| $33,136 |
|
|
|
|
|
| | |
|
|
|
| | |
|
|
| Pension and other postretirement liabilities |
|
| | |
|
|
|
| | |
|
|
| Amortization of prior-service credit |
| $6,565 |
| |
| $7,354 |
|
| (a) |
| $5,426 |
| |
| $6,562 |
|
| (a) |
| Amortization of loss | (21,480 | ) | | (15,183 | ) |
| (a) | (24,952 | ) | | (21,571 | ) |
| (a) |
| Settlement loss | (4,200 | ) | | (1,279 | ) |
| (a) | (1,616 | ) | | — |
|
| (a) |
| Total amortization | (19,115 | ) | | (9,108 | ) |
|
| (21,142 | ) | | (15,009 | ) |
|
|
| 6,818 |
| | 4,064 |
|
| Income taxes | 4,568 |
| | 6,377 |
|
| Income taxes |
| Total amortization (net of tax) |
| ($12,297 | ) | |
| ($5,044 | ) |
|
|
| ($16,574 | ) | |
| ($8,632 | ) |
|
|
|
| | |
|
| | |
|
| Net unrealized investment gain (loss) |
| | |
|
| | |
|
| Realized gain (loss) |
| $4,382 |
| |
| $3,279 |
|
| Interest and investment income |
| $53,314 |
| |
| $4,010 |
|
| Interest and investment income |
| (2,147 | ) | | (1,607 | ) |
| Income taxes | (19,620 | ) | | (1,965 | ) |
| Income taxes |
| Total realized investment gain (loss) (net of tax) |
| $2,235 |
| |
| $1,672 |
|
|
|
| $33,694 |
| |
| $2,045 |
|
|
|
|
|
| | |
|
|
|
| | |
|
|
| Total reclassifications for the period (net of tax) |
| $4,609 |
| |
| $20,818 |
|
|
|
| ($6,741 | ) | |
| $26,549 |
|
|
|
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the ninethree months ended September 30,March 31, 2018 and 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 |
| $86,678 |
| |
| $237,483 |
| | Competitive business operating revenues |
| Interest rate swaps | (654 | ) | | (1,104 | ) | | Miscellaneous - net |
| Total realized gain (loss) on cash flow hedges | 86,024 |
| | 236,379 |
| | |
| | (30,108 | ) | | (82,733 | ) | | Income taxes |
| Total realized gain (loss) on cash flow hedges (net of tax) |
| $55,916 |
| |
| $153,646 |
| | |
| | | | | | |
| Pension and other postretirement liabilities | | | | | |
| Amortization of prior-service credit |
| $19,691 |
| |
| $22,064 |
| | (a) |
| Amortization of loss | (64,605 | ) | | (45,535 | ) | | (a) |
| Settlement loss | (5,965 | ) | | (1,279 | ) | | (a) |
| Total amortization | (50,879 | ) | | (24,750 | ) | | |
| | 19,034 |
| | 7,101 |
| | Income taxes |
| Total amortization (net of tax) |
| ($31,845 | ) | |
| ($17,649 | ) | | |
| | | | | | |
| Net unrealized investment gain (loss) | | | | | |
| Realized gain (loss) |
| $51,871 |
| |
| $13,129 |
| | Interest and investment income |
| | (25,417 | ) | | (6,433 | ) | | Income taxes |
| Total realized investment gain (loss) (net of tax) |
| $26,454 |
| |
| $6,696 |
| | |
| | | | | | |
| Total reclassifications for the period (net of tax) |
| $50,525 |
| |
| $142,693 |
| | |
|
| | | | | | | | | | |
| | | Amounts reclassified
from AOCI | | Income Statement Location |
| | | 2018 | | 2017 | | |
| | | (In Thousands) | | |
| Pension and other postretirement liabilities | | | | | | |
| Amortization of prior-service credit | |
| $1,934 |
| |
| $1,934 |
| | (a) |
| Amortization of loss | | (1,257 | ) | | (1,332 | ) | | (a) |
| Total amortization | | 677 |
| | 602 |
| | |
| | | (176 | ) | | (232 | ) | | Income taxes |
| Total amortization (net of tax) | | 501 |
| | 370 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $501 |
| |
| $370 |
| | |
| |
| (a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the three months ended September 30, 2017 and 2016 are as follows:
|
| | | | | | | | | | |
| | | Amounts reclassified
from AOCI | | Income Statement Location |
| | | 2017 | | 2016 | | |
| | | (In Thousands) | | |
| Pension and other postretirement liabilities | | | | | | |
| Amortization of prior-service credit | |
| $1,934 |
| |
| $1,947 |
| | (a) |
| Amortization of loss | | (1,332 | ) | | (1,570 | ) | | (a) |
| Total amortization | | 602 |
| | 377 |
| | |
| | | (232 | ) | | (145 | ) | | Income taxes |
| Total amortization (net of tax) | | 370 |
| | 232 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $370 |
| |
| $232 |
| | |
|
| | | | | | |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. | | | | | |
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the nine months ended September 30, 2017 and 2016 are as follows:
|
| | | | | | | | | | |
| | | Amounts reclassified
from AOCI | | Income Statement Location |
| | | 2017 | | 2016 | | |
| | | (In Thousands) | | |
| Pension and other postretirement liabilities | | | | | | |
| Amortization of prior-service credit | |
| $5,802 |
| |
| $5,841 |
| | (a) |
| Amortization of loss | | (3,996 | ) | | (4,712 | ) | | (a) |
| Total amortization | | 1,806 |
| | 1,129 |
| | |
| | | (756 | ) | | (404 | ) | | Income taxes |
| Total amortization (net of tax) | | 1,050 |
| | 725 |
| | |
| | | | | | | |
| Total reclassifications for the period (net of tax) | |
| $1,050 |
| |
| $725 |
| | |
| |
(a) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details. |
NOTE 4. REVOLVING CREDIT FACILITIES, LINES OF CREDIT, SHORT-TERM BORROWINGS, AND LONG-TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2022. The facility permitsincludes fronting commitments for the issuance 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 ninethree months ended September 30, 2017March 31, 2018 was 2.50%3.31% on the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of September 30, 2017.March 31, 2018.
| | | Capacity | | Borrowings | | Letters of Credit | | Capacity Available | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) | | $3,500 | | $150 | | $6 | | $3,344 | | $1,125 | | $6 | | $2,369 |
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 September 30, 2017,March 31, 2018, Entergy Corporation had $1.3 billion$655 million of commercial paper outstanding. The weighted-average interest rate for the ninethree months ended September 30, 2017March 31, 2018 was 1.45%1.88%.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of September 30, 2017March 31, 2018 as follows:
|
| | | | | | | | | | |
| Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of September 30, 2017March 31, 2018
| | Letters of Credit Outstanding as of September 30, 2017March 31, 2018 |
| Entergy Arkansas | | April 2018 | | $20 million (b) | | 2.49%3.14% | | $— | | $— |
| Entergy Arkansas | | August 2022 | | $150 million (c) | | 2.49%3.12% | | $—50 million | | $— |
| Entergy Louisiana | | August 2022 | | $350 million (d)(c) | | 2.49%2.94% | | $—100 million | | $9.1 million |
| Entergy Mississippi | | May 2018 | | $37.5 million (e)(d) | | 2.74%3.39% | | $— | | $— |
| Entergy Mississippi | | May 2018 | | $35 million (e)(d) | | 2.74%3.39% | | $— | | $— |
| Entergy Mississippi | | May 2018 | | $20 million (e)(d) | | 2.74%3.39% | | $— | | $— |
| Entergy Mississippi | | May 2018 | | $10 million (e)(d) | | 2.74%3.39% | | $— | | $— |
| Entergy New Orleans | | November 2018 | | $25 million (f)(c) | | 2.71%3.36% | | $— | | $0.8 million |
| Entergy Texas | | August 2022 | | $150 million (g)(c) | | 2.74%3.39% | | $— | | $24.4 million |
| |
| (a) | TheFor credit facilities with no borrowings as of March 31, 2018, the interest rate is the estimated interest rate as of September 30, 2017March 31, 2018 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. In April 2018, Entergy Arkansas renewed its credit facility through April 2019. |
| |
| (c) | The credit facility permitsincludes 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 permits the issuance of letters of credit against 50% of the borrowing capacity of the facility. |
| |
(e) | Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. |
| |
(f) | The Entergy Mississippi expects to renew its credit facility permits the issuance of letters of credit against $10 million of the borrowing capacity of the facility. |
| |
(g) | The credit facility permits the issuance of letters of credit against 50% of the borrowing capacity of the facility. facilities prior to expiration. |
The commitment fees on the credit facilities range from 0.075% to 0.275% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of September 30, 2017:March 31, 2018:
|
| | | | | | |
| Company | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of September 30, 2017March 31, 2018 (a)
|
| Entergy Arkansas | | $25 million | | 0.70% | | $21 million |
| Entergy Louisiana | | $125 million | | 0.70% | | $38.523.8 million |
| Entergy Mississippi | | $40 million | | 0.70% | | $12.816.6 million |
| Entergy New Orleans | | $15 million | | 0.75%1.00% | | $7.14.8 million |
| Entergy Texas | | $50 million | | 0.70% | | $19.625.6 million |
| |
| (a) | As of September 30, 2017,March 31, 2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, and $0.1 million for Entergy Mississippi.Mississippi, and $0.2 million for Entergy Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, 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 September 30, 2017March 31, 2018 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
| | | | Authorized | | Borrowings | Authorized | | Borrowings |
| | (In Millions) | (In Millions) |
| Entergy Arkansas | $250 | | $95 | $250 | | $124 |
| Entergy Louisiana | $450 | | $— | $450 | | $— |
| Entergy Mississippi | $175 | | $106 | $175 | | $75 |
| Entergy New Orleans | $100 | | $— | $150 | | $— |
| Entergy Texas | $200 | | $89 | $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 September 30, 2017, $80March 31, 2018, $118 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the ninethree months ended September 30, 2017March 31, 2018 was 2.56%3.10% 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 have the ability to issue letters of credit against the credit facility. This facility provides an additional funding source to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee. As of September 30, 2017, there were no cash borrowings outstanding under the credit facility.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The rate as of September 30, 2017that would most likely apply to outstanding borrowings under the facility was 2.73%.
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 September 30, 2017March 31, 2018 as follows:
| | | Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of September 30, 2017 | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of March 31, 2018 |
| | |
| | (Dollars in Millions) | |
| | (Dollars in Millions) |
| Entergy Arkansas VIE | | May 2019 | | $80 | | 2.49% | | $23.3 (b) | | May 2019 | | $80 | | 3.74% | | $43.9 (b) |
| Entergy Louisiana River Bend VIE | | May 2019 | | $105 | | 2.33% | | $78.8 | | May 2019 | | $105 | | 2.82% | | $52.3 |
| Entergy Louisiana Waterford VIE | | May 2019 | | $85 | | 2.55% | | $76.9 (c) | | May 2019 | | $85 | | 3.35% | | $62.9 (b) |
| System Energy VIE | | May 2019 | | $120 | | 2.44% | | $81.8 (d) | | May 2019 | | $120 | | 3.46% | | $43.2 (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 March 31, 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 September 30, 2017 was $8.3 million.liability. |
| |
(c) | Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for Entergy Louisiana Waterford VIE as of September 30, 2017 was $40.6 million. |
| |
(d) | Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for System Energy VIE as of September 30, 2017 was $31.8 million. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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.
The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of September 30, 2017March 31, 2018 as follows:
|
| | | | |
| Company | | Description | | Amount |
Entergy Arkansas VIE | | 2.62% Series K due December 2017 | | $60 million |
Entergy Arkansas VIE
| | 3.65% Series L due July 2021
| | $90 million |
| Entergy Arkansas VIE | | 3.17% Series M due December 2023 | | $40 million |
| Entergy Louisiana River Bend VIE | | 3.38% Series R due August 2020 | | $70 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 VIE | | 3.42% 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Debt Issuances and Retirements
(Entergy Arkansas)
In May 2017, Entergy Arkansas issued $220 million of 3.5% Series first mortgage bonds due April 2026. These bonds were a further issuance of the 3.5% Series first mortgage bonds issued in January 2016 and June 2016. Entergy Arkansas used a portion of the proceeds from the May 2017 issuance for general corporate purposes and used the remainder of the proceeds to pay, at maturity, its $54.7 million of 1.55% pollution control revenue refunding bonds due October 2017.
(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 usedis using the proceeds, together with other funds, to finance the construction of the Lake Charles Power Station and St. Charles Power Station,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; to repay borrowings under its $350 million credit facility; and for general corporate purposes.
In July 2017 the Entergy Louisiana River Bend nuclear fuel company variable interest entity paid, at maturity, 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 2017March 2018 the System Energy nuclear fuel companytrust variable interest entity paid, at maturity, its $50issued $100 million of 4.02%3.42% Series H notes.J notes due April 2021. The System Energy nuclear fuel trust variable interest entity used the proceeds to purchase additional nuclear fuel.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Value
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of September 30, 2017March 31, 2018 are as follows:
| | | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) | (In Thousands) |
| Entergy |
| $14,846,729 |
| |
| $15,216,502 |
|
| $16,851,636 |
| |
| $16,771,585 |
|
| Entergy Arkansas |
| $3,063,310 |
| |
| $2,979,162 |
|
| $2,978,569 |
| |
| $2,812,019 |
|
| Entergy Louisiana |
| $6,167,496 |
| |
| $6,454,620 |
|
| $6,938,439 |
| |
| $7,022,323 |
|
| Entergy Mississippi |
| $1,121,606 |
| |
| $1,142,048 |
|
| $1,270,399 |
| |
| $1,252,877 |
|
| Entergy New Orleans |
| $444,310 |
| |
| $468,770 |
|
| $436,995 |
| |
| $446,981 |
|
| Entergy Texas |
| $1,451,643 |
| |
| $1,533,790 |
|
| $1,562,555 |
| |
| $1,603,892 |
|
| System Energy |
| $551,391 |
| |
| $533,855 |
|
| $601,582 |
| |
| $576,121 |
|
| |
| (a) | The values exclude lease obligations of $34 million at System Energy and long-term DOE obligations of $184 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. |
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2017 were as follows:
|
| | | | | | | |
| | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) |
| Entergy |
| $15,075,266 |
| |
| $15,367,453 |
|
| Entergy Arkansas |
| $2,952,399 |
| |
| $2,865,844 |
|
| Entergy Louisiana |
| $6,144,071 |
| |
| $6,389,774 |
|
| Entergy Mississippi |
| $1,270,122 |
| |
| $1,285,741 |
|
| Entergy New Orleans |
| $436,870 |
| |
| $455,968 |
|
| Entergy Texas |
| $1,587,150 |
| |
| $1,661,902 |
|
| System Energy |
| $551,488 |
| |
| $529,119 |
|
| |
| (a) | The values exclude the lease obligations of $34 million at System Energy and long-term DOE obligations of $183 million at Entergy Arkansas, and include debt due within one year. |
| |
| (b) | Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein and are based on prices derived from inputs such as benchmark yields and reported trades. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of December 31, 2016 were as follows:
|
| | | | | | | |
| | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) (b) |
| | (In Thousands) |
| Entergy |
| $14,832,555 |
| |
| $14,815,535 |
|
| Entergy Arkansas |
| $2,829,785 |
| |
| $2,623,910 |
|
| Entergy Louisiana |
| $5,812,791 |
| |
| $5,929,488 |
|
| Entergy Mississippi |
| $1,120,916 |
| |
| $1,086,203 |
|
| Entergy New Orleans |
| $448,994 |
| |
| $455,459 |
|
| Entergy Texas |
| $1,508,407 |
| |
| $1,600,156 |
|
| System Energy |
| $551,132 |
| |
| $529,520 |
|
| |
(a) | The values exclude lease obligations of $57 million at Entergy Louisiana and $34 million at System Energy and long-term DOE obligations of $182 million at Entergy Arkansas, and include debt due within one year. |
| |
(b) | Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 8 to the financial statements herein and are based on prices derived from inputs such as benchmark yields and reported trades.herein. |
NOTE 5. STOCK-BASED COMPENSATION (Entergy Corporation)
Entergy grants stock and stock-based awards, which are described more fully in Note 12 to the financial statements in the Form 10-K. Awards under Entergy’s plans generally vest over three years.
Effective January 1, 2017,
Entergy adopted ASU 2016-09, which permits the election of an accounting policy changeCorporation and Subsidiaries
Notes 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.Financial Statements
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 September 30, 2017,March 31, 2018, there were options on 6,055,2264,393,990 shares of common stock outstanding with a weighted-average exercise price of $81.85.$74.39. The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of September 30, 2017. Because Entergy’s common stock price at September 30, 2017 was less than the weighted average exercise price, theMarch 31, 2018. The aggregate intrinsic value of the stock options outstanding as of September 30, 2017March 31, 2018 was zero. The intrinsic value of all “in the money” stock options was $19.7 million as of September 30, 2017.$19.3 million.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table includes financial information for outstanding stock options for the three months ended September 30, 2017March 31, 2018 and 2016:2017:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $1.1 |
| |
| $1.1 |
|
| Tax benefit recognized in Entergy’s net income |
| $0.5 |
| |
| $0.5 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.2 |
| |
| $0.2 |
|
The following table includes financial information for outstanding stock options for the nine months ended September 30, 2017 and 2016:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $3.3 |
| |
| $3.3 |
|
| $1.1 |
| |
| $1.1 |
|
| Tax benefit recognized in Entergy’s net income |
| $1.3 |
| |
| $1.3 |
|
| $0.3 |
| |
| $0.4 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $0.6 |
| |
| $0.6 |
|
| $0.2 |
| |
| $0.2 |
|
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.
The following table includes financial information for other outstanding equity awards for the three months ended September 30, 2017March 31, 2018 and 2016:2017:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $7.6 |
| |
| $8.5 |
|
| $8.8 |
| |
| $8.2 |
|
| Tax benefit recognized in Entergy’s net income |
| $3.0 |
| |
| $3.3 |
|
| $2.2 |
| |
| $3.1 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $2.1 |
| |
| $2.0 |
|
| $2.3 |
| |
| $2.0 |
|
The following table includes financial information for other outstanding equity awards for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| Compensation expense included in Entergy’s net income |
| $24.1 |
| |
| $25.4 |
|
| Tax benefit recognized in Entergy’s net income |
| $9.3 |
| |
| $9.8 |
|
| Compensation cost capitalized as part of fixed assets and inventory |
| $6.3 |
| |
| $5.7 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 6. RETIREMENT AND OTHER POSTRETIREMENT BENEFITS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
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 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 March 31, 2017, with no change in net income, of $21 million for Entergy, $2.8 million for Entergy Arkansas, $6.1 million for Entergy Louisiana, $0.6 million for Entergy Mississippi, $0.2 million for Entergy New Orleans, ($0.2) million for Entergy Texas, and $0.9 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 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 thirdfirst quarters of 20172018 and 2016,2017, included the following components:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $33,410 |
| |
| $35,811 |
|
| Interest cost on projected benefit obligation | 65,206 |
| | 65,403 |
|
| Expected return on assets | (102,056 | ) | | (97,366 | ) |
| Amortization of prior service cost | 65 |
| | 270 |
|
| Amortization of loss | 56,930 |
| | 48,824 |
|
| Net pension costs |
| $53,555 |
| |
| $52,942 |
|
Entergy’s qualified pension cost, including amounts capitalized, for the nine months ended September 30, 2017 and 2016, included the following components: |
| | | | | | | |
| | 2018 | | 2017 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $38,752 |
| |
| $33,410 |
|
| Interest cost on projected benefit obligation | 66,854 |
| | 65,206 |
|
| Expected return on assets | (110,535 | ) | | (102,056 | ) |
| Amortization of prior service cost | 99 |
| | 65 |
|
| Amortization of loss | 68,526 |
| | 56,930 |
|
| Net pension costs |
| $63,696 |
| |
| $53,555 |
|
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $100,230 |
| |
| $107,433 |
|
| Interest cost on projected benefit obligation | 195,618 |
| | 196,209 |
|
| Expected return on assets | (306,168 | ) | | (292,098 | ) |
| Amortization of prior service cost | 195 |
| | 810 |
|
| Amortization of loss | 170,790 |
| | 146,472 |
|
| Net pension costs |
| $160,665 |
| |
| $158,826 |
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the third quarters of 2017 and 2016, included the following components: |
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $5,090 |
| |
| $6,925 |
| |
| $1,472 |
| |
| $625 |
| |
| $1,364 |
| |
| $1,536 |
|
| Interest cost on projected benefit obligation | | 12,944 |
| | 14,809 |
| | 3,732 |
| | 1,791 |
| | 3,392 |
| | 3,091 |
|
| Expected return on assets | | (20,427 | ) | | (23,017 | ) | | (6,131 | ) | | (2,800 | ) | | (6,180 | ) | | (4,663 | ) |
| Amortization of loss | | 11,640 |
| | 12,354 |
| | 3,053 |
| | 1,658 |
| | 2,310 |
| | 2,964 |
|
| Net pension cost | |
| $9,247 |
| |
| $11,071 |
| |
| $2,126 |
| |
| $1,274 |
| |
| $886 |
| |
| $2,928 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $5,181 |
| |
| $7,049 |
| |
| $1,562 |
| |
| $656 |
| |
| $1,416 |
| |
| $1,566 |
|
| Interest cost on projected benefit obligation | | 13,055 |
| | 14,870 |
| | 3,811 |
| | 1,814 |
| | 3,557 |
| | 2,992 |
|
| Expected return on assets | | (19,772 | ) | | (22,096 | ) | | (5,981 | ) | | (2,687 | ) | | (6,062 | ) | | (4,459 | ) |
| Amortization of loss | | 10,936 |
| | 11,946 |
| | 2,985 |
| | 1,615 |
| | 2,340 |
| | 2,604 |
|
| Net pension cost | |
| $9,400 |
| |
| $11,769 |
| |
| $2,377 |
| |
| $1,398 |
| |
| $1,251 |
| |
| $2,703 |
|
The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the nine months ended September 30, 2017 and 2016, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $15,270 |
| |
| $20,775 |
| |
| $4,416 |
| |
| $1,875 |
| |
| $4,092 |
| |
| $4,608 |
|
| Interest cost on projects benefit obligation | | 38,832 |
| | 44,427 |
| | 11,196 |
| | 5,373 |
| | 10,176 |
| | 9,273 |
|
| Expected return on assets | | (61,281 | ) | | (69,051 | ) | | (18,393 | ) | | (8,400 | ) | | (18,540 | ) | | (13,989 | ) |
| Amortization of loss | | 34,920 |
| | 37,062 |
| | 9,159 |
| | 4,974 |
| | 6,930 |
| | 8,892 |
|
| Net pension cost | |
| $27,741 |
| |
| $33,213 |
| |
| $6,378 |
| |
| $3,822 |
| |
| $2,658 |
| |
| $8,784 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $15,543 |
| |
| $21,147 |
| |
| $4,686 |
| |
| $1,968 |
| |
| $4,248 |
| |
| $4,698 |
|
| Interest cost on projected benefit obligation | | 39,165 |
| | 44,610 |
| | 11,433 |
| | 5,442 |
| | 10,671 |
| | 8,976 |
|
| Expected return on assets | | (59,316 | ) | | (66,288 | ) | | (17,943 | ) | | (8,061 | ) | | (18,186 | ) | | (13,377 | ) |
| Amortization of loss | | 32,808 |
| | 35,838 |
| | 8,955 |
| | 4,845 |
| | 7,020 |
| | 7,812 |
|
| Net pension cost | |
| $28,200 |
| |
| $35,307 |
| |
| $7,131 |
| |
| $4,194 |
| |
| $3,753 |
| |
| $8,109 |
|
Non-Qualified Net Pension Cost
Entergy recognized $15.8 million and $8 million in pension cost for its non-qualified pension plans in the third quarters of 2017 and 2016, respectively. Reflected in the pension cost for non-qualified pension plans in the third quarters of 2017 and 2016, respectively, is a $11.6 million and $3.7 million settlement charge related to the payment of lump sum benefits out of the plan. Entergy recognized $28.9 million and $16.5 million in pensions costs for its non-qualified pension plans for the nine months ended September 30, 2017 and 2016, respectively. Reflected in the pension cost for non-qualified pension plans for the nine months ended September 30, 2017 and 2016, respectively, is a $15.5 million and $3.7 million settlement charge related to the payment of lump sum benefits out of this plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans in the third quarters of 2017 and 2016:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2017 |
| $111 |
| |
| $46 |
| |
| $62 |
| |
| $18 |
| |
| $124 |
|
| 2016 |
| $105 |
| |
| $58 |
| |
| $60 |
| |
| $16 |
| |
| $126 |
|
Reflected in Entergy Arkansas’s non-qualified pension costs in the third quarter of 2017 is $10 thousand in settlement charges related to the payment of lump sum benefits out of the plan.
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2017 |
| $483 |
| |
| $141 |
| |
| $189 |
| |
| $55 |
| |
| $377 |
|
| 2016 |
| $317 |
| |
| $176 |
| |
| $179 |
| |
| $48 |
| |
| $380 |
|
Reflected in Entergy Arkansas’s non-qualified pension costs for the nine months ended September 30, 2017 is $173 thousand in settlement charges related to the payment of lump sum benefits out of this plan.
Components of Net Other Postretirement Benefit Cost
Entergy’s other postretirement benefit cost, including amounts capitalized, for the third quarters of 2017 and 2016, included the following components:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $6,729 |
| |
| $8,073 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 13,960 |
| | 14,083 |
|
| Expected return on assets | (9,408 | ) | | (10,455 | ) |
| Amortization of prior service credit | (10,356 | ) | | (11,373 | ) |
| Amortization of loss | 5,476 |
| | 4,554 |
|
| Net other postretirement benefit cost |
| $6,401 |
| |
| $4,882 |
|
Entergy’s other postretirement benefit cost, including amounts capitalized, for the nine months ended September 30, 2017 and 2016, included the following components:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $20,187 |
| |
| $24,219 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 41,880 |
| | 42,249 |
|
| Expected return on assets | (28,224 | ) | | (31,365 | ) |
| Amortization of prior service credit | (31,068 | ) | | (34,119 | ) |
| Amortization of loss | 16,428 |
| | 13,662 |
|
| Net other postretirement benefit cost |
| $19,203 |
| |
| $14,646 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ other postretirement benefitqualified pension cost, including amounts capitalized, for their employees for the thirdfirst quarters of 20172018 and 2016,2017, included the following components:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New Orleans | | Entergy
Texas | | System
Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $863 |
| |
| $1,593 |
| |
| $290 |
| |
| $142 |
| |
| $372 |
| |
| $320 |
|
| Interest cost on APBO | | 2,255 |
| | 3,025 |
| | 690 |
| | 469 |
| | 1,124 |
| | 559 |
|
| Expected return on assets | | (3,959 | ) | | — |
| | (1,200 | ) | | (1,159 | ) | | (2,180 | ) | | (717 | ) |
| Amortization of prior service credit | | (1,278 | ) | | (1,934 | ) | | (456 | ) | | (186 | ) | | (579 | ) | | (378 | ) |
| Amortization of loss | | 1,115 |
| | 465 |
| | 419 |
| | 105 |
| | 826 |
| | 390 |
|
| Net other postretirement benefit cost | |
| ($1,004 | ) | |
| $3,149 |
| |
| ($257 | ) | |
| ($629 | ) | |
| ($437 | ) | |
| $174 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 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 projects 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 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $978 |
| |
| $1,869 |
| |
| $386 |
| |
| $156 |
| |
| $398 |
| |
| $334 |
|
| Interest cost on APBO | | 2,324 |
| | 3,260 |
| | 709 |
| | 448 |
| | 1,039 |
| | 529 |
|
| Expected return on assets | | (4,464 | ) | | — |
| | (1,379 | ) | | (1,154 | ) | | (2,394 | ) | | (814 | ) |
| Amortization of prior service credit | | (1,368 | ) | | (1,947 | ) | | (234 | ) | | (186 | ) | | (681 | ) | | (393 | ) |
| Amortization of loss | | 1,064 |
| | 732 |
| | 223 |
| | 37 |
| | 537 |
| | 287 |
|
| Net other postretirement benefit cost | |
| ($1,466 | ) | |
| $3,914 |
| |
| ($295 | ) | |
| ($699 | ) | |
| ($1,101 | ) | |
| ($57 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $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 |
|
Non-Qualified Net Pension Cost
Entergy recognized $8.9 million and $4.6 million in pension cost for its non-qualified pension plans in the first quarters of 2018 and 2017, respectively. Reflected in the pension cost for non-qualified pension plans in the first quarter of 2018 is a $4.4 million settlement charge related to the payment of lump sum benefits out of the plan.
The Registrant Subsidiaries’ other postretirement benefitSubsidiaries recognized the following pension cost including amounts capitalized, for their employees for their non-qualified pension plans for the nine months ended September 30, 2017first quarters of 2018 and 2016, included the following components:2017:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $2,589 |
| |
| $4,779 |
| |
| $870 |
| |
| $426 |
| |
| $1,116 |
| |
| $960 |
|
| Interest cost on APBO | | 6,765 |
| | 9,075 |
| | 2,070 |
| | 1,407 |
| | 3,372 |
| | 1,677 |
|
| Expected return on assets | | (11,877 | ) | | — |
| | (3,600 | ) | | (3,477 | ) | | (6,540 | ) | | (2,151 | ) |
| Amortization of prior service credit | | (3,834 | ) | | (5,802 | ) | | (1,368 | ) | | (558 | ) | | (1,737 | ) | | (1,134 | ) |
| Amortization of loss | | 3,345 |
| | 1,395 |
| | 1,257 |
| | 315 |
| | 2,478 |
| | 1,170 |
|
| Net other postretirement benefit cost | |
| ($3,012 | ) | |
| $9,447 |
| |
| ($771 | ) | |
| ($1,887 | ) | |
| ($1,311 | ) | |
| $522 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| 2018 |
| $132 |
| |
| $50 |
| |
| $80 |
| |
| $21 |
| |
| $137 |
|
| 2017 |
| $105 |
| |
| $48 |
| |
| $64 |
| |
| $18 |
| |
| $127 |
|
Reflected in Entergy Arkansas’s non-qualified pension costs in the first quarter of 2018 is $12 thousand in settlement charges related to the payment of lump sum benefits out of this plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Net Other Postretirement Benefit Cost
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $2,934 |
| |
| $5,607 |
| |
| $1,158 |
| |
| $468 |
| |
| $1,194 |
| |
| $1,002 |
|
| Interest cost on APBO | | 6,972 |
| | 9,780 |
| | 2,127 |
| | 1,344 |
| | 3,117 |
| | 1,587 |
|
| Expected return on assets | | (13,392 | ) | | — |
| | (4,137 | ) | | (3,462 | ) | | (7,182 | ) | | (2,442 | ) |
| Amortization of prior service credit | | (4,104 | ) | | (5,841 | ) | | (702 | ) | | (558 | ) | | (2,043 | ) | | (1,179 | ) |
| Amortization of loss | | 3,192 |
| | 2,196 |
| | 669 |
| | 111 |
| | 1,611 |
| | 861 |
|
| Net other postretirement benefit cost | |
| ($4,398 | ) | |
| $11,742 |
| |
| ($885 | ) | |
| ($2,097 | ) | |
| ($3,303 | ) | |
| ($171 | ) |
Entergy’s other postretirement benefit cost, including amounts capitalized, for the first quarters of 2018 and 2017, included the following components:
|
| | | | | | | |
| | 2018 | | 2017 |
| | (In Thousands) |
| Service cost - benefits earned during the period |
| $6,782 |
| |
| $6,729 |
|
| Interest cost on accumulated postretirement benefit obligation (APBO) | 12,681 |
| | 13,960 |
|
| Expected return on assets | (10,373 | ) | | (9,408 | ) |
| Amortization of prior service credit | (9,251 | ) | | (10,356 | ) |
| Amortization of loss | 3,432 |
| | 5,476 |
|
| Net other postretirement benefit cost |
| $3,271 |
| |
| $6,401 |
|
The Registrant Subsidiaries’ other postretirement benefit cost, including amounts capitalized, for their employees for the first quarters of 2018 and 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 | |
| $793 |
| |
| $1,556 |
| |
| $321 |
| |
| $129 |
| |
| $330 |
| |
| $306 |
|
| Interest cost on APBO | | 1,997 |
| | 2,789 |
| | 683 |
| | 417 |
| | 939 |
| | 500 |
|
| Expected return on assets | | (4,342 | ) | | — |
| | (1,303 | ) | | (1,313 | ) | | (2,446 | ) | | (783 | ) |
| Amortization of prior service credit | | (1,278 | ) | | (1,934 | ) | | (456 | ) | | (186 | ) | | (579 | ) | | (378 | ) |
| Amortization of loss | | 289 |
| | 388 |
| | 377 |
| | 34 |
| | 206 |
| | 233 |
|
| Net other postretirement benefit cost | |
| ($2,541 | ) | |
| $2,799 |
| |
| ($378 | ) | |
| ($919 | ) | |
| ($1,550 | ) | |
| ($122 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| 2017 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) |
| Service cost - benefits earned during the period | |
| $863 |
| |
| $1,593 |
| |
| $290 |
| |
| $142 |
| |
| $372 |
| |
| $320 |
|
| Interest cost on APBO | | 2,255 |
| | 3,025 |
| | 690 |
| | 469 |
| | 1,124 |
| | 559 |
|
| Expected return on assets | | (3,959 | ) | | — |
| | (1,200 | ) | | (1,159 | ) | | (2,180 | ) | | (717 | ) |
| Amortization of prior service credit | | (1,278 | ) | | (1,934 | ) | | (456 | ) | | (186 | ) | | (579 | ) | | (378 | ) |
| Amortization of loss | | 1,115 |
| | 465 |
| | 419 |
| | 105 |
| | 826 |
| | 390 |
|
| Net other postretirement benefit cost | |
| ($1,004 | ) | |
| $3,149 |
| |
| ($257 | ) | |
| ($629 | ) | |
| ($437 | ) | |
| $174 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 thirdfirst 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 |
| |
| ($88 | ) | |
| $6,565 |
|
|
| ($99 | ) |
|
| $5,595 |
|
|
| ($70 | ) |
|
| $5,426 |
|
| Amortization of loss | | (18,451 | ) | | (2,202 | ) | | (827 | ) | | (21,480 | ) |
| (21,957 | ) |
| (1,932 | ) |
| (1,063 | ) |
| (24,952 | ) |
| Settlement loss | | — |
| | — |
| | (4,200 | ) | | (4,200 | ) |
| — |
|
| — |
|
| (1,616 | ) |
| (1,616 | ) |
| | |
| ($18,516 | ) | |
| $4,516 |
| |
| ($5,115 | ) | |
| ($19,115 | ) |
|
| ($22,056 | ) |
|
| $3,663 |
|
|
| ($2,749 | ) |
|
| ($21,142 | ) |
| Entergy Louisiana | | | | | | | | |
|
|
|
|
|
|
|
|
| Amortization of prior service credit | |
| $— |
| |
| $1,934 |
| |
| $— |
| |
| $1,934 |
|
|
| $— |
|
|
| $1,934 |
|
|
| $— |
|
|
| $1,934 |
|
| Amortization of loss | | (865 | ) | | (465 | ) | | (2 | ) | | (1,332 | ) |
| (867 | ) |
| (388 | ) |
| (2 | ) |
| (1,257 | ) |
| | |
| ($865 | ) | |
| $1,469 |
| |
| ($2 | ) | |
| $602 |
|
|
| ($867 | ) |
|
| $1,546 |
|
|
| ($2 | ) |
|
| $677 |
|
|
| | | | | | | | | | | | | | | | |
| 2016 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($270 | ) |
|
| $7,738 |
|
|
| ($114 | ) |
|
| $7,354 |
|
| Amortization of loss |
| (12,482 | ) |
| (2,063 | ) |
| (638 | ) |
| (15,183 | ) |
| Settlement loss |
| — |
|
| — |
|
| (1,279 | ) |
| (1,279 | ) |
|
|
| ($12,752 | ) |
|
| $5,675 |
|
|
| ($2,031 | ) |
|
| ($9,108 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
| Amortization of prior service credit |
|
| $— |
|
|
| $1,947 |
|
|
| $— |
|
|
| $1,947 |
|
| Amortization of loss |
| (836 | ) |
| (732 | ) |
| (2 | ) |
| (1,570 | ) |
|
|
| ($836 | ) |
|
| $1,215 |
|
|
| ($2 | ) |
|
| $377 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) for the nine months ended September 30, 2017 and 2016:
|
| | | | | | | | | | | | | | | | |
| 2017 |
| Qualified
Pension
Costs |
| Other
Postretirement
Costs |
| Non-Qualified
Pension Costs |
| Total |
|
| (In Thousands) |
|
|
| Entergy |
|
|
|
|
|
|
|
|
| Amortization of prior service (cost)/credit |
|
| ($195 | ) |
|
| $20,152 |
|
|
| ($266 | ) |
|
| $19,691 |
|
| Amortization of loss |
| (55,351 | ) |
| (6,606 | ) |
| (2,648 | ) |
| (64,605 | ) |
| Settlement loss |
| — |
|
| — |
|
| (5,965 | ) |
| (5,965 | ) |
|
|
| ($55,546 | ) |
|
| $13,546 |
|
|
| ($8,879 | ) |
|
| ($50,879 | ) |
| Entergy Louisiana |
|
|
|
|
|
|
|
|
| Amortization of prior service credit |
|
| $— |
|
|
| $5,802 |
|
|
| $— |
|
|
| $5,802 |
|
| Amortization of loss |
| (2,594 | ) |
| (1,395 | ) |
| (7 | ) |
| (3,996 | ) |
|
|
| ($2,594 | ) |
|
| $4,407 |
|
|
| ($7 | ) |
|
| $1,806 |
|
| | | 2016 | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total | |
| 2017 | | | Qualified
Pension
Costs | | Other
Postretirement
Costs | | Non-Qualified
Pension Costs | | Total |
| | | (In Thousands) | | | | (In Thousands) | | |
| Entergy | | | | | | | | | | | | | | | | |
| Amortization of prior service (cost)/credit | |
| ($810 | ) | |
| $23,214 |
| |
| ($340 | ) | |
| $22,064 |
| |
| ($65 | ) | |
| $6,717 |
| |
| ($90 | ) | |
| $6,562 |
|
| Amortization of loss | | (37,446 | ) | | (6,189 | ) | | (1,900 | ) | | (45,535 | ) | | (18,450 | ) | | (2,202 | ) | | (919 | ) | | (21,571 | ) |
| Settlement loss | | — |
| | — |
| | (1,279 | ) | | (1,279 | ) | |
| | |
| ($38,256 | ) | |
| $17,025 |
| |
| ($3,519 | ) | |
| ($24,750 | ) | |
| ($18,515 | ) | |
| $4,515 |
| |
| ($1,009 | ) | |
| ($15,009 | ) |
| Entergy Louisiana | | | | | | | | | | | | | | | | |
| Amortization of prior service credit | |
| $— |
| |
| $5,841 |
| |
| $— |
| |
| $5,841 |
| |
| $— |
| |
| $1,934 |
| |
| $— |
| |
| $1,934 |
|
| Amortization of loss | | (2,508 | ) | | (2,196 | ) | | (8 | ) | | (4,712 | ) | | (865 | ) | | (465 | ) | | (2 | ) | | (1,332 | ) |
| | |
| ($2,508 | ) | |
| $3,645 |
| |
| ($8 | ) | |
| $1,129 |
| |
| ($865 | ) | |
| $1,469 |
| |
| ($2 | ) | |
| $602 |
|
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 September 30, 2017,March 31, 2018, Entergy had contributed $318$91.8 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 |
| $79,725 |
| |
| $86,728 |
| |
| $19,063 |
| |
| $9,842 |
| |
| $16,908 |
| |
| $18,307 |
|
| Pension contributions made through September 2017 |
| $62,252 |
| |
| $67,993 |
| |
| $14,922 |
| |
| $7,832 |
| |
| $13,131 |
| |
| $14,498 |
|
| Remaining estimated pension contributions to be made in 2017 |
| $17,473 |
| |
| $18,735 |
| |
| $4,141 |
| |
| $2,010 |
| |
| $3,777 |
| |
| $3,809 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Entergy 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 March 2018 |
| $17,373 |
| |
| $19,510 |
| |
| $4,194 |
| |
| $2,061 |
| |
| $3,873 |
| |
| $3,715 |
|
| Remaining estimated pension contributions to be made in 2018 |
| $46,689 |
| |
| $52,407 |
| |
| $10,739 |
| |
| $5,189 |
| |
| $7,010 |
| |
| $10,071 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 7. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy Corporation
Entergy’s reportable segments as of September 30, 2017March 31, 2018 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 thirdfirst quarters of 20172018 and 20162017 is as follows: |
| | | | | | | | | | | | | | | | | | | | |
| | | Utility | | Entergy Wholesale Commodities | | All Other | | Eliminations | | Entergy |
| | | (In Thousands) |
| 2017 | | | | | | | | | | |
| Operating revenues | |
| $2,820,421 |
| |
| $423,245 |
| |
| $— |
| |
| ($38 | ) | |
| $3,243,628 |
|
| Income taxes | |
| $230,647 |
| |
| $25,563 |
| |
| ($14,415 | ) | |
| $— |
| |
| $241,795 |
|
| Consolidated net income (loss) | |
| $403,733 |
| |
| $55,765 |
| |
| ($25,956 | ) | |
| ($31,898 | ) | |
| $401,644 |
|
| 2016 | | | | | | | | | | |
| Operating revenues | |
| $2,649,392 |
| |
| $475,345 |
| |
| $— |
| |
| ($34 | ) | |
| $3,124,703 |
|
| Income taxes | |
| $255,603 |
| |
| $6,115 |
| |
| ($3,812 | ) | |
| $— |
| |
| $257,906 |
|
| Consolidated net income (loss) | |
| $447,782 |
| |
| $8,221 |
| |
| ($30,901 | ) | |
| ($31,898 | ) | |
| $393,204 |
|
| | | | | | | | | | | |
Entergy’s segment financial information for the nine months ended September 30, 2017 and 2016 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 | | |
| $2,304,990 |
| |
| $418,924 |
| |
| $— |
| |
| ($33 | ) | |
| $2,723,881 |
|
| Income taxes | | |
| $52,224 |
| |
| ($1,078 | ) | |
| ($7,483 | ) | |
| $— |
| |
| $43,663 |
|
| Consolidated net income (loss) | | |
| $217,940 |
| |
| ($17,779 | ) | |
| ($32,063 | ) | |
| ($31,898 | ) | |
| $136,200 |
|
| Total assets as of March 31, 2018 | | |
| $43,690,561 |
| |
| $5,504,233 |
| |
| $834,463 |
| |
| ($2,747,732 | ) | |
| $47,281,525 |
|
| 2017 | | | | | | | | | | | | | | | | | | | | |
| Operating revenues | |
| $7,156,865 |
| |
| $1,293,867 |
| |
| $— |
| |
| ($96 | ) | |
| $8,450,636 |
| |
| $2,035,112 |
| |
| $553,367 |
| |
| $— |
| |
| ($21 | ) | |
| $2,588,458 |
|
| Income taxes | |
| $459,990 |
| |
| ($507,719 | ) | |
| ($39,826 | ) | |
| $— |
| |
| ($87,555 | ) | |
| $98,492 |
| |
| ($78,337 | ) | |
| ($12,392 | ) | |
| $— |
| |
| $7,763 |
|
| Consolidated net income (loss) | |
| $817,738 |
| |
| $252,455 |
| |
| ($73,434 | ) | |
| ($95,695 | ) | |
| $901,064 |
| |
| $167,623 |
| |
| ($27,197 | ) | |
| ($22,477 | ) | |
| ($31,898 | ) | |
| $86,051 |
|
| Total assets as of September 30, 2017 | |
| $42,669,606 |
| |
| $5,630,207 |
| |
| $985,466 |
| |
| ($2,886,837 | ) | |
| $46,398,442 |
| |
| 2016 | | | | | | | | | | | |
| Operating revenues | |
| $6,855,664 |
| |
| $1,341,534 |
| |
| $— |
| |
| ($80 | ) | |
| $8,197,118 |
| |
| Income taxes | |
| $359,653 |
| |
| ($176,626 | ) | |
| ($34,148 | ) | |
| $— |
| |
| $148,879 |
| |
| Consolidated net income (loss) | |
| $1,027,751 |
| |
| $338,651 |
| |
| ($69,672 | ) | |
| ($95,695 | ) | |
| $1,201,035 |
| |
| 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions in 2016.contributions.
AdditionalTotal restructuring charges for the thirdfirst quarter 2018 were comprised of the following:
|
| | | | | | | | | | | |
| | Employee retention and severance expenses and other benefits-related costs | | Contracted economic development costs | | Total |
| | (In Millions) |
| Balance as of January 1, 2018 |
| $83 |
| |
| $14 |
| |
| $97 |
|
| Restructuring costs accrued | 26 |
| | — |
| | 26 |
|
| Balance as of March 31, 2018 |
| $109 |
| |
| $14 |
| |
| $123 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total restructuring charges for the first quarter 2017 were comprised of the following:
|
| | | | | | | | | | | |
| | Employee retention and severance expenses and other benefits-related costs | | Contracted economic development costs | | Total |
| | (In Millions) |
| Balance as of July 1, 2017 |
| $36 |
| |
| $21 |
| |
| $57 |
|
| Restructuring costs accrued | 23 |
| | — |
| | 23 |
|
| Non-cash portion | — |
| | (7 | ) | | (7 | ) |
| Balance as of September 30, 2017 |
| $59 |
| |
| $14 |
| |
| $73 |
|
|
| | | | | | | | | | | |
| | Employee retention and severance
expenses and other benefits-related costs | | Contracted economic development costs | | Total |
| | (In Millions) |
| Balance as of January 1, 2017 |
| $70 |
| |
| $21 |
| |
| $91 |
|
| Restructuring costs accrued | 24 |
| | — |
| | 24 |
|
| Balance as of March 31, 2017 |
| $94 |
| |
| $21 |
| |
| $115 |
|
In addition, Entergy incurred $16$73 million in the first quarter 2018 and $212 million in the first quarter 2017 of impairment charges in the third quarter 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs are charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.
Additional restructuring charges forGoing forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses associated with management’s strategy to reduce the nine months ended September 30, 2017 were comprisedsize of the following:
|
| | | | | | | | | | | |
| | Employee retention and severance
expenses and other benefits-related costs | | Contracted economic development costs | | Total |
| | (In Millions) |
| Balance as of January 1, 2017 |
| $70 |
| |
| $21 |
| |
| $91 |
|
| Restructuring costs accrued | 89 |
| | — |
| | 89 |
|
| Non-cash portion | — |
| | (7 | ) | | (7 | ) |
| Cash paid out | 100 |
| | — |
| | 100 |
|
| Balance as of September 30, 2017 |
| $59 |
| |
| $14 |
| |
| $73 |
|
In addition, Entergy Wholesale Commodities’ merchant fleet of approximately $165 million in 2018, of which $26 million has been incurred $422as of March 31, 2018, and approximately $205 million of impairment charges in the nine months ended September 30, 2017 related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets.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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 8. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity. For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk. A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk. Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace. Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies. Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.
Derivatives
Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rate swaps. Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments.
Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation. The maximum length of time over which Entergy Wholesale Commodities is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at September 30, 2017March 31, 2018 is approximately 3.53 years. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 88%98% for the remainder of 2017,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2018, of which approximately 31%79% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts. Total planned generation for the remainder of 20172018 is 7.620.7 TWh.
Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guaranty, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allow for termination and liquidation of all positions in the event of a failure or inability to post collateral.
Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts. The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee. As of September 30, 2017, there were noMarch 31, 2018, derivative contracts with counterpartiesone counterparty were in a liability position.position (approximately $0.3 million total). In addition to the corporate guarantee, $0.5 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $6 million in cash collateral and $69 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 $4 million in cash collateral and $28$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, Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of short-term natural gas swaps that financially settle against NYMEX futures. These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy Louisiana and Entergy New Orleans. The total volume of natural gas swaps outstanding as of September 30, 2017March 31, 2018 is 27,702,90063,890,000 MMBtu for Entergy, including 21,673,20053,730,000 MMBtu for Entergy Louisiana 5,042,700and 10,160,000 MMBtu for Entergy Mississippi, and 987,000 MMBtu for Entergy New Orleans.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, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2017 through May 31, 2018. 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 September 30, 2017March 31, 2018 is 75,62118,490 GWh for Entergy, including 17,0144,153 GWh for Entergy Arkansas, 33,7008,162 GWh for Entergy Louisiana, 10,2142,562 GWh for Entergy Mississippi, 3,839943 GWh for Entergy New Orleans, and 10,3262,541 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 September 30, 2017March 31, 2018 and December 31, 2016.2017. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Mississippi, and Entergy MississippiTexas as of September 30, 2017March 31, 2018 and December 31, 2016.2017.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of September 30,March 31, 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.
|
| | | | | | | | | | |
| 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) | | $63 | | ($14) | | $49 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $31 | | ($5) | | $26 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $13 | | ($13) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $5 | | ($5) | | $— | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $3 | | ($3) | | $— | | Entergy Wholesale Commodities |
| Financial transmission rights | | Prepayments and other | | $9 | | ($1) | | $8 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $4 | | ($4) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $1 | | $— | | $1 | | Utility |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2017 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
|
| | | | | | | | | | |
| Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business |
| | | | | (In Millions) | | |
| Derivatives designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $52 | | ($22) | | $30 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $29 | | ($7) | | $22 | | Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities
(current portion) | | $17 | | ($17) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $7 | | ($7) | | $— | | Entergy Wholesale Commodities |
| Derivatives not designated as hedging instruments | | | | | | | | | | |
| Assets: | | | | | | | | | | |
| Electricity swaps and options | | Prepayments and other (current portion) | | $11 | | ($3) | | $8 | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other deferred debits and other assets (non-current portion) | | $1 | | ($1) | | $— | | Entergy Wholesale Commodities |
| Financial transmission rights | | Prepayments and other | | $39 | | ($2) | | $37 | | Utility and Entergy Wholesale Commodities |
| Liabilities: | | | | | | | | | | |
| Electricity swaps and options | | Other current liabilities(current portion) | | $8 | | ($8) | | $— | | Entergy Wholesale Commodities |
| Electricity swaps and options | | Other non-current liabilities (non-current portion) | | $1 | | ($1) | | $— | | Entergy Wholesale Commodities |
| Natural gas swaps | | Other current liabilities | | $1 | | $— | | $1 | | Utility |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2016 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
| | | Instrument | | Balance Sheet Location | | Fair Value (a) | | Offset (b) | | Net (c) (d) | | Business | | 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 $1 million posted and $6 million held as of March 31, 2018 and $1 million posted and $4 million held as of September 30, 2017 and $2 million posted as of December 31, 2016.2017. Also excludes $28$69 million in letters of credit held as of September 30,March 31, 2018 and $34 million in letters of credit held as of December 31, 2017. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended September 30,March 31, 2018 and 2017 and 2016 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) |
| | | (In Millions) | | | | (In Millions) |
| 2017 | | | | | | |
| Electricity swaps and options | | $43 | | Competitive businesses operating revenues | | $23 |
| | | | | | | |
| 2016 | | | | | | |
| Electricity swaps and options | | $70 | | Competitive businesses operating revenues | | $37 |
| |
(a) | Before taxes of $8 million and $13 million for the three months ended September 30, 2017 and 2016, respectively |
The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the nine months ended September 30, 2017 and 2016 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 | | | $91 | | Competitive businesses operating revenues | | ($30) |
| | | |
| 2017 | | |
| Electricity swaps and options | | $136 | | Competitive businesses operating revenues | | $87 | | $50 | | Competitive businesses operating revenues | | $51 |
| | | |
| 2016 | | |
| Electricity swaps and options | | $156 | | Competitive businesses operating revenues | | $237 | |
| |
| (a) | Before taxes of $30($6) million and $83$18 million for the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, respectively |
At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive business operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended September 30,March 31, 2018 and 2017 and 2016 was $2.4$13.3 million and $6.4 million, respectively. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the nine months ended September 30, 2017 and 2016 was $6.4 million and $6.1($1) million, respectively.
Based on market prices as of September 30, 2017,March 31, 2018, unrealized gains recorded in accumulated other comprehensive income on cash flow hedges relating to power sales totaled $59$65 million of net unrealized gains. Approximately $37$41 million is expected to be reclassified from accumulated other comprehensive income to
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 September 30, 2017 and 2016 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) | ($3) |
Financial transmission rights | | $— | | Purchased power expense | (b) | $28 |
Electricity swaps and options | | ($2) | (c) | Competitive business operating revenues | | $— |
| | | | | | |
2016 | | | | | | |
Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $25 |
Financial transmission rights | | $— | | Purchased power expense | (b) | $37 |
Electricity swaps and options | | ($9) | (c) | Competitive business operating revenues | | $— |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the ninethree months ended September 30,March 31, 2018 and 2017 and 2016 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) | ($20) |
| Financial transmission rights |
| $— |
| Purchased power expense | (b) | $103 |
| Electricity swaps and options | | $2 | (c) | Competitive business operating revenues | | $— |
| | | | | | | |
| 2016 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($5) |
| Financial transmission rights | | $— | | Purchased power expense | (b) | $96 |
| Electricity swaps and options | | $6 | (c) | Competitive business operating revenues | | ($9) |
|
| | | | | | |
| 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) | $— |
| Financial transmission rights |
| $— |
| Purchased power expense | (b) | $32 |
| Electricity swaps and options | | $— | (c) | Competitive business operating revenues | | $1 |
| | | | | | |
| 2017 | | | | | | |
| Natural gas swaps | | $— | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($7) |
| Financial transmission rights | | $— | | Purchased power expense | (b) | $30 |
| Electricity swaps and options | | $9 | (c) | Competitive business operating revenues | | $— |
| |
| (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. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of September 30, 2017March 31, 2018 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.
|
| | | | | | |
Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
Assets: | | | | | | |
Financial transmission rights | | Prepayments and other | | $4.4 | | Entergy Arkansas |
Financial transmission rights | | Prepayments and other | | $18.8 | | Entergy Louisiana |
Financial transmission rights | | Prepayments and other | | $5.5 | | Entergy Mississippi |
Financial transmission rights | | Prepayments and other | | $3.5 | | Entergy New Orleans |
Financial transmission rights | | Prepayments and other | | $5.0 | | Entergy Texas |
| | | | | | |
Liabilities: | | | | | | |
Natural gas swaps | | Other current liabilities | | $0.7 | | Entergy Louisiana |
Natural gas swaps | | Other current liabilities | | $0.2 | | Entergy Mississippi |
|
| | | | | | | | | | | | | | | | |
| 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 | |
| $1.9 |
| |
| ($0.1 | ) | |
| $1.8 |
| | Entergy Arkansas |
| Financial transmission rights | | Prepayments and other | |
| $3.8 |
| |
| ($0.4 | ) | |
| $3.4 |
| | Entergy Louisiana |
| Financial transmission rights | | Prepayments and other | |
| $0.9 |
| |
| $— |
| |
| $0.9 |
| | Entergy Mississippi |
| Financial transmission rights | | Prepayments and other | |
| $0.7 |
| |
| $— |
| |
| $0.7 |
| | Entergy New Orleans |
| Financial transmission rights | | Prepayments and other | |
| $1.4 |
| |
| $— |
| |
| $1.4 |
| | Entergy Texas |
| | | | | | | | | | | |
| Liabilities: | | | | | | | | | | |
| Natural gas swaps | | Other current liabilities | |
| $1.2 |
| |
| $— |
| |
| $1.2 |
| | Entergy Louisiana |
| Natural gas swaps | | Other current liabilities | |
| $0.2 |
| |
| $— |
| |
| $0.2 |
| | Entergy Mississippi |
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 20162017 are as follows:
|
| | | | | | |
Instrument | | Balance Sheet Location | | Fair Value (a) | | Registrant |
| | | | (In Millions) | | |
Assets: | | | | | | |
Natural gas swaps | | Prepayments and other | | $10.9 | | Entergy Louisiana |
Natural gas swaps | | Prepayments and other | | $2.3 | | Entergy Mississippi |
Natural gas swaps | | Prepayments and other | | $0.2 | | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Prepayments and other | | $5.4 | | Entergy Arkansas |
Financial transmission rights | | Prepayments and other | | $8.5 | | Entergy Louisiana |
Financial transmission rights | | Prepayments and other | | $3.2 | | Entergy Mississippi |
Financial transmission rights | | Prepayments and other | | $1.1 | | Entergy New Orleans |
Financial transmission rights | | Prepayments and other | | $3.1 | | Entergy 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 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| |
| (d) | As of September 30,March 31, 2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, $0.1 million for Entergy Mississippi, and $0.2 million for Entergy Texas. As of December 31, 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, and $0.1 million for Entergy Mississippi. As of December 31, 2016, letters of credit posted with MISO covered financial transmission rights exposure of $0.3Mississippi, and $0.05 million for Entergy Arkansas and $0.1 million for Entergy Mississippi.Texas. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended September 30,March 31, 2018 and 2017 and 2016 are as follows:
|
| | | | | | |
| Instrument | | Income Statement Location | | Amount of gain
(loss) recorded
in the income statement | | Registrant |
| | | | | (In Millions) | | |
20172018 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($2.6) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.6) | (a) | Entergy Mississippi |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $4.2 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $9.4 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $4.7 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $1.9 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $7.0 | (b) | Entergy Texas |
| | | | | | |
2016 | | | | | | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $19.5 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $5.3 | (a) | Entergy Mississippi |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $7.1 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $20.4 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $6.7 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $0.9 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $1.8 | (b) | Entergy Texas |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the nine months ended September 30, 2017 and 2016 are as follows:
|
| | | | | | |
Instrument |
| Income Statement Location |
| Amount of gain
(loss) recorded
in the income statement |
| Registrant |
| | | | (In Millions) | | |
2017 | | | |
| | |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($16.3) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($3.1)0.2) | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.1) | (a) | Entergy New Orleans |
| | | | | | | |
| Financial transmission rights | | Purchased power expense | | $19.38.0 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $38.917.6 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $16.37.8 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $7.73.3 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $19.2($3.5) | (b) | Entergy Texas |
| | | | | | | |
20162017 | | | | | | |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($4.6)6.1) | (a) | Entergy Louisiana |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $0.3($1.1) | (a) | Entergy Mississippi |
| Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.5)0.1) | (a) | Entergy New Orleans |
| | | | | | | |
| Financial transmission rights | | Purchased power expense | | $20.34.6 | (b) | Entergy Arkansas |
| Financial transmission rights | | Purchased power expense | | $52.515.2 | (b) | Entergy Louisiana |
| Financial transmission rights | | Purchased power expense | | $11.13.1 | (b) | Entergy Mississippi |
| Financial transmission rights | | Purchased power expense | | $2.82.4 | (b) | Entergy New Orleans |
| Financial transmission rights | | Purchased power expense | | $8.75.3 | (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. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Values
The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling. Considerable judgment is required in developing the estimates
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of fair value. Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses realized on financial instruments other than those instruments held by the Entergy Wholesale Commodities business are reflected in future rates and therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.
Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement. Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value. The inputs can be readily observable, corroborated by market data, or generally unobservable. Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.
Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs.
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 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates. They are classified as Level 3 assets and liabilities. The valuations of these assets and liabilities are performed by the Business Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accounting group. The primary functions of the Business Unit Risk
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Business Unit Risk Control group is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Accounting Policy and Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Business Unit Risk Control group reports to the Vice President and Treasurer while the Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The amounts reflected as the fair value of electricity swaps are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts include cash flow hedges that swap fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices. The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities. For contracts that have unit contingent terms, a further discount is applied based on the historical relationship between contract and market prices for similar contract terms.
The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes. Inputs to the valuation include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.
On a daily basis, the Business Unit Risk Control group calculates the mark-to-market for electricity swaps and options. The Business Unit Risk Control group also validates forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions. Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and 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 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
assumptions used in the valuation. The Business Unit Risk Control groups report to the Vice President and Treasurer. The Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 2017March 31, 2018 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 | |
| $459 |
| |
| $— |
| |
| $— |
| |
| $459 |
| |
| $1,148 |
| |
| $— |
| |
| $— |
| |
| $1,148 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 487 |
| | — |
| | — |
| | 487 |
| | 577 |
| | — |
| | — |
| | 577 |
|
| Debt securities | | 1,035 |
| | 1,394 |
| | — |
| | 2,429 |
| | 1,084 |
| | 1,535 |
| | — |
| | 2,619 |
|
| Common trusts (b) | | | | | | | | 4,067 |
| | | | | | | | 3,920 |
|
| Power contracts | | — |
| | — |
| | 60 |
| | 60 |
| | — |
| | — |
| | 75 |
| | 75 |
|
| Securitization recovery trust account | | 53 |
| | — |
| | — |
| | 53 |
| | 52 |
| | — |
| | — |
| | 52 |
|
| Escrow accounts | | 407 |
| | — |
| | — |
| | 407 |
| | 398 |
| | — |
| | — |
| | 398 |
|
| Financial transmission rights | | — |
| | — |
| | 37 |
| | 37 |
| | — |
| | — |
| | 8 |
| | 8 |
|
| | |
| $2,441 |
| |
| $1,394 |
| |
| $97 |
| |
| $7,999 |
| |
| $3,259 |
| |
| $1,535 |
| |
| $83 |
| |
| $8,797 |
|
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | |
| $1 |
| |
| $— |
| |
| $— |
| |
| $1 |
| |
| $1 |
| |
| $— |
| |
| $— |
| |
| $1 |
|
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $1,058 |
| |
| $— |
| |
| $— |
| |
| $1,058 |
| |
| $725 |
| |
| $— |
| |
| $— |
| |
| $725 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 480 |
| | — |
| | — |
| | 480 |
| | 526 |
| | — |
| | — |
| | 526 |
|
| Debt securities | | 985 |
| | 1,228 |
| | — |
| | 2,213 |
| | 1,125 |
| | 1,425 |
| | — |
| | 2,550 |
|
| Common trusts (b) | | | | | | | | 3,031 |
| | | | | | | | 4,136 |
|
| Power contracts | | — |
| | — |
| | 16 |
| | 16 |
| | — |
| | — |
| | 5 |
| | 5 |
|
| Securitization recovery trust account | | 46 |
| | — |
| | — |
| | 46 |
| | 45 |
| | — |
| | — |
| | 45 |
|
| Escrow accounts | | 433 |
| | — |
| | — |
| | 433 |
| | 406 |
| | — |
| | — |
| | 406 |
|
| Gas hedge contracts | | 13 |
| | — |
| | — |
| | 13 |
| |
| Financial transmission rights | | — |
| | — |
| | 21 |
| | 21 |
| | — |
| | — |
| | 21 |
| | 21 |
|
| | |
| $3,015 |
| |
| $1,228 |
| |
| $37 |
| |
| $7,311 |
| |
| $2,827 |
| |
| $1,425 |
| |
| $26 |
| |
| $8,414 |
|
| Liabilities: | | | | | | | | | | | | | | | | |
| Power contracts | |
| $— |
| |
| $— |
| |
| $11 |
| |
| $11 |
| |
| $— |
| |
| $— |
| |
| $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. |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 2017March 31, 2018 and 2016:2017:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights | Power Contracts | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| | (In Millions) | (In Millions) |
| Balance as of July 1, |
| $38 |
| |
| $57 |
| |
| $66 |
| |
| $46 |
| |
| Balance as of January 1, | |
| ($65 | ) | |
| $21 |
| |
| $5 |
| |
| $21 |
|
| Total gains (losses) for the period (a) | | | | | | | | | | | | | | |
| Included in earnings | 2 |
| | — |
| | 6 |
| | — |
| 14 |
| | (1 | ) | | — |
| | — |
|
| Included in other comprehensive income | 43 |
| | — |
| | 70 |
| | — |
| 91 |
| | — |
| | 50 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 8 |
| | — |
| | 22 |
| — |
| | 20 |
| | — |
| | 17 |
|
| Settlements | (23 | ) | | (28 | ) | | (47 | ) | | (37 | ) | 35 |
| | (32 | ) | | (50 | ) | | (30 | ) |
| Balance as of September 30, |
| $60 |
| |
| $37 |
| |
| $95 |
| |
| $31 |
| |
| Balance as of March 31, | |
| $75 |
| |
| $8 |
| |
| $5 |
| |
| $8 |
|
| |
| (a) | Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $0.2 million for the three months ended March 31, 2018 and $0.4 million for the three months ended September 30, 2017 and $1 million for the three months ended September 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 nine months ended September 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 earnings | 6 |
| | 1 |
| | (3 | ) | | — |
|
| Included in other comprehensive income | 136 |
| | — |
| | 156 |
| | — |
|
| Included as a regulatory liability/asset | — |
| | 56 |
| | — |
| | 49 |
|
| Issuances of financial transmission rights | — |
| | 62 |
| | — |
| | 55 |
|
| Settlements | (87 | ) | | (103 | ) | | (247 | ) | | (96 | ) |
| Balance as of September 30, |
| $60 |
| |
| $37 |
| |
| $95 |
| |
| $31 |
|
| |
(a) | Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $1 million for the nine months ended September 30, 2017 and $1 million for the nine months ended September 30, 2016.March 31, 2017. |
The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of September 30, 2017:March 31, 2018:
|
| | | | | | | | | |
| Transaction Type | | Fair Value as of September 30, 2017 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | | (In Millions) | | | | | | | (In Millions) |
| Power contracts - electricity swaps | | $60 | | Unit contingent discount | | +/- | 4% | | $5 |
Entergy Corporation and Subsidiaries
Notes to Financial Statements |
| | | | | | | | | |
| Transaction Type | | Fair Value as of March 31, 2018 | | Significant Unobservable Inputs | | Range from Average % | | Effect on Fair Value |
| | (In Millions) | | | | | | | (In Millions) |
| Power contracts - electricity swaps | | $75 | | Unit contingent discount | | +/- | 4% - 4.75% | | $5 - $7 |
The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
|
| | | | | | | | |
Significant Unobservable Input | | Transaction Type | | Position | | Change to Input | | Effect on Fair Value |
| Unit contingent discount | | Electricity swaps | | Sell | | Increase (Decrease) | | Decrease (Increase) |
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 2017March 31, 2018 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.
Entergy Arkansas
|
| | | | | | | | | | | | | | | | |
| 2017 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) |
| Assets: | | | | | | | | |
| Decommissioning trust funds (a): | | | | | | | | |
| Equity securities | |
| $6.7 |
| |
| $— |
| |
| $— |
| |
| $6.7 |
|
| Debt securities | | 128.4 |
| | 205.7 |
| | — |
| | 334.1 |
|
| Common trusts (b) | | | | | | | | 569.6 |
|
| Securitization recovery trust account | | 7.8 |
| | — |
| | — |
| | 7.8 |
|
| Escrow accounts | | 2.4 |
| | — |
| | — |
| | 2.4 |
|
| Financial transmission rights | | — |
| | — |
| | 4.4 |
| | 4.4 |
|
| | |
| $145.3 |
| |
| $205.7 |
| |
| $4.4 |
| |
| $925.0 |
|
|
| | | | | | | | | | | | | | | | |
| 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 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy LouisianaArkansas
| | | 2017 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2018 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $45.4 |
| |
| $— |
| |
| $— |
| |
| $45.4 |
| |
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 10.8 |
| | — |
| | — |
| | 10.8 |
| |
| $3.6 |
| |
| $— |
| |
| $— |
| |
| $3.6 |
|
| Debt securities | | 145.5 |
| | 333.3 |
| | — |
| | 478.8 |
| | 111.3 |
| | 239.5 |
| | — |
| | 350.8 |
|
| Common trusts (b) | | | | | | | | 770.4 |
| | | | | | | | 581.3 |
|
| Escrow accounts | | 288.8 |
| | — |
| | — |
| | 288.8 |
| |
| Securitization recovery trust account | | 9.4 |
| | — |
| | — |
| | 9.4 |
| | 7.9 |
| | — |
| | — |
| | 7.9 |
|
| Financial transmission rights | | — |
| | — |
| | 18.8 |
| | 18.8 |
| | — |
| | — |
| | 1.8 |
| | 1.8 |
|
| | |
| $499.9 |
| |
| $333.3 |
| |
| $18.8 |
| |
| $1,622.4 |
| |
| $122.8 |
| |
| $239.5 |
| |
| $1.8 |
| |
| $945.4 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | |
| $0.7 |
| |
| $— |
| |
| $— |
| |
| $0.7 |
| |
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $163.9 |
| |
| $— |
| |
| $— |
| |
| $163.9 |
| |
| Decommissioning trust funds (a): | | |
| | |
| | |
| | |
| | | | | | | | |
| Equity securities | | 13.9 |
| | — |
| | — |
| | 13.9 |
| |
| $11.7 |
| |
| $— |
| |
| $— |
| |
| $11.7 |
|
| Debt securities | | 132.3 |
| | 292.5 |
| | — |
| | 424.8 |
| | 115.8 |
| | 232.4 |
| | — |
| | 348.2 |
|
| Common trusts (b) | | | | | | | | 702.0 |
| | | | | | | | 585.0 |
|
| Securitization recovery trust account | | | 3.7 |
| | — |
| | — |
| | 3.7 |
|
| Escrow accounts | | 305.7 |
| | — |
| | — |
| | 305.7 |
| | 2.4 |
| | — |
| | — |
| | 2.4 |
|
| Securitization recovery trust account | | 2.8 |
| | — |
| | — |
| | 2.8 |
| |
| Gas hedge contracts | | 10.9 |
| | — |
| | — |
| | 10.9 |
| |
| Financial transmission rights | | — |
| | — |
| | 8.5 |
| | 8.5 |
| | — |
| | — |
| | 3.0 |
| | 3.0 |
|
| | |
| $629.5 |
| |
| $292.5 |
| |
| $8.5 |
| |
| $1,632.5 |
| |
| $133.6 |
| |
| $232.4 |
| |
| $3.0 |
| |
| $954.0 |
|
Entergy MississippiLouisiana
| | | 2017 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2018 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | |
| $561.9 |
| |
| $— |
| |
| $— |
| |
| $561.9 |
|
| Decommissioning trust funds (a): | | | | | | | | | |
| Equity securities | | | 12.2 |
| | — |
| | — |
| | 12.2 |
|
| Debt securities | | | 145.6 |
| | 370.7 |
| | — |
| | 516.3 |
|
| Common trusts (b) | | | | | | | | | 775.9 |
|
| Escrow accounts | |
| $31.9 |
| |
| $— |
| |
| $— |
| |
| $31.9 |
| | 285.6 |
| | — |
| | — |
| | 285.6 |
|
| Securitization recovery trust account | | | 9.5 |
| | — |
| | — |
| | 9.5 |
|
| Financial transmission rights | | — |
| | — |
| | 5.5 |
| | 5.5 |
| | — |
| | — |
| | 3.4 |
| | 3.4 |
|
| | |
| $31.9 |
| |
| $— |
| |
| $5.5 |
| |
| $37.4 |
| |
| $1,014.8 |
| |
| $370.7 |
| |
| $3.4 |
| |
| $2,164.8 |
|
| | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Gas hedge contracts | |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $0.2 |
| |
| $1.2 |
| |
| $— |
| |
| $— |
| |
| $1.2 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $76.8 |
| |
| $— |
| |
| $— |
| |
| $76.8 |
| |
| $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 | | 31.8 |
| | — |
| | — |
| | 31.8 |
| | 289.5 |
| | — |
| | — |
| | 289.5 |
|
| Gas hedge contracts | | 2.3 |
| | — |
| | — |
| | 2.3 |
| |
| Securitization recovery trust account | | | 2.0 |
| | — |
| | — |
| | 2.0 |
|
| Financial transmission rights | | — |
| | — |
| | 3.2 |
| | 3.2 |
| | — |
| | — |
| | 10.2 |
| | 10.2 |
|
| | |
| $110.9 |
| |
| $— |
| |
| $3.2 |
| |
| $114.1 |
| |
| $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: | | | | | | | | |
| Temporary cash investments | |
| $0.3 |
| |
| $— |
| |
| $— |
| |
| $0.3 |
|
| Escrow accounts | | 32.1 |
| | — |
| | — |
| | 32.1 |
|
| Financial transmission rights | | — |
| | — |
| | 0.9 |
| | 0.9 |
|
| | |
| $32.4 |
| |
| $— |
| |
| $0.9 |
| |
| $33.3 |
|
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Gas hedge contracts | |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $0.2 |
|
|
| | | | | | | | | | | | | | | | |
| 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 Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans
| | | 2017 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2018 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $28.4 |
| |
| $— |
| |
| $— |
| |
| $28.4 |
| |
| $1.3 |
| |
| $— |
| |
| $— |
| |
| $1.3 |
|
| Securitization recovery trust account | | 4.7 |
| | — |
| | — |
| | 4.7 |
| | 4.8 |
| | — |
| | — |
| | 4.8 |
|
| Escrow accounts | | 84.2 |
| | — |
| | — |
| | 84.2 |
| | 79.8 |
| | — |
| | — |
| | 79.8 |
|
| Financial transmission rights | | — |
| | — |
| | 3.5 |
| | 3.5 |
| | — |
| | — |
| | 0.7 |
| | 0.7 |
|
| | |
| $117.3 |
| |
| $— |
| |
| $3.5 |
| |
| $120.8 |
| |
| $85.9 |
| |
| $— |
| |
| $0.7 |
| |
| $86.6 |
|
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $103.0 |
| |
| $— |
| |
| $— |
| |
| $103.0 |
| |
| $32.7 |
| |
| $— |
| |
| $— |
| |
| $32.7 |
|
| Securitization recovery trust account | | 1.7 |
| | — |
| | — |
| | 1.7 |
| | 1.5 |
| | — |
| | — |
| | 1.5 |
|
| Escrow accounts | | 88.6 |
| | — |
| | — |
| | 88.6 |
| | 81.9 |
| | — |
| | — |
| | 81.9 |
|
| Gas hedge contracts | | 0.2 |
| | — |
| | — |
| | 0.2 |
| |
| Financial transmission rights | | — |
| | — |
| | 1.1 |
| | 1.1 |
| | — |
| | — |
| | 2.2 |
| | 2.2 |
|
| | |
| $193.5 |
| |
| $— |
| |
| $1.1 |
| |
| $194.6 |
| |
| $116.1 |
| |
| $— |
| |
| $2.2 |
| |
| $118.3 |
|
| | | | | | | | | | |
| Liabilities: | | | | | | | | | |
| Gas hedge contracts | | |
| $0.2 |
| |
| $— |
| |
| $— |
| |
| $0.2 |
|
Entergy Texas
| | | 2017 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2018 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | | |
| $39.0 |
| |
| $— |
| |
| $— |
| |
| $39.0 |
|
| Securitization recovery trust account | |
| $30.8 |
| |
| $— |
| |
| $— |
| |
| $30.8 |
| | 29.7 |
| | — |
| | — |
| | 29.7 |
|
| Financial transmission rights | | — |
| | — |
| | 5.0 |
| | 5.0 |
| | — |
| | — |
| | 1.4 |
| | 1.4 |
|
| | |
| $30.8 |
| |
| $— |
| |
| $5.0 |
| |
| $35.8 |
| |
| $68.7 |
| |
| $— |
| |
| $1.4 |
| |
| $70.1 |
|
| | | 2016 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2017 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $5.0 |
| |
| $— |
| |
| $— |
| |
| $5.0 |
| |
| $115.5 |
| |
| $— |
| |
| $— |
| |
| $115.5 |
|
| Securitization recovery trust account | | 37.5 |
| | — |
| | — |
| | 37.5 |
| | 37.7 |
| | — |
| | — |
| | 37.7 |
|
| Financial transmission rights | | — |
| | — |
| | 3.1 |
| | 3.1 |
| | — |
| | — |
| | 3.4 |
| | 3.4 |
|
| | |
| $42.5 |
| |
| $— |
| |
| $3.1 |
| |
| $45.6 |
| |
| $153.2 |
| |
| $— |
| |
| $3.4 |
| |
| $156.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
System Energy
| | | 2017 | | Level 1 | | Level 2 | | Level 3 | | Total | |
| 2018 | | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | (In Millions) |
| Assets: | | | | | | | | | | | | | | | | |
| Temporary cash investments | |
| $144.9 |
| |
| $— |
| |
| $— |
| |
| $144.9 |
| |
| $278.7 |
| |
| $— |
| |
| $— |
| |
| $278.7 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 2.6 |
| | — |
| | — |
| | 2.6 |
| | 2.3 |
| | — |
| | — |
| | 2.3 |
|
| Debt securities | | 198.2 |
| | 131.4 |
| | — |
| | 329.6 |
| | 172.5 |
| | 153.1 |
| | — |
| | 325.6 |
|
| Common trusts (b) | | | | | | | | 538.4 |
| | | | | | | | 568.3 |
|
| | |
| $345.7 |
| |
| $131.4 |
| |
| $— |
| |
| $1,015.5 |
| |
| $453.5 |
| |
| $153.1 |
| |
| $— |
| |
| $1,174.9 |
|
| | | 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 |
| |
| $287.1 |
| |
| $— |
| |
| $— |
| |
| $287.1 |
|
| Decommissioning trust funds (a): | | | | | | | | | | | | | | | | |
| Equity securities | | 0.3 |
| | — |
| | — |
| | 0.3 |
| | 3.1 |
| | — |
| | — |
| | 3.1 |
|
| Debt securities | | 248.3 |
| | 58.3 |
| | — |
| | 306.6 |
| | 187.2 |
| | 143.3 |
| | — |
| | 330.5 |
|
| Common trusts (b) | | | | | | | | 473.6 |
| | | | | | | | 572.1 |
|
| | |
| $493.7 |
| |
| $58.3 |
| |
| $— |
| |
| $1,025.6 |
| |
| $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. |
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 2017.March 31, 2018.
| | | | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) | (In Millions) |
| Balance as of July 1, |
| $8.3 |
| |
| $28.3 |
| |
| $9.1 |
| |
| $5.2 |
| |
| $5.5 |
| |
| Balance as of January 1, | |
| $3.0 |
| |
| $10.2 |
| |
| $2.1 |
| |
| $2.2 |
| |
| $3.4 |
|
| Gains included as a regulatory liability/asset | 0.3 |
| | (0.1 | ) | | 1.1 |
| | 0.2 |
| | 6.5 |
| 6.8 |
| | 10.8 |
| | 6.6 |
| | 1.8 |
| | (5.5 | ) |
| Settlements | (4.2 | ) | | (9.4 | ) | | (4.7 | ) | | (1.9 | ) | | (7.0 | ) | (8.0 | ) | | (17.6 | ) | | (7.8 | ) | | (3.3 | ) | | 3.5 |
|
| Balance as of September 30, |
| $4.4 |
| |
| $18.8 |
| |
| $5.5 |
| |
| $3.5 |
| |
| $5.0 |
| |
| Balance as of March 31, | |
| $1.8 |
| |
| $3.4 |
| |
| $0.9 |
| |
| $0.7 |
| |
| $1.4 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 2016.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy
Arkansas | | Entergy
Louisiana | | Entergy
Mississippi | | Entergy
New
Orleans | | Entergy
Texas |
| | (In Millions) |
| Balance as of July 1, |
| $14.0 |
| |
| $16.2 |
| |
| $5.6 |
| |
| $2.0 |
| |
| $8.0 |
|
| Gains included as a regulatory liability/asset | 1.2 |
| | 16.6 |
| | 5.1 |
| | 0.5 |
| | (1.1 | ) |
| Settlements | (7.1 | ) | | (20.4 | ) | | (6.7 | ) | | (0.9 | ) | | (1.8 | ) |
| Balance as of September 30, |
| $8.1 |
| |
| $12.4 |
| |
| $4.0 |
| |
| $1.6 |
| |
| $5.1 |
|
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30,March 31, 2017.
|
| | | | | | | | | | | | | | | | | | | |
| | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) |
| Balance as of January 1, |
| $5.4 |
| |
| $8.5 |
| |
| $3.2 |
| |
| $1.1 |
| |
| $3.1 |
|
| Issuances of financial transmission rights | 8.9 |
| | 31.0 |
| | 9.6 |
| | 5.0 |
| | 7.1 |
|
| Gains included as a regulatory liability/asset | 9.4 |
| | 18.2 |
| | 9.0 |
| | 5.1 |
| | 14.0 |
|
| Settlements | (19.3 | ) | | (38.9 | ) | | (16.3 | ) | | (7.7 | ) | | (19.2 | ) |
| Balance as of September 30, |
| $4.4 |
| |
| $18.8 |
| |
| $5.5 |
| |
| $3.5 |
| |
| $5.0 |
|
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 2016.
| | | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) | (In Millions) |
| Balance as of January 1, |
| $7.9 |
| |
| $8.5 |
| |
| $2.4 |
| |
| $1.5 |
| |
| $2.2 |
|
| $5.4 |
| |
| $8.5 |
| |
| $3.2 |
| |
| $1.1 |
| |
| $3.1 |
|
| Issuances of financial transmission rights | 18.8 |
| | 18.1 |
| | 5.9 |
| | 2.8 |
| | 9.3 |
| |
| Gains (losses) included as a regulatory liability/asset | 1.7 |
| | 38.3 |
| | 6.8 |
| | 0.1 |
| | 2.3 |
| 0.1 |
| | 10.8 |
| | 1.2 |
| | 1.8 |
| | 3.2 |
|
| Settlements | (20.3 | ) | | (52.5 | ) | | (11.1 | ) | | (2.8 | ) | | (8.7 | ) | (4.6 | ) | | (15.2 | ) | | (3.1 | ) | | (2.4 | ) | | (5.3 | ) |
| Balance as of September 30, |
| $8.1 |
| |
| $12.4 |
| |
| $4.0 |
| |
| $1.6 |
| |
| $5.1 |
| |
| Balance as of March 31, | |
| $0.9 |
| |
| $4.1 |
| |
| $1.3 |
| |
| $0.5 |
| |
| $1.0 |
|
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,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
and Palisades. The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.
See Note 16 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 reducing 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 unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still held as of September 30, 2017 and DecemberMarch 31, 20162018 were ($64) million. The equity securities are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $4,554 |
| |
| $1,983 |
| |
| $— |
|
| Debt Securities | | 2,429 |
| | 45 |
| | 14 |
|
| Total | |
| $6,983 |
| |
| $2,028 |
| |
| $14 |
|
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2016 | | | | | | |
| Equity Securities | |
| $3,511 |
| |
| $1,673 |
| |
| $1 |
|
| Debt Securities | | 2,213 |
| | 34 |
| | 27 |
|
| Total | |
| $5,724 |
| |
| $1,707 |
| |
| $28 |
|
The fair values of the decommissioning trustgenerally held in funds related to the Entergy Wholesale Commodities nuclear plants as of September 30, 2017that are $478 million for Indian Point 1, $607 million for Indian Point 2, $774 million for Indian Point 3, $445 million for Palisades, $1,037 million for Pilgrim, and $601 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.designed
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $472 million and $399 million as of September 30, 2017 and December 31, 2016, respectively. The amortized cost of debt securities was $2,398 million as of September 30, 2017 and $2,212 million as of December 31, 2016. As of September 30, 2017, the debt securities have an average coupon rate of approximately 3.21%, an average duration of approximately 6.17 years, and an average maturity of approximately 10.07 years. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.
The available-for-sale securities held as of March 31, 2018 and December 31, 2017 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2018 | | | | | | |
| Debt Securities | | 2,619 |
| | 23 |
| | 48 |
|
| | | | | | | |
| 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 ($2) million as of March 31, 2018 and $7 million as of December 31, 2017 for debt securities. The amortized cost of debt securities was $2,643 million as of March 31, 2018 and $2,539 million as of December 31, 2017. As of March 31, 2018, the debt securities have an average coupon rate of approximately 3.26%, an average duration of approximately 6.18 years, and an average maturity of approximately 10.09 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 September 30, 2017:March 31, 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 |
| $5 |
| |
| $— |
| |
| $732 |
| |
| $5 |
| |
| $1,667 |
| |
| $35 |
|
| More than 12 months | — |
| | — |
| | 267 |
| | 9 |
| | 241 |
| | 13 |
|
| Total |
| $5 |
| |
| $— |
| |
| $999 |
| |
| $14 |
| |
| $1,908 |
| |
| $48 |
|
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 Securities | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | (In Millions) |
| Less than 12 months |
| $23 |
| |
| $1 |
| |
| $1,169 |
| |
| $26 |
|
| $8 |
| |
| $1 |
| |
| $1,099 |
| |
| $7 |
|
| More than 12 months | 1 |
| | — |
| | 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 September 30, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $91 |
| |
| $125 |
|
| 1 year - 5 years | 801 |
| | 763 |
|
| 5 years - 10 years | 789 |
| | 719 |
|
| 10 years - 15 years | 130 |
| | 109 |
|
| 15 years - 20 years | 87 |
| | 73 |
|
| 20 years+ | 531 |
| | 424 |
|
| Total |
| $2,429 |
| |
| $2,213 |
|
During the three months ended September 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $440 million and $564 million, respectively. During the three months ended September 30, 2017 and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2016,The fair value of debt securities, summarized by contractual maturities, as of March 31, 2018 and December 31, 2017 are as follows:
|
| | | | | | | |
| | 2018 | | 2017 |
| | (In Millions) |
| less than 1 year |
| $89 |
| |
| $74 |
|
| 1 year - 5 years | 928 |
| | 902 |
|
| 5 years - 10 years | 784 |
| | 812 |
|
| 10 years - 15 years | 152 |
| | 147 |
|
| 15 years - 20 years | 101 |
| | 100 |
|
| 20 years+ | 565 |
| | 515 |
|
| Total |
| $2,619 |
| |
| $2,550 |
|
During the three months ended March 31, 2018 and 2017, proceeds from the dispositions of securities amounted to $1,091 million and $514 million, respectively. During the three months ended March 31, 2018 and 2017, gross gains of $9$1 million and $6$9 million, respectively, and gross losses of $2$7 million and $1$5 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
DuringThe fair values of the nine months ended September 30,decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31, 2018 are $485 million for Indian Point 1, $614 million for Indian Point 2, $789 million for Indian Point 3, $453 million for Palisades, $1,048 million for Pilgrim, and $591 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 2016, proceeds from$613 million for Vermont Yankee. The fair values of the dispositions of securities amounted to $1,903 million and $1,797 million, respectively. Duringdecommissioning trust funds for the nine months ended September 30, 2017 and 2016, gross gains of $79 million and $26 million, respectively, and gross losses of $9 million and $6 million, respectively, were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.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 September 30, 2017March 31, 2018 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 | | | 350.8 |
| | 0.5 |
| | 9.7 |
|
| | | (In Millions) | | | | | | |
| 2017 | | | | | | | | | | | | |
| Equity Securities | |
| $576.3 |
| |
| $327.2 |
| |
| $— |
| |
| $596.7 |
| |
| $354.9 |
| |
| $— |
|
| Debt Securities | | 334.1 |
| | 3.1 |
| | 2.3 |
| | 348.2 |
| | 2.1 |
| | 3.0 |
|
| Total | |
| $910.4 |
| |
| $330.3 |
| |
| $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 |
| |
The amortized cost of debt securities was $333.3$360 million as of September 30, 2017March 31, 2018 and $310.1$349.1 million as of December 31, 2016.2017. As of September 30, 2017,March 31, 2018, the debt securities have an average coupon rate of approximately 2.53%2.67%, an average duration of approximately 5.835.48 years, and an average maturity of approximately 6.786.90 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still held as of March 31, 2018 were ($8) million. The equity securities are generally held in funds that are designed
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of March 31, 2018:
|
| | | | | | | | |
| | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| Less than 12 months | |
| $277.8 |
| |
| $7.2 |
|
| More than 12 months | | 42.5 |
| | 2.5 |
|
| Total | |
| $320.3 |
| |
| $9.7 |
|
The fair value and gross unrealized losses of the available-for-sale 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, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $168.0 |
| |
| $1.2 |
|
| More than 12 months | — |
| | — |
| | 41.4 |
| | 1.8 |
|
| Total |
| $— |
| |
| $— |
| |
| $209.4 |
| |
| $3.0 |
|
The fair value of debt securities, summarized by contractual maturities, as of March 31, 2018 and December 31, 2017 are as follows:
|
| | | | | | | |
| | 2018 | | 2017 |
| | (In Millions) |
| less than 1 year |
| $14.1 |
| |
| $13.0 |
|
| 1 year - 5 years | 130.6 |
| | 123.4 |
|
| 5 years - 10 years | 177.9 |
| | 180.6 |
|
| 10 years - 15 years | 3.4 |
| | 4.8 |
|
| 15 years - 20 years | 7.0 |
| | 3.4 |
|
| 20 years+ | 17.8 |
| | 23.0 |
|
| Total |
| $350.8 |
| |
| $348.2 |
|
During the three months endedMarch 31, 2018 and 2017, proceeds from the dispositions of securities amounted to $34.9 million and $36 million, respectively. During the three months ended March 31, 2018 and 2017, gross gains of $0.1 million and $0.5 million, respectively, and gross losses of $0.1 million and $0.1 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2018 and December 31, 2017 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2018 | | | | | | |
| Debt Securities | | 516.3 |
| | 5.7 |
| | 8.4 |
|
| | | | | | | |
| 2017 | | | | | | |
| Equity Securities | |
| $818.3 |
| |
| $461.2 |
| |
| $— |
|
| Debt Securities | | 493.8 |
| | 10.9 |
| | 3.6 |
|
| Total | |
| $1,312.1 |
| |
| $472.1 |
| |
| $3.6 |
|
The amortized cost of debt securities was $519 million as of March 31, 2018 and $490 million as of December 31, 2017. As of March 31, 2018, the debt securities have an average coupon rate of approximately 3.83%, an average duration of approximately 6.05 years, and an average maturity of approximately 11.85 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still held as of March 31, 2018 were ($10.8) million. 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 September 30, 2017:March 31, 2018:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $114.4 |
| |
| $0.6 |
|
| More than 12 months | — |
| | — |
| | 37.3 |
| | 1.7 |
|
| Total |
| $— |
| |
| $— |
| |
| $151.7 |
| |
| $2.3 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
|
| | | | | | | | |
| | | Debt Securities |
| | | Fair Value | | Gross Unrealized Losses |
| | | (In Millions) |
| Less than 12 months | |
| $254.9 |
| |
| $4.6 |
|
| More than 12 months | | 78.8 |
| | 3.8 |
|
| Total | |
| $333.7 |
| |
| $8.4 |
|
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 Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
| More than 12 months | — |
| | — |
| | — |
| | — |
|
| Total |
| $— |
| |
| $— |
| |
| $146.7 |
| |
| $4.2 |
|
The fair value of debt securities, summarized by contractual maturities, as of September 30, 2017 and December 31, 2016 are as follows:
|
| | | | | | | |
| | 2017 | | 2016 |
| | (In Millions) |
| less than 1 year |
| $11.8 |
| |
| $16.7 |
|
| 1 year - 5 years | 107.9 |
| | 106.2 |
|
| 5 years - 10 years | 194.4 |
| | 161.2 |
|
| 10 years - 15 years | 2.6 |
| | 7.7 |
|
| 15 years - 20 years | 1.4 |
| | 1.0 |
|
| 20 years+ | 16.0 |
| | 16.5 |
|
| Total |
| $334.1 |
| |
| $309.3 |
|
During the three months endedSeptember 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $51.9 million and $61.2 million, respectively. During the three months ended September 30, 2017 and 2016, gross gains of $0.04 million and $0.4 million, respectively, and gross losses of $0.5 thousand and $0.04 million, respectively were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months endedSeptember 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $219.2 million and $165 million, respectively. During the nine months ended September 30, 2017 and 2016, gross gains of $11.7 million and $1.6 million, respectively, and gross losses of $0.2 million and $0.3 million, respectively were reclassified out of other regulatory liabilities/assets into earnings. |
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $135.3 |
| |
| $1.1 |
|
| More than 12 months | — |
| | — |
| | 84.4 |
| | 2.5 |
|
| Total |
| $— |
| |
| $— |
| |
| $219.7 |
| |
| $3.6 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts. The securities held as of September 30, 2017 and December 31, 2016 are summarized as follows:
|
| | | | | | | | | | | | |
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | | (In Millions) |
| 2017 | | | | | | |
| Equity Securities | |
| $781.2 |
| |
| $420.3 |
| |
| $— |
|
| Debt Securities | | 478.8 |
| | 10.9 |
| | 2.8 |
|
| Total | |
| $1,260.0 |
| |
| $431.2 |
| |
| $2.8 |
|
| | | | | | | |
| 2016 | | | | | | |
| Equity Securities | |
| $715.9 |
| |
| $346.6 |
| |
| $— |
|
| Debt Securities | | 424.8 |
| | 8.0 |
| | 5.0 |
|
| Total | |
| $1,140.7 |
| |
| $354.6 |
| |
| $5.0 |
|
The amortized cost of debt securities was $470.7 million as of September 30, 2017 and $421.9 million as of December 31, 2016. As of September 30, 2017, the debt securities have an average coupon rate of approximately 3.84%, an average duration of approximately 5.76 years, and an average maturity of approximately 11.6 years. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of September 30, 2017:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $127.3 |
| |
| $1.1 |
|
| More than 12 months | — |
| | — |
| | 51.5 |
| | 1.7 |
|
| Total |
| $— |
| |
| $— |
| |
| $178.8 |
| |
| $2.8 |
|
The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2016:
|
| | | | | | | | | | | | | | | |
| | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $198.8 |
| |
| $4.8 |
|
| More than 12 months | — |
| | — |
| | 4.8 |
| | 0.2 |
|
| Total |
| $— |
| |
| $— |
| |
| $203.6 |
| |
| $5.0 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of debt securities, summarized by contractual maturities, as of September 30, 2017March 31, 2018 and December 31, 20162017 are as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $27.7 |
| |
| $31.4 |
|
| $28.1 |
| |
| $23.2 |
|
| 1 year - 5 years | 113.2 |
| | 99.1 |
| 136.7 |
| | 122.8 |
|
| 5 years - 10 years | 117.1 |
| | 122.8 |
| 108.4 |
| | 109.3 |
|
| 10 years - 15 years | 50.7 |
| | 41.4 |
| 52.9 |
| | 52.7 |
|
| 15 years - 20 years | 43.4 |
| | 30.9 |
| 44.7 |
| | 50.7 |
|
| 20 years+ | 126.7 |
| | 99.2 |
| 145.5 |
| | 135.1 |
|
| Total |
| $478.8 |
| |
| $424.8 |
|
| $516.3 |
| |
| $493.8 |
|
During the three months ended September 30,March 31, 2018 and 2017, and 2016, proceeds from the dispositions of securities amounted to $50.5$125.5 million and $54.7$40.6 million, respectively. During the three months ended September 30,March 31, 2018 and 2017, and 2016, gross gains of $2.9$0.5 million and $0.4$0.03 million, respectively, and gross losses of $0.1 million and $0.1 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $176.1 million and $178.2 million, respectively. During the nine months ended September 30, 2017 and 2016, gross gains of $7.9 million and $3 million, respectively, and gross losses of $0.4$0.8 million and $0.2 million, respectively, related to available-for-sale securities 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 September 30, 2017March 31, 2018 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 | | | 325.6 |
| | 1.4 |
| | 5.8 |
|
| | | (In Millions) | | | | | | |
| 2017 | | | | | | | | | | | | |
| Equity Securities | |
| $541.0 |
| |
| $276.2 |
| |
| $— |
| |
| $575.2 |
| |
| $308.6 |
| |
| $— |
|
| Debt Securities | | 329.6 |
| | 3.7 |
| | 1.9 |
| | 330.5 |
| | 4.2 |
| | 1.2 |
|
| Total | |
| $870.6 |
| |
| $279.9 |
| |
| $1.9 |
| |
| $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 $327.8$330 million as of September 30, 2017March 31, 2018 and $309.1$327.5 million as of December 31, 2016.2017. As of September 30, 2017,March 31, 2018, the debt securities have an average coupon rate of approximately 2.44%2.72%, an average duration of approximately 6.376.38 years, and an average maturity of approximately 8.889.39 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2018 on equity securities still held as of March 31, 2018 were ($7.8) million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of 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 September 30, 2017:March 31, 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 |
| $— |
| |
| $— |
| |
| $135.6 |
| |
| $1.0 |
| |
| $240.7 |
| |
| $5.5 |
|
| More than 12 months | — |
| | — |
| | 57.5 |
| | 0.9 |
| | 10.2 |
| | 0.3 |
|
| Total |
| $— |
| |
| $— |
| |
| $193.1 |
| |
| $1.9 |
| |
| $250.9 |
| |
| $5.8 |
|
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 Securities | Equity Securities | | Debt Securities |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | (In Millions) |
| Less than 12 months |
| $— |
| |
| $— |
| |
| $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 |
|
The fair value of debt securities, summarized by contractual maturities, as of September 30, 2017March 31, 2018 and December 31, 20162017 are as follows:
| | | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Millions) | (In Millions) |
| less than 1 year |
| $8.7 |
| |
| $6.6 |
|
| $5.5 |
| |
| $4.1 |
|
| 1 year - 5 years | 170.7 |
| | 188.2 |
| 164.5 |
| | 173.0 |
|
| 5 years - 10 years | 79.1 |
| | 78.5 |
| 78.4 |
| | 78.5 |
|
| 10 years - 15 years | 4.4 |
| | 1.3 |
| 3.8 |
| | 1.0 |
|
| 15 years - 20 years | 6.5 |
| | 7.8 |
| 10.7 |
| | 6.9 |
|
| 20 years+ | 60.2 |
| | 24.2 |
| 62.7 |
| | 67.0 |
|
| Total |
| $329.6 |
| |
| $306.6 |
|
| $325.6 |
| |
| $330.5 |
|
During the three months ended September 30,March 31, 2018 and 2017, and 2016, proceeds from the dispositions of securities amounted to $54.6$54.2 million and $103.5$75.8 million, respectively. During the three months ended September 30,March 31, 2018 and 2017, and 2016, gross gains of $0.2$0.1 million and $0.7$0.1 million, respectively, and gross losses of $0.2$0.6 million and $0.1$0.7 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
During the nine months ended September 30, 2017 and 2016, proceeds from the dispositions of securities amounted to $308.1 million and $392.9 million, respectively. During the nine months ended September 30, 2017 and 2016, gross gains of $0.7 million and $3.2 million, respectively, and gross losses of $1.5 million and $0.4 million, respectively, were reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Other-than-temporary impairments and unrealized gains and losses
Entergy evaluates 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three and nine months ended September 30, 2017March 31, 2018 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 nine months endedSeptember 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 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 second quarter 2016,Tax Cuts and Jobs Act, Entergy maderecorded 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 receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis, using the closing price as indicative of a higher fair market value for the plant. The re-determined basis resulted in a $44 million income tax benefitlimitation in the first quarter 2017.2018 which did not have a material effect on financial position, results of operations, or cash flows.
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 inFor a constructive contributiondiscussion 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 contributedproceedings commenced or other responses by Entergy’s regulators to the subsidiaries. Recognition of the gainTax Cuts 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
tax assets. Entergy’s stock-based compensation plans are discussed inJobs Act, see Note 122 to the financial statements herein and in the Form 10-K.
NOTE 11. PROPERTY, PLANT, AND EQUIPMENT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Construction Expenditures in Accounts Payable
Construction expenditures included in accounts payable at September 30, 2017March 31, 2018 are $219$280 million for Entergy, $28.6$39.1 million for Entergy Arkansas, $95.5$119.4 million for Entergy Louisiana, $7.2$7.5 million for Entergy Mississippi, $0.6$5.6 million for Entergy New Orleans, $18.9$14.8 million for Entergy Texas, and $26.9$41.9 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.
Entergy Louisiana was considered to hold a variable interest in the lessor from which it leased an undivided interest representing approximately 9.3% of the Waterford 3 nuclear plant. After Entergy Louisiana acquired a beneficial interest in the leased assets in March 2016, however, the lessor was no longer considered a variable interest entity. Entergy Louisiana made payments on its lease, including interest, of $9.2 million 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.
System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest representing approximately 11.5% of the Grand Gulf nuclear plant. System Energy is the lessee under this arrangement, which is described in more detail in Note 10 to the financial statements in the Form 10-K. System Energy made payments on its lease, including interest, of $8.6 million in the three months ended September 30, 2017March 31, 2018 and $8.6 million in the three months ended September 30, 2016. System Energy made payments on its lease, including interest, of $17.2 million in the nine months ended September 30, 2017 and $17.2 million in the nine months ended September 30, 2016.March 31, 2017.
NOTE 13. ACQUISITIONS AND DISPOSITIONS (Entergy Corporation)Entergy Corporation and Subsidiaries
Notes to Financial Statements
AcquisitionsNOTE 13. REVENUE RECOGNITION(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Palisades Purchase Power AgreementRevenue Recognition
As discussedEntergy 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 transfer of promised goods or services to customers in an amount that reflects the Form 10-K, Entergy’s purchaseconsideration 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 Palisades planteffective date. Because the standard did not result in 2007 included a unit-contingent, 15-year purchased power agreement (PPA) with Consumers Energyany 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 100% of the plant’s output, excluding any future uprates. Prices under the PPA rangethree months ended March 31, 2018.
Revenues from $43.50/MWh in 2007 to $61.50/MWh in 2022,electric service and the average price undersale of natural gas are recognized when services are transferred to the PPA is $51/MWh. Forcustomer in an amount equal to what Entergy has the PPA, which was at below-market prices atright to bill the timecustomer because this amount represents the value of services provided to customers.
Entergy’s total revenues for the acquisition, Entergy will amortize a liability to revenue over the life of the agreement. The amount that will be amortized each period is based upon the present value, calculated at the date of acquisition, of each year’s difference between revenue under the agreement and revenue based on estimated market prices.three months ended March 31, 2018 were as follows:
|
| | | | |
| | 2018 |
| | (In Thousands) |
| Utility: | | |
| Residential | |
| $892,085 |
|
| Commercial | | 595,720 |
|
| Industrial | | 597,186 |
|
| Governmental | | 56,478 |
|
| Total billed retail | | 2,141,469 |
|
| | |
| Sales for resale (a) | | 69,526 |
|
| Other electric revenues (b) | | 27,433 |
|
| Non-customer revenues (c) | | 9,834 |
|
| Total electric revenues | | 2,248,262 |
|
| | |
| Natural gas | | 56,695 |
|
| | |
| Entergy Wholesale Commodities: | | |
| Competitive businesses sales (a) | | 409,135 |
|
| Non-customer revenues (c) | | 9,789 |
|
| Total competitive businesses | | 418,924 |
|
| | |
| Total operating revenues | |
| $2,723,881 |
|
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ total revenues for the three months ended March 31, 2018 were as follows:
|
| | | | | | | | | | | | | | | | | | | | |
| 2018 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | | (In Thousands) |
| | | | | | | | | | | |
| Residential | |
| $235,524 |
| |
| $295,517 |
| |
| $148,342 |
| |
| $64,575 |
| |
| $148,126 |
|
| Commercial | | 120,634 |
| | 224,928 |
| | 110,460 |
| | 54,272 |
| | 85,427 |
|
| Industrial | | 111,477 |
| | 352,336 |
| | 42,501 |
| | 7,570 |
| | 83,302 |
|
| Governmental | | 4,648 |
| | 17,310 |
| | 10,848 |
| | 17,691 |
| | 5,981 |
|
| Total billed retail | | 472,283 |
|
| 890,091 |
|
| 312,151 |
|
| 144,108 |
|
| 322,836 |
|
| | | | | | | | | | | |
| Sales for resale (a) | | 66,103 |
| | 89,255 |
| | 1,993 |
| | 13,337 |
| | 23,361 |
|
| Other electric revenues (b) | | 10,024 |
| | 20,503 |
| | (719 | ) | | (3,111 | ) | | 2,264 |
|
| Non-customer revenues (c) | | 2,614 |
| | 5,257 |
| | 2,318 |
| | 1,484 |
| | 479 |
|
| Total electric revenues | | 551,024 |
|
| 1,005,106 |
|
| 315,743 |
|
| 155,818 |
|
| 348,940 |
|
| | | | | | | | | | | |
| Natural gas | | — |
| | 24,238 |
| | — |
| | 32,457 |
| | — |
|
| | | | | | | | | | | |
| Total operating revenues | |
| $551,024 |
|
|
| $1,029,344 |
|
|
| $315,743 |
|
|
| $188,275 |
|
|
| $348,940 |
|
| |
| (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 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 December 2016,the MISO market, Entergy announcedoffers 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 it had reached an agreementtakes 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.
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, to amend the existing PPA to terminate early, on May 31, 2018, subject to regulatory approvals. Entergy updated the liability amortization calculation to reflect the expected early terminationexecuted as part of the PPA. In September 2017,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 andissues monthly invoices to Consumers Energy terminatedfor 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 amendment agreement, and Entergy announcedpricing was considered below-market at the decision to continue to operatetime of acquisition, a liability was recorded for the plant through the endfair value of the PPA. Based on that decision, the amounts to bebelow-market PPA, and is being amortized to revenue forover the next five years will be approximately $2 million forlife of the remainder of 2017, $6 million in 2018, $10 million in 2019, $11 million in 2020, and $12 million in 2021.agreement.
DispositionsPractical Expedients and Exceptions
FitzPatrickEntergy 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 right to bill the customer for services performed.
In March 2017
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 NRC approved the saleinitial 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 FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy insubsidiaries within the Entergy Wholesale Commodities segment to Exelon.have operations and maintenance services contracts that have fixed components and terms longer than one year. The transaction closed in March 2017 for a purchase price of $110 million, including the $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilitiestotal fixed consideration 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.these unsatisfied performance obligations, however, is not material to Entergy revenues.
As discussed in Note 10 to the financial statements herein, as a resultRecovery 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.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 Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf. The assetscapital 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 liabilities associated with the sale of FitzPatrick to Exelon were classified as held for sale on Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet as of December 31, 2016. The disposition-date fair value of the decommissioning trust fund was $805 million, classified within other deferred debits, and the disposition-date fair value of the asset retirement obligation was $727 million, classified within other non-current liabilities. The transaction also included property, plant, and equipmentconcurrent 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.
NOTE 14. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. Following are updates to that discussion.
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 third quarter 2017, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Palisades. The revised estimate resulted in a $68.7 million reduction in its decommissioning cost liability, along with a corresponding reduction in the plant asset. The reduction in its estimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning cash flows due to the decision to continue to operate the plant until the spring of 2022.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
________________
In the opinion of the management of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals and reclassification of previously reported amounts to conform to current classifications) necessary for a fair statement of the results for the interim periods presented. Entergy’s business is subject to seasonal fluctuations, however, with peak periods occurring typically during the first and third quarters. The results for the interim periods presented should not be used as a basis for estimating results of operations for a full year.
Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk
See “Market and Credit Risk Sensitive Instruments” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
Part I, Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of September 30, 2017,March 31, 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 September 30, 2017March 31, 2018 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 2017 Compared to Third Quarter 2016
Net income decreased $17.5 million primarily due to lower net revenue, higher nuclear refueling outage expenses, a higher effective income tax rate, and higher taxes other than income taxes, partially offset by lower other operation and maintenance expenses.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income decreased $17.8increased $22 million primarily due to higher nuclear refueling outagenet revenue and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses, higher depreciation and amortization expenses, a higher effective income tax rate, higher taxes other than income taxes, and lower net revenue, partially offset by higher other income.nuclear refueling outage expenses.
Net Revenue
Third Quarter 2017 Compared to Third Quarter 2016
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the third quarter 2017 to the third quarter 2016:
|
| | | |
| Amount |
| (In Millions) |
2016 net revenue |
| $496.3 |
|
Volume/weather | (24.6 | ) |
Retail electric price | 9.7 |
|
Other | 0.4 |
|
2017 net revenue |
| $481.8 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales. The decrease was partially offset by an increase of 168 GWh, or 9%, in industrial usage primarily due to a new customer in the primary metals industry.
The retail electric price variance is primarily due to the implementation of formula rate plan rates, as approved by the APSC, effective with the first billing cycle of January 2017. The increase was partially offset by a decrease in the energy efficiency rider, as approved by the APSC, effective January 2017. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).credits. Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2017first quarter 2018 to the nine months ended September 30, 2016:first quarter 2017:
|
| | | |
| | Amount |
| | (In Millions) |
20162017 net revenue |
| $1,183.7 |
|
Volume/weather | (40.0 | ) |
Asset retirement obligation | (11.1 | ) |
Opportunity sales | 7.5330.3 |
|
| Retail electric price | 34.122.4 |
|
| Volume/weather | 20.4 |
|
| Other | 4.41.0 |
|
20172018 net revenue |
| $1,178.6374.1 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales during the billed and unbilled sales periods. The decrease was partially offset by an increase of 520 GWh, or 10%, in industrial usage primarily due to a new customer in the primary metals industry.
The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and trust earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by a decrease in regulatory credits because of an increase in decommissioning trust earnings, including portfolio rebalancing for the ANO 1 decommissioning trust fund.
The opportunity sales variance results from the estimated net revenue effect recorded in the first quarter 2016 in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the opportunity sales proceeding.
The retail electric price variance is primarily due to the implementation ofan increase in formula rate plan rates effective with the first billing cycle of January 20172018 and an increase in base ratesthe energy efficiency rider effective February 24, 2016,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 14filing.
The volume/weather variance is primarily due to an increase of 599 GWh, or 12%, in billed electricity usage, including the financial statementseffect 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 Form 10-K for discussion of the Union Power Station purchase.primary metals industry.
Other Income Statement Variances
Third Quarter 2017 Compared to Third Quarter 2016
Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages as compared to previous outages.
Other operation and maintenance expenses decreasedincreased primarily due to:
a decreaseto an increase of $8.8$6.5 million in nuclear generation expenses primarily due to a lower scope of work,higher labor costs, including a lower scope of work performed during plant outages, in the third quarter 2017 compared to the third quarter 2016, partially offset by higher nuclearcontract labor, costs to position the nuclear fleet to meet its operational goals.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
$3.7 million in energy efficiency costs. The increase was partially offset by higher nuclear insurance refunds of $3.6 million. 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.
a decrease of $5.2 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs; and
a decrease of $4.2 million in energy efficiency costs, including $4.6 million in credits received in the third quarter 2017 related to incentives recognized as a result of participation in energy efficiency programs, and the effects of true ups to the energy efficiency filings in September 2017 for fixed costs to be collected from customers.
The decrease was partially offset by:
the effect of recording in July 2016 the final court decision in a lawsuit against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of $5.5 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements in the Form 10-K for discussion of Entergy Arkansas’s spent nuclear fuel litigation; and
an increase of $2.1 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs.
Taxes other than income taxes increased primarily due to anincreases in local franchise taxes and payroll taxes. The increase in ad valoremlocal franchise taxes is primarily due to higher assessmentsbilling factors and higher millage rates.electric retail revenues.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages compared to previous outages.
Other operation and maintenance expenses decreased primarily due to:
a decrease of $24.9 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs as compared to the prior year, partially offset by higher nuclear labor costs, including contract labor,to position the nuclear fleet to meet its operational goals. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - ANO Damage, Outage, and NRC Reviews” in the Form 10-K for a discussion of the ANO stator incident and subsequent NRC reviews. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals;
a decrease of $7.6 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs; and
a decrease of $7 million in energy efficiency costs, including $4.6 million in credits received in the third quarter 2017 related to incentives recognized as a result of participation in energy efficiency programs, and the effects of true ups to the energy efficiency filings in September 2017 for fixed costs to be collected from customers.
The decrease was partially offset by:
the deferral in the first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC as part of the 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case settlement;
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
an increase of $11 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs and higher labor costs, including contract labor;
the effect of recording in July 2016 the final court decision in a lawsuit against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of $5.5 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements in the Form 10-K for discussion of Entergy Arkansas’s spent nuclear fuel litigation; and
an increase of $3.2 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in the first quarter 2016.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes primarily due to higher assessments and higher millage rates.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Block 2 of the Union Power Station purchased in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.service.
Other incomeInterest expense increased primarily due to higher realized gainsthe issuance of $220 million of 3.5% Series first mortgage bonds in 2017 as compared to the same period in 2016 on the decommissioning trust fund investments, including portfolio rebalancing for the ANO 1 decommissioning trust fund.May 2017.
Income Taxes
The effective income tax rate was 39%20.7% for the thirdfirst quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to 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 state income taxes and a write-off of a stock-based compensation deferred tax asset.
The effective income tax rate was 44.4% for the first quarter 2017. The difference in the effective income tax rate for the thirdfirst quarter 2017 versus the federal statutory rate of 35% was primarily due to state income taxes.
The effective incomea write-off of a stock-based compensation deferred tax rate was 39.4% for the nine months ended September 30, 2017. The difference in the effective income tax rate for the nine months ended September 30, 2017 versus the federal statutory rate of 35% was primarily due toasset, state income taxes, and certain book and tax differences related to utility plant items, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 36.1% for the third quarter 2016. The difference in the effective income tax rate for the third quarter 2016 versus the federal statutory rate of 35% was primarily due to state income taxes, partially offset by flow-through tax accounting.
The effective income tax rate was 37.4% for the nine months ended September 30, 2016. The difference in the effective income tax rate for the nine months ended September 30, 2016 versus the federal statutory rate of 35% was primarily due to state income taxes and certain book and tax differences related to utility plant items, partially offset by flow-through tax accounting and book and tax differences related to the allowance for equity funds used during construction.
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 Reviews”Subsidiaries 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, and Note 2 to the financial statements herein and in the Form 10-K contains discussion of replacement power costs.proceedings commenced or other responses by Entergy’s regulators to the Tax Act.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the ninethree months ended September 30,March 31, 2018 and 2017 and 2016 were as follows:
| | | | 2017 | | 2016 | 2018 | | 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 activities | 367,551 |
| | 473,800 |
| 179,890 |
| | 154,541 |
|
| Investing activities | (667,841 | ) | | (774,210 | ) | (161,344 | ) | | (207,097 | ) |
| Financing activities | 280,245 |
| | 294,686 |
| (23,839 | ) | | 32,522 |
|
| Net decrease in cash and cash equivalents | (20,045 | ) | | (5,724 | ) | (5,293 | ) | | (20,034 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $464 |
| |
| $3,411 |
|
| $923 |
| |
| $475 |
|
Operating Activities
Net cash flow provided by operating activities decreased $106.2increased $25.3 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to an increase of $46.1 million in spending on nuclear refueling outages in 2017, the timing of payments to vendors and a decrease in net income.
Investing Activities
Net cash flow used in investing activities decreased $106.4 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to the purchasetiming of Power Block 2recovery of the Union Power Station in March 2016 for approximately $237 millionfuel and a decrease of $36.9 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.
The decrease waspurchased power costs, partially offset by:by the timing of receivables from customers.
$66 million in funds held on deposit for principal and interest payments due October 1, 2017;
an increase of $61.6 million in nuclear construction expenditures primarily due to a higher scope of work performed on various nuclear projects in 2017;
an increase of $22.9 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017;
an increase of $21 million in distribution construction expenditures primarily due to a higher scope of work performed on various projects in 2017; and
an increase of $18.6 million in information technology construction expenditures primarily due to increased spending on substation circuit replacement.
Financing Activities
Net cash flow provided by financing activities decreased $14.4 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to:
a $200 million capital contribution received from Entergy Corporation in March 2016 primarily in anticipation of Entergy Arkansas’s purchase of Power Block 2 of the Union Power Station; and
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $45.8 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 primarily due to a decrease in cash used of $49 million as a result of the fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle and a decrease of $15.8 million in transmission construction expenditures primarily due to a lower scope of work performed in 2018 as compared to the same period in 2017. The decrease was partially offset by an increase of $8.6 million in information technology construction expenditures primarily due to increased spending on various technology projects and an increase of $6.1 million in nuclear construction expenditures primarily due to a higher scope of work performed on various nuclear projects in 2018 as compared to the same period in 2017.
Financing Activities
Entergy Arkansas’s financing activities used $23.8 million of cash for the three months ended March 31, 2018 compared to providing $32.5 million of cash for the three months ended March 31, 2017 primarily due to:
net repayments of short-term borrowings of $23.3$6.1 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 20172018 as compared to net short-term borrowings of $35.7$52.3 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2017;
borrowings of $50 million in 2016.2018 on the Entergy Arkansas long-term credit facility;
The decrease was partially offset by:
the net issuancerepayment of $215.9$24.9 million of long-term debtborrowings in 2017 as compared to2018 on the net issuance of $156.1 million of long-term debt in 2016;
the redemptions of $75 million of 6.45% Series preferred stock and $10 million of 6.08% Series preferred stock in 2016;Entergy Arkansas nuclear fuel company variable interest entity credit facility; and
money pool activity.
IncreasesDecreases in Entergy Arkansas’s payable to the money pool are a sourceuse of cash flow, and Entergy Arkansas’s payable to the money pool increaseddecreased by $43.9$42.3 million in 20172018 compared to decreasing by $3.7$20.2 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.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 55.8 | % | | 55.3 | % | 55.3 | % | | 55.5 | % |
| Effect of excluding the securitization bonds | (0.3 | %) | | (0.4 | %) | (0.3 | %) | | (0.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 55.5 | % | | 54.9 | % | 55.0 | % | | 55.2 | % |
| Effect of subtracting cash | — | % | | (0.2 | %) | — | % | | — | % |
| Net debt to net capital, excluding securitization bonds (a) | 55.5 | % | | 54.7 | % | 55.0 | % | | 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
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Arkansas is developing its capital investment plan for 2018 through 2020 and currently anticipates making $2.1 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; investments in ANO 1 and 2; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Arkansas’s payables to the money pool were as follows:
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $95,114 | | $51,232 | | $49,073 | | $52,742 |
|
| | | | | | |
March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $123,858 | | $166,137 | | $31,008 | | $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 2022. Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2018.2019. The $150 million credit facility permitsincludes fronting commitments for the issuance of letters of credit against 50%$5 million of the borrowing capacity of the facility. As of September 30, 2017, there were noMarch 31, 2018, cash borrowings of $50 million 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 September 30, 2017,March 31, 2018, a $2$1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in May 2019. As of September 30, 2017, $8.3March 31, 2018, $43.9 million in letters of credit to support a like amount of commercial paper issued and $15 million in loans were outstanding under the Entergy Arkansas nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Retail Rates
2016 Formula Rate Plan FilingInternal Restructuring
As discussed in the Form 10-K, Entergy Arkansas is required to make a supplemental filing supporting the recovery of certain nuclear costs. In Aprilin November 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit its supplemental filing in conjunctionan application with its 2017 formula rate plan filing, which was subsequently made in July 2017 and is discussed below. In May 2017 the APSC approvedseeking authorization to undertake a restructuring that would result in the joint motiontransfer of substantially all of the assets and proposaloperations 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’s supplemental filing onArkansas also filed a concurrent schedulenotice with the Missouri Public Service Commission in December 2017 formula rate plan filing. In doing so, however, the APSC noted that a determinationout of whether the supplemental information supporting certain nuclear expenditures will be considered in the hearing for the 2017 formula rate plan filing or a separate hearing will be made at a later time. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
approve a unanimous settlement agreement resolving all issues in the docket and providing for recoveryan abundance of the 2017 and 2018 nuclear costs.
2017 Formula Rate Plan Filing
In July 2017,caution, although Entergy Arkansas filed withdoes not serve any retail customers in Missouri. In April 2018 the APSC its 2017 formula rate plan filing showingMissouri Public Service Commission approved Entergy Arkansas’s projected earned return on common equity forfiling. If 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%. Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and the projected annual revenue requirement increase exceeds the four percent, resulting in a proposed increase for the 2017 formula rate plan of $70.9 million. In October 2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments that projected a $126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on a revision to the four percent cap calculation. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs. The settlement agreement does not affect Entergy Arkansas’s proposed $71.1 million revenue requirement increase. If a final order is not issued by December 13, 2017, the proposed formula rate plan adjustment will become effective January 2, 2018, subject to refund.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’s deployment of advanced metering infrastructure is in the public interest. 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. Entergy Arkansas filed rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement. Also in August 2017 supplemental testimony was filed and a settlement hearing was held. In October 2017 the APSC issued an order finding that Entergy Arkansas’s AMI deployment is in the public interest and approving the settlement agreement subject to a minor modification.appropriate approvals are obtained, Entergy Arkansas expects to recover the undepreciated balance of its existing meters through a regulatory asset torestructuring will be amortized over 15 years.consummated on 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 Arkansas Attorney General filed a response to Entergy Arkansas’s annual redetermination filing requesting that the APSC suspend the proposed tariff to investigate the amount of the redetermination 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 energy cost recovery rider, those issues exceed the scope of the instant rate redetermination. Entergy 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 testimonya 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 of the issues suggested by the Attorney General in March 2017 recommending that the proceeding at this time. The redetermined rate should be implementedbecame effective with the first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.
Opportunity Sales Proceedings
As discussed in the Form 10-K, in June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocated the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibited sales to third parties by individual companies absent an offer of a right-of-
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
first-refusal to other Utility operating companies. The LPSC’s complaint challenges sales made beginning in 2002 and requests refunds.
In April 2016 the FERC issued orders addressing 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 arguing that payments made by Entergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain contracts. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. In September 2017 the FERC issued an order denying the request for rehearing on the issue of whether any payments by Entergy Arkansas to the other Utility operating companies should be reduced due to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana.
Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the LPSC submitted testimony disputing certain aspects of the calculations, and Entergy Services submitted answering testimony in January 2017. In February 2017 the FERC staff filed testimony and Entergy Services filed responsive testimony. In March 2017 the LPSC filed rebuttal testimony. A hearing was held in May 2017. In July 2017 the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interest to the other Utility operating companies. In August 2017 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individual briefs on exceptions challenging various aspects of the initial decision. In September 2017 the Utility operating companies, the LPSC, the APSC, the MPSC, the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties. The case is pending before the FERC. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.
The effect of the FERC’s decisions thus far in the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies. Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million, which includes interest, for its estimated increased costs and payment to the other Utility operating companies. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Entergy Arkansas, therefore, recorded a regulatory asset in the first quarter 2016 of approximately $75 million, which represents its estimate of the retail portion of the costs.
Entergy Arkansas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
2018.
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 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 SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | |
| Electric | |
| $673,226 |
| |
| $654,599 |
| |
| $1,644,239 |
| |
| $1,624,224 |
| |
| $551,024 |
| |
| $474,351 |
|
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 133,254 |
| | 105,147 |
| | 283,354 |
| | 274,106 |
| | 108,306 |
| | 99,409 |
|
| Purchased power | | 63,423 |
| | 52,023 |
| | 193,108 |
| | 163,541 |
| | 71,972 |
| | 55,133 |
|
| Nuclear refueling outage expenses | | 22,988 |
| | 14,554 |
| | 59,942 |
| | 44,604 |
| | 23,402 |
| | 19,619 |
|
| Other operation and maintenance | | 175,013 |
| | 187,294 |
| | 512,691 |
| | 514,109 |
| | 169,358 |
| | 163,008 |
|
| Decommissioning | | 14,320 |
| | 13,504 |
| | 42,321 |
| | 39,908 |
| | 14,760 |
| | 13,895 |
|
| Taxes other than income taxes | | 29,259 |
| | 24,931 |
| | 78,438 |
| | 70,978 |
| | 27,905 |
| | 24,051 |
|
| Depreciation and amortization | | 70,433 |
| | 67,309 |
| | 206,586 |
| | 197,597 |
| | 71,981 |
| | 67,066 |
|
| Other regulatory charges (credits) - net | | (5,219 | ) | | 1,177 |
| | (10,797 | ) | | 2,896 |
| |
| Other regulatory credits - net | | | (3,307 | ) | | (10,526 | ) |
| TOTAL | | 503,471 |
| | 465,939 |
| | 1,365,643 |
| | 1,307,739 |
| | 484,377 |
| | 431,655 |
|
| | | | | | | | | | | | | |
| OPERATING INCOME | | 169,755 |
| | 188,660 |
| | 278,596 |
| | 316,485 |
| | 66,647 |
| | 42,696 |
|
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 4,140 |
| | 3,734 |
| | 13,922 |
| | 12,661 |
| | 4,008 |
| | 4,350 |
|
| Interest and investment income | | 6,738 |
| | 5,410 |
| | 27,865 |
| | 14,774 |
| | 6,814 |
| | 6,932 |
|
| Miscellaneous - net | | 183 |
| | 812 |
| | 19 |
| | (983 | ) | | (3,871 | ) | | (2,956 | ) |
| TOTAL | | 11,061 |
| | 9,956 |
| | 41,806 |
| | 26,452 |
| | 6,951 |
| | 8,326 |
|
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | 31,010 |
| | 28,152 |
| | 86,776 |
| | 88,726 |
| | 29,766 |
| | 27,252 |
|
| Allowance for borrowed funds used during construction | | (1,944 | ) | | (2,000 | ) | | (6,458 | ) | | (6,851 | ) | | (1,890 | ) | | (1,962 | ) |
| TOTAL | | 29,066 |
| | 26,152 |
| | 80,318 |
| | 81,875 |
| | 27,876 |
| | 25,290 |
|
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 151,750 |
| | 172,464 |
| | 240,084 |
| | 261,062 |
| | 45,722 |
| | 25,732 |
|
| | | | | | | | | | | | | |
| Income taxes | | 59,112 |
| | 62,316 |
| | 94,592 |
| | 97,729 |
| | 9,467 |
| | 11,428 |
|
| | | | | | | | | | | | | |
| NET INCOME | | 92,638 |
| | 110,148 |
| | 145,492 |
| | 163,333 |
| | 36,255 |
| | 14,304 |
|
| | | | | | | | | | | | | |
| Preferred dividend requirements | | 357 |
| | 1,476 |
| | 1,071 |
| | 4,913 |
| | 357 |
| | 357 |
|
| | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $92,281 |
| |
| $108,672 |
| |
| $144,421 |
| |
| $158,420 |
| |
| $35,898 |
| |
| $13,947 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $145,492 |
| |
| $163,333 |
| |
| $36,255 |
| |
| $14,304 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 311,725 |
| | 319,845 |
| | 115,976 |
| | 105,721 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 78,390 |
| | 163,202 |
| | 11,877 |
| | 16,361 |
|
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | (45,180 | ) | | (116,584 | ) | | 31,033 |
| | 53,355 |
|
| Fuel inventory | | 10,089 |
| | 28,968 |
| | (13,868 | ) | | (5,747 | ) |
| Accounts payable | | (78,396 | ) | | 95,116 |
| | (26,924 | ) | | (73,635 | ) |
| Prepaid taxes and taxes accrued | | 15,367 |
| | (78,879 | ) | |
| Taxes accrued | | | 10,072 |
| | 7,175 |
|
| Interest accrued | | 12,436 |
| | 5,909 |
| | 9,748 |
| | 8,562 |
|
| Deferred fuel costs | | (53,664 | ) | | (50,687 | ) | | 1,971 |
| | (9,137 | ) |
| Other working capital accounts | | (6,762 | ) | | 4,259 |
| | 5,591 |
| | 15,485 |
|
| Provisions for estimated losses | | 10,094 |
| | 130 |
| | 6,520 |
| | 1,997 |
|
| Other regulatory assets | | (4,680 | ) | | (5,680 | ) | | 13,835 |
| | 1,815 |
|
| Other regulatory liabilities | | | (13,546 | ) | | 23,435 |
|
| Pension and other postretirement liabilities | | (73,107 | ) | | (77,823 | ) | | (19,277 | ) | | (19,553 | ) |
| Other assets and liabilities | | 45,747 |
| | 22,691 |
| | 10,627 |
| | 14,403 |
|
| Net cash flow provided by operating activities | | 367,551 |
| | 473,800 |
| | 179,890 |
| | 154,541 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (558,985 | ) | | (494,071 | ) | | (167,485 | ) | | (165,496 | ) |
| Allowance for equity funds used during construction | | 14,521 |
| | 13,134 |
| | 4,143 |
| | 4,557 |
|
| Payment for purchase of plant | | — |
| | (237,324 | ) | |
| Nuclear fuel purchases | | (95,289 | ) | | (80,716 | ) | | (19,391 | ) | | (88,537 | ) |
| Proceeds from sale of nuclear fuel | | 51,029 |
| | 40,336 |
| | 30,907 |
| | 51,029 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 219,223 |
| | 165,038 |
| | 34,865 |
| | 36,013 |
|
| Investment in nuclear decommissioning trust funds | | (228,740 | ) | | (176,981 | ) | | (40,238 | ) | | (40,961 | ) |
| Changes in securitization account | | (3,619 | ) | | (3,524 | ) | | (4,145 | ) | | (3,702 | ) |
| Change in other investments | | (65,981 | ) | | — |
| |
| Other | | — |
| | (102 | ) | |
| Net cash flow used in investing activities | | (667,841 | ) | | (774,210 | ) | | (161,344 | ) | | (207,097 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | 222,717 |
| | 777,671 |
| | 175,000 |
| | — |
|
| Retirement of long-term debt | | (6,803 | ) | | (621,608 | ) | | (149,904 | ) | | — |
|
Capital contribution from parent
| | — |
| | 200,000 |
| |
| Redemption of preferred stock | | — |
| | (85,283 | ) | |
| Changes in short-term borrowings - net | | 23,257 |
| | 35,717 |
| | (6,087 | ) | | 52,300 |
|
| Changes in money pool payable - net | | 43,882 |
| | (3,669 | ) | | (42,279 | ) | | (20,224 | ) |
| Dividends paid: | | | | | | | | |
| Preferred stock | | (1,071 | ) | | (6,274 | ) | | (357 | ) | | (357 | ) |
| Other | | (1,737 | ) | | (1,868 | ) | | (212 | ) | | 803 |
|
| Net cash flow provided by financing activities | | 280,245 |
| | 294,686 |
| |
| Net cash flow provided by (used in) financing activities | | | (23,839 | ) | | 32,522 |
|
| | | | | | | | | |
| Net decrease in cash and cash equivalents | | (20,045 | ) | | (5,724 | ) | | (5,293 | ) | | (20,034 | ) |
| Cash and cash equivalents at beginning of period | | 20,509 |
| | 9,135 |
| | 6,216 |
| | 20,509 |
|
| Cash and cash equivalents at end of period | |
| $464 |
| |
| $3,411 |
| |
| $923 |
| |
| $475 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| | | | |
|
| Cash paid during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $70,321 |
| |
| $78,500 |
| |
| $18,761 |
| |
| $17,311 |
|
| Income taxes | |
| $— |
| |
| $7,242 |
| |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | September 30, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $127 |
| |
| $20,174 |
| |
| $891 |
| |
| $6,184 |
|
| Temporary cash investments | | 337 |
| | 335 |
| | 32 |
| | 32 |
|
| Total cash and cash equivalents | | 464 |
| | 20,509 |
| | 923 |
| | 6,216 |
|
| Securitization recovery trust account | | 7,759 |
| | 4,140 |
| | 7,893 |
| | 3,748 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 140,147 |
| | 102,229 |
| | 127,821 |
| | 110,016 |
|
| Allowance for doubtful accounts | | (1,531 | ) | | (1,211 | ) | | (1,250 | ) | | (1,063 | ) |
| Associated companies | | 35,455 |
| | 35,286 |
| | 34,105 |
| | 38,765 |
|
| Other | | 52,109 |
| | 58,153 |
| | 46,631 |
| | 65,209 |
|
| Accrued unbilled revenues | | 113,650 |
| | 100,193 |
| | 79,707 |
| | 105,120 |
|
| Total accounts receivable | | 339,830 |
| | 294,650 |
| | 287,014 |
| | 318,047 |
|
| Deferred fuel costs | | 150,206 |
| | 96,690 |
| | 61,282 |
| | 63,302 |
|
| Fuel inventory - at average cost | | 22,671 |
| | 32,760 |
| | 43,226 |
| | 29,358 |
|
| Materials and supplies - at average cost | | 191,199 |
| | 182,600 |
| | 198,585 |
| | 192,853 |
|
| Deferred nuclear refueling outage costs | | 80,769 |
| | 81,313 |
| | 49,047 |
| | 56,485 |
|
| Prepayments and other | | 81,322 |
| | 14,293 |
| | 9,597 |
| | 12,108 |
|
| TOTAL | | 874,220 |
| | 726,955 |
| | 657,567 |
| | 682,117 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Decommissioning trust funds | | 910,369 |
| | 834,735 |
| | 935,728 |
| | 944,890 |
|
| Other | | 3,162 |
| | 7,912 |
| | 786 |
| | 3,160 |
|
| TOTAL | | 913,531 |
| | 842,647 |
| | 936,514 |
| | 948,050 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 10,823,675 |
| | 10,488,060 |
| | 11,111,420 |
| | 11,059,538 |
|
| Property under capital lease | | 598 |
| | 716 |
| |
| Construction work in progress | | 365,938 |
| | 304,073 |
| | 361,843 |
| | 280,888 |
|
| Nuclear fuel | | 236,447 |
| | 307,352 |
| | 226,435 |
| | 277,345 |
|
| TOTAL UTILITY PLANT | | 11,426,658 |
| | 11,100,201 |
| | 11,699,698 |
| | 11,617,771 |
|
| Less - accumulated depreciation and amortization | | 4,721,860 |
| | 4,635,885 |
| | 4,827,210 |
| | 4,762,352 |
|
| UTILITY PLANT - NET | | 6,704,798 |
| | 6,464,316 |
| | 6,872,488 |
| | 6,855,419 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 67,228 |
| | 62,646 |
| |
| Other regulatory assets (includes securitization property of $31,448 as of September 30, 2017 and $41,164 as of December 31, 2016) | | 1,428,127 |
| | 1,428,029 |
| |
| Other regulatory assets (includes securitization property of $24,682 as of March 31, 2018 and $28,583 as of December 31, 2017) | | | 1,553,602 |
| | 1,567,437 |
|
| Deferred fuel costs | | 67,046 |
| | 66,898 |
| | 67,145 |
| | 67,096 |
|
| Other | | 16,126 |
| | 14,626 |
| | 20,397 |
| | 13,910 |
|
| TOTAL | | 1,578,527 |
| | 1,572,199 |
| | 1,641,144 |
| | 1,648,443 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $10,071,076 |
| |
| $9,606,117 |
| |
| $10,107,713 |
| |
| $10,134,029 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | September 30, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $114,700 |
| |
| $114,700 |
| |
| Short-term borrowings | | 8,257 |
| | — |
| |
| $43,887 |
| |
| $49,974 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 237,246 |
| | 239,711 |
| | 308,104 |
| | 365,915 |
|
| Other | | 142,160 |
| | 185,153 |
| | 169,916 |
| | 215,942 |
|
| Customer deposits | | 97,432 |
| | 97,512 |
| | 97,885 |
| | 97,687 |
|
| Taxes accrued | | 22,561 |
| | 7,194 |
| | 57,393 |
| | 47,321 |
|
| Interest accrued | | 29,016 |
| | 16,580 |
| | 27,963 |
| | 18,215 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | | 386,489 |
| | — |
|
| Other | | 34,329 |
| | 36,557 |
| | 28,730 |
| | 29,922 |
|
| TOTAL | | 685,701 |
| | 697,407 |
| | 1,120,367 |
| | 824,976 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,265,375 |
| | 2,186,623 |
| | 1,205,470 |
| | 1,190,669 |
|
| Accumulated deferred investment tax credits | | 34,404 |
| | 35,305 |
| | 33,803 |
| | 34,104 |
|
| Regulatory liability for income taxes - net | | | 597,025 |
| | 985,823 |
|
| Other regulatory liabilities | | 349,380 |
| | 305,907 |
| | 352,354 |
| | 363,591 |
|
| Decommissioning | | 966,674 |
| | 924,353 |
| | 995,973 |
| | 981,213 |
|
| Accumulated provisions | | 28,776 |
| | 18,682 |
| | 41,249 |
| | 34,729 |
|
| Pension and other postretirement liabilities | | 351,046 |
| | 424,234 |
| | 334,016 |
| | 353,274 |
|
| Long-term debt (includes securitization bonds of $41,578 as of September 30, 2017 and $48,139 as of December 31, 2016) | | 2,948,610 |
| | 2,715,085 |
| |
| Long-term debt (includes securitization bonds of $34,739 as of March 31, 2018 and $34,662 as of December 31, 2017) | | | 2,978,569 |
| | 2,952,399 |
|
| Other | | 12,022 |
| | 13,854 |
| | 4,885 |
| | 5,147 |
|
| TOTAL | | 6,956,287 |
| | 6,624,043 |
| | 6,543,344 |
| | 6,900,949 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Preferred stock without sinking fund | | 31,350 |
| | 31,350 |
| | 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 |
| |
| 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 | | 790,243 |
| | 790,243 |
| | 790,264 |
| | 790,264 |
|
| Retained earnings | | 1,607,025 |
| | 1,462,604 |
| | 1,621,918 |
| | 1,586,020 |
|
| TOTAL | | 2,397,738 |
| | 2,253,317 |
| | 2,412,652 |
| | 2,376,754 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $10,071,076 |
| |
| $9,606,117 |
| |
| $10,107,713 |
| |
| $10,134,029 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY | | For the Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | |
| | | Common Equity | | | | Common Equity | | |
| | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total | | Common
Stock | | Paid-in
Capital | | Retained
Earnings | | Total |
| | | (In Thousands) | |
| | | | | | | | | | |
| Balance at December 31, 2015 | |
| $470 |
| |
| $588,493 |
| |
| $1,302,695 |
| |
| $1,891,658 |
| |
| | | | | | | | | | |
| Net income | | — |
| | — |
| | 163,333 |
| | 163,333 |
| |
| Capital contribution from parent | | — |
| | 200,000 |
| | — |
| | 200,000 |
| |
| Capital stock redemption | | — |
| | 1,750 |
| | (2,034 | ) | | (284 | ) | |
| Preferred stock dividends | | — |
| | — |
| | (4,913 | ) | | (4,913 | ) | |
| | | | | | | | | | |
| Balance at September 30, 2016 | |
| $470 |
| |
| $790,243 |
| |
| $1,459,081 |
| |
| $2,249,794 |
| |
| | | | | | | | | | | (In Thousands) |
| | | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | |
| $470 |
| |
| $790,243 |
| |
| $1,462,604 |
| |
| $2,253,317 |
| |
| $470 |
| |
| $790,243 |
| |
| $1,462,604 |
| |
| $2,253,317 |
|
| | | | | | | | | | | | | | | | | |
| Net income | | — |
| | — |
| | 145,492 |
| | 145,492 |
| | — |
| | — |
| | 14,304 |
| | 14,304 |
|
| Preferred stock dividends | | — |
| | — |
| | (1,071 | ) | | (1,071 | ) | | — |
| | — |
| | (357 | ) | | (357 | ) |
| | | | | | | | | | | | | | | | | |
| Balance at September 30, 2017 | |
| $470 |
| |
| $790,243 |
| |
| $1,607,025 |
| |
| $2,397,738 |
| |
| Balance at March 31, 2017 | | |
| $470 |
| |
| $790,243 |
| |
| $1,476,551 |
| |
| $2,267,264 |
|
| | | | | | | | | | |
| | | | | | | | | | |
| Balance at December 31, 2017 | | |
| $470 |
| |
| $790,264 |
| |
| $1,586,020 |
| |
| $2,376,754 |
|
| | | | | | | | | | |
| Net income | | | — |
| | — |
| | 36,255 |
| | 36,255 |
|
| Preferred stock dividends | | | — |
| | — |
| | (357 | ) | | (357 | ) |
| | | | | | | | | | |
| Balance at March 31, 2018 | | |
| $470 |
| |
| $790,264 |
| |
| $1,621,918 |
| |
| $2,412,652 |
|
| | | | | | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | | | | | |
| | ENTERGY ARKANSAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | |
| | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | Electric Operating Revenues: | | | | | | | Electric Operating Revenues: | | | | | | |
| Residential | |
| $254 |
| |
| $275 |
| |
| ($21 | ) | | (8 | ) | |
| $236 |
| |
| $183 |
| |
| $53 |
| | 29 |
|
| Commercial | | 150 |
| | 151 |
| | (1 | ) | | (1 | ) | | 121 |
| | 106 |
| | 15 |
| | 14 |
|
| Industrial | | 145 |
| | 137 |
| | 8 |
| | 6 |
| | 111 |
| | 96 |
| | 15 |
| | 16 |
|
| Governmental | | 6 |
| | 5 |
| | 1 |
| | 20 |
| | 5 |
| | 4 |
| | 1 |
| | 25 |
|
| Total retail | | 555 |
| | 568 |
| | (13 | ) | | (2 | ) | |
| Total billed retail | | | 473 |
| | 389 |
| | 84 |
| | 22 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 33 |
| | 26 |
| | 7 |
| | 27 |
| | 30 |
| | 32 |
| | (2 | ) | | (6 | ) |
| Non-associated companies | | 45 |
| | 30 |
| | 15 |
| | 50 |
| | 36 |
| | 45 |
| | (9 | ) | | (20 | ) |
| Other | | 40 |
| | 31 |
| | 9 |
| | 29 |
| | 12 |
| | 8 |
| | 4 |
| | 50 |
|
| Total | |
| $673 |
| |
| $655 |
| |
| $18 |
| | 3 |
| |
| $551 |
| |
| $474 |
| |
| $77 |
| | 16 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 2,236 |
| | 2,485 |
| | (249 | ) | | (10 | ) | | 2,329 |
| | 1,927 |
| | 402 |
| | 21 |
|
| Commercial | | 1,723 |
| | 1,822 |
| | (99 | ) | | (5 | ) | | 1,365 |
| | 1,315 |
| | 50 |
| | 4 |
|
| Industrial | | 2,074 |
| | 1,906 |
| | 168 |
| | 9 |
| | 1,828 |
| | 1,681 |
| | 147 |
| | 9 |
|
| Governmental | | 67 |
| | 68 |
| | (1 | ) | | (1 | ) | | 56 |
| | 56 |
| | — |
| | — |
|
| Total retail | | 6,100 |
| | 6,281 |
| | (181 | ) | | (3 | ) | | 5,578 |
| | 4,979 |
| | 599 |
| | 12 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 483 |
| | 463 |
| | 20 |
| | 4 |
| | 487 |
| | 446 |
| | 41 |
| | 9 |
|
| Non-associated companies | | 2,026 |
| | 1,632 |
| | 394 |
| | 24 |
| | 1,717 |
| | 1,962 |
| | (245 | ) | | (12 | ) |
| Total | | 8,609 |
| | 8,376 |
| | 233 |
| | 3 |
| | 7,782 |
| | 7,387 |
| | 395 |
| | 5 |
|
| | | | | | | | | | |
| | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | | |
| Electric Operating Revenues: | | | | | | | |
| Residential | |
| $597 |
| |
| $620 |
| |
| ($23 | ) | | (4 | ) | |
| Commercial | | 375 |
| | 376 |
| | (1 | ) | | — |
| |
| Industrial | | 355 |
| | 337 |
| | 18 |
| | 5 |
| |
| Governmental | | 15 |
| | 13 |
| | 2 |
| | 15 |
| |
| Total retail | | 1,342 |
| | 1,346 |
| | (4 | ) | | — |
| |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 96 |
| | 19 |
| | 77 |
| | 405 |
| |
| Non-associated companies | | 96 |
| | 105 |
| | (9 | ) | | (9 | ) | |
| Other | | 110 |
| | 154 |
| | (44 | ) | | (29 | ) | |
| Total | |
| $1,644 |
| |
| $1,624 |
| |
| $20 |
| | 1 |
| |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 5,625 |
| | 5,918 |
| | (293 | ) | | (5 | ) | |
| Commercial | | 4,410 |
| | 4,512 |
| | (102 | ) | | (2 | ) | |
| Industrial | | 5,584 |
| | 5,064 |
| | 520 |
| | 10 |
| |
| Governmental | | 180 |
| | 179 |
| | 1 |
| | 1 |
| |
| Total retail | | 15,799 |
| | 15,673 |
| | 126 |
| | 1 |
| |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 1,316 |
| | 1,427 |
| | (111 | ) | | (8 | ) | |
| Non-associated companies | | 4,374 |
| | 6,440 |
| | (2,066 | ) | | (32 | ) | |
| Total | | 21,489 |
| | 23,540 |
| | (2,051 | ) | | (9 | ) | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 2017 Compared to Third Quarter 2016
Net income decreased $3.2increased $17.2 million primarily due to a lower effective income tax rate, higher net revenue, and higher other income, partially offset by higher other operation and maintenance expenses, and higher taxes other than income taxes, partially offset byand higher other income.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income decreased $149.3 million primarily due to the effect of a settlement with the IRS related to the 2010-2011 IRS audit which resulted in a $136.1 million reduction of income tax expense in 2016. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlementdepreciation and benefit sharing.amortization expenses.
Net Revenue
Third Quarter 2017 Compared to Third Quarter 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 thirdfirst quarter 20172018 to the thirdfirst quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
20162017 net revenue |
| $719.8561.1 |
|
| Volume/weather | (20.624.2 | )
|
| Retail electric price | 13.8(20.1 | ) |
| Other | 8.5 |
|
Other | 4.4 |
|
20172018 net revenue |
| $717.4573.7 |
|
The volume/weather variance is primarily due to an increase of 824 GWh, or 7%, in billed electricity usage, including the effect of lessmore favorable weather on residential and commercial sales. The decrease was partially offset by an increase of 282 GWh, or 4%, in industrial usage primarily due to an increase in demand for existing customers as well as expansion projects in the chemicals industry.
The retail electric price variance is primarily due to a regulatory charge of $27 million recorded in the timingfirst quarter 2018 to reflect the effects of recovery of purchased power capacity costs througha provision in the settlement reached in the formula rate plan mechanism.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
| | | |
| Amount |
| (In Millions) |
2016 net revenue |
| $1,891.8 |
|
Retail electric price | 23.1 |
|
Louisiana Act 55 financing savings obligation | 17.2 |
|
Volume/weather | (31.6 | ) |
Other | 1.2 |
|
2017 net revenue |
| $1,901.7 |
|
The retail electric price variance is primarily due to an increase in formula rate plan revenues, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016 and the timing of recovery of purchased power costs through the formula rate plan mechanism.extension proceeding. 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 Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements in the Form 10-K for additional discussion of the settlement and benefit sharing.
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales and decreased usage during the unbilled sales period. This decrease was partially offset by an increase of 610 GWh, or 3%, in industrial usage primarily due to an increase in demand for existing customers, expansion projects in the chemicals industry, and an increase in demand for cogeneration customers, partially offset by an extended seasonal outage for an existing large refinery customer.
Other Income Statement Variances
Third Quarter 2017 Compared to Third Quarter 2016
Other operation and maintenance expenses increased primarily due to to:
an increase of $10.4$14 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals and a higher scope of work performed during plant outages in the third quarter 20172018 as compared to the third quarter 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters”same period in 2017; and
an increase of $7.1 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed in 2018 as compared to the Form 10-K forsame period in 2017.
The increase was partially offset by a discussiondecrease of the increased operating costs to position the nuclear fleet to meet its operational goals.$5.4 million in loss provisions.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes, local franchise fees,taxes, and state franchisepayroll taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017.assessments. Local franchise feestaxes increased primarily due to higher revenues in the thirdfirst quarter 20172018 as compared to the third quarter 2016. State franchise taxessame period in 2017.
Depreciation and amortization expenses increased primarily due to a changeadditions to plant in theservice.
Entergy Louisiana, franchise tax law which became effective for 2017.LLC and Subsidiaries
Management's Financial Discussion and Analysis
Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in the third quarter 2017 as compared to the third quarter 2016, which
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
included the St. Charles Power Station project, and higher realized gains in the third quarter 2017 as compared to the third quarter 2016 on the River Bend and Waterford 3 decommissioning trust fund investments.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Other operation and maintenance expenses increased primarily due to:
an increase of $12.3 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals, partially offset by a lower scope of work performed during plant outages in 2017 as compared to the same period in 2016. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Nuclear Matters” in the Form 10-K for a discussion of the increased operating costs to position the nuclear fleet to meet its operational goals;
an increase of $4.3 million in compensation and benefits costs primarily due to a downward revision to estimated incentive compensation expense in first quarter 2016;
an increase of $3.6 million in fossil-fueled generation expenses primarily due to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016, partially offset by asbestos loss provisions in 2016;
an increase of $3.5 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financial statements herein and in the Form 10-K for further information on the recovery of these costs;
an increase of $3.4 million in other loss provisions; and
an increase of $2.1 million in transmission expenses primarily due to higher labor costs, including contract labor.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes, local franchise fees, state franchise taxes, and payroll taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017. Local franchise fees increased primarily due to higher revenues in 2017 as compared to 2016. State franchise taxes increased primarily due to a change in the Louisiana franchise tax law which became effective for 2017.
Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Blocks 3 and 4 of the Union Power Station purchased in March 2016 and the effects of recording in third quarter 2016 final court decisions in the River Bend and Waterford 3 lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $6 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
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 as compared to the same period in 2016,2018, which included the St. Charles Power Station project, and higher realized gainschanges in 2017 as compared to the same period in 2016 on the River Bend decommissioning trust fund investments,investment activity, including portfolio rebalancing toof certain of the 30% interest in River Bend formerly owned by Cajun.
Interest expense decreased primarily due to an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2017 as compared to the same period in 2016, which included the St. Charles Power Station project.decommissioning trust funds.
Income Taxes
The effective income tax rates were 33.6%rate was 16.3% for the thirdfirst quarter 2017 and 32.4% for the nine months ended September 30, 2017.2018. The differencesdifference in the effective income tax ratesrate for the thirdfirst quarter 20172018 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the nine months ended September 30,non-taxable income distributions earned on preferred membership interests, 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 state income taxes and a write-off of a stock-based compensation deferred tax asset.
The effective income tax rate was 31.3% for the first quarter 2017. The difference in the effective income tax rate for the first quarter 2017 versus the federal statutory rate of 35% werewas primarily due to book and tax differences
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
related to the non-taxable income distributions earned on preferred membership interests and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes.taxes and a write-off of a stock-based compensation deferred tax asset.
Income Tax Legislation
The effectiveSee 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 34.4% for the third quarter 2016. The differencelegislation enacted in the effective income tax rate for the third quarter 2016 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by state income taxes.
The effective income tax rate was 10.4% for the nine months ended September 30, 2016. The difference in the effective income tax rate for the nine months ended September 30, 2016 versus the federal statutory rate of 35% was primarily due to the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016 and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by state income taxes. SeeDecember 2017. Note 3 to the financial statements in the Form 10-K forcontains additional discussion of the 2010-2011 IRS audit settlement.
Louisianaeffect of the Tax Legislation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –LouisianaAct on 2017 results of operations and financial position, the provisions of the Tax Legislation”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 for a discussioncontains discussions of proceedings commenced or other responses by Entergy’s regulators to the Louisiana tax legislation.Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the ninethree months ended September 30,March 31, 2018 and 2017 and 2016 were as follows:
| | | | 2017 | | 2016 | 2018 | | 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 activities | 927,176 |
| | 877,945 |
| 328,040 |
| | 339,704 |
|
| Investing activities | (1,379,365 | ) | | (1,138,425 | ) | (613,950 | ) | | (472,011 | ) |
| Financing activities | 293,862 |
| | 320,457 |
| 812,289 |
| | (14,250 | ) |
| Net increase (decrease) in cash and cash equivalents | (158,327 | ) | | 59,977 |
| 526,379 |
| | (146,557 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $55,523 |
| |
| $95,079 |
|
| $562,286 |
| |
| $67,293 |
|
Operating Activities
Net cash flow provided by operating activities increased $49.2 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 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; and
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
an interest payment of $60Operating Activities
Net cash flow provided by operating activities decreased $11.7 million made infor the three months ended March 2016 related31, 2018 compared to the purchasethree months ended March 31, 2017 primarily due to:
a decrease of a beneficial interest$114 million in income tax refunds in the Waterford 3 leased assets.first quarter 2018 as compared to the first quarter 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; and
a decrease due to the timing of recovery of fuel and purchased power costs.
The increasedecrease 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
an increasea decrease of $64$22.7 million in spending on nuclear refueling outages;
a decrease due to the timing of recovery of fuel and purchased power costs; and
proceeds of $25.1 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for a discussion of the DOE litigation.outages.
Investing Activities
Net cash flow used in investing activities increased $240.9$141.9 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to:
money pool activity;
an increase of $297.1$60.9 million in transmission construction expenditures due to a higher scope of work performed in 2018 as compared to the same period in 2017; and
an increase of $53.7 million in fossil-fueled generation construction expenditures primarily due to higher spending on the St.Lake Charles Power Station and Lakethe St. Charles Power Station projects in 2017;2018.
The increase was partially offset by a decrease of $137 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 service deliveries, and the timing of cash payments during the nuclear fuel cycle;
an increase of $95.3 million in transmission construction expenditures due to a higher scope of work performed in 2017 as compared to the same period in 2016;
an increase of $60.7 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017;
money pool activity;
$33.3 million in funds held on deposit for interest payments due October 1, 2017;
an increase of $25.8 million in information technology construction expenditures due to increased spending on advanced metering infrastructure;
an increase of $17.3 million in distribution construction expenditures due to increased spending on digital technology improvements within the customer contact centers; and
proceeds of $17.3 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the DOE litigation.
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 $475 million in March 2016. See Note 14 to the financial statements in the Form 10-K for discussion of the Union Power Station purchase.cycle.
Increases in Entergy Louisiana’s receivable from the money pool are a use of cash flow, and Entergy Louisiana‘s receivable from the money pool increased by $50.4$170.2 million for the ninethree months ended September 30, 2017March 31, 2018 compared to increasing by $3.3$8 million for the ninethree months ended September 30, 2016.March 31, 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 Louisiana’s financing activities decreased $26.6provided $812.3 million of cash for the ninethree months ended September 30, 2017March 31, 2018 compared to using $14.3 million of cash for the ninethree months ended September 30, 2016March 31, 2017 primarily due to the netfollowing activity:
the issuance of $350.5$750 million of 4.00% Series first mortgage bonds in March 2018;
equity distributions of $42.1 million in the first quarter 2017. There were no distributions in the first quarter 2018 in anticipation of the excess deferred income taxes to be returned to customers as a result of the enactment of the Tax Cuts and Jobs Act in December 2017. See Note 2 to the financial statements herein and in the Form 10-K for discussion of regulatory proceedings related to the enactment of the Tax Cuts and Jobs Act;
net borrowings of $100 million on the Entergy Louisiana long-term debtcredit facility in 20172018; and
net borrowings of $19.4 million on Entergy Louisiana’s nuclear fuel company variable interest entities’ credit facilities in 2018 compared to the net issuanceborrowings of $557.7$87.5 million in 2016.2017.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
The decrease was partially offset by:
a decrease of $123.8 million of 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; and
net borrowings of $36.8 million on the nuclear fuel company variable interest entities’ credit facilities in 2017 compared to net repayments of $18.4 million in 2016.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Louisiana is primarily due to the issuance of long-term debt in 2018.
| | | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 53.5 | % | | 53.4 | % | 56.4 | % | | 53.8 | % |
| Effect of excluding securitization bonds | (0.4 | %) | | (0.5 | %) | (0.3 | %) | | (0.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 53.1 | % | | 52.9 | % | 56.1 | % | | 53.5 | % |
| Effect of subtracting cash | (0.2 | %) | | (0.9 | %) | (2.1 | %) | | (0.1 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 52.9 | % | | 52.0 | % | 54.0 | % | | 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.
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 is developing its capital investment plan for 2018 through 2020 and currently anticipates making $4.1 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments, such as the St. Charles Power Station and the Lake Charles Power Station, discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; investments in River Bend and Waterford 3; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Louisiana’s receivables from the money pool were as follows:
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $72,899 | | $22,503 | | $9,428 | | $6,154 |
|
| | | | | | |
March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $181,336 | | $11,173 | | $30,550 | | $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 2022. The credit facility permitsincludes fronting commitments for the issuance of letters of credit against 50%$15 million of the borrowing capacity of the facility. As of September 30, 2017,March 31, 2018, there were no$100 million of cash borrowings and $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 September 30, 2017,March 31, 2018, a $38.5$23.8 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 September 30, 2017, $78.8March 31, 2018, $52.3 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
nuclear fuel company variable interest entity. As of September 30, 2017, $40.6March 31, 2018, $62.9 million in letters of credit to support a like amount of commercial paper issued and $36.3 million in loans were outstanding under the Entergy Louisiana Waterford nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.
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, with athe deadlines extended and the hearing continued from June 2018 to August 2018 in order to allow the parties an opportunity to reach settlement. In April 2018.2018 the parties filed an unopposed joint motion for consideration of proposed stipulation by the LPSC seeking approval of the signed settlement agreement at the May 16, 2018 LPSC Business and Executive Session. The settlement recommends 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.
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.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Retail Rates - Electric
2014 Formula Rate Plan Filing
As discussed in the Form 10-K, in September 2015, Entergy Louisiana filed its formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. In June 2017 the LPSC staff and Entergy Louisiana filed an unopposed joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of this proceeding with no changes to rates already implemented.
2015 Formula Rate Plan Filing
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.
In November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding did not oppose an extension for this period of time. In June 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was filed and the LPSC approved the stipulation in July 2017.
2016 Formula Rate Plan Filing
In May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflects an earned return on common equity of 9.84%. As such, no adjustment to base formula rate plan revenue is required. The following adjustments, however, are required under the formula rate plan. The 2016 formula rate plan evaluation report shows a decrease in formula rate plan revenue of approximately $16.9 million, comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million, a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million, and a decrease in incremental formula rate plan revenue of $3.7 million. Additionally, the formula rate plan evaluation report calls for a decrease of $40.5 million in the MISO cost recovery revenue requirement from the current level of $46.8 million to $6.3 million. Rates reflecting these adjustments were implemented with the first billing cycle of September 2017, subject to refund, pending the review proceedings. Parties have intervened in the proceedings. No procedural schedule has been established. In September 2017 the LPSC issued its report indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report are required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.
Formula Rate Plan Extension Request
In August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications of its terms. Those modifications include: a one-time resetting of base rates to the midpoint of the band at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidth from a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recover certain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers. 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 has requested thatand the LPSC consider its requeststaff 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 an expeditedcommon 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 earned return on common equity;
a cap on potential revenue increase of $35 million for the 2018 evaluation period, and render $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 decisionframework for the flow back of certain tax benefits created by December 2017,the Tax Act to customers; and
a transmission recovery mechanism providing for the opportunity to recover certain transmission related expenditures in an effortexcess of $100 million annually for projects placed in service up to maintain Entergy Louisiana’s current cycle for implementingone month prior to rate adjustments, i.e., September 2018, withoutchange outside of sharing that is designed to operate in a manner similar to the need for filing a full base rate case proceeding.additional capacity mechanism.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Waterford 3 Replacement Steam Generator Project
See Note 2 to the financial statements in the Form 10-K for discussion of the Waterford 3 replacement steam generator project prudence review proceeding. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made in January 2017. Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staffUnion Power Station and Entergy Louisiana in May 2017. In May 2017 the LPSC accepted the joint report of proceedings resolving the matter.
Deactivation or Retirement Decisions for Entergy Louisiana Plants
As 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. An evidentiary hearing was held in August 2017 and post-hearing briefs were submitted in October 2017. A decision is expected in 2018.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Louisiana filed an application seeking a finding fromIn March 2018 the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is inadopted the public interest. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s proposed AMI system, with modifications to the proposed customer charge. The stipulation also confirmedALJ’s recommended order finding that Entergy Louisiana shall continuedid not demonstrate that its decision to include in rate basepermanently surrender transmission rights for the remaining book value of the existing electric metersmothballed (not retired) Willow Glen 2 and also to depreciate4 units was reasonable and that Entergy Louisiana should hold customers harmless from increased transmission expenses should those assets using current depreciation rates. In July 2017units be reactivated. Because no party or the LPSC approvedsuggested that Willow Glen 2 and 4 should be reactivated and because the stipulation.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.
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 expensescosts incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016.by Entergy Louisiana requested to recoverin connection 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 10.79%. If the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’sas-filed rates from the supplemental filing sought an annual increase in revenue of $1.4 million. Following review of the filing, except for the proposed extraordinary cost recovery,are accepted by the LPSC, staff confirmed Entergy Louisiana’s filing was consistentcustomers will receive a cost reduction of approximately $0.7 million effective with the principlesbills rendered on 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 withafter the first billing cycle of May 2017.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
In connection with the joint report of proceedings accepted by the LPSC,2018, as well as a $0.2 million prospective reduction in May 2017, Entergy Louisiana filed an application to initiate a separate proceeding to recover the deferred operation and maintenance expenses of $1.4 million incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016 through the extraordinary cost provision of the gas rate stabilization plan. The LPSC staff submitted its direct testimony ininfrastructure rider effective with bills rendered on and after the proceeding recommending recoveryfirst billing cycle of $0.9 million. The procedural schedule includes a hearing in FebruaryJuly 2018.
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. The audit included a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2014 through 2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the period from 2012 through 2015. Discovery commenced in March 2017.
As discussed in the Form 10-K, in April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit included a review of the reasonableness of the charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009. In December 2016 the LPSC opened a new docket in order to resolve the issue regarding the proper methodology for the recovery of nuclear dry fuel storage costs. In October 2017 the LPSC approved the continued recovery of the nuclear dry fuel storage costs through the fuel adjustment clause, resolving the open issue in the audit.
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters. The following is an update to that discussion.
River Bend’s operating license is currently due to expire in August 2025. In May 2017,
Entergy Louisiana, filed an application with the NRC for an extension of River Bend’s operating license to 2045. In October 2017 an intervenor filed with the NRC a petition to interveneLLC and request for a hearing on the River Bend license renewal application. As provided by NRC procedure, a panel of the Atomic SafetySubsidiaries
Management's Financial Discussion and Licensing Board has been designated to determine whether the intervenor’s three proposed contentions, or allegations of errors or omissions in the license renewal application, are admissible and, if so, to rule on any admitted contentions.Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Louisiana’s accounting for nuclear decommissioning costs, utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies. The following is an update to that discussion.
In the first quarter 2018, Entergy Louisiana 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.
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | |
| Electric | | $1,280,475 |
| |
| $1,240,217 |
| | $3,216,677 |
| |
| $3,166,380 |
| |
| $1,005,106 |
| |
| $864,076 |
|
| Natural gas | | 10,019 |
| | 9,235 |
| | 38,034 |
| | 37,251 |
| | 24,238 |
| | 16,707 |
|
| TOTAL | | 1,290,494 |
| | 1,249,452 |
| | 3,254,711 |
| | 3,203,631 |
| | 1,029,344 |
| | 880,783 |
|
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 301,584 |
| | 261,979 |
| | 635,684 |
| | 616,402 |
| | 180,781 |
| | 154,044 |
|
| Purchased power | | 273,325 |
| | 261,212 |
| | 795,825 |
| | 677,309 |
| | 251,772 |
| | 239,827 |
|
| Nuclear refueling outage expenses | | 13,616 |
| | 12,894 |
| | 38,565 |
| | 38,648 |
| | 13,099 |
| | 12,185 |
|
| Other operation and maintenance | | 238,249 |
| | 229,717 |
| | 704,696 |
| | 668,738 |
| | 234,380 |
| | 217,112 |
|
| Decommissioning | | 12,444 |
| | 11,812 |
| | 36,850 |
| | 34,978 |
| | 12,772 |
| | 12,123 |
|
| Taxes other than income taxes | | 45,059 |
| | 38,129 |
| | 135,418 |
| | 124,857 |
| | 51,280 |
| | 45,283 |
|
| Depreciation and amortization | | 117,923 |
| | 114,251 |
| | 349,660 |
| | 336,294 |
| | 120,822 |
| | 115,630 |
|
| Other regulatory charges (credits) - net | | (1,795 | ) | | 6,507 |
| | (78,503 | ) | | 18,084 |
| | 23,119 |
| | (74,187 | ) |
| TOTAL | | 1,000,405 |
| | 936,501 |
| | 2,618,195 |
| | 2,515,310 |
| | 888,025 |
| | 722,017 |
|
| | | | | | | | | | | | | |
| OPERATING INCOME | | 290,089 |
| | 312,951 |
| | 636,516 |
| | 688,321 |
| | 141,319 |
| | 158,766 |
|
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 13,393 |
| | 6,735 |
| | 34,492 |
| | 18,479 |
| | 17,745 |
| | 9,990 |
|
| Interest and investment income | | 42,662 |
| | 38,731 |
| | 124,411 |
| | 116,398 |
| | 43,275 |
| | 39,830 |
|
| Miscellaneous - net | | (2,957 | ) | | (4,429 | ) | | (8,631 | ) | | (10,044 | ) | | (7,665 | ) | | (9,142 | ) |
| TOTAL | | 53,098 |
| | 41,037 |
| | 150,272 |
| | 124,833 |
| | 53,355 |
| | 40,678 |
|
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | 69,518 |
| | 68,396 |
| | 205,316 |
| | 204,259 |
| | 70,096 |
| | 67,315 |
|
| Allowance for borrowed funds used during construction | | (6,713 | ) | | (3,455 | ) | | (17,428 | ) | | (9,735 | ) | | (8,763 | ) | | (5,174 | ) |
| TOTAL | | 62,805 |
| | 64,941 |
| | 187,888 |
| | 194,524 |
| | 61,333 |
| | 62,141 |
|
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 280,382 |
| | 289,047 |
| | 598,900 |
| | 618,630 |
| | 133,341 |
| | 137,303 |
|
| | | | | | | | | | | | | |
| Income taxes | | 94,098 |
| | 99,541 |
| | 193,759 |
| | 64,193 |
| | 21,748 |
| | 42,925 |
|
| | | | | | | | | | | | | |
| NET INCOME | |
| $186,284 |
| |
| $189,506 |
| |
| $405,141 |
| |
| $554,437 |
| |
| $111,593 |
| |
| $94,378 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | |
| | Three Months Ended | | Nine Months Ended | |
| | 2017 | | 2016 | | 2017 | | 2016 | 2018 | | 2017 |
| | (In Thousands) | | (In Thousands) | (In Thousands) |
| | | | | | | | | | | |
| Net Income | $186,284 |
| |
| $189,506 |
| | $405,141 |
| |
| $554,437 |
|
| $111,593 |
| |
| $94,378 |
|
| Other comprehensive loss | | | | | | | | | | |
| Pension and other postretirement liabilities (net of tax benefit of $232, $145, $756, and $404) | (370 | ) | | (232 | ) | | (1,050 | ) | | (725 | ) | |
| Pension and other postretirement liabilities (net of tax benefit of $176 and $232) | | (501 | ) | | (370 | ) |
| Other comprehensive loss | (370 | ) | | (232 | ) | | (1,050 | ) | | (725 | ) | (501 | ) | | (370 | ) |
| Comprehensive Income |
| $185,914 |
| |
| $189,274 |
| |
| $404,091 |
| |
| $553,712 |
|
| $111,092 |
| |
| $94,008 |
|
| | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $405,141 |
| |
| $554,437 |
| |
| $111,593 |
| |
| $94,378 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 458,963 |
| | 462,007 |
| | 157,887 |
| | 151,472 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 303,397 |
| | 155,996 |
| | 86,443 |
| | 163,299 |
|
| Changes in working capital: | | | | | | | | |
| Receivables | | (92,610 | ) | | (159,517 | ) | | 53,786 |
| | 75,196 |
|
| Fuel inventory | | 7,643 |
| | (1,578 | ) | | (1,402 | ) | | 3,066 |
|
| Accounts payable | | 31,865 |
| | (18,420 | ) | | (18,036 | ) | | (7,846 | ) |
| Prepaid taxes and taxes accrued | | 97,138 |
| | (55,780 | ) | | (24,705 | ) | | 22,563 |
|
| Interest accrued | | 9,149 |
| | 7,531 |
| | 6,365 |
| | 5,983 |
|
| Deferred fuel costs | | (37,753 | ) | | (6,091 | ) | | (52,090 | ) | | (19,487 | ) |
| Other working capital accounts | | (49,266 | ) | | (2,503 | ) | | (55 | ) | | (20,810 | ) |
| Changes in provisions for estimated losses | | (6,331 | ) | | 1,658 |
| | (481 | ) | | (4,059 | ) |
| Changes in other regulatory assets | | 60,014 |
| | 73,920 |
| | 28,579 |
| | 28,922 |
|
| Changes in other regulatory liabilities | | (72,060 | ) | | 30,847 |
| | (6,088 | ) | | (59,969 | ) |
| Changes in pension and other postretirement liabilities | | (70,489 | ) | | (63,735 | ) | | (18,075 | ) | | (17,054 | ) |
| Other | | (117,625 | ) | | (100,827 | ) | | 4,319 |
| | (75,950 | ) |
| Net cash flow provided by operating activities | | 927,176 |
| | 877,945 |
| | 328,040 |
| | 339,704 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (1,177,121 | ) | | (675,248 | ) | | (469,398 | ) | | (360,693 | ) |
| Allowance for equity funds used during construction | | 34,492 |
| | 18,479 |
| | 17,745 |
| | 9,990 |
|
| Payment for purchase of plant | | — |
| | (474,670 | ) | |
| Nuclear fuel purchases | | (159,637 | ) | | (49,219 | ) | | (9,997 | ) | | (139,620 | ) |
| Proceeds from the sale of nuclear fuel | | 28,884 |
| | 64,498 |
| | 36,301 |
| | 28,884 |
|
| Receipts from storm reserve escrow account | | 8,836 |
| | — |
| | — |
| | 8,836 |
|
| Payments to storm reserve escrow account | | (1,422 | ) | | (823 | ) | | (853 | ) | | (332 | ) |
| Changes to securitization account | | (6,538 | ) | | (6,649 | ) | | (7,523 | ) | | (5,527 | ) |
| Proceeds from nuclear decommissioning trust fund sales | | 176,056 |
| | 178,183 |
| | 125,453 |
| | 40,586 |
|
| Investment in nuclear decommissioning trust funds | | (204,500 | ) | | (206,976 | ) | | (137,097 | ) | | (51,393 | ) |
| Changes in money pool receivable - net | | (50,396 | ) | | (3,274 | ) | | (170,163 | ) | | (8,047 | ) |
| Insurance proceeds | | 5,305 |
| | — |
| | 1,582 |
| | 5,305 |
|
| Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | — |
| | 17,274 |
| |
| Changes in other investments - net | | (33,324 | ) | | — |
| |
| Net cash flow used in investing activities | | (1,379,365 | ) | | (1,138,425 | ) | | (613,950 | ) | | (472,011 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | 646,850 |
| | 1,389,315 |
| | 947,038 |
| | — |
|
| Retirement of long-term debt | | (296,359 | ) | | (831,632 | ) | | (154,117 | ) | | (57,499 | ) |
| Changes in credit borrowings - net | | 36,762 |
| | (18,385 | ) | |
| Changes in short-term borrowings - net | | | 19,382 |
| | 87,504 |
|
| Distributions paid: | | | | | | | | |
| Common equity | | (91,250 | ) | | (215,000 | ) | | — |
| | (42,125 | ) |
| Other | | (2,141 | ) | | (3,841 | ) | | (14 | ) | | (2,130 | ) |
| Net cash flow provided by financing activities | | 293,862 |
| | 320,457 |
| |
| Net cash flow provided by (used in) financing activities | | | 812,289 |
| | (14,250 | ) |
| | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | (158,327 | ) | | 59,977 |
| | 526,379 |
| | (146,557 | ) |
| Cash and cash equivalents at beginning of period | | 213,850 |
| | 35,102 |
| | 35,907 |
| | 213,850 |
|
| Cash and cash equivalents at end of period | |
| $55,523 |
| |
| $95,079 |
| |
| $562,286 |
| |
| $67,293 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid (received) during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $189,896 |
| |
| $251,196 |
| |
| $61,613 |
| |
| $59,261 |
|
| Income taxes | |
| ($116,937 | ) | |
| $62,676 |
| |
| ($2,973 | ) | |
| ($116,937 | ) |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | ASSETS | | September 30, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents: | | | | | | | | |
| Cash | |
| $10,143 |
| |
| $49,972 |
| |
| $385 |
| |
| $5,836 |
|
| Temporary cash investments | | 45,380 |
| | 163,878 |
| | 561,901 |
| | 30,071 |
|
| Total cash and cash equivalents | | 55,523 |
| | 213,850 |
| | 562,286 |
| | 35,907 |
|
| Accounts receivable: | | | | | | | | |
| Customer | | 288,237 |
| | 213,517 |
| | 219,522 |
| | 254,308 |
|
| Allowance for doubtful accounts | | (7,677 | ) | | (6,277 | ) | | (9,137 | ) | | (8,430 | ) |
| Associated companies | | 190,048 |
| | 155,794 |
| | 306,933 |
| | 143,524 |
|
| Other | | 58,933 |
| | 54,186 |
| | 64,776 |
| | 60,893 |
|
| Accrued unbilled revenues | | 174,379 |
| | 159,176 |
| | 137,696 |
| | 153,118 |
|
| Total accounts receivable | | 703,920 |
| | 576,396 |
| | 719,790 |
| | 603,413 |
|
| Fuel inventory | | 43,095 |
| | 50,738 |
| | 41,130 |
| | 39,728 |
|
| Materials and supplies - at average cost | | 297,545 |
| | 294,421 |
| | 309,433 |
| | 299,881 |
|
| Deferred nuclear refueling outage costs | | 83,207 |
| | 22,535 |
| | 52,723 |
| | 65,711 |
|
| Prepaid taxes | | 12,966 |
| | 110,104 |
| |
| Prepayments and other | | 85,303 |
| | 41,687 |
| | 41,147 |
| | 34,035 |
|
| TOTAL | | 1,281,559 |
| | 1,309,731 |
| | 1,726,509 |
| | 1,078,675 |
|
| | | | | | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | | | | | |
| Investment in affiliate preferred membership interests | | 1,390,587 |
| | 1,390,587 |
| | 1,390,587 |
| | 1,390,587 |
|
| Decommissioning trust funds | | 1,260,022 |
| | 1,140,707 |
| | 1,304,423 |
| | 1,312,073 |
|
| Storm reserve escrow account | | 284,071 |
| | 291,485 |
| | 285,612 |
| | 284,759 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 236,802 |
| | 217,494 |
| | 273,388 |
| | 245,255 |
|
| Other | | 18,837 |
| | 28,844 |
| | 14,407 |
| | 18,999 |
|
| TOTAL | | 3,190,319 |
| | 3,069,117 |
| | 3,268,417 |
| | 3,251,673 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 19,237,157 |
| | 18,827,532 |
| | 19,722,068 |
| | 19,678,536 |
|
| Natural gas | | 182,704 |
| | 172,816 |
| | 195,230 |
| | 191,899 |
|
| Construction work in progress | | 1,225,066 |
| | 670,201 |
| | 1,490,196 |
| | 1,281,452 |
|
| Nuclear fuel | | 339,749 |
| | 249,807 |
| | 275,750 |
| | 337,402 |
|
| TOTAL UTILITY PLANT | | 20,984,676 |
| | 19,920,356 |
| | 21,683,244 |
| | 21,489,289 |
|
| Less - accumulated depreciation and amortization | | 8,622,235 |
| | 8,420,596 |
| | 8,597,382 |
| | 8,703,047 |
|
| UTILITY PLANT - NET | | 12,362,441 |
| | 11,499,760 |
| | 13,085,862 |
| | 12,786,242 |
|
| | | | | | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | | | | | |
| Regulatory assets: | | | | | | | | |
| Regulatory asset for income taxes - net | | 480,257 |
| | 470,480 |
| |
| Other regulatory assets (includes securitization property of $76,520 as of September 30, 2017 and $92,951 as of December 31, 2016) | | 1,098,267 |
| | 1,168,058 |
| |
| Other regulatory assets (includes securitization property of $66,296 as of March 31, 2018 and $71,367 as of December 31, 2017) | | | 1,117,263 |
| | 1,145,842 |
|
| Deferred fuel costs | | 168,122 |
| | 168,122 |
| | 168,122 |
| | 168,122 |
|
| Other | | 17,374 |
| | 16,003 |
| | 23,323 |
| | 18,310 |
|
| TOTAL | | 1,764,020 |
| | 1,822,663 |
| | 1,308,708 |
| | 1,332,274 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $18,598,339 |
| |
| $17,701,271 |
| |
| $19,389,496 |
| |
| $18,448,864 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | September 30, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT LIABILITIES | | | | | | | | |
| Currently maturing long-term debt | |
| $675,002 |
| |
| $200,198 |
| |
| $675,002 |
| |
| $675,002 |
|
| Short-term borrowings | | 40,555 |
| | 3,794 |
| | 62,922 |
| | 43,540 |
|
| Accounts payable: | | | | | | | | |
| Associated companies | | 85,920 |
| | 82,106 |
| | 86,427 |
| | 126,685 |
|
| Other | | 347,338 |
| | 358,741 |
| | 375,783 |
| | 404,374 |
|
| Customer deposits | | 149,274 |
| | 148,601 |
| | 151,492 |
| | 150,623 |
|
| Taxes accrued | | | — |
| | 18,157 |
|
| Interest accrued | | 84,747 |
| | 75,598 |
| | 81,893 |
| | 75,528 |
|
| Deferred fuel costs | | 10,458 |
| | 48,211 |
| | 19,357 |
| | 71,447 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | | 217,850 |
| | — |
|
| Other | | 88,525 |
| | 80,013 |
| | 63,165 |
| | 79,037 |
|
| TOTAL | | 1,481,819 |
| | 997,262 |
| | 1,733,891 |
| | 1,644,393 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 2,998,156 |
| | 2,691,118 |
| | 2,144,037 |
| | 2,050,371 |
|
| Accumulated deferred investment tax credits | | 123,088 |
| | 126,741 |
| | 120,652 |
| | 121,870 |
|
| Regulatory liability for income taxes - net | | | 506,092 |
| | 725,368 |
|
| Other regulatory liabilities | | 808,914 |
| | 880,974 |
| | 756,397 |
| | 761,059 |
|
| Decommissioning | | 1,125,732 |
| | 1,082,685 |
| | 1,240,833 |
| | 1,140,461 |
|
| Accumulated provisions | | 304,441 |
| | 310,772 |
| | 301,967 |
| | 302,448 |
|
| Pension and other postretirement liabilities | | 709,396 |
| | 780,278 |
| | 730,116 |
| | 748,384 |
|
| Long-term debt (includes securitization bonds of $89,430 as of September 30, 2017 and $99,217 as of December 31, 2016) | | 5,492,494 |
| | 5,612,593 |
| |
| Long-term debt (includes securitization bonds of $77,801 as of March 31, 2018 and $77,736 as of December 31, 2017) | | | 6,263,437 |
| | 5,469,069 |
|
| Other | | 159,711 |
| | 137,039 |
| | 175,941 |
| | 176,637 |
|
| TOTAL | | 11,721,932 |
| | 11,622,200 |
| | 12,239,472 |
| | 11,495,667 |
|
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| EQUITY | | | | | | | | |
| Member's equity | | 5,444,080 |
| | 5,130,251 |
| | 5,473,083 |
| | 5,355,204 |
|
| Accumulated other comprehensive loss | | (49,492 | ) | | (48,442 | ) | | (56,950 | ) | | (46,400 | ) |
| TOTAL | | 5,394,588 |
| | 5,081,809 |
| | 5,416,133 |
| | 5,308,804 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $18,598,339 |
| |
| $17,701,271 |
| |
| $19,389,496 |
| |
| $18,448,864 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | For the Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | |
| | Common Equity | | | Common Equity | | |
| | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total | Member’s
Equity | | Accumulated Other Comprehensive Loss | | Total |
| | (In Thousands) | |
| | | | | | | |
| Balance at December 31, 2015 |
| $4,793,724 |
| |
| ($56,412 | ) | |
| $4,737,312 |
| |
| | | | | | | |
| Net income | 554,437 |
| | — |
| | 554,437 |
| |
| Other comprehensive loss | — |
| | (725 | ) | | (725 | ) | |
| Distributions declared on common equity | (215,000 | ) | | — |
| | (215,000 | ) | |
| Other | (22 | ) | | — |
| | (22 | ) | |
| | | | | | | |
| Balance at September 30, 2016 |
| $5,133,139 |
| |
| ($57,137 | ) | |
| $5,076,002 |
| |
| | | | | | | (In Thousands) |
| | | | | | | | | | | |
| Balance at December 31, 2016 |
| $5,130,251 |
| |
| ($48,442 | ) | |
| $5,081,809 |
|
| $5,130,251 |
| |
| ($48,442 | ) | |
| $5,081,809 |
|
| | | | | | | | | | | |
| Net income | 405,141 |
| | — |
| | 405,141 |
| 94,378 |
| | — |
| | 94,378 |
|
| Other comprehensive loss | — |
| | (1,050 | ) | | (1,050 | ) | — |
| | (370 | ) | | (370 | ) |
| Distributions declared on common equity | (91,250 | ) | | — |
| | (91,250 | ) | (42,125 | ) | | — |
| | (42,125 | ) |
| Other | (62 | ) | | — |
| | (62 | ) | (4 | ) | | — |
| | (4 | ) |
| | | | | | | | | | | |
| Balance at September 30, 2017 |
| $5,444,080 |
| |
| ($49,492 | ) | |
| $5,394,588 |
| |
| Balance at March 31, 2017 | |
| $5,182,500 |
| |
| ($48,812 | ) | |
| $5,133,688 |
|
| | | | | | | |
| | | | | | | |
| Balance at December 31, 2017 | |
| $5,355,204 |
| |
| ($46,400 | ) | |
| $5,308,804 |
|
| | | | | | | |
| Net income | | 111,593 |
| | — |
| | 111,593 |
|
| Other comprehensive loss | | — |
| | (501 | ) | | (501 | ) |
| Reclassification pursuant to ASU 2018-02 | | 6,262 |
| | (10,049 | ) | | (3,787 | ) |
| Other | | 24 |
| | — |
| | 24 |
|
| | | | | | | |
| Balance at March 31, 2018 | |
| $5,473,083 |
| |
| ($56,950 | ) | |
| $5,416,133 |
|
| | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | |
| | ENTERGY LOUISIANA, LLC AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $411 |
| |
| $413 |
| |
| ($2 | ) | | — |
| |
| $296 |
| |
| $221 |
| |
| $75 |
| | 34 |
|
| Commercial | | 285 |
| | 273 |
| | 12 |
| | 4 |
| | 225 |
| | 195 |
| | 30 |
| | 15 |
|
| Industrial | | 428 |
| | 361 |
| | 67 |
| | 19 |
| | 352 |
| | 325 |
| | 27 |
| | 8 |
|
| Governmental | | 19 |
| | 18 |
| | 1 |
| | 6 |
| | 17 |
| | 15 |
| | 2 |
| | 13 |
|
| Total retail | | 1,143 |
| | 1,065 |
| | 78 |
| | 7 |
| |
| Total billed retail | | | 890 |
| | 756 |
| | 134 |
| | 18 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 69 |
| | 116 |
| | (47 | ) | | (41 | ) | | 74 |
| | 62 |
| | 12 |
| | 19 |
|
| Non-associated companies | | 23 |
| | 13 |
| | 10 |
| | 77 |
| | 15 |
| | 14 |
| | 1 |
| | 7 |
|
| Other | | 45 |
| | 46 |
| | (1 | ) | | (2 | ) | | 26 |
| | 32 |
| | (6 | ) | | (19 | ) |
| Total | |
| $1,280 |
| |
| $1,240 |
| |
| $40 |
| | 3 |
| |
| $1,005 |
| |
| $864 |
| |
| $141 |
| | 16 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 4,301 |
| | 4,635 |
| | (334 | ) | | (7 | ) | | 3,459 |
| | 2,852 |
| | 607 |
| | 21 |
|
| Commercial | | 3,228 |
| | 3,363 |
| | (135 | ) | | (4 | ) | | 2,661 |
| | 2,540 |
| | 121 |
| | 5 |
|
| Industrial | | 7,627 |
| | 7,345 |
| | 282 |
| | 4 |
| | 7,049 |
| | 6,961 |
| | 88 |
| | 1 |
|
| Governmental | | 208 |
| | 208 |
| | — |
| | — |
| | 201 |
| | 193 |
| | 8 |
| | 4 |
|
| Total retail | | 15,364 |
| | 15,551 |
| | (187 | ) | | (1 | ) | | 13,370 |
| | 12,546 |
| | 824 |
| | 7 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 1,164 |
| | 2,360 |
| | (1,196 | ) | | (51 | ) | | 1,014 |
| | 994 |
| | 20 |
| | 2 |
|
| Non-associated companies | | 616 |
| | 335 |
| | 281 |
| | 84 |
| | 513 |
| | 295 |
| | 218 |
| | 74 |
|
| Total | | 17,144 |
| | 18,246 |
| | (1,102 | ) | | (6 | ) | | 14,897 |
| | 13,835 |
| | 1,062 |
| | 8 |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | | |
| Electric Operating Revenues: | | | | | | | | | |
| Residential | |
| $911 |
| |
| $913 |
| |
| ($2 | ) | | — |
| |
| Commercial | | 716 |
| | 694 |
| | 22 |
| | 3 |
| |
| Industrial | | 1,147 |
| | 1,006 |
| | 141 |
| | 14 |
| |
| Governmental | | 51 |
| | 50 |
| | 1 |
| | 2 |
| |
| Total retail | | 2,825 |
| | 2,663 |
| | 162 |
| | 6 |
| |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 204 |
| | 310 |
| | (106 | ) | | (34 | ) | |
| Non-associated companies | | 53 |
| | 37 |
| | 16 |
| | 43 |
| |
| Other | | 135 |
| | 156 |
| | (21 | ) | | (13 | ) | |
| Total | |
| $3,217 |
| |
| $3,166 |
| |
| $51 |
| | 2 |
| |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 10,154 |
| | 10,608 |
| | (454 | ) | | (4 | ) | |
| Commercial | | 8,497 |
| | 8,622 |
| | (125 | ) | | (1 | ) | |
| Industrial | | 22,272 |
| | 21,662 |
| | 610 |
| | 3 |
| |
| Governmental | | 595 |
| | 602 |
| | (7 | ) | | (1 | ) | |
| Total retail | | 41,518 |
| | 41,494 |
| | 24 |
| | — |
| |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 3,399 |
| | 6,104 |
| | (2,705 | ) | | (44 | ) | |
| Non-associated companies | | 1,280 |
| | 1,321 |
| | (41 | ) | | (3 | ) | |
| Total | | 46,197 |
| | 48,919 |
| | (2,722 | ) | | (6 | ) | |
| | | | | | | | | | |
ENTERGY MISSISSIPPI, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 2017 Compared to Third Quarter 2016
Net income remained relatively unchanged, decreasing by $0.1 million, because lower net revenue was substantially offset by lower other operation and maintenance expenses.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income decreased $3.9increased $5.7 million primarily due to lowerhigher net revenue and a lower effective income tax rate, partially offset by higher depreciation and amortization expenses, partially offset by lower other operation and maintenance expenses and lower interest expense.expenses.
Net Revenue
Third Quarter 2017 Compared to Third Quarter 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 thirdfirst quarter 20172018 to the thirdfirst quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
20162017 net revenue |
| $214.7154.1 |
|
| Retail electric price | 5.2 |
|
| Volume/weather | (9.34.8 | ) |
Retail electric price | (5.0 | )
|
| Other | 0.90.4 |
|
20172018 net revenue |
| $201.3164.5 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in residential and commercial usage resulting from a 1% increase in the average number of residential and commercial customers.
The retail electric price variance is primarily due to lowerhigher storm damage rider revenues due to resetting the storm damage provision to zero beginning with the November 2016 billing cycle. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle. The decrease was partially offset by an increase in the energy efficiency rider. See Note 2 to the financial statements herein and in the Form 10-K for further discussion on the storm damage rider.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
| | | |
| Amount |
| (In Millions) |
2016 net revenue |
| $541.2 |
|
Volume/weather | (19.6 | ) |
Retail electric price | 6.6 |
|
Other | 1.4 |
|
2017 net revenue |
| $529.6 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase of 40 GWh, or 2%, in industrial usage. The increase in industrial usage is primarily due to expansion projects in the pulp and paper industry, an increase in usage by the mid to small industrial sector, and new customers in the wood products industry, partially offset by a decrease in demand for existing customers.
The retail electric price variance is primarily due to a $19.4 million net annual increase in rates, as approved by the MPSC, effective with the first billing cycle of July 2016 and an increase in the energy efficiency rider. The increase was partially offset by lower storm damage rider revenues due to resetting the storm damage provision to zero beginning with the November 2016 billing cycle.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 formula rate plan andon the storm damage rider.
The volume/weather variance is primarily due to an increase of 309 GWh, or 11%, in billed electricity usage, including the effect of more favorable weather on residential sales.
Other Income Statement Variances
Third Quarter 2017 Compared to Third Quarter 2016
Other operation and maintenance expenses decreasedincreased primarily due to a decreasean increase of $6.1 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs and a decrease of $4.8$5.1 million in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for a discussion onof storm cost recovery.
The decrease was partially offset by an increase of $1.6 million in energy efficiency costs.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Other operation and maintenance expenses decreased primarily due to:
a decrease of $6.6 million in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for a discussion on storm cost recovery; and
a decrease of $3.6 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs, partially offset by a higher scope of work done in 2017 as compared to the same period in 2016.
The decrease was partially offset by an increase of $3.5 million in energy efficiency costs.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Depreciation and amortization expenses increased primarily due to additions to plantsplant in service.
Interest expense decreased primarily due to the refinancing at lower interest rates of certain first mortgage bonds in 2016 and the retirement, at maturity, of $125 million of 3.25% Series first mortgage bonds in June 2016. See Note 5 to the financial statements in the Form 10-K for details of long-term debt.
Income Taxes
The effective income tax rate was 37.8%23.3% for the thirdfirst quarter 2018. The difference in the effective income tax rate for the first quarter 2018 versus the federal statutory rate of 21% was primarily due to state income taxes and a write-off of a stock-based compensation deferred tax asset, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 41.0% for the first quarter 2017. The difference in the effective income tax rate for the thirdfirst quarter 2017 versus the federal statutory rate of 35% was primarily due to a write-off of a stock-based compensation deferred tax asset and state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
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 38.4%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 nine months ended September 30, 2017. The differenceTax Act, and Note 2 to the financial statements herein and in the effective income tax rate for the nine months ended September 30, 2017 versus the federal statutory rateForm 10-K contains discussion of 35% was primarily due to state income taxes, partially offsetproceedings commenced or other responses by book and tax differences relatedEntergy’s regulators to the allowance for equity funds used during construction.
The effective income tax rates were 38.6% for the third quarter 2016 and 36.9% for the nine months ended September 30, 2016. The difference in the effective income tax rates for the third quarter 2016 and the nine months ended September 30, 2016 versus the federal statutory rate of 35% were primarily due to state income taxes and certain book and tax differences related to utility plant items.Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the ninethree months ended September 30,March 31, 2018 and 2017 and 2016 were as follows:
| | | | 2017 | | 2016 | 2018 | | 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 activities | 129,314 |
| | 141,960 |
| (8,841 | ) | | (9,132 | ) |
| Investing activities | (300,966 | ) | | (244,814 | ) | (76,268 | ) | | (79,691 | ) |
| Financing activities | 94,867 |
| | 265,513 |
| 79,316 |
| | 12,036 |
|
| Net increase (decrease) in cash and cash equivalents | (76,785 | ) | | 162,659 |
| |
| Net decrease in cash and cash equivalents | | (5,793 | ) | | (76,787 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $49 |
| |
| $308,264 |
|
| $303 |
| |
| $47 |
|
Operating Activities
Net cash flow provided byused in operating activities decreased $12.6$0.3 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to the timing of recovery of fuel and purchased power costs in 20172018 as compared to the same period in 2016 and the timing of payments to vendors. The decrease was partially2017 substantially offset by income tax refunds of $15.1 million in 2017 compared to income tax payments of $3.9 million in 2016.2017. Entergy Mississippi received state income tax refunds of $15.1 million in 2017 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resultedagreement resulting from the carryback of net operating losses.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $56.2decreased $3.4 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to:
an increaseto a decrease of $53.1$14.8 million in transmission construction expenditures primarily due to a higherlower scope of work performed in 20172018 as compared to the same period in 2016;
an increase of $18.5 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed in 2017, as compared to the same period in 2016;
an increase of $13.1 million in storm spending in 2017 as compared to the same period in 2016; and
an increase of $9.1 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2017 as compared to the same period in 2016.
The increase was partially offset by money pool activity.
Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased by $1.6 million for the three months ended March 31, 2018 compared to decreasing by $10.6 million for the ninethree months ended September 30, 2017 compared to increasing $25 million for the nine months ended September 30, 2016.March 31, 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 $170.6increased $67.3 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to the net issuance of $291.6 million of long-term debt in 2016, partially offset by money pool activityactivity.
Entergy Mississippi, Inc.
Management's Financial Discussion and a decrease of $13.5 million in common stock dividends paid in 2017 as compared to the same period 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-K for details of long-term debt.Analysis
Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow, and Entergy Mississippi’s payable to the money pool increased by $106.2$74.9 million for the ninethree months ended September 30,March 31, 2018 compared to increasing by $12.3 million for the three months ended March 31, 2017.
Capital Structure
Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table.
| | | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 48.4 | % | | 50.2 | % | 51.0 | % | | 51.5 | % |
| Effect of subtracting cash | — | % | | (1.8 | %) | — | % | | (0.2 | %) |
| Net debt to net capital | 48.4 | % | | 48.4 | % | 51.0 | % | | 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.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Mississippi’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Mississippi is developing its capital investment plan for 2018 through 2020 and currently anticipates making $1.3 billion in capital investments during that period. The preliminary estimate includes amounts associated with specific investments such as transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including initial investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
| September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| ($106,180) | | $10,595 | | $50,916 | | $25,930 |
|
| | | | | | |
| March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| ($74,892) | | $1,633 | | ($12,324) | | $10,595 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Mississippi has four separate credit facilities in the aggregate amount of $102.5 million scheduled to expire in May 2018. Entergy Mississippi expects to renew its credit facilities prior to expiration. No borrowings were outstanding under the credit facilities as of September 30, 2017.March 31, 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 September 30, 2017, a $12.8March 31, 2018, $16.6 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.
Formula Rate Plan
In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 2016 look-back filing and 2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSC approved the stipulation, which resulted in no change in rates.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in November 2016, Entergy Mississippi filed an application seeking a finding from the MPSC that Entergy Mississippi’s deployment of advanced metering infrastructure is in the public interest. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without any material
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
changes, finding thatFormula Rate Plan
In March 2018, Entergy Mississippi submitted its formula rate plan 2018 test year filing and 2017 look-back filing showing Entergy Mississippi’s deploymentearned return for the historical 2017 calendar year and projected earned return for the 2018 calendar year, in large part as a result of AMIthe lower federal corporate income tax rate effective in 2018, to be within the formula rate plan bandwidth, resulting in no change in rates. The filing is currently subject to MPSC review. 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.
Internal Restructuring
In March 2018, Entergy Mississippi filed an application with the MPSC seeking authorization to undertake a restructuring that would result in the public interesttransfer of substantially all of the assets and grantingoperations of Entergy Mississippi to a certificate of public conveniencenew entity, which would ultimately be held by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and necessity. Theapproval by the MPSC, order also confirmedthe 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 shall continuewould 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 includea 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 rate basea transaction regarded as a merger under the remaining book valueTXBOC. 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 existing meters thatEntergy Corporation). As a result of the contribution, Entergy Mississippi Power and Light will be retired as parta 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 AMI deployment and also to depreciate those assets using current depreciation rates.
Mississippi Attorney General Complaint
As discussed in the Form 10-K, the Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation,restructuring, Entergy Mississippi, LLC will hold substantially all of the assets, and will have assumed substantially all of the liabilities, of Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, breach of good faith and fair dealing, and requesting an accounting and restitution. The complaint is wide ranging and relates to tariffs and procedures under whichMississippi. Entergy Mississippi purchases power not generated in Mississippimay modify or supplement the steps to meet electricity demand. The defendants have deniedbe taken to effectuate 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.restructuring.
Storm Cost Recovery
See the Form 10-K for discussion of Entergy Mississippi’s storm damage provision. As of July 31, 2017, the balance in Entergy Mississippi’s accumulated storm damage provision was less than $10 million, therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with September 2017 bills.
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.
Entergy Mississippi, Inc.
Management's Financial Discussion and Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in 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 Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | |
| | | |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $315,743 |
| |
| $258,443 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 63,528 |
| | 39,140 |
|
| Purchased power | | 87,456 |
| | 71,070 |
|
| Other operation and maintenance | | 59,458 |
| | 54,622 |
|
| Taxes other than income taxes | | 25,394 |
| | 23,972 |
|
| Depreciation and amortization | | 38,182 |
| | 35,317 |
|
| Other regulatory charges (credits) - net | | 293 |
| | (5,837 | ) |
| TOTAL | | 274,311 |
| | 218,284 |
|
| | | | | |
| OPERATING INCOME | | 41,432 |
| | 40,159 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 1,978 |
| | 1,843 |
|
| Interest and investment income | | 25 |
| | 26 |
|
| Miscellaneous - net | | (571 | ) | | (976 | ) |
| TOTAL | | 1,432 |
| | 893 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 13,905 |
| | 12,672 |
|
| Allowance for borrowed funds used during construction | | (828 | ) | | (720 | ) |
| TOTAL | | 13,077 |
| | 11,952 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 29,787 |
| | 29,100 |
|
| | | | | |
| Income taxes | | 6,944 |
| | 11,942 |
|
| | | | | |
| NET INCOME | | 22,843 |
| | 17,158 |
|
| | | | | |
| Preferred dividend requirements and other | | 238 |
| | 238 |
|
| | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $22,605 |
| |
| $16,920 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
(Page left blank intentionally)
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $22,843 |
| |
| $17,158 |
|
| Adjustments to reconcile net income to net cash flow used in operating activities: | | | | |
| Depreciation and amortization | | 38,182 |
| | 35,317 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 7,787 |
| | 13,505 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 1,018 |
| | 17,890 |
|
| Fuel inventory | | (767 | ) | | 2,672 |
|
| Accounts payable | | (24,818 | ) | | (19,639 | ) |
| Taxes accrued | | (56,244 | ) | | (38,825 | ) |
| Interest accrued | | (5,548 | ) | | (2,953 | ) |
| Deferred fuel costs | | 13,817 |
| | (5,236 | ) |
| Other working capital accounts | | (4,856 | ) | | (578 | ) |
| Provisions for estimated losses | | 4,754 |
| | (1,772 | ) |
| Other regulatory assets | | 4,586 |
| | (10,918 | ) |
| Other regulatory liabilities | | 766 |
| | (3,341 | ) |
| Pension and other postretirement liabilities | | (4,604 | ) | | (4,613 | ) |
| Other assets and liabilities | | (5,757 | ) | | (7,799 | ) |
| Net cash flow used in operating activities | | (8,841 | ) | | (9,132 | ) |
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (79,141 | ) | | (92,087 | ) |
| Allowance for equity funds used during construction | | 1,978 |
| | 1,843 |
|
| Changes in money pool receivable - net | | 1,633 |
| | 10,595 |
|
| Other | | (738 | ) | | (42 | ) |
| Net cash flow used in investing activities | | (76,268 | ) | | (79,691 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Changes in money pool payable - net | | 74,892 |
| | 12,324 |
|
| Dividends paid: | | | | |
| Preferred stock | | (238 | ) | | (238 | ) |
| Other | | 4,662 |
| | (50 | ) |
| Net cash flow provided by financing activities | | 79,316 |
| | 12,036 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (5,793 | ) | | (76,787 | ) |
| Cash and cash equivalents at beginning of period | | 6,096 |
| | 76,834 |
|
| Cash and cash equivalents at end of period | |
| $303 |
| |
| $47 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $18,820 |
| |
| $15,036 |
|
| Income taxes | |
| $— |
| |
| ($15,087 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| INCOME STATEMENTS |
| For the Three and Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $349,197 |
| |
| $309,739 |
| |
| $898,852 |
| |
| $820,923 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 61,681 |
| | 3,444 |
| | 146,869 |
| | 64,790 |
|
| Purchased power | | 90,086 |
| | 87,070 |
| | 236,409 |
| | 216,814 |
|
| Other operation and maintenance | | 57,491 |
| | 67,155 |
| | 172,199 |
| | 178,809 |
|
| Taxes other than income taxes | | 23,568 |
| | 24,837 |
| | 71,518 |
| | 68,821 |
|
| Depreciation and amortization | | 36,176 |
| | 34,438 |
| | 106,935 |
| | 101,746 |
|
| Other regulatory charges (credits) - net | | (3,840 | ) | | 4,483 |
| | (13,983 | ) | | (1,832 | ) |
| TOTAL | | 265,162 |
| | 221,427 |
| | 719,947 |
| | 629,148 |
|
| | | | | | | | | |
| OPERATING INCOME | | 84,035 |
| | 88,312 |
| | 178,905 |
| | 191,775 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 2,566 |
| | 1,441 |
| | 6,741 |
| | 4,072 |
|
| Interest and investment income | | — |
| | 129 |
| | 33 |
| | 490 |
|
| Miscellaneous - net | | (54 | ) | | (849 | ) | | (1,032 | ) | | (2,604 | ) |
| TOTAL | | 2,512 |
| | 721 |
| | 5,742 |
| | 1,958 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 12,713 |
| | 13,866 |
| | 37,953 |
| | 43,866 |
|
| Allowance for borrowed funds used during construction | | (1,048 | ) | | (741 | ) | | (2,681 | ) | | (2,099 | ) |
| TOTAL | | 11,665 |
| | 13,125 |
| | 35,272 |
| | 41,767 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 74,882 |
| | 75,908 |
| | 149,375 |
| | 151,966 |
|
| | | | | | | | | |
| Income taxes | | 28,337 |
| | 29,296 |
| | 57,369 |
| | 56,042 |
|
| | | | | | | | | |
| NET INCOME | | 46,545 |
| | 46,612 |
| | 92,006 |
| | 95,924 |
|
| | | | | | | | | |
| Preferred dividend requirements and other | | 238 |
| | 707 |
| | 715 |
| | 2,121 |
|
| | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $46,307 |
| |
| $45,905 |
| |
| $91,291 |
| |
| $93,803 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $13 |
| |
| $1,607 |
|
| Temporary cash investments | | 290 |
| | 4,489 |
|
| Total cash and cash equivalents | | 303 |
| | 6,096 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 83,092 |
| | 72,039 |
|
| Allowance for doubtful accounts | | (635 | ) | | (574 | ) |
| Associated companies | | 39,490 |
| | 45,081 |
|
| Other | | 14,768 |
| | 9,738 |
|
| Accrued unbilled revenues | | 41,174 |
| | 54,256 |
|
| Total accounts receivable | | 177,889 |
| | 180,540 |
|
| Deferred fuel costs | | 18,627 |
| | 32,444 |
|
| Fuel inventory - at average cost | | 46,373 |
| | 45,606 |
|
| Materials and supplies - at average cost | | 42,957 |
| | 42,571 |
|
| Prepayments and other | | 8,120 |
| | 7,041 |
|
| TOTAL | | 294,269 |
| | 314,298 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,588 |
| | 4,592 |
|
| Storm reserve escrow account | | 32,061 |
| | 31,969 |
|
| TOTAL | | 36,649 |
| | 36,561 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,725,645 |
| | 4,660,297 |
|
| Property under capital lease | | — |
| | 125 |
|
| Construction work in progress | | 146,168 |
| | 149,367 |
|
| TOTAL UTILITY PLANT | | 4,871,813 |
| | 4,809,789 |
|
| Less - accumulated depreciation and amortization | | 1,711,157 |
| | 1,681,306 |
|
| UTILITY PLANT - NET | | 3,160,656 |
| | 3,128,483 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Other regulatory assets | | 393,323 |
| | 397,909 |
|
| Other | | 5,679 |
| | 2,124 |
|
| TOTAL | | 399,002 |
| | 400,033 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,890,576 |
| |
| $3,879,375 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $117,633 |
| |
| $55,689 |
|
| Other | | 55,887 |
| | 77,326 |
|
| Customer deposits | | 83,574 |
| | 83,654 |
|
| Taxes accrued | | 26,599 |
| | 82,843 |
|
| Interest accrued | | 17,353 |
| | 22,901 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | 162,140 |
| | — |
|
| Other | | 8,708 |
| | 12,785 |
|
| TOTAL | | 471,894 |
| | 335,198 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 497,129 |
| | 488,806 |
|
| Accumulated deferred investment tax credits | | 8,827 |
| | 8,867 |
|
| Regulatory liability for income taxes - net | | 248,739 |
| | 411,011 |
|
| Asset retirement cost liabilities | | 9,348 |
| | 9,219 |
|
| Accumulated provisions | | 49,518 |
| | 44,764 |
|
| Pension and other postretirement liabilities | | 96,893 |
| | 101,498 |
|
| Long-term debt | | 1,270,399 |
| | 1,270,122 |
|
| Other | | 16,973 |
| | 11,639 |
|
| TOTAL | | 2,197,826 |
| | 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 | | 1,000,982 |
| | 978,377 |
|
| TOTAL | | 1,200,475 |
| | 1,177,870 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,890,576 |
| |
| $3,879,375 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $92,006 |
| |
| $95,924 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 106,935 |
| | 101,746 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 65,204 |
| | 43,201 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | (31,085 | ) | | (39,253 | ) |
| Fuel inventory | | 8,059 |
| | 412 |
|
| Accounts payable | | (2,644 | ) | | 25,200 |
|
| Taxes accrued | | (5,815 | ) | | (765 | ) |
| Interest accrued | | (2,366 | ) | | (2,349 | ) |
| Deferred fuel costs | | (27,344 | ) | | (79,671 | ) |
| Other working capital accounts | | (279 | ) | | (1,910 | ) |
| Provisions for estimated losses | | (10,274 | ) | | 5,221 |
|
| Other regulatory assets | | (33,323 | ) | | 18,851 |
|
| Pension and other postretirement liabilities | | (18,863 | ) | | (18,871 | ) |
| Other assets and liabilities | | (10,897 | ) | | (5,776 | ) |
| Net cash flow provided by operating activities | | 129,314 |
| | 141,960 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (313,910 | ) | | (223,643 | ) |
| Allowance for equity funds used during construction | | 6,741 |
| | 4,072 |
|
| Changes in money pool receivable - net | | 10,595 |
| | (24,986 | ) |
| Change in other investments | | (3,185 | ) | | — |
|
| Other | | (1,207 | ) | | (257 | ) |
| Net cash flow used in investing activities | | (300,966 | ) | | (244,814 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 624,034 |
|
| Retirement of long-term debt | | — |
| | (332,400 | ) |
| Change in money pool payable - net | | 106,180 |
| | — |
|
| Dividends paid: | | | | |
| Common stock | | (10,500 | ) | | (24,000 | ) |
| Preferred stock | | (715 | ) | | (2,121 | ) |
| Other | | (98 | ) | | — |
|
| Net cash flow provided by financing activities | | 94,867 |
| | 265,513 |
|
| | | | | |
| Net increase (decrease) in cash and cash equivalents | | (76,785 | ) | | 162,659 |
|
| Cash and cash equivalents at beginning of period | | 76,834 |
| | 145,605 |
|
| Cash and cash equivalents at end of period | |
| $49 |
| |
| $308,264 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $38,549 |
| |
| $44,209 |
|
| Income taxes | |
| ($15,087 | ) | |
| $3,878 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 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 | — |
| | — |
| | 17,158 |
| | 17,158 |
|
| Preferred stock dividends | — |
| | — |
| | (238 | ) | | (238 | ) |
| | | | | | | | |
| Balance at March 31, 2017 |
| $199,326 |
| |
| $167 |
| |
| $912,218 |
| |
| $1,111,711 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2017 |
| $199,326 |
| |
| $167 |
| |
| $978,377 |
| |
| $1,177,870 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 22,843 |
| | 22,843 |
|
| Preferred stock dividends | — |
| | — |
| | (238 | ) | | (238 | ) |
| | | | | | | | |
| Balance at March 31, 2018 |
| $199,326 |
| |
| $167 |
| |
| $1,000,982 |
| |
| $1,200,475 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $42 |
| |
| $16 |
|
| Temporary cash investments | | 7 |
| | 76,818 |
|
| Total cash and cash equivalents | | 49 |
| | 76,834 |
|
| Accounts receivable: | | |
| | |
|
| Customer | | 81,898 |
| | 51,218 |
|
| Allowance for doubtful accounts | | (669 | ) | | (549 | ) |
| Associated companies | | 34,417 |
| | 45,973 |
|
| Other | | 8,835 |
| | 12,006 |
|
| Accrued unbilled revenues | | 55,983 |
| | 51,327 |
|
| Total accounts receivable | | 180,464 |
| | 159,975 |
|
| Deferred fuel costs | | 34,301 |
| | 6,957 |
|
| Fuel inventory - at average cost | | 42,813 |
| | 50,872 |
|
| Materials and supplies - at average cost | | 44,100 |
| | 41,146 |
|
| Prepayments and other | | 14,555 |
| | 8,873 |
|
| TOTAL | | 316,282 |
| | 344,657 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | |
| | |
|
| Non-utility property - at cost (less accumulated depreciation) | | 4,596 |
| | 4,608 |
|
| Escrow accounts | | 31,894 |
| | 31,783 |
|
| TOTAL | | 36,490 |
| | 36,391 |
|
| | | | | |
| UTILITY PLANT | | |
| | |
|
| Electric | | 4,454,890 |
| | 4,321,214 |
|
| Property under capital lease | | 502 |
| | 1,590 |
|
| Construction work in progress | | 234,116 |
| | 118,182 |
|
| TOTAL UTILITY PLANT | | 4,689,508 |
| | 4,440,986 |
|
| Less - accumulated depreciation and amortization | | 1,651,270 |
| | 1,602,711 |
|
| UTILITY PLANT - NET | | 3,038,238 |
| | 2,838,275 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | |
| | |
|
| Regulatory assets: | | |
| | |
|
| Regulatory asset for income taxes - net | | 40,367 |
| | 38,284 |
|
| Other regulatory assets | | 373,453 |
| | 342,213 |
|
| Other | | 3,710 |
| | 2,320 |
|
| TOTAL | | 417,530 |
| | 382,817 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,808,540 |
| |
| $3,602,140 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | |
| | |
|
| Accounts payable: | | |
| | |
|
| Associated companies | |
| $147,147 |
| |
| $43,647 |
|
| Other | | 75,915 |
| | 80,227 |
|
| Customer deposits | | 83,682 |
| | 84,112 |
|
| Taxes accrued | | 58,225 |
| | 64,040 |
|
| Interest accrued | | 19,287 |
| | 21,653 |
|
| Other | | 13,589 |
| | 9,554 |
|
| TOTAL | | 397,845 |
| | 303,233 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | |
| | |
|
| Accumulated deferred income taxes and taxes accrued | | 926,123 |
| | 861,331 |
|
| Accumulated deferred investment tax credits | | 8,811 |
| | 8,667 |
|
| Asset retirement cost liabilities | | 9,092 |
| | 8,722 |
|
| Accumulated provisions | | 44,166 |
| | 54,440 |
|
| Pension and other postretirement liabilities | | 90,696 |
| | 109,551 |
|
| Long-term debt | | 1,121,606 |
| | 1,120,916 |
|
| Other | | 14,238 |
| | 20,108 |
|
| TOTAL | | 2,214,732 |
| | 2,183,735 |
|
| | | | | |
| Commitments and Contingencies | | |
| | |
|
| | | | | |
| Preferred stock without sinking fund | | 20,381 |
| | 20,381 |
|
| | | | | |
| COMMON EQUITY | | |
| | |
|
| Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2017 and 2016 | | 199,326 |
| | 199,326 |
|
| Capital stock expense and other | | 167 |
| | 167 |
|
| Retained earnings | | 976,089 |
| | 895,298 |
|
| TOTAL | | 1,175,582 |
| | 1,094,791 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,808,540 |
| |
| $3,602,140 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | | | | | | | | |
| ENTERGY MISSISSIPPI, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Capital Stock Expense and Other | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $199,326 |
| |
| ($690 | ) | |
| $813,414 |
| |
| $1,012,050 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 95,924 |
| | 95,924 |
|
| Common stock dividends | — |
| | — |
| | (24,000 | ) | | (24,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (2,121 | ) | | (2,121 | ) |
| | | | | | | | |
| Balance at September 30, 2016 |
| $199,326 |
| |
| ($690 | ) | |
| $883,217 |
| |
| $1,081,853 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $199,326 |
| |
| $167 |
| |
| $895,298 |
| |
| $1,094,791 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 92,006 |
| | 92,006 |
|
| Common stock dividends | — |
| | — |
| | (10,500 | ) | | (10,500 | ) |
| Preferred stock dividends | — |
| | — |
| | (715 | ) | | (715 | ) |
| | | | | | | | |
| Balance at September 30, 2017 |
| $199,326 |
| |
| $167 |
| |
| $976,089 |
| |
| $1,175,582 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
| | ENTERGY MISSISSIPPI, INC. | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
|
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
|
| Electric Operating Revenues: | | | | | | | | | | |
| | |
| | |
| | |
|
| Residential | |
| $158 |
| |
| $141 |
| |
| $17 |
| | 12 |
| |
| $148 |
| |
| $111 |
| |
| $37 |
| | 33 |
|
| Commercial | | 121 |
| | 102 |
| | 19 |
| | 19 |
| | 110 |
| | 92 |
| | 18 |
| | 20 |
|
| Industrial | | 41 |
| | 34 |
| | 7 |
| | 21 |
| | 43 |
| | 36 |
| | 7 |
| | 19 |
|
| Governmental | | 11 |
| | 10 |
| | 1 |
| | 10 |
| | 11 |
| | 9 |
| | 2 |
| | 22 |
|
| Total retail | | 331 |
| | 287 |
| | 44 |
| | 15 |
| |
| Total billed retail | | | 312 |
| | 248 |
| | 64 |
| | 26 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Non-associated companies | | 4 |
| | 11 |
| | (7 | ) | | (64 | ) | | 2 |
| | 5 |
| | (3 | ) | | (60 | ) |
| Other | | 14 |
| | 12 |
| | 2 |
| | 17 |
| | 2 |
| | 5 |
| | (3 | ) | | (60 | ) |
| Total | |
| $349 |
| |
| $310 |
| |
| $39 |
| | 13 |
| |
| $316 |
| |
| $258 |
| |
| $58 |
| | 22 |
|
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | | | | | | | |
| Residential | | 1,747 |
| | 1,955 |
| | (208 | ) | | (11 | ) | | 1,449 |
| | 1,190 |
| | 259 |
| | 22 |
|
| Commercial | | 1,407 |
| | 1,477 |
| | (70 | ) | | (5 | ) | | 1,100 |
| | 1,062 |
| | 38 |
| | 4 |
|
| Industrial | | 665 |
| | 693 |
| | (28 | ) | | (4 | ) | | 597 |
| | 586 |
| | 11 |
| | 2 |
|
| Governmental | | 118 |
| | 128 |
| | (10 | ) | | (8 | ) | | 99 |
| | 98 |
| | 1 |
| | 1 |
|
| Total retail | | 3,937 |
| | 4,253 |
| | (316 | ) | | (7 | ) | | 3,245 |
| | 2,936 |
| | 309 |
| | 11 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Non-associated companies | | 251 |
| | 384 |
| | (133 | ) | | (35 | ) | | 193 |
| | 181 |
| | 12 |
| | 7 |
|
| Total | | 4,188 |
| | 4,637 |
| | (449 | ) | | (10 | ) | | 3,438 |
| | 3,117 |
| | 321 |
| | 10 |
|
| | | | | | | | | | |
| | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| |
| Description | | 2017 | | 2016 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | |
| |
| Electric Operating Revenues: | | |
| | |
| | |
| | |
| |
| Residential | |
| $380 |
| |
| $345 |
| |
| $35 |
| | 10 |
| |
| Commercial | | 314 |
| | 275 |
| | 39 |
| | 14 |
| |
| Industrial | | 115 |
| | 97 |
| | 18 |
| | 19 |
| |
| Governmental | | 30 |
| | 29 |
| | 1 |
| | 3 |
| |
| Total retail | | 839 |
| | 746 |
| | 93 |
| | 12 |
| |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Non-associated companies | | 16 |
| | 21 |
| | (5 | ) | | (24 | ) | |
| Other | | 44 |
| | 54 |
| | (10 | ) | | (19 | ) | |
| Total | |
| $899 |
| |
| $821 |
| |
| $78 |
| | 10 |
| |
| | | |
| | |
| | |
| | |
| |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 4,072 |
| | 4,325 |
| | (253 | ) | | (6 | ) | |
| Commercial | | 3,611 |
| | 3,682 |
| | (71 | ) | | (2 | ) | |
| Industrial | | 1,869 |
| | 1,829 |
| | 40 |
| | 2 |
| |
| Governmental | | 317 |
| | 328 |
| | (11 | ) | | (3 | ) | |
| Total retail | | 9,869 |
| | 10,164 |
| | (295 | ) | | (3 | ) | |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Non-associated companies | | 744 |
| | 759 |
| | (15 | ) | | (2 | ) | |
| Total | | 10,613 |
| | 10,923 |
| | (310 | ) | | (3 | ) | |
ENTERGY NEW ORLEANS, INC.LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 2017 Compared to Third Quarter 2016
Net income decreased $5.2remained relatively unchanged, decreasing by $0.1 million, primarily due to lower net revenuebecause higher other operation and higher taxes other than income taxes.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income decreased $2.3 million primarily due to lower net revenuemaintenance expenses and higher taxes other than income taxes partiallywere offset by lower other operation and maintenance expenseshigher net revenue and a lower effective income tax rate.
Net Revenue
Third Quarter 2017 Compared to Third Quarter 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. Following is an analysis of the changes in net revenue comparing the thirdfirst quarter 20172018 to the thirdfirst quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
20162017 net revenue |
| $96.070.2 |
|
| Volume/weather | 3.6 |
|
| Net gas revenue | 2.2 |
|
| Retail electric price | (4.8 | ) |
Volume/weather | (3.32.6 | ) |
| Other | 0.41.6 |
|
20172018 net revenue |
| $88.375.0 |
|
The volume/weather variance is primarily due to an increase of 128 GWh, or 10%, in billed electricity usage, including the effect of more favorable weather primarily on residential and commercial 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 to:
a decrease in the purchased power and capacity acquisition cost recovery rider primarily due to credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017.2017; and
a regulatory charge of $1.6 million recorded in the first quarter 2018 as a result of a filing made with the City Council in March 2018 proposing to return to customers the benefits of the reduction in income tax expense resulting from the enactment of the Tax Cuts and Jobs Act. 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 Cuts and Jobs Act.
Other Income Statement Variances
The volume/weather variance isOther operation and maintenance expenses increased primarily due to:
an increase of $2.2 million in distribution expenses primarily due to an overall higher scope of work performed in 2018 compared to the effect of less favorable weather on residentialsame period in 2017 and commercial sales, partially offset by an increase in residential and commercial usage resulting from a 1% increase in the average number of residential and commercial electric customers.higher vegetation maintenance costs;
Entergy New Orleans, Inc.LLC and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016an increase of $1.2 million in energy efficiency costs; and
Net revenue consistsan increase of operating revenues net of: 1) fuel, fuel-related$1 million in fossil-fueled generation expenses and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the changes in net revenue comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
| | | |
| Amount |
| (In Millions) |
2016 net revenue |
| $244.4 |
|
Volume/weather | (6.4 | ) |
Retail electric price | (1.7 | ) |
Other | 1.5 |
|
2017 net revenue |
| $237.8 |
|
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in residential and commercial usage resulting from a 1% increase in the average number of residential and commercial electric customers.
The retail electric price variance is primarily due to a decrease in the purchased power and capacity acquisition cost recovery rider primarily due to credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017. The decrease was partially offset by an increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase ofhigher plant expenses at Power Block 1 of the Union Power Station in March 2016. See Note 22018 as compared 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 and in the Form 10-K for further discussion of the credits associated with Entergy New Orleans’s internal restructuring.
Other Income Statement Variances
Third Quarter 2017 Compared to Third Quarter 20162017.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes and higher local franchise taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher electric and gas retail revenues in the thirdfirst quarter 20172018 as compared to the thirdfirst quarter 2016.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Other operation and maintenance expenses decreased primarily due to:
a decrease of $2.9 million in fossil-fueled generation expenses primarily due to the deactivation of Michoud Units 2 and 3 effective May 2016 and higher outages costs at Power Block 1 of the Union Power Station in 2016 as compared to the same period in 2017;
a decrease of $2.1 million in loss provisions;
a decrease of $1.1 million due to lower write-offs of uncollectible customer accounts; and
a decrease of $1 million in energy efficiency costs.
The decrease was partially offset by an increase of $3.2 million in distribution expenses primarily due to higher labor costs, including contract labor, and higher vegetation maintenance.
Taxes other than income taxes increased primarily due to higher local franchise taxes and an increase in ad valorem taxes. Local franchise taxes increased primarily due to higher electric retail revenues in 2017 as compared
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
to the same period in 2016. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017.
Income Taxes
The effective income tax rates were 36.6%rate was 19.5% for the thirdfirst quarter 2017 and 36.3% for the nine months ended September 30, 2017.2018. The differencesdifference in the effective income tax ratesrate for the thirdfirst quarter 2017 and the nine months ended June 30, 20172018 versus the federal statutory rate of 35% were21% was primarily due to state income taxesflow-through tax accounting and certain book and tax differences related to utility plant items, partially offset by flow-throughstate income taxes, the provision for uncertain tax accounting.positions, and a write-off of a stock-based compensation deferred tax asset.
The effective income tax rate was 36.5%36.4% for the thirdfirst quarter 2016 and 38.9% for the nine months ended September 30, 2016.2017. The differencesdifference in the effective income tax ratesrate for the thirdfirst quarter 2016 and the nine months ended September 30, 20162017 versus the federal statutory rate of 35% werewas primarily due to state income taxes, and certain book and tax differences related to utility plant items, and a write-off of a stock-based compensation deferred tax asset, partially offset by flow-through tax accounting.
Income Tax Legislation
See the “Income Tax Legislation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in Form 10-K for 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 discusses proceedings commenced or other responses by Entergy’s regulators to the Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the ninethree months ended September 30,March 31, 2018 and 2017 and 2016 were as follows:
| | | | 2017 | | 2016 | 2018 | | 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 activities | 84,240 |
| | 92,823 |
| 7,049 |
| | 5,619 |
|
| Investing activities | (116,704 | ) | | (290,944 | ) | (31,573 | ) | | (40,751 | ) |
| Financing activities | (41,722 | ) | | 147,134 |
| (6,857 | ) | | (11,868 | ) |
| Net decrease in cash and cash equivalents | (74,186 | ) | | (50,987 | ) | (31,381 | ) | | (47,000 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $28,882 |
| |
| $37,889 |
|
| $1,360 |
| |
| $56,068 |
|
Operating Activities
Net cash flow provided by operating activities decreased $8.6increased $1.4 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to the timing of collections from customers and the timing of payments to vendors, and lower net revenue in 2017 as compared to the same period in 2016. The decrease was substantially offset by the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016 and income tax paymentscosts.
Entergy New Orleans, made income tax payments of $8.5 million in 2016 primarily due to state income taxes resulting from the effect of net operating loss limitations enacted by the state of Louisiana.LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $174.2$9.2 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to the purchasemoney pool activity and a decrease of Power Block 1 of the Union Power Station for approximately $237$8.6 million in March 2016,storm spending. The decrease was partially offset by money pool activity. See Note 14an increase of $13.3 million in fossil-fueled generation construction expenditures primarily due to higher spending on the New Orleans Power Station project in 2018 and an increase of $7.2 million in distribution construction expenditures primarily due to a higher scope of work performed in 2018 as compared to the financial statementssame period in 2017, including investment in the Form 10-K for discussionreliability and infrastructure of the Union Power Station purchase.Entergy New Orleans’s distribution system.
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 increased $32.1decreased $12.3 million in 20172018 compared to decreasing $9.6increasing $12.1 million in
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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’sNet cash flow used in financing activities used $41.7decreased $5 million of cash for the ninethree months ended September 30, 2017March 31, 2018 compared to providing $147.1 million of cash for the ninethree months ended September 30, 2016March 31, 2017 primarily due to a decrease of $6 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; and
$36.1 million in common stock dividends paid in 2017 as compared to $14 million in common stock dividends paid in 2016. There were no common stock dividends paid in first quarter 2016 in anticipationenactment of the purchase of Power Block 1 of the Union Power Station in March 2016.Tax Cuts and Jobs Act.
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 capitalization is balanced between equity and debt, as shown in the following table.
| | | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 49.4 | % | | 50.1 | % | 51.0 | % | | 51.3 | % |
| Effect of excluding securitization bonds | (4.9 | %) | | (5.2 | %) | (4.7 | %) | | (4.7 | %) |
| Debt to capital, excluding securitization bonds (a) | 44.5 | % | | 44.9 | % | 46.3 | % | | 46.6 | % |
| Effect of subtracting cash | (2.0 | %) | | (8.0 | %) | (0.1 | %) | | (2.4 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 42.5 | % | | 36.9 | % | 46.2 | % | | 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 useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy New Orleans, Inc.LLC and Subsidiaries
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy New Orleans is developing its capital investment plan for 2018 through 2020 and currently anticipates making $585 million in capital investments during that period. The estimate includes amounts associated with specific investments such as the New Orleans Power Station discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including initial investment to support advanced metering; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy New Orleans’s receivables from the money pool were as follows:
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $46,282 | | $14,215 | | $6,172 | | $15,794 |
|
| | | | | | |
| March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $432 | | $12,723 | | $26,315 | | $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 permitsincludes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of September 30, 2017,March 31, 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 September 30, 2017,March 31, 2018, a $7.1$4.8 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.
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 was retired 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 August 2017March 2018 the City Council establishedadopted a procedural schedule that provided for a hearing in December 2017 with a City Council decision expected in February 2018.resolution approving construction of the 128 MW unit. The targeted commercial operation date is January 2020, subject to receipt of all necessary permits. In October 2017 severalApril 2018 intervenors filed testimony opposing the construction of the New Orleans Power Station or,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.
Advanced Metering Infrastructure (AMI) Filings
As discussed in one case, supporting a slightly smaller configuration ofthe Form 10-K, in February 2018 the City Council approved Entergy New Orleans’s alternative proposal. The commercial operation dateapplication seeking a finding that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is dependent onin the alternative selected bypublic 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 andadopted a resolution directing Entergy New Orleans to explore the receiptoptions for accelerating the deployment of other permits and approvals. AMI. Entergy New Orleans is required to report its findings to the City Council by June 2018.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
State and Local Rate Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation” in the Form 10-K for a discussion of state and local rate regulation. The following are updates to that discussion.
Retail Rates
As discussed in the Form 10-K, in February 2017, 115
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 periodLLC and approve a cost recovery mechanism. Subsidiaries
Management's Financial Discussion and Analysis
Reliability Investigation
In AprilAugust 2017 the City Council approved an implementation plan forestablished a docket to investigate the Energy Smart program from April 2017 through December 2019. The City Council directed thatreliability of the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. In September 2017, Entergy New Orleans filed a supplemental plandistribution system and proposed several optionsto consider implementing certain reliability standards and possible financial penalties for an interim cost recovery mechanism necessary to recover program costs during the period between when existing funds directed to Energy Smart programs are depleted (estimated to be June 2018) and when new rates from the anticipatednot meeting any such standards. In April 2018 combined rate case, which will include a cost recovery mechanism for Energy Smart funding, take effect (estimated to be August 2019). Entergy New Orleans requested that the City Council approve a cost recovery mechanism prior to June 2018.
Internal Restructuring
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 Orleans to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. In May 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle,directing Entergy New Orleans will credit retail customers $10 million in 2017, $1.4 millionto demonstrate within 30 days that it has been prudent in the first quartermanagement and maintenance 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 resultreliability of the anticipated 2018 base rate case.its distribution system. The resolution also called for Entergy New Orleans began crediting retail customers in June 2017. In June 2017to file a revised reliability plan addressing the FERC approved the transactioncurrent state of its distribution system and pursuant to the agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the yearsproposing remedial measures for increasing reliability. On April 30, 2018, 2019, and 2020. Entergy New Orleans expects to complete the internal restructuring in fourth quarter 2017.
Advanced Metering Infrastructure (AMI) Filing
As discussed in the Form 10-K, in October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure ismotion to extend all deadlines in the public interest. In April 2017, 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 status conference was held in October 2017, and the parties set another status conference for February 2018 with the intent to continue to pursue settlement in the interim.proceeding by 30 days.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Entergy New Orleans, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for further discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy New Orleans’s accounting for utility regulatory accounting, unbilled revenue, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, 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 SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | |
| Electric | |
| $182,451 |
| |
| $185,775 |
| |
| $482,251 |
| |
| $457,317 |
| |
| $155,818 |
| |
| $142,345 |
|
| Natural gas | | 16,566 |
| | 15,561 |
| | 61,977 |
| | 58,279 |
| | 32,457 |
| | 26,644 |
|
| TOTAL | | 199,017 |
| | 201,336 |
| | 544,228 |
| | 515,596 |
| | 188,275 |
| | 168,989 |
|
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 26,082 |
| | 19,231 |
| | 79,118 |
| | 42,706 |
| | 23,739 |
| | 30,075 |
|
| Purchased power | | 79,137 |
| | 82,581 |
| | 220,601 |
| | 221,689 |
| | 83,156 |
| | 68,359 |
|
| Other operation and maintenance | | 26,448 |
| | 27,251 |
| | 74,256 |
| | 78,752 |
| | 28,299 |
| | 22,291 |
|
| Taxes other than income taxes | | 15,135 |
| | 13,409 |
| | 41,397 |
| | 35,846 |
| | 15,132 |
| | 12,846 |
|
| Depreciation and amortization | | 13,286 |
| | 13,047 |
| | 39,356 |
| | 38,719 |
| | 13,747 |
| | 13,050 |
|
| Other regulatory charges - net | | 5,514 |
| | 3,538 |
| | 6,717 |
| | 6,812 |
| | 6,333 |
| | 385 |
|
| TOTAL | | 165,602 |
| | 159,057 |
| | 461,445 |
| | 424,524 |
| | 170,406 |
| | 147,006 |
|
| | | | | | | | | | | | | |
| OPERATING INCOME | | 33,415 |
| | 42,279 |
| | 82,783 |
| | 91,072 |
| | 17,869 |
| | 21,983 |
|
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 654 |
| | 311 |
| | 1,656 |
| | 767 |
| | 851 |
| | 450 |
|
| Interest and investment income | | 222 |
| | 58 |
| | 521 |
| | 157 |
| | 93 |
| | 135 |
|
| Miscellaneous - net | | 39 |
| | (92 | ) | | 177 |
| | (144 | ) | | (337 | ) | | (123 | ) |
| TOTAL | | 915 |
| | 277 |
| | 2,354 |
| | 780 |
| | 607 |
| | 462 |
|
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | 5,313 |
| | 5,373 |
| | 16,012 |
| | 15,730 |
| | 5,279 |
| | 5,343 |
|
| Allowance for borrowed funds used during construction | | (229 | ) | | (116 | ) | | (580 | ) | | (291 | ) | | (314 | ) | | (158 | ) |
| TOTAL | | 5,084 |
| | 5,257 |
| | 15,432 |
| | 15,439 |
| | 4,965 |
| | 5,185 |
|
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 29,246 |
| | 37,299 |
| | 69,705 |
| | 76,413 |
| | 13,511 |
| | 17,260 |
|
| | | | | | | | | | | | | |
| Income taxes | | 10,717 |
| | 13,598 |
| | 25,316 |
| | 29,701 |
| | 2,629 |
| | 6,282 |
|
| | | | | | | | | | | | | |
| NET INCOME | | 18,529 |
| | 23,701 |
| | 44,389 |
| | 46,712 |
| | 10,882 |
| | 10,978 |
|
| | | | | | | | | | | | | |
| Preferred dividend requirements and other | | 241 |
| | 241 |
| | 724 |
| | 724 |
| | — |
| | 241 |
|
| | | | | | | | | | | | | |
| EARNINGS APPLICABLE TO COMMON STOCK | |
| $18,288 |
| |
| $23,460 |
| |
| $43,665 |
| |
| $45,988 |
| |
| EARNINGS APPLICABLE TO COMMON EQUITY | | |
| $10,882 |
| |
| $10,737 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
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| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | For the Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING ACTIVITIES | | | | | | | | |
| Net income | |
| $44,389 |
| |
| $46,712 |
| |
| $10,882 |
| |
| $10,978 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | 39,356 |
| | 38,719 |
| | 13,747 |
| | 13,050 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 30,834 |
| | 132,201 |
| | 17,909 |
| | 7,102 |
|
| Changes in assets and liabilities: | | | | | | | | |
| Receivables | | (17,030 | ) | | (17,409 | ) | | 3,378 |
| | (2,659 | ) |
| Fuel inventory | | (490 | ) | | (215 | ) | | 951 |
| | 1,798 |
|
| Accounts payable | | (4,950 | ) | | 7,088 |
| | (7,973 | ) | | (11,920 | ) |
Prepaid taxes
| | (4,484 | ) | | (87,763 | ) | | (13,351 | ) | | (1,992 | ) |
| Interest accrued | | 546 |
| | 1,172 |
| | (81 | ) | | 34 |
|
| Deferred fuel costs | | 4,258 |
| | (16,671 | ) | | (11,309 | ) | | 6,096 |
|
| Other working capital accounts | | (6,750 | ) | | 735 |
| | (12,082 | ) | | (13,106 | ) |
| Provisions for estimated losses | | (1,702 | ) | | 678 |
| | 196 |
| | (655 | ) |
| Other regulatory assets | | 10,093 |
| | 6,837 |
| | 7,226 |
| | 300 |
|
| Other regulatory liabilities | | | 1,331 |
| | (934 | ) |
| Pension and other postretirement liabilities | | (13,793 | ) | | (13,673 | ) | | (3,686 | ) | | (3,915 | ) |
| Other assets and liabilities | | 3,963 |
| | (5,588 | ) | | (89 | ) | | 1,442 |
|
| Net cash flow provided by operating activities | | 84,240 |
| | 92,823 |
| | 7,049 |
| | 5,619 |
|
| | | | | | | | | |
| INVESTING ACTIVITIES | | | | | | | | |
| Construction expenditures | | (81,143 | ) | | (63,161 | ) | | (41,105 | ) | | (26,079 | ) |
| Allowance for equity funds used during construction | | 1,656 |
| | 767 |
| | 851 |
| | 450 |
|
| Payment for purchase of plant | | — |
| | (237,335 | ) | |
| Investment in affiliates | | — |
| | (38 | ) | |
| Changes in money pool receivable - net | | (32,067 | ) | | 9,622 |
| | 12,291 |
| | (12,100 | ) |
| Receipts from storm reserve escrow account | | — |
| | 3 |
| | 3 |
| | — |
|
| Payments to storm reserve escrow account | | (406 | ) | | (300 | ) | | (232 | ) | | (110 | ) |
| Changes in securitization account | | (2,990 | ) | | (502 | ) | | (3,381 | ) | | (2,912 | ) |
| Change in other investments | | (1,754 | ) | | — |
| |
| Net cash flow used in investing activities | | (116,704 | ) | | (290,944 | ) | | (31,573 | ) | | (40,751 | ) |
| | | | | | | | | |
| FINANCING ACTIVITIES | | | | | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 190,697 |
| |
| Retirement of long-term debt | | (5,114 | ) | | (77,094 | ) | |
| Capital contribution from parent | | — |
| | 47,750 |
| |
| Dividends paid: | | | | | | | | |
| Common stock | | (36,100 | ) | | (14,000 | ) | | (6,250 | ) | | (12,200 | ) |
| Preferred stock | | (724 | ) | | (724 | ) | | — |
| | (241 | ) |
| Other | | 216 |
| | 505 |
| | (607 | ) | | 573 |
|
| Net cash flow provided by (used in) financing activities | | (41,722 | ) | | 147,134 |
| |
| Net cash flow used in financing activities | | | (6,857 | ) | | (11,868 | ) |
| | | | | | | | | |
| Net decrease in cash and cash equivalents | | (74,186 | ) | | (50,987 | ) | | (31,381 | ) | | (47,000 | ) |
| Cash and cash equivalents at beginning of period | | 103,068 |
| | 88,876 |
| | 32,741 |
| | 103,068 |
|
| Cash and cash equivalents at end of period | |
| $28,882 |
| |
| $37,889 |
| |
| $1,360 |
| |
| $56,068 |
|
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest - net of amount capitalized | |
| $14,668 |
| |
| $13,613 |
| |
| $5,098 |
| |
| $5,043 |
|
| Income taxes | |
| $— |
| |
| $8,500 |
| |
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | ASSETS | | September 30, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 2018 and December 31, 2017 |
(Unaudited) | | | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) |
| CURRENT ASSETS | | | | | | | | |
| Cash and cash equivalents | | | | | | | | |
| Cash | |
| $518 |
| |
| $28 |
| |
| $26 |
| |
| $30 |
|
| Temporary cash investments | | 28,364 |
| | 103,040 |
| | 1,334 |
| | 32,711 |
|
| Total cash and cash equivalents | | 28,882 |
| | 103,068 |
| | 1,360 |
| | 32,741 |
|
Securitization recovery trust account
| | 4,728 |
| | 1,738 |
| | 4,836 |
| | 1,455 |
|
| Accounts receivable: | | | | | | | | |
|
| Customer | | 57,440 |
| | 43,536 |
| | 51,744 |
| | 51,006 |
|
| Allowance for doubtful accounts | | (3,140 | ) | | (3,059 | ) | | (3,072 | ) | | (3,057 | ) |
| Associated companies | | 49,213 |
| | 16,811 |
| | 9,576 |
| | 22,976 |
|
| Other | | 4,928 |
| | 5,926 |
| | 10,051 |
| | 6,471 |
|
| Accrued unbilled revenues | | 22,124 |
| | 18,254 |
| | 14,066 |
| | 20,638 |
|
| Total accounts receivable | | 130,565 |
| | 81,468 |
| | 82,365 |
| | 98,034 |
|
| Deferred fuel costs | | 560 |
| | 4,818 |
| | 3,535 |
| | — |
|
| Fuel inventory - at average cost | | 2,331 |
| | 1,841 |
| | 939 |
| | 1,890 |
|
| Materials and supplies - at average cost | | 10,682 |
| | 8,416 |
| | 11,562 |
| | 10,381 |
|
| Prepaid taxes | | 8,863 |
| | 4,379 |
| | 39,830 |
| | 26,479 |
|
| Prepayments and other | | 15,515 |
| | 6,587 |
| | 18,794 |
| | 8,030 |
|
| TOTAL | | 202,126 |
| | 212,315 |
| | 163,221 |
| | 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 | | 81,843 |
| | 81,437 |
| | 79,775 |
| | 79,546 |
|
| Other | | 2,414 |
| | 7,160 |
| | — |
| | 2,373 |
|
| TOTAL | | 85,273 |
| | 89,613 |
| | 80,791 |
| | 82,935 |
|
| | | | | | | | | |
| UTILITY PLANT | | | | | | | | |
| Electric | | 1,276,279 |
| | 1,258,934 |
| | 1,314,262 |
| | 1,302,235 |
|
| Natural gas | | 252,608 |
| | 240,408 |
| | 267,527 |
| | 261,263 |
|
| Construction work in progress | | 49,885 |
| | 24,975 |
| | 71,845 |
| | 46,993 |
|
| TOTAL UTILITY PLANT | | 1,578,772 |
| | 1,524,317 |
| | 1,653,634 |
| | 1,610,491 |
|
| Less - accumulated depreciation and amortization | | 621,488 |
| | 604,825 |
| | 643,737 |
| | 631,178 |
|
| UTILITY PLANT - NET | | 957,284 |
| | 919,492 |
| | 1,009,897 |
| | 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 $74,586 as of September 30, 2017 and $82,272 as of December 31, 2016) | | 258,013 |
| | 268,106 |
| |
| Other regulatory assets (includes securitization property of $69,199 as of March 31, 2018 and $72,095 as of December 31, 2017) | | | 244,207 |
| | 251,433 |
|
| Other | | 890 |
| | 963 |
| | 1,843 |
| | 1,065 |
|
| TOTAL | | 262,983 |
| | 273,149 |
| | 250,130 |
| | 256,578 |
|
| | | | | | | | | |
| TOTAL ASSETS | |
| $1,507,666 |
| |
| $1,494,569 |
| |
| $1,504,039 |
| |
| $1,497,836 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | LIABILITIES AND EQUITY | | September 30, 2017 and December 31, 2016 | |
| March 31, 2018 and December 31, 2017 | | March 31, 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 | | 42,408 |
| | 39,260 |
| | 43,119 |
| | 47,472 |
|
| Other | | 26,110 |
| | 35,920 |
| | 29,267 |
| | 29,777 |
|
| Customer deposits | | 28,734 |
| | 28,667 |
| | 28,727 |
| | 28,442 |
|
| Interest accrued | | 5,989 |
| | 5,443 |
| | 5,406 |
| | 5,487 |
|
| Deferred fuel costs | | | — |
| | 7,774 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | | 27,857 |
| | — |
|
| Other | | 9,291 |
| | 11,415 |
| | 4,564 |
| | 7,351 |
|
| TOTAL CURRENT LIABILITIES | | 114,636 |
| | 122,809 |
| | 141,017 |
| | 128,380 |
|
| | | | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | | | |
| Accumulated deferred income taxes and taxes accrued | | 369,688 |
| | 334,953 |
| | 302,461 |
| | 283,302 |
|
| Accumulated deferred investment tax credits | | 528 |
| | 622 |
| | 2,296 |
| | 2,323 |
|
| Regulatory liability for income taxes - net | | 4,133 |
| | 9,074 |
| | 90,359 |
| | 119,259 |
|
| Asset retirement cost liabilities | | 3,024 |
| | 2,875 |
| | 3,128 |
| | 3,076 |
|
| Accumulated provisions | | 86,811 |
| | 88,513 |
| | 85,279 |
| | 85,083 |
|
| Pension and other postretirement liabilities | | 22,957 |
| | 36,750 |
| | 17,061 |
| | 20,755 |
|
| Long-term debt (includes securitization bonds of $79,844 as of September 30, 2017 and $84,776 as of December 31, 2016) | | 423,783 |
| | 428,467 |
| |
| Long-term payable due to Entergy Louisiana | | 18,423 |
| | 18,423 |
| |
| Gas system rebuild insurance proceeds | | — |
| | 447 |
| |
| Long-term debt (includes securitization bonds of $74,480 as of March 31, 2018 and $74,419 as of December 31, 2017) | | | 418,572 |
| | 418,447 |
|
| Long-term payable due to associated company | | | 16,346 |
| | 16,346 |
|
| Other | | 9,392 |
| | 4,910 |
| | 7,340 |
| | 5,317 |
|
| TOTAL NON-CURRENT LIABILITIES | | 938,739 |
| | 925,034 |
| | 942,842 |
| | 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 | | 229,223 |
| | 221,658 |
| |
| EQUITY | | | | | |
| Member's equity | | | 420,180 |
| | 415,548 |
|
| TOTAL | | 434,511 |
| | 426,946 |
| | 420,180 |
| | 415,548 |
|
| | | | | | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $1,507,666 |
| |
| $1,494,569 |
| |
| $1,504,039 |
| |
| $1,497,836 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in
Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $33,744 |
| |
| $123,794 |
| |
| $192,494 |
| |
| $350,032 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 46,712 |
| | 46,712 |
|
| Capital contribution from parent | — |
| | 47,750 |
| | — |
| | 47,750 |
|
| Common stock dividends | — |
| | — |
| | (14,000 | ) | | (14,000 | ) |
| Preferred stock dividends | — |
| | — |
| | (724 | ) | | (724 | ) |
| | | | | | | | |
| Balance at September 30, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $224,482 |
| |
| $429,770 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $33,744 |
| |
| $171,544 |
| |
| $221,658 |
| |
| $426,946 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 44,389 |
| | 44,389 |
|
| Common stock dividends | — |
| | — |
| | (36,100 | ) | | (36,100 | ) |
| Preferred stock dividends | — |
| | — |
| | (724 | ) | | (724 | ) |
| | | | | | | | |
| Balance at September 30, 2017 |
| $33,744 |
| |
| $171,544 |
| |
| $229,223 |
| |
| $434,511 |
|
| | | | | | | | |
| See Notes to Financial Statements. | |
| | |
| | |
| | |
|
|
| | | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| |
| |
| Member’s Equity |
| (In Thousands) |
| |
| Balance at December 31, 2016 |
| $426,946 |
|
| |
| Net income | 10,978 |
|
| Common equity distributions | (12,200 | ) |
| Preferred stock dividends | (241 | ) |
| |
| Balance at March 31, 2017 |
| $425,483 |
|
| |
| |
| Balance at December 31, 2017 |
| $415,548 |
|
| |
| Net income | 10,882 |
|
| Common equity distributions | (6,250 | ) |
| |
| Balance at March 31, 2018 |
| $420,180 |
|
| |
| See Notes to Financial Statements. | |
|
| | | ENTERGY NEW ORLEANS, INC. AND SUBSIDIARIES | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
|
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
|
| Electric Operating Revenues: | | | | | | | | | | | | |
| | |
| | |
|
| Residential | |
| $82 |
| |
| $80 |
| |
| $2 |
| | 3 |
| |
| $65 |
| |
| $53 |
| |
| $12 |
| | 23 |
|
| Commercial | | 63 |
| | 60 |
| | 3 |
| | 5 |
| | 54 |
| | 54 |
| | — |
| | — |
|
| Industrial | | 9 |
| | 9 |
| | — |
| | — |
| | 8 |
| | 8 |
| | — |
| | — |
|
| Governmental | | 21 |
| | 20 |
| | 1 |
| | 5 |
| | 18 |
| | 18 |
| | — |
| | — |
|
| Total retail | | 175 |
| | 169 |
| | 6 |
| | 4 |
| |
| Total billed retail | | | 145 |
| | 133 |
| | 12 |
| | 9 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 11 |
| | (11 | ) | | (100 | ) | |
| Non-associated companies | | 3 |
| | 1 |
| | 2 |
| | 200 |
| |
| Other | | 4 |
| | 5 |
| | (1 | ) | | (20 | ) | |
| Total | |
| $182 |
| |
| $186 |
| |
| ($4 | ) | | (2 | ) | |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| |
| Residential | | 711 |
| | 752 |
| | (41 | ) | | (5 | ) | |
| Commercial | | 634 |
| | 652 |
| | (18 | ) | | (3 | ) | |
| Industrial | | 119 |
| | 125 |
| | (6 | ) | | (5 | ) | |
| Governmental | | 217 |
| | 224 |
| | (7 | ) | | (3 | ) | |
| Total retail | | 1,681 |
| | 1,753 |
| | (72 | ) | | (4 | ) | |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Associated companies | | — |
| | 272 |
| | (272 | ) | | (100 | ) | |
| Non-associated companies | | 255 |
| | 28 |
| | 227 |
| | 811 |
| |
| Total | | 1,936 |
| | 2,053 |
| | (117 | ) | | (6 | ) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | |
| |
| Description | | 2017 | | 2016 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | |
| |
| Electric Operating Revenues: | | | | |
| | |
| | |
| |
| Residential | |
| $191 |
| |
| $177 |
| |
| $14 |
| | 8 |
| |
| Commercial | | 173 |
| | 155 |
| | 18 |
| | 12 |
| |
| Industrial | | 26 |
| | 24 |
| | 2 |
| | 8 |
| |
| Governmental | | 58 |
| | 52 |
| | 6 |
| | 12 |
| |
| Total retail | | 448 |
| | 408 |
| | 40 |
| | 10 |
| |
| Sales for resale: | | |
| | |
| | |
| | |
| |
| Associated companies | | — |
| | 30 |
| | (30 | ) | | (100 | ) | |
| Non associated companies | | 21 |
| | 2 |
| | 19 |
| | 950 |
| | 13 |
| | 9 |
| | 4 |
| | 44 |
|
| Other | | 13 |
| | 17 |
| | (4 | ) | | (24 | ) | | (2 | ) | | — |
| | (2 | ) | | — |
|
| Total | |
| $482 |
| |
| $457 |
| |
| $25 |
| | 5 |
| |
| $156 |
| |
| $142 |
| |
| $14 |
| | 10 |
|
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Residential | | 1,635 |
| | 1,710 |
| | (75 | ) | | (4 | ) | | 577 |
| | 456 |
| | 121 |
| | 27 |
|
| Commercial | | 1,690 |
| | 1,700 |
| | (10 | ) | | (1 | ) | | 524 |
| | 515 |
| | 9 |
| | 2 |
|
| Industrial | | 322 |
| | 333 |
| | (11 | ) | | (3 | ) | | 99 |
| | 98 |
| | 1 |
| | 1 |
|
| Governmental | | 589 |
| | 592 |
| | (3 | ) | | (1 | ) | | 181 |
| | 184 |
| | (3 | ) | | (2 | ) |
| Total retail | | 4,236 |
| | 4,335 |
| | (99 | ) | | (2 | ) | | 1,381 |
| | 1,253 |
| | 128 |
| | 10 |
|
| Sales for resale: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
| Associated companies | | — |
| | 1,070 |
| | (1,070 | ) | | (100 | ) | |
| Non-associated companies | | 1,270 |
| | 83 |
| | 1,187 |
| | 1,430 |
| | 627 |
| | 507 |
| | 120 |
| | 24 |
|
| Total | | 5,506 |
| | 5,488 |
| | 18 |
| | — |
| | 2,008 |
| | 1,760 |
| | 248 |
| | 14 |
|
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Third Quarter 2017 Compared to Third Quarter 2016
Net income decreased $16.5increased $6.5 million primarily due to lowerhigher net revenue higher taxes other thanand a lower effective income taxes, andtax rate, partially offset by higher depreciation and amortization expenses.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income decreased $23.2 million primarily due to lower net revenue, higher depreciation and amortization expenses, higher taxes other than income taxes, and higher other operation and maintenance expenses, partially offset by a lower effective income tax rate.
Net Revenue
Third Quarter 2017 Compared to Third Quarter 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. Following is an analysis of the change in net revenue comparing the thirdfirst quarter 20172018 to the thirdfirst quarter 2016:2017:
|
| | | |
| | Amount |
| | (In Millions) |
20162017 net revenue |
| $203.4140.3 |
|
| Retail electric price | 6.0 |
|
| Volume/weather | (10.15.0 | )
|
| Net wholesale revenue | (9.86.0 | ) |
Purchased power capacity | (3.7 | ) |
Transmission revenue | (3.3 | ) |
Retail electric price | 6.3 |
|
| Other | (1.30.4 | ) |
20172018 net revenue |
| $181.5144.9 |
|
The retail electric price variance is primarily due to increases in the transmission cost recovery factor rider rate in March 2017 and the distribution cost recovery factor rider in September 2017, each as approved by the PUCT. See Note 2 to the financial statements in the Form 10-K for further discussion of the transmission cost recovery factor rider and the distribution cost recovery factor rider filings.
The volume/weather variance is primarily due to the effect of lessmore favorable weather on residential and commercial sales, and the effects of the power outages caused by Hurricane Harvey, partially offset by an increase in residential and commercial usage resulting from a 1% increase in the average number of residential customers and a 3% increase in the average number of commercial customers, and an increase in industrial usage. The increase was partially offset by decreased usage during the unbilled sales period. The increase in industrial usage is primarily due to an increase in demand for midmid-size to small customers and cogeneration customers.
The net wholesale revenue variance is primarily due to lower net capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.
Theincreased purchased power capacity variance is primarily due to increased expenses due to capacity cost changes for ongoing purchased power capacity contracts.costs.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The transmission revenue variance is primarily due to a decrease in the amount of transmission revenues allocated by MISO.
The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider in September 2016 and an increase in the transmission cost recovery factor rider rate in March 2017, each as approved by the PUCT. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission cost recovery factor rider filings.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing the nine months ended September 30, 2017 to the nine months ended September 30, 2016:
|
| | | |
| Amount |
| (In Millions) |
2016 net revenue |
| $498.6 |
|
Net wholesale revenue | (30.7 | ) |
Purchased power capacity | (5.5 | ) |
Transmission revenue | (4.1 | ) |
Retail electric | 16.0 |
|
Other | 0.5 |
|
2017 net revenue |
| $474.8 |
|
The net wholesale revenue variance is primarily due to lower net capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.
The purchased power capacity variance is primarily due to increased expenses due to capacity cost changes for ongoing purchased power capacity contracts.
The transmission revenue variance is primarily due to a decrease in the amount of transmission revenues allocated by MISO.
The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider in September 2016 and an increase in the transmission cost recovery factor rider rate in March 2017, each as approved by the PUCT. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the transmission cost recovery factor rider filings.
Other Income Statement Variances
Third Quarter 2017 Compared to Third Quarter 2016
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from higher assessments and a true-up to the sales and use tax accruals recorded in 2016 resulting from an audit settlement.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Other operation and maintenance expenses increased primarily due to:
an increase of $2.6 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs;
an increase of $1.8 million in customer service costs primarily due to higher write-offs of uncollectible customer accounts;
an increase of $1.6 million in fossil-fueled generation expenses primarily due to 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 as a result of the amount of transmission costs allocated by MISO; and
an increase of $1.1 million in information technology expenses including software maintenance costs and upgrade projects.
The increase was partially offset by a decrease of $4.5 million due to the termination of transmission equalization expenses, as allocated under the System Agreement, as a result of Entergy Texas’s exit from the System Agreement in August 2016.
Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from higher assessments and a true-up to the sales and use tax accruals recorded in 2016 resulting from an audit settlement.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Income Taxes
The effective income tax rate was 35.9%22.2% for the thirdfirst quarter 2017.2018. The difference in the effective income tax rate for the thirdfirst quarter 20172018 versus the federal statutory rate of 35%21% was primarily due to a write-off of a stock-based compensation deferred tax asset in 2018 and state income taxes, partially offset by certain book and tax differences related to utility plant items partially offset byand book and tax differences related to the allowance for equity funds used during construction.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
The effective income tax rate was 34.6%43.2% for the nine months ended September 30,first quarter 2017. The difference in the effective income tax rate for the nine months ended September 30,first quarter 2017 versus the federal statutory rate of 35% was primarily due to book and tax differences related to the allowance for equity funds used during construction and the reversal of a portion of the provision for uncertain tax positions, partially offset by certain book and tax differences related to utility plant items and a write-off of a stock-based compensation deferred tax asset.
The effective income tax rates were 36.2% for the third quarter 2016 and 37.4% for the nine months ended September 30, 2016. The differencesasset in the effective income tax rates for the third quarter 2016 and for the nine months ended September 30, 2016 versus the federal statutory rate of 35% were primarily due to state income taxes2017 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.
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, and Note 2 to the financial statements herein and in the Form 10-K contains discussions of proceedings commenced or other responses by Entergy’s regulators to the Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 2018 and 2017 were as follows:
|
| | | | | | | |
| | 2018 | | 2017 |
| | (In Thousands) |
| Cash and cash equivalents at beginning of period |
| $115,513 |
| |
| $6,181 |
|
| | | | |
| Cash flow provided by (used in): | | | |
| Operating activities | 1,048 |
| | 59,580 |
|
| Investing activities | (52,129 | ) | | (69,587 | ) |
| Financing activities | (25,456 | ) | | 3,914 |
|
| Net decrease in cash and cash equivalents | (76,537 | ) | | (6,093 | ) |
| | | | |
| Cash and cash equivalents at end of period |
| $38,976 |
| |
| $88 |
|
Operating Activities
Net cash flow provided by operating activities decreased $58.5 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 primarily due to the timing of recovery of fuel and purchased power costs.
Investing Activities
Net cash flow used in investing activities decreased $17.5 million for the three months ended March 31, 2018 compared to the three months ended March 31, 2017 primarily due to money pool activity and cash collateral of $14 million posted in March 2017 to support Entergy Texas’s obligations to MISO. The decrease was partially offset by:
an increase of $17.5 million in fossil-fueled generation construction expenditures primarily due to increased spending on the Lewis Creek Dam restoration project; and
an increase of $6.6 million in transmission construction expenditures primarily due to a higher scope of work performed in 2018 as compared to the same period in 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 $32.3 million for the three months ended March 31, 2018 compared to
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the nine months ended September 30, 2017 and 2016 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 activities | 192,954 |
| | 196,698 |
|
| Investing activities | (228,582 | ) | | (251,366 | ) |
| Financing activities | 30,949 |
| | 53,829 |
|
| Net decrease in cash and cash equivalents | (4,679 | ) | | (839 | ) |
| | | | |
| Cash and cash equivalents at end of period |
| $1,502 |
| |
| $1,343 |
|
Operating Activities
Net cash flow provideddecreasing by operating activities decreased $3.7$0.7 million for the ninethree months ended September 30, 2017 comparedMarch 31, 2017. The money pool is an inter-company borrowing arrangement designed to reduce the nine months ended September 30, 2016 primarily due to decreased net income.
The decrease was partially offset by:
the timing of recovery of fuel and purchased power costs in 2017 as compared to the same period in 2016;
income tax refunds of $1.4 million in 2017 compared to income tax payments of $3.4 million in 2016 in accordance with an intercompany income tax allocation agreement; and
a decrease of $3.3 million in interest paid in 2017 as compared to the same period in 2016.
Investing Activities
Net cash flow used in investing activities decreased $22.8 millionUtility subsidiaries’ need for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 primarily due to a decrease of $55.7 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017 as compared to the same period in 2016, partially offset by an increase in baseline work performed in 2017 as compared to the same period in 2016. The decrease was partially offset by an increase of $24.3 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed in 2017 as compared to the same period in 2016 and an increase of $9.4 million in distribution construction expenditures primarily due to increased spending on digital technology improvements within the customer contact centers.external short-term borrowings.
Financing Activities
Net cash flow provided byEntergy Texas’s financing activities decreased $22.9used $25.5 million of cash for the ninethree months ended September 30, 2017March 31, 2018 compared to providing $3.9 million of cash for the ninethree months ended September 30, 2016March 31, 2017 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 $89.3$28.9 million for the ninethree months ended September 30, 2017 compared to decreasing
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
by $9.7 million for the nine months ended September 30, 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.March 31, 2017.
Capital Structure
Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital ratio for Entergy Texas is primarily due to the increase in retained earnings.
| | | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 56.0 | % | | 58.5 | % | 55.0 | % | | 55.7 | % |
| Effect of excluding the securitization bonds | (7.4 | %) | | (8.3 | %) | (6.0 | %) | | (6.3 | %) |
| Debt to capital, excluding securitization bonds (a) | 48.6 | % | | 50.2 | % | 49.0 | % | | 49.4 | % |
| Effect of subtracting cash | — | % | | (0.1 | %) | (0.8 | %) | | (2.5 | %) |
| Net debt to net capital, excluding securitization bonds (a) | 48.6 | % | | 50.1 | % | 48.2 | % | | 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 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.
Entergy Texas is developing its capital investment plan for 2018 through 2020 and currently anticipates making $1.9 billion in capital investments during that period. The estimate includes amounts associated with specific investments such as the Montgomery County Power Station discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including initial investment to support advanced metering; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
|
| | | | | | |
September 30,
2017 | | December 31, 2016 | | September 30,
2016 | | December 31, 2015 |
| (In Thousands) |
| ($89,312) | | $681 | | ($12,399) | | ($22,068) |
|
| | | | | | |
March 31,
2018 | | December 31, 2017 | | March 31,
2017 | | December 31, 2016 |
| (In Thousands) |
| $12,590 | | $44,903 | | ($28,941) | | $681 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in August 2022. The credit facility permitsincludes fronting commitments for the issuance of letters of credit against 50%$30 million of the borrowing capacity of the facility. As of September 30, 2017,March 31, 2018, there were no cash borrowings and $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 September 30, 2017,March 31, 2018, a $19.6$25.6 million letter of credit was outstanding under Entergy Texas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Montgomery County Power Station
In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including estimated costs of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal 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. The costs of the transmission interconnection and network upgrades and other related costs included in the total current estimated cost of the Montgomery County Power Station are not subject to the $831 million cap. Also in June 2017, the ALJ 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.
Hurricane Harvey
In August 2017, Hurricane Harvey caused extensive damage to Entergy Texas’s service area. The storm resulted in widespread power outages and significant damage primarily to distribution infrastructure. Total restoration costs for the repair and/or replacement of Entergy Texas’s electric facilities damaged by Hurricane Harvey are currently estimated to be in the range of $75 million to $105 million. Based on current progress, management expects total restoration costs to be towards the lower end of the range. Entergy Texas is considering all reasonable avenues to recover storm-related costs from Hurricane Harvey, including, but not limited to, securitization or other alternative financing and traditional retail recovery on an interim and permanent basis. Storm cost recovery or financing will be subject to review by applicable regulatory authorities.
Entergy Texas has recorded accounts payable for the estimated costs incurred that were necessary to return customers to service. Entergy Texas recorded corresponding regulatory assets of approximately $13.1 million and construction work in progress of approximately $25.9 million. Entergy Texas recorded the regulatory assets in accordance with its accounting policies and based on the historic treatment of such costs in its service area because management believes that recovery through some form of regulatory mechanism is probable. Because Entergy Texas has not gone through the regulatory process regarding these storm costs, there is an element of risk, and Entergy Texas is unable to predict with certainty the degree of success it may have in its recovery initiatives, the amount of restoration costs that it may ultimately recover, or the timing of such recovery.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Retail Rates
2011 Rate Case
See the Form 10-K for discussion of Entergy Texas’s 2011 rate case. As discussed in the Form 10-K, several parties, including Entergy Texas, appealed various aspects of the PUCT’s order to the Travis County District Court. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced in the Form 10-K, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issued its opinion affirming the District Court’s decision on all points. Entergy Texas and other parties petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. In September 2017 the Texas Supreme Court denied the petitions for review. Entergy Texas filed a motion for rehearing of the Texas Supreme Court’s denial of the petition for review. That motion is pending.
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 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 parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million, with the resulting rates effective for usage no later than October 1, 2017. In September 2017 the PUCT issued its final order approving the unopposed stipulation and settlement agreement. The amended DCRF rider rates became effective for usage on and after September 1, 2017.
Fuel and purchased power cost recovery
As discussed in the Form 10-K, in July 2015 certain parties filed briefs in 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’s requested relief. In January 2017 the PUCT and an intervenor filed petitions for appeal to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held before the U.S. Court of Appeals for the Fifth Circuit in February 2018. In April 2018 the U.S. Court of Appeals for the Fifth Circuit reversed the decision of the Federal District Court, reinstating the original PUCT decision. Entergy Texas entered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refundis considering its legal options. The State District Court appeal of the over-recovery balance of $21 million as of November 30,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 May 2017 through October 2017. Also in December 2016 through April 2017.2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers, the refunds flowed through bills for the months of July 2017beginning January 2018 and continued through September 2017.March 2018. The fuel refund was approved by the PUCT in August 2017.
Advanced Metering Infrastructure (AMI) Filing
In April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to 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
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 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 inMarch 2018. In October 2017, Entergy Texas and other parties entered into and filed an unopposed stipulation and settlement agreement. PUCT action on the stipulation and settlement agreement remains pending. Entergy Texas expects a decision from the PUCT by December 2017.
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 discussion of nuclear matters.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of 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 SUBSIDIARIES | CONSOLIDATED INCOME STATEMENTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | |
| | | Three Months Ended | | Nine Months Ended | | |
| | | 2017 | | 2016 | | 2017 | | 2016 | | 2018 | | 2017 |
| | | (In Thousands) | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | | | | | |
| Electric | |
| $432,909 |
| |
| $442,085 |
| |
| $1,175,324 |
| |
| $1,233,311 |
| |
| $348,940 |
| |
| $363,927 |
|
| | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | |
| Operation and Maintenance: | | | | | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 60,292 |
| | 21,919 |
| | 164,447 |
| | 185,801 |
| | 18,706 |
| | 58,013 |
|
| Purchased power | | 163,532 |
| | 189,213 |
| | 474,241 |
| | 486,696 |
| | 159,692 |
| | 150,384 |
|
| Other operation and maintenance | | 51,917 |
| | 50,536 |
| | 162,400 |
| | 157,706 |
| | 52,674 |
| | 54,128 |
|
| Taxes other than income taxes | | 20,811 |
| | 17,486 |
| | 59,506 |
| | 54,081 |
| | 20,403 |
| | 19,444 |
|
| Depreciation and amortization | | 29,788 |
| | 27,412 |
| | 87,272 |
| | 79,526 |
| | 30,766 |
| | 28,111 |
|
| Other regulatory charges - net | | 27,619 |
| | 27,555 |
| | 61,879 |
| | 62,229 |
| | 25,617 |
| | 15,227 |
|
| TOTAL | | 353,959 |
| | 334,121 |
| | 1,009,745 |
| | 1,026,039 |
| | 307,858 |
| | 325,307 |
|
| | | | | | | | | | | | | |
| OPERATING INCOME | | 78,950 |
| | 107,964 |
| | 165,579 |
| | 207,272 |
| | 41,082 |
| | 38,620 |
|
| | | | | | | | | | | | | |
| OTHER INCOME | | | | | | | | | | | | |
| Allowance for equity funds used during construction | | 1,849 |
| | 1,472 |
| | 4,762 |
| | 6,174 |
| | 1,661 |
| | 1,281 |
|
| Interest and investment income | | 244 |
| | 221 |
| | 656 |
| | 689 |
| | 555 |
| | 201 |
|
| Miscellaneous - net | | 1,298 |
| | (256 | ) | | 485 |
| | (726 | ) | | 113 |
| | 40 |
|
| TOTAL | | 3,391 |
| | 1,437 |
| | 5,903 |
| | 6,137 |
| | 2,329 |
| | 1,522 |
|
| | | | | | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | | | | | |
| Interest expense | | 21,714 |
| | 22,416 |
| | 64,949 |
| | 65,993 |
| | 22,051 |
| | 21,808 |
|
| Allowance for borrowed funds used during construction | | (1,134 | ) | | (954 | ) | | (2,896 | ) | | (4,008 | ) | | (938 | ) | | (761 | ) |
| TOTAL | | 20,580 |
| | 21,462 |
| | 62,053 |
| | 61,985 |
| | 21,113 |
| | 21,047 |
|
| | | | | | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 61,761 |
| | 87,939 |
| | 109,429 |
| | 151,424 |
| | 22,298 |
| | 19,095 |
|
| | | | | | | | | | | | | |
| Income taxes | | 22,173 |
| | 31,806 |
| | 37,886 |
| | 56,671 |
| | 4,948 |
| | 8,241 |
|
| | | | | | | | | | | | | |
| NET INCOME | |
| $39,588 |
| |
| $56,133 |
| |
| $71,543 |
| |
| $94,753 |
| |
| $17,350 |
| |
| $10,854 |
|
| | | | | | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | | | | | |
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|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $17,350 |
| |
| $10,854 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 30,766 |
| | 28,111 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | (21,607 | ) | | (25,678 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | 9,190 |
| | (683 | ) |
| Fuel inventory | | (134 | ) | | 4,581 |
|
| Accounts payable | | (24,653 | ) | | (1,150 | ) |
| Taxes accrued | | 3,981 |
| | 16,110 |
|
| Interest accrued | | (5,575 | ) | | (6,816 | ) |
| Deferred fuel costs | | (28,626 | ) | | 20,375 |
|
| Other working capital accounts | | 4,788 |
| | 1,422 |
|
| Provisions for estimated losses | | (208 | ) | | 663 |
|
| Other regulatory assets | | 20,497 |
| | 23,762 |
|
| Other regulatory liabilities | | 5,145 |
| | (2,498 | ) |
| Pension and other postretirement liabilities | | (6,851 | ) | | (5,814 | ) |
| Other assets and liabilities | | (3,015 | ) | | (3,659 | ) |
| Net cash flow provided by operating activities | | 1,048 |
| | 59,580 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (94,123 | ) | | (68,765 | ) |
| Allowance for equity funds used during construction | | 1,696 |
| | 1,320 |
|
| Increase in other investments | | — |
| | (14,000 | ) |
| Changes in money pool receivable - net | | 32,313 |
| | 681 |
|
| Changes in securitization account | | 7,985 |
| | 11,177 |
|
| Net cash flow used in investing activities | | (52,129 | ) | | (69,587 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Retirement of long-term debt | | (24,977 | ) | | (24,188 | ) |
| Change in money pool payable - net | | — |
| | 28,941 |
|
| Other | | (479 | ) | | (839 | ) |
| Net cash flow provided by (used in) financing activities | | (25,456 | ) | | 3,914 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (76,537 | ) | | (6,093 | ) |
| Cash and cash equivalents at beginning of period | | 115,513 |
| | 6,181 |
|
| Cash and cash equivalents at end of period | |
| $38,976 |
| |
| $88 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $26,939 |
| |
| $27,986 |
|
| Income taxes | |
| ($1,624 | ) | |
| ($3,446 | ) |
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $71,543 |
| |
| $94,753 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation and amortization | | 87,272 |
| | 79,526 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 36,252 |
| | (7,605 | ) |
| Changes in assets and liabilities: | | | | |
| Receivables | | (30,030 | ) | | (40,678 | ) |
| Fuel inventory | | (7,371 | ) | | 268 |
|
| Accounts payable | | 24,711 |
| | (74 | ) |
| Prepaid taxes and taxes accrued | | 1,122 |
| | 55,121 |
|
| Interest accrued | | (7,207 | ) | | (9,453 | ) |
| Deferred fuel costs | | (3,134 | ) | | (6,472 | ) |
| Other working capital accounts | | (8,455 | ) | | (9,786 | ) |
| Provisions for estimated losses | | (1,460 | ) | | (3,318 | ) |
| Other regulatory assets | | 59,549 |
| | 69,324 |
|
| Pension and other postretirement liabilities | | (22,978 | ) | | (21,092 | ) |
| Other assets and liabilities | | (6,860 | ) | | (3,816 | ) |
| Net cash flow provided by operating activities | | 192,954 |
| | 196,698 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (243,226 | ) | | (264,394 | ) |
| Allowance for equity funds used during construction | | 4,879 |
| | 6,266 |
|
| Insurance proceeds received for property damages | | 2,431 |
| | — |
|
| Change in money pool receivable - net | | 681 |
| | — |
|
| Changes in securitization account | | 6,653 |
| | 6,762 |
|
| Net cash flow used in investing activities | | (228,582 | ) | | (251,366 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | — |
| | 123,502 |
|
| Retirement of long-term debt | | (58,076 | ) | | (55,764 | ) |
| Changes in money pool payable - net | | 89,312 |
| | (9,669 | ) |
| Other | | (287 | ) | | (4,240 | ) |
| Net cash flow provided by financing activities | | 30,949 |
| | 53,829 |
|
| | | | | |
| Net decrease in cash and cash equivalents | | (4,679 | ) | | (839 | ) |
| Cash and cash equivalents at beginning of period | | 6,181 |
| | 2,182 |
|
| Cash and cash equivalents at end of period | |
| $1,502 |
| |
| $1,343 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid (received) during the period for: | | | | |
| Interest - net of amount capitalized | |
| $70,237 |
| |
| $73,570 |
|
| Income taxes | |
| ($1,446 | ) | |
| $3,443 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $26 |
| |
| $32 |
|
| Temporary cash investments | | 38,950 |
| | 115,481 |
|
| Total cash and cash equivalents | | 38,976 |
| | 115,513 |
|
| Securitization recovery trust account | | 29,698 |
| | 37,683 |
|
| Accounts receivable: | | | | |
| Customer | | 63,979 |
| | 74,382 |
|
| Allowance for doubtful accounts | | (422 | ) | | (463 | ) |
| Associated companies | | 68,569 |
| | 90,629 |
|
| Other | | 7,450 |
| | 9,831 |
|
| Accrued unbilled revenues | | 43,982 |
| | 50,682 |
|
| Total accounts receivable | | 183,558 |
| | 225,061 |
|
| Fuel inventory - at average cost | | 42,865 |
| | 42,731 |
|
| Materials and supplies - at average cost | | 39,294 |
| | 38,605 |
|
| Prepayments and other | | 13,502 |
| | 19,710 |
|
| TOTAL | | 347,893 |
| | 479,303 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 481 |
| | 457 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
|
| Other | | 19,454 |
| | 19,235 |
|
| TOTAL | | 20,311 |
| | 20,068 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,614,489 |
| | 4,569,295 |
|
| Construction work in progress | | 122,764 |
| | 102,088 |
|
| TOTAL UTILITY PLANT | | 4,737,253 |
| | 4,671,383 |
|
| Less - accumulated depreciation and amortization | | 1,603,585 |
| | 1,579,387 |
|
| UTILITY PLANT - NET | | 3,133,668 |
| | 3,091,996 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Other regulatory assets (includes securitization property of $295,062 as of March 31, 2018 and $313,123 as of December 31, 2017) | | 640,901 |
| | 661,398 |
|
| Other | | 28,731 |
| | 26,973 |
|
| TOTAL | | 669,632 |
| | 688,371 |
|
| | | | | |
| TOTAL ASSETS | |
| $4,171,504 |
| |
| $4,279,738 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $500,000 |
| |
| $— |
|
| Accounts payable: | | | | |
| Associated companies | | 51,454 |
| | 59,347 |
|
| Other | | 87,369 |
| | 126,095 |
|
| Customer deposits | | 41,395 |
| | 40,925 |
|
| Taxes accrued | | 49,640 |
| | 45,659 |
|
| Interest accrued | | 19,981 |
| | 25,556 |
|
| Deferred fuel costs | | 38,675 |
| | 67,301 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | 41,325 |
| | — |
|
| Other | | 6,926 |
| | 8,132 |
|
| TOTAL | | 836,765 |
| | 373,015 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 522,688 |
| | 544,642 |
|
| Accumulated deferred investment tax credits | | 11,790 |
| | 11,983 |
|
| Regulatory liability for income taxes - net | | 372,230 |
| | 412,620 |
|
| Other regulatory liabilities | | 11,060 |
| | 6,850 |
|
| Asset retirement cost liabilities | | 6,930 |
| | 6,835 |
|
| Accumulated provisions | | 9,907 |
| | 10,115 |
|
| Pension and other postretirement liabilities | | 11,008 |
| | 17,853 |
|
| Long-term debt (includes securitization bonds of $333,233 as of March 31, 2018 and $358,104 as of December 31, 2017) | | 1,062,555 |
| | 1,587,150 |
|
| Other | | 49,054 |
| | 48,508 |
|
| TOTAL | | 2,057,222 |
| | 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 | | 631,071 |
| | 613,721 |
|
| TOTAL | | 1,277,517 |
| | 1,260,167 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $4,171,504 |
| |
| $4,279,738 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $1,472 |
| |
| $1,216 |
|
| Temporary cash investments | | 30 |
| | 4,965 |
|
| Total cash and cash equivalents | | 1,502 |
| | 6,181 |
|
| Securitization recovery trust account | | 30,798 |
| | 37,451 |
|
| Accounts receivable: | | | | |
| Customer | | 86,860 |
| | 71,803 |
|
| Allowance for doubtful accounts | | (552 | ) | | (828 | ) |
| Associated companies | | 41,002 |
| | 39,447 |
|
| Other | | 12,982 |
| | 14,756 |
|
| Accrued unbilled revenues | | 53,962 |
| | 39,727 |
|
| Total accounts receivable | | 194,254 |
| | 164,905 |
|
| Fuel inventory - at average cost | | 44,548 |
| | 37,177 |
|
| Materials and supplies - at average cost | | 40,294 |
| | 36,631 |
|
| Prepayments and other | | 24,194 |
| | 18,599 |
|
| TOTAL | | 335,590 |
| | 300,944 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Investments in affiliates - at equity | | 538 |
| | 600 |
|
| Non-utility property - at cost (less accumulated depreciation) | | 376 |
| | 376 |
|
| Other | | 19,126 |
| | 18,801 |
|
| TOTAL | | 20,040 |
| | 19,777 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,431,291 |
| | 4,274,069 |
|
| Construction work in progress | | 153,679 |
| | 111,227 |
|
| TOTAL UTILITY PLANT | | 4,584,970 |
| | 4,385,296 |
|
| Less - accumulated depreciation and amortization | | 1,566,743 |
| | 1,526,057 |
|
| UTILITY PLANT - NET | | 3,018,227 |
| | 2,859,239 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 104,915 |
| | 105,816 |
|
| Other regulatory assets (includes securitization property of $330,669 as of September 30, 2017 and $384,609 as of December 31, 2016) | | 681,508 |
| | 740,156 |
|
| Other | | 8,303 |
| | 7,149 |
|
| TOTAL | | 794,726 |
| | 853,121 |
|
| | | | | |
| TOTAL ASSETS | |
| $4,168,583 |
| |
| $4,033,081 |
|
| | | | | |
| See Notes to Financial Statements. | | |
| | |
|
|
| | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Accounts payable: | | | | |
| Associated companies | |
| $142,695 |
| |
| $47,867 |
|
| Other | | 106,117 |
| | 77,342 |
|
| Customer deposits | | 44,141 |
| | 44,419 |
|
| Taxes accrued | | 16,473 |
| | 15,351 |
|
| Interest accrued | | 18,770 |
| | 25,977 |
|
| Deferred fuel costs | | 51,409 |
| | 54,543 |
|
| Other | | 10,445 |
| | 9,388 |
|
| TOTAL | | 390,050 |
| | 274,887 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,061,320 |
| | 1,027,647 |
|
| Accumulated deferred investment tax credits | | 12,221 |
| | 12,934 |
|
| Other regulatory liabilities | | 7,002 |
| | 8,502 |
|
| Asset retirement cost liabilities | | 6,742 |
| | 6,470 |
|
| Accumulated provisions | | 6,124 |
| | 7,584 |
|
| Pension and other postretirement liabilities | | 44,359 |
| | 67,313 |
|
| Long-term debt (includes securitization bonds of $371,422 as of September 30, 2017 and $429,043 as of December 31, 2016) | | 1,451,643 |
| | 1,508,407 |
|
| Other | | 48,585 |
| | 50,343 |
|
| TOTAL | | 2,637,996 |
| | 2,689,200 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2017 and 2016 | | 49,452 |
| | 49,452 |
|
| Paid-in capital | | 481,994 |
| | 481,994 |
|
| Retained earnings | | 609,091 |
| | 537,548 |
|
| TOTAL | | 1,140,537 |
| | 1,068,994 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $4,168,583 |
| |
| $4,033,081 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 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 | — |
| | — |
| | 10,854 |
| | 10,854 |
|
| | | | | | | | |
| Balance at March 31, 2017 |
| $49,452 |
| |
| $481,994 |
| |
| $548,402 |
| |
| $1,079,848 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2017 |
| $49,452 |
| |
| $596,994 |
| |
| $613,721 |
| |
| $1,260,167 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 17,350 |
| | 17,350 |
|
| | | | | | | | |
| Balance at March 31, 2018 |
| $49,452 |
| |
| $596,994 |
| |
| $631,071 |
| |
| $1,277,517 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
|
| | | | | | | | | | | | | | | |
| ENTERGY TEXAS, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | | | |
| Balance at December 31, 2015 |
| $49,452 |
| |
| $481,994 |
| |
| $430,010 |
| |
| $961,456 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 94,753 |
| | 94,753 |
|
| | | | | | | | |
| Balance at September 30, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $524,763 |
| |
| $1,056,209 |
|
| | | | | | | | |
| | | | | | | | |
| Balance at December 31, 2016 |
| $49,452 |
| |
| $481,994 |
| |
| $537,548 |
| |
| $1,068,994 |
|
| | | | | | | | |
| Net income | — |
| | — |
| | 71,543 |
| | 71,543 |
|
| | | | | | | | |
| Balance at September 30, 2017 |
| $49,452 |
| |
| $481,994 |
| |
| $609,091 |
| |
| $1,140,537 |
|
| | | | | | | | |
| See Notes to Financial Statements. | | | | | | | |
| | ENTERGY TEXAS, INC. AND SUBSIDIARIES | SELECTED OPERATING RESULTS | | For the Three and Nine Months Ended September 30, 2017 and 2016 | |
| For the Three Months Ended March 31, 2018 and 2017 | | For the Three Months Ended March 31, 2018 and 2017 |
(Unaudited) | | | | | | | | | | | | | | |
| | | Three Months Ended | | Increase/ | | | | | | Increase/ | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | | 2018 | | 2017 | | (Decrease) | | % |
| | | (Dollars In Millions) | | | | (Dollars In Millions) | | |
| Electric Operating Revenues: | | | | | | | | | | | | | | | | |
| Residential | |
| $202 |
| |
| $196 |
| |
| $6 |
| | 3 |
| |
| $148 |
| |
| $137 |
| |
| $11 |
| | 8 |
|
| Commercial | | 101 |
| | 91 |
| | 10 |
| | 11 |
| | 85 |
| | 90 |
| | (5 | ) | | (6 | ) |
| Industrial | | 97 |
| | 75 |
| | 22 |
| | 29 |
| | 83 |
| | 100 |
| | (17 | ) | | (17 | ) |
| Governmental | | 6 |
| | 6 |
| | — |
| | — |
| | 6 |
| | 6 |
| | — |
| | — |
|
| Total retail | | 406 |
| | 368 |
| | 38 |
| | 10 |
| |
| Total billed retail | | | 322 |
| | 333 |
| | (11 | ) | | (3 | ) |
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 18 |
| | 52 |
| | (34 | ) | | (65 | ) | | 13 |
| | 13 |
| | — |
| | — |
|
| Non-associated companies | | 4 |
| | 13 |
| | (9 | ) | | (69 | ) | | 10 |
| | 5 |
| | 5 |
| | 100 |
|
| Other | | 5 |
| | 9 |
| | (4 | ) | | (44 | ) | | 4 |
| | 13 |
| | (9 | ) | | (69 | ) |
| Total | |
| $433 |
| |
| $442 |
| |
| ($9 | ) | | (2 | ) | |
| $349 |
| |
| $364 |
| |
| ($15 | ) | | (4 | ) |
| | | | | | | | | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | | | | | | | | |
| Residential | | 1,839 |
| | 1,989 |
| | (150 | ) | | (8 | ) | | 1,474 |
| | 1,213 |
| | 261 |
| | 22 |
|
| Commercial | | 1,279 |
| | 1,336 |
| | (57 | ) | | (4 | ) | | 1,083 |
| | 1,006 |
| | 77 |
| | 8 |
|
| Industrial | | 2,018 |
| | 1,948 |
| | 70 |
| | 4 |
| | 1,832 |
| | 1,790 |
| | 42 |
| | 2 |
|
| Governmental | | 73 |
| | 75 |
| | (2 | ) | | (3 | ) | | 70 |
| | 63 |
| | 7 |
| | 11 |
|
| Total retail | | 5,209 |
| | 5,348 |
| | (139 | ) | | (3 | ) | | 4,459 |
| | 4,072 |
| | 387 |
| | 10 |
|
| Sales for resale: | | | | | | | | | | | | | | | | |
| Associated companies | | 386 |
| | 1,187 |
| | (801 | ) | | (67 | ) | | 366 |
| | 338 |
| | 28 |
| | 8 |
|
| Non-associated companies | | 238 |
| | 354 |
| | (116 | ) | | (33 | ) | | 194 |
| | 77 |
| | 117 |
| | 152 |
|
| Total | | 5,833 |
| | 6,889 |
| | (1,056 | ) | | (15 | ) | | 5,019 |
| | 4,487 |
| | 532 |
| | 12 |
|
| | | | | | | | | | |
| | | | | | | | | | |
| | | Nine Months Ended | | Increase/ | | | |
| Description | | 2017 | | 2016 | | (Decrease) | | % | |
| | | (Dollars In Millions) | | | |
| Electric Operating Revenues: | | | | | | | | | |
| Residential | |
| $482 |
| |
| $461 |
| |
| $21 |
| | 5 |
| |
| Commercial | | 282 |
| | 260 |
| | 22 |
| | 8 |
| |
| Industrial | | 292 |
| | 263 |
| | 29 |
| | 11 |
| |
| Governmental | | 18 |
| | 18 |
| | — |
| | — |
| |
| Total retail | | 1,074 |
| | 1,002 |
| | 72 |
| | 7 |
| |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 47 |
| | 169 |
| | (122 | ) | | (72 | ) | |
| Non-associated companies | | 18 |
| | 31 |
| | (13 | ) | | (42 | ) | |
| Other | | 36 |
| | 31 |
| | 5 |
| | 16 |
| |
| Total | |
| $1,175 |
| |
| $1,233 |
| |
| ($58 | ) | | (5 | ) | |
| | | | | | | | | | |
| Billed Electric Energy Sales (GWh): | | | | | | | | | |
| Residential | | 4,326 |
| | 4,473 |
| | (147 | ) | | (3 | ) | |
| Commercial | | 3,387 |
| | 3,423 |
| | (36 | ) | | (1 | ) | |
| Industrial | | 5,781 |
| | 5,693 |
| | 88 |
| | 2 |
| |
| Governmental | | 205 |
| | 213 |
| | (8 | ) | | (4 | ) | |
| Total retail | | 13,699 |
| | 13,802 |
| | (103 | ) | | (1 | ) | |
| Sales for resale: | | | | | | | | | |
| Associated companies | | 1,149 |
| | 4,292 |
| | (3,143 | ) | | (73 | ) | |
| Non-associated companies | | 586 |
| | 848 |
| | (262 | ) | | (31 | ) | |
| Total | | 15,434 |
| | 18,942 |
| | (3,508 | ) | | (19 | ) | |
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf. The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement. Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.
Third Quarter 2017 Compared to Third Quarter 2016
Net income changed insignificantly, decreasing by $1.8 million, for the third quarter 2017 compared to the third quarter 2016.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Net income decreased $13.1increased $2 million primarily due to provisions against revenue being recorded in 2017 in connection with the complaint against System Energy’s return on equity,a lower other regulatory credits, and a higher effective income tax rate, in 2017. partially offset by lower operating revenue resulting from lower rate base as compared to the prior year.
Income Tax Legislation
See the “Federal Regulation - Complaint Against System EnergyIncome Tax Legislation” belowsection of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K for furthera discussion of the complaint against System Energy. System Energy records a regulatory debit or creditTax 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 difference between asset retirement obligation-related expensesTax Act, and trust earnings plus asset retirement obligation-related costs collectedNote 2 to the financial statements herein and in revenue. The decrease in regulatory credits is primarily causedthe Form 10-K contains discussions of proceedings commenced or other responses by decreases in depreciation and accretion expenses.Entergy’s regulators to the Tax Act.
Liquidity and Capital Resources
Cash Flow
Cash flows for the ninethree months ended September 30,March 31, 2018 and 2017 and 2016 were as follows:
| | | | 2017 | | 2016 | 2018 | | 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 activities | 279,485 |
| | 234,759 |
| 65,371 |
| | 65,776 |
|
| Investing activities | (259,598 | ) | | (193,271 | ) | (85,956 | ) | | (65,068 | ) |
| Financing activities | (120,783 | ) | | (80,987 | ) | 12,097 |
| | (6,163 | ) |
| Net decrease in cash and cash equivalents | (100,896 | ) | | (39,499 | ) | (8,488 | ) | | (5,455 | ) |
| | | | | | | |
| Cash and cash equivalents at end of period |
| $144,967 |
| |
| $191,162 |
|
| $278,699 |
| |
| $240,408 |
|
Operating Activities
Net cash flow provided by operating activities increased $44.7remained relatively unchanged, decreasing by $0.4 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016 primarily due to a decrease in spending of $36.1 million on nuclear refueling outages in 2017 as compared to the same period in 2016 and the timing of collection of receivables,March 31, 2017.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
partially offset by proceeds of $28.4 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements in the Form 10-K for a discussion of the DOE litigation.
Investing Activities
Net cash flow used in investing activities increased $66.3$20.9 million for the ninethree months ended September 30, 2017March 31, 2018 compared to the ninethree months ended September 30, 2016March 31, 2017 primarily due to:
money pool activity;
proceedsto an increase of $15.8$112.7 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements in the Form 10-K for discussionas a result of the DOE litigation; and
$9.1 million in funds held on deposit for interest payments due October 1, 2017.
The increase was partially offset by:
fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;cycle and
a decrease an increase of $15.9$17.6 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 increase 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 $202.7$21.5 million for the ninethree months ended September 30, 2017March 31, 2018 compared to decreasingincreasing by $8.4$80.7 million for the ninethree months ended September 30, 2016.March 31, 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 increased $39.8provided $12.1 million of cash for the ninethree months ended September 30, 2017March 31, 2018 compared to using $6.2 million of cash for the ninethree months ended September 30, 2016March 31, 2017 primarily due to:to the following activity:
a decreasethe issuance in net borrowingsMarch 2018 of $65.2$100 million onof 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity’s credit facility in 2017 as 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;
The increase was partially offset by:
a decrease in common stock dividends and distributions of $53.4$63.2 million in 2017 compared to 2016first quarter 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
net short-term borrowings of $25.3 million in the partial repayment caused by System Energythree months ended March 31, 2018 compared to net short-term borrowings of $43.9 million in May 2016 of $22 million of 5.875% pollution control revenue bonds due 2022 issuedthe three months ended March 31, 2017 on behalf of System Energy.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.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Capital Structure
System Energy’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for System Energy is primarily due to the issuance in March 2018 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity.
| | | | September 30, 2017 | | December 31, 2016 | March 31, 2018 | | December 31, 2017 |
| Debt to capital | 45.0 | % | | 45.5 | % | 49.0 | % | | 44.5 | % |
| Effect of subtracting cash | (7.0 | %) | | (12.0 | %) | (13.7 | %) | | (16.0 | %) |
| Net debt to net capital | 38.0 | % | | 33.5 | % | 35.3 | % | | 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 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
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 is developing its capital investment plan for 2018 through 2020 and currently anticipates making $515 million in capital investments during that period. The estimate includes amounts associated with specific investments and initiatives such as investments in Grand Gulf.
System Energy’s receivables from the money pool were as follows:
|
| | | | | | |
September 30, 2017 | | December 31, 2016 | | September 30, 2016 | | December 31, 2015 |
| (In Thousands) |
| $236,467 | | $33,809 | | $31,511 | | $39,926 |
|
| | | | | | |
March 31, 2018 | | December 31, 2017 | | March 31, 2017 | | December 31, 2016 |
| (In Thousands) |
| $90,136 | | $111,667 | | $114,553 | | $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 September 30, 2017, $31.8March 31, 2018, $43.2 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.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Complaint Against System Energy
In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94%. The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017, as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67%. System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The LPSC and the City Council intervened in the proceeding expressing support for the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. In September 2017 the FERC established a refund effective date of January 23, 2017, consolidated the return on equity complaint proceeding with the proceeding related to System Energy’s Unit Power Sales Agreement amendments, discussed below, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.
Unit Power Sales Agreement
In August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017.
In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to further proceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, the FERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower than proposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of the further settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the rate decrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding related to the complaint filed by the APSC and MPSC, discussed above, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
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 Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | 2017 | | 2016 | | 2017 | | 2016 |
| | | (In Thousands) | | (In Thousands) |
| OPERATING REVENUES | | | | | | | | |
| Electric | |
| $156,106 |
| |
| $114,039 |
| |
| $475,849 |
| |
| $403,056 |
|
| | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | |
| Operation and Maintenance: | | | | | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 16,170 |
| | (7,393 | ) | | 53,164 |
| | 26,429 |
|
| Nuclear refueling outage expenses | | 4,435 |
| | 4,958 |
| | 13,595 |
| | 14,448 |
|
| Other operation and maintenance | | 51,392 |
| | 32,867 |
| | 154,103 |
| | 100,793 |
|
| Decommissioning | | 8,290 |
| | 12,802 |
| | 34,974 |
| | 37,782 |
|
| Taxes other than income taxes | | 6,679 |
| | 6,256 |
| | 19,767 |
| | 18,894 |
|
| Depreciation and amortization | | 34,524 |
| | 30,811 |
| | 105,152 |
| | 100,902 |
|
| Other regulatory credits - net | | (2,843 | ) | | (10,148 | ) | | (24,626 | ) | | (32,564 | ) |
| TOTAL | | 118,647 |
| | 70,153 |
| | 356,129 |
| | 266,684 |
|
| | | | | | | | | |
| OPERATING INCOME | | 37,459 |
| | 43,886 |
| | 119,720 |
| | 136,372 |
|
| | | | | | | | | |
| OTHER INCOME | | | | | | | | |
| Allowance for equity funds used during construction | | 1,736 |
| | 1,758 |
| | 4,148 |
| | 6,089 |
|
| Interest and investment income | | 6,624 |
| | 4,233 |
| | 15,021 |
| | 12,631 |
|
| Miscellaneous - net | | (130 | ) | | (109 | ) | | (361 | ) | | (365 | ) |
| TOTAL | | 8,230 |
| | 5,882 |
| | 18,808 |
| | 18,355 |
|
| | | | | | | | | |
| INTEREST EXPENSE | | | | | | | | |
| Interest expense | | 9,169 |
| | 9,186 |
| | 27,469 |
| | 28,119 |
|
| Allowance for borrowed funds used during construction | | (425 | ) | | (440 | ) | | (1,014 | ) | | (1,536 | ) |
| TOTAL | | 8,744 |
| | 8,746 |
| | 26,455 |
| | 26,583 |
|
| | | | | | | | | |
| INCOME BEFORE INCOME TAXES | | 36,945 |
| | 41,022 |
| | 112,073 |
| | 128,144 |
|
| | | | | | | | | |
| Income taxes | | 16,362 |
| | 18,652 |
| | 51,793 |
| | 54,726 |
|
| | | | | | | | | |
| NET INCOME | |
| $20,583 |
| |
| $22,370 |
| |
| $60,280 |
| |
| $73,418 |
|
| | | | | | | | | |
| See Notes to Financial Statements. | | | | | | | | |
(page left blank intentionally)
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $60,280 |
| |
| $73,418 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 184,625 |
| | 176,571 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 44,017 |
| | 73,829 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 21,147 |
| | 9,084 |
|
| Accounts payable | | 2,344 |
| | (2,217 | ) |
| Prepaid taxes and taxes accrued | | 2,956 |
| | (30,063 | ) |
| Interest accrued | | 401 |
| | 406 |
|
| Other working capital accounts | | 7,605 |
| | (22,051 | ) |
| Other regulatory assets | | 1,196 |
| | (12,392 | ) |
| Pension and other postretirement liabilities | | (14,665 | ) | | (15,789 | ) |
| Other assets and liabilities | | (30,421 | ) | | (16,037 | ) |
| Net cash flow provided by operating activities | | 279,485 |
| | 234,759 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (60,041 | ) | | (71,471 | ) |
| Allowance for equity funds used during construction | | 4,148 |
| | 6,089 |
|
| Nuclear fuel purchases | | (24,239 | ) | | (137,248 | ) |
| Proceeds from the sale of nuclear fuel | | 60,188 |
| | 11,467 |
|
| Changes in other investments - net | | (9,061 | ) | | — |
|
| Proceeds from nuclear decommissioning trust fund sales | | 308,134 |
| | 392,926 |
|
| Investment in nuclear decommissioning trust funds | | (336,069 | ) | | (419,255 | ) |
| Changes in money pool receivable - net | | (202,658 | ) | | 8,415 |
|
Litigation proceeds for reimbursement of spent nuclear fuel storage costs
| | — |
| | 15,806 |
|
| Net cash flow used in investing activities | | (259,598 | ) | | (193,271 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Retirement of long-term debt | | (50,003 | ) | | (22,002 | ) |
| Changes in credit borrowings - net | | 14,858 |
| | 80,041 |
|
| Common stock dividends and distributions | | (85,610 | ) | | (139,000 | ) |
| Other | | (28 | ) | | (26 | ) |
| Net cash flow used in financing activities | | (120,783 | ) | | (80,987 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (100,896 | ) | | (39,499 | ) |
| Cash and cash equivalents at beginning of period | | 245,863 |
| | 230,661 |
|
| Cash and cash equivalents at end of period | |
| $144,967 |
| |
| $191,162 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $26,251 |
| |
| $27,087 |
|
| Income taxes | |
| $— |
| |
| $3,402 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| INCOME STATEMENTS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING REVENUES | | | | |
| Electric | |
| $148,443 |
| |
| $154,787 |
|
| | | | | |
| OPERATING EXPENSES | | | | |
| Operation and Maintenance: | | | | |
| Fuel, fuel-related expenses, and gas purchased for resale | | 28,425 |
| | 15,334 |
|
| Nuclear refueling outage expenses | | 3,972 |
| | 4,773 |
|
| Other operation and maintenance | | 45,339 |
| | 47,463 |
|
| Decommissioning | | 8,457 |
| | 13,232 |
|
| Taxes other than income taxes | | 7,097 |
| | 6,424 |
|
| Depreciation and amortization | | 33,321 |
| | 35,441 |
|
| Other regulatory credits - net | | (9,109 | ) | | (10,362 | ) |
| TOTAL | | 117,502 |
| | 112,305 |
|
| | | | | |
| OPERATING INCOME | | 30,941 |
| | 42,482 |
|
| | | | | |
| OTHER INCOME | | | | |
| Allowance for equity funds used during construction | | 2,100 |
| | 1,094 |
|
| Interest and investment income | | 6,886 |
| | 4,674 |
|
| Miscellaneous - net | | (1,176 | ) | | (1,066 | ) |
| TOTAL | | 7,810 |
| | 4,702 |
|
| | | | | |
| INTEREST EXPENSE | | | | |
| Interest expense | | 9,325 |
| | 9,119 |
|
| Allowance for borrowed funds used during construction | | (532 | ) | | (267 | ) |
| TOTAL | | 8,793 |
| | 8,852 |
|
| | | | | |
| INCOME BEFORE INCOME TAXES | | 29,958 |
| | 38,332 |
|
| | | | | |
| Income taxes | | 7,650 |
| | 17,985 |
|
| | | | | |
| NET INCOME | |
| $22,308 |
| |
| $20,347 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| ASSETS |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $47 |
| |
| $786 |
|
| Temporary cash investments | | 144,920 |
| | 245,077 |
|
| Total cash and cash equivalents | | 144,967 |
| | 245,863 |
|
| Accounts receivable: | | | | |
| Associated companies | | 284,724 |
| | 104,390 |
|
| Other | | 4,814 |
| | 3,637 |
|
| Total accounts receivable | | 289,538 |
| | 108,027 |
|
| Materials and supplies - at average cost | | 86,719 |
| | 82,469 |
|
| Deferred nuclear refueling outage costs | | 11,713 |
| | 24,729 |
|
| Prepaid taxes | | 12,926 |
| | 15,882 |
|
| Prepayments and other | | 14,450 |
| | 4,229 |
|
| TOTAL | | 560,313 |
| | 481,199 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 870,610 |
| | 780,496 |
|
| TOTAL | | 870,610 |
| | 780,496 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,308,864 |
| | 4,331,668 |
|
| Property under capital lease | | 585,084 |
| | 585,084 |
|
| Construction work in progress | | 80,343 |
| | 43,888 |
|
| Nuclear fuel | | 188,956 |
| | 259,635 |
|
| TOTAL UTILITY PLANT | | 5,163,247 |
| | 5,220,275 |
|
| Less - accumulated depreciation and amortization | | 3,155,691 |
| | 3,063,249 |
|
| UTILITY PLANT - NET | | 2,007,556 |
| | 2,157,026 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Regulatory asset for income taxes - net | | 86,515 |
| | 93,127 |
|
| Other regulatory assets | | 416,628 |
| | 411,212 |
|
| Other | | 4,421 |
| | 4,652 |
|
| TOTAL | | 507,564 |
| | 508,991 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,946,043 |
| |
| $3,927,712 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| September 30, 2017 and December 31, 2016 |
| (Unaudited) |
| | | 2017 | | 2016 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $4 |
| |
| $50,003 |
|
| Short-term borrowings | | 31,751 |
| | 66,893 |
|
| Accounts payable: | | | | |
| Associated companies | | 10,325 |
| | 5,843 |
|
| Other | | 44,958 |
| | 50,558 |
|
| Interest accrued | | 14,450 |
| | 14,049 |
|
| Other | | 2,958 |
| | 2,957 |
|
| TOTAL | | 104,446 |
| | 190,303 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 1,147,913 |
| | 1,112,865 |
|
| Accumulated deferred investment tax credits | | 39,726 |
| | 41,663 |
|
| Other regulatory liabilities | | 424,381 |
| | 370,862 |
|
| Decommissioning | | 853,291 |
| | 854,202 |
|
| Pension and other postretirement liabilities | | 103,185 |
| | 117,850 |
|
| Long-term debt | | 551,387 |
| | 501,129 |
|
| Other | | 8,221 |
| | 15 |
|
| TOTAL | | 3,128,104 |
| | 2,998,586 |
|
| | | | | |
| Commitments and Contingencies | | | | |
| | | | | |
| COMMON EQUITY | | | | |
| Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2017 and 2016 | | 679,350 |
| | 679,350 |
|
| Retained earnings | | 34,143 |
| | 59,473 |
|
| TOTAL | | 713,493 |
| | 738,823 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,946,043 |
| |
| $3,927,712 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CASH FLOWS |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| OPERATING ACTIVITIES | | | | |
| Net income | |
| $22,308 |
| |
| $20,347 |
|
| Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
| Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 66,323 |
| | 61,562 |
|
| Deferred income taxes, investment tax credits, and non-current taxes accrued | | 7,929 |
| | 18,293 |
|
| Changes in assets and liabilities: | | | | |
| Receivables | | 5,883 |
| | 13,953 |
|
| Accounts payable | | (9,632 | ) | | (3,008 | ) |
| Prepaid taxes and taxes accrued | | (15,033 | ) | | (15,032 | ) |
| Interest accrued | | 736 |
| | 295 |
|
| Other working capital accounts | | (5,874 | ) | | (1,111 | ) |
| Other regulatory assets | | (1,960 | ) | | (1,571 | ) |
| Other regulatory liabilities | | (18,988 | ) | | 23,401 |
|
| Pension and other postretirement liabilities | | (3,537 | ) | | (4,187 | ) |
| Other assets and liabilities | | 17,216 |
| | (47,166 | ) |
| Net cash flow provided by operating activities | | 65,371 |
| | 65,776 |
|
| | | | | |
| INVESTING ACTIVITIES | | | | |
| Construction expenditures | | (30,707 | ) | | (14,096 | ) |
| Allowance for equity funds used during construction | | 2,100 |
| | 1,094 |
|
| Nuclear fuel purchases | | (74,257 | ) | | (21,765 | ) |
| Proceeds from the sale of nuclear fuel | | — |
| | 60,188 |
|
| Proceeds from nuclear decommissioning trust fund sales | | 54,210 |
| | 75,787 |
|
| Investment in nuclear decommissioning trust funds | | (58,833 | ) | | (85,532 | ) |
| Changes in money pool receivable - net | | 21,531 |
| | (80,744 | ) |
| Net cash flow used in investing activities | | (85,956 | ) | | (65,068 | ) |
| | | | | |
| FINANCING ACTIVITIES | | | | |
| Proceeds from the issuance of long-term debt | | 100,000 |
| | — |
|
| Retirement of long-term debt | | (50,002 | ) | | (50,001 | ) |
| Changes in short-term borrowings - net | | 25,339 |
| | 43,851 |
|
| Common stock dividends and distributions | | (63,240 | ) | | — |
|
| Other | | — |
| | (13 | ) |
| Net cash flow provided by (used in) financing activities | | 12,097 |
| | (6,163 | ) |
| | | | | |
| Net decrease in cash and cash equivalents | | (8,488 | ) | | (5,455 | ) |
| Cash and cash equivalents at beginning of period | | 287,187 |
| | 245,863 |
|
| Cash and cash equivalents at end of period | |
| $278,699 |
| |
| $240,408 |
|
| | | | | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
| Cash paid during the period for: | | | | |
| Interest - net of amount capitalized | |
| $8,592 |
| |
| $8,593 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Nine Months Ended September 30, 2017 and 2016 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | |
| Balance at December 31, 2015 |
| $719,350 |
| |
| $61,729 |
| |
| $781,079 |
|
| | | | | | |
| Net income | — |
| | 73,418 |
| | 73,418 |
|
| Common stock dividends and distributions | (40,000 | ) | | (99,000 | ) | | (139,000 | ) |
| | | | | | |
| Balance at September 30, 2016 |
| $679,350 |
| |
| $36,147 |
| |
| $715,497 |
|
| | | | | | |
| | | | | | |
| Balance at December 31, 2016 |
| $679,350 |
| |
| $59,473 |
| |
| $738,823 |
|
| | | | | | |
| Net income | — |
| | 60,280 |
| | 60,280 |
|
| Common stock dividends | — |
| | (85,610 | ) | | (85,610 | ) |
| | | | | | |
| Balance at September 30, 2017 |
| $679,350 |
| |
| $34,143 |
| |
| $713,493 |
|
| | | | | | |
| See Notes to Financial Statements. | | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| ASSETS |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT ASSETS | | | | |
| Cash and cash equivalents: | | | | |
| Cash | |
| $47 |
| |
| $78 |
|
| Temporary cash investments | | 278,652 |
| | 287,109 |
|
| Total cash and cash equivalents | | 278,699 |
| | 287,187 |
|
| Accounts receivable: | | | | |
| Associated companies | | 142,321 |
| | 170,149 |
|
| Other | | 6,940 |
| | 6,526 |
|
| Total accounts receivable | | 149,261 |
| | 176,675 |
|
| Materials and supplies - at average cost | | 89,431 |
| | 88,424 |
|
| Deferred nuclear refueling outage costs | | 9,668 |
| | 7,908 |
|
| Prepayments and other | | 5,596 |
| | 2,489 |
|
| TOTAL | | 532,655 |
| | 562,683 |
|
| | | | | |
| OTHER PROPERTY AND INVESTMENTS | | | | |
| Decommissioning trust funds | | 896,219 |
| | 905,686 |
|
| TOTAL | | 896,219 |
| | 905,686 |
|
| | | | | |
| UTILITY PLANT | | | | |
| Electric | | 4,331,713 |
| | 4,327,849 |
|
| Property under capital lease | | 588,281 |
| | 588,281 |
|
| Construction work in progress | | 100,467 |
| | 69,937 |
|
| Nuclear fuel | | 248,372 |
| | 207,513 |
|
| TOTAL UTILITY PLANT | | 5,268,833 |
| | 5,193,580 |
|
| Less - accumulated depreciation and amortization | | 3,203,002 |
| | 3,175,018 |
|
| UTILITY PLANT - NET | | 2,065,831 |
| | 2,018,562 |
|
| | | | | |
| DEFERRED DEBITS AND OTHER ASSETS | | | | |
| Regulatory assets: | | | | |
| Other regulatory assets | | 446,287 |
| | 444,327 |
|
| Other | | 11,363 |
| | 7,629 |
|
| TOTAL | | 457,650 |
| | 451,956 |
|
| | | | | |
| TOTAL ASSETS | |
| $3,952,355 |
| |
| $3,938,887 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| BALANCE SHEETS |
| LIABILITIES AND EQUITY |
| March 31, 2018 and December 31, 2017 |
| (Unaudited) |
| | | 2018 | | 2017 |
| | | (In Thousands) |
| CURRENT LIABILITIES | | | | |
| Currently maturing long-term debt | |
| $85,005 |
| |
| $85,004 |
|
| Short-term borrowings | | 43,170 |
| | 17,830 |
|
| Accounts payable: | | | | |
| Associated companies | | 6,189 |
| | 16,878 |
|
| Other | | 65,448 |
| | 62,868 |
|
| Taxes accrued | | 31,551 |
| | 46,584 |
|
| Interest accrued | | 14,125 |
| | 13,389 |
|
| Current portion of unprotected excess accumulated deferred income taxes | | 76,442 |
| | — |
|
| Other | | 2,437 |
| | 2,434 |
|
| TOTAL | | 324,367 |
| | 244,987 |
|
| | | | | |
| NON-CURRENT LIABILITIES | | | | |
| Accumulated deferred income taxes and taxes accrued | | 785,726 |
| | 776,420 |
|
| Accumulated deferred investment tax credits | | 39,087 |
| | 39,406 |
|
| Regulatory liability for income taxes - net | | 167,518 |
| | 246,122 |
|
| Other regulatory liabilities | | 439,165 |
| | 455,991 |
|
| Decommissioning | | 870,120 |
| | 861,664 |
|
| Pension and other postretirement liabilities | | 118,337 |
| | 121,874 |
|
| Long-term debt | | 516,577 |
| | 466,484 |
|
| Other | | 21,581 |
| | 15,130 |
|
| TOTAL | | 2,958,111 |
| | 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 | | 68,027 |
| | 52,459 |
|
| TOTAL | | 669,877 |
| | 710,809 |
|
| | | | | |
| TOTAL LIABILITIES AND EQUITY | |
| $3,952,355 |
| |
| $3,938,887 |
|
| | | | | |
| See Notes to Financial Statements. | | | | |
|
| | | | | | | | | | | |
| SYSTEM ENERGY RESOURCES, INC. |
| STATEMENTS OF CHANGES IN COMMON EQUITY |
| For the Three Months Ended March 31, 2018 and 2017 |
| (Unaudited) |
| | | | |
| | Common Equity | | |
| | Common Stock | | Retained Earnings | | Total |
| | (In Thousands) |
| | | | | | |
| Balance at December 31, 2016 |
| $679,350 |
| |
| $59,473 |
| |
| $738,823 |
|
| | | | | | |
| Net income | — |
| | 20,347 |
| | 20,347 |
|
| | | | | | |
| Balance at March 31, 2017 |
| $679,350 |
| |
| $79,820 |
| |
| $759,170 |
|
| | | | | | |
| | | | | | |
| Balance at December 31, 2017 |
| $658,350 |
| |
| $52,459 |
| |
| $710,809 |
|
| | | | | | |
| Net income | — |
| | 22,308 |
| | 22,308 |
|
| Common stock dividends and distributions | (56,500 | ) | | (6,740 | ) | | (63,240 | ) |
| | | | | | |
| Balance at March 31, 2018 |
| $601,850 |
| |
| $68,027 |
| |
| $669,877 |
|
| | | | | | |
| See Notes to Financial Statements. | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See “PART I, Item 1, Litigation” in the Form 10-K for a discussion of legal, administrative, and other regulatory proceedings affecting Entergy. Also see Note 1 and Note 2 to the financial statements herein and “Item 5, Other Information, Environmental Regulation” below for updates regarding environmental proceedings and regulation.
Item 1A. Risk Factors
There have been no material changes to the risk factors discussed in “PART I, Item 1A, Risk Factors” in the Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities (a)
|
| | | | | | | | | | | | | | |
| Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of a Publicly Announced Plan | | Maximum $ Amount of Shares that May Yet be Purchased Under a Plan (b) |
| | | | | | | | | |
7/1/01/2017-7/2018-1/31/20172018 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
8/2/01/2017-8/31/20172018-2/28/2018 | | — |
| |
| $— |
| | — |
| |
| $350,052,918 |
|
9/3/01/2017-9/30/20172018-3/31/2018 | | — |
| |
| $— |
| | — |
| |
| $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.
In March 2017, Entergy sold the FitzPatrick plant to Exelon, and as part of the transaction, the FitzPatrick decommissioning trust fund, along with the decommissioning obligation for that plant, was transferred to Exelon. The FitzPatrick spent fuel disposal contract was assigned to Exelon as part of the transaction.
Environmental Regulation
Following are updates to the Environmental Regulation section of Part I, Item 1 of the Form 10-K.
Clean Air Act and Subsequent Amendments
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 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 granted in part the petitions for reconsideration and stated its intent to stay the FIP compliance deadlines by at least 90 days. Subsequently, the EPA granted a 90 day stay of the FIP effective dates and the EPA now has proposed approval of (i) an extension of these NOx limit deadlines to January 2020 and (ii) a state implementation for NOx controls that allows compliance with the provisions of the Cross-State Air Pollution Rule to satisfy the NOx regional haze provisions for White Bluff, Independence, and Lake Catherine. Arkansas published a proposed replacement state plan in October 2017. This plan is under review, and comments are due to the state in January 2018. The Eighth Circuit granted the government’s motion to hold the appeal litigation in abeyance and has directed the parties to file status reports in December 2017.
In Louisiana, Entergy is working with the Louisiana Department of Environmental Quality (LDEQ) and the EPA to revise the Louisiana SIP for regional haze, which was disapproved in part in 2012. The LDEQ submitted a revised SIP in February 2017. In May 2017 the EPA proposed to approve a majority of the revisions. In September 2017 the EPA issued a proposed SIP approval for the Nelson plant, requiring an emission limitation consistent with the use of low-sulfur coal, with a compliance date three years from the effective date of the final EPA approval. The EPA’s final approval decision is expected in the fourth quarter 2017. Entergy continues to monitor the submission and to file comments in the process as appropriate.
New and Existing Source Performance Standards for Greenhouse Gas Emissions
As a part of a climate plan announced in June 2013, the EPA was directed to (i) reissue proposed carbon pollution standards for new power plants by September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollution standards, regulations, or guidelines, as appropriate, for modified, reconstructed, and existing power plants no later than June 1, 2014; (iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirement that states submit to the EPA the implementation plans required under Section 111(d) ofviolated the Clean Air Act by revoking the 1997 standard and its implementing regulations by no later than June 30, 2016. In January 2014creating 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, requiresthat allowed states to develop plans for compliance with the EPA’s emission standards. In February 2016 the U.S. Supreme Court issued a stay halting the effectivenessavoid certain “anti-backsliding” provisions of the rule until the rule is reviewed by the D.C. Circuit and by the U.S. Supreme Court, if further review is granted. In March 2017 the current administration issued an executive order entitled “Promoting Energy Independence and Economic Growth” instructing the EPA to review and then to suspend, revise, or rescind the Clean Power Plan, if appropriate. The 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 October 2017 the EPA announced a proposed rule that would repeal the Clean Power Plan on the grounds that it exceeds the EPA’s statutory authority under the Clean Air Act. The EPA also askedhas not stated whether it will request additional review of this decision or what actions it will take to review further the D.C. Circuit to continue to hold the litigation over the Clean Power Plan in abeyance “pending the conclusion of rulemaking” and stated to the court that the agency intends to issue “in the near future” an advance notice of proposed rulemaking seeking comments on replacing the Clean Power Plan. Also in October 2017, the EPA submitted its draft advance notice of proposed rulemaking to the Office of Management and Budget for review, which typically takes 60-90 days.1997 designations.
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. In May 2017 a plaintiff filed two parallel state court appeals challenging New York State’s actions in signing and implementing the Indian Point settlement with Entergy on the basis that the State failed to perform sufficient environmental analysis of its actions. All signatories to the settlement agreement, including the Entergy affiliates that hold NRC licenses for Indian Point, were named. For a discussion of the recent Indian Point settlement, see “Entergy Wholesale Commodities Authorization to Operate Its Nuclear Power Plants” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.
316(b) Cooling Water Intake Structures
The EPA finalized regulations in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in water use and corresponding perceived aquatic impacts. Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the rule. After litigation, in May 2014, the EPA issued a new final 316(b) rule, followed by publication in the Federal Register in August 2014, with the final rule effective in October 2014. Entergy is developing a compliance plan for each affected facility in accordance with the requirements of the final rule.
Entergy filed a petition for review of the final rule as a co-petitioner with the Utility Water Act Group. The U.S. Court of Appeals for the Second Circuit heard oral argument in September 2017. No decision is expected before the first quarter 2018.
Federal Jurisdiction of Waters of the United States
In September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federal Clean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the EPA’s release of a draft scientific report on the “connectivity” of waters that the agency said would inform the rulemaking. This report was finalized in January 2015. The final rule was published in the Federal Register in June 2015. The rule could significantly increase the number and types of waters included in the EPA’s and the U.S. Army Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’s operations. The final rule has been challenged in federal court by several parties, including most states. In August 2015 the District Court for North Dakota issued a preliminary injunction staying the new rule in 13 states. In October 2015 the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the rule. Entergy will continue to monitor this rulemaking and ensure compliance with existing permitting processes. In response to the stay, the EPA and the U.S. Army Corps of Engineers resumed nationwide use of the agencies’ regulations as they existed prior to August 27, 2015. In February 2017 the current administration issued an executive order instructing the EPA and the U.S. Army Corps of Engineers to review the Waters of the United States rule and to revise or rescind, as appropriate. In June 2017 the EPA and the U.S. Army Corps of Engineers released a proposed rule that rescinds the June 2015 rule and recodifies the definition of “waters of the U.S.” that was in effect prior to the 2015 rule. The administration is expected to propose a definition of “waters of the U.S.” at a later date.
Coal Combustion Residuals
SeeAs discussed in the Form 10-K, for discussion of the coal combustion residuals rule (CCR rule) andin December 2016 the Water Infrastructure Improvements for the Nation Act (WIIN Act). was signed into law, which authorizes states to regulate coal ash rather than leaving primary enforcement to citizen suit actions. States may submit to the EPA proposals for a permit program. In September 2017 the EPA agreed to reconsider certain provisions of the CCR (coal combustion residuals) rule in light of the WIIN Act. TheIn March 2018 the EPA has not yet initiated a new roundpublished its proposed revisions to the CCR rule with comments due at the end of rulemaking and has not extended the existing mid-October 2017 groundwater monitoring deadline. Entergy met the existing monitoring deadline, is monitoring state agency actions, and will participate in the regulatory development process.April 2018.
Other Environmental MattersAmendments to Articles of Incorporation
Entergy Louisiana and Entergy TexasArkansas
Several class actionOn May 1, 2018, Entergy Arkansas adopted the Third Amended and other lawsuits have been filed Restated Articles of Incorporation to amend its Second Amended and Restated Articles of Incorporation to correct certain typographical errors contained
in statesuch Second Amended and federal courts seeking relief fromRestated Articles of Incorporation. The Articles of Amendment and Restatement for the Third Amended and Restated Articles of Incorporation of Entergy Gulf States, Inc. and others for damages caused by the disposal of hazardous waste and for asbestos-related disease allegedly resulting from exposure on Entergy Gulf States, Inc.’s premises.Arkansas are included in this filing as Exhibit 3(a).
Entergy Louisiana, as successorMississippi
On May 1, 2018, Entergy Mississippi adopted the Third Amended and Restated Articles of Incorporation to amend its Second Amended and Restated Articles of Incorporation (i) to correct certain typographical errors contained in interestsuch Second Amended and Restated Articles of Incorporation and (ii) to Entergy Gulf States Louisiana, currently is involved in the second phase of the remedial investigation of the Lake Charles Service Center site, located in Lake Charles, Louisiana. A manufactured gas plant (MGP) is believed to have operated at this site from approximately 1916 to 1931. Coal tar, a by-product of the distillation process employed at MGPs, apparently was routed to a portion of the property for disposal. The same area also has been used as a landfill. In 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 tons of contaminated soil and debris were excavated and disposed of from an area within the service center. In 2003 a cap was constructed over the remedial area to prevent the migration of contaminationdelete all provisions relating to the surface. In August 2005 an administrative order was issued by the EPA requiring that a 10-year groundwater study be conducted at6.25% Preferred Stock, Cumulative, $25 Par Value, as it has redeemed all shares of such series of preferred stock. Such Third Amended and Restated Articles of Incorporation are included in this site. The groundwater monitoring study commenced in January 2006 and is continuing. The EPA released the second Five Year Review in 2015. The EPA indicated that the current remediation technique was insufficient and that Entergy would need to utilize other remediation technologies on the site. In July 2015, Entergy submitted a Focused Feasibility Study to the 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, a waterloo barrier, may not be necessary and requested revisions to the Focused Feasibility Study. The EPA plans to provide comments on the revised 2017 Focused Feasibility Study in the next Five Year Review in 2020. Entergy is continuing discussions with the EPA regarding the ongoing actions at the site.filing as Exhibit 3(b).
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 | | Nine Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | September 30, | | December 31, | | March 31, |
| | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 |
| Entergy Arkansas | | 3.79 |
| | 3.62 |
| | 3.08 |
| | 2.04 |
| | 3.32 |
| | 3.70 | | 3.62 |
| | 3.08 |
| | 2.04 |
| | 3.32 |
| | 2.87 |
| | 2.50 |
| Entergy Louisiana | | 2.61 |
| | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.57 |
| | 3.86 | | 3.30 |
| | 3.44 |
| | 3.36 |
| | 3.57 |
| | 3.85 |
| | 2.86 |
| Entergy Mississippi | | 2.79 |
| | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.96 |
| | 4.82 | | 3.19 |
| | 3.23 |
| | 3.59 |
| | 3.96 |
| | 4.49 |
| | 3.08 |
| Entergy New Orleans | | 2.91 |
| | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.61 |
| | 5.17 | | 1.85 |
| | 3.55 |
| | 4.90 |
| | 4.61 |
| | 4.50 |
| | 3.44 |
| Entergy Texas | | 1.76 |
| | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.92 |
| | 2.66 | | 1.94 |
| | 2.39 |
| | 2.22 |
| | 2.92 |
| | 2.41 |
| | 2.00 |
| System Energy | | 5.12 |
| | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.39 |
| | 4.99 | | 5.66 |
| | 4.04 |
| | 4.53 |
| | 5.39 |
| | 4.91 |
| | 4.14 |
| | | | | 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 | | Nine Months Ended | | Twelve Months Ended | | Three Months Ended |
| | | December 31, | | September 30, | | December 31, | | March 31, |
| | | 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | 2018 |
| Entergy Arkansas | | 3.36 |
| | 3.25 |
| | 2.76 |
| | 1.85 |
| | 3.09 |
| | 3.62 | | 3.25 |
| | 2.76 |
| | 1.85 |
| | 3.09 |
| | 2.81 |
| | 2.46 |
| Entergy Louisiana | | 2.47 |
| | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.57 |
| | 3.86 | | 3.14 |
| | 3.28 |
| | 3.24 |
| | 3.57 |
| | 3.85 |
| | 2.86 |
| Entergy Mississippi | | 2.59 |
| | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.71 |
| | 4.68 | | 2.97 |
| | 3.00 |
| | 3.34 |
| | 3.71 |
| | 4.36 |
| | 3.01 |
| Entergy New Orleans | | 2.63 |
| | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.30 |
| | 4.83 | | 1.70 |
| | 3.26 |
| | 4.50 |
| | 4.30 |
| | 4.24 |
| | 3.44 |
The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.
Item 6. Exhibits
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| | *4(a)3(a) - | Extension Agreement, dated asArticles of August 7, 2017, toAmendment and Restatement for the Third Amended and Restated Credit Agreement dated asArticles of August 14, 2015, as amended, amongIncorporation of Entergy Corporation, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto.Arkansas effective May 1, 2018. |
| | | |
| | *4(b)3(b) - | Amendment, dated as of October 17, 2017, toThird Amended and Restated Credit Agreement dated asArticles of August 14, 2015, as amended, amongIncorporation of Entergy Corporation, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto.Mississippi effective May 1, 2018. |
| | | |
| | *4(c)4(a) - | Agreement,Eighty-ninth Supplemental Indenture, dated as of October 17, 2017, pursuantMarch 1, 2018, to AmendedEntergy Louisiana Mortgage and Restated Credit AgreementDeed of Trust, dated as of August 14, 2015, as amended, among Entergy Corporation, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto.April 1, 1944 (4.43 to Form 8-K filed March 23, 2018 in 1-32718). |
| | | |
| | *4(d)4(b) - | Extension Agreement,Eighty-ninth Supplemental Indenture, dated as of August 7, 2017,March 1, 2018, to Amended and Restated Credit AgreementEntergy Louisiana Indenture of Mortgage, dated as of August 14, 2015, as amended, among Entergy Arkansas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto.September 1, 1926 (4.42 to Form 8-K filed March 23, 2018 in 1-32718). |
| | | |
| | *4(e)4(c) - | Amendment,Ninth Supplemental Indenture, dated as of October 17, 2017,March 1, 2018, to AmendedEntergy Louisiana Mortgage and Restated Credit AgreementDeed of Trust, dated as of August 14,November 1, 2015 as amended, among Entergy Arkansas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto.(4.41 to Form 8-K filed March 23, 2018 in 1-32718). |
| | | |
| | *4(f)4(d) - | Agreement,Officer’s Certificate No. 10-B-8, dated March 20, 2018, supplemental to Mortgage and Deed of Trust of Entergy Louisiana, LLC, dated as of October 17, 2017, pursuantNovember 1, 2015 (4.40 to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Arkansas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto.Form 8-K filed March 23, 2018 in 1-32718). |
| | |
| *4(g) - | Extension Agreement, dated as of August 7, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Louisiana, LLC, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | |
| *4(h) - | Amendment, dated as of October 17, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Louisiana, LLC, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | |
| *4(i) - | Agreement, dated as of October 17, 2017, pursuant to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Louisiana, LLC, as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | |
| *4(j) - | Amendment, dated as of September 26, 2017, to Amended and Restated Credit Agreement, dated as of June 30, 2016, as amended, among Entergy New Orleans, as the Borrower, the banks and other financial institutions party thereto as Lenders, and Bank of America, N.A., as Administrative Agent. |
| | |
| *4(k) - | Extension Agreement, dated as of August 7, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Texas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | |
| *4(l) - | Amendment, dated as of October 17, 2017, to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Texas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
| | |
| *4(m) - | Amendment, dated as of October 17, 2017, pursuant to Amended and Restated Credit Agreement dated as of August 14, 2015, as amended, among Entergy Texas, Inc., as the Borrower, the banks and other financial institutions party thereto as Lenders, Citibank, N.A., as Administrative Agent and as an LC Issuing Bank, and the other LC Issuing Banks party thereto. |
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| | *12(a) - | |
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| | *12(b) - | |
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| | *12(c) - | |
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| | *12(d) - | |
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| | *12(e) - | |
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| | *12(f) - | |
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| | *31(a) - | |
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| | *31(b) - | |
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| | *31(c) - | |
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| | *31(d) - | |
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| | *31(e) - | |
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| | *31(f) - | |
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| | *31(g) - | |
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| | *31(h) - | |
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| | *31(i) - | |
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| | *31(j) - | |
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| | *31(k) - | |
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| | *31(l) - | |
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| | *31(m) - | |
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| | *31(n) - | |
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| | *32(a) - | |
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| | *32(b) - | |
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| | *32(c) - | |
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| | *32(d) - | |
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| | *32(e) - | |
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| | *32(f) - | |
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| | *32(g) - | |
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| | *32(h) - | |
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| | *32(i) - | |
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| | *32(j) - | |
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| | *32(k) - | |
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| | *32(l) - | |
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|
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| | *32(m) - | |
| | | |
| | *32(n) - | |
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| | *101 INS - | XBRL Instance Document. |
| | | |
| | *101 SCH - | XBRL Taxonomy Extension Schema Document. |
| | | |
| | *101 PRE - | XBRL Taxonomy Presentation Linkbase Document. |
| | | |
| | *101 LAB - | XBRL Taxonomy Label Linkbase Document. |
| | | |
| | *101 CAL - | XBRL Taxonomy Calculation Linkbase Document. |
| | | |
| | *101 DEF - | XBRL Definition Linkbase Document. |
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.
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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: November 3, 2017May 4, 2018