false504501504601504409601--12-31Q32019639 Loyola Avenue425 West Capitol Avenue4809 Jefferson Highway308 East Pearl Street1600 Perdido Street10055 Grogans Mill Road1340 Echelon ParkwayNew OrleansLittle RockJeffersonJacksonNew OrleansThe WoodlandsJacksonUSUSUSUSUSUSUS70113722017012139201701127738039213LAARLAMSLATXMS0000065984000000732300013489520000066901000007150800014274370000202584YesYesYesYesYesYesfalsefalsefalsefalsefalsefalseNon-accelerated FilerNon-accelerated FilerNon-accelerated FilerNon-accelerated FilerNon-accelerated FilerDETXTXTXTXTXARYesYesYesYesYesYesfalsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalsefalse576-4000377-4000576-4000368-5000670-3700981-2000368-5000CHX0.70.70.7500000040000000.0010.0010.0010.001172000000.04750.040.010.0150000000020000000010000005000000002000000001000000261587009465250007893502700351804652500078935046525000789350465250007893500.03170.03650.03380.03920.03220.03422024-09-142020-04-302021-09-162024-09-142021-09-162021-09-162020-05-312020-05-312020-05-312021-11-202024-09-142021-09-164238580002089800055682000636200002836590003384080001401600045386000583820002206250008250001708000130300017472000851700048000053430001454700041260001770001291900053000067600003420001308600010260000.650.650.650.650.655560000036079000014329000497530006045300023633600026817700045960003293900052085000178558000P3YP3Y7253086670947950
Table of Contents





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


FORM 10-Q

(Mark One) 
X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
For the Quarterly Period Ended March 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 For the transition period from ____________ to ____________


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


Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
     
1-11299
ENTERGY CORPORATION
1-35747ENTERGY NEW ORLEANS, LLC
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
 1-35747
ENTERGY NEW ORLEANS, LLC
(a Texas limited liability company)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
72-122975282-2212934
     
     
1-10764
ENTERGY ARKANSAS, LLC
1-34360ENTERGY TEXAS, INC.
(a Texas limited liability company)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
83-1918668
 1-34360
ENTERGY TEXAS, INC.
(a Texas corporation)
10055 Grogans Mill Road
The Woodlands, Texas 77380
Telephone (409) 981-2000
83-191866861-1435798
     
     
1-32718
ENTERGY LOUISIANA, LLC
1-09067SYSTEM ENERGY RESOURCES, INC.
(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
47-446964672-0752777
     
     
1-31508
ENTERGY MISSISSIPPI, LLC
(a Texas limited liability company)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
83-1950019   
     



Table of Contents

Securities registered pursuant to Section 12(b) of the Act:
RegistrantTitle of Class
Trading
Symbol
Name of Each Exchange
on Which Registered
Entergy CorporationCommon Stock, $0.01 Par ValueETRNew York Stock Exchange
Common Stock, $0.01 Par ValueETRNYSE Chicago, Inc.
Entergy Arkansas, LLCMortgage Bonds, 4.90% Series due December 2052EABNew York Stock Exchange
Mortgage Bonds, 4.75% Series due June 2063EAENew York Stock Exchange
Mortgage Bonds, 4.875% Series due September 2066EAINew York Stock Exchange
Entergy Louisiana, LLCMortgage Bonds, 5.25% Series due July 2052ELJNew York Stock Exchange
Mortgage Bonds, 4.70% Series due June 2063ELUNew York Stock Exchange
Mortgage Bonds, 4.875% Series due September 2066ELCNew York Stock Exchange
Entergy Mississippi, LLCMortgage Bonds, 4.90% Series due October 2066EMPNew York Stock Exchange
Entergy New Orleans, LLCMortgage Bonds, 5.0% Series due December 2052ENJNew York Stock Exchange
Mortgage Bonds, 5.50% Series due April 2066ENONew York Stock Exchange
Entergy Texas, Inc.Mortgage Bonds, 5.625% Series due June 2064EZTNew York Stock Exchange
5.375% Series A Preferred Stock, Cumulative, No Par Value (Liquidation Value $25 Per Share)ETI/PRNew York Stock Exchange


Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Yesþ No o


Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted 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 such files).  Yesþ No o


Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
 
Large
accelerated
filer
 
Accelerated
filer
 
Non-
accelerated
Non-accelerated filer
 
Smaller
reporting
company
 
Emerging
growth
company
Entergy Corporationü        
Entergy Arkansas, LLC    ü    
Entergy Louisiana, LLC    ��ü    
Entergy Mississippi, LLC    ü    
Entergy New Orleans, 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


Securities registered pursuant to Section 12(b) of the Act:
Registrant
Trading
Symbol
Title of Class
Name of Each Exchange
on Which Registered
Common Stock Outstanding Outstanding at October 31, 2019
Entergy CorporationETR($0.01 par value)Common Stock, $0.01 Par Value – 189,926,451 shares outstanding at April 30, 2019
New York Stock Exchange LLC
NYSE Chicago, Inc.
Entergy Arkansas, LLCEABMortgage Bonds, 4.90% Series due December 2052New York Stock Exchange LLC
EAEMortgage Bonds, 4.75% Series due June 2063New York Stock Exchange LLC
EAIMortgage Bonds, 4.875% Series due September 2066New York Stock Exchange LLC
Entergy Louisiana, LLCELJMortgage Bonds, 5.25% Series due July 2052New York Stock Exchange LLC
ELUMortgage Bonds, 4.70% Series due June 2063New York Stock Exchange LLC
ELCMortgage Bonds, 4.875% Series due September 2066New York Stock Exchange LLC
Entergy Mississippi, LLCEMPMortgage Bonds, 4.90% Series due October 2066New York Stock Exchange LLC
Entergy New Orleans, LLCENJMortgage Bonds, 5.0% Series due December 2052New York Stock Exchange LLC
ENOMortgage Bonds, 5.50% Series due April 2066New York Stock Exchange LLC
Entergy Texas, Inc.EZTMortgage Bonds, 5.625% Series due June 2064New York Stock Exchange LLC199,102,083


Entergy Corporation, Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, 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, 2018 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, filed by the individual registrants with the SEC, and should be read in conjunction therewith.





Table of Contents
TABLE OF CONTENTS


 Page Number
  
  
Part I. Financial Information
  
Entergy Corporation and Subsidiaries 
Notes to Financial Statements 
Entergy Arkansas, LLC and Subsidiaries 
Entergy Louisiana, LLC and Subsidiaries 


i

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TABLE OF CONTENTS




 Page Number
  
Entergy Mississippi, LLC 
Entergy New Orleans, LLC and Subsidiaries 
Entergy Texas, Inc. and Subsidiaries 
System Energy Resources, Inc. 
  
Part II. Other Information
  




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FORWARD-LOOKING INFORMATION


In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance.  Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements.  Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct.  Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made.  Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
 
Forward-looking statements involve a number of risks and uncertainties.  There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including those factors discussed or incorporated by reference in (a) Item 1A. Risk Factors in the Form 10-K, (b) Management’s Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):


resolution of pending and future rate cases, formula rate proceedings and related negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;
long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the benefits of continued MISO participation, the effect of current or projected MISO market rules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;
changes in utility regulation, including with 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 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 Entergy’s nuclear generating facilities;
increases in costs and capital expenditures that could result from changing regulatory requirements, emerging operating and industry issues, and the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s nuclear generating 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 and sale of each of these nuclear plants;




iii

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FORWARD-LOOKING INFORMATION (Continued)


the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers;
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 and other regulated air emissions, heat and other regulated discharges to water, requirements for waste management and disposal and for the remediation of contaminated sites, wetlands protection and permitting, and changes in costs of compliance with environmental laws and regulations;
changes in laws and regulations, agency positions, or associated litigation related to protected species and associated critical habitat designations;
the effects of changes in federal, state, or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, trade/tariff, or energy policies;
the effects of full or partial shutdowns of the federal government or delays in obtaining government or regulatory actions or decisions;
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 extreme weather events and 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 northern 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;
the effects of Entergy’s strategies to reduce tax 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, 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 (i) Entergy’s ability to implement new or emerging technologies, (ii) the impact of changes relating to new, developing, or alternative sources of generation such as distributed energy and energy storage, renewable energy, energy efficiency, demand side management, and other measures that reduce load, and (iii) competition from other companies offering products and services to Entergy’s customers based on new or emerging technologies or alternative sources of generation;
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 employees with specialized skills;


iv

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FORWARD-LOOKING INFORMATION (Concluded)


changes in accounting standards and corporate governance;
declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans;
future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;
changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites 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 mid-2022, including the implementation of the planned shutdowns 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 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.




v

Table of Contents


DEFINITIONS


Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or AcronymTerm
  
ALJAdministrative Law Judge
ANO 1 and 2Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSCArkansas Public Service Commission
ASUAccounting Standards Update issued by the FASB
BoardBoard of Directors of Entergy Corporation
CajunCajun Electric Power Cooperative, Inc.
capacity factorActual plant output divided by maximum potential plant output for the period
City CouncilCouncil of the City of New Orleans, Louisiana
D.C. CircuitU.S. Court of Appeals for the District of Columbia Circuit
DOEUnited States Department of Energy
EntergyEntergy Corporation and its direct and indirect subsidiaries
Entergy CorporationEntergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States LouisianaEntergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy LouisianaEntergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy TexasEntergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale CommoditiesEntergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPAUnited States Environmental Protection Agency
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FitzPatrickJames A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017
Form 10-KAnnual Report on Form 10-K for the calendar year ended December 31, 2018 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries
Grand GulfUnit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy
GWhGigawatt-hour(s), which equals one million kilowatt-hours
IndependenceIndependence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC


vi

Table of Contents


DEFINITIONS (Continued)
Abbreviation or AcronymTerm
  
Indian Point 2Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRSInternal Revenue Service
ISOIndependent System Operator
kWKilowatt, which equals one thousand watts
kWhKilowatt-hour(s)
LPSCLouisiana Public Service Commission
MISOMidcontinent Independent System Operator, Inc., a regional transmission organization
MMBtuOne million British Thermal Units
MPSCMississippi Public Service Commission
MWMegawatt(s), which equals one thousand kilowatts
MWhMegawatt-hour(s)
Net debt to net capital ratioGross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operationInstalled capacity owned and operated
NRCNuclear Regulatory Commission
NYPANew York Power Authority
PalisadesPalisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & OtherThe portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
PilgrimPilgrim Nuclear Power Station (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in May 2019 and was sold in August 2019
PPAPurchased power agreement or power purchase agreement
PUCTPublic Utility Commission of Texas
Registrant SubsidiariesEntergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.
River BendRiver Bend Station (nuclear), owned by Entergy Louisiana
SECSecurities and Exchange Commission
System AgreementAgreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System EnergySystem Energy Resources, Inc.
TWhTerawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales AgreementAgreement, dated as of June 10, 1982, as amended and approved by the FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
UtilityEntergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companiesEntergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas


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DEFINITIONS (Concluded)
Abbreviation or AcronymTerm
  
Vermont YankeeVermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014 and was disposed of in January 2019
Waterford 3Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisiana
weather-adjusted usageElectric usage excluding the effects of deviations from normal weather
White BluffWhite Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas




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Table of Contents


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 and sale of each of the Entergy Wholesale Commodities nuclear power plants.
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 and 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


FirstThird Quarter 2019 Compared to FirstThird Quarter 2018


Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the firstthird quarter 2019 to the firstthird quarter 2018 showing how much the line item increased or (decreased) in comparison to the prior period:
 

Utility
 
Entergy
Wholesale
Commodities
 

Parent &
Other (a)
 

Entergy
 

Utility
 
Entergy
Wholesale
Commodities
 

Parent &
Other (a)
 

Entergy
 (In Thousands) (In Thousands)
2018 Consolidated Net Income (Loss) 
$217,940
 
($17,779) 
($63,961) 
$136,200
3rd Quarter 2018 Consolidated Net Income (Loss) 
$507,745
 
$105,571
 
($73,498) 
$539,818
                
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits) (43,585) 10,643
 19
 (32,923)
Operating revenues 115,943
 (79,717) 30
 36,256
Fuel, fuel-related expenses, and gas purchased for resale (138,700) 6,349
 21
 (132,330)
Purchased power (120,948) (2,072) (21) (123,041)
Other regulatory charges (credits) (32,316) 
 
 (32,316)
Other operation and maintenance (2,636) (2,116) 4,218
 (534) 23,668
 (72,791) 806
 (48,317)
Asset write-offs, impairments, and related charges 
 1,055
 
 1,055
 
 42,871
 
 42,871
Taxes other than income taxes (2,191) (3,607) (845) (6,643) 10,379
 (6,268) (296) 3,815
Depreciation and amortization 10,020
 (111) 300
 10,209
 55,786
 (1,716) 521
 54,591
Other income 7,076
 182,512
 (1,738) 187,850
 (18,467) (82,237) 230
 (100,474)
Interest expense 5,650
 919
 7,317
 13,886
 10,273
 (2,766) (935) 6,572
Other expenses 229
 15,171
 
 15,400
 6,382
 15,707
 
 22,089
Income taxes (63,788) 66,986
 (4,090) (892) 208,733
 104,804
 (1,330) 312,207
                
2019 Consolidated Net Income (Loss) 
$234,147
 
$97,079
 
($72,580) 
$258,646
3rd Quarter 2019 Consolidated Net Income (Loss) 
$581,964
 
($140,501) 
($72,004) 
$369,459


(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.




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Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis




FirstThird quarter 2019 results of operations includes impairment chargesa loss of $74$191 million ($58156 million net-of-tax) as a result of the sale of the Pilgrim plant in August 2019. See Note 16 to the financial statements herein and firstNote 13 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant.

Third quarter 2018 results of operations includes impairment charges of $73$155 million ($58123 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 exit the Entergy Wholesale Commodities’ merchant power business, a $107 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a restructuring of the investment holdings in one of its nuclear plant decommissioning trust funds, and a $23 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a state income tax audit. 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 shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 3 to the financial statements in the Form 10-K for discussion of the state income tax audit and restructuring of its interest in the decommissioning trust fund.

Utility

Following is an analysis of the change in operating revenues comparing the third quarter 2019 to the third quarter 2018:
Amount
(In Millions)
2018 operating revenues
$2,724
Fuel, rider, and other revenues that do not significantly affect net income(218)
Return of unprotected excess accumulated deferred income taxes to customers186
Retail electric price99
Volume/weather49
2019 operating revenues
$2,840

The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In third quarter 2019, $91 million was returned to customers through reductions in operating revenues as compared to $277 million in third quarter 2018. There is no effect on net income as the reductions in operating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.     


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The retail electric price variance is primarily due to:

an increase in formula rate plan revenues effective September 2018 at Entergy Louisiana and an interim increase in formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for St. Charles Power Station, each as approved by the LPSC;
an increase in formula rate plan rates effective with the first billing cycle of January 2019 at Entergy Arkansas, as approved by the APSC;
a base rate increase effective October 2018 at Entergy Texas, as approved by the PUCT; and
an increase in formula rate plan revenues at Entergy Mississippi effective with the first billing cycle of July 2019, as approved by the MPSC.

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

The volume/weather variance is primarily due to increased usage during the unbilled sales period.

Entergy Wholesale Commodities

Operating revenues for Entergy Wholesale Commodities decreased from $380 million for the third quarter2018 to $300 million for the third quarter 2019 primarily due to the shutdown of Pilgrim in May 2019 and lower capacity prices.

Following are key performance measures for Entergy Wholesale Commodities for the third quarters2019 and 2018:
 2019 2018
Owned capacity (MW) (a)3,274 3,962
GWh billed6,847 7,576
    
Entergy Wholesale Commodities Nuclear Fleet (b)   
Capacity factor98% 90%
GWh billed6,210 6,976
Average energy price ($/MWh)$37.29 $38.01
Average capacity price ($/kW-month)$4.50 $9.32

(a)The reduction in owned capacity is due to the shutdown of the 688 MW Pilgrim plant in May 2019.
(b)The Entergy Wholesale Commodities nuclear power plants had no refueling outage days in the third quarters 2019 and 2018.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $635 million for the third quarter 2018 to $658 million for the third quarter 2019 primarily due to:

an increase of $11 million in spending on customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $10 million in information technology costs primarily due to higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance;
an increase of $9 million in loss provisions;


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an increase of $4 million in distribution operations and asset management costs primarily due to higher advanced metering customer education costs and higher contract costs for meter reading services; and
an increase of $4 million in storm damage provisions at Entergy Mississippi. See Note 2 to the financial statements herein and in the Form 10-K for discussion of storm cost recovery.

The increase was partially offset by:

a decrease of $11 million in nuclear generation expenses primarily due to a lower scope of work performed in the third quarter 2019 as compared to the third quarter 2018 and the effect of recording the final court decision in the River Bend lawsuit against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of approximately $5 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation;
a $6 million loss in third quarter 2018 on the sale of fuel oil inventory per an agreement approved by the MPSC in June 2018 resulting from the stipulation related to the effects of the Tax Act. There is no effect on net income as the loss on the sale of fuel oil inventory is offset by a reduction in income tax expense; and
a decrease of $5 million in energy efficiency costs due to the timing of recovery from customers.

Depreciation and amortization expenses increased primarily due to:

additions to plant in service, including the St. Charles Power Station;
a reduction of approximately $26 million in depreciation expense recorded in the third quarter 2018 as part of a settlement approved by the FERC in the Unit Power Sales Agreement proceeding; and
new depreciation rates at Entergy Mississippi, as approved by the MPSC, and at Entergy Texas, as approved by the PUCT.

The increase was partially offset by updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreement, as approved by the FERC. See Note 2 to the financial statements in the Form 10-K for further discussion of the Unit Power Sales Agreement proceeding.

Other regulatory charges (credits) include regulatory charges of $18 million recorded in third quarter 2018 to reflect the effects of regulatory agreements to return the benefits of the lower income tax rate in 2018 to Entergy Louisiana customers. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.     

Other income decreased primarily due to changes in decommissioning trust fund activity, including portfolio rebalancing of certain of the decommissioning trust funds in the third quarter 2018.

Interest expense increased primarily due to the issuance in March 2019 of $525 million of 4.20% Series mortgage bonds by Entergy Louisiana and the issuance in March 2019 of $350 million of 4.20% Series mortgage bonds by Entergy Arkansas.

Entergy Wholesale Commodities

Other operation and maintenance expenses decreased from $209 million for the third quarter 2018 to $136 million for the third quarter 2019 primarily due to:

a decrease of $37 million in nuclear generation expenditures primarily due to the absence of other operation and maintenance expenses in the third quarter 2019 from the Pilgrim plant, which was sold in August 2019. See Note 16 to the financial statements herein and Note 13 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant; and

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a decrease of $26 million in severance and retention expenses in the third quarter 2019 compared to the third quarter 2018. Severance and retention expenses were incurred in 2019 and 2018 due to management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business. 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 shut down and sell all of the remaining plants in the Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses resulting from management’s strategy to shut down and sell all of the remaining plants in the Entergy Wholesale Commodities’ merchant nuclear fleet.

Asset write-offs, impairments, and related charges for the third quarter 2019 include a loss of $191 million ($156 million net-of-tax) as a result of the sale of the Pilgrim plant in August 2019. Asset write-offs, impairments, and related charges for the third quarter 2018 include impairment charges of $155 million ($123 million net-of-tax) as a result of an asset retirement obligation revision and expenditures for capital assets. These costs were charged to expense as incurred as a result of the impaired fair 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 exit the Entergy Wholesale Commodities’ merchant power business. 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 shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. See Note 14 to the financial statements in the Form 10-K for a discussion of impairment of long-lived assets. See Note 16 to the financial statements herein and Note 13 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant.

Other income decreased primarily due to lower gains on decommissioning trust fund investments in the third quarter 2019 compared to the third quarter 2018, including the effect of portfolio rebalancing in the third quarter 2018. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.

Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of the amortization in 2019 of costs associated with a refueling outage at Palisades.

Income Taxes

The effective income tax rate was 7.3% for the third quarter 2019. The difference in the effective income tax rate for the third quarter 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was (110.2%) for the third quarter 2018. The difference in the effective income tax rate for the third quarter 2018 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes, a restructuring of the investment holdings in one of the Entergy Wholesale Commodities’ nuclear plant decommissioning trusts for which additional tax basis is now recoverable, and the conclusion of a state income tax audit involving Entergy Wholesale Commodities. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for a discussion of the restructuring and the conclusion of the state income tax audit.


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Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018 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)
2018 Consolidated Net Income (Loss) 
$1,104,078
 
$31,456
 
($210,657) 
$924,877
         
Operating revenues 3,164
 (83,849) 82
 (80,603)
Fuel, fuel-related expenses, and gas purchased for resale (114,405) 18,559
 71
 (95,775)
Purchased power (244,938) (5,725) (67) (250,730)
Other regulatory charges (credits) (262,114) 
 
 (262,114)
Other operation and maintenance 42,858
 (86,812) (3,128) (47,082)
Asset write-offs, impairments, and related charges 
 (8,599) 
 (8,599)
Taxes other than income taxes 15,137
 (11,962) (1,142) 2,033
Depreciation and amortization 79,223
 (2,501) 1,169
 77,891
Other income 1,676
 123,799
 (4,894) 120,581
Interest expense 21,800
 (1,431) 6,743
 27,112
Other expenses 14,077
 46,036
 
 60,113
Income taxes 406,417
 192,645
 (5,695) 593,367
         
2019 Consolidated Net Income (Loss) 
$1,150,863
 
($68,804) 
($213,420) 
$868,639

(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, 2019 include a loss of $191 million ($156 million net-of-tax) as a result of the sale of the Pilgrim plant in August 2019 and impairment charges of $98 million ($77 million net-of-tax) due to costs being charged directly to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business. See Note 16 to the financial statements herein and Note 13 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant. See MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” below and in the Form 10-K for discussion of management’s strategy to shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet.


Net RevenueResults of operations for the nine months ended September 30, 2018 include impairment charges of $297 million ($235 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 exit the Entergy Wholesale Commodities’ merchant power business, a $107 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a restructuring of the investment holdings in one of its nuclear plant decommissioning trust funds, a $52 million income tax benefit, recognized by Entergy Louisiana, as a result of the settlement of the 2012-2013 IRS audit, associated


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with the Hurricane Katrina and Hurricane Rita contingent sharing obligation associated with the Louisiana Act 55 financing, and a $23 million reduction of income tax expense, recognized by Entergy Wholesale Commodities, as a result of a state income tax audit. 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 shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 3 to the financial statements in the Form 10-K for discussion of the IRS audit settlement, the state income tax audit, and restructuring of its interest in the decommissioning trust fund.

Utility


Following is an analysis of the change in net revenueoperating revenues comparing the first quarternine months ended September 30, 2019 to the first quarternine months ended September 30, 2018:
 Amount
 (In Millions)
2018 net revenueoperating revenues

$1,4607,390

Fuel, rider, and other revenues that do not significantly affect net income(381)
Return of unprotected excess accumulated deferred income taxes to customers(61215)
Volume/weather(38)
Retail electric price61200

OtherVolume/weather(631)
2019 net revenueoperating revenues

$1,4167,393



The Utility operating companies’ results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The return of unprotected excess accumulated deferred income taxes to customers resulted from activity in 2019 at the Utility operating companies in response to the enactment of the Tax Cuts and Jobs Act. The return of unprotected excess accumulated deferred income taxes began in second quarter 2018. In the nine months ended September 30, 2019, $212 million was returned to customers through reductions in operating revenues as compared to $427 million in the nine months ended September 30, 2018. There is no effect on net income as the reductions in net revenueoperating revenues were offset by reductions in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.     

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 driven by continued growth from new and expansion projects and increased demand from existing customers.


The retail electric price variance is primarily due to:


an increase in formula rate plan revenues effective September 2018 at Entergy Louisiana and an interim increase in formula rate plan revenues effective June 2019 due to the regulatory charges recorded in first quarter 2018 to reflect the effects of regulatory agreements to return the benefitsinclusion of the lower income tax rate in 2018 to Entergy Louisiana customers;first-year revenue requirement for St. Charles Power Station, each as approved by the LPSC;
an increase in formula rate plan rates effective with the first billing cycle of January 2019 at Entergy Arkansas, as approved by the APSC;
a base rate increase effective October 2018 at Entergy Texas, as approved by the PUCT; and
an increase in formula rate plan revenues implementedat Entergy Mississippi effective with the first billing cycle of September 2018 at Entergy Louisiana,July 2019, as approved by the LPSC; andMPSC.
the implementation of an advanced metering system customer charge effective January 2019 at Entergy Louisiana, as approved by the LPSC.


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



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The volume/weather variance is primarily due to a decrease of 1,741 GWh, or 2%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales, partially offset by increased usage during the unbilled sales period.

Entergy Wholesale Commodities


Following is an analysis of the change in net revenue comparing the first quarter 2019 to the first quarter 2018:
Amount
(In Millions)
2018 net revenue
$382
Nuclear volume15
Other(4)
2019 net revenue
$393

As shown in the table above, net revenueOperating revenues for Entergy Wholesale Commodities increased by $11decreased from $1,108 million infor the first quarternine months ended September 30, 2018 to $1,024 million for the nine months ended September 30, 2019 as comparedprimarily due to the first quarter 2018 primarily due toshutdown of Pilgrim in May 2019 and lower capacity prices, partially offset by higher volume in the Entergy Wholesale Commodities nuclear fleet resulting from fewer non-refueling outage days in the first quarter 2019 as compared to the first quarter 2018.days.


Following are key performance measures for Entergy Wholesale Commodities for the first quartersnine months ended September 30, 2019 and 2018:
2019 20182019 2018
Owned capacity (MW)(a)3,962 3,9623,274 3,962
GWh billed7,203 6,99621,308 21,853
  
Entergy Wholesale Commodities Nuclear Fleet  
Capacity factor85% 83%91% 86%
GWh billed6,690 6,40819,602 20,096
Average energy price ($/MWh)$51.43 $52.29$40.85 $40.72
Average capacity price ($/kW-month)$4.71 $3.83$4.83 $7.01
Refueling outage days:  
Indian Point 2 13 33
Indian Point 321 29 


(a)The reduction in owned capacity is due to the shutdown of the 688 MW Pilgrim plant in May 2019.

Other Income Statement Items


Utility


Other operation and maintenance expenses decreasedincreased from $588$1,852 million for the first quarternine months ended September 30, 2018 to $585$1,894 million for the first quarternine months ended September 30, 2019 primarily due to:


an increase of $27 million in spending on customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $26 million in information technology costs primarily due to higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance; and
an increase of $13 million in distribution operations and asset management costs primarily due to higher advanced metering customer education costs and higher contract costs for meter reading services.

The increase was partially offset by:

a decrease of $20$22 million in nuclear generation expenses primarily due to a lower scope of work performed in the first quarter 2019 as compared to first quarter 2018 and lower nuclear labor costs, including contract labor;
a decrease of $5 million in storm damage provisions at Entergy Mississippi. See Note 2 to the financial statements in the Form 10-K for discussion of storm cost recovery;2018; and
a decrease of $4$11 million in energy efficiency costs due to the timing of recovery from customers.

The decrease was partially offset by:

an increase of $8 million in information technology costs primarily due to higher software maintenance costs and higher contract costs;
an increase of $5 million in outside legal costs primarily due to a settlement received in 2018 which reduced legal costs in the first quarter 2018;


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an increase of $4 million in spending on customer initiatives to explore new technologies and services;
an increase of $3 million in advanced metering costs, including customer education costs; and
an increase of $3 million in fossil-fueled generation expenses due to a higher scope of work performed in the first quarter 2019 as compared to the first quarter 2018.


Depreciation and amortization expenses increased primarily due to to:

additions to plant in service, including the St. Charles Power Station;
a reduction of approximately $26 million in depreciation expense recorded in the third quarter 2018 as part of a settlement approved by the FERC in the Unit Power Sales Agreement proceeding; and
new depreciation rates at Entergy Mississippi, as approved by the MPSC, and at Entergy Texas, as approved by the PUCT.

The increase was partially offset by updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the Unit Power Sales Agreement, as part of a settlement approved by the FERC in August 2018.FERC. See Note 2 to the financial statements in the Form 10-K for further discussion of the Unit Power Sales Agreement.Agreement proceeding.


Other regulatory charges (credits) include the following significant activity:

a regulatory charge recorded in second quarter 2018 to reflect the return of unprotected excess accumulated deferred income taxes per an agreement approved by the MPSC in June 2018 that resulted in a reduction in net utility plant of $127 million. There is no effect on net income as the regulatory charge was offset by a reduction in income tax expense in 2018; and
regulatory charges of $73 million recorded in 2018 to reflect the effects of regulatory agreements to return the benefits of the lower income tax rate in 2018 to Entergy Louisiana customers.

See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.     

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 2019, which included the Lake Charles Power Station, St. Charles Power Station, Montgomery County Power Station, and New Orleans Power Station projects. The increase was partiallysubstantially offset by changes in decommissioning trust fund activity, including portfolio rebalancing of certain of the decommissioning trust funds in 2018.


Interest expense increased primarily due to an increaseto:

the issuance in debt outstanding at March 2019 of $525 million of 4.20% Series mortgage bonds by Entergy Louisiana;
the Utility operating companies. issuance in March 2019 of $350 million of 4.20% Series mortgage bonds by Entergy Arkansas; and
the issuance in May 2018 of $250 million of 4.00% Series mortgage bonds by Entergy Arkansas.

See Note 5 to the financial statements in the Form 10-K and Note 4 to the financial statements herein for a discussion of long-term debt.


Entergy Wholesale Commodities


Other operation and maintenance expenses decreased from $600 million for the nine months ended September 30, 2018 to $513 million for the nine months ended September 30, 2019 primarily due to:

a decrease of $49 million in nuclear generation expenditures primarily due to the absence of other operation and maintenance expenses in the nine months ended September 30, 2019 from the Pilgrim plant, which was sold in August 2019. See Note 16 to the financial statements herein and Note 13 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant; and

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a decrease of $29 million in severance and retention expenses in the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Severance and retention expenses were incurred in 2019 and 2018 due to management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business. 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 shut down and sell all of the remaining plants in the Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses resulting from management’s strategy to shut down and sell all of the remaining plants in the Entergy Wholesale Commodities’ merchant nuclear fleet.

Asset write-offs, impairments, and related charges for the nine months ended September 30, 2019 include a loss of $191 million ($156 million net-of-tax) as a result of the sale of the Pilgrim plant in August 2019 and impairment charges of $98 million ($77 million net-of-tax) related to nuclear refueling outage spending and expenditures for capital assets. Asset write-offs, impairments, and related charges for the nine months ended September 30, 2018 include impairment charges of $297 million ($235 million net-of-tax) related to an asset retirement obligation revision, nuclear refueling outage spending, and expenditures for capital assets. These costs were charged to expense as incurred as a result of the impaired fair 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 exit the Entergy Wholesale Commodities’ merchant power business. 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 shut down and sell all of the remaining plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 9 to the financial statements in the Form 10-K for a discussion of asset retirement obligations. See Note 14 to the financial statements in the Form 10-K for a discussion of impairment of long-lived assets. See Note 16 to the financial statements herein and Note 13 to the financial statements in the Form 10-K for further discussion of the sale of the Pilgrim plant.

Other income increased primarily due to higher gains on decommissioning trust fund investments in the first quarternine months ended September 30, 2019 as compared to the first quarternine months ended September 30, 2018. See Notes 8 and 9 to the financial statements herein for a discussion of decommissioning trust fund investments.


Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of the amortization in 2019 of higher costs associated with a refueling outage at Palisades.


Income Taxes


The effective income tax rate was 14.2%7.8% for the first quarternine months ended September 30, 2019. The difference in the effective income tax rate for the first quarternine months ended September 30, 2019 versus the federal statutory rate of 21% was primarily due to amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes and the tax effects of the disposition of Vermont Yankee. See Notes 2 andNote 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for a discussion of the tax effects of the Vermont Yankee disposition.


The effective income tax rate was 24.3%(128.4%) for the first quarternine months ended September 30, 2018. The difference in the effective income tax rate for the first quarternine months ended September 30, 2018 versus the federal statutory rate of 21% was primarily due to stateamortization of excess accumulated deferred income taxes, a write-offrestructuring of the investment holdings in one of the Entergy Wholesale Commodities’ nuclear plant decommissioning trusts for which additional tax basis is now recoverable, and an IRS audit settlement for the 2012-2013 tax returns. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a stock-based compensation deferred tax asset,discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for a discussion of the IRS audit settlement 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.restructuring.




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Income Tax Legislation


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the Tax Cuts and Jobs Act 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 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.

Entergy Wholesale Commodities Exit from the Merchant Power Business


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business” in the Form 10-K for a discussion of management’s strategy to shut down and sell all remaining plants in the Entergy Wholesale Commodities’ merchant nuclear fleet.  Following are updates to that discussion.
 
Vermont Yankee Disposition


As discussed in more detail in Note 16 to the financial statements herein, in January 2019, Entergy transferred 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC, the owner of the Vermont Yankee plant, to a subsidiary of NorthStar.


Planned Sale of Pilgrim

As discussed in the Form 10-K, Entergy entered into a purchase and sale agreement with Holtec International to sell to a Holtec subsidiary 100% of the equity interests in Entergy Nuclear Generation Company, the owner of Pilgrim, for $1,000 (subject to adjustments for net liabilities and other amounts). On August 22, 2019, the NRC approved the transfer of Pilgrim’s facility licenses to Holtec. At that time, hearing requests filed by the Commonwealth of Massachusetts and Pilgrim Watch challenging Holtec’s financial qualifications and the sufficiency of the NRC’s review of the associated environmental impacts of the license transfer were pending with the NRC Commissioners. The NRC approval order included a condition acknowledging the NRC’s longstanding authority to modify, condition, or rescind the license transfer order as a result of any hearing that may be conducted.  On August 26, 2019, as permitted by the August 22 order, Entergy and Holtec closed the transaction. On September 3 and 4, 2019, Pilgrim Watch and Massachusetts each filed with the NRC motions to stay the effectiveness of the August 22 order pending the resolution of the NRC hearing process. The NRC has not yet ruled on the Pilgrim Watch and Massachusetts hearing requests or the stay motions. In addition, on September 25, 2019, Massachusetts filed a petition with the U.S. Court of Appeals for the District of Columbia Circuit, asking the court to vacate the NRC’s August 22 license transfer approval order and related approvals. On October 16, 2019, Entergy and Holtec filed a motion to intervene in the U.S. Court of Appeals proceeding. On October 28, 2019, Massachusetts filed a motion for stay pending appeal. The court of appeals has not yet ruled on Massachusetts’ petition.
The sale of Entergy Nuclear Generation Company will includeto Holtec included the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. Subject to the conditions discussed in the Form 10-K, the transaction is expected to close by the end of 2019. The transaction is expected to resultresulted in a loss based on the difference between Entergy’s adjusted net investment in Entergy Nuclear Generation Company and the sale price plus any agreed adjustments. As of March 31, 2019, Entergy’s adjusted net investment in Entergy Nuclear Generation Company was $180 million. The primary variables$191 million ($156 million net-of-tax) in the ultimate loss that Entergy will incur arethird quarter 2019. See Note 16 to the valuesfinancial statements herein for discussion of the nuclear decommissioning trust andclosing of the asset retirement obligation at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing.Pilgrim transaction.


Planned Sale of Indian Point Energy Center


In April 2019, Entergy entered into an agreement to sell, directly or indirectly, 100% of the equity interests in the subsidiaries that own Indian Point 1, Indian Point 2, and Indian Point 3, after Indian Point 3 has been shut down and defueled, to a Holtec International subsidiary for decommissioning. The sale includes the transfer of the licenses, spent fuel, decommissioning liabilities, and nuclear decommissioning trusts for the three units.


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The transaction is subject to closing conditions, including approval from the NRC. Entergy and Holtec also plan to seek an order from the New York State Public Service Commission disclaiming jurisdiction, or alternatively approving the transaction. Closing is also conditioned on obtaining from the New York State Department of Environmental Conservation an agreement related to Holtec’s decommissioning plan as being consistent with applicable standards. The transaction closing is targeted for third quarterMay 2021, following the defueling of Indian Point 3.


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As consideration for the transfer to Holtec of its interest in Indian Point, Entergy will receive nominal cash consideration. The Indian Point transaction is expected to result in a loss based on the difference between Entergy’s adjusted net investment in the subsidiaries at closing and the sale price net of any agreed adjustments. As of March 31,September 30, 2019, Entergy’s adjusted net investment in the Indian Point units was $315$240 million. The primary variables in the ultimate loss that Entergy will incur are the values of the nuclear decommissioning trusts and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized any deferred tax balances at closing. The terms of the transaction include limitations on withdrawals from the nuclear decommissioning trusts to fund decommissioning activities and controls on how Entergy manages the investment of nuclear decommissioning trust assets between signing and closing; however, the agreement does not require a minimum level of funding in the nuclear decommissioning trusts as a condition to closing.


Costs Associated with Entergy Wholesale Commodities Strategic Transactions


Entergy expects to incur employee retention and severance expenses associated with management’s strategy to reduce the size ofexit the Entergy Wholesale Commodities’ merchant fleetpower business of approximately $130$100 million in 2019, of which $34$70 million has been incurred as of March 31,September 30, 2019, and a total of approximately $110$135 million from 2020 through 2022. In addition, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $74$8 million for the three months ended March 31,September 30, 2019 and $98 million for the nine months ended September 30, 2019. 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 ofexit the Entergy Wholesale Commodities’ merchant fleet.power business. 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.


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 debt to capital ratio is shown in the following table. The increasedecrease in the debt to capital ratio for Entergy as of March 31,September 30, 2019 is primarily due to the net issuancesettlement of debtthe remaining equity forwards in 2019. See Note 3 to the financial statements herein for a discussion of the equity forward sale agreements.
March 31,
2019
 
December 31,
2018
September 30,
2019
 
December 31,
2018
Debt to capital67.8% 66.7%65.4% 66.7%
Effect of excluding securitization bonds(0.5%) (0.6%)(0.4%) (0.6%)
Debt to capital, excluding securitization bonds (a)67.3% 66.1%65.0% 66.1%
Effect of subtracting cash(1.2%) (0.6%)(1.2%) (0.6%)
Net debt to net capital, excluding securitization bonds (a)66.1% 65.5%63.8% 65.5%



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(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.


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Net debt consists of debt less cash and cash equivalents.  Debt consists of notes payable and commercial paper, financing 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 September 2023.2024.  The facility includes fronting commitments for the issuance of letters of credit against $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 threenine months ended March 31,September 30, 2019 was 4.03%3.94% on the drawn portion of the facility. Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31,September 30, 2019:
Capacity Borrowings 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500 $155 $6 $3,339
Capacity Borrowings 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500 $320 $6 $3,174


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 Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of March 31,September 30, 2019, Entergy Corporation had approximately $1,942$1,918 million of commercial paper outstanding. The weighted-average interest rate for the threenine months ended March 31,September 30, 2019 was 3.03%2.88%.


In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in November 2020. As of March 31,September 30, 2019, $139 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the threenine months ended March 31,September 30, 2019 was 4.28%4.07% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K and Note 16 to the financial statements herein for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.



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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 2019 through 2021. Following are updates to that discussion.


Preliminary Capital Investment Plan Estimate for 2020-2022
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Entergy Corporationis developing its capital investment plan for 2020 through 2022 and Subsidiariescurrently anticipates that the Utility will make approximately $11.4 billion in capital investments during that period and that Entergy Wholesale Commodities will make approximately $65 million in capital investments, not including nuclear fuel, during that period. The preliminary Utility estimate includes specific investments such as the Lake Charles Power Station, Washington Parish Energy Center, Sunflower Solar Facility, New Orleans Power Station, New Orleans Solar Station and Montgomery County Power Station; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including advanced meters and related investments; resource planning, including potential generation projects; system improvements; investments in Entergy’s nuclear fleet; software and security; and other investments. The preliminary Entergy Wholesale Commodities estimate includes amounts associated with specific investments, such as 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.
Management's Financial Discussion
St. Charles Power Station

As discussed in the Form 10-K, the LPSC issued an order in December 2016 approving certification that the public necessity and Analysisconvenience would be served by the construction of the St. Charles Power Station. Commercial operation commenced in May 2019.




Choctaw Generating Station


In August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary of GenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near French Camp, Mississippi.  The purchase price is expected to be approximately $314 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $401 million.  The purchase iswas contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  These includeincluded regulatory approvals from the MPSC and the FERC. Clearance under the Hart-Scott-Rodino Antitrust Improvements Act has occurred. In September 2019 the FERC approved the acquisition.  In October 2018, Entergy Mississippi filed an application with the MPSC seeking approval of the acquisition and cost recovery. In a separate filing in October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacity additions approved by the MPSC. ClosingEntergy Mississippi executed a joint stipulation as to all issues with the Mississippi Public Utilities Staff and, in October 2019, the MPSC adopted the joint stipulation which approved Entergy Mississippi’s request to acquire, own, operate, improve, and maintain the facility. The MPSC approved the expected total cost of the acquisition of approximately $401 million and authorized Entergy Mississippi to recover acquisition and ownership costs of the facility through its formula rate plan, including costs incurred before the effective date of the interim capacity rate mechanism, which Entergy Mississippi expects to be approved later this year. Entergy Mississippi purchased the plant in October 2019.

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New Orleans Power Station

In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 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. 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 cost estimate for the alternative 128 MW unit is expected$210 million. In addition, the application renewed the commitment to occurpursue up to 100 MW of renewable resources to serve New Orleans. In March 2018 the City Council adopted a resolution approving construction of the 128 MW unit. The targeted commercial operation date is mid-2020, subject to receipt of all necessary permits.

In April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council a request for rehearing, which was subsequently denied, and a petition for judicial review of the City Council’s decision, and also filed a lawsuit challenging the City Council’s approval based on Louisiana’s open meeting law. In May 2018 the City Council announced that it would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in paying certain attendees and speakers in support of the New Orleans Power Station to attend or speak at certain meetings organized by the endCity Council. In June 2018, Entergy New Orleans produced documents in response to a City Council resolution relating to this investigation. In October 2018 investigators for the City Council released their report, concluding that individuals were paid to attend and/or speak in support of 2019. Due diligence performedthe New Orleans Power Station and that Entergy New Orleans “knew or should have known that such conduct occurred or reasonably might occur.”  The City Council issued a resolution requiring Entergy New Orleans to show cause why it should not be fined $5 million as a result of the findings in the report. In November 2018, Entergy New Orleans submitted its response to the show cause resolution, disagreeing with certain characterizations and omissions of fact in the report and asserting that the City Council could not legally impose the proposed fine.  Simultaneous with the filing of its response to the show cause resolution, Entergy New Orleans sent a letter to the City Council re-asserting that the City Council’s imposition of the proposed fine would be unlawful, but acknowledging that the actions of a subcontractor, which was retained by an Entergy New Orleans contractor without the knowledge or contractually-required consent of Entergy New Orleans, were contrary to Entergy’s values.  In that letter, Entergy New Orleans offered to donate $5 million to the City Council to resolve the show cause proceeding.  In January 2019, Entergy New Orleans submitted a new settlement proposal to the City Council. The proposal retains the components of the first offer but adds to it a commitment to make reasonable efforts to limit the costs of the project to the $210 million cost estimate with advanced notification of anticipated cost overruns, additional reporting requirements for cost and environmental items, and a commitment regarding reliability investment and to work with the New Orleans Sewerage and Water Board to provide a reliable source of power. In February 2019 the City Council approved a resolution approving the settlement proposal and allowing the construction of the New Orleans Power Station to commence.

Also in February 2019, certain intervenors in the City Council proceeding on the plant indicatesNew Orleans Power Station filed suit in Louisiana state court challenging the Louisiana Department of Environmental Quality’s issuance of the New Orleans Power Station’s air permit. Entergy New Orleans intervened in that lawsuit and, along with the Louisiana Department of Environmental Quality, filed exceptions seeking dismissal of the lawsuit. In June 2019 the state court judge sustained the exceptions and dismissed the plaintiffs’ petition with prejudice. Also in June 2019, a state court judge in New Orleans affirmed the City Council’s approval of the New Orleans Power Station and dismissed the petition for judicial review that had been filed in April 2018. The petitioners have filed an appeal of that ruling. Also in June 2019, with regard to the lawsuit challenging the City Council’s decision on the basis of a violation of the open meetings law, the same state court judge in New Orleans ruled that there existswas a potential mechanical issueviolation of the open meetings law at the February 2018 meeting of the City Council’s Utilities, Cable, Telecommunications and Technology Committee at which that must be addressed priorCommittee considered the New Orleans Power Station approval, and further ruled that, although there was no violation of the open meetings law at the March 2018 full City Council meeting at which the New Orleans Power Station was

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approved, both the approval of the Committee and the approval of the full City Council were void. The City Council and Entergy New Orleans have each filed a suspensive appeal of the open meetings law ruling. A suspensive appeal suspends the effect of the judgment in the open meetings law proceeding while the appeal is being taken. The petitioners sought in the state appellate court, and then at the Louisiana Supreme Court, to closing.  Thereterminate the suspension of the effect of the judgment, but both courts declined to do so. Appellate briefing on the merits both in the open meetings law appeal and in the judicial review appeal is some possibilityscheduled to begin in November 2019. The New Orleans Power Station related settlement that closing may be delayedwas approved by the full City Council in February 2019 and that allowed Entergy New Orleans to allow time for this issue to be resolved.move forward with the construction of the New Orleans Power Station was not affected by the state court judge’s open meetings ruling. Construction of the plant is underway and continuing.


Searcy Solar Facility


In March 2019, Entergy Arkansas announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar energy facility that will be sited on approximately 800 acres in White County near Searcy, Arkansas.  The purchase is contingent upon, among other things, obtaining necessary approvals from applicable federal and state regulatory and permitting agencies.  The project will be constructed by a subsidiary of NextEra Energy Resources.  Entergy Arkansas will purchase the facility upon completion and after the other purchase contingencies have been met.  Closing is expected to occur by the end of 2021. In May 2019, Entergy Arkansas filed a petition with the APSC seeking a finding that the transaction is in the public interest and requesting all necessary approvals. In September 2019 other parties filed testimony largely supporting the resource acquisition but disputing Entergy Arkansas’s proposed method of cost recovery. Entergy Arkansas filed its rebuttal testimony in October 2019. A hearing is scheduled in January 2020.


Sunflower Solar Facility

In November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi.  The estimated base purchase price is approximately $138.4 million.  The estimated total investment, including the base purchase price and other related costs, for Entergy Mississippi to acquire the Sunflower Solar Facility is approximately $153.2 million. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  The project will be built by Sunflower County Solar Project, LLC, a sub-subsidiary of Recurrent Energy, LLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have been met.  In December 2018, Entergy Mississippi filed a joint petition with Sunflower Solar Project at the MPSC for Sunflower Solar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility.  Entergy Mississippi has proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the annual ownership costs of the Sunflower Solar Facility. In August 2019 consultants retained by the Mississippi Public Utilities Staff filed a report expressing concerns regarding the project economics and recommended that, should the MPSC wish to approve the project, Entergy Mississippi should be required to guarantee the energy output of the unit. Entergy Mississippi and the Staff are engaged in settlement discussions to address these concerns.  A hearing before the MPSC is targeted to occur in the fourth quarter of 2019. Closing is targeted to occur by the end of 2021.

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 AprilOctober 2019 meeting, the Board declared a dividend of $0.91$0.93 per share, which isan increase from the sameprevious $0.91 quarterly dividend per share that Entergy has paid since the third quarter 2018.




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Cash Flow Activity


As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2019 20182019 2018
(In Millions)(In Millions)
Cash and cash equivalents at beginning of period
$481
 
$781

$481
 
$781
      
Cash flow provided by (used in): 
  
 
  
Operating activities501
 557
2,118
 1,860
Investing activities(951) (974)(3,025) (3,000)
Financing activities952
 841
1,382
 1,347
Net increase in cash and cash equivalents502
 424
475
 207
      
Cash and cash equivalents at end of period
$983
 
$1,205

$956
 
$988


Operating Activities


Net cash flow provided by operating activities decreased by $56increased $258 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:


a decrease of $193 million in pension contributions in 2019 as compared to the same period in 2018. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding;
the decrease in the return of unprotected excess accumulated deferred income taxes to Utility customers. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of the regulatory activity regarding the Tax Cuts and Jobs Act;
the effect of less favorable weather on billed Utility sales in 2019;
an increase of $41 million in spending on nuclear refueling outages in 2019 as compared to the same period in 2018; and
an increase of $29 million in interest paid in 2019 as compared to the same period in 2018 resulting from an increase in debt outstanding.

The decrease was partially offset by:

an increase due to the timing of recovery of fuel and purchased power costs in 2019 as compared to the same period in 2018. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
an increase of $94 million due to Vermont Yankee decommissioning spending in 2018; and
a decrease of $80$30 million in pension contributionsspending on nuclear refueling outage expenses in 2019 as compared to the same period in 2018. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates

The increase was partially offset by:

$140 million in severance and retention payments paid in 2019. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business herein and in the Form 10-K for a discussion of management’s strategy to exit the Entergy Wholesale Commodities’ merchant power business;
lower Entergy Wholesale Commodities revenues in 2019; and
the Form 10-K and Note 6 to the financial statements herein for a discussioneffect of qualified pension and other postretirement benefits funding.
less favorable weather on billed Utility sales in 2019.


Investing Activities


Net cash flow used in investing activities decreased $23increased $25 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:to an increase of $197 million in construction expenditures, primarily in the Utility business, as discussed below, partially offset by:



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a decrease in collateral posted to provide credit support to secure its obligations under agreements to sell power produced by Entergy Wholesale Commodities’ power plants; and
an increase of $11$116 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.cycle; and

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The decrease was partially offset by$67 million primarily due to changes in the decommissioning trust funds and an increase of $20 million in construction expenditures, primarily in the Utility business. collateral posted to provide credit support to secure its obligations under agreements to sell power produced by Entergy Wholesale Commodities’ power plants.

The increase in construction expenditures in the Utility business is primarily due to:


an increase of $32$138 million primarily due to investment in the infrastructure of the distribution system, including increased spending on advanced metering infrastructure;
an increase of $76 million in storm spending in 2019; and
an increase of $164 million in transmission construction expenditures due to a higher scope of work performed in 2019 on various projects;projects.
an
The increase in construction expenditures was partially offset by:

a decrease of $27$60 million in distributionnuclear construction expenditures primarily due to lower spending in 2019 on various nuclear projects;
a decrease of $40 million in fossil-fueled generation construction expenditures primarily due to a higherlower scope of work performed in 2019 on various projects; and
an increase of $21 million in nuclear construction expenditures primarily due to higher spending on various nuclear projects.

The increase in construction expenditures was partially offset by:

a decrease of $33 million in fossil-fueled generation construction expenditures primarily due to lower spending in 2019 on self-build projects in the Utility business; and
a decrease of $22$36 million in information technology capital expenditures primarily due to lower spending in 2019 on various projects.critical infrastructure protection.


Financing Activities


Net cash flow provided by financing activities increased $111$35 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:

proceeds of $608 million from the issuance of common stock as a result of the settlement of the remaining equity forwards in May 2019. See Note 3 to a decrease in the financial statements herein for discussion of the equity forward sale agreements;
net repayments of $812short-term borrowings of $111 million in 2018 by the nuclear fuel company variable interest entities;
an increase of commercial paper$65 million in 2019. treasury stock issuances in 2019 due to a larger amount of previously repurchased Entergy Corporation common stock issued in 2019 to satisfy stock option exercises; and
the issuance of $35 million aggregate liquidation value 5.375% Series A preferred stock in September 2019 by Entergy Texas.

The increase was partially offset by:


long-term debt activity providing approximately $1,145$1,274 million of cash in 2019 compared to approximately $1,772$1,422 million in 2018;
the repurchase in first quarter 2019 of $50 million of Class A mandatorily redeemable preferred membership units in Entergy Holdings Company LLC, a wholly-owned Entergy subsidiary, that were held by a third party;
an increase of $44 million in common dividends paid as a result of an increase in the shares outstanding and an increase in the quarterly dividend paid in 2019 compared to 2018; and
short-term borrowingsnet repayments of $39$25 million of commercial paper in 2019 compared to net issuances of $480 million in 2018 by the nuclear fuel company variable interest entities.2018.


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.



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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.



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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.  Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both. In addition to its forward physical power contracts, Entergy Wholesale Commodities may also use a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk. 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 March 31,September 30, 2019 (2019 represents the remainder of the year):



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Entergy Wholesale Commodities Nuclear Portfolio
 2019 2020 2021 2022 2019 2020 2021 2022
Energy  
Percent of planned generation under contract (a):  
Unit-contingent (b) 98% 95% 91% 66% 97% 97% 92% 66%
Planned generation (TWh) (c) (d) 18.6 17.7 9.6 2.8 6.1 17.8 9.6 2.8
Average revenue per MWh on contracted volumes:  
Expected based on market prices as of March 31, 2019 $34.7 $42.0 $56.9 $58.8
Expected based on market prices as of September 30, 2019 $34.4 $41.6 $56.8 $58.8
  
Capacity  
Percent of capacity sold forward (e):  
Bundled capacity and energy contracts (f) 27% 37% 68% 97% 28% 37% 68% 97%
Capacity contracts (g) 30% 27% —% —% 38% 28% —% —%
Total 57% 64% 68% 97% 66% 65% 68% 97%
Planned net MW in operation (average) (d) 3,167 2,195 1,158 338 3,167 2,195 1,158 338
Average revenue under contract per kW per month (applies to capacity contracts only) $5.1 $3.2 $— $— $3.5 $3.3 $— $—
  
Total Energy and Capacity Revenues (h)  
Expected sold and market total revenue per MWh $38.9 $45.1 $55.0 $47.5 $36.7 $44.9 $54.5 $46.8
Sensitivity: -/+ $10 per MWh market price change $38.7-$39.1 $45.0-$45.2 $54.1-$55.9 $44.1-$51.0 $36.4-$36.9 $44.7-$45.1 $53.6-$55.3 $43.4-$50.3


(a)Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty. Positions that are not classified as hedges are netted in the planned generation under contract.

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(b)Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to the buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold. All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(c)Amount of output expected to be generated by Entergy Wholesale Commodities nuclear resources considering plant operating characteristics and outage schedules.
(d)
Assumes the planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, planned shutdown of Indian Point 3 on April 30, 2021, and planned shutdown of Palisades on May 31, 2022. 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” above.
(e)Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(f)A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(g)A contract for the sale of an installed capacity product in a regional market.
(h)Includes assumptions on converting a portion of the portfolio to contracted with fixed price 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 March 31,September 30, 2019 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income

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Management's Financial Discussion and Analysis

of $2 million for the remainder of 2019. As of March 31,September 30, 2018, a positive $10 per MW change would have had a corresponding effect on pre-tax income of $1.4($1) million for the remainder of 2018. A negative $10 per MWh change in the annual average energy price in the markets based on March 31,September 30, 2019 market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of ($4)2) million for the remainder of 2019. As of March 31,September 30, 2018, a negative $10 per MW change would have had a corresponding effect on pre-tax income of ($1.4)$1 million for the remainder of 2018.


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 guarantee.  Cash and letters of credit are also acceptable forms of credit support. At March 31,September 30, 2019, based on power prices at that time, Entergy had liquidity exposure of $121$85 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $34$21 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 March 31,September 30, 2019, Entergy would have been required to provide approximately $75$30 million of additional cash or letters of credit under some of the agreements. As of March 31,September 30, 2019, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $235$140 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.


As of March 31,September 30, 2019, 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.


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Management's Financial Discussion and Analysis


Pilgrim


In March 2019 the NRC moved Pilgrim from its “multiple/repetitive degraded cornerstone column,” or Column 4, of its Reactor Oversight Process Action Matrix to its “licensee response column,” or Column 1. Pilgrim ceased operations in May 2019. In August 2019, Entergy transferred 100% of the equity interests in Entergy Nuclear Generation Company, the owner of Pilgrim, to a subsidiary of Holtec International.


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, 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 Note 1 to the financial statements in the Form 10-K for discussion of new accounting pronouncements.





ENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
   
 Three Months Ended Nine Months Ended
2019 20182019 2018 2019 2018
(In Thousands, Except Share Data)(In Thousands, Except Share Data)
OPERATING REVENUES          
Electric
$2,121,024
 
$2,248,262

$2,812,934
 
$2,697,887
 
$7,279,683
 
$7,276,374
Natural gas54,948
 56,695
27,269
 26,352
 112,916
 112,990
Competitive businesses433,612
 418,924
300,372
 380,080
 1,023,768
 1,107,606
TOTAL2,609,584
 2,723,881
3,140,575
 3,104,319
 8,416,367
 8,496,970
          
OPERATING EXPENSES          
Operation and Maintenance:          
Fuel, fuel-related expenses, and gas purchased for resale478,330
 443,296
596,939
 729,269
 1,542,592
 1,638,367
Purchased power339,507
 396,023
316,339
 439,380
 1,001,707
 1,252,437
Nuclear refueling outage expenses50,441
 42,760
52,044
 37,937
 153,447
 116,057
Other operation and maintenance783,051
 783,585
805,696
 854,013
 2,430,617
 2,477,699
Asset write-offs, impairments, and related charges73,979
 72,924
198,086
 155,215
 288,483
 297,082
Decommissioning102,119
 94,400
101,811
 93,829
 308,557
 285,834
Taxes other than income taxes158,575
 165,218
165,731
 161,916
 487,715
 485,682
Depreciation and amortization357,274
 347,065
379,219
 324,628
 1,099,990
 1,022,099
Other regulatory charges (credits)(16,946) 42,946
4,781
 37,097
 (38,698) 223,416
TOTAL2,326,330
 2,388,217
2,620,646
 2,833,284
 7,274,410
 7,798,673
          
OPERATING INCOME283,254
 335,664
519,929
 271,035
 1,141,957
 698,297
          
OTHER INCOME          
Allowance for equity funds used during construction38,216
 28,343
33,161
 32,354
 108,546
 92,367
Interest and investment income228,149
 16,870
82,295
 177,081
 406,663
 265,086
Miscellaneous - net(64,658) (31,356)(50,086) (43,591) (160,614) (123,439)
TOTAL201,707
 13,857
65,370
 165,844
 354,595
 234,014
          
INTEREST EXPENSE          
Interest expense200,993
 182,923
201,412
 195,311
 603,517
 570,548
Allowance for borrowed funds used during construction(17,449) (13,265)(14,773) (15,244) (49,034) (43,177)
TOTAL183,544
 169,658
186,639
 180,067
 554,483
 527,371
          
INCOME BEFORE INCOME TAXES301,417
 179,863
398,660
 256,812
 942,069
 404,940
          
Income taxes42,771
 43,663
29,201
 (283,006) 73,430
 (519,937)
          
CONSOLIDATED NET INCOME258,646
 136,200
369,459
 539,818
 868,639
 924,877
          
Preferred dividend requirements of subsidiaries4,109
 3,439
4,219
 3,439
 12,438
 10,317
          
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION
$254,537
 
$132,761

$365,240
 
$536,379
 
$856,201
 
$914,560
          
Earnings per average common share:          
Basic
$1.34
 
$0.73

$1.84
 
$2.96
 
$4.42
 
$5.06
Diluted
$1.32
 
$0.73

$1.82
 
$2.92
 
$4.38
 
$5.01
          
Basic average number of common shares outstanding189,575,187
 180,707,575
198,932,387
 181,002,303
 193,876,557
 180,845,440
Diluted average number of common shares outstanding192,234,191
 181,431,968
200,492,935
 183,664,583
 195,685,851
 182,692,325
          
See Notes to Financial Statements.          




ENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
     
 Three Months Ended Nine Months Ended
2019 20182019 2018 2019 2018
(In Thousands)(In Thousands)
          
Net Income
$258,646
 
$136,200

$369,459
 
$539,818
 
$868,639
 
$924,877

          
Other comprehensive income   
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of ($5,352) and $25,349)(12,426) 95,427
Pension and other postretirement liabilities (net of tax expense of $3,249 and $4,568)11,550
 16,574
Net unrealized investment gain (loss) (net of tax expense of $8,073 and $5,375)13,703
 (32,856)
Other comprehensive income12,827
 79,145
Other comprehensive income (loss)       
Cash flow hedges net unrealized gain (loss) (net of tax expense (benefit) of ($5,343), ($8,517), $14,547, and ($480))(20,103) (32,004) 62,453
 (1,645)
Pension and other postretirement liabilities (net of tax expense of $6,760, $4,126, $13,086, and $12,919)25,464
 15,265
 48,510
 47,404
Net unrealized investment gain (loss) (net of tax expense (benefit) of $1,303, ($825), $17,472, and $1,078)5,271
 (1,745) 33,244
 (37,242)
Other comprehensive income (loss)10,632
 (18,484) 144,207
 8,517

          
Comprehensive Income271,473
 215,345
380,091
 521,334
 1,012,846
 933,394
Preferred dividend requirements of subsidiaries4,109
 3,439
4,219
 3,439
 12,438
 10,317
Comprehensive Income Attributable to Entergy Corporation
$267,364
 
$211,906

$375,872
 
$517,895
 
$1,000,408
 
$923,077
          
See Notes to Financial Statements.          

ENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Consolidated net income 
$258,646
 
$136,200
 
$868,639
 
$924,877
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities:        
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 530,224
 525,181
 1,634,677
 1,517,344
Deferred income taxes, investment tax credits, and non-current taxes accrued 104,884
 104,607
 373,723
 82,641
Asset write-offs, impairments, and related charges 25,462
 25,800
 225,175
 210,263
Changes in working capital:        
Receivables 39,697
 131,150
 (231,005) (153,703)
Fuel inventory (4,401) (16,261) (14,399) 49,728
Accounts payable (63,613) (68,857) (175,246) 79,949
Taxes accrued (44,083) (56,301) (2,420) 43,510
Interest accrued (20,546) (10,011) (2,314) (9,398)
Deferred fuel costs 20,201
 (76,238) 90,319
 (25,284)
Other working capital accounts (42,016) (28,004) (19,232) (86,063)
Changes in provisions for estimated losses 13,720
 10,744
 14,114
 28,599
Changes in other regulatory assets (162,192) 84,349
 (92,861) 207,135
Changes in other regulatory liabilities 130,924
 (31,380) (19,115) (413,684)
Changes in pensions and other postretirement liabilities (7,713) (97,418) (132,044) (345,526)
Other (278,005) (76,168) (400,064) (250,884)
Net cash flow provided by operating activities 501,189
 557,393
 2,117,947
 1,859,504
        
INVESTING ACTIVITIES        
Construction/capital expenditures (951,629) (931,479) (3,079,726) (2,883,047)
Allowance for equity funds used during construction 38,322
 28,512
 108,867
 92,829
Nuclear fuel purchases (38,445) (49,647) (55,176) (170,819)
Proceeds from sale of assets 19,801
 12,915
Insurance proceeds received for property damages 
 1,582
 7,040
 10,523
Changes in securitization account (1,084) (7,063) (4,213) (12,985)
Payments to storm reserve escrow account (2,285) (1,175) (6,184) (4,515)
Decrease (increase) in other investments 39,045
 (406) 30,370
 (36,140)
Litigation proceeds for reimbursement of spent nuclear fuel storage costs 2,369
 
Proceeds from nuclear decommissioning trust fund sales 1,307,547
 1,091,332
 3,518,616
 4,177,919
Investment in nuclear decommissioning trust funds (1,342,429) (1,106,094) (3,566,690) (4,187,161)
Net cash flow used in investing activities (950,958) (974,438) (3,024,926) (3,000,481)
        
See Notes to Financial Statements.        

ENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
FINANCING ACTIVITIES        
Proceeds from the issuance of:        
Long-term debt 3,444,230
 2,505,726
 7,133,571
 5,604,131
Preferred stock of subsidiary 33,486
 
Treasury stock 35,577
 1,952
 89,303
 24,646
Common stock 607,650
 
Retirement of long-term debt (2,298,855) (734,000) (5,859,714) (4,181,820)
Repurchase of preferred membership units (50,000) 
 (50,000) 
Changes in credit borrowings and commercial paper - net (17) (773,177) (24,550) 368,370
Other (1,945) 5,193
 (9,175) 25,540
Dividends paid:        
Common stock (172,591) (160,887) (526,408) (482,865)
Preferred stock (4,109) (3,439) (12,328) (10,317)
Net cash flow provided by financing activities 952,290
 841,368
 1,381,835
 1,347,685

        
Net increase in cash and cash equivalents 502,521
 424,323
 474,856
 206,708

        
Cash and cash equivalents at beginning of period 480,975
 781,273
 480,975
 781,273

        
Cash and cash equivalents at end of period 
$983,496
 
$1,205,596
 
$955,831
 
$987,981
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid (received) during the period for:        
Interest - net of amount capitalized 
$214,935
 
$185,606
 
$584,622
 
$558,381
Income taxes 
($13,844) 
($4,297) 
($8,649) 
$18,200
        
See Notes to Financial Statements.        



ENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents:        
Cash 
$118,384
 
$56,690
 
$70,395
 
$56,690
Temporary cash investments 865,112
 424,285
 885,436
 424,285
Total cash and cash equivalents 983,496
 480,975
 955,831
 480,975
Accounts receivable:        
Customer 589,519
 558,494
 732,763
 558,494
Allowance for doubtful accounts (7,458) (7,322) (7,987) (7,322)
Other 158,293
 167,722
 132,547
 167,722
Accrued unbilled revenues 334,355
 395,511
 481,048
 395,511
Total accounts receivable 1,074,709
 1,114,405
 1,338,371
 1,114,405
Deferred fuel costs 19,209
 27,251
 
 27,251
Fuel inventory - at average cost 121,705
 117,304
 131,703
 117,304
Materials and supplies - at average cost 771,707
 752,843
 803,843
 752,843
Deferred nuclear refueling outage costs 231,628
 230,960
 173,229
 230,960
Prepayments and other 205,322
 234,326
 258,695
 234,326
TOTAL 3,407,776
 2,958,064
 3,661,672
 2,958,064
        
OTHER PROPERTY AND INVESTMENTS        
Decommissioning trust funds 6,877,865
 6,920,164
 6,128,647
 6,920,164
Non-utility property - at cost (less accumulated depreciation) 310,215
 304,382
 326,704
 304,382
Other 439,849
 437,265
 448,140
 437,265
TOTAL 7,627,929
 7,661,811
 6,903,491
 7,661,811
        
PROPERTY, PLANT, AND EQUIPMENT        
Electric 50,260,871
 49,831,486
 52,705,142
 49,831,486
Natural gas 509,987
 496,150
 533,217
 496,150
Construction work in progress 3,289,734
 2,888,639
 2,871,054
 2,888,639
Nuclear fuel 790,398
 861,272
 707,198
 861,272
TOTAL PROPERTY, PLANT, AND EQUIPMENT 54,850,990
 54,077,547
 56,816,611
 54,077,547
Less - accumulated depreciation and amortization 22,198,769
 22,103,101
 22,695,886
 22,103,101
PROPERTY, PLANT, AND EQUIPMENT - NET 32,652,221
 31,974,446
 34,120,725
 31,974,446
        
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
Other regulatory assets (includes securitization property of $333,783 as of March 31, 2019 and $360,790 as of December 31, 2018) 4,908,688
 4,746,496
Other regulatory assets (includes securitization property of $268,177 as of September 30, 2019 and $360,790 as of December 31, 2018) 4,839,357
 4,746,496
Deferred fuel costs 239,595
 239,496
 239,793
 239,496
Goodwill 377,172
 377,172
 377,172
 377,172
Accumulated deferred income taxes 61,255
 54,593
 67,438
 54,593
Other 330,745
 262,988
 296,620
 262,988
TOTAL 5,917,455
 5,680,745
 5,820,380
 5,680,745
        
TOTAL ASSETS 
$49,605,381
 
$48,275,066
 
$50,506,268
 
$48,275,066
        
See Notes to Financial Statements.        

ENTERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT LIABILITIES        
Currently maturing long-term debt 
$150,010
 
$650,009
 
$520,012
 
$650,009
Notes payable and commercial paper 1,942,322
 1,942,339
 1,917,788
 1,942,339
Accounts payable 1,406,327
 1,496,058
 1,328,631
 1,496,058
Customer deposits 409,433
 411,505
 409,090
 411,505
Taxes accrued 210,156
 254,241
 251,821
 254,241
Interest accrued 172,645
 193,192
 190,877
 193,192
Deferred fuel costs 64,653
 52,396
 115,761
 52,396
Pension and other postretirement liabilities 62,218
 61,240
 57,374
 61,240
Current portion of unprotected excess accumulated deferred income taxes 239,664
 248,127
 117,575
 248,127
Other 203,655
 134,437
 194,117
 134,437
TOTAL 4,861,083
 5,443,544
 5,103,046
 5,443,544
        
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued 4,252,292
 4,107,152
 4,552,456
 4,107,152
Accumulated deferred investment tax credits 211,013
 213,101
 206,837
 213,101
Regulatory liability for income taxes-net 1,737,479
 1,817,021
 1,677,707
 1,817,021
Other regulatory liabilities 1,839,183
 1,620,254
 1,871,005
 1,620,254
Decommissioning and asset retirement cost liabilities 6,577,180
 6,355,543
 6,068,323
 6,355,543
Accumulated provisions 527,866
 514,107
 528,172
 514,107
Pension and other postretirement liabilities 2,607,394
 2,616,085
 2,487,906
 2,616,085
Long-term debt (includes securitization bonds of $398,291 as of March 31, 2019 and $423,858 as of December 31, 2018) 17,167,886
 15,518,303
Long-term debt (includes securitization bonds of $338,408 as of September 30, 2019 and $423,858 as of December 31, 2018) 16,938,014
 15,518,303
Other 634,211
 1,006,249
 783,330
 1,006,249
TOTAL 35,554,504
 33,767,815
 35,113,750
 33,767,815
        
Commitments and Contingencies        
        
Subsidiaries' preferred stock without sinking fund 219,427
 219,402
 219,411
 219,402
        
COMMON EQUITY    
Common stock, $.01 par value, authorized 500,000,000 shares; issued 261,587,009 shares in 2019 and in 2018 2,616
 2,616
EQUITY    
Common stock, $.01 par value, authorized 500,000,000 shares; issued 270,035,180 shares in 2019 and 261,587,009 shares in 2018 2,700
 2,616
Paid-in capital 5,920,183
 5,951,431
 6,553,009
 5,951,431
Retained earnings 8,809,902
 8,721,150
 9,057,749
 8,721,150
Accumulated other comprehensive loss (551,152) (557,173) (419,772) (557,173)
Less - treasury stock, at cost (71,670,773 shares in 2019 and 72,530,866 shares in 2018) 5,211,182
 5,273,719
Less - treasury stock, at cost (70,947,950 shares in 2019 and 72,530,866 shares in 2018) 5,158,625
 5,273,719
Total common shareholder's equity 10,035,061
 8,844,305
Subsidiary's preferred stock without sinking fund 35,000
 
TOTAL 8,970,367
 8,844,305
 10,070,061
 8,844,305
        
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 
$49,605,381
 
$48,275,066
 
$50,506,268
 
$48,275,066
        
See Notes to Financial Statements.        



ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2019 and 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYCONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2018For the Nine Months Ended September 30, 2018
(Unaudited)
          



Common Shareholders’ Equity



Common Shareholders’ Equity

Subsidiaries’ Preferred Stock 
Common
Stock
 
Treasury
Stock
 
Paid-in
Capital
 Retained Earnings Accumulated Other Comprehensive Income (Loss) TotalSubsidiaries’ Preferred Stock 
Common
Stock
 
Treasury
Stock
 
Paid-in
Capital
 Retained Earnings Accumulated Other Comprehensive Loss Total
(In Thousands)(In Thousands)
Balance at December 31, 2017
$—
 
$2,548
 
($5,397,637) 
$5,433,433
 
$7,977,702
 
($23,531) 
$7,992,515

$—
 
$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)
 
 
 
 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

 2,548
 (5,397,637) 5,433,433
 8,553,959
 (656,148) 7,936,155
                          
Consolidated net income3,439
 
 
 
 132,761
 
 136,200
3,439
 
 
 
 132,761
 
 136,200
Other comprehensive income
 
 
 
 
 79,145
 79,145

 
 
 
 
 79,145
 79,145
Common stock issuances related to stock plans
 
 20,477
 (16,170) 
 
 4,307

 
 20,477
 (16,170) 
 
 4,307
Common stock dividends declared
 
 
 
 (160,887) 
 (160,887)
 
 
 
 (160,887) 
 (160,887)
Preferred dividend requirements of subsidiaries(3,439) 
 
 
 
 
 (3,439)(3,439) 
 
 
 
 
 (3,439)
Reclassification pursuant to ASU 2018-02
 
 
 
 (32,043) 15,505
 (16,538)
 
 
 
 (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

 2,548
 (5,377,160) 5,417,263
 8,493,790
 (561,498) 7,974,943
                          
Balance at December 31, 2018
$—
 
$2,616
 
($5,273,719) 
$5,951,431
 
$8,721,150
 
($557,173) 
$8,844,305
Implementation of accounting standards
 
 
 
 6,806
 (6,806) 
Balance at January 1, 2019
$—
 
$2,616
 
($5,273,719) 
$5,951,431
 
$8,727,956
 
($563,979) 
$8,844,305
             
Consolidated net income4,109
 
 
 
 254,537
 
 258,646
3,439
 
 
 
 245,421
 
 248,860
Other comprehensive income
 
 
 
 
 12,827
 12,827
Other comprehensive loss
 
 
 
 
 (52,144) (52,144)
Common stock issuances related to stock plans
 
 62,537
 (31,248) 
 
 31,289

 
 3,035
 12,141
 
 
 15,176
Common stock dividends declared
 
 
 
 (172,591) 
 (172,591)
 
 
 
 (160,935) 
 (160,935)
Preferred dividend requirements of subsidiaries(4,109) 
 
 
 
 
 (4,109)(3,439) 
 
 
 
 
 (3,439)
Balance at March 31, 2019
$—
 
$2,616
 
($5,211,182) 
$5,920,183
 
$8,809,902
 
($551,152) 
$8,970,367
Balance at June 30, 2018
 2,548
 (5,374,125) 5,429,404
 8,578,276
 (613,642) 8,022,461
             
Consolidated net income3,439
 
 
 
 536,379
 
 539,818
Other comprehensive loss
 
 
 
 
 (18,484) (18,484)
Common stock issuances related to stock plans
 
 21,108
 12,292
 
 
 33,400
Common stock dividends declared
 
 
 
 (161,044) 
 (161,044)
Preferred dividend requirements of subsidiaries(3,439) 
 
 
 
 
 (3,439)
Balance at September 30, 2018
$—
 
$2,548
 
($5,353,017) 
$5,441,696
 
$8,953,611
 
($632,126) 
$8,412,712
                          
See Notes to Financial Statements.See Notes to Financial Statements.            See Notes to Financial Statements.            



ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
(Unaudited)
       
  Nine Months Ended Increase/  
Description 2019 2018 (Decrease) %

 (Dollars in Millions)  
Utility electric operating revenues:        
Residential 
$803
 
$892
 
($89) (10)
Commercial 554
 596
 (42) (7)
Industrial 601
 597
 4
 1
Governmental 53
 57
 (4) (7)
Total billed retail 2,011
 2,142
 (131) (6)
Sales for resale 84
 69
 15
 22
Other 26
 37
 (11) (30)
Total 
$2,121
 
$2,248
 
($127) (6)

        
Utility billed electric energy sales (GWh):        
Residential 8,471
 9,287
 (816) (9)
Commercial 6,423
 6,732
 (309) (5)
Industrial 11,683
 11,405
 278
 2
Governmental 601
 608
 (7) (1)
Total retail 27,178
 28,032
 (854) (3)
Sales for resale 3,814
 3,244
 570
 18
Total 30,992
 31,276
 (284) (1)

        
Entergy Wholesale Commodities:        
Operating revenues 
$434
 
$419
 
$15
 4
Billed electric energy sales (GWh) 7,203
 6,996
 207
 3
ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2019
(Unaudited)
              
   Common Shareholders’ Equity  
 Subsidiaries' Preferred Stock Common
Stock
 Treasury
Stock
 Paid-in
Capital
 Retained Earnings Accumulated Other Comprehensive Loss Total
 (In Thousands)
Balance at December 31, 2018
$—
 
$2,616
 
($5,273,719) 
$5,951,431
 
$8,721,150
 
($557,173) 
$8,844,305
Implementation of accounting standards
 
 
 
 6,806
 (6,806) 
Balance at January 1, 2019
 2,616
 (5,273,719) 5,951,431
 8,727,956
 (563,979) 8,844,305
              
Consolidated net income4,109
 
 
 
 254,537
 
 258,646
Other comprehensive income
 
 
 
 
 12,827
 12,827
Common stock issuances related to stock plans
 
 62,537
 (31,248) 
 
 31,289
Common stock dividends declared
 
 
 
 (172,591) 
 (172,591)
Preferred dividend requirements of subsidiaries(4,109) 
 
 
 
 
 (4,109)
Balance at March 31, 2019
 2,616
 (5,211,182) 5,920,183
 8,809,902
 (551,152) 8,970,367
              
Consolidated net income4,109
 
 
 
 236,424
 
 240,533
Other comprehensive income
 
 
 
 
 120,748
 120,748
Settlement of equity forwards through common stock issuance
 84
 
 607,566
 
 
 607,650
Common stock issuance costs
 
 
 (7) 
 
 (7)
Common stock issuances related to stock plans
 
 23,391
 11,791
 
 
 35,182
Common stock dividends declared
 
 
 
 (172,861) 
 (172,861)
Preferred dividend requirements of subsidiaries(4,109) 
 
 
 
 
 (4,109)
Balance at June 30, 2019
 2,700
 (5,187,791) 6,539,533
 8,873,465
 (430,404) 9,797,503
              
Consolidated net income4,219
 
 
 
 365,240
 
 369,459
Other comprehensive income
 
 
 
 
 10,632
 10,632
Common stock issuances related to stock plans
 
 29,166
 13,476
 
 
 42,642
Common stock dividends declared
 
 
 
 (180,956) 
 (180,956)
Subsidiary's preferred stock issuance35,000
 
 
 
 
 
 35,000
Preferred dividend requirements of subsidiaries(4,219) 
 
 
 
 
 (4,219)
Balance at September 30, 2019
$35,000
 
$2,700
 
($5,158,625) 
$6,553,009
 
$9,057,749
 
($419,772) 
$10,070,061
              
See Notes to Financial Statements.            


ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED OPERATING RESULTS
For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
       
  Three Months Ended Increase/  

 2019 2018 (Decrease) %

 (Dollars in Millions)  
Utility electric operating revenues:        
Residential 
$1,155
 
$1,139
 
$16
 1
Commercial 722
 694
 28
 4
Industrial 686
 683
 3
 
Governmental 62
 61
 1
 2
Total billed retail 2,625
 2,577
 48
 2
Sales for resale 63
 76
 (13) (17)
Other 125
 45
 80
 178
Total 
$2,813
 
$2,698
 
$115
 4

        
Utility billed electric energy sales (GWh):        
Residential 11,627
 11,821
 (194) (2)
Commercial 8,499
 8,726
 (227) (3)
Industrial 12,861
 12,879
 (18) 
Governmental 705
 714
 (9) (1)
Total retail 33,692
 34,140
 (448) (1)
Sales for resale 3,025
 2,978
 47
 2
Total 36,717
 37,118
 (401) (1)

        
Entergy Wholesale Commodities:        
Operating revenues 
$300
 
$380
 
($80) (21)
Billed electric energy sales (GWh) 6,847
 7,576
 (729) (10)
         
         
  Nine Months Ended Increase/  

 2019 2018 (Decrease) %

 (Dollars in Millions)  
Utility electric operating revenues:        
Residential 
$2,727
 
$2,800
 
($73) (3)
Commercial 1,872
 1,871
 1
 
Industrial 1,929
 1,905
 24
 1
Governmental 172
 174
 (2) (1)
Total billed retail 6,700
 6,750
 (50) (1)
Sales for resale 223
 215
 8
 4
Other 357
 311
 46
 15
Total 
$7,280
 
$7,276
 
$4
 

        
Utility billed electric energy sales (GWh):        
Residential 27,749
 28,857
 (1,108) (4)
Commercial 21,764
 22,401
 (637) (3)
Industrial 36,509
 36,503
 6
 
Governmental 1,932
 1,934
 (2) 
Total retail 87,954
 89,695
 (1,741) (2)
Sales for resale 10,009
 8,788
 1,221
 14
Total 97,963
 98,483
 (520) (1)

        
Entergy Wholesale Commodities:        
Operating revenues 
$1,024
 
$1,108
 
($84) (8)
Billed electric energy sales (GWh) 21,308
 21,853
 (545) (2)


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 on May 31, 2019.Pilgrim. In March 2019 the NRC moved Pilgrim from its “multiple/repetitive degraded cornerstone column,” or Column 4, of its Reactor Oversight Process Action Matrix to its “licensee response column,” or Column 1. Pilgrim ceased operations in May 2019. In June 2019, following permanent defueling of the reactor,     Pilgrim was removed from the NRC’s Reactor Oversight Process and is now subject to the NRC’s normal decommissioning inspection program. In August 2019 the NRC approved the transfer of the Pilgrim operating license from Entergy to Holtec and the transaction closed on August 26, 2019. See Note 16 to the financial statements herein for further discussion of the sale of Pilgrim.


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. The following is an update to that discussion.


In August 2019 the U.S. Court of Federal Claims issued a final judgment in the amount of $19 million in favor of Entergy Louisiana against the DOE in the second round River Bend damages case. Entergy Louisiana received payment from the U.S. Treasury in September 2019. The effects of recording the judgment were reductions to plant, nuclear fuel expense, and other operation and maintenance expense. The River Bend damages awarded included $12 million related to costs previously recorded as nuclear fuel expense, $5 million related to costs previously recorded as other operation and maintenance expense, and $2 million in costs previously capitalized.

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.
 

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Notes to Financial Statements

Non-Nuclear Property Insurance


See Note 8 to the financial statements in the Form 10-K for information on Entergy’s non-nuclear property insurance program.


Employment and Labor-related Proceedings


See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.



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Notes to Financial Statements

Asbestos Litigation(Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)


See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation.



Grand Gulf-Related Agreements

See Note 8 to the financial statements in the Form 10-K for information regarding Grand Gulf-related agreements. The following is an update to that discussion.

Capital Funds Agreement (Entergy Corporation and System Energy)

Pursuant to the terms of the Capital Funds Agreement, Entergy Corporation had agreed to supply System Energy with sufficient capital to (i) maintain System Energy’s equity capital at an amount equal to a minimum of 35% of its total capitalization (excluding short-term debt), (ii) permit the continued commercial operation of Grand Gulf, and (iii) pay in full when due all indebtedness for borrowed money of System Energy. Effective July 19, 2019, the Capital Funds Agreement was terminated.


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

System Energy

In a filing made with the FERC in March 2018, Entergy proposed revisions to the Unit Power Sales Agreement, among other agreements, to reflect the effects of the Tax Act. In the filing System Energy proposed to return all of its unprotected excess accumulated deferred income taxes to its customers by the end of 2018. In May 2018 the FERC accepted System Energy’s proposed tax revisions with an effective date of June 1, 2018, subject to refund and the outcome of settlement and hearing procedures.  Settlement discussions were terminated in April 2019, and the hearing is scheduled for March 2020. The retail regulators of the Utility operating companies that are parties to the Unit Power Sales Agreement are challenging the treatment and amount of excess tax liabilities associated with uncertain tax positions related to nuclear decommissioning.


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Notes to Financial Statements

Fuel and purchased power cost recovery


Entergy Arkansas


Production Cost Allocation Rider

In May 2019, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflected a credit to customers for the recovery of the true-up adjustment resulting from the 2018 over-recovered retail balance of $0.1 million and the recovery of a $4.2 million payment to Entergy Arkansas as a result of the FERC’s May 2018 decision in the 2005 bandwidth proceeding, in which the FERC directed a compliance filing to be made that consisted of the comprehensive recalculation of the bandwidth formula rate with true-up payments and receipts based on test period data for June 1, 2005 through December 31, 2005. The rates for the 2019 production cost allocation rider update are effective July 2019 through June 2020.

Energy Cost Recovery Rider


In March 2019, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01882 per kWh to $0.01462 per kWh and became effective with the first billing cycle in April 2019. In March 2019 the Arkansas Attorney General filed a response to Entergy Arkansas’s annual adjustment and included with its filing a motion for investigation of alleged overcharges to customers in connection with the FERC’s October 2018 order in the opportunity sales proceeding. Entergy Arkansas filed its response to the Attorney General’s motion in April 2019 in which Entergy Arkansas stated its intent to initiate a proceeding to address recovery issues related to the October 2018 FERC order. In May 2019, Entergy Arkansas initiated the opportunity sales recovery proceeding, discussed below, and requested that the APSC establish that proceeding as the single designated proceeding in which interested parties may assert claims related to the appropriate retail rate treatment of the FERC October 2018 order and related FERC orders in the opportunity sales proceeding. In June 2019 the APSC granted Entergy Arkansas’s request and also denied the Attorney General’s motion in the energy cost recovery proceeding seeking an investigation into Entergy Arkansas’s annual energy cost recovery rider adjustment and referred the evaluation of such matters to the opportunity sales recovery proceeding.


Entergy Louisiana


In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. In January 2019 the LPSC staff consultant issued its audit report. In its report the LPSC staff consultant recommendedrecommending that Entergy Louisiana refund approximately $7.3 million, plus interest, to customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant. Entergy Louisiana recorded a provision in the first quarter 2019 for the potential outcome of the audit. In August 2019, Entergy Louisiana filed direct testimony challenging the basis for the LPSC staff’s recommended disallowance and providing an alternative calculation of replacement power costs should it be determined that a disallowance is appropriate. Entergy Louisiana’s calculation would require a refund to customers of approximately $4.2 million, plus interest, as compared to the LPSC staff’s recommendation of $7.3 million, plus interest. Responsive testimony was filed by the LPSC staff and intervenors in September 2019; all parties either agreed with or did not oppose Entergy Louisiana’s alternative calculation of replacement power costs. In September 2019 the procedural schedule was suspended to facilitate settlement negotiations.


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, and breach of good faith and fair dealing, and requesting an accounting

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Notes to Financial Statements

and restitution. The defendants have deniedEntergy believes the allegations.complaint is unfounded. In December 2008 the Attorney General’s lawsuit was removed to U.S. District Court in Jackson, Mississippi. Pre-trial and settlement conferences were held in October 2018. In October 2018 the District Court rescheduled the trial to April 2019. In April 2019 the District Court remanded the Attorney General’s lawsuit to the Hinds County Chancery Court in Jackson, Mississippi. A hearing on procedural and dispositive motions was held in August 2019. Following the parties’ oral arguments, the Attorney General filed a post hearing brief, to which Entergy Mississippi filed a response. The motions remain pending before the chancellor of the Hinds County Chancery Court.


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Entergy CorporationTexas

In September 2019, Entergy Texas filed an application to reconcile its fuel and Subsidiariespurchased power costs for the period from April 2016 through March 2019. During the reconciliation period, Entergy Texas incurred approximately $1.6 billion in Texas jurisdictional eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. Entergy Texas estimated an under-recovery balance of approximately $25.8 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2019. The proceeding is currently pending.
Notes to Financial Statements


Retail Rate Proceedings


See Note 2 to the financial statements in the Form 10-K for information regarding retail rate proceedings involving the Utility operating companies.  The following are updates to that discussion.


Filings with the APSC (Entergy Arkansas)


Retail Rates

2019 Formula Rate Plan Filing


As discussed in the Form 10-K, the formula rate plan filing that will be made inIn July 2019, to setEntergy Arkansas filed with the formula rates for the 2020 calendar year will include a netting adjustment that will compare projected costs and sales for 2018 that were approved in the 2017APSC its 2019 formula rate plan filing to set its formula rate for the 2020 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2020 and a netting adjustment for the historical year 2018.  The total proposed formula rate plan rider revenue change designed to produce a target rate of return on common equity of 9.75% is $15.3 million, which is based upon a deficiency of approximately $61.9 million for the 2020 projected year, netted with a credit of approximately $46.6 million in the 2018 historical year netting adjustment. During 2018, Entergy Arkansas experienced higher-than expected sales volume, and actual 2018 costs were lower than forecasted.  These changes, coupled with a reduced income tax rate resulting from the Tax Cuts and sales data.Jobs Act, resulted in the credit for the historical year netting adjustment. In the fourth quarter 2018, Entergy Arkansas recorded a provision of $35.1 million that reflected the estimate of the historical year netting adjustment that willwas expected to be included in the 2019 filing to reflect the change in formula rate plan revenues associated with actual 2018 results when compared to the allowed rate of return on equity.filing. In the first quarter 2019, Entergy Arkansas recorded an additional $10.5provisions totaling $11.5 million provision to reflect the currentupdated estimate of the historical year netting adjustment to be included in the 2019 filing.  In October 2019 other parties in the proceeding filed their errors and objections requesting certain adjustments to Entergy Arkansas’s filing, which, if granted, would reduce or eliminate Entergy Arkansas’s proposed revenue change. Entergy Arkansas filed its response addressing the requested adjustments in October 2019. In its response, Entergy Arkansas accepted certain of the adjustments recommended by the General Staff of the APSC that would reduce the proposed formula rate plan rider revenue change to $14 million. Entergy Arkansas disputed the remaining adjustments proposed by the parties. In October 2019, Entergy Arkansas filed a unanimous settlement agreement with the other parties in the proceeding seeking APSC approval of a revised total formula rate plan rider revenue change of $10.1 million. The proposed new formula rates would go into effect in January 2020. In its July 2019 formula rate plan filing, Entergy Arkansas proposed to recover an $11.2 million regulatory asset, amortized over five years, associated with specific costs related to the potential construction of scrubbers at the White Bluff plant. While Entergy Arkansas does not concede that the regulatory asset does not have merit, for purposes of reaching a settlement amount on the total formula rate plan rider change Entergy Arkansas agreed not to include the amounts associated with the White Bluff scrubber regulatory asset in the 2019 formula rate plan filing or future filings. Entergy Arkansas will record a


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Notes to Financial Statements

write off of the $11.2 million White Bluff scrubber regulatory asset.

Filings with the LPSC (Entergy Louisiana)

Retail Rates - Electric

2017 Formula Rate Plan Filing

Commercial operation at St. Charles Power Station commenced in May 2019. In May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the St. Charles Power Station. The resulting interim adjustment to rates became effective with the first billing cycle of June 2019.

2018 Formula Rate Plan Filing

In May 2019, Entergy Louisiana filed its formula rate plan evaluation report for its 2018 calendar year operations. The 2018 test year evaluation report produced an earned return on common equity of 10.61% leading to a base rider formula rate plan revenue decrease of $8.9 million. While base rider formula rate plan revenue decreased as a result of this filing, overall formula rate plan revenues increased by approximately $118.7 million. This outcome is primarily driven by a reduction to the credits previously flowed through the tax reform adjustment mechanism and an increase in the transmission recovery mechanism, partially offset by reductions in the additional capacity mechanism revenue requirements and extraordinary cost items. The filing is subject to review by the LPSC. Resulting rates were implemented in September 2019, subject to refund due to contested issues.

Entergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination, if approved, would be accomplished on a revenue-neutral basis intended not to affect the rates of other customer classes. Entergy Louisiana contemplates that any combination of residential rates resulting from this request would be implemented with the results of the 2019 test year formula rate plan filing.

Several parties intervened in the proceeding and the LPSC staff filed its report of objections/reservations in accordance with the applicable provisions of the formula rate plan. In its report the LPSC staff re-urged reservations with respect to the outstanding issues from the 2017 test year formula rate plan filing and disputed the inclusion of certain affiliate costs for test years 2017 and 2018. The LPSC staff objected to Entergy Louisiana’s proposal to combine residential rates but proposed the setting of a status conference to establish a procedural schedule to more fully address the issue. The LPSC staff also reserved its right to object to the treatment of the sale of Willow Glen reflected in the evaluation report and to the August 2019 compliance update, which was made primarily to update the capital additions reflected in the formula rate plan’s transmission recovery mechanism, based on limited time to review it. Additionally, since the completion of certain transmission projects, the LPSC staff has issued supplemental data requests addressing the prudence of Entergy Louisiana’s expenditures in connection with those projects. Entergy Louisiana is in the process of responding to those requests.

Investigation of Costs Billed by Entergy Services

In November 2018 the LPSC issued a notice of proceeding initiating an investigation into costs incurred by Entergy Services that are included in the retail rates of Entergy Louisiana. As noted in the notice of proceeding, the LPSC observed an increase in capital construction-related costs that have been incurred by Entergy Services. Discovery is ongoing and has included efforts to seek highly detailed information on a broad range of matters unrelated to the scope of the audit.


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Retail Rates - Gas

2018 Rate Stabilization Plan Filing

As discussed in the Form 10-K, in January 2019, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2018. Entergy Louisiana made a compliance filing in April 2019 and rates were implemented during the first billing cycle of May 2019, subject to refund and final LPSC review.

Gas Rate Stabilization Plan Extension Request

In August 2019, Entergy Louisiana submitted an application to the LPSC seeking extension of the gas rate stabilization plan for the 2019-2021 test years. The LPSC has established a procedural schedule to address this request with a hearing scheduled in May 2020.

Filings with the MPSC (Entergy Mississippi)


Formula Rate Plan


In March 2019, Entergy Mississippi submitted its formula rate plan 2019 test year filing and 2018 look-back filing showing Entergy Mississippi’s earned return for the historical 2018 calendar year to be above the formula rate plan bandwidth and projected earned return for the 2019 calendar year to be below the formula rate plan bandwidth. The 2019 test year filing shows a $36.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.94% return on rate base, within the formula rate plan bandwidth. The 2018 look-back filing compares actual 2018 results to the approved benchmark return on rate base and shows a $10.1 million interim decrease in formula rate plan revenues is necessary. In the fourth quarter 2018, Entergy Mississippi recorded a provision of $9.3 million that reflected the estimate of the difference between the 2018 expected earned rate of return on rate base and an established performance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth mechanism. In the first quarter 2019, Entergy Mississippi recorded aan increase of $0.8 million increase in the provision to reflect the amount shown in the look-back filing. TheIn June 2019, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed that the 2019 test year filing showed that a $32.8 million rate increase is currently subjectnecessary to MPSC review. A final orderreset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.93% return on rate base, within the formula rate plan bandwidth. Additionally, pursuant to the joint stipulation, Entergy Mississippi’s 2018 look-back filing reflected an earned return on rate base of 7.81% in calendar year 2018 which is expectedabove the look-back benchmark return on rate base of 7.13%, resulting in an $11 million decrease in formula rate plan revenues on an interim basis through June 2020. In the second quarter 2019, withEntergy Mississippi recorded an additional $0.9 million increase in the resultingprovision to reflect the $11 million shown in the look-back filing. In June 2019 the MPSC approved the joint stipulation with rates effective for the first billing cycle of July 2019.


Filings with the City Council (Entergy New Orleans)

Retail Rates

See the Form 10-K for discussion of the electric and gas base rate case filed by Entergy New Orleans in September 2018. The evidentiary hearing in this proceeding was held in June 2019. The record and post-hearing briefs were submitted in July 2019. In August 2019, Entergy New Orleans sent a letter to the City Council proposing a framework for settlement of the rate case.  That framework includes, among other things: (1) a total reduction in revenues of approximately $30 million ($27 million electric, $3 million gas); (2) a reduced return on common equity lower than 10.5%, but still commensurate with Entergy New Orleans’s level of risk, paired with three-year electric and gas formula rate plans with forward-looking features; (3) a demand-side management program intended to achieve greater penetration of the City Council’s Energy Smart programs and make progress towards the City Council’s energy efficiency goals. In October 2019 the City Council’s Utility Committee approved a resolution for consideration by

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the full City Council that included a 9.35% return on common equity, a total reduction in revenues of approximately $39 million ($36 million electric; $3 million gas), and an equity ratio of the lesser of 50% or Entergy New Orleans’s actual equity ratio. Also in October 2019, Entergy New Orleans sent another letter to the City Council identifying certain issues with the proposed resolution and inviting the City Council to resume negotiations in an effort to address these issues. The City Council may consider the resolution at its November 7, 2019 meeting.

Filings with the PUCT (Entergy Texas)


Base Rate Case


In January 2019, Entergy Texas filed for recovery of rate case expenses totaling $7.2 million. The amounts requested primarily include internal and external expenses related to litigating the 2018 base rate case. Parties filed testimony in April 2019 recommending a disallowance ranging from $3.2 million to $4.2 million of the $7.2 million requested. In May 2019, Entergy Texas is evaluating its responsefiled rebuttal testimony responding to the parties’ positions. Apositions. In September 2019 an order was issued abating the procedural schedule and scheduled hearing is scheduledto allow the finalization of a settlement in principle reached among the parties. The settlement provides for June 2019.a black box disallowance of $1.4 million. In the third quarter 2019, Entergy Texas recorded a provision for the 2018 base rate case expenses based on the settlement in principle. In October 2019 the settlement was filed for review by the PUCT.


Other Filings


In March 2019, Entergy Texas filed with the PUCT a request to set a new distribution cost recovery factor (DCRF) rider. The proposed new DCRF rider is designed to collect approximately $3.2 million annually from Entergy Texas’s retail customers based on its capital invested in distribution between January 1, 2018 and December 31, 2018. A procedural schedule hasIn September 2019 the PUCT issued an order approving rates, which had been established, with a hearingeffective on an interim basis since June 2019, at the level proposed in June 2019.Entergy Texas’s application.


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In December 2018, Entergy Texas filed with the PUCT a request to set a new transmission cost recovery factor (TCRF) rider. The proposed new TCRF rider is designed to collect approximately $2.7 million annually from Entergy Texas’s retail customers based on its capital invested in transmission between January 1, 2018 and September 30, 2018. In April 2019 parties filed testimony proposing a load growth adjustment, which would have fully offset Entergy Texas’s proposed TCRF revenue requirement. TheIn July 2019 the PUCT has previously ruledgranted Entergy Texas’s application as filed to begin recovery of the requested $2.7 million annual revenue requirement, rejecting opposing parties’ proposed adjustment; however, the PUCT found that load growth adjustmentsthe question of prudence of the actual investment costs should not be includeddetermined in Entergy Texas’s next rate case similar to the procedure used for the costs recovered through the DCRF rider. In October 2019 the PUCT issued an order on a TCRF.motion for rehearing, clarifying and affirming its prior order granting Entergy Texas’s application as filed. Also in October 2019 a second motion for rehearing was filed, and Entergy Texas filed a response in opposition to the motion. The second motion for interim ratesrehearing is pending before the PUCT.

In August 2019, Entergy Texas filed with the PUCT a request to be effective April 2019. In April 2019 the hearing onamend its TCRF rider. The proposed new TCRF rider is designed to collect approximately $19.4 million annually from Entergy Texas’s motionretail customers based on its capital invested in transmission between January 1, 2018 and June 30, 2019, which is $16.7 million in incremental annual revenue above the $2.7 million approved in the prior pending TCRF proceeding. The proceeding is currently pending.

System Agreement Cost Equalization Proceedings

As discussed in the Form 10-K, the hearing on the merits were held,bandwidth calculation for the seven months June 1, 2005 through December 31, 2005 occurred in July 2016. The presiding judge issued an initial decision in November 2016. In the initial decision, the presiding judge agreed with the Utility operating companies’ position that: (1) interest on the bandwidth payments for the 2005 test period should be accrued from June 1, 2006 until the date that the bandwidth payments for that calculation are paid, which is consistent with how the Utility operating companies performed the

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calculation; and (2) a portion of Entergy Louisiana’s 2001-vintage Louisiana state net operating loss accumulated deferred income tax that results from the Vidalia tax deduction should be excluded from the 2005 test period bandwidth calculation. Various participants filed briefs on exceptions and/or briefs opposing exceptions related to the initial decision, including the LPSC, the APSC, the FERC trial staff, and Entergy Services. In May 2018 the FERC issued an order affirming the initial decision and ordered a comprehensive recalculation of the bandwidth payments/receipts for the seven months June 1, 2005 through December 31, 2005 and a recalculation of the 2006 and 2007 test years as a result of limited revisions. Entergy filed the comprehensive recalculation of the bandwidth payments/receipts for the seven months June 1, 2005 through December 31, 2005 and the ALJ suspended2006 and 2007 test years in July 2018. The filing shows the dateadditional following payments and receipts among the Utility operating companies:
Payments (Receipts)
(In Millions)
Entergy Arkansas($4)
Entergy Louisiana($23)
Entergy Mississippi$16
Entergy New Orleans$5
Entergy Texas$6


These payments were made in July 2018. In January 2019 the FERC denied the LPSC’s request for rehearing of the May 2018 order. In May 2019 the FERC accepted the July 2018 compliance filing, and the LPSC sought rehearing of that decision in June 2019.

Rough Production Cost Equalization

2010 Rate Filing Based on Calendar Year 2009 Production Costs

In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC’s orders in the System Agreement proceeding, and supplemented the filing in September 2010.  Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which also filed protests.  In July 2010 the TCRF would be put into permanent effect until July 2019, unlessFERC accepted Entergy’s proposed rates for filing, effective June 1, 2010, subject to refund.  After an earlier decision isabeyance of the proceeding schedule, a hearing was held in March 2014 and in December 2015 the FERC issued an order. Among other things, the December 2015 order directed Entergy to submit a compliance filing. In January 2016 the LPSC, the APSC, and Entergy filed requests for rehearing of the FERC’s December 2015 order. In February 2016, Entergy submitted the compliance filing ordered in the December 2015 order.  The result of the true-up payments and receipts for the recalculation of production costs resulted in the following payments/receipts among the Utility operating companies:
Payments (Receipts)
(In Millions)
Entergy Arkansas$2
Entergy Louisiana$6
Entergy Mississippi($4)
Entergy New Orleans($1)
Entergy Texas($3)

In September 2016 the FERC accepted the February 2016 compliance filing subject to a further compliance filing made in November 2016. The further compliance filing was required as a result of an order issued in September 2016 ruling on the January 2016 rehearing requests filed by the PUCT. This matter is currently awaitingLPSC, the ALJ’s proposalAPSC, and Entergy. In the order addressing the rehearing requests, the FERC granted the LPSC’s rehearing request and directed that interest be calculated on the

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payment/receipt amounts. The FERC also granted the APSC’s and Entergy’s rehearing request and ordered the removal of both securitized asset accumulated deferred income taxes and contra-securitization accumulated deferred income taxes from the calculation. In November 2016, Entergy submitted its compliance filing in response to the FERC’s order on rehearing. The compliance filing included a revised calculation of the bandwidth true-up payments and receipts based on 2009 test year data and interest calculations. The LPSC protested the interest calculations. In November 2017 the FERC issued an order rejecting the November 2016 compliance filing. The FERC determined that the payments detailed in the November 2016 compliance filing did not include adequate interest for decision.the payments from Entergy Arkansas to Entergy Louisiana because it did not include interest on the principal portion of the payment that was made in February 2016. In December 2017, Entergy recalculated the interest pursuant to the November 2017 order. As a result of the recalculations, Entergy Arkansas owed very minor payments to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. In June 2019 the FERC issued an order denying the LPSC’s rehearing request of FERC’s September 2016 order. The LPSC rehearing request asked the FERC to reverse its decision that both securitized asset accumulated deferred income taxes and contra-securitization accumulated deferred income taxes should be removed from the bandwidth calculation.


Entergy Arkansas Opportunity Sales Proceeding


As discussed in the Form 10-K, in December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order in the opportunity sales proceeding. The compliance filing provided a final calculation of Entergy Arkansas’s payments to the other Utility operating companies, including interest. No protests were filed in response to the December 2018 compliance filing. The December 2018 compliance filing is pending FERC action.


In February 2019 the LPSC filed a new complaint relating to two issues that were raised in the opportunity sales proceeding, but that, in its October 2018 order, the FERC held were outside the scope of the proceeding. In March 2019, Entergy Services filed an answer and motion to dismiss the new complaint.


In May 2019, Entergy Arkansas filed an application and supporting testimony with the APSC requesting approval of a special rider tariff to recover the costs of these payments from its retail customers over a 24-month period.  The application requested that the APSC approve the rider to take effect within 30 days or, if suspended by the APSC as allowed by commission rule, approve the rider to take effect in the first billing cycle of the first month occurring 30 days after issuance of the APSC’s order approving the rider. In June 2019 the APSC suspended Entergy Arkansas’s tariff and granted Entergy Arkansas’s motion asking the APSC to establish the proceeding as the single designated proceeding in which interested parties may assert claims related to the appropriate retail rate treatment of the FERC’s October 2018 order and related FERC orders in the opportunity sales proceeding.

Complaints Against System Energy


Return on Equity and Capital Structure Complaints


See the Form 10-K for a discussion of the return on equity complaints filed by the APSC and the MPSC and by the LPSC against System Energy. The LPSC’s complaint also includes a challenge to System Energy’s capital structure. In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System Energy’s capital structure and setting for hearing the return on equity complaint, with a refund effective date of April 27, 2018. The portion of the LPSC’s complaint dealing with return on equity was subsequently consolidated with the APSC and MPSC complaint for hearing. The consolidated hearing has been scheduled for September 2019, and the parties are required to address an order (issued in a separate proceeding involving New England transmission owners) that proposed modifying the FERC’s standard methodology for determining return on equity. In September 2018, System Energy filed a request for rehearing and the LPSC filed a request for rehearing or reconsideration of the FERC’s August 2018 order. The LPSC’s request referenced an amended complaint that it filed on the same day raising the same capital structure claim the FERC had earlier dismissed. The FERC initiated a new proceeding for the amended capital structure complaint, and System Energy submitted a response in October 2018. In January 2019 the FERC set the amended capital structure complaint for settlement and hearing proceedings. Settlement procedures in the capital structure proceeding commenced in February 2019. As noted below, in June 2019


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settlement discussions were terminated and the amended capital structure complaint was consolidated with the ongoing return on equity proceeding.

In January 2019 the LPSC and the APSC and MPSC filed direct testimony in the return on equity proceeding. For the refund period January 23, 2017 through April 23, 2018, the LPSC argues for an authorized return on equity for System Energy of 7.81% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.24%. For the refund period April 27, 2018 through July 27, 2019, and for application on a prospective basis, the LPSC argues for an authorized return on equity for System Energy of 7.97% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.41%. In March 2019, System Energy submitted answering testimony in the return on equity proceeding. For the first refund period, System Energy’s testimony argues for a return on equity of 10.10% (median) or 10.70% (midpoint). For the second refund period, System Energy’s testimony shows that the calculated returns on equity for the first period fall within the range of presumptively just and reasonable returns on equity, and thus the second complaint should be dismissed (and the first period return on equity used going forward). If the FERC nonetheless were to set a new return on equity for the second period (and going forward), System Energy argues the return on equity should be either 10.32% (median) or 10.69% (midpoint).


In May 2019 the FERC trial staff filed its direct and answering testimony in the return on equity proceeding. For the first refund period, the FERC trial staff calculates an authorized return on equity for System Energy of 9.89% based on the application of FERC’s proposed methodology. The FERC trial staff’s direct and answering testimony noted that an authorized return on equity of 9.89% for the first refund period was within the range of presumptively just and reasonable returns on equity for the second refund period, as calculated using a study period ending January 31, 2019 for the second refund period.

In June 2019, System Entergy filed testimony responding to the testimony filed by the FERC trial staff. Among other things, System Energy’s testimony rebutted arguments raised by the FERC trial staff and provided updated calculations for the second refund period based on the study period ending May 31, 2019. For that refund period, System Energy’s testimony shows that strict application of the return on equity methodology proposed by the FERC trial staff indicates that the second complaint would not be dismissed, and the new return on equity would be set at 9.65% (median) or 9.74% (midpoint). System Energy’s testimony argues that these results are insufficient in light of benchmarks such as state returns on equity and treasury bond yields, and instead proposes that the calculated returns on equity for the second period should be either 9.91% (median) or 10.3% (midpoint). System Energy’s testimony also argues that, under application of its proposed modified methodology, the 10.10% return on equity calculated for the first refund period would fall within the range of presumptively just and reasonable returns on equity for the second refund period. System Energy is recording a provision against revenue for the potential outcome of this proceeding.

Also in June 2019, the FERC’s Chief ALJ issued an order terminating settlement discussions in the amended complaint addressing System Energy’s capital structure. The ALJ consolidated the amended complaint with the ongoing return on equity proceeding and set new procedural deadlines for the consolidated hearing, such that the hearing will commence in January 2020 and the initial decision will be due in June 2020.

In August 2019 the LPSC and the APSC and MPSC filed rebuttal testimony in the return on equity proceeding and direct and answering testimony relating to System Energy’s capital structure. The LPSC reargues for an authorized return on equity for System Energy of 7.81% for the first refund period and 7.97% for the second refund period. The APSC and MPSC argue for an authorized return on equity for System Energy of 8.26% for the first refund period and 8.32% for the second refund period. With respect to capital structure, the LPSC proposes that the FERC establish a hypothetical capital structure for System Energy for ratemaking purposes. Specifically, the LPSC proposes that System Energy’s common equity ratio be set to Entergy Corporation’s equity ratio of 37% equity and 63% debt. In the alternative, the LPSC argues that the equity ratio should be no higher than 49%, the composite equity ratio of System Energy and the other Entergy operating companies who purchase under the Unit Power Sales Agreement. The APSC and MPSC recommend that 35.98% be set as the common equity ratio for System Energy. As an alternative, the APSC and MPSC propose that System Energy’s common equity be set at 46.75% based on the median equity ratio of the proxy group for setting the return on equity.

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In September 2019 the FERC trial staff filed its rebuttal testimony in the return on equity proceeding. For the first refund period, the FERC trial staff calculates an authorized return on equity for System Energy of 9.40% based on the application of the FERC’s proposed methodology and an updated proxy group. For the second refund period, based on the study period ending May 31, 2019, the FERC trial staff rebuttal testimony argues for a return on equity of 9.63%. In September 2019 the FERC trial staff also filed direct and answering testimony relating to System Energy’s capital structure. The FERC trial staff argues that the average capital structure of the proxy group used to develop System Energy’s return on equity should be used to establish the capital structure. Using this approach, the FERC trial staff calculates the average capital structure for its proposed proxy group of 46.74% common equity, and 53.26% debt.
In October 2019, System Energy filed answering testimony disputing the FERC trial staff’s, the LPSC’s, and the APSC’s and MPSC’s arguments for the use of a hypothetical capital structure and arguing that the use of System Energy’s actual capital structure is just and reasonable.

Grand Gulf Sale-leaseback Renewal Complaint


As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1.


In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC, and City Council filed direct testimony. The LPSC testimony seeks refunds that include the renewal lease payments (approximately $17.2 million per year since July 2015), rate base reductions for accumulated deferred income taxes associated with uncertain tax positions (claimed to be approximately $334.5 million as of December 2018), and the cost of capital additions associated with the sale-leaseback interest (claimed to be approximately $274.8 million), as well as interest on those amounts. The direct testimony of the City Council and the APSC and MPSC address various issues raised by the LPSC. System Energy disputes that any refunds are owed for billings under the Unit Power Sales Agreement. A hearing has been scheduled for November 2019.



In June 2019 System Energy filed answering testimony in the sale-leaseback complaint proceeding arguing that the FERC should reject all claims for refunds.  Among other things, System Energy argued that claims for refunds of the costs of lease renewal payments and capital additions should be rejected because those costs were recovered consistent with the Unit Power Sales Agreement formula rate, System Energy was not over or double recovering any costs, and customers will save approximately $850 million over initial and renewal terms of the leases.  System Energy argued that claims for refunds associated with liabilities arising from uncertain tax positions should be rejected because the liabilities do not provide cost-free capital, the repayment timing of the liabilities is uncertain, and the outcome of the underlying tax positions is uncertain.  System Energy’s testimony also challenged the refund calculations supplied by the other parties.

In August 2019 the FERC trial staff filed direct and answering testimony seeking refunds for rate base reductions for liabilities associated with uncertain tax positions (claimed to be up to approximately $602 million plus interest). The FERC trial staff also argued that System Energy recovered $32 million more than it should have in depreciation expense for capital additions. In September 2019, System Energy filed cross-answering testimony disputing the FERC trial staff’s arguments for refunds, stating that the FERC trial staff’s position regarding depreciation rates for capital additions is not unreasonable and explaining that any change in depreciation expense is only one element of a Unit Power Sales Agreement rebilling calculation. Adjustments to depreciation expense in any rebilling under the Unit Power Sales Agreement formula rate will also involve changes to accumulated depreciation, accumulated deferred income taxes, and other formula elements as needed. In October 2019 the LPSC filed rebuttal testimony increasing the amount of refunds sought for liabilities associated with uncertain tax positions.  The LPSC now seeks approximately $512 million plus interest.  At the same time, the FERC trial staff filed rebuttal testimony conceding that it was no longer seeking up to $602 million related to the uncertain tax positions; instead, it is seeking approximately $511

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million plus interest.  The LPSC also argued that adjustments to depreciation rates should affect rate base on a prospective basis only.

Storm Cost Recovery Filings with Retail Regulators

Entergy Mississippi

As discussed in the Form 10-K, Entergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If Entergy Mississippi’s accumulated storm damage provision balance exceeds $15 million, the collection of the storm damage provision ceases until such time that the accumulated storm damage provision becomes less than $10 million. As of May 31, 2019, Entergy Mississippi’s storm damage provision balance was less than $10 million. Accordingly, Entergy Mississippi resumed billing the monthly storm damage provision effective with July 2019 bills.


NOTE 3.  EQUITY (Entergy Corporation, Entergy Louisiana, and Entergy Louisiana)Texas)


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 March 31,
 2019 2018
 (In Millions, Except Per Share Data)
 Income Shares $/share Income Shares $/share
Basic earnings per share           
Net income attributable to Entergy Corporation
$254.5
 189.6
 
$1.34
 
$132.8
 180.7
 
$0.73
Average dilutive effect of:           
Stock options  0.4
 
   0.2
 
Other equity plans  0.5
 (0.01)   0.5
 
Equity forwards  1.7
 (0.01)   
 
Diluted earnings per share
$254.5
 192.2
 
$1.32
 
$132.8
 181.4
 
$0.73

 For the Three Months Ended September 30,
 2019 2018
 (In Millions, Except Per Share Data)
 Income Shares $/share Income Shares $/share
Basic earnings per share           
Net income attributable to Entergy Corporation
$365.2
 198.9
 
$1.84
 
$536.4
 181.0
 
$2.96
Average dilutive effect of:           
Stock options  0.7
 (0.01)   0.4
 (0.01)
Other equity plans  0.9
 (0.01)   0.8
 (0.01)
Equity forwards  
 
   1.5
 (0.02)
Diluted earnings per share
$365.2
 200.5
 
$1.82
 
$536.4
 183.7
 
$2.92

The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.71.1 million for the three months ended March 31,September 30, 2018.

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 For the Nine Months Ended September 30,
 2019 2018
 (In Millions, Except Per Share Data)
 Income Shares $/share Income Shares $/share
Basic earnings per share           
Net income attributable to Entergy Corporation
$856.2
 193.9
 
$4.42
 
$914.6
 180.8
 
$5.06
Average dilutive effect of:           
Stock options  0.5
 (0.01)   0.3
 (0.01)
Other equity plans  0.7
 (0.02)   0.7
 (0.01)
Equity forwards  0.6
 (0.01)   0.9
 (0.03)
Diluted earnings per share
$856.2
 195.7
 
$4.38
 
$914.6
 182.7
 
$5.01


The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 0.2 million for the nine months ended September 30, 2019 and approximately 41.1 million for the threenine months ended March 31,September 30, 2018.


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.


Dividends declared per common share were $0.91 for the three months ended March 31,September 30, 2019 and $0.89 for the three months ended March 31,September 30, 2018. Dividends declared per common share were $2.73 for the nine months ended September 30, 2019 and $2.67 for the nine months ended September 30, 2018.


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Equity Forward Sale Agreements


As discussed in Note 7 to the financial statements in the Form 10-K, in June 2018, Entergy marketed an equity offering of 15.3 million shares of common stock. In lieu of issuing equity at the time of the offering, Entergy entered into forward sale agreements with various investment banks. In December 2018, Entergy physically settled a portion of its obligations under the forward sale agreements by delivering 6,834,221 shares of common stock in exchange for cash proceeds of approximately $500 million. In May 2019, Entergy is required to settle its remaining obligations under the forward sale agreements with respect tophysically settled the remaining 8,448,171 shares of common stock on a settlement date or dates on or prior to June 7, 2019.in exchange for cash proceeds of approximately $608 million.

Until settlement of the remaining equity forwards, earnings per share dilution resulting from the agreements, if any, will be determined under the treasury stock method. Share dilution occurs when the average market price of Entergy’s common stock is higher than the average forward sales price. If Entergy had elected to net share settle the forward sale agreements as of March 31, 2019, Entergy would have been required to deliver 2.0 million shares.


Treasury Stock


During the threenine months ended March 31,September 30, 2019, Entergy Corporation issued 860,0931,582,916 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 threenine months ended March 31,September 30, 2019.


Retained Earnings


On April 3,October 25, 2019, Entergy Corporation’s Board of Directors declared a common stock dividend of $0.91$0.93 per share, payable on June 3,December 2, 2019, to holders of record as of May 9,November 7, 2019.


Entergy implemented ASU No. 2017-12 “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” effective January 1, 2019. The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges. Entergy implemented this standard using a modified retrospective method, and recorded an adjustment increasing retained earnings and increasing accumulated other comprehensive loss by approximately $8 million as of January 1, 2019 for the cumulative effect of the ineffectiveness portion of designated hedges on nuclear power sales.


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Entergy implemented ASU 2017-08 “Receivables (Topic 310): Nonrefundable Fees and Other Costs” effective January 1, 2019. The ASU amends the amortization period for certain purchased callable debt securities held at a premium to the earliest call date. Entergy implemented this standard using the modified retrospective approach, and recorded an adjustment decreasing retained earnings and decreasing accumulated other comprehensive loss by approximately $1 million as of January 1, 2019 for the cumulative effect of the amended amortization period.


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 March 31,September 30, 2019 by component:

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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)
Ending balance, December 31, 2018
($23,135) 
($531,922) 
($2,116) 
($557,173)
Implementation of accounting standards(7,685) 
 879
 (6,806)
Beginning balance, January 1, 2019
($30,820) 
($531,922) 
($1,237) 
($563,979)
        
Other comprehensive income (loss) before reclassifications28,312
 
 13,539
 41,851
Amounts reclassified from accumulated other comprehensive income (loss)(40,738) 11,550
 164
 (29,024)
Net other comprehensive income (loss) for the period(12,426) 11,550
 13,703
 12,827
Ending balance, March 31, 2019
($43,246) 
($520,372) 
$12,466
 
($551,152)
 
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)
Beginning balance, July 1, 2019
$51,736
 
($508,876) 
$26,736
 
($430,404)
Other comprehensive income (loss) before reclassifications(5,190) 
 8,350
 3,160
Amounts reclassified from accumulated other comprehensive income (loss)(14,913) 25,464
 (3,079) 7,472
Net other comprehensive income (loss) for the period(20,103) 25,464
 5,271
 10,632
Ending balance, September 30, 2019
$31,633
 
($483,412) 
$32,007
 
($419,772)


The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31,September 30, 2018 by component:
 
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)
        
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 reclassifications71,566
 
 838
 72,404
Amounts reclassified from accumulated other comprehensive income (loss)23,861
 16,574
 (33,694) 6,741
Net other comprehensive income (loss) for the period95,427
 16,574
 (32,856) 79,145
        
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)
 
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)
Beginning balance, July 1, 2018
($14,874) 
($589,926) 
($8,842) 
($613,642)
Other comprehensive income (loss) before reclassifications(40,401) 
 (7,173) (47,574)
Amounts reclassified from accumulated other comprehensive income (loss)8,397
 15,265
 5,428
 29,090
Net other comprehensive income (loss) for the period(32,004) 15,265
 (1,745) (18,484)
Ending balance, September 30, 2018
($46,878) 
($574,661) 
($10,587) 
($632,126)



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The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2019 by component:
 
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)
Ending balance, December 31, 2018
($23,135) 
($531,922) 
($2,116) 
($557,173)
Implementation of accounting standards(7,685) 
 879
 (6,806)
Beginning balance, January 1, 2019
($30,820) 
($531,922) 
($1,237) 
($563,979)
        
Other comprehensive income (loss) before reclassifications122,481
 
 37,724
 160,205
Amounts reclassified from accumulated other comprehensive income (loss)(60,028) 48,510
 (4,480) (15,998)
Net other comprehensive income (loss) for the period62,453
 48,510
 33,244
 144,207
Ending balance, September 30, 2019
$31,633
 
($483,412) 
$32,007
 
($419,772)


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The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the nine months ended September 30, 2018 by component:
 
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)
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(31,816) 
 (50,958) (82,774)
Amounts reclassified from accumulated other comprehensive income (loss)30,171
 47,404
 13,716
 91,291
Net other comprehensive income (loss) for the period(1,645) 47,404
 (37,242) 8,517
        
Reclassification pursuant to ASU 2018-02(7,756) (90,966) 114,227
 15,505
        
Ending balance, September 30, 2018
($46,878) 
($574,661) 
($10,587) 
($632,126)


The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31,September 30, 2019 and 2018:
  Pension and Other
Postretirement Liabilities
  2019 2018
  (In Thousands)
Beginning balance, July 1, 
($8,091) 
($57,451)
Amounts reclassified from accumulated other
comprehensive income (loss)
 (969) (500)
Net other comprehensive income (loss) for the period (969) (500)
Ending balance, September 30, 
($9,060) 
($57,951)


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  Pension and Other
Postretirement Liabilities
  2019 2018
  (In Thousands)
Beginning balance, January 1, 
($6,153) 
($46,400)
Amounts reclassified from accumulated other
comprehensive income (loss)
 (969) (501)
Net other comprehensive income (loss) for the period (969) (501)
     
Reclassification pursuant to ASU 2018-02 
 (10,049)
     
Ending balance, March 31, 
($7,122) 
($56,950)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the nine months ended September 30, 2019 and 2018:
  Pension and Other
Postretirement Liabilities
  2019 2018
  (In Thousands)
Beginning balance, January 1, 
($6,153) 
($46,400)
Amounts reclassified from accumulated other
comprehensive income (loss)
 (2,907) (1,502)
Net other comprehensive income (loss) for the period (2,907) (1,502)
     
Reclassification pursuant to ASU 2018-02 
 (10,049)
     
Ending balance, September 30, 
($9,060) 
($57,951)

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31,September 30, 2019 and 2018 are as follows:

Amounts reclassified
from AOCI

Income Statement Location
 2019 2018  

(In Thousands)

Cash flow hedges net unrealized gain (loss)
  

   Power contracts
$18,925
 
($10,566)
Competitive business operating revenues
   Interest rate swaps(48) (63)
Miscellaneous - net
Total realized gain (loss) on cash flow hedges18,877
 (10,629)


(3,964) 2,232

Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
$14,913
 
($8,397)




  

Pension and other postretirement liabilities

  

   Amortization of prior-service credit
$5,325
 
$5,425

(a)
   Amortization of loss(20,919) (24,740)
(a)
   Settlement loss(16,630) (76)
(a)
Total amortization(32,224) (19,391)


6,760
 4,126

Income taxes
Total amortization (net of tax)
($25,464) 
($15,265)



  

Net unrealized investment gain (loss)
  

Realized gain (loss)
$4,872
 
($8,589)
Interest and investment income

(1,793) 3,161

Income taxes
Total realized investment gain (loss) (net of tax)
$3,079
 
($5,428)




  

Total reclassifications for the period (net of tax)
($7,472) 
($29,090)


 
Amounts reclassified
from AOCI
 Income Statement Location
 2019 2018  
 (In Thousands)  
Cash flow hedges net unrealized gain (loss)     
   Power contracts
$51,615
 
($30,082) Competitive business operating revenues
   Interest rate swaps(48) (122) Miscellaneous - net
Total realized gain (loss) on cash flow hedges51,567
 (30,204)  
 (10,829) 6,343
 Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
$40,738
 
($23,861)  
      
Pension and other postretirement liabilities     
   Amortization of prior-service credit
$5,326
 
$5,426
 (a)
   Amortization of loss(18,988) (24,952) (a)
   Settlement loss(1,137) (1,616) (a)
Total amortization(14,799) (21,142)  
 3,249
 4,568
 Income taxes
Total amortization (net of tax)
($11,550) 
($16,574)  
      
Net unrealized investment gain (loss)     
Realized gain (loss)
($259) 
$53,314
 Interest and investment income
 95
 (19,620) Income taxes
Total realized investment gain (loss) (net of tax)
($164) 
$33,694
  
      
Total reclassifications for the period (net of tax)
$29,024
 
($6,741)  


(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost.  See Note 6 to the financial statements herein for additional details.



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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the threenine months ended March 31,September 30, 2019 and 2018 are as follows:
 Amounts reclassified
from AOCI
 Income Statement Location
Amounts reclassified
from AOCI
 Income Statement Location
 2019 2018 2019 2018 
 (In Thousands) (In Thousands) 
Cash flow hedges net unrealized gain (loss)    
Power contracts
$76,129
 
($37,913) Competitive business operating revenues
Interest rate swaps(145) (278) Miscellaneous - net
Total realized gain (loss) on cash flow hedges75,984
 (38,191) 
(15,956) 8,020
 Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
$60,028
 
($30,171) 
    
Pension and other postretirement liabilities         
Amortization of prior-service credit 
$1,838
 
$1,934
 (a)
$15,977
 
$16,278
 (a)
Amortization of loss (527) (1,257) (a)(58,888) (74,503) (a)
Settlement loss(18,685) (2,098) (a)
Total amortization 1,311
 677
 (61,596) (60,323) 
 (342) (176) Income taxes13,086
 12,919
 Income taxes
Total amortization (net of tax) 969
 501
 
($48,510) 
($47,404) 
         
Net unrealized investment gain (loss)    
Realized gain (loss)
$7,088
 
($21,703) Interest and investment income
(2,608) 7,987
 Income taxes
Total realized investment gain (loss) (net of tax)
$4,480
 
($13,716) 
    
Total reclassifications for the period (net of tax) 
$969
 
$501
 
$15,998
 
($91,291) 


(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost.  See Note 6 to the financial statements herein for additional details.



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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended September 30, 2019 and 2018 are as follows:
  Amounts reclassified
from AOCI
 Income Statement Location
  2019 2018  
  (In Thousands)  
Pension and other postretirement liabilities      
   Amortization of prior-service credit 
$1,837
 
$1,934
 (a)
   Amortization of loss (526) (1,257) (a)
Total amortization 1,311
 677
  
  (342) (177) Income taxes
Total amortization (net of tax) 969
 500
  
       
Total reclassifications for the period (net of tax) 
$969
 
$500
  


(a)These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost.  See Note 6 to the financial statements herein for additional details.

Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the nine months ended September 30, 2019 and 2018 are as follows:
  Amounts reclassified
from AOCI
 Income Statement Location
  2019 2018  
  (In Thousands)  
Pension and other postretirement liabilities      
   Amortization of prior-service credit 
$5,511
 
$5,802
 (a)
   Amortization of loss (1,578) (3,770) (a)
Total amortization 3,933
 2,032
  
  (1,026) (530) Income taxes
Total amortization (net of tax) 2,907
 1,502
  
       
Total reclassifications for the period (net of tax) 
$2,907
 
$1,502
  


(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.

Preferred Stock

In September 2019, Entergy Texas issued $35 million of 5.375% Series A preferred stock, a total of 1,400,000 shares with a liquidation value of $25 per share, all of which are outstanding as of September 30, 2019. The dividends are cumulative and payable quarterly. The preferred stock is redeemable on or after October 15, 2024 at Entergy Texas’s option, at a fixed redemption price of $25 per share.

Accounting standards regarding the classification and measurement of redeemable securities require the classification of preferred securities between liabilities and shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances. These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote. The outstanding preferred stock of Entergy

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Texas has protective rights with respect to unpaid dividends but provides for the election of board members that would not constitute a majority of the board, and the preferred stock of Entergy Texas is therefore classified as a component of equity.

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 September 2023.2024.  The facility includes fronting commitments for the issuance of letters of credit against $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 threenine months ended March 31,September 30, 2019 was 4.03%3.94% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of March 31,September 30, 2019.
Capacity Borrowings 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500 $155 $6 $3,339

Capacity Borrowings 
Letters
of Credit
 
Capacity
Available
(In Millions)
$3,500 $320 $6 $3,174


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 $2 billion.  At March 31,September 30, 2019, Entergy Corporation had approximately $1,942$1,918 million of commercial paper outstanding.  The weighted-average interest rate for the threenine months ended March 31,September 30, 2019 was 3.03%2.88%.


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Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31,September 30, 2019 as follows:
Company 
Expiration
Date
 
Amount of
Facility
 Interest Rate (a) 
Amount Drawn
as of
March 31,September 30, 2019
 
Letters of Credit
Outstanding as of March 31,
September 30, 2019
Entergy Arkansas April 2020 $20 million (b) 3.75%3.17% $— $—
Entergy Arkansas September 20232024 $150 million (c) 3.75%3.17% $— $—
Entergy Louisiana September 20232024 $350 million (c) 3.75%3.17% $— $—
Entergy Mississippi May 20192020 $37.5 million (d) 4.00%3.54% $— $—
Entergy Mississippi May 20192020 $35 million (d) 4.00%3.54% $— $—
Entergy Mississippi May 20192020 $10 million (d) 4.00%3.54% $— $—
Entergy New Orleans November 2021 $25 million (c) 3.77%3.32% $— $0.8 million
Entergy Texas September 20232024 $150 million (c) 4.00%3.54% $— $1.3 million


(a)The interest rate is the estimated interest rate as of March 31,September 30, 2019 that would have 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.

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(c)The credit facility includes fronting commitments for the issuance of letters of credit against a portion of the borrowing capacity of the 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)Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. Entergy Mississippi expects to renew its credit facilities prior to expiration.


The commitment fees on the credit facilities range from 0.075% to 0.225% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization.  Each Registrant Subsidiary is in compliance with this covenant.


In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into 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 March 31,September 30, 2019:
Company 
Amount of
Uncommitted Facility
 Letter of Credit Fee 
Letters of Credit
Issued as of
March 31,September 30, 2019 (a)
Entergy Arkansas $25 million 0.70% $1 million
Entergy Louisiana $125 million 0.70% $4311.7 million
Entergy Mississippi $4065 million 0.70% $12.18.1 million
Entergy New Orleans $15 million 1.00% $1 million
Entergy Texas $50 million 0.70% $11.726.2 million



(a)As of March 31,September 30, 2019, letters of credit posted with MISO covered financial transmission rights exposure of $0.4$0.2 million for Entergy Mississippi, and $1.5 million for Entergy Texas.Mississippi. See Note 8 to the financial statements herein for discussion of financial transmission rights.


The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.  The current FERC-authorized limits for Entergy New Orleans are effective through October 31, 2019.2021. The current FERC-

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authorizedFERC-authorized limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy Texas, and System Energy are effective through November 8, 2020. 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 termshort-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 March 31,September 30, 2019 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
 Authorized Borrowings
 (In Millions)
Entergy Arkansas$250 $—
Entergy Louisiana$450 $—
Entergy Mississippi$175 $—
Entergy New Orleans$150 $46
Entergy Texas$200 $—
System Energy$200 $—



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 Authorized Borrowings
 (In Millions)
Entergy Arkansas$250 $—
Entergy Louisiana$450 $—
Entergy Mississippi$175 $11
Entergy New Orleans$150 $2
Entergy Texas$200 $—
System Energy$200 $—


Vermont Yankee Asset Retirement Management, LLC Credit Facility


In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Vermont Yankee Asset Retirement Management, LLC, Entergy Nuclear Vermont Yankee’s parent company that remains an Entergy subsidiary after the transfer. The credit facility has a borrowing capacity of $139 million and expires in November 2020. The commitment fee is currently 0.20% of the undrawn commitment amount.  As of March 31,September 30, 2019, $139 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the threenine months ended March 31,September 30, 2019 was 4.28%4.07% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K and Note 16 to the financial statements herein for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.


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 have commercial paper programs in place. Following is a summary as of March 31, 2019 as follows:September 30, 2019:
Company 
Expiration
Date
 
Amount
of
Facility
 Weighted Average Interest Rate on Borrowings (a) 
Amount
Outstanding as of
September 30, 2019
  
 (Dollars in Millions)
Entergy Arkansas VIE September 2021 $80 3.41% $30.3
Entergy Louisiana River Bend VIE September 2021 $105 3.37% $84.3
Entergy Louisiana Waterford VIE September 2021 $105 3.41% $65.5
System Energy VIE September 2021 $120 3.42% $53.6

Company 
Expiration
Date
 
Amount
of
Facility
 Weighted Average Interest Rate on Borrowings (a) 
Amount
Outstanding as of
March 31, 2019
  
 (Dollars in Millions)
Entergy Arkansas VIE September 2021 $80 3.50% $42.6
Entergy Louisiana River Bend VIE September 2021 $105 3.46% $95.4
Entergy Louisiana Waterford VIE September 2021 $105 3.48% $79.5
System Energy VIE September 2021 $120 3.45% $94.1


(a)Includes letter of credit fees and bank fronting fees on commercial paper issuances, if any, 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.


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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 March 31,September 30, 2019 as follows:
Company Description Amount
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 3.42% 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.


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Debt Issuances and Retirements


(Entergy Arkansas)


In March 2019, Entergy Arkansas issued $350 million of 4.20% Series first mortgage bonds due April 2049. Entergy Arkansas expects to useis using the proceeds for general corporate purposes.


(Entergy Louisiana)


In March 2019, Entergy Louisiana issued $525 million of 4.20% Series collateral trust mortgage bonds due April 2050. Entergy Louisiana expects to useis using the proceeds, together with other funds, to finance the construction of the Lake Charles Power Station and the St. Charles Power Station, and for general corporate purposes.


(Entergy Mississippi)

In June 2019, Entergy Mississippi issued $300 million of 3.85% Series mortgage bonds due June 2049. Entergy Mississippi used the proceeds to repay, at maturity, its $150 million of 6.64% Series mortgage bonds due July 2019 and for general corporate purposes.

(Entergy Texas)


In January 2019, Entergy Texas issued $300 million of 4.0% Series first mortgage bonds due March 2029 and $400 million of 4.5% Series first mortgage bonds due March 2039. Entergy Texas used the proceeds to repay, at maturity, its $500 million of 7.125% Series first mortgage bonds due February 2019 and for general corporate purposes.


In September 2019, Entergy Texas issued $300 million of 3.55% Series mortgage bonds due September 2049.
Entergy Texas is using the proceeds, together with other funds, to finance the construction of the Montgomery County Power Station, and for general corporate purposes.

(System Energy)


In March 2019, System Energy issued $134 million of 2.50% Series 2019 revenue refunding bonds due April 2022. The proceeds were used to redeem, prior to maturity, $134 million of 5.875% Series 1998 pollution control revenue refunding bonds due April 2022.





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Fair Value


The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31,September 30, 2019 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
$17,317,896
 
$17,613,263

$17,458,026
 
$18,628,268
Entergy Arkansas
$3,555,152
 
$3,471,105

$3,538,384
 
$3,621,073
Entergy Louisiana
$7,377,912
 
$7,665,243

$7,344,160
 
$8,038,675
Entergy Mississippi
$1,325,915
 
$1,332,283

$1,469,454
 
$1,586,199
Entergy New Orleans
$483,844
 
$510,959

$478,619
 
$522,688
Entergy Texas
$1,680,966
 
$1,755,754

$1,938,303
 
$2,128,842
System Energy
$610,798
 
$586,518

$570,001
 
$554,374


(a)The values excludefair value excludes lease obligations of $34 million at System Energy and long-term DOE obligations of $188$190 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, 2018 were as follows:
 
Book Value
of Long-Term Debt
 
Fair Value
of Long-Term Debt (a) (b)
 (In Thousands)
Entergy
$16,168,312
 
$15,880,239
Entergy Arkansas
$3,225,759
 
$3,002,627
Entergy Louisiana
$6,805,768
 
$6,834,134
Entergy Mississippi
$1,325,750
 
$1,276,452
Entergy New Orleans
$483,704
 
$491,569
Entergy Texas
$1,513,735
 
$1,528,828
System Energy
$630,750
 
$596,123


(a)The values exclude the lease obligations of $34 million at System Energy and long-term DOE obligations of $187 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.




NOTE 5.  STOCK-BASED COMPENSATION (Entergy Corporation)


Entergy grants stock and stock-based awards, which are described more fully in Note 12 to the financial statements in the Form 10-K.  Awards under Entergy’s plans generally vest over three years.




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Notes to Financial Statements


Stock Options


Entergy granted options on 693,161 shares of its common stock under the 2015 Equity Ownership Plan during the first quarter 2019 with a fair value of $8.32 per option.  As of March 31,September 30, 2019, there were options on 3,210,2372,515,896 shares of common stock outstanding with a weighted-average exercise price of $78.25.$78.53.  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 March 31,September 30, 2019.  The aggregate intrinsic value of the stock options outstanding as of March 31,September 30, 2019 was $55.8$97.7 million.

The following table includes financial information for outstanding stock options for the three months ended March 31,September 30, 2019 and 2018:
2019 20182019 2018
(In Millions)(In Millions)
Compensation expense included in Entergy’s net income
$1.0
 
$1.1

$0.9
 
$1.1
Tax benefit recognized in Entergy’s net income
$0.2
 
$0.3

$0.2
 
$0.2
Compensation cost capitalized as part of fixed assets and inventory
$0.3
 
$0.2
Compensation cost capitalized as part of fixed assets and materials and supplies
$0.4
 
$0.1


The following table includes financial information for outstanding stock options for the nine months ended September 30, 2019 and 2018:
 2019 2018
 (In Millions)
Compensation expense included in Entergy’s net income
$2.9
 
$3.3
Tax benefit recognized in Entergy’s net income
$0.7
 
$0.8
Compensation cost capitalized as part of fixed assets and materials and supplies
$1.0
 
$0.5


Other Equity Awards


In January 2019, the Board approved and Entergy granted 355,537 restricted stock awards and 180,824 long-term incentive awards under the 2015 Equity Ownership Plan.  The restricted stock awards were made effective as of January 31, 2019 and were valued at $89.19 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.  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 three-year vesting period.


In addition, long-term incentive awards were also 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. For the 2019-2021 performance period, performance will be measured based eighty80 percent on relative total shareholder return and twenty20 percent on a cumulative adjusted earnings per share metric.  The performance units were granted as of January 31, 2019 and eighty80 percent were valued at $102.07 per share based on various factors, primarily market conditions; and twenty20 percent were valued at $89.19 per share, the closing price of Entergy’s common stock on that date.  Performance units have the same dividend rights as shares of Entergy common stock and are considered issued and outstanding shares of Entergy upon vesting. Performance units are expensed ratably over the three-year vesting period and compensation cost for the portion of the award based on cumulative adjusted earnings per share will be adjusted based on the number of units that ultimately vest. See Note 12 to the financial statements in the Form 10-K for a description of the Long-Term Performance Unit Program.


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Notes to Financial Statements

The following table includes financial information for other outstanding equity awards for the three months ended March 31,September 30, 2019 and 2018:
2019 20182019 2018
(In Millions)(In Millions)
Compensation expense included in Entergy’s net income
$8.8
 
$8.8

$8.4
 
$8.5
Tax benefit recognized in Entergy’s net income
$2.2
 
$2.2

$2.1
 
$2.2
Compensation cost capitalized as part of fixed assets and inventory
$2.9
 
$2.3
Compensation cost capitalized as part of fixed assets and materials and supplies
$3.0
 
$2.5




The following table includes financial information for other outstanding equity awards for the nine months ended September 30, 2019 and 2018:
35
 2019 2018
 (In Millions)
Compensation expense included in Entergy’s net income
$25.6
 
$26.0
Tax benefit recognized in Entergy’s net income
$6.5
 
$6.6
Compensation cost capitalized as part of fixed assets and materials and supplies
$8.8
 
$7.3




Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements

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


Components of Qualified Net Pension Cost

Entergy’s qualified pension cost, including amounts capitalized, for the firstthird quarters of 2019 and 2018, included the following components:
2019 20182019 2018
(In Thousands)(In Thousands)
Service cost - benefits earned during the period
$33,607
 
$38,752

$33,553
 
$38,752
Interest cost on projected benefit obligation73,941
 66,854
73,261
 66,854
Expected return on assets(103,884) (110,535)(103,751) (110,535)
Amortization of prior service cost
 99

 99
Amortization of loss58,418
 68,526
Amortization of net loss60,395
 68,526
Settlement charges1,137
 
16,291
 
Net pension costs
$63,219
 
$63,696

$79,749
 
$63,696

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Notes to Financial Statements


Entergy’s qualified pension cost, including amounts capitalized, for the nine months ended September 30, 2019 and 2018, included the following components:
 2019 2018
 (In Thousands)
Service cost - benefits earned during the period
$100,766
 
$116,256
Interest cost on projected benefit obligation221,114
 200,562
Expected return on assets(311,494) (331,605)
Amortization of prior service cost
 297
Amortization of net loss177,233
 205,578
Settlement charges17,591
 
Net pension costs
$205,210
 
$191,088


The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the firstthird quarters of 2019 and 2018, included the following components:
2019 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
 Mississippi
 Entergy
New Orleans
 Entergy
Texas
 System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$5,261
 
$7,284
 
$1,629
 
$569
 
$1,350
 
$1,550
 
$5,260
 
$7,284
 
$1,629
 
$568
 
$1,350
 
$1,549
Interest cost on projected benefit obligation 14,175
 15,882
 4,068
 1,874
 3,613
 3,364
 14,175
 15,882
 4,068
 1,873
 3,613
 3,364
Expected return on assets (20,176) (22,652) (5,968) (2,696) (5,862) (4,678) (20,177) (22,651) (5,969) (2,696) (5,862) (4,678)
Amortization of loss 11,840
 11,643
 3,104
 1,529
 2,334
 2,850
Amortization of net loss 11,840
 11,643
 3,104
 1,529
 2,334
 2,850
Net pension cost 
$11,100
 
$12,157
 
$2,833
 
$1,276
 
$1,435
 
$3,086
 
$11,098
 
$12,158
 
$2,832
 
$1,274
 
$1,435
 
$3,085
2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$6,189
 
$8,446
 
$1,822
 
$673
 
$1,589
 
$1,776
 
$6,189
 
$8,446
 
$1,822
 
$673
 
$1,589
 
$1,776
Interest cost on projected benefit obligation 13,004
 14,940
 3,769
 1,813
 3,348
 3,227
 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) (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
Amortization of net 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
 
$10,754
 
$13,027
 
$2,699
 
$1,447
 
$1,040
 
$3,727


The Registrant Subsidiaries’ qualified pension cost, including amounts capitalized, for their employees for the nine months ended September 30, 2019 and 2018, included the following components:
2019 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
  (In Thousands)
Service cost - benefits earned during the period 
$15,782
 
$21,852
 
$4,887
 
$1,706
 
$4,050
 
$4,649
Interest cost on projected benefit obligation 42,525
 47,646
 12,204
 5,621
 10,837
 10,091
Expected return on assets (60,529) (67,955) (17,905) (8,089) (17,586) (14,032)
Amortization of net loss 35,522
 34,929
 9,313
 4,588
 7,002
 8,550
Net pension cost 
$33,300
 
$36,472
 
$8,499
 
$3,826
 
$4,303
 
$9,258

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Notes to Financial Statements

2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
 Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
  (In Thousands)
Service cost - benefits earned during the period 
$18,567
 
$25,338
 
$5,466
 
$2,019
 
$4,767
 
$5,328
Interest cost on projected benefit obligation 39,012
 44,820
 11,307
 5,439
 10,044
 9,681
Expected return on assets (65,553) (74,427) (19,506) (8,979) (19,569) (14,973)
Amortization of net loss 40,236
 43,350
 10,830
 5,862
 7,878
 11,145
Net pension cost 
$32,262
 
$39,081
 
$8,097
 
$4,341
 
$3,120
 
$11,181


Non-Qualified Net Pension Cost


Entergy recognized $4$4.6 million and $8.9$4.2 million in pension cost for its non-qualified pension plans in the firstthird quarters of 2019 and 2018, respectively. Reflected in the pension cost for non-qualified pension plans in the first quarterthird quarters of 2019 and 2018 were settlement charges of $4.4 million$955 thousand and $212 thousand, respectively, related to the payment of lump sum benefits out of the plan. Entergy recognized $16.3 million and $19.7 million in pension cost for its non-qualified pension plans for the nine months ended September 30, 2019 and 2018, respectively. Reflected in the pension cost for non-qualified pension plans for the nine months ended September 30, 2019 and 2018 were settlement charges of $4.6 million and $7 million, respectively, related to the payment of lump sum benefits out of the plan.


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Notes to Financial Statements


The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the firstthird quarters of 2019 and 2018:
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
(In Thousands)(In Thousands)
2019
$73
 
$43
 
$75
 
$5
 
$124

$67
 
$38
 
$69
 
$5
 
$119
2018
$132
 
$50
 
$80
 
$21
 
$137

$114
 
$42
 
$73
 
$20
 
$122


Reflected in Entergy Arkansas’s non-qualified pension costs in the firstthird quarter of 2018 were settlement charges of $12$7 thousand related to the payment of lump sum benefits out of the plan.


The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the nine months ended September 30, 2019 and 2018:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 (In Thousands)
2019
$211
 
$122
 
$257
 
$16
 
$365
2018
$369
 
$138
 
$230
 
$62
 
$529

Reflected in Entergy Mississippi’s non-qualified pension costs for the nine months ended September 30, 2019 were settlement charges of $40 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Arkansas’s non-qualified pension costs for the nine months ended September 30, 2018 were settlement charges of $30 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’s non-qualified pension costs for the nine months ended September 30, 2018 were settlement charges of $139 thousand related to the payment of lump sum benefits out of the plan.

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Notes to Financial Statements


Components of Net Other Postretirement Benefit Cost (Income)

Entergy’s other postretirement benefit cost (income), including amounts capitalized, for the firstthird quarters of 2019 and 2018, included the following components:
2019 20182019 2018
(In Thousands)(In Thousands)
Service cost - benefits earned during the period
$4,675
 
$6,782

$4,675
 
$6,782
Interest cost on accumulated postretirement benefit obligation (APBO)11,975
 12,681
11,975
 12,681
Expected return on assets(9,562) (10,373)(9,562) (10,373)
Amortization of prior service credit(8,844) (9,251)(8,844) (9,251)
Amortization of loss358
 3,432
Net other postretirement benefit cost
($1,398) 
$3,271
Amortization of net loss358
 3,432
Net other postretirement benefit cost (income)
($1,398) 
$3,271

Entergy’s other postretirement benefit cost (income), including amounts capitalized, for the nine months ended September 30, 2019 and 2018, included the following components:
 2019 2018
 (In Thousands)
Service cost - benefits earned during the period
$14,025
 
$20,346
Interest cost on accumulated postretirement benefit obligation (APBO)35,925
 38,043
Expected return on assets(28,686) (31,119)
Amortization of prior service credit(26,532) (27,753)
Amortization of net loss1,074
 10,296
Net other postretirement benefit cost (income)
($4,194) 
$9,813


The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for firstthird quarters of 2019 and 2018, included the following components:
2019 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New Orleans
 Entergy
Texas
 System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$591
 
$1,160
 
$262
 
$92
 
$236
 
$243
 
$591
 
$1,160
 
$262
 
$92
 
$236
 
$243
Interest cost on APBO 1,807
 2,666
 670
 395
 854
 476
 1,807
 2,666
 670
 395
 854
 476
Expected return on assets (3,991) 
 (1,199) (1,237) (2,276) (697) (3,991) 
 (1,199) (1,237) (2,276) (697)
Amortization of prior service credit (1,238) (1,837) (439) (171) (561) (363) (1,238) (1,837) (439) (171) (561) (363)
Amortization of (gain) loss 144
 (174) 181
 58
 121
 89
Net other postretirement benefit cost 
($2,687) 
$1,815
 
($525) 
($863) 
($1,626) 
($252)
Amortization of net (gain) loss 144
 (174) 181
 58
 121
 89
Net other postretirement benefit cost (income) 
($2,687) 
$1,815
 
($525) 
($863) 
($1,626) 
($252)



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Notes to Financial Statements


2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands) (In Thousands)
Service cost - benefits earned during the period 
$793
 
$1,556
 
$321
 
$129
 
$330
 
$306
 
$793
 
$1,556
 
$321
 
$129
 
$330
 
$306
Interest cost on APBO 1,997
 2,789
 683
 417
 939
 500
 1,997
 2,789
 683
 417
 939
 500
Expected return on assets (4,342) 
 (1,303) (1,313) (2,446) (783) (4,342) 
 (1,303) (1,313) (2,446) (783)
Amortization of prior service credit (1,278) (1,934) (456) (186) (579) (378) (1,278) (1,934) (456) (186) (579) (378)
Amortization of loss 289
 388
 377
 34
 206
 233
Net other postretirement benefit cost 
($2,541) 
$2,799
 
($378) 
($919) 
($1,550) 
($122)
Amortization of net loss 289
 388
 377
 34
 206
 233
Net other postretirement benefit cost (income) 
($2,541) 
$2,799
 
($378) 
($919) 
($1,550) 
($122)


The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the nine months ended September 30, 2019 and 2018, included the following components:
2019 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
  (In Thousands)
Service cost - benefits earned during the period 
$1,773
 
$3,480
 
$786
 
$276
 
$708
 
$729
Interest cost on APBO 5,421
 7,998
 2,010
 1,185
 2,562
 1,428
Expected return on assets (11,973) 
 (3,597) (3,711) (6,828) (2,091)
Amortization of prior service credit (3,714) (5,511) (1,317) (513) (1,683) (1,089)
Amortization of net (gain) loss 432
 (522) 543
 174
 363
 267
Net other postretirement benefit cost (income) 
($8,061) 
$5,445
 
($1,575) 
($2,589) 
($4,878) 
($756)

2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
  (In Thousands)
Service cost - benefits earned during the period 
$2,379
 
$4,668
 
$963
 
$387
 
$990
 
$918
Interest cost on APBO 5,991
 8,367
 2,049
 1,251
 2,817
 1,500
Expected return on assets (13,026) 
 (3,909) (3,939) (7,338) (2,349)
Amortization of prior service credit (3,834) (5,802) (1,368) (558) (1,737) (1,134)
Amortization of net loss 867
 1,164
 1,131
 102
 618
 699
Net other postretirement benefit cost (income) 
($7,623) 
$8,397
 
($1,134) 
($2,757) 
($4,650) 
($366)



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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 firstthird quarters of 2019 and 2018:
2019
Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total Qualified
Pension
Costs
 Other
Postretirement
Costs
 Non-Qualified
Pension Costs
 Total


(In Thousands)

 (In Thousands)  
Entergy







        
Amortization of prior service (cost) credit

$—


$5,375


($49)

$5,326
 
$—
 
$5,375
 
($50) 
$5,325
Amortization of loss
(18,735)
308

(561)
(18,988)
Amortization of net gain (loss) (20,686) 308
 (541) (20,919)
Settlement loss
(1,137)




(1,137) (16,257) 
 (373) (16,630)



($19,872)

$5,683


($610)

($14,799) 
($36,943) 
$5,683
 
($964) 
($32,224)
Entergy Louisiana







        
Amortization of prior service credit

$—


$1,838


$—


$1,838
 
$—
 
$1,837
 
$—
 
$1,837
Amortization of loss
(699)
174

(2)
(527)
Amortization of net gain (loss) (699) 174
 (1) (526)



($699)

$2,012


($2)

$1,311
 
($699) 
$2,011
 
($1) 
$1,311
2018 Qualified
Pension
Costs
 Other
Postretirement
Costs
 Non-Qualified
Pension Costs
 Total
Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total
 (In Thousands)  
(In Thousands)

Entergy        







Amortization of prior service (cost) credit 
($99) 
$5,595
 
($70) 
$5,426


($99)

$5,595


($71)

$5,425
Amortization of loss (21,957) (1,932) (1,063) (24,952)
Amortization of net loss
(21,958)
(1,932)
(850)
(24,740)
Settlement loss 
 
 (1,616) (1,616)




(76)
(76)
 
($22,056) 
$3,663
 
($2,749) 
($21,142)

($22,057)

$3,663


($997)

($19,391)
Entergy Louisiana        







Amortization of prior service credit 
$—
 
$1,934
 
$—
 
$1,934


$—


$1,934


$—


$1,934
Amortization of loss (867) (388) (2) (1,257)
Amortization of net loss
(867)
(388)
(2)
(1,257)
 
($867) 
$1,546
 
($2) 
$677


($867)

$1,546


($2)

$677



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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, 2019 and 2018:
2019
Qualified
Pension
Costs

Other
Postretirement
Costs

Non-Qualified
Pension Costs

Total


(In Thousands)

Entergy







Amortization of prior service (cost) credit

$—


$16,125


($148)

$15,977
Amortization of net gain (loss)
(58,156)
923

(1,655)
(58,888)
Settlement loss
(17,557)


(1,128)
(18,685)



($75,713)

$17,048


($2,931)

($61,596)
Entergy Louisiana







Amortization of prior service credit

$—


$5,511


$—


$5,511
Amortization of net gain (loss)
(2,096)
522

(4)
(1,578)



($2,096)

$6,033


($4)

$3,933
2018 Qualified
Pension
Costs
 Other
Postretirement
Costs
 Non-Qualified
Pension Costs
 Total
  (In Thousands)  
Entergy        
Amortization of prior service (cost) credit 
($297) 
$16,786
 
($211) 
$16,278
Amortization of net loss (65,870) (5,801) (2,832) (74,503)
Settlement loss 
 
 (2,098) (2,098)
  
($66,167) 
$10,985
 
($5,141) 
($60,323)
Entergy Louisiana        
Amortization of prior service credit 
$—
 
$5,802
 
$—
 
$5,802
Amortization of net loss (2,601) (1,164) (5) (3,770)
  
($2,601) 
$4,638
 
($5) 
$2,032


Employer Contributions


Based on current assumptions, Entergy expects to contribute $176.9 million to its qualified pension plans in 2019.  As of March 31,September 30, 2019, Entergy had contributed $11.7$123.1 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 2019:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands)
Expected 2019 pension contributions
$27,112
 
$26,451
 
$7,701
 
$1,800
 
$1,645
 
$8,285
Pension contributions made through September 2019
$18,222
 
$18,272
 
$5,186
 
$1,237
 
$1,192
 
$5,631
Remaining estimated pension contributions to be made in 2019
$8,890
 
$8,179
 
$2,515
 
$563
 
$453
 
$2,654



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Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 (In Thousands)
Expected 2019 pension contributions
$27,112
 
$26,451
 
$7,701
 
$1,800
 
$1,645
 
$8,285
Pension contributions made through March 2019
$454
 
$1,914
 
$156
 
$111
 
$286
 
$290
Remaining estimated pension contributions to be made in 2019
$26,658
 
$24,537
 
$7,545
 
$1,689
 
$1,359
 
$7,995



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 March 31,September 30, 2019 are Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of 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 firstthird quarters of 2019 and 2018 is as follows:
 Utility 
Entergy
Wholesale
Commodities
 All Other Eliminations Entergy Utility 
Entergy
Wholesale
Commodities
 All Other Eliminations Entergy
 (In Thousands) (In Thousands)
2019                    
Operating revenues 
$2,175,982
 
$433,612
 
$—
 
($10) 
$2,609,584
 
$2,840,222
 
$300,363
 
$9
 
($19) 
$3,140,575
Income taxes 
($11,564) 
$65,908
 
($11,573) 
$—
 
$42,771
 
$71,698
 
($30,855) 
($11,642) 
$—
 
$29,201
Consolidated net income (loss) 
$234,147
 
$97,079
 
($40,682) 
($31,898) 
$258,646
 
$581,964
 
($140,501) 
($40,105) 
($31,899) 
$369,459
Total assets as of March 31, 2019 
$46,502,826
 
$5,065,643
 
$719,602
 
($2,682,690) 
$49,605,381
2018                    
Operating revenues 
$2,304,990
 
$418,924
 
$—
 
($33) 
$2,723,881
 
$2,724,279
 
$380,080
 
$—
 
($40) 
$3,104,319
Income taxes 
$52,224
 
($1,078) 
($7,483) 
$—
 
$43,663
 
($137,035) 
($135,659) 
($10,312) 
$—
 
($283,006)
Consolidated net income (loss) 
$217,940
 
($17,779) 
($32,063) 
($31,898) 
$136,200
 
$507,745
 
$105,571
 
($41,601) 
($31,897) 
$539,818
Total assets as of December 31, 2018 
$44,777,167
 
$5,459,275
 
$733,366
 
($2,694,742) 
$48,275,066


Entergy’s segment financial information for the nine months ended September 30, 2019 and 2018 is as follows:
  Utility 
Entergy
Wholesale
Commodities
 All Other Eliminations Entergy
  (In Thousands)
2019          
Operating revenues $7,392,641 $1,023,757 $11 
($42) $8,416,367
Income taxes $81,283 $25,763 
($33,616) 
$—
 $73,430
Consolidated net income (loss) $1,150,863 
($68,804) 
($117,725) 
($95,695) $868,639
Total assets as of September 30, 2019 $48,348,371 $4,122,007 $501,983 
($2,466,093) $50,506,268
2018          
Operating revenues $7,389,477 $1,107,606 
$—
 
($113) $8,496,970
Income taxes 
($325,134) 
($166,882) 
($27,921) 
$—
 
($519,937)
Consolidated net income (loss) $1,104,078 $31,456 
($114,962) 
($95,695) $924,877
Total assets as of December 31, 2018 $44,777,167 $5,459,275 $733,366 
($2,694,742) $48,275,066

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.




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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 shut down and sell all of the remaining plants in the merchant nuclear fleet. These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions.


Total restructuring charges for the firstthird quarters of 2019 and 2018 were comprised of the following:
 2019 2018
 
Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total
 (In Millions)
Balance as of January 1,
$179
 
$14
 
$193
 
$83
 
$14
 
$97
Restructuring costs accrued34
 
 34
 26
 
 26
Balance as of March 31,
$213
 
$14
 
$227
 
$109
 
$14
 
$123
 2019 2018
 
Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total
 (In Millions)
Balance as of July 1,
$181
 
$14
 
$195
 
$143
 
$14
 
$157
Restructuring costs accrued14
 
 14
 43
 
 43
Cash paid out86
 
 86
 
 
 
Balance as of September 30,
$109
 
$14
 
$123
 
$186
 
$14
 
$200


In addition, Entergy Wholesale Commodities incurred $74$8 million in the firstthird quarter 2019 and $73$155 million in the firstthird quarter 2018 of impairment and other related charges associated with these strategic decisions and transactions.


Total restructuring charges for the nine months ended September 30, 2019 and 2018 were comprised of the following:
 2019 2018
 Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total Employee retention and severance
expenses and other benefits-related costs
 Contracted economic development costs Total
 (In Millions)
Balance as of January 1,
$179
 
$14
 
$193
 
$83
 
$14
 
$97
Restructuring costs accrued70
 
 70
 103
 
 103
Cash paid out140
 
 140
 
 
 
Balance as of September 30,
$109
 
$14
 
$123
 
$186
 
$14
 
$200

In addition, Entergy Wholesale Commodities incurred $98 million in the nine months ended September 30, 2019 and $297 million in the nine months ended September 30, 2018 of impairment and other related charges associated with these strategic decisions and transactions.


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Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses associated with management’s strategy to exit the merchant power business of approximately $130$100 million in 2019, of which $34$70 million has been incurred as of March 31,September 30, 2019, and a total of approximately $110$135 million from 2020 through mid-2022.2022.


Registrant Subsidiaries


Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business.  Each of the Registrant Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.




NOTE 8.  RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)


Market Risk


In the normal course of business, Entergy is exposed to a number of market risks.  Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument.  All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk.  Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.


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Notes to Financial Statements


The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation.  To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.


As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in the day ahead or spot markets.  In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk.  When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.


Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity.  For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk.  A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk.  Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace.  Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies.  Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods.  These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.


Derivatives


Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions

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Notes to Financial Statements

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 March 31,September 30, 2019 is approximately 21.5 years.  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 98%97% for the remainder of 2019, of which approximately 72% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for the remainder of 2019 is 18.66.1 TWh.


Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guarantee, 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.


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Notes to Financial Statements


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 March 31,September 30, 2019, there were no derivative contracts with seven counterparties were in a liability position (approximately $49 million total).position. In addition to the corporate guarantee, $19$13 million in cash collateral were required to be posted by the Entergy subsidiary to its counterparties and $1$2 million in cash and $4$48 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2018, derivative contracts with six6 counterparties were in a liability position (approximately $34 million total). In addition to the corporate guarantee, $19 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 manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of natural gas swaps and options that financially settle against either the average Henry Hub Gas Daily prices or the NYMEX Henry Hub. These swaps and options 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 price volatility for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy New Orleans. The maximum length of time over which Entergy has executed natural gas swaps and options as of March 31,September 30, 2019 is 54.5 years for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of March 31,September 30, 2019 is 76 months each for Entergy Mississippi.Mississippi and Entergy New Orleans. The total volume of natural gas swaps and options outstanding as of March 31,September 30, 2019 is 45,740,00040,346,000 MMBtu for Entergy, including 36,540,00032,880,000 MMBtu for Entergy Louisiana, and 9,200,0006,210,000 MMBtu for Entergy Mississippi.Mississippi, and 1,256,000 for Entergy New Orleans. Credit support for these natural gas swaps and options is covered by master agreements that do not require Entergy to provide collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.



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Notes to Financial Statements

During the second quarter 2018,2019, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 20182019 through May 31, 2019.2020. 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 March 31,September 30, 2019 is 18,92879,459 GWh for Entergy, including 4,09917,898 GWh for Entergy Arkansas, 8,23536,474 GWh for Entergy Louisiana, 2,52010,087 GWh for Entergy Mississippi, 9483,751 GWh for Entergy New Orleans, and 3,04710,931 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 March 31,September 30, 2019 and December 31, 2018. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Mississippi as of September 30, 2019 and Entergy Mississippi and Entergy Texas as of March 31, 2019 and December 31, 2018.



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Notes to Financial Statements

The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of March 31,September 30, 2019 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) $35 ($5) $30 Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $14 ($2) $12 Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities (current portion) $5 ($5) $— Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $2 ($2) $— Entergy Wholesale Commodities
Derivatives not designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $9 ($3) $6 Entergy Wholesale Commodities
Natural gas swaps and options Other deferred debits and other assets (non-current portion) $1 $— $1 Utility
Financial transmission rights Prepayments and other $17 ($1) $16 Utility and Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities
(current portion)
 $4 ($4) $— Entergy Wholesale Commodities
Natural gas swaps and options Other current liabilities
(current portion)
 $4 $— $4 Utility
Natural gas swaps and options Other non-current liabilities (non-current portion) $1 $— $1 Utility

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Notes to Financial Statements

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) $6 ($6) $— Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $3 ($3) $— Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities (current portion) $45 ($9) $36 Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $16 ($3) $13 Entergy Wholesale Commodities
Derivatives not designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $9 ($6) $3 Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $2 ($2) $— Entergy Wholesale Commodities
Natural gas swaps and options Other deferred debits and other assets (non-current portion) $1 $— $1 Utility
Financial transmission rights Prepayments and other $6 ($1) $5 Utility and Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities
(current portion)
 $2 ($2) $— Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $2 ($2) $— Entergy Wholesale Commodities
Natural gas swaps and options Other current liabilities $1 $— $1 Utility

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Notes to Financial Statements


The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 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 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) $32 ($32) $— Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $7 ($7) $— Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities (current portion) $54 ($33) $21 Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $20 ($7) $13 Entergy Wholesale Commodities
Derivatives not designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $4 ($2) $2 Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $1 $— $1 Entergy Wholesale Commodities
Natural gas swaps and options Other deferred debits and other assets (non-current portion) $2 $— $2 Utility
Financial transmission rights Prepayments and other $16 ($1) $15 Utility and Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities (current portion) $1 ($1) $— Entergy Wholesale Commodities
Natural gas swaps and options Other current liabilities $1 $— $1 Utility

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) $32 ($32) $— Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $7 ($7) $— Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities (current portion) $54 ($33) $21 Entergy Wholesale Commodities
Electricity swaps and options Other non-current liabilities (non-current portion) $20 ($7) $13 Entergy Wholesale Commodities
Derivatives not designated as hedging instruments          
Assets:          
Electricity swaps and options Prepayments and other (current portion) $4 ($2) $2 Entergy Wholesale Commodities
Electricity swaps and options Other deferred debits and other assets (non-current portion) $1 $— $1 Entergy Wholesale Commodities
Natural gas swaps and options Other deferred debits and other assets (non-current portion) $2 $— $2 Utility
Financial transmission rights Prepayments and other $16 ($1) $15 Utility and Entergy Wholesale Commodities
Liabilities:          
Electricity swaps and options Other current liabilities (current portion) $1 ($1) $— Entergy Wholesale Commodities
Natural gas swaps and options Other current liabilities $1 $— $1 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$2 million held and $19$13 million posted as of March 31,September 30, 2019 and $19 million posted as of December 31, 2018. Also excludes letters of credit in the amount of $4$48 million held and $2 million posted as of March 31,September 30, 2019 and $4 million posted as of December 31, 2018.


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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 March 31,September 30, 2019 and 2018 are as follows:
Instrument Amount of gain recognized in other
comprehensive income
 Income Statement location Amount of gain (loss)
reclassified from
accumulated other comprehensive income into income (a)
 
Amount of gain (loss)
recognized in other
comprehensive income
 Income Statement location 
Amount of gain
reclassified from
accumulated other comprehensive income into income (a)

 (In Millions) (In Millions) (In Millions) (In Millions)
2019  
Electricity swaps and options $26 Competitive businesses operating revenues $52 ($7) Competitive businesses operating revenues $19
  
2018  
Electricity swaps and options $91 Competitive businesses operating revenues ($30) ($51) Competitive businesses operating revenues ($11)

(a)Before taxes of $4 million and ($2) million for the three months ended September 30, 2019 and 2018, 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, 2019 and 2018 are as follows:
Instrument 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)
2019      
Electricity swaps and options $145 Competitive businesses operating revenues $76
       
2018      
Electricity swaps and options ($40) Competitive businesses operating revenues ($38)

    
(a)Before taxes of $11$16 million and ($6)8) million for the threenine months ended March 31,September 30, 2019 and 2018, respectively


Prior to the adoption of ASU 2017-12, Entergy measured its hedges for ineffectiveness. Any ineffectiveness was recognized in earnings during the period. The ineffective portion of cash flow hedges was recorded in competitive businesses operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the three months ended March 31,September 30, 2018 was $13.3($3.1) million. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness during the nine months ended September 30, 2018 was ($5.2) million.


Based on market prices as of March 31,September 30, 2019, unrealized gains (losses) recorded in accumulated other comprehensive income on cash flow hedges relating to power sales totaled ($53)$42 million of net unrealized losses.  Approximately ($39)$30 million is expected to be reclassified from accumulated other comprehensive income to

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operating revenues in the next twelve months.  The actual amount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices.    


Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation.  Gains or losses accumulated in other comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are included in income as the original hedged transaction occurs. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.



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The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended March 31,September 30, 2019 and 2018 are as follows:
Instrument
Amount of gain (loss) recognized in accumulated other comprehensive income
Income Statement

location

Amount of gain (loss)

recorded in the income statement
  (In Millions)   (In Millions)
2019 
    
Natural gas swaps and options $— Fuel, fuel-related expenses, and gas purchased for resale(a)($1)2)
Financial transmission rights
$—
Purchased power expense(b)$2125
Electricity swaps and options $—(c)Competitive business operating revenues $51
       
2018      
Natural gas swaps $— Fuel, fuel-related expenses, and gas purchased for resale(a)$—
Financial transmission rights $— Purchased power expense(b)$3231
Electricity swaps and options$—(c)Competitive business operating revenues($2)


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The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the nine months ended September 30, 2019 and 2018 are as follows:
Instrument
Amount of gain (loss) recognized in accumulated other comprehensive income
Income Statement
location

Amount of gain (loss)
recorded in the income statement
(In Millions)(In Millions)
2019
Natural gas swaps and options$—Fuel, fuel-related expenses, and gas purchased for resale(a)($9)
Financial transmission rights
$—
Purchased power expense(b)$78
Electricity swaps and options $—(c)Competitive business operating revenues $14
2018
Natural gas swaps$—Fuel, fuel-related expenses, and gas purchased for resale(a)$5
Financial transmission rights$—Purchased power expense(b)$104
Electricity swaps and options$—(c)Competitive business operating revenues$—



(a)Due to regulatory treatment, the natural gas swaps and options 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 and options 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 recognized in accumulated other comprehensive income from electricity swaps and options de-designated as hedged items.




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The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of March 31,September 30, 2019 are 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) Offset (b) Net (c) (d) Registrant Balance Sheet Location Fair Value (a) Offset (b) Net (c) (d) Registrant
 (In Millions)  (In Millions) 
Assets:        
Natural gas swaps and options Prepayments and other $0.2 $— $0.2 Entergy Louisiana Prepayments and other $0.1 $— $0.1 Entergy Louisiana
Natural gas swaps and options Other deferred debits and other assets (non-current portion) $1.3 $— $1.3 Entergy Louisiana Other deferred debits and other assets (non-current portion) $1.0 $— $1.0 Entergy Louisiana
        
Financial transmission rights Prepayments and other $1.2 ($0.1) $1.1 Entergy Arkansas Prepayments and other $4.0 ($0.1) $3.9 Entergy Arkansas
Financial transmission rights Prepayments and other $2.8 $— $2.8 Entergy Louisiana Prepayments and other $9.1 $— $9.1 Entergy Louisiana
Financial transmission rights Prepayments and other $0.7 $— $0.7 Entergy Mississippi Prepayments and other $1.5 $— $1.5 Entergy Mississippi
Financial transmission rights Prepayments and other $0.5 $— $0.5 Entergy New Orleans Prepayments and other $0.7 $— $0.7 Entergy New Orleans
Financial transmission rights Prepayments and other $0.3 ($0.6) ($0.3) Entergy Texas Prepayments and other $1.7 ($0.4) $1.3 Entergy Texas
        
Liabilities:        
Natural gas swaps and options Other current liabilities 
$0.3
 
$—
 
$0.3
 Entergy Louisiana Other current liabilities $2.2 $— $2.2 Entergy Louisiana
Natural gas swaps and options Other non-current liabilities $1.4 $— $1.4 Entergy Louisiana
Natural gas swaps Other current liabilities 
$0.8
 
$—
 
$0.8
 Entergy Mississippi Other current liabilities $1.1 $— $1.1 Entergy Mississippi
Natural gas swaps Other current liabilities $0.1 $— $0.1 Entergy New Orleans




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The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2018 are as follows:
Instrument Balance Sheet Location Fair Value (a) Offset (b) Net (c) (d) Registrant
    (In Millions)  
Assets:          
Natural gas swaps and options Prepayments and other $0.3 $— $0.3 Entergy Louisiana
Natural gas swaps and options Other deferred debits and other assets $1.6 $— $1.6 Entergy Louisiana
           
Financial transmission rights Prepayments and other $3.6 ($0.2) $3.4 Entergy Arkansas
Financial transmission rights Prepayments and other $8.4 ($0.1) $8.3 Entergy Louisiana
Financial transmission rights Prepayments and other $2.2 $— $2.2 Entergy Mississippi
Financial transmission rights Prepayments and other $1.3 $— $1.3 Entergy New Orleans
           
Liabilities:          
Financial transmission rights Other current liabilities $0.9 ($1.4) ($0.5) Entergy Texas
           
Natural gas swaps and options Other current liabilities $1.1 $— $1.1 Entergy Louisiana
Natural gas swaps Other current liabilities $0.1 $— $0.1 Entergy New Orleans


(a)Represents the gross amounts of recognized assets/liabilities
(b)Represents the netting of fair value balances with the same counterparty
(c)Represents the net amounts of assets/liabilities presented on the Registrant Subsidiaries’ balance sheets
(d)As of March 31,September 30, 2019, letters of credit posted with MISO covered financial transmission rights exposure of $0.4$0.2 million for Entergy Mississippi and $1.5 million for Entergy Texas.Mississippi. As of December 31, 2018, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi, and $4.1 million for Entergy Texas.






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The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended March 31,September 30, 2019 and 2018 are as follows:
Instrument
Income Statement Location
Amount of gain

(loss) recorded

in the income statement

Registrant
    (In Millions)  
2019
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale$0.8(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($1.8)(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$0.2(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$8.4(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$8.8(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$1.1(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$1.9(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$0.3(b)Entergy Texas
2018      
Natural gas swaps Fuel, fuel-related expenses, and gas purchased for resale ($0.2)1.7)(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.3)(a)Entergy Mississippi
Natural gas swaps Fuel, fuel-related expenses, and gas purchased for resale ($0.1)(a)Entergy New Orleans
       
Financial transmission rights Purchased power expense $8.03.5(b)Entergy Arkansas
Financial transmission rights Purchased power expense $17.614.4(b)Entergy Louisiana
Financial transmission rights Purchased power expense $7.81.9(b)Entergy Mississippi
Financial transmission rightsPurchased power expense($0.3)(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$5.5(b)Entergy Texas
2018
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($0.7)(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$0.1(a)Entergy Mississippi
Financial transmission rightsPurchased power expense$10.1(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$13.8(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$5.4(b)Entergy Mississippi
Financial transmission rights Purchased power expense $3.32.0(b)Entergy New Orleans
Financial transmission rights Purchased power expense ($3.5)0.4)(b)Entergy Texas



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The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the nine months ended September 30, 2019 and 2018 are as follows:
Instrument
Income Statement Location
Amount of gain
(loss) recorded
in the income statement

Registrant
(In Millions)
2019
Natural gas swaps and optionsFuel, fuel-related expenses, and gas purchased for resale($3.6)(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale($5.5)(a)Entergy Mississippi
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$0.1(a)Entergy New Orleans
Financial transmission rightsPurchased power expense$15.4(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$40.9(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$5.3(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$2.2(b)Entergy New Orleans
Financial transmission rightsPurchased power expense$13.6(b)Entergy Texas
2018
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$4.2(a)Entergy Louisiana
Natural gas swapsFuel, fuel-related expenses, and gas purchased for resale$0.9(a)Entergy Mississippi
Financial transmission rightsPurchased power expense$20.1(b)Entergy Arkansas
Financial transmission rightsPurchased power expense$57.2(b)Entergy Louisiana
Financial transmission rightsPurchased power expense$23.0(b)Entergy Mississippi
Financial transmission rightsPurchased power expense$10.5(b)Entergy New Orleans
Financial transmission rightsPurchased power expense($5.6)(b)Entergy Texas


(a)Due to regulatory treatment, the natural gas swaps and options 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 and options 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.


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 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


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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 swaps traded on exchanges with active markets.  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 and gas swaps and options valued using observable inputs.


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.


The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Business Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accounting group.  The primary functions of the Business Unit Risk Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations


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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 partythird-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 monthlyquarterly 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 groups review these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Business Unit Risk Control groups report to the Vice President and Treasurer.  The Accounting Policy and Entergy Wholesale Commodities Accounting groups report to the Chief Accounting Officer.





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The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of March 31,September 30, 2019 and December 31, 2018.  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.
2019 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
 (In Millions) (In Millions)
Assets:                
Temporary cash investments 
$865
 
$—
 
$—
 
$865
 
$885
 
$—
 
$—
 
$885
Decommissioning trust funds (a):                
Equity securities 1,357
 
 
 1,357
 836
 
 
 836
Debt securities 1,320
 1,672
 
 2,992
 1,214
 1,754
 
 2,968
Common trusts (b)       2,529
       2,325
Power contracts 
 
 3
 3
 
 
 48
 48
Securitization recovery trust account 52
 
 
 52
 55
 
 
 55
Escrow accounts 405
 
 
 405
 410
 
 
 410
Gas hedge contracts 1
 
 
 1
 
 1
 
 1
Financial transmission rights 
 
 5
 5
 
 
 16
 16
 
$4,000
 
$1,672
 
$8
 
$8,209
 
$3,400
 
$1,755
 
$64
 
$7,544
                
Liabilities:                
Power contracts 
$—
 
$—
 
$49
 
$49
Gas hedge contracts 1
 
 
 1
 
$4
 
$1
 
$—
 
$5
 
$1
 
$—
 
$49
 
$50


2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$424
 
$—
 
$—
 
$424
Decommissioning trust funds (a):        
Equity securities 1,686
 
 
 1,686
Debt securities 1,259
 1,625
 
 2,884
Common trusts (b)       2,350
Power contracts 
 
 3
 3
Securitization recovery trust account 51
 
 
 51
Escrow accounts 403
 
 
 403
Gas hedge contracts 
 2
 
 2
Financial transmission rights 
 
 15
 15
  
$3,823
 
$1,627
 
$18
 
$7,818
Liabilities:        
Power contracts 
$—
 
$—
 
$34
 
$34
Gas hedge contracts 1
 
 
 1
  
$1
 
$—
 
$34
 
$35

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$424
 
$—
 
$—
 
$424
Decommissioning trust funds (a):        
Equity securities 1,686
 
 
 1,686
Debt securities 1,259
 1,625
 
 2,884
Common trusts (b)       2,350
Power contracts 
 
 3
 3
Securitization recovery trust account 51
 
 
 51
Escrow accounts 403
 
 
 403
Gas hedge contracts 
 2
 
 2
Financial transmission rights 
 
 15
 15
  
$3,823
 
$1,627
 
$18
 
$7,818
Liabilities:        
Power contracts 
$—
 
$—
 
$34
 
$34
Gas hedge contracts 1
 
 
 1
  
$1
 
$—
 
$34
 
$35

(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.

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(b)Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2019 and 2018:
 2019 2018
 Power Contracts Financial transmission rights Power Contracts Financial transmission rights

(In Millions)
Balance as of January 1,
($31) 
$15
 
($65) 
$21
Total gains (losses) for the period (a)       
Included in earnings5
 
 14
 (1)
Included in other comprehensive income26
 
 91
 
Included as a regulatory liability/asset
 11
 
 20
Settlements(46) (21) 35
 (32)
Balance as of March 31,
($46) 
$5
 
$75
 
$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 ($4.9) million for the three months ended March 31, 2019 and $0.2 million for the three months ended March 31, 2018.

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 March 31, 2019:
Transaction Type
Fair Value
as of
March 31, 2019
Significant
Unobservable Inputs
Range
from
Average
%
Effect on
Fair Value
(In Millions)(In Millions)
Power contracts - electricity swaps($46)Unit contingent discount+/-4% - 4.75%($5) - ($6)

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

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 2019 and December 31, 2018.  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.


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Entergy Arkansas
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$189.5
 
$—
 
$—
 
$189.5
Decommissioning trust funds (a):        
Equity securities 5.5
 
 
 5.5
Debt securities 99.2
 291.8
 
 391.0
Common trusts (b)       600.8
Securitization recovery trust account 8.2
 
 
 8.2
Financial transmission rights 
 
 1.1
 1.1
  
$302.4
 
$291.8
 
$1.1
 
$1,196.1

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Decommissioning trust funds (a):        
Equity securities 
$4.0
 
$—
 
$—
 
$4.0
Debt securities 94.8
 286.5
 
 381.3
Common trusts (b)       526.7
Securitization recovery trust account 4.7
 
 
 4.7
Financial transmission rights 
 
 3.4
 3.4
  
$103.5
 
$286.5
 
$3.4
 
$920.1

Entergy Louisiana
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$237.0
 
$—
 
$—
 
$237.0
Decommissioning trust funds (a):        
Equity securities 10.4
 
 
 10.4
Debt securities 184.6
 371.1
 
 555.7
Common trusts (b)       841.9
Escrow accounts 291.2
 
 
 291.2
Securitization recovery trust account 9.0
 
 
 9.0
Gas hedge contracts 1.5
 
 
 1.5
Financial transmission rights 
 
 2.8
 2.8
  
$733.7
 
$371.1
 
$2.8
 
$1,949.5
         
Liabilities:        
Gas hedge contracts 
$0.3
 
$—
 
$—
 
$0.3


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Notes to Financial Statements

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$43.1
 
$—
 
$—
 
$43.1
Decommissioning trust funds (a):  
  
  
  
Equity securities 13.3
 
 
 13.3
Debt securities 162.0
 370.9
 
 532.9
Common trusts (b)       738.8
Escrow accounts 289.5
 
 
 289.5
Securitization recovery trust account 3.6
 
 
 3.6
Gas hedge contracts 
 1.9
 
 1.9
Financial transmission rights 
 
 8.3
 8.3
  
$511.5
 
$372.8
 
$8.3
 
$1,631.4
         
Liabilities:        
Gas hedge contracts 
$0.7
 
$0.4
 
$—
 
$1.1

Entergy Mississippi
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Escrow accounts $32.6 
$—
 
$—
 $32.6
Financial transmission rights 
 
 0.7
 0.7
  
$32.6
 
$—
 
$0.7
 
$33.3
         
Liabilities:        
Gas hedge contracts 
$0.8
 
$—
 
$—
 
$0.8

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$36.9
 
$—
 
$—
 
$36.9
Escrow accounts 32.4
 
 
 32.4
Financial transmission rights 
 
 2.2
 2.2
  
$69.3
 
$—
 
$2.2
 
$71.5

Entergy New Orleans
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Securitization recovery trust account 
$5.1
 
$—
 
$—
 
$5.1
Escrow accounts 81.3
 
 
 81.3
Financial transmission rights 
 
 0.5
 0.5
  
$86.4
 
$—
 
$0.5
 
$86.9


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2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$19.7
 
$—
 
$—
 
$19.7
Securitization recovery trust account 2.2
 
 
 2.2
Escrow accounts 80.9
 
 
 80.9
Financial transmission rights 
 
 1.3
 1.3
  
$102.8
 
$—
 
$1.3
 
$104.1
         
Liabilities:        
Gas hedge contracts 
$0.1
 
$—
 
$—
 
$0.1

Entergy Texas
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:
        
Temporary cash investments 
$22.2
 
$—
 
$—
 
$22.2
Securitization recovery trust account 29.5
 
 
 29.5
  
$51.7
 
$—
 
$—
 
$51.7
         
Liabilities:        
Financial transmission rights 
$—
 
$—
 
$0.3
 
$0.3

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:
        
Securitization recovery trust account 
$40.2
 
$—
 
$—
 
$40.2
         
Liabilities:        
Financial transmission rights 
$—
 
$—
 
$0.5
 
$0.5

System Energy
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$158.2
 
$—
 
$—
 
$158.2
Decommissioning trust funds (a):        
Equity securities 4.7
 
 
 4.7
Debt securities 226.8
 148.4
 
 375.2
Common trusts (b)       571.4
  
$389.7
 
$148.4
 
$—
 
$1,109.5


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2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$95.6
 
$—
 
$—
 
$95.6
Decommissioning trust funds (a):        
Equity securities 4.4
 
 
 4.4
Debt securities 224.5
 139.7
 
 364.2
Common trusts (b)       500.9
  
$324.5
 
$139.7
 
$—
 
$965.1


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


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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2019.September 30, 2019 and 2018:
 2019 2018
 Power Contracts Financial transmission rights Power Contracts Financial transmission rights
 (In Millions)
Balance as of July 1,
$72
 
$29
 
($25) 
$41
Total gains (losses) for the period (a)       
Included in earnings1
 
 (4) 
Included in other comprehensive income(7) 
 (51) 
Included as a regulatory liability/asset
 12
 
 19
Settlements(18) (25) 13
 (31)
Balance as of September 30,
$48
 
$16
 
($67) 
$29


(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($1.2) million for the three months ended September 30, 2019 and $1.7 million for the three months ended September 30, 2018.

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, 2019 and 2018:
 2019 2018
 Power Contracts Financial transmission rights Power Contracts Financial transmission rights

(In Millions)
Balance as of January 1,
($31) 
$15
 
($65) 
$21
Total gains (losses) for the period (a)       
Included in earnings4
 
 (5) (1)
Included in other comprehensive income145
 
 (40) 
Included as a regulatory liability/asset
 44
 
 67
Issuances of financial transmission rights
 35
 
 46
Settlements(70) (78) 43
 (104)
Balance as of September 30,
$48
 
$16
 
($67) 
$29


(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is ($4.7) million for the nine months ended September 30, 2019 and $1.1 million for the nine months ended September 30, 2018.


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The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification as of September 30, 2019:
Transaction TypeFair Value
Significant
Unobservable Inputs
Range
from
Average
%
Effect on
Fair Value
(In Millions)(In Millions)
Power contracts - electricity swaps$48Unit contingent discount+/-4% - 4.75%$4 - $5


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:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 (In Millions)
Balance as of January 1,
$3.4
 
$8.3
 
$2.2
 
$1.3
 
($0.5)
Gains (losses) included as a regulatory liability/asset6.1
 3.3
 (0.4) 1.1
 0.5
Settlements(8.4) (8.8) (1.1) (1.9) (0.3)
Balance as of March 31,
$1.1
 
$2.8
 
$0.7
 
$0.5
 
($0.3)
Significant
Unobservable
Input
Transaction TypePositionChange to Input
Effect on
Fair Value
Unit contingent discountElectricity swapsSellIncrease (Decrease)Decrease (Increase)


The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of September 30, 2019 and December 31, 2018.  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
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$76.7
 
$—
 
$—
 
$76.7
Decommissioning trust funds (a):        
Equity securities 6.2
 
 
 6.2
Debt securities 101.4
 306.3
 
 407.7
Common trusts (b)       631.9
Securitization recovery trust account 7.9
 
 
 7.9
Financial transmission rights 
 
 3.9
 3.9
  
$192.2
 
$306.3
 
$3.9
 
$1,134.3

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Decommissioning trust funds (a):        
Equity securities 
$4.0
 
$—
 
$—
 
$4.0
Debt securities 94.8
 286.5
 
 381.3
Common trusts (b)       526.7
Securitization recovery trust account 4.7
 
 
 4.7
Financial transmission rights 
 
 3.4
 3.4
  
$103.5
 
$286.5
 
$3.4
 
$920.1



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Entergy Louisiana
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$127.8
 
$—
 
$—
 
$127.8
Decommissioning trust funds (a):        
Equity securities 5.3
 
 
 5.3
Debt securities 183.7
 409.7
 
 593.4
Common trusts (b)       886.9
Escrow accounts 294.5
 
 
 294.5
Securitization recovery trust account 10.1
 
 
 10.1
Gas hedge contracts 0.1
 1.0
 
 1.1
Financial transmission rights 
 
 9.1
 9.1
  
$621.5
 
$410.7
 
$9.1
 
$1,928.2
         
Liabilities:        
Gas hedge contracts 
$2.2
 
$1.4
 
$—
 
$3.6

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$43.1
 
$—
 
$—
 
$43.1
Decommissioning trust funds (a):  
  
  
  
Equity securities 13.3
 
 
 13.3
Debt securities 162.0
 370.9
 
 532.9
Common trusts (b)       738.8
Escrow accounts 289.5
 
 
 289.5
Securitization recovery trust account 3.6
 
 
 3.6
Gas hedge contracts 
 1.9
 
 1.9
Financial transmission rights 
 
 8.3
 8.3
  
$511.5
 
$372.8
 
$8.3
 
$1,631.4
         
Liabilities:        
Gas hedge contracts 
$0.7
 
$0.4
 
$—
 
$1.1


Entergy Mississippi
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$98.9
 
$—
 
$—
 
$98.9
Escrow accounts 33.0
 
 
 33.0
Financial transmission rights 
 
 1.5
 1.5
  
$131.9
 
$—
 
$1.5
 
$133.4
         
Liabilities:        
Gas hedge contracts 
$1.1
 
$—
 
$—
 
$1.1


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2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$36.9
 
$—
 
$—
 
$36.9
Escrow accounts 32.4
 
 
 32.4
Financial transmission rights 
 
 2.2
 2.2
  
$69.3
 
$—
 
$2.2
 
$71.5


Entergy New Orleans
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Securitization recovery trust account 
$5.3
 
$—
 
$—
 
$5.3
Escrow accounts 82.2
 
 
 82.2
Financial transmission rights 
 
 0.7
 0.7
  
$87.5
 
$—
 
$0.7
 
$88.2
         
Liabilities:        
Gas hedge contracts 
$0.1
 
$—
 
$—
 
$0.1

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$19.7
 
$—
 
$—
 
$19.7
Securitization recovery trust account 2.2
 
 
 2.2
Escrow accounts 80.9
 
 
 80.9
Financial transmission rights 
 
 1.3
 1.3
  
$102.8
 
$—
 
$1.3
 
$104.1
         
Liabilities:        
Gas hedge contracts 
$0.1
 
$—
 
$—
 
$0.1


Entergy Texas
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:
        
Temporary cash investments 
$92.3
 
$—
 
$—
 
$92.3
Securitization recovery trust account 31.6
 
 
 31.6
Financial transmission rights 
 
 1.3
 1.3
  
$123.9
 
$—
 
$1.3
 
$125.2


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2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:
        
Securitization recovery trust account 
$40.2
 
$—
 
$—
 
$40.2
         
Liabilities:        
Financial transmission rights 
$—
 
$—
 
$0.5
 
$0.5


System Energy
2019 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$164.2
 
$—
 
$—
 
$164.2
Decommissioning trust funds (a):        
Equity securities 5.8
 
 
 5.8
Debt securities 206.0
 189.3
 
 395.3
Common trusts (b)       601.2
  
$376.0
 
$189.3
 
$—
 
$1,166.5

2018 Level 1 Level 2 Level 3 Total
  (In Millions)
Assets:        
Temporary cash investments 
$95.6
 
$—
 
$—
 
$95.6
Decommissioning trust funds (a):        
Equity securities 4.4
 
 
 4.4
Debt securities 224.5
 139.7
 
 364.2
Common trusts (b)       500.9
  
$324.5
 
$139.7
 
$—
 
$965.1


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


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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31,September 30, 2019.
 Entergy
Arkansas
 Entergy
Louisiana
 Entergy
Mississippi
 Entergy
New
Orleans
 Entergy
Texas
 (In Millions)
Balance as of July 1,
$8.2
 
$15.6
 
$2.8
 
$2.0
 
$0.6
Gains (losses) included as a regulatory liability/asset(0.8) 7.9
 0.6
 (1.6) 6.2
Settlements(3.5) (14.4) (1.9) 0.3
 (5.5)
Balance as of September 30,
$3.9
 
$9.1
 
$1.5
 
$0.7
 
$1.3

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended September 30, 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 January 1,
$3.0
 
$10.2
 
$2.1
 
$2.2
 
$3.4
Balance as of July 1,
$10.5
 
$18.2
 
$4.4
 
$3.0
 
$4.7
Gains (losses) included as a regulatory liability/asset6.8
 10.8
 6.6
 1.8
 (5.5)10.9
 7.6
 4.7
 1.1
 (5.0)
Settlements(8.0) (17.6) (7.8) (3.3) 3.5
(10.1) (13.8) (5.4) (2.0) 0.4
Balance as of March 31,
$1.8
 
$3.4
 
$0.9
 
$0.7
 
$1.4
Balance as of September 30,
$11.3
 
$12.0
 
$3.7
 
$2.1
 
$0.1




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, 2019.
57
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 (In Millions)
Balance as of January 1,
$3.4
 
$8.3
 
$2.2
 
$1.3
 
($0.5)
Issuances of financial transmission rights9.6
 18.7
 3.9
 2.7
 0.1
Gains (losses) included as a regulatory liability/asset6.3
 23.0
 0.6
 (1.1) 15.3
Settlements(15.4) (40.9) (5.2) (2.2) (13.6)
Balance as of September 30,
$3.9
 
$9.1
 
$1.5
 
$0.7
 
$1.3


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Notes to Financial Statements


The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the nine months ended September 30, 2018.
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 (In Millions)
Balance as of January 1,
$3.0
 
$10.2
 
$2.1
 
$2.2
 
$3.4
Issuances of financial transmission rights11.8
 20.0
 4.5
 3.7
 6.1
Gains (losses) included as a regulatory liability/asset16.6
 39.0
 20.1
 6.7
 (15.0)
Settlements(20.1) (57.2) (23.0) (10.5) 5.6
Balance as of September 30,
$11.3
 
$12.0
 
$3.7
 
$2.1
 
$0.1



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


The NRC requires Entergy subsidiaries to maintain nuclear decommissioning 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, and Palisades. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.


As discussed in Note 16 to the financial statements herein and Note 14 to the financial statements in the Form 10-K, in January 2019, Entergy completed the transfer of the Vermont Yankee plant to NorthStar. As part of the transaction, Entergy transferred the Vermont Yankee decommissioning trust fund to NorthStar. As of December 31, 2018, the fair value of the decommissioning trust fund was $532 million.


As discussed in Note 16 to the financial statements herein, in August 2019, Entergy completed the transfer of the Pilgrim plant to Holtec. As part of the transaction, Entergy transferred the Pilgrim decommissioning trust fund to Holtec. The disposition-date fair value of the decommissioning trust fund was approximately $1,030 million.

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 records an offsetting amount in other deferred credits for the unrealized 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, 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 available-for-sale debt securities in the trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity.  Unrealized losses (where cost exceeds fair market value) on the available-for-sale debt securities in the trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings. A portion of Entergy’s decommissioning trust funds are held in a wholly-owned registered investment company, and unrealized gains and losses on both the equity and debt securities held in the registered investment company are recognized in earnings. Generally, Entergy records 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 and nine months ended March 31,September 30, 2019 on equity securities still held as of March 31,September 30, 2019 were $340 million.$17 million and $491 million, respectively. The equity securities

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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 debt securities are generally held in individual government and credit issuances.


The available-for-sale securities held as of March 31,September 30, 2019 and December 31, 2018 are summarized as follows:
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 (In Millions) (In Millions)
2019            
Debt Securities (a) 
$2,562
 
$51
 
$9
 
$2,462
 
$114
 
$2
            
2018            
Debt Securities (a) 
$2,495
 
$19
 
$35
 
$2,495
 
$19
 
$35


(a)Debt securities presented herein do not include the $430$506 million and $389 million of debt securities held in the wholly-owned registered investment company as of March 31,September 30, 2019 and December 31, 2018, respectively, which are not accounted for as available-for-sale.

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Notes to Financial Statements



The unrealized gains/(losses) above are reported before deferred taxes of $7$16 million as of March 31,September 30, 2019 and ($1) million as of December 31, 2018 for debt securities. The amortized cost of available-for-sale debt securities was $2,520$2,362 million as of March 31,September 30, 2019 and $2,511 million as of December 31, 2018.  As of March 31,September 30, 2019, available-for-sale debt securities have an average coupon rate of approximately 3.28%3.15%, an average duration of approximately 5.425.63 years, and an average maturity of approximately 9.139.02 years.


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31,September 30, 2019:
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions) (In Millions)
Less than 12 months 
$197
 
$1
 
$236
 
$2
More than 12 months 588
 8
 67
 
Total 
$785
 
$9
 
$303
 
$2


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions)
Less than 12 months
$652
 
$9
More than 12 months782
 26
Total
$1,434
 
$35



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Fair
Value
 
Gross
Unrealized
Losses
 (In Millions)
Less than 12 months
$652
 
$9
More than 12 months782
 26
Total
$1,434
 
$35


The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31,September 30, 2019 and December 31, 2018 are as follows:
 2019 2018
 (In Millions)
Less than 1 year
$165
 
$199
1 year - 5 years870
 1,066
5 years - 10 years636
 544
10 years - 15 years89
 77
15 years - 20 years98
 78
20 years+604
 531
Total
$2,462
 
$2,495

 2019 2018
 (In Millions)
Less than 1 year
$185
 
$199
1 year - 5 years1,100
 1,066
5 years - 10 years609
 544
10 years - 15 years67
 77
15 years - 20 years95
 78
20 years+506
 531
Total
$2,562
 
$2,495


During the three months ended March 31,September 30, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $365$407 million and $1,091$2,377 million, respectively.  During the three months ended March 31,September 30, 2019 and 2018, gross gains of $2$11 million and $1$4 million, respectively, and gross losses of $2$0.4 million and $7$15 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.


During the nine months ended September 30, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $1,133 million and $4,178 million, respectively.  During the nine months ended September 30, 2019 and 2018, gross gains of $20 million and $6 million, respectively, and gross losses of $3 million and $37 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.

The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of March 31,September 30, 2019 are $510$534 million for Indian Point 1, $645$676 million for Indian Point 2, $845$893 million for Indian Point 3, $481and $492 million for Palisades, and $1,040 million for Pilgrim.Palisades. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2018 are $471 million

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for Indian Point 1, $598 million for Indian Point 2, $781 million for Indian Point 3, $444 million for Palisades, $1,028 million for Pilgrim, and $532 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.


Entergy Arkansas


Entergy Arkansas holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31,September 30, 2019 and December 31, 2018 are summarized as follows:
  
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
  (In Millions)
2019      
Debt Securities 
$407.7
 
$11.8
 
$0.9
       
2018      
Debt Securities 
$381.3
 
$0.6
 
$8.2

  
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
  (In Millions)
2019      
Debt Securities 
$391.0
 
$2.9
 
$2.3
       
2018      
Debt Securities 
$381.3
 
$0.6
 
$8.2


The amortized cost of available-for-sale debt securities was $390.4$396.8 million as of March 31,September 30, 2019 and $389 million as of December 31, 2018.  As of March 31,September 30, 2019, available-for-sale debt securities have an average coupon

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rate of approximately 2.85%2.78%, an average duration of approximately 4.815.57 years, and an average maturity of approximately 7.348.13 years.


The unrealized gains/(losses) recognized during the three and nine months ended March 31,September 30, 2019 on equity securities still held as of March 31,September 30, 2019 were $70.7 million.$2.6 million and $96.5 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31,September 30, 2019:
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions) (In Millions)
Less than 12 months 
$3.6
 
$—
 
$51.5
 
$0.8
More than 12 months 182.7
 2.3
 21.0
 0.1
Total 
$186.3
 
$2.3
 
$72.5
 
$0.9


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions)
Less than 12 months
$65.8
 
$0.5
More than 12 months231.1
 7.7
Total
$296.9
 
$8.2

 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions)
Less than 12 months
$65.8
 
$0.5
More than 12 months231.1
 7.7
Total
$296.9
 
$8.2


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The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31,September 30, 2019 and December 31, 2018 are as follows:
 2019 2018
 (In Millions)
Less than 1 year
$50.3
 
$32.5
1 year - 5 years120.4
 170.3
5 years - 10 years144.5
 114.0
10 years - 15 years24.3
 10.3
15 years - 20 years14.2
 8.1
20 years+54.0
 46.1
Total
$407.7
 
$381.3

 2019 2018
 (In Millions)
Less than 1 year
$35.6
 
$32.5
1 year - 5 years163.7
 170.3
5 years - 10 years123.7
 114.0
10 years - 15 years10.2
 10.3
15 years - 20 years9.4
 8.1
20 years+48.4
 46.1
Total
$391.0
 
$381.3


During the three months endedMarch 31,September 30, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $10.9$45.5 million and $34.9$137.9 million, respectively.  During the three months ended March 31,September 30, 2019 and 2018, gross gains of $0.02$2 million and $0.1 million, respectively, and gross losses of $0.1 million and $0.1$0.01 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings. During the three months ended September 30, 2018, gross losses of $0.6 million related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings. During the three months endedSeptember 30, 2019, there were no gross losses.



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During the nine months endedSeptember 30, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $78.7 million and $259.3 million, respectively.  During the nine months ended September 30, 2019 and 2018, gross gains of $2.1 million and $0.1 million, respectively, and gross losses of $0.1 million and $3 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

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,September 30, 2019 and December 31, 2018 are summarized as follows:
  
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
  (In Millions)
2019      
Debt Securities 
$593.4
 
$32.6
 
$0.3
       
2018      
Debt Securities 
$532.9
 
$4.1
 
$6.0

  
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
  (In Millions)
2019      
Debt Securities 
$555.7
 
$17.1
 
$1.4
       
2018      
Debt Securities 
$532.9
 
$4.1
 
$6.0


The amortized cost of available-for-sale debt securities was $539.9$561 million as of March 31,September 30, 2019 and $534.8 million as of December 31, 2018.  As of March 31,September 30, 2019, the available-for-sale debt securities have an average coupon rate of approximately 3.92%3.85%, an average duration of approximately 6.626.53 years, and an average maturity of approximately 13.2613.11 years.


The unrealized gains/(losses) recognized during the three and nine months ended March 31,September 30, 2019 on equity securities still held as of March 31,September 30, 2019 were $98.5 million.$6 million and $137.2 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.


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The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31,September 30, 2019:
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions) (In Millions)
Less than 12 months 
$26.5
 
$0.2
 
$49.3
 
$0.3
More than 12 months 87.4
 1.2
 12.9
 
Total 
$113.9
 
$1.4
 
$62.2
 
$0.3



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The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions)
Less than 12 months
$170.1
 
$2.1
More than 12 months145.8
 3.9
Total
$315.9
 
$6.0


The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31,September 30, 2019 and December 31, 2018 are as follows:
2019 20182019 2018
(In Millions)(In Millions)
Less than 1 year
$42.4
 
$31.1

$56.6
 
$31.1
1 year - 5 years119.3
 130.5
138.2
 130.5
5 years - 10 years135.7
 111.0
118.4
 111.0
10 years - 15 years26.8
 29.0
34.7
 29.0
15 years - 20 years44.5
 37.1
45.0
 37.1
20 years+187.0
 194.2
200.5
 194.2
Total
$555.7
 
$532.9

$593.4
 
$532.9


During the three months ended March 31,September 30, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $56.2$59.7 million and $125.5$773.9 million, respectively.  During the three months ended March 31,September 30, 2019 and 2018, gross gains of $0.3$2.5 million and $0.5$1.9 million, respectively, and gross losses of $0.2 million$29 thousand and $0.8$3.6 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, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $155.4 million and $943.3 million, respectively.  During the nine months ended September 30, 2019 and 2018, gross gains of $4.2 million and $2.5 million, respectively, and gross losses of $0.2 million and $4.8 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.


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System Energy


System Energy holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts.  The available-for-sale securities held as of March 31,September 30, 2019 and December 31, 2018 are summarized as follows:
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 
Fair
Value
 
Total
Unrealized
Gains
 
Total
Unrealized
Losses
 (In Millions) (In Millions)
2019            
Debt Securities 
$375.2
 
$6.9
 
$1.2
 
$395.3
 
$19.7
 
$0.1
            
2018            
Debt Securities 
$364.2
 
$2.9
 
$5.8
 
$364.2
 
$2.9
 
$5.8


The amortized cost of available-for-sale debt securities was $369.5$375.6 million as of March 31,September 30, 2019 and $367.1 million as of December 31, 2018.  As of March 31,September 30, 2019, available-for-sale debt securities have an average coupon rate of approximately 3.08%3.09%, an average duration of approximately 6.346.84 years, and an average maturity of approximately 9.069.88 years.


The unrealized gains/(losses) recognized during the three and nine months ended March 31,September 30, 2019 on equity securities still held as of March 31,September 30, 2019 were $67.3 million.$2.5 million and $91.8 million, respectively. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of March 31,September 30, 2019:
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
(In Millions)(In Millions)
Less than 12 months 
$44.2
 
$—
 
$38.8
 
$0.1
More than 12 months 77.4
 1.2
 4.3
 
Total 
$121.6
 
$1.2
 
$43.1
 
$0.1


The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2018:
 
Fair
Value
 
Gross
Unrealized
Losses
 (In Millions)
Less than 12 months
$89.7
 
$2.4
More than 12 months79.8
 3.4
Total
$169.5
 
$5.8




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The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31,September 30, 2019 and December 31, 2018 are as follows:
2019 20182019 2018
(In Millions)(In Millions)
Less than 1 year
$14.5
 
$22.8

$11.2
 
$22.8
1 year - 5 years195.0
 188.0
187.7
 188.0
5 years - 10 years80.1
 73.4
92.7
 73.4
10 years - 15 years4.1
 5.2
3.0
 5.2
15 years - 20 years10.2
 10.2
5.9
 10.2
20 years+71.3
 64.6
94.8
 64.6
Total
$375.2
 
$364.2

$395.3
 
$364.2


During the three months ended March 31,September 30, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $42.1$108.6 million and $54.2$157.8 million, respectively.  During the three months ended March 31,September 30, 2019 and 2018, gross gains of $0.4$1.7 million and $0.1 million,$6.5 thousand, respectively, and gross losses of $0.1$0.2 million and $0.6$0.3 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, 2019 and 2018, proceeds from the dispositions of available-for-sale securities amounted to $238.4 million and $357.2 million, respectively.  During the nine months ended September 30, 2019 and 2018, gross gains of $3.6 million and $0.3 million, respectively, and gross losses of $0.6 million and $4.8 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.

Other-than-temporary impairments and unrealized gains and losses


Entergy evaluates the available-for-sale debt securities in the Entergy Wholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the three and nine months ended March 31,September 30, 2019 and 2018.  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. 




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.


Tax Cuts and Jobs Act


During the three months ended March 31, 2019, Entergy Arkansas, Entergy Louisiana, and Entergy Texas returnedsecond quarter 2018, Registrant Subsidiaries began returning unprotected excess accumulated deferred income taxes, associated with the effects of the Tax Cuts and Jobs Act, to their customers through rate riders

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and other means approved by their respective regulatory commissions. Return of the unprotected excess accumulated deferred income taxes results in a reduction in the regulatory liability for income taxes and a corresponding reduction in income tax expense. This has a significant effect on the effective tax rate for the period as compared to the statutory tax rate. For the three months ended March 31, 2019 theThe return of unprotected excess accumulated deferred income taxes reduced Entergy’s and the Registrant Subsidiaries’ regulatory liability for income taxes as follows: Entergy Arkansas, $32 million; Entergy Louisiana, $7 million; and Entergy Texas, $22 million.

 
Three Months
Ended September 30,
 
Nine Months
Ended September 30,
 2019 2018 2019 2018
 (In Millions)
Entergy
$96
 
$283
 
$219
 
$562
Entergy Arkansas
$41
 
$153
 
$99
 
$260
Entergy Louisiana
$17
 
$55
 
$31
 
$86
Entergy Mississippi
$—
 
$32
 
$—
 
$161
Entergy New Orleans
$7
 
$9
 
$9
 
$9
Entergy Texas
$31
 
$—
 
$73
 
$—
System Entergy
$—
 
$34
 
$7
 
$46



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Other Tax Matters


In April 2019 the state of Arkansas enacted corporate income tax law changes that phase in an Arkansas tax rate reduction from the current rate of 6.5% to 6.2% in 2021 and 5.9% by the yearin 2022.  The rate reduction will eventually reduce Entergy Arkansas’s combined federal and state applicable tax rate by 0.4%less than 0.5% once fully adopted.  As a result of the rate reduction, Entergy Arkansas recorded a regulatory liability for income taxes of approximately $25 million which includes a tax gross-up related to the treatment of income taxes in the ratemaking formula. The Arkansas tax law enactment also phases in an increase to the net operating loss carryover period from five to ten years.  The adoption

In September 2019, Entergy Utility Holding Company, LLC and its regulated, wholly owned subsidiaries including Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans, became eligible to and joined the Entergy Corporation consolidated federal income tax group.  Additionally, in September 2019, Entergy Texas issued $35 million of these5.375% Series A preferred stock with a liquidation value of $25 per share resulting in the disaffiliation and de-consolidation of Entergy Texas from the consolidated federal income tax lawreturn of Entergy Corporation.  These changes throughoutwill not affect the phase-in period is not expectedaccrual or allocation of income taxes for the Registrant Subsidiaries. See Note 3 to have a significant effect on the financial position, resultsstatements herein for discussion of operations, or cash flows of Entergy Arkansas, the Utility, or Entergy.preferred stock issuance.


Vermont Yankee


The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter of 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. See Note 16 to the financial statements herein for discussion of the Vermont Yankee transaction.





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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 March 31,September 30, 2019 are $324$306 million for Entergy, $29.9$41.7 million for Entergy Arkansas, $118$74 million for Entergy Louisiana, $13.8$14.7 million for Entergy Mississippi, $8.2$13.9 million for Entergy New Orleans, $72.3$81.6 million for Entergy Texas, and $20.2$24.6 million for System Energy.  Construction expenditures included in accounts payable at December 31, 2018 are $311 million for Entergy, $35.7 million for Entergy Arkansas, $104.6 million for Entergy Louisiana, $13.6 million for Entergy Mississippi, $5.8 million for Entergy New Orleans, $55.6 million for Entergy Texas, and $26.3 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.


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,under this arrangement, including interest, of $8.6 million in the three months ended March 31,September 30, 2019 and in the three months ended March 31,September 30, 2018. System Energy made payments under this arrangement, including interest, of $17.2 million in the nine months ended September 30, 2019 and in the nine months ended September 30, 2018.






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


See Note 19 to the financial statements in the Form 10-K for a discussion of revenue recognition.  Entergy’s total revenues for the three months ended March 31,September 30, 2019 and 2018 are as follows:
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
Utility:        
Residential 
$802,539
 
$892,085
 
$1,154,455
 
$1,138,744
Commercial 554,058
 595,720
 722,334
 693,760
Industrial 601,000
 597,186
 686,122
 682,823
Governmental 52,960
 56,478
 61,697
 60,647
Total billed retail 2,010,557
 2,141,469
 2,624,608
 2,575,974
        
Sales for resale (a) 84,435
 69,526
 63,082
 76,247
Other electric revenues (b) 15,470
 27,433
 115,352
 42,847
Non-customer revenues (c) 10,562
 9,834
 9,892
 2,819
Total electric revenues 2,121,024
 2,248,262
 2,812,934
 2,697,887
        
Natural gas 54,948
 56,695
 27,269
 26,352
        
Entergy Wholesale Commodities:        
Competitive businesses sales (a) 360,471
 409,135
 282,420
 407,763
Non-customer revenues (c) 73,141
 9,789
 17,952
 (27,683)
Total competitive businesses 433,612
 418,924
 300,372
 380,080
        
Total operating revenues 
$2,609,584
 
$2,723,881
 
$3,140,575
 
$3,104,319





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Entergy’s total revenues for the nine months ended September 30, 2019 and 2018 are as follows:
  2019 2018
  (In Thousands)
Utility:    
Residential 
$2,727,367
 
$2,799,539
Commercial 1,871,416
 1,871,380
Industrial 1,928,857
 1,904,828
Governmental 172,280
 173,949
    Total billed retail 6,699,920
 6,749,696
     
Sales for resale (a) 222,834
 214,984
Other electric revenues (b) 326,771
 289,668
Non-customer revenues (c) 30,158
 22,026
    Total electric revenues 7,279,683
 7,276,374
     
Natural gas 112,916
 112,990
     
Entergy Wholesale Commodities:    
Competitive businesses sales (a) 923,288
 1,148,460
Non-customer revenues (c) 100,480
 (40,854)
    Total competitive businesses 1,023,768
 1,107,606
     
    Total operating revenues 
$8,416,367
 
$8,496,970


The Registrant Subsidiaries’ total revenues for the three months ended March 31,September 30, 2019 and 2018 were as follows:
2019 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
  (In Thousands)
           
Residential 
$253,627
 
$426,012
 
$177,785
 
$81,468
 
$215,563
Commercial 162,564
 277,071
 131,596
 56,430
 94,673
Industrial 156,024
 376,595
 44,054
 8,613
 100,836
Governmental 5,907
 18,731
 12,551
 19,030
 5,478
    Total billed retail 578,122

1,098,409

365,986

165,541

416,550
           
Sales for resale (a) 58,953
 81,664
 9,569
 6,876
 16,704
Other electric revenues (b) 47,085
 37,521
 20,499
 2,537
 9,177
Non-customer revenues (c) 3,366
 4,280
 2,678
 1,784
 446
    Total electric revenues 687,526

1,221,874

398,732

176,738

442,877
           
Natural gas 
 9,803
 
 17,466
 
           
    Total operating revenues 
$687,526


$1,231,677


$398,732


$194,204


$442,877


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2019 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
  (In Thousands)
           
Residential 
$209,867
 
$264,065
 
$128,809
 
$52,076
 
$147,722
Commercial 124,578
 206,779
 97,914
 45,741
 79,046
Industrial 121,577
 346,678
 37,697
 7,250
 87,798
Governmental 4,899
 16,891
 10,036
 15,901
 5,233
    Total billed retail 460,921

834,413

274,456

120,968

319,799
           
Sales for resale (a) 79,584
 83,955
 4,814
 10,224
 16,775
Other electric revenues (b) 2,304
 12,441
 405
 (1,706) 3,496
Non-customer revenues (c) 3,003
 5,884
 2,569
 1,397
 404
    Total electric revenues 545,812

936,693

282,244

130,883

340,474
           
Natural gas 
 22,637
 
 32,311
 
           
    Total operating revenues 
$545,812


$959,330


$282,244


$163,194


$340,474



2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
  (In Thousands)
           
Residential 
$250,081
 
$408,680
 
$170,258
 
$86,014
 
$223,711
Commercial 119,950
 272,985
 126,987
 62,428
 111,409
Industrial 126,079
 393,884
 44,383
 9,655
 108,823
Governmental 4,445
 17,566
 11,488
 20,364
 6,785
    Total billed retail 500,555
 1,093,115
 353,116
 178,461
 450,728
           
Sales for resale (a) 60,338
 71,634
 7,876
 4,863
 23,290
Other electric revenues (b) 4,446
 34,220
 4,079
 (1,107) 2,735
Non-customer revenues (c) 3,060
 (2,691) 2,663
 1,947
 478
    Total electric revenues 568,399
 1,196,278
 367,734
 184,164
 477,231
           
Natural gas 
 10,334
 
 16,018
 
           
    Total operating revenues 
$568,399
 
$1,206,612
 
$367,734
 
$200,182
 
$477,231


The Registrant Subsidiaries’ total revenues for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
2019 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
 (In Thousands) (In Thousands)
                    
Residential 
$235,524
 
$295,517
 
$148,342
 
$64,575
 
$148,126
 
$621,208
 
$980,443
 
$423,395
 
$192,165
 
$510,156
Commercial 120,634
 224,928
 110,460
 54,272
 85,427
 412,697
 715,983
 331,785
 156,152
 254,799
Industrial 111,477
 352,336
 42,501
 7,570
 83,302
 396,515
 1,108,193
 120,490
 24,353
 279,306
Governmental 4,648
 17,310
 10,848
 17,691
 5,981
 15,776
 53,547
 33,108
 53,916
 15,933
Total billed retail 472,283
 890,091
 312,151
 144,108
 322,836
 1,446,196
 2,858,166
 908,778
 426,586
 1,060,194
                    
Sales for resale (a) 66,103
 89,255
 1,993
 13,337
 23,361
 213,038
 248,827
 19,377
 25,680
 48,251
Other electric revenues (b) 10,024
 20,503
 (719) (3,111) 2,264
 107,599
 130,269
 47,887
 8,093
 37,329
Non-customer revenues (c) 2,614
 5,257
 2,318
 1,484
 479
 9,434
 15,564
 7,671
 4,414
 1,157
Total electric revenues 551,024
 1,005,106
 315,743
 155,818
 348,940
 1,776,267
 3,252,826
 983,713
 464,773
 1,146,931
                    
Natural gas 
 24,238
 
 32,457
 
 
 44,498
 
 68,418
 
                    
Total operating revenues 
$551,024
 
$1,029,344
 
$315,743
 
$188,275
 
$348,940
 
$1,776,267
 
$3,297,324
 
$983,713
 
$533,191
 
$1,146,931



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2018 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
Entergy
Texas
  (In Thousands)
           
Residential 
$644,735
 
$972,113
 
$451,331
 
$208,821
 
$522,539
Commercial 334,325
 719,652
 354,799
 171,224
 291,380
Industrial 335,529
 1,114,898
 133,012
 26,493
 294,896
Governmental 12,859
 51,581
 33,788
 56,503
 19,218
    Total billed retail 1,327,448
 2,858,244
 972,930
 463,041
 1,128,033
           
Sales for resale (a) 179,637
 272,690
 21,645
 24,390
 71,828
Other electric revenues (b) 98,571
 124,749
 35,055
 7,404
 28,468
Non-customer revenues (c) 8,372
 7,390
 7,536
 4,749
 1,328
    Total electric revenues 1,614,028
 3,263,073
 1,037,166
 499,584
 1,229,657
           
Natural gas 
 45,671
 
 67,319
 
           
    Total operating revenues 
$1,614,028
 
$3,308,744
 
$1,037,166
 
$566,903
 
$1,229,657

(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.

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




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. The following is an updateare updates to that discussion.


In the first quarter 2019, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $126.2 million increase in its decommissioning cost liabilities, along with corresponding increases in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.



In the second quarter 2019, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for Waterford 3 as a result of a revised decommissioning cost study. The revised estimate resulted in a $147.5 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 useful life of the unit.

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NOTE 15. LEASES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)


Entergy implemented ASU 2016-02, “Leases (Topic 842),” effective January 1, 2019. The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months. Concurrent with the implementation of ASU 2016-02, Entergy implemented ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” which provided Entergy the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard, and ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which intended to simplify the transition requirement giving Entergy the option to apply the transition provisions of the new standard at the date of adoption instead of at the earliest comparative period. In implementing these ASUs, Entergy elected the options provided in both ASU 2018-01 and ASU 2018-11. This accounting was applied to all lease agreements using the modified retrospective method, which required an adjustment to retained earnings for the cumulative effect of adopting the standard as of the effective date, and when implemented with ASU 2018-11, allowed Entergy to recognize the leased assets and liabilities on its balance sheet beginning on January 1, 2019 without restating prior periods. In adopting the standard, in January 2019 Entergy recognized right-of-use assets and corresponding lease liabilities totaling approximately $263 million, including $59 million for Entergy Arkansas, $51 million for Entergy Louisiana, $26 million for Entergy Mississippi, $7 million for Entergy New Orleans, and $16 million for Entergy Texas. Implementation of the standards had no material effect on consolidated net income; therefore, no adjustment to retained earnings was recorded. The adoption of the standards had no effect on cash flows.


General


As of March 31,September 30, 2019, Entergy and the Registrant Subsidiaries held operating and financing leases for fleet vehicles used in operations, real estate, fuel storage facilities, and power purchase agreements.aircraft. Excluded from this are power purchase agreements not meeting the definition of a lease, nuclear fuel leases, and the Grand Gulf sale-leaseback which were determined not to be leases.


Leases have remaining terms of one year to 3052 years. Real estate leases generally include at least one five-year renewal option; however, renewal is not typically considered reasonably certain unless Entergy or a Registrant Subsidiary makes significant leasehold improvements or other modifications which would hinder its ability to easily move. In

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certain of the lease agreements for fleet vehicles used in operations, Entergy and the Registrant Subsidiaries provide residual value guarantees to the lessor; however, due to the nature of the agreements and Entergy’s continuing relationship with the lessor, Entergy and the Registrant Subsidiaries expect to renegotiate or refinance the leases prior to conclusion of the lease. As such, Entergy and the Registrant Subsidiaries do not believe it is probable that they will be required to pay anything pertaining to the residual value guarantee, and the lease liabilities and right-of-use assets are measured accordingly.


Entergy incurred the following total lease costs for the three months ended March 31,September 30, 2019:
  (In Thousands)
Operating lease cost 

$15,72016,086

Financing lease cost:  
Amortization of right-of-use assets 

$2,9122,945

Interest on lease liabilities 

$753763



Of the lease costs disclosed above, Entergy had $15 thousand in short-term lease costs for the three months ended September 30, 2019.


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Entergy incurred the following total lease costs for the nine months ended September 30, 2019:
(In Thousands)
Operating lease cost
$47,061
Financing lease cost:
Amortization of right-of-use assets
$10,837
Interest on lease liabilities
$2,597


Of the lease costs disclosed above, Entergy had $15 thousand in short-term lease costs for the nine months ended September 30, 2019.

The lease costs disclosed above materially approximate the cash flows used by Entergy for leases with all costs included within operating activities on the Consolidated Statements of Cash Flows, except for the financing lease costs which are included in financing activities.


The Registrant Subsidiaries incurred the following lease costs for the three months ended March 31,September 30, 2019:
Entergy Arkansas Entergy Louisiana Entergy Mississippi 
Entergy
New Orleans
 Entergy TexasEntergy Arkansas Entergy Louisiana Entergy Mississippi 
Entergy
New Orleans
 Entergy Texas
(In Thousands)(In Thousands)
Operating lease cost
$3,295
 
$3,026
 
$1,753
 
$357
 
$1,085

$3,306
 
$3,003
 
$1,752
 
$349
 
$1,074
Financing lease cost:                  
Amortization of right-of-use assets
$629
 
$1,025
 
$348
 
$176
 
$306

$621
 
$1,014
 
$369
 
$178
 
$335
Interest on lease liabilities
$105
 
$152
 
$59
 
$30
 
$46

$105
 
$161
 
$65
 
$29
 
$54


Of the lease costs disclosed above, Entergy Louisiana had $15 thousand in short-term lease costs for the three months ended September 30, 2019.

The Registrant Subsidiaries incurred the following lease costs for the nine months ended September 30, 2019:
 Entergy Arkansas Entergy Louisiana Entergy Mississippi 
Entergy
New Orleans
 Entergy Texas
 (In Thousands)
Operating lease cost
$9,724
 
$8,854
 
$5,220
 
$1,058
 
$3,135
Financing lease cost:         
Amortization of right-of-use assets
$2,448
 
$4,014
 
$1,408
 
$696
 
$965
Interest on lease liabilities
$408
 
$612
 
$241
 
$114
 
$153


Of the lease costs disclosed above, Entergy Louisiana had $15 thousand in short-term lease costs for the nine months ended September 30, 2019.

The lease costs disclosed above materially approximate the cash flows used by the Registrant Subsidiaries for leases with all costs included within operating activities on the respective Statements of Cash Flows, except for the financing lease costs which are included in financing activities.
            

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Entergy has elected to account for short-term leases in accordance with policy options provided by accounting guidance; therefore, there are no related lease liabilities or right-of-use assets for the costs recognized above by Entergy or by its Registrant Subsidiaries in the table below.


Included within Property, Plant, and Equipment on Entergy’s consolidated balance sheet at March 31,September 30, 2019 are $241$236 million related to operating leases and $60 million related to financing leases.


Included within Utility Plant on the Registrant Subsidiaries’ respective balance sheets at March 31,September 30, 2019 are the following amounts:
 Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
 (In Thousands)
Operating leases
$49,503
 
$34,248
 
$18,149
 
$3,894
 
$13,074
Financing leases
$11,094
 
$16,795
 
$6,994
 
$2,913
 
$5,515

 Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
 (In Thousands)
Operating leases
$52,916
 
$36,066
 
$18,926
 
$4,961
 
$9,991
Financing leases
$11,317
 
$16,978
 
$6,358
 
$2,974
 
$5,076

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The following lease-related liabilities are recorded within the respective Other lines on Entergy’s consolidated balance sheet as of March 31,September 30, 2019:
  (In Thousands)
Current liabilities:  
Operating leases 

$53,12152,348

Financing leases 

$11,59011,482

Non-current liabilities:  
Operating leases 

$173,456184,404

Financing leases 

$53,06553,252




The following lease-related liabilities are recorded within the respective Other lines on the Registrant Subsidiaries’ respective balance sheets at March 31,September 30, 2019:
 Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
 (In Thousands)
Current liabilities:         
Operating leases
$10,662
 
$9,969
 
$6,137
 
$1,138
 
$3,427
Financing leases
$2,600
 
$3,860
 
$1,473
 
$626
 
$1,252
Non-current liabilities:        
Operating leases
$38,881
 
$24,289
 
$12,254
 
$2,755
 
$9,689
Financing leases
$8,665
 
$12,925
 
$5,521
 
$2,286
 
$4,221

 Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
 (In Thousands)
Current liabilities:         
Operating leases
$11,321
 
$10,958
 
$6,461
 
$1,748
 
$3,071
Financing leases
$2,465
 
$4,052
 
$1,382
 
$678
 
$1,281
Non-current liabilities:         
Operating leases
$41,597
 
$25,144
 
$12,565
 
$3,218
 
$7,007
Financing leases
$8,851
 
$13,039
 
$4,975
 
$2,296
 
$3,708


The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and financing leases of Entergy at March 31,September 30, 2019:
Weighted average remaining lease terms:  
Operating leases 5.515.10

Financing leases 7.066.79

Weighted average discount rate:  
Operating leases 3.753.91%
Financing leases 4.644.67%




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The following information contains the weighted average remaining lease term in years and the weighted average discount rate for the operating and financing leases of the Registrant Subsidiaries at March 31,September 30, 2019:
 Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
  
Weighted average remaining lease terms:         
Operating leases6.09
 4.28
 4.65
 3.99
 4.49
Financing leases5.44
 5.41
 5.41
 5.72
 5.25
Weighted average discount rate:         
Operating leases3.75% 3.74% 3.77% 3.94% 3.86%
Financing leases3.75% 3.75% 3.71% 3.93% 3.84%

 Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
  
Weighted average remaining lease terms:         
Operating leases6.38
 4.32
 5.09
 5.64
 4.15
Financing leases5.64
 5.29
 5.39
 5.81
 5.09
Weighted average discount rate:         
Operating leases3.29% 3.54% 3.67% 3.55% 3.80%
Financing leases3.71% 3.56% 3.70% 3.97% 3.72%


Maturity of the lease liabilities for Entergy as of March 31,September 30, 2019 are as follows:
Year Operating Leases Financing Leases
  (In Thousands)
     
Remainder for 2019 
$16,088
 
$3,608
2020 59,965
 13,521
2021 53,791
 11,973
2022 45,391
 10,775
2023 35,050
 9,664
Years thereafter 56,906
 26,889
Minimum lease payments 267,191
 76,430
Less: amount representing interest 30,438
 11,696
Present value of net minimum lease payments 
$236,753
 
$64,734

Year Operating Leases Financing Leases
  (In Thousands)
     
Remainder for 2019 
$44,143
 
$10,375
2020 52,905
 12,489
2021 43,482
 10,941
2022 34,768
 9,743
2023 27,974
 8,680
Years thereafter 45,259
 26,744
Minimum lease payments 248,531
 78,972
Less: amount representing interest 21,954
 14,318
Present value of net minimum lease payments 
$226,577
 
$64,654




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Maturity of the lease liabilities for the Registrant Subsidiaries as of March 31,September 30, 2019 are as follows:


Operating Leases
Year Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
 (In Thousands) (In Thousands)
                    
Remainder of 2019 
$9,285
 
$8,316
 
$5,231
 
$1,036
 
$2,631
 
$3,168
 
$2,863
 
$1,968
 
$332
 
$1,022
2020 11,085
 9,795
 5,845
 1,216
 2,961
 11,756
 10,518
 6,066
 1,196
 4,014
2021 9,137
 8,009
 3,886
 945
 2,186
 9,911
 8,787
 4,937
 939
 3,279
2022 6,763
 5,137
 2,505
 622
 1,196
 7,613
 6,068
 3,503
 659
 2,338
2023 5,600
 3,262
 1,228
 460
 839
 6,341
 4,079
 1,376
 497
 1,994
Years thereafter 15,713
 3,346
 2,313
 999
 1,104
 16,421
 4,702
 2,642
 729
 2,193
Minimum lease payments 57,583
 37,865
 21,008
 5,278
 10,917
 55,210
 37,017
 20,492
 4,352
 14,840
Less: amount representing interest 4,664
 1,764
 1,982
 312
 839
 5,667
 2,759
 2,101
 459
 1,724
Present value of net minimum lease payments 
$52,919
 
$36,101
 
$19,026
 
$4,966
 
$10,078
 
$49,543
 
$34,258
 
$18,391
 
$3,893
 
$13,116


Financing Leases
Year Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
  (In Thousands)
           
Remainder of 2019 
$713
 
$1,135
 
$429
 
$204
 
$375
2020 2,654
 4,191
 1,655
 660
 1,364
2021 2,258
 3,536
 1,490
 549
 1,171
2022 1,969
 3,096
 1,297
 499
 965
2023 1,728
 2,635
 1,078
 451
 827
Years thereafter 2,905
 3,818
 1,740
 881
 1,316
Minimum lease payments 12,227
 18,411
 7,689
 3,244
 6,018
Less: amount representing interest 961
 1,626
 695
 332
 545
Present value of net minimum lease payments 
$11,266
 
$16,785
 
$6,994
 
$2,912
 
$5,473

Year Entergy Arkansas Entergy Louisiana Entergy Mississippi Entergy New Orleans Entergy Texas
  (In Thousands)
           
Remainder of 2019 
$2,071
 
$3,302
 
$1,159
 
$592
 
$1,010
2020 2,464
 3,843
 1,431
 616
 1,165
2021 2,067
 3,189
 1,266
 505
 973
2022 1,778
 2,749
 1,073
 454
 766
2023 1,551
 2,301
 867
 407
 633
Years thereafter 2,476
 5,414
 1,154
 748
 796
Minimum lease payments 12,407
 20,798
 6,950
 3,322
 5,343
Less: amount representing interest 1,091
 3,707
 592
 349
 354
Present value of net minimum lease payments 
$11,316
 
$17,091
 
$6,358
 
$2,973
 
$4,989


In allocating consideration in lease contracts to the lease and non-lease components, Entergy and the Registrant Subsidiaries have made the accounting policy election to combine lease and non-lease components related to fleet vehicles used in operations, fuel storage agreements, and purchased power agreements and to allocate the contract consideration to both lease and non-lease components for real estate leases.


In accordance with ASU 2018-11, below is the lease disclosure from Note 10 to the financial statements in the Form 10-K.




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Notes to Financial Statements


General


As of December 31, 2018, Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):
 
Year
 
Operating
Leases
 
Capital
Leases
  (In Thousands)
2019 
$94,043
 
$2,887
2020 82,191
 2,887
2021 75,147
 2,887
2022 60,808
 2,887
2023 47,391
 2,887
Years thereafter 88,004
 16,117
Minimum lease payments 447,584
 30,552
Less:  Amount representing interest 
 8,555
Present value of net minimum lease payments 
$447,584
 
$21,997

 
Year
 
Operating
Leases
 
Capital
Leases
  (In Thousands)
2019 
$94,043
 
$2,887
2020 82,191
 2,887
2021 75,147
 2,887
2022 60,808
 2,887
2023 47,391
 2,887
Years thereafter 88,004
 16,117
Minimum lease payments 447,584
 30,552
Less:  Amount representing interest 
 8,555
Present value of net minimum lease payments 
$447,584
 
$21,997


Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $47.8 million in 2018, $53.1 million in 2017, and $44.4 million in 2016.


As of December 31, 2018, the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):


Operating Leases
 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
  (In Thousands)
2019 
$20,421
 
$25,970
 
$9,344
 
$2,493
 
$5,744
2020 13,918
 21,681
 8,763
 2,349
 4,431
2021 11,931
 19,514
 7,186
 1,901
 3,625
2022 9,458
 15,756
 5,675
 1,314
 2,218
2023 7,782
 12,092
 2,946
 1,043
 1,561
Years thereafter 23,297
 22,003
 4,417
 2,323
 2,726
Minimum lease payments 
$86,807
 
$117,016
 
$38,331
 
$11,423
 
$20,305

 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
  (In Thousands)
2019 
$20,421
 
$25,970
 
$9,344
 
$2,493
 
$5,744
2020 13,918
 21,681
 8,763
 2,349
 4,431
2021 11,931
 19,514
 7,186
 1,901
 3,625
2022 9,458
 15,756
 5,675
 1,314
 2,218
2023 7,782
 12,092
 2,946
 1,043
 1,561
Years thereafter 23,297
 22,003
 4,417
 2,323
 2,726
Minimum lease payments 
$86,807
 
$117,016
 
$38,331
 
$11,423
 
$20,305




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Rental Expenses
 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
  (In Millions)
2018 
$6.2
 
$20.2
 
$4.6
 
$2.5
 
$3.1
 
$1.9
2017 
$7.5
 
$23.0
 
$5.6
 
$2.5
 
$3.4
 
$2.2
2016 
$8.0
 
$17.8
 
$4.0
 
$0.9
 
$2.8
 
$1.6

 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
  (In Millions)
2018 
$6.2
 
$20.2
 
$4.6
 
$2.5
 
$3.1
 
$1.9
2017 
$7.5
 
$23.0
 
$5.6
 
$2.5
 
$3.4
 
$2.2
2016 
$8.0
 
$17.8
 
$4.0
 
$0.9
 
$2.8
 
$1.6


In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment.  Railcar operating lease payments were $2.8 million in 2018, $4 million in 2017, and $3.4 million in 2016 for Entergy Arkansas and $0.4 million in 2018, $0.3 million in 2017, and $0.3 million in 2016 for Entergy Louisiana.  Oil tank facilities lease payments for Entergy Mississippi were $0.1 million in 2018, $1.6 million in 2017, and $1.6 million in 2016.


On January 1, 2019, Entergy implemented ASU No. 2016-02, “Leases (Topic 842)” along with the practical expedients provided by ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements.”  See Note 1 to the financial statements in the Form 10-K for further discussion of ASU No. 2016-02.


Power Purchase Agreements


As of December 31, 2018, Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:
Year Entergy Texas (a) Entergy
  (In Thousands)
2019 
$31,159
 
$31,159
2020 31,876
 31,876
2021 32,609
 32,609
2022 10,180
 10,180
Minimum lease payments 
$105,824
 
$105,824


(a)Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.


Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $30.5 million in 2018, $34.1 million in 2017, and $26.1 million in 2016.


Sales and Leaseback Transactions


Waterford 3 Lease Obligation


In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million.  The leases were scheduled to expire in July 2017.  Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.




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In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.


In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.


Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million. Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.


As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09%) of $57.5 million, including $2.3 million in interest, due January 2017 that was recorded as long-term debt.


In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.


Grand Gulf Lease Obligations


In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million.  The initial term of the leases expired in July 2015.  System Energy renewed the leases in December 2013 for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value.  In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.


System Energy is required to report the sale-leaseback as a financing transaction in its financial statements.  For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation.  However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes.  Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero0 net balance for the regulatory asset at the end of the lease term.  The amount was a net regulatory liability of $55.6 million as of December 31, 2018 and 2017.




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As of December 31, 2018, System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments that are recorded as long-term debt, as follows, which reflects the effect of the December 2013 renewal:
 Amount
 (In Thousands)
  
2019
$17,188
202017,188
202117,188
202217,188
202317,188
Years thereafter223,437
Total309,377
Less: Amount representing interest275,025
Present value of net minimum lease payments
$34,352

 Amount
 (In Thousands)
  
2019
$17,188
202017,188
202117,188
202217,188
202317,188
Years thereafter223,437
Total309,377
Less: Amount representing interest275,025
Present value of net minimum lease payments
$34,352




NOTE 16.  DISPOSITIONS (Entergy Corporation)


Vermont Yankee


As discussed in Note 14 to the financial statements in the Form 10-K, in January 2019, Entergy transferred 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC, the owner of the Vermont Yankee plant, to a subsidiary of NorthStar.


Entergy Nuclear Vermont Yankee had an outstanding credit facility that was used to pay for dry fuel storage costs. This credit facility was guaranteed by Entergy Corporation. Vermont Yankee Asset Retirement Management, LLC, a subsidiary of Entergy, assumed the obligations under the credit facility. At the closing of the transaction, NorthStar caused Entergy Nuclear Vermont Yankee, renamed NorthStar Vermont Yankee, to issue a $139 million promissory note to Vermont Yankee Asset Retirement Management. The amount of the note included the balance outstanding on the credit facility, as well as borrowing fees and costs incurred by Entergy in connection with the credit facility.


Upon closing of the transaction in January 2019, the Vermont Yankee decommissioning trust, along with the decommissioning obligation for the plant, was transferred to NorthStar. The Vermont Yankee spent fuel disposal contract was assigned to NorthStar as part of the transaction. The Vermont Yankee transaction resulted in Entergy generating a net deferred tax asset in January 2019.  The deferred tax asset could not be fully realized by Entergy in the first quarter of 2019; accordingly, Entergy accrued a net tax expense of $29 million on the disposition of Vermont Yankee. The transaction also resulted in other charges of $5.4 million ($4.2 million after-tax)net-of-tax) in the first quarter 2019.

Pilgrim

In July 2018, Entergy entered into a purchase and sale agreement with Holtec International to sell to a Holtec subsidiary 100% of the equity interests in Entergy Nuclear Generation Company, the owner of the Pilgrim plant. In August 2019 the NRC approved the sale of the plant to Holtec. The transaction closed in August 2019 for a purchase price of $1,000 (subject to adjustments for net liabilities and other amounts). The sale included the transfer of the Pilgrim nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning. The transaction resulted in a loss of $191 million ($156 million net-of-tax) in the third quarter 2019. The disposition-date fair value of the nuclear decommissioning trust fund was approximately $1,030 million and the disposition-date fair

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value of the asset retirement obligation was $837 million. The transaction also included property, plant, and equipment with a net book value of 0, materials and supplies, and prepaid assets.

________________


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 March 31,September 30, 2019, 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 March 31,September 30, 2019 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.





ENTERGY ARKANSAS, LLC AND SUBSIDIARIES


MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations


Net Income


Third Quarter 2019 Compared to Third Quarter 2018

Net income increased $2.9$20.8 million primarily due to higher retail electric price and higher volume/weather, partially offset by higher depreciation and amortization expenses and lower nuclear refueling outageother income.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net income decreased $8.6 million primarily due to higher depreciation and amortization expenses, higher net revenue, after excluding the effect of the return of unprotected excess accumulated deferred income taxes to customers which is offset in income taxes,interest expense, lower volume/weather, and lowerhigher other operation and maintenance expenses, partially offset by higher interest expense and higher depreciation and amortization expenses.retail electric price.


Net RevenueOperating Revenues


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). Third Quarter 2019 Compared to Third Quarter 2018

Following is an analysis of the change in net revenueoperating revenues comparing the firstthird quarter 2019 to the firstthird quarter 2018:

 Amount
 (In Millions)
2018 net revenueoperating revenues

$374.1568.4

Fuel, rider, and other revenues that do not significantly affect net income(30.8)
Return of unprotected excess accumulated deferred income taxes to customers(31.8111.4)
Formula rate plan regulatory provision(10.5)
Retail electric price10.622.9

OtherVolume/weather3.815.6

2019 net revenueoperating revenues

$346.2687.5



Entergy Arkansas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. In third quarter 2019, $41.4 million was returned to customers as compared to $152.8 million in third quarter 2018. There is no effect on net income as the reduction in net revenueoperating revenues in each period was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.


The formula rate plan regulatory provision is due to an additional provision recorded in the first quarter 2019 to reflect the current estimate
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Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of January 2019, as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.


The volume/weather variance is primarily due to an increase in usage during the unbilled sales period, partially offset by a decrease of 302 GWh, or 5%, in billed electricity usage, including a decrease in industrial usage primarily due to a decrease in small industrial sales.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018:
Amount
(In Millions)
2018 operating revenues
$1,614.0
Fuel, rider, and other revenues that do not significantly affect net income(29.8)
Return of unprotected excess accumulated deferred income taxes to customers161.7
Retail electric price50.6
Volume/weather(20.2)
2019 operating revenues
$1,776.3

Entergy Arkansas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a tax adjustment rider beginning in April 2018. In the nine months ended September 30, 2019, $98.7 million was returned to customers as compared to $260.4 million in the nine months ended September 30, 2018. There is no effect on net income as the reduction in operating revenues in each period was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of January 2019, as approved by the APSC. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filing.

The volume/weather variance is primarily due to a decrease of 719 GWh, or 4%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales and a decrease in industrial usage. The decrease in industrial usage is primarily due to a decrease in small industrial sales.

Other Income Statement Variances


Third Quarter 2019 Compared to Third Quarter 2018

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

Other income decreased primarily due to changes in decommissioning trust fund investment activity.


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Interest expense increased primarily due to the issuance of $350 million of 4.20% Series mortgage bonds in March 2019.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Nuclear refueling outage expenses decreased primarily due to the amortization of lower costs associated with the most recent outages as compared to previous outages.


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Other operation and maintenance expenses decreasedincreased primarily due to:

an increase of $5.9 million due to spending on customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $5.7 million in information technology costs primarily due to higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance;
an increase of $3.8 million in distribution operations and asset management costs primarily due to higher advanced metering customer education costs and higher contract costs for meter reading services;
an increase of $3.3 million in fossil-fueled generation expenses primarily due to a higher scope of work performed during plant outages in 2019 as compared to the same period in 2018; and
lower nuclear insurance refunds of $3 million.

The increase was offset by a decrease of $8.9$12 million in nuclear generation expenses primarily due to a lower scope of work performed in the first quarter 2019 as compared to the first quartersame period in 2018 and lower nuclear labor costs, including contract labor.

Thea decrease was partially offset by:

an increase of $1.8$5.9 million in information technologyenergy efficiency costs primarily due to higher software maintenance costs and higher labor costs;the timing of recovery from customers.
an increase of $1.1 million in outside legal costs primarily due to a settlement received in 2018 which reduced legal costs in the first quarter 2018;
an increase of $1 million in advanced metering costs, including customer education costs; and
several individually insignificant items.


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


Other income decreased primarily due to changes in decommissioning trust fund investment activity.

Interest expense increased primarily due to the issuance of $350 million of 4.20% Series mortgage bonds in March 2019 and the issuance of $250 million of 4.00% Series first mortgage bonds in May 2018 and the issuance of $350 million of 4.20% Series first mortgage bonds in March 2019.2018.


Income Taxes


The effective income tax rate was (138.2%rates were 4.5% for the third quarter 2019 and (13.1%) for the first quarternine months ended September 30, 2019. The differencedifferences in the effective income tax raterates for the firstthird quarter 2019 and the nine months ended September 30, 2019 versus the federal statutory rate of 21% waswere primarily due to the amortization of excess accumulated deferred income taxes and 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. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 10 to the financial statements herein for discussion of corporate income tax law changes that phase in an Arkansas tax rate reduction.


The effective income tax rate was 20.7%(631.3%) for the firstthird quarter 2018. The difference in the effective income tax rate for the firstthird quarter 2018 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and 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 the provision for uncertain tax positions. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a write-offdiscussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax rate was (286.4%) for the nine months ended September 30, 2018. The difference in the effective income tax rate for the nine months ended September 30, 2018 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and certain book and tax differences related to utility plant items, partially offset by state income taxes. See Note 10 to the financial statements herein and

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Notes 2 and 3 to the financial statements in the Form 10-K for a stock-based compensation deferred tax asset.discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.


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 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.



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Liquidity and Capital Resources


Cash Flow


Cash flows for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2019 20182019 2018
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$119
 
$6,216

$119
 
$6,216
      
Cash flow provided by (used in):

  


  
Operating activities206,467
 179,890
576,612
 362,585
Investing activities(160,961) (161,344)(506,676) (574,337)
Financing activities144,616
 (23,839)7,014
 427,318
Net increase (decrease) in cash and cash equivalents190,122
 (5,293)
Net increase in cash and cash equivalents76,950
 215,566
      
Cash and cash equivalents at end of period
$190,241
 
$923

$77,069
 
$221,782


Operating Activities


Net cash flow provided by operating activities increased $26.6$214 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:

a decrease in the return of unprotected excess accumulated deferred income taxes to customers in 2019 as compared to the same period in 2018. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act;
a decrease of $33.9 million in spending on nuclear refueling outages in 2019;
a decrease of $33.8 million in pension contributions in 2019. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding; and
the timing of recovery of fuel and purchased power costscosts.


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Management's Financial Discussion and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.Analysis


Investing Activities


Net cash flow used in investing activities decreased $0.4$67.7 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to to:

a decrease of $18.8 million in nuclear construction expenditures primarily due to a lower scope of work performed on various nuclear projects in 2019 as compared to the same period in 2018 and a decrease of $11.1$43.3 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. cycle;
a decrease of $42.6 million in nuclear construction expenditures primarily as a result of work performed in 2018 on various ANO 1 and 2 outage projects;
a decrease of $17.8 million in fossil-fueled generation construction expenditures due to a decrease in spending on various fossil-fueled generation projects in 2019 as compared to the same period in 2018;
a decrease of $10.8 million in transmission construction expenditures due to a lower scope of work performed in 2019 on various projects; and
a decrease of $11.7 million in information technology capital expenditures primarily due to lower spending in 2019 on critical infrastructure protection.

The decrease was substantiallypartially offset by an increase of $39.3 million in distribution construction expenditures primarily due to investment in the reliability and infrastructure of Entergy Arkansas’s distribution system, including increased spending on advanced metering infrastructure, and an increase of $13.3 million in storm spending.

Financing Activities

Net cash flow provided by financing activities decreased $420.3 million for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 primarily due to:

a $350 million capital contribution from Entergy Corporation in 2018 in anticipation of the return of unprotected excess accumulated deferred income taxes to customers and upcoming planned capital investments;
the issuance of $250 million of 4.00% Series mortgage bonds in May 2018;
a common equity distribution of $115 million in 2019 in order to maintain the targeted capital structure;
net repayments of long-term borrowings of $29.3 million in 2019 compared to net long-term borrowings of $45.5 million in 2018 on the Entergy Arkansas nuclear fuel company variable interest entity credit facility; and
money pool activity.


Increases in Entergy Arkansas’s receivable from the money pool are a use of cash flow, and Entergy Arkansas’s receivable from the money pool increasedThe decrease was partially offset by $30.5 million for the three months ended March 31, 2019. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Entergy Arkansas’s financing activities provided $144.6 million of cash for the three months ended March 31, 2019 compared to using $23.8 million of cash for the three months ended March 31, 2018 primarily due to the following activity:

the issuance of $350 million of 4.20% Series first mortgage bonds in March 2019;
money pool activity;2019 and
net repayments of short-term borrowings of $50 million in 2018 on the Entergy Arkansas long-termnuclear fuel company variable interest entity credit facility.facility in 2018.



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Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $182.7 million in 2019 compared to decreasing by $42.3$166.1 million in 2018. 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.



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Capital Structure


Entergy Arkansas’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of $350 million of first mortgage bonds in March 2019.

March 31,
2019
 
December 31,
2018
September 30,
2019
 
December 31,
2018
Debt to capital54.1% 52.0%53.3% 52.0%
Effect of excluding the securitization bonds(0.1%) (0.2%)(0.1%) (0.2%)
Debt to capital, excluding securitization bonds (a)54.0% 51.8%53.2% 51.8%
Effect of subtracting cash(1.4%) %(0.5%) %
Net debt to net capital, excluding securitization bonds (a)52.6% 51.8%52.7% 51.8%


(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, financing lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Arkansas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because the securitization bonds are non-recourse to Entergy Arkansas, as more fully described in Note 5 to the financial statements in the Form 10-K.  Entergy Arkansas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.


Uses and Sources of Capital


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resourcesin 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 is developing its capital investment plan for 2020 through 2022 and currently anticipates making $2.5 billion in capital investments during that period. The preliminary estimate includes 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 advanced meters and related investments; resource planning, including potential generation projects; system improvements; investments in ANO 1 and 2; software and security; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
March 31,
 2019
 
December 31,
2018
 
March 31,
 2018
 
December 31,
2017
(In Thousands)
$30,521 ($182,738) ($123,858) ($166,137)
September 30,
 2019
 
December 31,
2018
 
September 30,
 2018
 
December 31,
2017
(In Thousands)
$6,896 ($182,738) $13,421 ($166,137)


See Note 4 to the financial statements in the Form 10-K for a description of the money pool.




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Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in September 2023.2024. Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2020. The $150 million credit facility includes fronting commitments for the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of March 31,September 30, 2019, no cash borrowings and no letters of credit were outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31,September 30, 2019, a $1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.


The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in September 2021.  As of March 31,September 30, 2019, $42.6$30.3 million in loans were outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facility.


Searcy Solar Facility


In March 2019, Entergy Arkansas announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar energy facility that will be sited on approximately 800 acres in White County near Searcy, Arkansas.  The purchase is contingent upon, among other things, obtaining necessary approvals from applicable federal and state regulatory and permitting agencies.  The project will be constructed by a subsidiary of NextEra Energy Resources.  Entergy Arkansas will purchase the facility upon completion and after the other purchase contingencies have been met.  Closing is expected to occur by the end of 2021. In May 2019, Entergy Arkansas filed a petition with the APSC seeking a finding that the transaction is in the public interest and requesting all necessary approvals. In September 2019 other parties filed testimony largely supporting the resource acquisition but disputing Entergy Arkansas’s proposed method of cost recovery. Entergy Arkansas filed its rebuttal testimony in October 2019. A hearing is scheduled in January 2020.


State and Local Rate Regulation and Fuel-Cost Recovery


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –State and Local Rate Regulation and Fuel-Cost Recoveryin 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


As discussed in the Form 10-K, the formula rate plan filing that will be made in2019 Formula Rate Plan Filing

In July 2019, to setEntergy Arkansas filed with the formula rates for the 2020 calendar year will include a netting adjustment that will compare projected costs and sales for 2018 that were approved in the 2017APSC its 2019 formula rate plan filing to set its formula rate for the 2020 calendar year. The filing contained an evaluation of Entergy Arkansas’s earnings for the projected year 2020 and a netting adjustment for the historical year 2018.  The total proposed formula rate plan rider revenue change designed to produce a target rate of return on common equity of 9.75% is $15.3 million, which is based upon a deficiency of approximately $61.9 million for the 2020 projected year, netted with a credit of approximately $46.6 million in the 2018 historical year netting adjustment. During 2018, Entergy Arkansas experienced higher-than expected sales volume, and actual 2018 costs were lower than forecasted.  These changes, coupled with a reduced income tax rate resulting from the Tax Cuts and sales data.Jobs Act, resulted in the credit for the historical year netting adjustment. In the fourth quarter 2018, Entergy Arkansas recorded a provision of $35.1 million that reflected the estimate of the historical year netting adjustment that willwas expected to be included in the 2019 filing to reflect the change in formula rate plan revenues associated with actual 2018 results when compared to the allowed rate of return on equity.filing. In the first quarter 2019, Entergy Arkansas recorded an additional $10.5provisions totaling $11.5 million provision to reflect the currentupdated estimate of the historical year netting adjustment to be included in the 2019 filing.   In October 2019 other parties in the proceeding filed their errors and objections requesting certain adjustments to Entergy Arkansas’s filing, which, if granted, would reduce or eliminate Entergy Arkansas’s proposed revenue change. Entergy Arkansas filed its response addressing the requested adjustments in October 2019. In its response, Entergy Arkansas accepted certain of the adjustments recommended by the General Staff of the APSC that would reduce the


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proposed formula rate plan rider revenue change to $14 million. Entergy Arkansas disputed the remaining adjustments proposed by the parties. In October 2019, Entergy Arkansas filed a unanimous settlement agreement with the other parties in the proceeding seeking APSC approval of a revised total formula rate plan rider revenue change of $10.1 million. The proposed new formula rates would go into effect in January 2020. In its July 2019 formula rate plan filing, Entergy Arkansas proposed to recover an $11.2 million regulatory asset, amortized over five years, associated with specific costs related to the potential construction of scrubbers at the White Bluff plant. While Entergy Arkansas does not concede that the regulatory asset does not have merit, for purposes of reaching a settlement amount on the total formula rate plan rider change Entergy Arkansas agreed not to include the amounts associated with the White Bluff scrubber regulatory asset in the 2019 formula rate plan filing or future filings. Entergy Arkansas will record a write off of the $11.2 million White Bluff scrubber regulatory asset.

Production Cost Allocation Rider

In May 2019, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflected a credit to customers for the recovery of the true-up adjustment resulting from the 2018 over-recovered retail balance of $0.1 million and the recovery of a $4.2 million payment to Entergy Arkansas as a result of the FERC’s May 2018 decision in the 2005 bandwidth proceeding, in which the FERC directed a compliance filing to be made that consisted of the comprehensive recalculation of the bandwidth formula rate with true-up payments and receipts based on test period data for June 1, 2005 through December 31, 2005. The rates for the 2019 production cost allocation rider update are effective July 2019 through June 2020.

Energy Cost Recovery Rider


In March 2019, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected a decrease from $0.01882 per kWh to $0.01462 per kWh and became effective with the first billing cycle in April 2019. In March 2019 the Arkansas Attorney General filed a response to Entergy Arkansas’s annual adjustment and included with its filing a motion for investigation of alleged overcharges to customers in connection with the FERC’s October 2018 order in the opportunity sales proceeding. Entergy Arkansas filed its response to the Attorney General’s motion in April 2019 in which Entergy Arkansas stated its intent to initiate a proceeding to address recovery issues related to the October 2018 FERC order.


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In May 2019, Entergy Arkansas LLCinitiated the opportunity sales recovery proceeding, discussed below, and Subsidiariesrequested that the APSC establish that proceeding as the single designated proceeding in which interested parties may assert claims related to the appropriate retail rate treatment of the FERC October 2018 order and related FERC orders in the opportunity sales proceeding. In June 2019 the APSC granted Entergy Arkansas’s request and also denied the Attorney General’s motion in the energy cost recovery proceeding seeking an investigation into Entergy Arkansas’s annual energy cost recovery rider adjustment and referred the evaluation of such matters to the opportunity sales recovery proceeding.
Management's Financial Discussion and Analysis

Opportunity Sales Proceeding


As discussed in the Form 10-K, in December 2018, Entergy made a compliance filing in response to the FERC’s October 2018 order in the opportunity sales proceeding. The compliance filing provided a final calculation of Entergy Arkansas’s payments to the other Utility operating companies, including interest. No protests were filed in response to the December 2018 compliance filing. The December 2018 compliance filing is pending FERC action.


In February 2019 the LPSC filed a new complaint relating to two issues that were raised in the opportunity sales proceeding, but that, in its October 2018 order, the FERC held were outside the scope of the proceeding. In March 2019, Entergy Services filed an answer and motion to dismiss the new complaint.


In May 2019, Entergy Arkansas filed an application and supporting testimony with the APSC requesting approval of a special rider tariff to recover the costs of these payments from its retail customers over a 24-month period.  The application requested that the APSC approve the rider to take effect within 30 days or, if suspended by the APSC as allowed by commission rule, approve the rider to take effect in the first billing cycle of the first month occurring

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30 days after issuance of the APSC’s order approving the rider. In June 2019 the APSC suspended Entergy Arkansas’s tariff and granted Entergy Arkansas’s motion asking the APSC to establish the proceeding as the single designated proceeding in which interested parties may assert claims related to the appropriate retail rate treatment of the FERC’s October 2018 order and related FERC orders in the opportunity sales proceeding.

Net Metering Legislation

An Arkansas law was enacted effective July 2019 that, among other things, expands the definition of a “net metering customer” to include two additional types of customers: (1) customers that lease net metering facilities, subject to certain leasing arrangements, and (2) government entities or other entities exempt from state and federal income taxes that enter into a service contract for a net metering facility. The latter provision would allow eligible entities, many of whom are small and large general service customers, to purchase renewable energy directly from third party providers and receive bill credits for these purchases. The APSC was given authority under this law to address certain matters, such as cost shifting and the appropriate compensation for net metered energy, and has initiated proceedings for this purpose. Because of the size and number of customers eligible under this new law, there is a risk of loss of load and the shifting of significant costs from eligible entities to other customers.

Federal Regulation


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Federal Regulationin 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, 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 2019, Entergy Arkansas recorded a revision to its estimated decommissioning cost liabilities for ANO 1 and ANO 2 as a result of a revised decommissioning cost study. The revised estimates resulted in a $126.2 million increase in its decommissioning cost liabilities, along with corresponding increases in the related asset retirement cost assets that will be depreciated over the remaining lives of the units.


New Accounting Pronouncements


See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.



ENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
    
   Three Months Ended Nine Months Ended
 2019 2018 2019 2018 2019 2018
 (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES            
Electric 
$545,812
 
$551,024
 
$687,526
 
$568,399
 
$1,776,267
 
$1,614,028
            
OPERATING EXPENSES            
Operation and Maintenance:            
Fuel, fuel-related expenses, and gas purchased for resale 152,159
 108,306
 109,779
 164,438
 370,534
 379,240
Purchased power 47,058
 71,972
 61,074
 58,213
 156,417
 195,024
Nuclear refueling outage expenses 17,248
 23,402
 17,381
 19,062
 51,823
 61,623
Other operation and maintenance 166,460
 169,358
 188,299
 188,882
 542,765
 536,032
Decommissioning 15,761
 14,760
 17,422
 15,226
 50,351
 44,971
Taxes other than income taxes 28,363
 27,905
 31,783
 27,972
 87,327
 80,322
Depreciation and amortization 75,847
 71,981
 78,594
 73,579
 231,502
 218,261
Other regulatory charges (credits) - net 445
 (3,307) 1,018
 (13,758) (8,873) (29,378)
TOTAL 503,341
 484,377
 505,350
 533,614
 1,481,846
 1,486,095
            
OPERATING INCOME 42,471
 66,647
 182,176
 34,785
 294,421
 127,933
            
OTHER INCOME            
Allowance for equity funds used during construction 3,428
 4,008
 3,977
 3,735
 10,777
 12,214
Interest and investment income 6,183
 6,814
 8,788
 12,060
 19,193
 21,352
Miscellaneous - net (3,690) (3,871) (4,286) (3,063) (12,704) (10,815)
TOTAL 5,921
 6,951
 8,479
 12,732
 17,266
 22,751
            
INTEREST EXPENSE            
Interest expense 33,383
 29,766
 35,454
 31,632
 104,664
 92,315
Allowance for borrowed funds used during construction (1,414) (1,890) (1,641) (1,739) (4,384) (5,737)
TOTAL 31,969
 27,876
 33,813
 29,893
 100,280
 86,578
            
INCOME BEFORE INCOME TAXES 16,423
 45,722
 156,842
 17,624
 211,407
 64,106
            
Income taxes (22,698) 9,467
 7,126
 (111,266) (27,729) (183,595)
            
NET INCOME 39,121
 36,255
 149,716
 128,890
 239,136
 247,701
            
Preferred dividend requirements 
 357
 
 357
 
 1,071
            
EARNINGS APPLICABLE TO COMMON EQUITY 
$39,121
 
$35,898
 
$149,716
 
$128,533
 
$239,136
 
$246,630
            
See Notes to Financial Statements.            







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ENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Net income 
$39,121
 
$36,255
 
$239,136
 
$247,701
Adjustments to reconcile net income to net cash flow provided by operating activities:        
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 117,255
 115,976
 351,390
 335,939
Deferred income taxes, investment tax credits, and non-current taxes accrued 30,756
 11,877
 85,246
 28,463
Changes in assets and liabilities:        
Receivables 22,194
 31,033
 (70,395) (33,422)
Fuel inventory 260
 (13,868) (5,350) 7,523
Accounts payable (56,432) (26,924) (24,766) (20,904)
Taxes accrued (10,616) 10,072
 (18,608) 30,686
Interest accrued 12,661
 9,748
 20,206
 13,558
Deferred fuel costs 44,926
 1,971
 52,468
 24,463
Other working capital accounts 1,599
 5,591
 44,803
 (8,827)
Provisions for estimated losses 9,930
 6,520
 8,841
 10,013
Other regulatory assets (56,263) 13,835
 (55,749) 22,574
Other regulatory liabilities 53,386
 (13,546) 32,537
 (218,518)
Pension and other postretirement liabilities (910) (19,277) (26,136) (64,461)
Other assets and liabilities (1,400) 10,627
 (57,011) (12,203)
Net cash flow provided by operating activities 206,467
 179,890
 576,612
 362,585
        
INVESTING ACTIVITIES        
Construction expenditures (147,214) (167,485) (488,487) (517,882)
Allowance for equity funds used during construction 3,506
 4,143
 11,016
 12,572
Nuclear fuel purchases (214) (19,391) (26,732) (79,142)
Proceeds from sale of nuclear fuel 22,834
 30,907
 22,834
 31,897
Proceeds from nuclear decommissioning trust fund sales 34,423
 34,865
 199,031
 259,331
Investment in nuclear decommissioning trust funds (40,223) (40,238) (214,205) (269,913)
Change in money pool receivable - net (30,521) 
 (6,896) (13,421)
Changes in securitization account (3,553) (4,145) (3,238) (4,821)
Other 1
 
Insurance proceeds 
 7,043
Change in other investments 1
 (1)
Net cash flow used in investing activities (160,961) (161,344) (506,676) (574,337)
        
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt 603,655
 175,000
 781,510
 658,427
Retirement of long-term debt (275,904) (149,904) (473,827) (372,447)
Capital contribution from parent 
 350,000
Changes in short-term borrowings - net 
 (6,087) 
 (49,974)
Changes in money pool payable - net (182,738) (42,279) (182,738) (166,137)
Dividends paid:    
Distributions/dividends paid:    
Common equity (115,000) 
Preferred stock 
 (357) 
 (1,071)
Other (397) (212) (2,931) 8,520
Net cash flow provided by (used in) financing activities 144,616
 (23,839)
Net cash flow provided by financing activities 7,014
 427,318
        
Net increase (decrease) in cash and cash equivalents 190,122
 (5,293)
Net increase in cash and cash equivalents 76,950
 215,566
Cash and cash equivalents at beginning of period 119
 6,216
 119
 6,216
Cash and cash equivalents at end of period 
$190,241
 
$923
 
$77,069
 
$221,782
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    
    
Cash paid during the period for:        
Interest - net of amount capitalized 
$19,458
 
$18,761
 
$80,644
 
$74,966
        
See Notes to Financial Statements.        

ENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents:        
Cash 
$746
 
$118
 
$410
 
$118
Temporary cash investments 189,495
 1
 76,659
 1
Total cash and cash equivalents 190,241
 119
 77,069
 119
Securitization recovery trust account 8,218
 4,666
 7,904
 4,666
Accounts receivable:        
Customer 130,054
 94,348
 160,955
 94,348
Allowance for doubtful accounts (1,455) (1,264) (1,423) (1,264)
Associated companies 63,023
 48,184
 45,499
 48,184
Other 43,548
 64,393
 48,569
 64,393
Accrued unbilled revenues 86,910
 108,092
 137,444
 108,092
Total accounts receivable 322,080
 313,753
 391,044
 313,753
Deferred fuel costs 
 19,235
 
 19,235
Fuel inventory - at average cost 22,888
 23,148
 28,498
 23,148
Materials and supplies - at average cost 205,601
 196,314
 207,541
 196,314
Deferred nuclear refueling outage costs 60,689
 78,966
 33,581
 78,966
Prepayments and other 10,073
 14,553
 17,447
 14,553
TOTAL 819,790
 650,754
 763,084
 650,754
        
OTHER PROPERTY AND INVESTMENTS        
Decommissioning trust funds 997,263
 912,049
 1,045,826
 912,049
Other 5,478
 5,480
 5,476
 5,480
TOTAL 1,002,741
 917,529
 1,051,302
 917,529
        
UTILITY PLANT        
Electric 11,744,151
 11,611,041
 12,041,822
 11,611,041
Construction work in progress 304,981
 243,731
 299,195
 243,731
Nuclear fuel 171,038
 220,602
 186,731
 220,602
TOTAL UTILITY PLANT 12,220,170
 12,075,374
 12,527,748
 12,075,374
Less - accumulated depreciation and amortization 4,865,283
 4,864,818
 4,985,276
 4,864,818
UTILITY PLANT - NET 7,354,887
 7,210,556
 7,542,472
 7,210,556
        
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
Other regulatory assets (includes securitization property of $11,096 as of March 31, 2019 and $14,329 as of December 31, 2018) 1,591,240
 1,534,977
Other regulatory assets (includes securitization property of $4,596 as of September 30, 2019 and $14,329 as of December 31, 2018) 1,590,726
 1,534,977
Deferred fuel costs 67,393
 67,294
 67,591
 67,294
Other 26,292
 20,486
 21,441
 20,486
TOTAL 1,684,925
 1,622,757
 1,679,758
 1,622,757
        
TOTAL ASSETS 
$10,862,343
 
$10,401,596
 
$11,036,616
 
$10,401,596
        
See Notes to Financial Statements.        

ENTERGY ARKANSAS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT LIABILITIES        
Accounts payable:        
Associated companies 
$47,717
 
$251,768
 
$55,971
 
$251,768
Other 140,708
 187,387
 195,783
 187,387
Customer deposits 99,380
 99,053
 101,349
 99,053
Taxes accrued 46,273
 56,889
 38,281
 56,889
Interest accrued 31,554
 18,893
 39,099
 18,893
Deferred fuel costs 25,790
 
 33,530
 
Current portion of unprotected excess accumulated deferred income taxes 100,594
 99,316
 33,692
 99,316
Other 39,020
 23,943
 48,516
 23,943
TOTAL 531,036
 737,249
 546,221
 737,249
        
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued 1,131,314
 1,085,545
 1,172,542
 1,085,545
Accumulated deferred investment tax credits 32,602
 32,903
 32,002
 32,903
Regulatory liability for income taxes - net 467,198
 505,748
 480,573
 505,748
Other regulatory liabilities 493,326
 402,668
 526,004
 402,668
Decommissioning 1,190,346
 1,048,428
 1,224,936
 1,048,428
Accumulated provisions 58,909
 48,979
 57,820
 48,979
Pension and other postretirement liabilities 312,361
 313,295
 287,086
 313,295
Long-term debt (includes securitization bonds of $20,975 as of March 31, 2019 and $20,898 as of December 31, 2018) 3,555,152
 3,225,759
Long-term debt (includes securitization bonds of $14,016 as of September 30, 2019 and $20,898 as of December 31, 2018) 3,538,384
 3,225,759
Other 67,875
 17,919
 63,809
 17,919
TOTAL 7,309,083
 6,681,244
 7,383,156
 6,681,244
    
Commitments and Contingencies    
        
EQUITY        
Member's equity 3,022,224
 2,983,103
 3,107,239
 2,983,103
TOTAL 3,022,224
 2,983,103
 3,107,239
 2,983,103
        
TOTAL LIABILITIES AND EQUITY 
$10,862,343
 
$10,401,596
 
$11,036,616
 
$10,401,596
        
See Notes to Financial Statements.        



ENTERGY ARKANSAS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the ThreeNine Months Ended March 31,September 30, 2019 and 2018
(Unaudited)
   
   
  Member's Equity
  (In Thousands)
   
Balance at December 31, 2017 

$2,376,754

   
Net income 36,255

Preferred stock dividends (357)
Balance at March 31, 2018 
2,412,652

Net income82,556
Capital contribution from parent350,000
Preferred stock dividends(357)
Balance at June 30, 20182,844,851
Net income128,890
Preferred stock dividends(357)
Balance at September 30, 2018
$2,412,6522,973,384

   
   
Balance at December 31, 2018 

$2,983,103

   
Net income 39,121

Balance at March 31, 2019 
3,022,224

Net income50,299
Common equity distributions(115,000)
Balance at June 30, 20192,957,523
Net income149,716
Balance at September 30, 2019
$3,022,2243,107,239

   
See Notes to Financial Statements.  



ENTERGY ARKANSAS, LLC AND SUBSIDIARIESSELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
            
 Nine Months Ended Increase/   Three Months Ended Increase/  
Description 2019 2018 (Decrease) %

 2019 2018 (Decrease) %
 (Dollars In Millions)   (Dollars In Millions)  
Electric Operating Revenues:Electric Operating Revenues:      Electric Operating Revenues:      
Residential 
$210
 
$236
 
($26) (11) 
$254
 
$250
 
$4
 2
Commercial 125
 121
 4
 3
 163
 120
 43
 36
Industrial 122
 111
 11
 10
 156
 126
 30
 24
Governmental 5
 5
 
 
 6
 4
 2
 50
Total billed retail 462
 473
 (11) (2) 579
 500
 79
 16
Sales for resale:                
Associated companies 29
 30
 (1) (3) 30
 23
 7
 30
Non-associated companies 50
 36
 14
 39
 29
 37
 (8) (22)
Other 5
 12
 (7) (58) 50
 8
 42
 525
Total 
$546
 
$551
 
($5) (1) 
$688
 
$568
 
$120
 21
                
Billed Electric Energy Sales (GWh):                
Residential 2,205
 2,329
 (124) (5) 2,393
 2,482
 (89) (4)
Commercial 1,326
 1,365
 (39) (3) 1,761
 1,816
 (55) (3)
Industrial 1,845
 1,828
 17
 1
 2,125
 2,283
 (158) (7)
Governmental 57
 56
 1
 2
 67
 67
 
 
Total retail 5,433
 5,578
 (145) (3) 6,346
 6,648
 (302) (5)
Sales for resale:                
Associated companies 597
 487
 110
 23
 588
 483
 105
 22
Non-associated companies 2,519
 1,717
 802
 47
 1,515
 1,818
 (303) (17)
Total 8,549
 7,782
 767
 10
 8,449
 8,949
 (500) (6)
        
        
 Nine Months Ended Increase/  

 2019 2018 (Decrease) %
 (Dollars In Millions)  
Electric Operating Revenues:Electric Operating Revenues:      
Residential 
$621
 
$645
 
($24) (4)
Commercial 413
 334
 79
 24
Industrial 396
 335
 61
 18
Governmental 16
 13
 3
 23
Total billed retail 1,446
 1,327
 119
 9
Sales for resale:        
Associated companies 89
 80
 9
 11
Non-associated companies 124
 100
 24
 24
Other 117
 107
 10
 9
Total 
$1,776
 
$1,614
 
$162
 10
        
Billed Electric Energy Sales (GWh):        
Residential 6,144
 6,455
 (311) (5)
Commercial 4,433
 4,577
 (144) (3)
Industrial 5,800
 6,064
 (264) (4)
Governmental 181
 181
 
 
Total retail 16,558
 17,277
 (719) (4)
Sales for resale:        
Associated companies 1,694
 1,206
 488
 40
Non-associated companies 6,071
 4,706
 1,365
 29
Total 24,323
 23,189
 1,134
 5

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES


MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS



Results of Operations


Net Income


Third Quarter 2019 Compared to Third Quarter 2018

Net income increased $16$37 million primarily due to higher net revenueretail electric price and lower other operation and maintenance expenses,higher volume/weather. The increase was partially offset by higher depreciation and amortization expenses.expenses, higher other operation and maintenance expenses, and higher interest expense.


Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net Revenue

Net revenue consists of operating revenues net of: 1) fuel, fuel-relatedincome increased $51.7 million primarily due to higher retail electric price. The increase was partially offset by a higher effective income tax rate, lower volume/weather, higher depreciation and amortization expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  higher interest expense.

Operating Revenues

Third Quarter 2019 Compared to Third Quarter 2018

Following is an analysis of the change in net revenueoperating revenues comparing the firstthird quarter 2019 to the firstthird quarter 2018:

 Amount
 (In Millions)
2018 net revenueoperating revenues

$573.71,206.6

Fuel, rider, and other revenues that do not significantly affect net income(77.3)
Retail electric price46.052.0

Return of unprotected excess accumulated deferred income taxes to customers(7.037.6)
Volume/weather(29.612.8)
Other(0.8)
2019 net revenueoperating revenues

$582.31,231.7



Entergy Louisiana’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The retail electric price variance is primarily due to an increase in formula rate plan revenues effective September 2018 and an interim increase in formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for St. Charles Power Station, each as approved by the LPSC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018.

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In third quarter 2019, $17.2 million was returned to customers as compared to $54.8 million in third quarter 2018. There is no effect on net income as the reduction in operating revenues was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The volume/weather variance is primarily due to an increase in usage during the unbilled sales period.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018:
Amount
(In Millions)
2018 operating revenues
$3,308.7
Fuel, rider, and other revenues that do not significantly affect net income(159.2)
Retail electric price106.5
Return of unprotected excess accumulated deferred income taxes to customers55.5
Volume/weather(14.2)
2019 operating revenues
$3,297.3
Entergy Louisiana’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The retail electric price variance is primarily due to an increase in formula rate plan revenues effective September 2018 and an interim increase in formula rate plan revenues effective June 2019 due to the inclusion of the first-year revenue requirement for the St. Charles Power Station, each as approved by the LPSC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan proceedings.

The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through changes in the formula rate plan effective May 2018. In the nine months ended September 30, 2019, $30.8 million was returned to customers as compared to $86.3 million in the nine months ended September 30, 2018. There is no effect on net income as the reduction in operating revenues was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

The volume/weather variance is primarily due to a decrease of 623 GWh, or 3%, in billed electricity usage for residential and commercial customers, including the effect of less favorable weather. The decrease was partially offset by an increase in industrial usage primarily due to an increase in demand from expansion projects, primarily in the chemicals industry.


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Other Income Statement Variances

Third Quarter 2019 Compared to Third Quarter 2018

Other operation and maintenance expenses increased primarily due to:

an increase of $5.6 million in loss provisions;
an increase of $4.3 million in spending on customer initiatives to explore new technologies and services and continuous customer improvement; and
an increase of $3.6 million in information technology costs primarily due to higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance.

The increase was partially offset by a decrease of $3.9 million in nuclear generation expenses primarily due to proceeds of $5.2 million received in September 2019 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the financial statements herein for a discussion of the spent nuclear fuel litigation.
Taxes other than income increased primarily due to an increase in ad valorem taxes resulting from higher assessments.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the St. Charles Power Station, which was placed into service in May 2019.

Other regulatory charges (credits) include regulatory charges of $27$18.3 million recorded in the firstthird quarter 2018 to reflect the effects of a provision in the settlement reached in the formula rate plan extension proceeding to return the benefits of the lower federal income tax rate in 2018 to customers, an increase in formula rate plan revenues, as approved by the LPSC, implemented with the first billing cycle of September 2018, and the implementation of an advanced metering system customer charge, as approved by the LPSC, effective January 2019.customers. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan proceedings and advanced metering system customer charge.extension proceeding.


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

The volume/weather variance isInterest expense increased primarily due to a decreasethe issuance of 225 GWh, or 2%,$525 million of 4.20% Series mortgage bonds in billed electricity usage, including the effect of less favorable weather on residentialMarch 2019.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Other operation and commercial sales. The decrease was partially offset by maintenance expenses increased primarily due to:

an increase of $10.4 million in industrial usagespending on customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $8.3 million in information technology costs primarily due to an increase in demand from existing customers.higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance; and
an increase of $3.5 million in distribution operations and asset management costs primarily due to higher advanced metering customer education costs and higher contract costs for meter reading services.




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Other Income Statement VariancesThe increase was substantially offset by:


Other operation and maintenance expenses decreased primarily due to:

a decrease of $7.2 million in nuclear generation expenses primarily due to proceeds of $5.2 million received in September 2019 from the DOE litigation regarding spent nuclear fuel storage costs that were previously expensed and a lower scope of work performed during plant outages in 2019 as compared to the same period in 2018;
a decrease of $9.7$6 million in nuclear generationtransmission expenses primarily due to a lower scope of work performed during non-refueling plant outages in the first quarter 2019 as compared to the first quarter 2018 and lower nuclear laborsame period in 2018;
a decrease of $4 million in vegetation maintenance costs; and
a decrease of $4.1$3.6 million in energy efficiency costs due to the timing of recovery from customers.


The decrease was partially offset by:See Note 1 to the financial statements herein for a discussion of the spent nuclear fuel litigation

an increase of $2.2 million in information technology costs primarily due to higher software maintenance costs and higher contract costs; and
an increase of $2.1 million in loss provisions primarily due to a litigation provision recorded in first quarter 2019.


Depreciation and amortization expenses increased primarily due to additions to plant in service.service, including the St. Charles Power Station, which was placed in service in May 2019.


Other regulatory charges (credits) include regulatory charges of $73.3 million recorded in 2018 to reflect the effects of a provision in the settlement reached in the formula rate plan extension proceeding to return the benefits of the lower federal income tax rate in 2018 to customers. See Note 2 to the financial statements in the Form 10-K for discussion of the formula rate plan extension proceeding.

Other income increased primarily due to an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2019, including the Lake Charles Power Station and St. Charles Power Station projects. The increase was substantially offset by a changechanges in decommissioning trust fund investment activity.


Interest expense increased primarily due to the issuance of $525 million of 4.20% Series mortgage bonds in March 2019.

Income Taxes


The effective income tax rate was 11.5%rates were 17.7% for the firstthird quarter 2019 and 16.3% for the nine months ended September 30, 2019. The differencedifferences in the effective income tax raterates for the firstthird quarter 2019 and the nine months ended September 30, 2019 versus the federal statutory rate of 21% waswere primarily due to the amortization of excess accumulated deferred income taxes, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, the amortization of excess accumulated deferred income taxes, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.


The effective income tax rate was 16.3%1.3% for the firstthird quarter 2018. The difference in the effective income tax rate for the firstthird quarter 2018 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain bookpartially offset by state income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax differences relatedrate was (6.3%) for the nine months ended September 30, 2018. The difference in the effective income tax rate for the nine months ended September 30, 2018 versus the federal statutory rate of 21% was primarily due to utility plant items,the amortization of excess accumulated deferred income taxes, an IRS audit settlement for the 2012-2013 tax returns, and book and tax differences related to the allowance for equity funds used during construction,non-taxable income distributions earned on preferred membership interests, partially offset by state income taxestaxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a write-offdiscussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act. See Note 3 to the financial statements in the Form 10-K for a stock-based compensation deferred tax asset.discussion of the IRS audit settlement.


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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 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.



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Liquidity and Capital Resources


Cash Flow


Cash flows for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2019 20182019 2018
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$43,364
 
$35,907

$43,364
 
$35,907
      
Cash flow provided by (used in):      
Operating activities179,583
 328,040
962,443
 943,300
Investing activities(441,392) (613,950)(1,260,023) (1,283,844)
Financing activities523,608
 812,289
382,261
 518,222
Net increase in cash and cash equivalents261,799
 526,379
84,681
 177,678
      
Cash and cash equivalents at end of period
$305,163
 
$562,286

$128,045
 
$213,585


Operating Activities


Net cash flow provided by operating activities decreased $148.5increased $19.1 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:


the timing of collection of receivables from customers;
an increase of $28.7
a decrease of $40.1 million in pension contributions in spending on nuclear refueling outages;
an increase of $20.3 million in interest payments in the first quarter 2019 as compared to 2018. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding;
proceeds of $16.6 million received in September 2019 from the DOE litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 1 to the first quarter 2018;financial statements herein for a discussion of the spent nuclear fuel litigation; and
a decrease in the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to the financial statements in the Form 10-K and Note 10 to the financial statements herein for a discussion of the effects and the regulatory activity regarding the Tax Cuts and Jobs Act.


The decreaseincrease was partially offset by a decreaseby:

an increase of $17.6$68.4 million in pension contributionsspending on nuclear refueling outages;
the timing of payments to vendors; and
an increase of $18.7 million in 2019 as compared to 2018. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimatesstorm spending in the Form 10-K2019.


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Management's Financial Discussion and other postretirement benefits funding.Analysis


Investing Activities


Net cash flow used in investing activities decreased $172.6$23.8 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:

money pool activity;
a decrease of $90.3$214.4 million in fossil-fueled generation construction expenditures, primarily due to lower spending on the St. Charles Power Station and Lake Charles Power Station projects in 2019; and
money pool activity;
a decrease of $22$11.6 million in transmission constructioninformation technology capital expenditures primarily due to a lower scope of work performedspending in 2019 as compared to the same period in 2018.on critical infrastructure protection; and

several individually insignificant items.

The decrease was partially offset by:


an increase of $85.7$73.3 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; and

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an increase of $42.6$55.4 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2019;
an increase of $47.5 million in distribution construction expenditures primarily due to investment in the reliability and infrastructure of Entergy Louisiana’s distribution system, including increased spending on advanced metering infrastructure;
an increase of $38.9 million in transmission expenditures primarily due to a higher scope of work performed in 2019 as compared to the same period in 2018; and
an increase of $38.6 million in storm spending in 2019.


Decreases in Entergy Louisiana’s receivable from the money pool are a source of cash flow, and Entergy Louisiana’s receivable from the money pool decreased by $8.9$35.5 million for the threenine months ended March 31,September 30, 2019 compared to increasing by $170.2$2.4 million for the threenine months ended March 31,September 30, 2018. 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 $288.7$136 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:


the issuance of $750 million of 4.00% Series first mortgage bonds in March 2018. A portion of the proceeds was used to repay $375 million of 6.0% Series mortgage bonds in May 2018;
net borrowingsthe issuance of $100$600 million onof 4.20% Series mortgage bonds in August 2018. A portion of the Entergy Louisiana long-term credit facilityproceeds was used to repay $300 million of 6.5% Series mortgage bonds in September 2018; and
$49an increase of $99 million in common equity distributions in the first quarter 2019 primarily to maintain Entergy Louisiana’s targeted capital structure; andstructure.
net short-term borrowings of $19.4 million in 2018 on the nuclear fuel company variable interest entities’ credit facilities.


The decrease was partially offset by by:

the issuance of $525 million of 4.20% Series first mortgage bonds in March 2019 and 2019;
net long-term borrowings of $54.3$29.2 million on the nuclear fuel company variable interest entities’ credit facilities in 2019 compared to net repayments of long-term borrowings of $49.7$37 million on the nuclear fuel company variable interest entities’ credit facilities in 2018.2018; and

net repayments of short-term borrowings of $43.5 million in 2018 on the nuclear fuel company variable interest entities’ credit facilities.


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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 debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the issuance of $525 million of first mortgage bonds in March 2019.

March 31,
2019
 
December 31,
2018
September 30,
2019
 
December 31,
2018
Debt to capital55.3% 53.6%53.8% 53.6%
Effect of excluding securitization bonds(0.2%) (0.3%)(0.1%) (0.3%)
Debt to capital, excluding securitization bonds (a)55.1% 53.3%53.7% 53.3%
Effect of subtracting cash(1.1%) (0.1%)(0.5%) (0.1%)
Net debt to net capital, excluding securitization bonds (a)54.0% 53.2%53.2% 53.2%
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana.


Debt consists of short-term borrowings, financing lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Louisiana also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

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Uses and Sources of Capital


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Louisiana’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.


Entergy Louisiana is developing its capital investment plan for 2020 through 2022 and currently anticipates making $4.4 billion in capital investments during that period. The preliminary estimate includes specific investments such as the Washington Parish Energy Center and Lake Charles Power Station; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to maintain reliability and improve service to customers, including advanced meters and related investments; resource planning, including potential generation projects; system improvements; investments in River Bend and Waterford 3; software and security; 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’s receivables from the money pool were as follows:
March 31,
2019
 December 31, 2018 
March 31,
2018
 
December 31,
2017
(In Thousands)
$37,965 $46,845 $181,336 $11,173
September 30,
2019
 December 31, 2018 
September 30,
2018
 
December 31,
2017
(In Thousands)
$11,358 $46,843 $13,617 $11,173


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 September 2023.2024.  The credit facility includes fronting commitments for the issuance of letters of credit against $15 million of the

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Management's Financial Discussion and Analysis

borrowing capacity of the facility. As of March 31,September 30, 2019, there were no cash borrowings and no 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 March 31,September 30, 2019, a $43$11.7 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, each in the amount of $105 million and scheduled to expire in September 2021.  As of March 31,September 30, 2019, $95.4$84.3 million in loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of March 31,September 30, 2019, $79.5$65.5 million in loans were outstanding under the credit facility for the Entergy Louisiana Waterford nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for additional discussion of the nuclear fuel company variable interest entity credit facilities.


St. Charles Power Station

As discussed in the Form 10-K, the LPSC issued an order in December 2016 approving certification that the public necessity and convenience would be served by the construction of the St. Charles Power Station. Commercial operation commenced in May 2019.

State and Local Rate Regulation and Fuel-Cost Recovery


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

Retail Rates - Electric

2017 Formula Rate Plan Filing

Commercial operation at St. Charles Power Station commenced in May 2019. In May 2019, Entergy Louisiana filed an update to its 2017 formula rate plan evaluation report to include the estimated first-year revenue requirement of $109.5 million associated with the St. Charles Power Station. The resulting interim adjustment to rates became effective with the first billing cycle of June 2019.

2018 Formula Rate Plan Filing

In May 2019, Entergy Louisiana filed its formula rate plan evaluation report for its 2018 calendar year operations. The 2018 test year evaluation report produced an earned return on common equity of 10.61% leading to a base rider formula rate plan revenue decrease of $8.9 million. While base rider formula rate plan revenue decreased as a result of this filing, overall formula rate plan revenues increased by approximately $118.7 million. This outcome is primarily driven by a reduction to the credits previously flowed through the tax reform adjustment mechanism and an increase in the transmission recovery mechanism, partially offset by reductions in the additional capacity mechanism revenue requirements and extraordinary cost items. The filing is subject to review by the LPSC. Resulting rates were implemented in September 2019, subject to refund due to contested issues.

Entergy Louisiana also included in its filing a presentation of an initial proposal to combine the legacy Entergy Louisiana and legacy Entergy Gulf States Louisiana residential rates, which combination, if approved, would be accomplished on a revenue-neutral basis intended not to affect the rates of other customer classes. Entergy Louisiana contemplates that discussion.any combination of residential rates resulting from this request would be implemented with the results of the 2019 test year formula rate plan filing.



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Several parties intervened in the proceeding, and the LPSC staff filed its report of objections/reservations in accordance with the applicable provisions of the formula rate plan. In its report, the LPSC staff re-urged reservations with respect to the outstanding issues from the 2017 test year formula rate plan filing and disputed the inclusion of certain affiliate costs for test years 2017 and 2018. The LPSC staff objected to Entergy Louisiana’s proposal to combine residential rates but proposed the setting of a status conference to establish a procedural schedule to more fully address the issue. The LPSC staff also reserved its right to object to the treatment of the sale of Willow Glen reflected in the evaluation report and to the August 2019 compliance update, which was made primarily to update the capital additions reflected in the formula rate plan’s transmission recovery mechanism, based on limited time to review it. Additionally, since the completion of certain transmission projects, the LPSC staff has issued supplemental data requests addressing the prudence of Entergy Louisiana’s expenditures in connection with those projects. Entergy Louisiana is in the process of responding to those requests.

Investigation of Costs Billed by Entergy Services

In November 2018 the LPSC issued a notice of proceeding initiating an investigation into costs incurred by Entergy Services that are included in the retail rates of Entergy Louisiana. As noted in the notice of proceeding, the LPSC observed an increase in capital construction-related costs that have been incurred by Entergy Services. Discovery is ongoing and has included efforts to seek highly detailed information on a broad range of matters unrelated to the scope of the audit.

Retail Rates - Gas

2018 Rate Stabilization Plan Filing

As discussed in the Form 10-K, in January 2019, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2018. Entergy Louisiana made a compliance filing in April 2019 and rates were implemented during the first billing cycle of May 2019, subject to refund and final LPSC review.

Gas Rate Stabilization Plan Extension Request

In August 2019, Entergy Louisiana submitted an application to the LPSC seeking extension of the gas rate stabilization plan for the 2019-2021 test years. The LPSC has established a procedural schedule to address this request with a hearing scheduled in May 2020.

Fuel and purchased power recovery


In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. In January 2019 the LPSC staff consultant issued its audit report. In its report the LPSC staff consultant recommendedrecommending that Entergy Louisiana refund approximately $7.3 million, plus interest, to customers based upon the imputation of a claim of vendor fault in servicing its nuclear plant. Entergy Louisiana recorded a provision in the first quarter 2019 for the potential outcome of the audit. In August 2019, Entergy Louisiana filed direct testimony challenging the basis for the LPSC staff’s recommended disallowance and providing an alternative calculation of replacement power costs should it be determined that a disallowance is appropriate. Entergy Louisiana’s calculation would require a refund to customers of approximately $4.2 million, plus interest, as compared to the LPSC staff’s recommendation of $7.3 million, plus interest. Responsive testimony was filed by the LPSC staff and intervenors in September 2019; all parties either agreed with or did not oppose Entergy Louisiana’s alternative calculation of replacement power costs. In September 2019 the procedural schedule was suspended to facilitate settlement negotiations.


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.



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Federal RegulationNet Metering Rulemaking


In September 2019 the LPSC issued an order modifying its rules regarding net metering installations.  Among other things, the rule provides for 2-channel billing for net metering with excess energy put to the grid being compensated at the utility’s avoided cost.  However, the rule does provide that net meter installations in place as of December 31, 2019 will be subject to 1:1 net metering with excess energy put to the grid being compensated at the full retail rate for a period of 15 years (through December 31, 2034), after which those installations will be subject to 2-channel billing.  The rule also eliminates the existing limit on the cumulative number of net meter installations. 

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 Regulationin 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 Louisiana’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.


In the second quarter 2019, Entergy Louisiana recorded a revision to its estimated decommissioning cost liability for Waterford 3 as a result of a revised decommissioning cost study. The revised estimate resulted in a $147.5 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 useful life of the unit.

New Accounting Pronouncements


See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.



ENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
    
   Three Months Ended Nine Months Ended
 2019 2018 2019 2018 2019 2018
 (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES            
Electric 
$936,693
 
$1,005,106
 
$1,221,874
 
$1,196,278
 
$3,252,826
 
$3,263,073
Natural gas 22,637
 24,238
 9,803
 10,334
 44,498
 45,671
TOTAL 959,330
 1,029,344
 1,231,677
 1,206,612
 3,297,324
 3,308,744
            
OPERATING EXPENSES            
Operation and Maintenance:            
Fuel, fuel-related expenses, and gas purchased for resale 147,349
 180,781
 259,419
 318,987
 627,240
 700,296
Purchased power 257,306
 251,772
 197,830
 218,063
 678,150
 736,449
Nuclear refueling outage expenses 12,808
 13,099
 14,026
 12,969
 40,225
 38,739
Other operation and maintenance 225,888
 234,380
 249,773
 239,230
 726,496
 724,604
Decommissioning 13,879
 12,772
 15,606
 13,654
 43,544
 39,906
Taxes other than income taxes 49,682
 51,280
 49,602
 44,594
 145,942
 143,021
Depreciation and amortization 126,134
 120,822
 137,891
 124,030
 394,271
 366,950
Other regulatory charges (credits) - net (27,660) 23,119
 (29,224) (1,433) (90,762) 30,781
TOTAL 805,386
 888,025
 894,923
 970,094
 2,565,106
 2,780,746
            
OPERATING INCOME 153,944
 141,319
 336,754
 236,518
 732,218
 527,998
            
OTHER INCOME            
Allowance for equity funds used during construction 23,914
 17,745
 14,609
 20,423
 59,194
 57,292
Interest and investment income 71,986
 43,275
 45,237
 53,009
 166,721
 143,137
Miscellaneous - net (42,344) (7,665) (15,067) (25,782) (79,717) (56,217)
TOTAL 53,556
 53,355
 44,779
 47,650
 146,198
 144,212
            
INTEREST EXPENSE            
Interest expense 74,703
 70,096
 78,350
 73,084
 230,684
 216,762
Allowance for borrowed funds used during construction (11,367) (8,763) (7,041) (10,168) (28,145) (28,382)
TOTAL 63,336
 61,333
 71,309
 62,916
 202,539
 188,380
            
INCOME BEFORE INCOME TAXES 144,164
 133,341
 310,224
 221,252
 675,877
 483,830
            
Income taxes 16,531
 21,748
 54,964
 2,944
 109,900
 (30,430)
            
NET INCOME 
$127,633
 
$111,593
 
$255,260
 
$218,308
 
$565,977
 
$514,260
            
See Notes to Financial Statements.            





ENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
   
  Three Months Ended Nine Months Ended
 2019 20182019 2018 2019 2018
 (In Thousands)(In Thousands) (In Thousands)
           
Net Income 
$127,633
 
$111,593

$255,260
 
$218,308
 
$565,977
 
$514,260
Other comprehensive loss           
Pension and other postretirement liabilities (net of tax benefit of $342 and $176) (969) (501)
Pension and other postretirement liabilities (net of tax benefit of $342, $177, $1,026, and $530)(969) (500) (2,907) (1,502)
Other comprehensive loss (969) (501)(969) (500) (2,907) (1,502)
Comprehensive Income 
$126,664
 
$111,092

$254,291
 
$217,808
 
$563,070
 
$512,758
           
See Notes to Financial Statements.           

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ENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
    
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Net income 
$127,633
 
$111,593
 
$565,977
 
$514,260
Adjustments to reconcile net income to net cash flow provided by operating activities:        
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 153,368
 157,887
 498,397
 490,638
Deferred income taxes, investment tax credits, and non-current taxes accrued 49,041
 86,443
 174,825
 167,603
Changes in working capital:        
Receivables (849) 53,786
 (72,018) (61,281)
Fuel inventory 31
 (1,402) (1,752) 6,120
Accounts payable (26,475) (18,036) (40,131) (20,481)
Prepaid taxes and taxes accrued 16,311
 (24,705) 78,910
 (22,893)
Interest accrued (9,300) 6,365
 5,102
 2,382
Deferred fuel costs (50,620) (52,090) (11,459) (25,781)
Other working capital accounts (41,481) (55) (62,332) (5,086)
Changes in provisions for estimated losses 2,962
 (481) 9,748
 7,800
Changes in other regulatory assets (91,490) 28,579
 (103,635) 49,245
Changes in other regulatory liabilities 49,352
 (6,088) (26,115) (29,943)
Changes in pension and other postretirement liabilities (1,954) (18,075) (15,761) (59,305)
Other 3,054
 4,319
 (37,313) (69,978)
Net cash flow provided by operating activities 179,583
 328,040
 962,443
 943,300
        
INVESTING ACTIVITIES        
Construction expenditures (401,573) (469,398) (1,277,108) (1,322,633)
Allowance for equity funds used during construction 23,914
 17,745
 59,194
 57,292
Nuclear fuel purchases (59,422) (9,997) (63,157) (32,362)
Proceeds from the sale of nuclear fuel 
 36,301
 11,608
 54,088
Payments to storm reserve escrow account (1,651) (853) (5,013) (3,297)
Changes to securitization account (5,405) (7,523) (6,467) (8,056)
Proceeds from nuclear decommissioning trust fund sales 101,555
 125,453
 307,164
 943,306
Investment in nuclear decommissioning trust funds (107,690) (137,097) (331,138) (973,218)
Changes in money pool receivable - net 8,880
 (170,163) 35,485
 (2,444)
Insurance proceeds 
 1,582
 7,040
 3,480
Other 2,369
 
Net cash flow used in investing activities (441,392) (613,950) (1,260,023) (1,283,844)
        
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt 1,212,989
 947,038
 2,332,003
 1,950,482
Retirement of long-term debt (642,307) (154,117) (1,798,014) (1,338,227)
Changes in short-term borrowings - net 
 19,382
 
 (43,540)
Distributions paid:        
Common equity (49,000) 
 (155,000) (56,000)
Other 1,926
 (14) 3,272
 5,507
Net cash flow provided by financing activities 523,608
 812,289
 382,261
 518,222
        
Net increase in cash and cash equivalents 261,799
 526,379
 84,681
 177,678
Cash and cash equivalents at beginning of period 43,364
 35,907
 43,364
 35,907
Cash and cash equivalents at end of period 
$305,163
 
$562,286
 
$128,045
 
$213,585
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid (received) during the period for:        
Interest - net of amount capitalized 
$81,940
 
$61,613
 
$219,323
 
$208,028
Income taxes 
$—
 
($2,973) 
$—
 
($2,973)
        
See Notes to Financial Statements.        

ENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
    
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents:        
Cash 
$68,144
 
$252
 
$224
 
$252
Temporary cash investments 237,019
 43,112
 127,821
 43,112
Total cash and cash equivalents 305,163
 43,364
 128,045
 43,364
Accounts receivable:        
Customer 219,503
 199,903
 258,090
 199,903
Allowance for doubtful accounts (1,912) (1,813) (2,154) (1,813)
Associated companies 106,149
 123,363
 81,906
 123,363
Other 73,120
 60,879
 46,282
 60,879
Accrued unbilled revenues 144,493
 167,052
 194,753
 167,052
Total accounts receivable 541,353
 549,384
 578,877
 549,384
Deferred fuel costs 19,209
 
Fuel inventory 34,387
 34,418
 36,170
 34,418
Materials and supplies - at average cost 328,666
 324,627
 344,207
 324,627
Deferred nuclear refueling outage costs 61,384
 24,406
 70,456
 24,406
Prepayments and other 38,550
 38,715
 47,519
 38,715
TOTAL 1,328,712
 1,014,914
 1,205,274
 1,014,914
        
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 1,408,045
 1,284,996
 1,485,569
 1,284,996
Storm reserve escrow account 291,176
 289,525
 294,538
 289,525
Non-utility property - at cost (less accumulated depreciation) 292,380
 286,555
 308,095
 286,555
Other 15,085
 14,927
 13,923
 14,927
TOTAL 3,397,273
 3,266,590
 3,492,712
 3,266,590
        
UTILITY PLANT        
Electric 20,614,483
 20,532,312
 22,283,456
 20,532,312
Natural gas 218,502
 211,421
 230,416
 211,421
Construction work in progress 1,997,965
 1,864,582
 1,325,784
 1,864,582
Nuclear fuel 329,778
 298,022
 291,404
 298,022
TOTAL UTILITY PLANT 23,160,728
 22,906,337
 24,131,060
 22,906,337
Less - accumulated depreciation and amortization 8,827,954
 8,837,596
 9,018,154
 8,837,596
UTILITY PLANT - NET 14,332,774
 14,068,741
 15,112,906
 14,068,741
        
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
Other regulatory assets (includes securitization property of $44,739 as of March 31, 2019 and $49,753 as of December 31, 2018) 1,196,567
 1,105,077
Other regulatory assets (includes securitization property of $32,939 as of September 30, 2019 and $49,753 as of December 31, 2018) 1,208,712
 1,105,077
Deferred fuel costs 168,122
 168,122
 168,122
 168,122
Other 32,729
 28,371
 27,297
 28,371
TOTAL 1,397,418
 1,301,570
 1,404,131
 1,301,570
        
TOTAL ASSETS 
$20,456,177
 
$19,651,815
 
$21,215,023
 
$19,651,815
        
See Notes to Financial Statements.        

ENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
    
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT LIABILITIES        
Currently maturing long-term debt 
$2
 
$2
 
$70,002
 
$2
Accounts payable:        
Associated companies 82,848
 102,749
 86,781
 102,749
Other 380,874
 390,367
 338,724
 390,367
Customer deposits 154,573
 155,314
 152,627
 155,314
Taxes accrued 47,179
 30,868
 109,778
 30,868
Interest accrued 74,150
 83,450
 88,552
 83,450
Deferred fuel costs 
 31,411
 19,952
 31,411
Current portion of unprotected excess accumulated deferred income taxes 33,343
 31,457
 33,231
 31,457
Other 59,002
 49,202
 71,608
 49,202
TOTAL 831,971
 874,820
 971,255
 874,820
        
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued 2,280,532
 2,226,721
 2,414,508
 2,226,721
Accumulated deferred investment tax credits 115,782
 116,999
 113,346
 116,999
Regulatory liability for income taxes - net 561,864
 581,001
 523,697
 581,001
Other regulatory liabilities 815,387
 748,784
 778,199
 748,784
Decommissioning 1,296,647
 1,280,272
 1,478,951
 1,280,272
Accumulated provisions 313,717
 310,755
 320,503
 310,755
Pension and other postretirement liabilities 641,132
 643,171
 627,155
 643,171
Long-term debt (includes securitization bonds of $55,747 as of March 31, 2019 and $55,682 as of December 31, 2018) 7,377,910
 6,805,766
Long-term debt (includes securitization bonds of $45,386 as of September 30, 2019 and $55,682 as of December 31, 2018) 7,274,158
 6,805,766
Other 240,664
 160,608
 402,296
 160,608
TOTAL 13,643,635
 12,874,077
 13,932,813
 12,874,077
        
Commitments and Contingencies        
        
EQUITY        
Member's equity 5,987,693
 5,909,071
 6,320,015
 5,909,071
Accumulated other comprehensive loss (7,122) (6,153) (9,060) (6,153)
TOTAL 5,980,571
 5,902,918
 6,310,955
 5,902,918
        
TOTAL LIABILITIES AND EQUITY 
$20,456,177
 
$19,651,815
 
$21,215,023
 
$19,651,815
        
See Notes to Financial Statements.        



ENTERGY LOUISIANA, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
      
Common Equity  Common Equity  
Member’s
Equity
 
Accumulated
Other
Comprehensive
Loss
 TotalMember’s
Equity
 
Accumulated
Other
Comprehensive
Loss
 Total
(In Thousands)(In Thousands)
          
Balance at December 31, 2017
$5,355,204
 
($46,400) 
$5,308,804

$5,355,204
 
($46,400) 
$5,308,804
          
Net income111,593
 
 111,593
111,593
 
 111,593
Other comprehensive loss
 (501) (501)
 (501) (501)
Reclassification pursuant to ASU 2018-026,262
 (10,049) (3,787)6,262
 (10,049) (3,787)
Other24
 
 24
24
 
 24
     
Balance at March 31, 2018
$5,473,083
 
($56,950) 
$5,416,133
5,473,083
 (56,950) 5,416,133
          
Net income184,358
 
 184,358
Other comprehensive loss
 (501) (501)
Common equity distributions(56,000) 
 (56,000)
Other(10) 
 (10)
Balance at June 30, 20185,601,431
 (57,451) 5,543,980
     
Net income218,308
 
 218,308
Other comprehensive loss
 (500) (500)
Other(10) 
 (10)
Balance at September 30, 2018
$5,819,729
 
($57,951) 
$5,761,778
          
Balance at December 31, 2018
$5,909,071
 
($6,153) 
$5,902,918

$5,909,071
 
($6,153) 
$5,902,918
          
Net income127,633
 
 127,633
127,633
 
 127,633
Other comprehensive loss
 (969) (969)
 (969) (969)
Distributions declared on common equity(49,000) 
 (49,000)
Common equity distributions(49,000) 
 (49,000)
Other(11) 
 (11)(11) 
 (11)
     
Balance at March 31, 2019
$5,987,693
 
($7,122) 
$5,980,571
5,987,693
 (7,122) 5,980,571
          
Net income183,084
 
 183,084
Other comprehensive loss
 (969) (969)
Common equity distributions(53,000) 
 (53,000)
Other(14) 
 (14)
Balance at June 30, 20196,117,763
 (8,091) 6,109,672
     
Net income255,260
 
 255,260
Other comprehensive loss
 (969) (969)
Common equity distributions(53,000) 
 (53,000)
Other(8) 
 (8)
Balance at September 30, 2019
$6,320,015
 
($9,060) 
$6,310,955
     
See Notes to Financial Statements.          



ENTERGY LOUISIANA, LLC AND SUBSIDIARIESSELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
            
         Three Months Ended Increase/  
 Nine Months Ended Increase/   2019 2018 (Decrease) %
Description 2019 2018 (Decrease) %
 (Dollars In Millions)   (Dollars In Millions)  
Electric Operating Revenues:                
Residential 
$264
 
$296
 
($32) (11) 
$426
 
$409
 
$17
 4
Commercial 207
 225
 (18) (8) 277
 273
 4
 1
Industrial 347
 352
 (5) (1) 376
 394
 (18) (5)
Governmental 17
 17
 
 
 19
 17
 2
 12
Total billed retail 835
 890
 (55) (6) 1,098
 1,093
 5
 
Sales for resale:                
Associated companies 68
 74
 (6) (8) 66
 58
 8
 14
Non-associated companies 16
 15
 1
 7
 16
 14
 2
 14
Other 18
 26
 (8) (31) 42
 31
 11
 35
Total 
$937
 
$1,005
 
($68) (7) 
$1,222
 
$1,196
 
$26
 2
                
Billed Electric Energy Sales (GWh):                
Residential 3,080
 3,459
 (379) (11) 4,614
 4,658
 (44) (1)
Commercial 2,519
 2,661
 (142) (5) 3,325
 3,382
 (57) (2)
Industrial 7,343
 7,049
 294
 4
 7,741
 7,619
 122
 2
Governmental 203
 201
 2
 1
 215
 216
 (1) 
Total retail 13,145
 13,370
 (225) (2) 15,895
 15,875
 20
 
Sales for resale:                
Associated companies 1,080
 1,014
 66
 7
 1,494
 1,545
 (51) (3)
Non-associated companies 505
 513
 (8) (2) 526
 369
 157
 43
Total 14,730
 14,897
 (167) (1) 17,915
 17,789
 126
 1
                
        
 Nine Months Ended Increase/  
 2019 2018 (Decrease) %
 (Dollars In Millions)  
Electric Operating Revenues:        
Residential 
$980
 
$972
 
$8
 1
Commercial 716
 720
 (4) (1)
Industrial 1,108
 1,115
 (7) (1)
Governmental 54
 51
 3
 6
Total billed retail 2,858
 2,858
 
 
Sales for resale:        
Associated companies 201
 229
 (28) (12)
Non-associated companies 48
 44
 4
 9
Other 146
 132
 14
 11
Total 
$3,253
 
$3,263
 
($10) 
        
Billed Electric Energy Sales (GWh):        
Residential 10,815
 11,221
 (406) (4)
Commercial 8,564
 8,781
 (217) (2)
Industrial 22,577
 22,160
 417
 2
Governmental 623
 613
 10
 2
Total retail 42,579
 42,775
 (196) 
Sales for resale:        
Associated companies 3,428
 4,099
 (671) (16)
Non-associated companies 1,433
 1,237
 196
 16
Total 47,440
 48,111
 (671) (1)
        

ENTERGY MISSISSIPPI, LLC


MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations


Net Income


Third Quarter 2019 Compared to Third Quarter 2018

Net income increased $5.5 million primarily due to higher retail electric price and higher volume/weather, partially offset by a higher effective income tax rate and higher depreciation and amortization expenses.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net income decreased $7.4$13.5 million primarily due to higher depreciation and amortization expenses, lower net revenue.volume/weather, higher interest expense, and higher taxes other than income taxes, partially offset by higher retail electric price.


Net RevenueOperating Revenues


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.  Third Quarter 2019 Compared to Third Quarter 2018

Following is an analysis of the change in net revenueoperating revenues comparing the firstthird quarter 2019 to the firstthird quarter 2018:
 Amount
 (In Millions)
2018 net revenueoperating revenues

$164.5367.7

Volume/weatherFuel, rider, and other revenues that do not significantly affect net income(5.19.8)
Return of unprotected excess accumulated deferred income taxes to customers25.8
Retail electric price(3.37.7)
OtherVolume/weather(0.97.3)
2019 net revenueoperating revenues

$155.2398.7



Entergy Mississippi’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The volume/weather variancereturn of unprotected excess accumulated deferred income taxes to customers is primarily due to the return of unprotected excess accumulated deferred income taxes through customer bill credits over a decreasethree-month period from July 2018 through September 2018 per an agreement approved by the MPSC in June 2018 resulting from the stipulation related to the effects of 226 GWh, or 7%,the Tax Cuts and Jobs Act. There was no effect on net income as the reduction in billed electricity usage, including the effect of less favorable weather on residential sales.

The retail electric price variance is primarily due to lower storm damage rider revenues. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle and ceased billing the storm damage rider effective with the August 2018 billing cycle. The decreaseoperating revenues was partially offset by higher ad valorema reduction in income tax adjustment rider revenues resulting from a rate increase effective October 2018.expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the storm damage rider.Tax Cuts and Jobs Act.


Other Income Statement Variances

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The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of July 2019, as approved by the MPSC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filing.

The volume/weather variance is primarily due to increased usage during the unbilled sales period.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018:
Amount
(In Millions)
2018 operating revenues
$1,037.2
Fuel, rider, and other revenues that do not significantly affect net income(80.7)
Volume/weather(8.1)
Retail electric price9.5
Return of unprotected excess accumulated deferred income taxes to customers25.8
2019 operating revenues
$983.7

Entergy Mississippi’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses decreasedassociated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The volume/weather variance is primarily due to a decrease of $5.1 million524 GWh, or 5%, in storm damage provisions,billed electricity usage, including the effect of less favorable weather on residential sales and a decrease in industrial usage. The decrease in industrial usage is primarily due to decreased small industrial sales.

The retail electric price variance is primarily due to an increase in formula rate plan rates effective with the first billing cycle of July 2019, as approved by the MPSC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the formula rate plan filing.

The return of unprotected excess accumulated deferred income taxes to customers is due to the return of unprotected excess accumulated deferred income taxes through customer bill credits over a three-month period from July 2018 through September 2018 per an agreement approved by the MPSC in June 2018 resulting from the stipulation related to the effects of the Tax Cuts and Jobs Act. There was no effect on net income as the reduction in operating revenues was offset by several individually insignificant items.a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Other Income Statement Variances

Third Quarter 2019 Compared to Third Quarter 2018

Other operation and maintenance expenses decreased primarily due to a $5.8 million loss in 2018 on the sale of fuel oil inventory per an agreement approved by the MPSC in June 2018 resulting from the stipulation related to the effects of the Tax Act. There is no effect on net income as the loss on the sale of fuel oil inventory is offset by a reduction in income tax expense. The decrease in other operation and maintenance expenses was significantly offset by an increase of $4 million in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of storm cost recovery.


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Depreciation and amortization expenses increased primarily as a result of higher depreciation rates, as approved by the MPSC, and additions to plant in service.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Other operation and maintenance expenses increased primarily due to:

an increase of $4 million in spending on customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $3.7 million in fossil-fueled generation expenses primarily due to an overall higher scope of work performed during plant outages;
an increase of $3.1 million in information technology costs primarily due to higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance;
an increase of $1.5 million in loss provisions; and
an increase of $1.3 million in distribution operations and asset management costs due to higher advanced metering customer education costs and higher contract costs for meter reading services.

The increase was partially offset by:

a $5.8 million loss in 2018 on the sale of fuel oil inventory per an agreement approved by the MPSC in June 2018 resulting from the stipulation related to the effects of the Tax Act. There is no effect on net income as the loss on the sale of fuel oil inventory is offset by a reduction in income tax expense; and
a decrease of $5.8 million in storm damage provisions. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of storm cost recovery.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes, partially offset by lower local franchise taxes. Ad valorem taxes increased primarily due to higher millage rates due to a rate increase effective October 2018. Local franchise taxes decreased primarily due to lower residential and commercial revenues in 2019 compared to 2018.

Depreciation and amortization expenses increased primarily as a result of higher depreciation rates, as approved by the MPSC, and additions to plant in service.

Other regulatory charges include a regulatory charge recorded in second quarter 2018 to reflect the return of unprotected excess accumulated deferred income taxes per an agreement approved by the MPSC in June 2018 that resulted in a reduction in net utility plant of $127.2 million. There is no effect on net income as the regulatory charge was offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity related to the Tax Cuts and Jobs Act.

Interest expense increased primarily due to the issuance of $55 million of 4.52% Series mortgage bonds in December 2018 and $300 million of 3.85% Series mortgage bonds in June 2019, partially offset by the repayment, at maturity, of $150 million of 6.64% Series mortgage bonds in July 2019.

Income Taxes


The effective income tax rates were 22.8% for the third quarter 2019 and 21.6% for the nine months ended September 30, 2019. The differences in the effective income tax rates for the third quarter 2019 and the nine months ended September 30, 2019 versus the federal statutory rate of 21% were primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.


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The effective income tax rate was 18.3%(46.7%) for the firstthird quarter 2019.2018. The difference in the effective income tax rate for the firstthird quarter 20192018 versus the federal statutory rate of 21% was primarily due to bookthe amortization of excess accumulated deferred income taxes. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.

The effective income tax differences relatedrate was 1,039.9% for the nine months ended September 30, 2018. The difference in the effective income tax rate for the nine months ended September 30, 2018 versus the federal statutory rate of 21% was primarily due to utility plant itemsthe amortization of excess accumulated deferred income taxes, state income taxes, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxesconstruction. See Note 10 to the financial statements herein and Notes 2 and 3 to the provision for uncertain tax positions.

The effective income tax rate was 23.3% for the first quarter 2018. The differencefinancial statements in the effective income tax rateForm 10-K for a discussion of the first quarter 2018 versuseffects and regulatory activity regarding the federal statutory rate of 21% was primarily due to state income taxesTax Cuts 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.Jobs Act.


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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 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.


Liquidity and Capital Resources


Cash Flow


Cash flows for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2019 20182019 2018
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$36,954
 
$6,096

$36,954
 
$6,096
      
Cash flow provided by (used in):      
Operating activities9,992
 (8,841)203,439
 218,024
Investing activities(54,376) (76,268)(276,307) (268,165)
Financing activities8,315
 79,316
134,850
 44,090
Net decrease in cash and cash equivalents(36,069) (5,793)
Net increase (decrease) in cash and cash equivalents61,982
 (6,051)
      
Cash and cash equivalents at end of period
$885
 
$303

$98,936
 
$45


Operating Activities


Entergy Mississippi’sNet cash flow provided by operating activities provided $10decreased $14.6 million in cash for the threenine months ended March 31,September 30, 2019 compared to using $8.8 million in cash for the threenine months ended March 31,September 30, 2018 primarily due to:


$26.2 million in proceeds from the sale of fuel oil inventory in 2018;
the timing of collection of receivables from customers;
a decrease of $4.6 million in interest paid in 2019 as compared to 2018;
a decrease of $4 million in pension contributions in 2019 as compared to 2018.storm damage rider revenues. See MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 62 to the financial statements herein and in the Form 10-K for afurther discussion of qualified pensionthe storm damage rider; and other postretirement benefits funding;
an increase of $6.2 million in storm spending in 2019.


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The decrease was partially offset by:

the return of unprotected excess accumulated deferred income taxes to customers in 2018;
the timing of recovery of fuel and purchased power costs in 2019 as compared to 2018.costs; and
a decrease of $7 million in pension contributions in 2019 as compared to 2018. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.


Investing Activities


Net cash flow used in investing activities decreased $21.9increased $8.1 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to money pool activity. The decrease was partially offset by to:

an increase of $9.6$20.3 million primarily due to investment in fossil-fueled generation construction expenditures, the infrastructure of Entergy Mississippi’s distribution system, including increased spending on advanced metering infrastructure;
an increase of $7.5$15.1 million in storm spending in 2019; and
an increase of $12.9 million in transmission construction expenditures and an increase of $5.6 million in distribution construction expenditures, each primarily due to a higher scope of work performed in 2019 as compared to the same period in 2018.



The increase was partially offset by money pool activity.
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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 $41.4$32.5 million for the threenine months ended March 31,September 30, 2019 compared to decreasing by $1.6 million for the threenine months ended March 31,September 30, 2018. 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 $71increased $90.8 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to the issuance of $300 million of 3.85% Series mortgage bonds in June 2019. The increase was partially offset by the repayment, at maturity, of $150 million of 6.64% Series mortgage bonds in July 2019 and money pool activity. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.


Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow, and Entergy Mississippi’s payable to the money pool increased by $10.9$33.8 million for the threenine months ended March 31, 2019 compared to increasing by $74.9 million for the three months ended March 31,September 30, 2018.


Capital Structure


Entergy Mississippi’s debt to capital ratio is shown in the following table.

March 31,
2019
 December 31, 2018
September 30,
2019
 December 31, 2018
Debt to capital50.5% 50.6%51.5% 50.6%
Effect of subtracting cash% (0.7%)(1.7%) (0.7%)
Net debt to net capital50.5% 49.9%49.8% 49.9%


Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, financing lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Mississippi uses the debt to capital ratio in analyzing

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its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition.  Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.


Uses and Sources of Capital


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resourcesin 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 2020 through 2022 and currently anticipates making $1.5 billion in capital investments during that period. The preliminary estimate includes specific investments such as the Sunflower Solar Facility; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including advanced meters and related investments; resource planning, including potential generation projects; system improvements; software and security; 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:
March 31,
2019
 December 31, 2018 
March 31,
2018
 December 31, 2017
(In Thousands)
($10,925) $41,380 ($74,892) $1,633
September 30,
2019
 December 31, 2018 
September 30,
2018
 December 31, 2017
(In Thousands)
$8,899 $41,380 ($33,816) $1,633


See Note 4 to the financial statements in the Form 10-K for a description of the money pool.


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Entergy Mississippi has three separate credit facilities in the aggregate amount of $82.5 million scheduled to expire in May 2019. Entergy Mississippi expects to renew its credit facilities prior to expiration.2020. No borrowings were outstanding under the credit facilities as of March 31,September 30, 2019.  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 March 31,September 30, 2019, $12.1$8.1 million of letters of credit were outstanding under Entergy Mississippi’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.


In October 2019, Entergy Mississippi received a capital contribution of $130 million in anticipation of Entergy Mississippi’s purchase of the Choctaw Generating Station.

Choctaw Generating Station


In August 2018, Entergy Mississippi announced that it signed an asset purchase agreement to acquire from a subsidiary of GenOn Energy Inc. the Choctaw Generating Station, an 810 MW natural gas fired combined-cycle turbine plant located near French Camp, Mississippi.  The purchase price is expected to be approximately $314 million.  Entergy Mississippi also expects to invest in various plant upgrades at the facility after closing and expects the total cost of the acquisition to be approximately $401 million.  The purchase iswas contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  These includeincluded regulatory approvals from the MPSC and the FERC. Clearance under the Hart-Scott-Rodino Antitrust Improvements Act has occurred. In September 2019 the FERC approved the acquisition.  In October 2018, Entergy Mississippi filed an application with the MPSC seeking approval of the acquisition and cost recovery. In a separate

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filing in October 2018, Entergy Mississippi proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the non-fuel annual ownership costs of the Choctaw Generating Station, as well as to allow similar cost recovery treatment for other future capacity additions approved by the MPSC. Entergy Mississippi executed a joint stipulation as to all issues with the Mississippi Public Utilities Staff and, in October 2019, the MPSC adopted the joint stipulation which approved Entergy Mississippi’s request to acquire, own, operate, improve, and maintain the facility. The MPSC approved the expected total cost of the acquisition of approximately $401 million and authorized Entergy Mississippi to recover acquisition and ownership costs of the facility through its formula rate plan, including costs incurred before the effective date of the interim capacity rate mechanism, which Entergy Mississippi expects to be approved later this year. Entergy Mississippi purchased the plant in October 2019.

Sunflower Solar Facility

In November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW to-be-constructed solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi.  The estimated base purchase price is approximately $138.4 million.  The estimated total investment, including the base purchase price and other related costs, for Entergy Mississippi to acquire the Sunflower Solar Facility is approximately $153.2 million. The purchase is contingent upon, among other things, obtaining necessary approvals, including full cost recovery, from applicable federal and state regulatory and permitting agencies.  The project will be built by Sunflower County Solar Project, LLC, a sub-subsidiary of Recurrent Energy, LLC. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have been met.  In December 2018, Entergy Mississippi filed a joint petition with Sunflower Solar Project at the MPSC for Sunflower Solar Project to construct and for Entergy Mississippi to acquire and thereafter own, operate, improve, and maintain the solar facility.  Entergy Mississippi has proposed revisions to its formula rate plan that would provide for a mechanism, the interim capacity rate adjustment mechanism, in the formula rate plan to recover the non-fuel related costs of additional owned capacity acquired by Entergy Mississippi, including the annual ownership costs of the Sunflower Solar Facility. In August 2019 consultants retained by the Mississippi Public Utilities Staff filed a report expressing concerns regarding the project economics and recommended that, should the MPSC wish to approve the project, Entergy Mississippi should be required to guarantee the energy output of the unit. Entergy Mississippi and the Staff are engaged in settlement discussions to address these concerns.  A hearing before the MPSC is targeted to occur in the fourth quarter of 2019. Closing is expectedtargeted to occur by the end of 2019. Due diligence performed on the plant indicates that there exists a potential mechanical issue that must be addressed prior to closing.  There is some possibility that closing may be delayed to allow time for this issue to be resolved.2021.


State and Local Rate Regulation and Fuel-Cost Recovery


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


Mississippi Attorney General Complaint


As discussed in the Form 10-K, the Mississippi Attorney General filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution. The defendants have deniedEntergy believes the allegations.complaint is unfounded. In December 2008 the Attorney General’s lawsuit was removed to U.S. District Court in Jackson, Mississippi. Pre-trial and settlement conferences were held in October 2018. In October 2018 the District Court rescheduled the trial to April 2019. In April 2019 the District Court remanded the Attorney General’s lawsuit to the Hinds County Chancery Court in Jackson, Mississippi. A hearing on procedural and dispositive motions was held in August 2019. Following the parties’ oral arguments, the Attorney General filed a post hearing brief, to which Entergy Mississippi filed a response. The motions remain pending before the chancellor of the Hinds County Chancery Court.




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Formula Rate Plan


In March 2019, Entergy Mississippi submitted its formula rate plan 2019 test year filing and 2018 look-back filing showing Entergy Mississippi’s earned return for the historical 2018 calendar year to be above the formula rate plan bandwidth and projected earned return for the 2019 calendar year to be below the formula rate plan bandwidth. The 2019 test year filing shows a $36.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.94% return on rate base, within the formula rate plan bandwidth. The 2018 look-back filing compares actual 2018 results to the approved benchmark return on rate base and shows a $10.1 million interim decrease in formula rate plan revenues is necessary. In the fourth quarter 2018, Entergy Mississippi recorded a provision of $9.3 million that reflected the estimate of the difference between the 2018 expected earned rate of return on rate base and an established performance-adjusted benchmark rate of return under the formula rate plan performance-adjusted bandwidth mechanism. In the first quarter 2019, Entergy Mississippi recorded aan increase of $0.8 million increase in the provision to reflect the amount shown in the look-back filing. TheIn June 2019, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a joint stipulation that confirmed that the 2019 test year filing showed that a $32.8 million rate increase is currently subjectnecessary to MPSC review. A final orderreset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 6.93% return on rate base, within the formula rate plan bandwidth. Additionally, pursuant to the joint stipulation, Entergy Mississippi’s 2018 look-back filing reflected an earned return on rate base of 7.81% in calendar year 2018 which is expectedabove the look-back benchmark return on rate base of 7.13%, resulting in an $11 million decrease in formula rate plan revenues on an interim basis through June 2020. In the second quarter 2019, withEntergy Mississippi recorded an additional $0.9 million increase in the resultingprovision to reflect the $11 million shown in the look-back filing. In June 2019 the MPSC approved the joint stipulation with rates effective for the first billing cycle of July 2019.


Storm Cost Recovery Filings with Retail Regulators

As discussed in the Form 10-K, Entergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If Entergy Mississippi’s accumulated storm damage provision balance exceeds $15 million, the collection of the storm damage provision ceases until such time that the accumulated storm damage provision becomes less than $10 million. As of May 31, 2019, Entergy Mississippi’s storm damage provision balance was less than $10 million. Accordingly, Entergy Mississippi resumed billing the monthly storm damage provision effective with July 2019 bills.

Federal Regulation


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Federal Regulationin 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.



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Entergy Mississippi, LLC
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 Mississippi’s accounting for utility regulatory accounting, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.


New Accounting Pronouncements


See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.



ENTERGY MISSISSIPPI, LLCINCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
      
   Three Months Ended Nine Months Ended
 2019 2018 2019 2018 2019 2018
 (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES            
Electric 
$282,244
 
$315,743
 
$398,732
 
$367,734
 
$983,713
 
$1,037,166
            
OPERATING EXPENSES            
Operation and Maintenance:            
Fuel, fuel-related expenses, and gas purchased for resale 53,229
 63,528
 87,386
 78,533
 188,006
 207,724
Purchased power 71,455
 87,456
 78,286
 104,787
 223,461
 289,397
Other operation and maintenance 59,183
 59,458
 69,253
 69,936
 195,357
 193,979
Taxes other than income taxes 26,127
 25,394
 26,673
 26,024
 78,613
 75,212
Depreciation and amortization 39,088
 38,182
 44,339
 37,752
 123,145
 114,293
Other regulatory charges - net 2,370
 293
 5,771
 5,487
 11,708
 133,715
TOTAL 251,452
 274,311
 311,708
 322,519
 820,290
 1,014,320
            
OPERATING INCOME 30,792
 41,432
 87,024
 45,215
 163,423
 22,846
            
OTHER INCOME            
Allowance for equity funds used during construction 1,913
 1,978
 2,079
 2,251
 6,341
 6,351
Interest and investment income 152
 25
 462
 1
 1,011
 26
Miscellaneous - net (263) (571) (1,648) 116
 (2,238) (1,866)
TOTAL 1,802
 1,432
 893
 2,368
 5,114
 4,511
            
INTEREST EXPENSE            
Interest expense 14,540
 13,905
 15,922
 13,950
 45,804
 41,916
Allowance for borrowed funds used during construction (785) (828) (892) (944) (2,683) (2,662)
TOTAL 13,755
 13,077
 15,030
 13,006
 43,121
 39,254
            
INCOME BEFORE INCOME TAXES 18,839
 29,787
INCOME (LOSS) BEFORE INCOME TAXES 72,887
 34,577
 125,416
 (11,897)
            
Income taxes 3,441
 6,944
 16,650
 (16,156) 27,114
 (123,715)
            
NET INCOME 15,398
 22,843
 56,237
 50,733
 98,302
 111,818
            
Preferred dividend requirements and other 
 238
 
 238
 
 715
            
EARNINGS APPLICABLE TO COMMON EQUITY 
$15,398
 
$22,605
 
$56,237
 
$50,495
 
$98,302
 
$111,103
            
See Notes to Financial Statements.            





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ENTERGY MISSISSIPPI, LLCSTATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Net income 
$15,398
 
$22,843
 
$98,302
 
$111,818
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities:    
Adjustments to reconcile net income to net cash flow provided by operating activities:    
Depreciation and amortization 39,088
 38,182
 123,145
 114,293
Deferred income taxes, investment tax credits, and non-current taxes accrued 12,072
 7,787
 32,596
 40,537
Changes in assets and liabilities:        
Receivables 18,364
 1,018
 (37,843) (49,456)
Fuel inventory (4,267) (767) (3,872) 33,705
Accounts payable (5,722) (24,818) (574) (9,845)
Taxes accrued (66,445) (56,244) (26,556) (24,280)
Interest accrued (293) (5,548) 2,093
 (4,767)
Deferred fuel costs 17,635
 13,817
 47,569
 9,826
Other working capital accounts 3,444
 (4,856) 533
 (8,348)
Provisions for estimated losses (846) 4,754
 (3,099) 7,894
Other regulatory assets (3,478) 4,586
 (923) 26,060
Other regulatory liabilities (9,301) 766
 (16,615) (139,063)
Pension and other postretirement liabilities 269
 (4,604) (6,930) (15,987)
Other assets and liabilities (5,926) (5,757) (4,387) 125,637
Net cash flow provided by (used in) operating activities 9,992
 (8,841)
Net cash flow provided by operating activities 203,439
 218,024
        
INVESTING ACTIVITIES        
Construction expenditures (97,487) (79,141) (314,622) (275,189)
Allowance for equity funds used during construction 1,913
 1,978
 6,341
 6,351
Changes in money pool receivable - net 41,380
 1,633
 32,481
 1,633
Other (182) (738) (507) (960)
Net cash flow used in investing activities (54,376) (76,268) (276,307) (268,165)
        
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt 292,763
 
Retirement of long-term debt (150,000) 
Changes in money pool payable - net 10,925
 74,892
 
 33,816
Distributions/dividends paid:        
Preferred stock 
 (238) 
 (715)
Other (2,610) 4,662
 (7,913) 10,989
Net cash flow provided by financing activities 8,315
 79,316
 134,850
 44,090
        
Net decrease in cash and cash equivalents (36,069) (5,793)
Net increase (decrease) in cash and cash equivalents 61,982
 (6,051)
Cash and cash equivalents at beginning of period 36,954
 6,096
 36,954
 6,096
Cash and cash equivalents at end of period 
$885
 
$303
 
$98,936
 
$45
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
Interest - net of amount capitalized 
$14,193
 
$18,820
 
$41,753
 
$44,781
        
See Notes to Financial Statements.        



ENTERGY MISSISSIPPI, LLCBALANCE SHEETSASSETS
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents:        
Cash 
$878
 
$11
 
$11
 
$11
Temporary cash investments 7
 36,943
 98,925
 36,943
Total cash and cash equivalents 885
 36,954
 98,936
 36,954
Accounts receivable:  
  
  
  
Customer 71,621
 73,205
 98,245
 73,205
Allowance for doubtful accounts (647) (563) (615) (563)
Associated companies 3,641
 51,065
 19,217
 51,065
Other 7,678
 8,647
 10,173
 8,647
Accrued unbilled revenues 40,488
 50,171
 60,867
 50,171
Total accounts receivable 122,781
 182,525
 187,887
 182,525
Deferred fuel costs 
 8,016
 
 8,016
Fuel inventory - at average cost 16,198
 11,931
 15,803
 11,931
Materials and supplies - at average cost 49,576
 47,255
 51,049
 47,255
Prepayments and other 4,043
 9,365
 8,694
 9,365
TOTAL 193,483
 296,046
 362,369
 296,046
        
OTHER PROPERTY AND INVESTMENTS  
  
  
  
Non-utility property - at cost (less accumulated depreciation) 4,572
 4,576
 4,564
 4,576
Storm reserve escrow account 32,629
 32,447
 32,953
 32,447
TOTAL 37,201
 37,023
 37,517
 37,023
        
UTILITY PLANT  
  
  
  
Electric 4,834,942
 4,780,720
 4,981,082
 4,780,720
Construction work in progress 182,618
 128,149
 177,221
 128,149
TOTAL UTILITY PLANT 5,017,560
 4,908,869
 5,158,303
 4,908,869
Less - accumulated depreciation and amortization 1,667,543
 1,641,821
 1,681,597
 1,641,821
UTILITY PLANT - NET 3,350,017
 3,267,048
 3,476,706
 3,267,048
        
DEFERRED DEBITS AND OTHER ASSETS  
  
  
  
Regulatory assets:  
  
  
  
Other regulatory assets 346,527
 343,049
 343,972
 343,049
Other 9,878
 3,638
 12,161
 3,638
TOTAL 356,405
 346,687
 356,133
 346,687
        
TOTAL ASSETS 
$3,937,106
 
$3,946,804
 
$4,232,725
 
$3,946,804
        
See Notes to Financial Statements.  
  
  
  

ENTERGY MISSISSIPPI, LLCBALANCE SHEETSLIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT LIABILITIES  
  
  
  
Currently maturing long-term debt 
$150,000
 
$150,000
 
$—
 
$150,000
Accounts payable:  
  
  
  
Associated companies 53,027
 42,928
 41,323
 42,928
Other 74,694
 79,117
 81,260
 79,117
Customer deposits 85,830
 85,085
 86,295
 85,085
Taxes accrued 11,107
 77,552
 50,996
 77,552
Interest accrued 19,938
 20,231
 22,324
 20,231
Deferred fuel costs 9,619
 
 39,553
 
Other 15,111
 7,526
 17,717
 7,526
TOTAL 419,326
 462,439
 339,468
 462,439
        
NON-CURRENT LIABILITIES  
  
  
  
Accumulated deferred income taxes and taxes accrued 566,047
 551,869
 591,105
 551,869
Accumulated deferred investment tax credits 10,146
 10,186
 10,066
 10,186
Regulatory liability for income taxes - net 244,123
 246,402
 239,630
 246,402
Other regulatory liabilities 26,600
 33,622
 23,779
 33,622
Asset retirement cost liabilities 9,333
 9,206
 9,594
 9,206
Accumulated provisions 50,296
 51,142
 48,043
 51,142
Pension and other postretirement liabilities 93,324
 93,100
 86,036
 93,100
Long-term debt 1,175,915
 1,175,750
 1,469,454
 1,175,750
Other 34,372
 20,862
 25,022
 20,862
TOTAL 2,210,156
 2,192,139
 2,502,729
 2,192,139
        
Commitments and Contingencies  
  
  
  
        
EQUITY  
  
  
  
Member's equity 1,307,624
 1,292,226
 1,390,528
 1,292,226
TOTAL 1,307,624
 1,292,226
 1,390,528
 1,292,226
        
TOTAL LIABILITIES AND EQUITY 
$3,937,106
 
$3,946,804
 
$4,232,725
 
$3,946,804
        
See Notes to Financial Statements.  
  
  
  



ENTERGY MISSISSIPPI, LLC
STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the ThreeNine Months Ended March 31,September 30, 2019 and 2018
(Unaudited)
   
   
  Member's Equity
  (In Thousands)
   
Balance at December 31, 2017 

$1,177,870

   
Net income 22,843

Preferred stock dividends (238)
Balance at March 31, 2018 
1,200,475

Net income38,242
Preferred stock dividends(239)
Balance at June 30, 20181,238,478
Net income50,733
Preferred stock dividends(238)
Balance at September 30, 2018
$1,200,4751,288,973

   
   
Balance at December 31, 2018 

$1,292,226

   
Net income 15,398

Balance at March 31, 2019 
1,307,624

Net income26,667
Balance at June 30, 20191,334,291
Net income56,237
Balance at September 30, 2019
$1,307,6241,390,528

   
See Notes to Financial Statements.  



ENTERGY MISSISSIPPI, LLCSELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
            
 Three Months Ended Increase/  
 Three Months Ended Increase/  
Description 2019 2018 (Decrease) %

 2019 2018 (Decrease) %
 (Dollars In Millions)  
 (Dollars In Millions)  
Electric Operating Revenues:  
  
  
  
        
Residential 
$129
 
$148
 
($19) (13) 
$178
 
$170
 
$8
 5
Commercial 98
 110
 (12) (11) 132
 127
 5
 4
Industrial 38
 43
 (5) (12) 44
 44
 
 
Governmental 10
 11
 (1) (9) 12
 12
 
 
Total billed retail 275
 312
 (37) (12) 366
 353
 13
 4
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 5
 2
 3
 150
 10
 8
 2
 25
Other 2
 2
 
 
 23
 7
 16
 229
Total 
$282
 
$316
 
($34) (11) 
$399
 
$368
 
$31
 8
  
  
  
  
  
  
  
  
Billed Electric Energy Sales (GWh):          
  
  
  
Residential 1,315
 1,449
 (134) (9) 1,832
 1,899
 (67) (4)
Commercial 1,040
 1,100
 (60) (5) 1,403
 1,475
 (72) (5)
Industrial 566
 597
 (31) (5) 654
 692
 (38) (5)
Governmental 98
 99
 (1) (1) 126
 128
 (2) (2)
Total retail 3,019
 3,245
 (226) (7) 4,015
 4,194
 (179) (4)
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 166
 193
 (27) (14) 472
 303
 169
 56
Total 3,185
 3,438
 (253) (7) 4,487
 4,497
 (10) 
        
        
 Nine Months Ended Increase/  

 2019 2018 (Decrease) %
 (Dollars In Millions)  
Electric Operating Revenues:  
  
  
  
Residential 
$423
 
$451
 
($28) (6)
Commercial 332
 355
 (23) (6)
Industrial 121
 133
 (12) (9)
Governmental 33
 34
 (1) (3)
Total billed retail 909
 973
 (64) (7)
Sales for resale:  
  
  
  
Non-associated companies 19
 21
 (2) (10)
Other 56
 43
 13
 30
Total 
$984
 
$1,037
 
($53) (5)
  
  
  
  
Billed Electric Energy Sales (GWh):        
Residential 4,307
 4,547
 (240) (5)
Commercial 3,548
 3,722
 (174) (5)
Industrial 1,808
 1,916
 (108) (6)
Governmental 327
 329
 (2) (1)
Total retail 9,990
 10,514
 (524) (5)
Sales for resale:  
  
  
  
Non-associated companies 852
 903
 (51) (6)
Total 10,842
 11,417
 (575) (5)



ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES


MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations


Net Income


Third Quarter 2019 Compared to Third Quarter 2018

Net income increased $3.5 million primarily due to higher volume/weather, partially offset by higher other operation and maintenance expenses.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net income decreased $1.9$3.6 million primarily due to higher other operation and maintenance expenses, a higher effective income tax rate, and lower net revenue, partially offset by lower taxeshigher other than income taxes.income.


Net RevenueOperating Revenues


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).  Third Quarter 2019 Compared to Third Quarter 2018

Following is an analysis of the change in net revenueoperating revenues comparing the firstthird quarter 2019 to the firstthird quarter 2018:
 Amount
 (In Millions)
2018 net revenueoperating revenues

$75.0200.2

Rough production cost equalizationFuel, rider, and other revenues that do not significantly affect net income(1.519.1)
Volume/weather(1.35.2)
AmortizationReturn of unprotected excess accumulated deferred income tax rate change liabilitytaxes to customers3.17.9
Other(1.2)
2019 net revenueoperating revenues

$74.1194.2



Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The rough production cost equalizationvolume/weather variance is primarily due to the effect of more favorable weather on residential and commercial sales.

The return of unprotected excess accumulated deferred income taxes to customers variance is due to the usea decrease in the firstreturn of unprotected excess accumulated deferred income taxes through the fuel adjustment clause. In the third quarter of 2018 of prior rough production cost equalization proceeds2019, $1.1 million was returned to offset investmentscustomers as compared to $9 million in Energy Smart energy efficiency programs. The rough production cost equalization variancethe third quarter 2018. There is offset in other operation and maintenance expenses and has no effect on net income.income as the reduction in operating revenues in each period is offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for discussion of Energy Smart program funding.

The volume/weather variance is primarily due to a decrease of 100 GWh, or 7%, in billed electricity usage, including the effect of less favorable weather on residential and commercial sales.

The amortization of income tax rate change liability variance is primarily due to the amortization of the regulatory liability that Entergy New Orleans began recording in 2018 for the lower income tax rate. This portion of the benefits of the lower income tax rate are being given to customers through investments in Energy Smart energy efficiency programs. The amortization of income tax rate change liability is offset in other operation and maintenance expenses and has no effect on net income. See Note 2 to the financial statements in the Form 10-K for further discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Other Income Statement Variances

Other operation and maintenance expenses increased primarily due to:


an increase of $1.5 million in information technology costs primarily due to higher software maintenance costs and higher contract costs;
an increase of $0.9 million in energy efficiency costs; and
an increase of $0.9 million in costs related to customer initiatives to explore new technologies and services.


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Management's Financial Discussion and Analysis


Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018:
Amount
(In Millions)
2018 operating revenues
$566.9
Fuel, rider, and other revenues that do not significantly affect net income(40.6)
Return of unprotected excess accumulated deferred income taxes to customers6.9
2019 operating revenues
$533.2

Entergy New Orleans’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

The return of unprotected excess accumulated deferred income taxes to customers variance is due to a decrease in the return of unprotected excess accumulated deferred income taxes through the fuel adjustment clause. In the nine months ended September 30, 2019, $2.1 million was returned to customers as compared to $9 million in the nine months ended September 30, 2018. There is no effect on net income as the reduction in operating revenues in each period is offset by a reduction in income tax expense. See Note 2 to the financial statements in the Form 10-K for discussion of regulatory activity regarding the Tax Cuts and Jobs Act.

Other Income Statement Variances

Third Quarter 2019 Compared to Third Quarter 2018

Other operation and maintenance expenses increased primarily due to:

an increase of $1.1 million in loss provisions;
an increase of $1 million in spending on customer initiatives to explore new technologies and services and continuous customer improvement; and
an increase of $0.9 million in information technology costs primarily due to higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance.

The increase was partially offset by:by several individually insignificant items.


Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Other operation and maintenance expenses increased primarily due to:

an increase of $4.8 million in information technology costs primarily due to higher costs related to a system conversion for Algiers customers;
an increase of $2.4 million in spending on customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $1.4 million in customer service costs primarily due to higher labor costs, including contract labor; and
an increase of $1.3 million in energy efficiency costs.


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Management's Financial Discussion and Analysis

The increase was partially offset by a decrease of $1.2$1.8 million in distribution expenses primarily due to lower contract labor costs; andcosts.
a decrease of $1.1 million in fossil-fueled generation expenses
Other income increased primarily due to lower plant operating expensesan increase in allowance for equity funds used during construction resulting from higher construction work in progress in 2019, as compared to 2018.including the New Orleans Power Station project.

Taxes other than income taxes decreased primarily due to a decrease in local franchise taxes primarily due to lower electric retail revenues in 2019 as compared to the same period in 2018.


Income Taxes


The effective income tax rate was 25.3%rates were 3.6% for the firstthird quarter 2019 and 10.2% for the nine months ended September 30, 2019. The differencedifferences in the effective income tax raterates for the firstthird quarter 2019 and the nine months ended September 30, 2019 versus the federal statutory rate of 21% waswere primarily due to permanent book and tax differences, statethe amortization of excess accumulated deferred income taxes, and the provision for uncertain tax positions, partially offset by flow-through tax accounting, 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.construction, partially offset by state income taxes and the provision for uncertain tax positions. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.


The effective income tax rate was 19.5%rates were (20.0%) for the firstthird quarter 2018 and 7.2% for the nine months ended September 30, 2018. The differencedifferences in the effective income tax raterates for the firstthird quarter 2018 and the nine months ended September 30, 2018 versus the federal statutory rate of 21% waswere primarily due to the amortization of excess accumulated deferred income taxes and flow-through tax accounting, and certain book and tax differences related to utility plant items, partially offset by state income taxes,taxes. See Note 10 to the provisionfinancial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for uncertain tax positions,a discussion of the effects and a write-off of a stock-based compensation deferred tax asset.regulatory activity regarding the Tax Cuts and Jobs Act.


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 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion.  Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.


Liquidity and Capital Resources


Cash Flow


Cash flows for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2019 20182019 2018
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$19,677
 
$32,741

$19,677
 
$32,741
      
Cash flow provided by (used in):      
Operating activities16,522
 7,049
77,433
 100,327
Investing activities(36,783) (31,573)(136,817) (133,233)
Financing activities1,378
 (6,857)39,733
 33,085
Net decrease in cash and cash equivalents(18,883) (31,381)
Net increase (decrease) in cash and cash equivalents(19,651) 179
      
Cash and cash equivalents at end of period
$794
 
$1,360

$26
 
$32,920




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Operating Activities


Net cash flow provided by operating activities increased $9.5decreased $22.9 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:

to the timing of payments to vendors;vendors.
the timing of recovery of fuel and purchased power costs; and
a decrease of $2 million in pension contributions in 2019 as compared to 2018. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.


Investing Activities


Net cash flow used in investing activities increased $5.2$3.6 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:


an increase of $9.5$13.6 million in fossil-fueled generationdistribution construction expenditures primarily due to higherinvestment in the reliability and infrastructure of Entergy New Orleans’s distribution system, including increased spending on the New Orleans Power Station and New Orleans Solar projects in 2019 as compared to the same period in 2018;advanced metering infrastructure; and
an increase of $5.8$13.4 million in transmission construction expenditures primarily due to a higher scope of work performed in 2019 as compared to the same period in 2018, including investment in Entergy New Orleans’s system reliability and infrastructure.


The increase was partially offset by money pool activity.activity and a decrease of $7.6 million in fossil-fueled generation construction expenditures primarily due to lower spending on the New Orleans Power Station in 2019 as compared to the same period in 2018.


Decreases in Entergy New Orleans’s receivable from the money pool are a source of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $22 million for the threenine months ended March 31,September 30, 2019 compared to decreasing $12.3$10.6 million for the threenine months ended March 31,September 30, 2018. 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 provided by financing activities provided $1.4increased $6.6 million of cash for the threenine months ended March 31,September 30, 2019 compared to using $6.9 million of cash for the threenine months ended March 31,September 30, 2018 primarily due to $6.3money pool activity and $23.8 million in common equity distributions in 2018, partially offset by the issuance of $60 million of 4.51% Series mortgage bonds in September 2018. CommonThere were no common equity distributions were lowermade in 2019 primarily as a resultin anticipation of the increase in planned capital investments.


Increases in Entergy New Orleans’s payable to the money pool are a source of cash flow, and Entergy New Orleans’s payable to the money pool increased $46.3 million for the nine months ended September 30, 2019.

Capital Structure


Entergy New Orleans’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due to anthe increase in member’s equity in 2019.
March 31,
2019
 
December 31,
2018
September 30,
2019
 
December 31,
2018
Debt to capital51.7% 52.1%49.5% 52.1%
Effect of excluding securitization bonds(3.5%) (3.5%)(3.3%) (3.5%)
Debt to capital, excluding securitization bonds (a)48.2% 48.6%46.2% 48.6%
Effect of subtracting cash% (1.2%)% (1.2%)
Net debt to net capital, excluding securitization bonds (a)48.2% 47.4%46.2% 47.4%


(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.



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Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, financing lease obligations, long-term debt, including the currently maturing portion, and the long-term payable due to an associated company.  Capital consists of debt and equity.  Net capital consists of capital less cash and cash equivalents.  Entergy New Orleans uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.


Uses and Sources of Capital


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy New Orleans’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.  


Entergy New Orleans is developing its capital investment plan for 2020 through 2022 and currently anticipates making $585 million in capital investments during that period.  The preliminary estimate includes specific investments such as the New Orleans Power Station and New Orleans Solar Station; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including advanced meters and related investments; system improvements; software and security; 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 or (payables to) the money pool were as follows:
March 31,
 2019
 
December 31,
2018
 
March 31,
 2018
 
December 31,
2017
(In Thousands)
($1,877) $22,016 $432 $12,723
September 30,
 2019
 
December 31,
2018
 
September 30,
 2018
 
December 31,
2017
(In Thousands)
($46,318) $22,016 $2,116 $12,723


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 2021. The credit facility includes fronting commitments for the issuance of letters of credit against $10 million of the borrowing capacity of the facility. As of March 31,September 30, 2019, 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 March 31,September 30, 2019, a $1 million letter of credit was outstanding under Entergy New Orleans’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.


New Orleans Power Station

In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 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. 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 cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment

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to pursue up to 100 MW of renewable resources to serve New Orleans. In March 2018 the City Council adopted a resolution approving construction of the 128 MW unit. The targeted commercial operation date is mid-2020, subject to receipt of all necessary permits.

In April 2018 intervenors opposing the construction of the New Orleans Power Station filed with the City Council a request for rehearing, which was subsequently denied, and a petition for judicial review of the City Council’s decision, and also filed a lawsuit challenging the City Council’s approval based on Louisiana’s open meeting law. In May 2018 the City Council announced that it would initiate an investigation into allegations that Entergy New Orleans, Entergy, or some other entity paid or participated in paying certain attendees and speakers in support of the New Orleans Power Station to attend or speak at certain meetings organized by the City Council. In June 2018, Entergy New Orleans produced documents in response to a City Council resolution relating to this investigation. In October 2018 investigators for the City Council released their report, concluding that individuals were paid to attend and/or speak in support of the New Orleans Power Station and that Entergy New Orleans “knew or should have known that such conduct occurred or reasonably might occur.”  The City Council issued a resolution requiring Entergy New Orleans to show cause why it should not be fined $5 million as a result of the findings in the report. In November 2018, Entergy New Orleans submitted its response to the show cause resolution, disagreeing with certain characterizations and omissions of fact in the report and asserting that the City Council could not legally impose the proposed fine.  Simultaneous with the filing of its response to the show cause resolution, Entergy New Orleans sent a letter to the City Council re-asserting that the City Council’s imposition of the proposed fine would be unlawful, but acknowledging that the actions of a subcontractor, which was retained by an Entergy New Orleans contractor without the knowledge or contractually-required consent of Entergy New Orleans, were contrary to Entergy’s values.  In that letter, Entergy New Orleans offered to donate $5 million to the City Council to resolve the show cause proceeding.  In January 2019, Entergy New Orleans submitted a new settlement proposal to the City Council. The proposal retained the components of the first offer but added to it a commitment to make reasonable efforts to limit the costs of the project to the $210 million cost estimate with advanced notification of anticipated cost overruns, additional reporting requirements for cost and environmental items, and a commitment regarding reliability investment and to work with the New Orleans Sewerage and Water Board to provide a reliable source of power. In February 2019 the City Council approved a resolution approving the settlement proposal and allowing the construction of the New Orleans Power Station to commence.

Also in February 2019, certain intervenors in the City Council proceeding on the New Orleans Power Station filed suit in Louisiana state court challenging the Louisiana Department of Environmental Quality’s issuance of the New Orleans Power Station’s air permit. Entergy New Orleans intervened in that lawsuit and, along with the Louisiana Department of Environmental Quality, filed exceptions seeking dismissal of the lawsuit. In June 2019 the state court judge sustained the exceptions and dismissed the plaintiffs’ petition with prejudice. Also in June 2019, a state court judge in New Orleans affirmed the City Council’s approval of the New Orleans Power Station and dismissed the petition for judicial review that had been filed in April 2018. The petitioners have filed an appeal of that ruling. Also in June 2019, with regard to the lawsuit challenging the City Council’s decision on the basis of a violation of the open meetings law, the same state court judge in New Orleans ruled that there was a violation of the open meetings law at the February 2018 meeting of the City Council’s Utilities, Cable, Telecommunications and Technology Committee at which that Committee considered the New Orleans Power Station approval, and further ruled that, although there was no violation of the open meetings law at the March 2018 full City Council meeting at which the New Orleans Power Station was approved, both the approval of the Committee and the approval of the full City Council were void. The City Council and Entergy New Orleans have each filed a suspensive appeal of the open meetings law ruling. A suspensive appeal suspends the effect of the judgment in the open meetings law proceeding while the appeal is being taken. The petitioners sought in the state appellate court, and then at the Louisiana Supreme Court, to terminate the suspension of the effect of the judgment, but both courts declined to do so. Appellate briefing on the merits both in the open meetings law appeal and in the judicial review appeal is scheduled to begin in November 2019. The New Orleans Power Station related settlement that was approved by the full City Council in February 2019 and that allowed Entergy New Orleans to move forward with the construction of the New Orleans Power Station was not affected by the state court judge’s open meetings ruling. Construction of the plant is underway and continuing.


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Renewables


As discussed in the Form 10-K, in July 2018, Entergy New Orleans filed an application with the City Council requesting approval of three utility-scale solar projects totaling 90 MW. In December 2018 the City Council advisors requested that Entergy New Orleans pursue alternative deal structures for the Washington Parish project and attempt to reduce costs for the 20 MW Orleans Parish project. As a result of settlement discussions, in March 2019, Entergy New Orleans revised its application to convert the build-own transfer acquisition of the 50 MW facility in Washington Parish to a power purchase agreement. Also in MarchIn June 2019 the parties to the proceeding executed a stipulated settlement term sheet, which recommends that the City Council approve Entergy New Orleans’s revised application as to all three projects. In July 2019 the City Council approved a motion to allow settlement discussions to continue until June 2019.the stipulated settlement.


State and Local Rate Regulation


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –State and Local Rate Regulationin the Form 10-K for a discussion of state and local rate regulation. The following is an update to that discussion.



Retail Rates

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TableSee the Form 10-K for discussion of Contents
the electric and gas base rate case filed by Entergy New Orleans LLCin September 2018. The evidentiary hearing in this proceeding was held in June 2019. The record and Subsidiariespost-hearing briefs were submitted in July 2019. In August 2019, Entergy New Orleans sent a letter to the City Council proposing a framework for settlement of the rate case.  That framework includes, among other things: (1) a total reduction in revenues of approximately $30 million ($27 million electric, $3 million gas); (2) a reduced return on common equity lower than 10.5%, but still commensurate with Entergy New Orleans’s level of risk, paired with three-year electric and gas formula rate plans with forward-looking features; (3) a demand-side management program intended to achieve greater penetration of the City Council’s Energy Smart programs and make progress towards the City Council’s energy efficiency goals. In October 2019 the City Council’s Utility Committee approved a resolution for consideration by the full City Council that included a 9.35% return on common equity, a total reduction in revenues of approximately $39 million ($36 million electric; $3 million gas), and an equity ratio of the lesser of 50% or Entergy New Orleans’s actual equity ratio. Also in October 2019, Entergy New Orleans sent another letter to the City Council identifying certain issues with the proposed resolution and inviting the City Council to resume negotiations in an effort to address these issues. The City Council may consider the resolution at its November 7, 2019 meeting.
Management's Financial Discussion and Analysis


Reliability Investigation


In August 2017 the City Council established a docket to investigate the reliability of the Entergy New Orleans distribution system and to consider implementing certain reliability standards and possible financial penalties for not meeting any such standards. In April 2018 the City Council adopted a resolution directing Entergy New Orleans to demonstrate that it has been prudent in the management and maintenance of the reliability of its distribution system. The resolution also called for Entergy New Orleans to file a revised reliability plan addressing the current state of its distribution system and proposing remedial measures for increasing reliability. In June 2018, Entergy New Orleans filed its response to the City Council’s resolution regarding the prudence of its management and maintenance of the reliability of its distribution system.  In July 2018, Entergy New Orleans filed its revised reliability plan discussing the various reliability programs that it uses to improve distribution system reliability and discussing generally the positive effect that advanced meter deployment and grid modernization can have on future reliability.  Entergy New Orleans has retained a national consulting firm with expertise in distribution system reliability to conduct a review of Entergy New Orleans’s distribution system reliability-related practices and procedures and to provide recommendations for improving distribution system reliability. The report was filed with the City Council in October 2018. The City Council also approved a resolution that opens a prudence investigation into whether Entergy New Orleans was imprudent for not acting sooner to address outages in New Orleans and whether fines should be imposed. In January 2019, Entergy New Orleans filed testimony in response to the prudence investigation and asserting that it had been prudent in managing

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system reliability. In April 2019 the City Council advisors filed comments and testimony asserting that Entergy New Orleans did not act prudently in maintaining and improving its distribution system reliability in recent years and recommending that a financial penalty in the range of $1.5 million to $2 million should be assessed.  Entergy New Orleans disagrees with the recommendation and plans to submitsubmitted rebuttal testimony and rebuttal comments in MayJune 2019. In October 2019 the City Council’s Utility Committee passed a resolution recommending that the City Council fines Entergy New Orleans $1 million for alleged imprudence in the maintenance of its distribution system. The City Council is expected to consider the resolution at its November 7, 2019 meeting.

Renewable Portfolio Standard Rulemaking

In March 2019 the City Council initiated a rulemaking proceeding to consider whether to establish a renewable portfolio standard. The rulemaking will consider, among other issues, whether to adopt a renewable portfolio standard, whether such standard should be voluntary or mandatory, what kinds of technologies should qualify for inclusion in the rules, what level, if any, of renewable generation should be required, and whether penalties are an appropriate component of the proposed rules. Parties to the proceeding submitted initial comments in June 2019 and reply comments in July 2019. Entergy New Orleans recommends that the City Council adopt a voluntary clean energy standard of 70% of generation being clean energy by 2030, as so defined, which, in addition to renewable generation, would include nuclear, beneficial electrification, and demand-side management as compliant technologies. Several other industry leaders, academic researchers, and environmental advocates filed comments also supporting a clean energy standard. Other parties, including many representatives of the solar and wind industry, are recommending mandatory, renewables-only requirements of up to 100% renewable resources by 2040. In September 2019 the City Council advisors issued a report and recommendations, which also put forth three alternative rules for comment from the parties. Comments were submitted in October 2019 with replies to be filed in November 2019.


Federal Regulation


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Federal Regulationin 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 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, 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 Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.



ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
    
   Three Months Ended Nine Months Ended
 2019 2018 2019 2018 2019 2018
 (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES            
Electric 
$130,883
 
$155,818
 
$176,738
 
$184,164
 
$464,773
 
$499,584
Natural gas 32,311
 32,457
 17,466
 16,018
 68,418
 67,319
TOTAL 163,194
 188,275
 194,204
 200,182
 533,191
 566,903
            
OPERATING EXPENSES            
Operation and Maintenance:            
Fuel, fuel-related expenses, and gas purchased for resale 30,760
 23,739
 27,013
 54,754
 84,963
 93,859
Purchased power 60,649
 83,156
 68,091
 57,828
 195,721
 214,773
Other operation and maintenance 30,298
 28,299
 32,755
 30,593
 95,305
 87,312
Taxes other than income taxes 13,542
 15,132
 15,142
 15,551
 41,819
 43,534
Depreciation and amortization 14,164
 13,747
 14,756
 14,059
 43,146
 41,756
Other regulatory charges (credits) - net (2,355) 6,333
Other regulatory charges - net 7,571
 5,853
 9,716
 18,313
TOTAL 147,058
 170,406
 165,328
 178,638
 470,670
 499,547
            
OPERATING INCOME 16,136
 17,869
 28,876
 21,544
 62,521
 67,356
            
OTHER INCOME            
Allowance for equity funds used during construction 2,290
 851
 2,793
 1,694
 7,769
 3,762
Interest and investment income 179
 93
 109
 30
 352
 330
Miscellaneous - net (1,506) (337) (1,019) (660) (3,467) (2,401)
TOTAL 963
 607
 1,883
 1,064
 4,654
 1,691
            
INTEREST EXPENSE            
Interest expense 5,936
 5,279
 6,046
 5,388
 18,001
 15,936
Allowance for borrowed funds used during construction (914) (314) (1,115) (626) (3,102) (1,390)
TOTAL 5,022
 4,965
 4,931
 4,762
 14,899
 14,546
            
INCOME BEFORE INCOME TAXES 12,077
 13,511
 25,828
 17,846
 52,276
 54,501
            
Income taxes 3,054
 2,629
 920
 (3,561) 5,342
 3,943
            
NET INCOME 
$9,023
 
$10,882
 
$24,908
 
$21,407
 
$46,934
 
$50,558
            
See Notes to Financial Statements.            



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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Net income 
$9,023
 
$10,882
 
$46,934
 
$50,558
Adjustments to reconcile net income to net cash flow provided by operating activities:        
Depreciation and amortization 14,164
 13,747
 43,146
 41,756
Deferred income taxes, investment tax credits, and non-current taxes accrued 9,743
 17,909
 20,427
 25,605
Changes in assets and liabilities:        
Receivables (20) 3,378
 (14,741) (15,310)
Fuel inventory 1,529
 951
 (374) 495
Accounts payable 8,298
 (7,973) (11,654) 8,868
Prepaid taxes and taxes accrued (4,443) (13,351) 242
 (8,743)
Interest accrued 650
 (81) 14
 564
Deferred fuel costs (71) (11,309) 8,328
 (59)
Other working capital accounts (15,144) (12,082) (8,737) (5,062)
Provisions for estimated losses 454
 196
 1,423
 417
Other regulatory assets (16,528) 7,226
 (14,435) 19,068
Other regulatory liabilities (8,634) 1,331
 (15,371) (5,353)
Pension and other postretirement liabilities (1,706) (3,686) (5,784) (12,956)
Other assets and liabilities 19,207
 (89) 28,015
 479
Net cash flow provided by operating activities 16,522
 7,049
 77,433
 100,327
        
INVESTING ACTIVITIES        
Construction expenditures (57,788) (41,105) (162,177) (142,585)
Allowance for equity funds used during construction 2,290
 851
 7,769
 3,762
Changes in money pool receivable - net 22,016
 12,291
 22,016
 10,607
Receipts from storm reserve escrow account 
 3
 
 3
Payments to storm reserve escrow account (451) (232) (1,382) (905)
Changes in securitization account (2,850) (3,381) (3,043) (4,115)
Net cash flow used in investing activities (36,783) (31,573) (136,817) (133,233)
        
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt 
 59,590
Retirement of long-term debt (5,420) (5,342)
Change in money pool payable - net 1,877
 
 46,318
 
Distributions/dividends paid:    
Distributions paid:    
Common equity 
 (6,250) 
 (23,750)
Other (499) (607) (1,165) 2,587
Net cash flow provided by (used in) financing activities 1,378
 (6,857)
Net cash flow provided by financing activities 39,733
 33,085
        
Net decrease in cash and cash equivalents (18,883) (31,381)
Net increase (decrease) in cash and cash equivalents (19,651) 179
Cash and cash equivalents at beginning of period 19,677
 32,741
 19,677
 32,741
Cash and cash equivalents at end of period 
$794
 
$1,360
 
$26
 
$32,920
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:    
Cash paid (received) during the period for:    
Interest - net of amount capitalized 
$5,027
 
$5,098
 
$17,211
 
$14,584
Income taxes 
($4,899) 
$—
        
See Notes to Financial Statements.        



ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents        
Cash 
$794
 
$26
 
$26
 
$26
Temporary cash investments 
 19,651
 
 19,651
Total cash and cash equivalents 794
 19,677
 26
 19,677
Securitization recovery trust account 5,075
 2,224
 5,268
 2,224
Accounts receivable:    
    
Customer 47,422
 43,890
 57,173
 43,890
Allowance for doubtful accounts (3,033) (3,222) (3,116) (3,222)
Associated companies 2,054
 27,938
 2,541
 27,938
Other 7,115
 4,090
 4,954
 4,090
Accrued unbilled revenues 16,049
 18,907
 22,776
 18,907
Total accounts receivable 69,607
 91,603
 84,328
 91,603
Fuel inventory - at average cost 4
 1,533
 1,907
 1,533
Materials and supplies - at average cost 11,989
 12,133
 12,865
 12,133
Prepayments and other 17,250
 6,905
 10,655
 6,905
TOTAL 104,719
 134,075
 115,049
 134,075
        
OTHER PROPERTY AND INVESTMENTS        
Non-utility property at cost (less accumulated depreciation) 1,016
 1,016
 1,016
 1,016
Storm reserve escrow account 81,305
 80,853
 82,236
 80,853
TOTAL 82,321
 81,869
 83,252
 81,869
        
UTILITY PLANT        
Electric 1,358,401
 1,364,091
 1,430,352
 1,364,091
Natural gas 291,484
 284,728
 302,801
 284,728
Construction work in progress 184,527
 146,668
 196,842
 146,668
TOTAL UTILITY PLANT 1,834,412
 1,795,487
 1,929,995
 1,795,487
Less - accumulated depreciation and amortization 675,943
 670,135
 699,525
 670,135
UTILITY PLANT - NET 1,158,469
 1,125,352
 1,230,470
 1,125,352
        
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 $58,089 as of March 31, 2019 and $60,453 as of December 31, 2018) 246,324
 229,796
Other regulatory assets (includes securitization property of $52,085 as of September 30, 2019 and $60,453 as of December 31, 2018) 244,231
 229,796
Other 1,991
 1,416
 1,749
 1,416
TOTAL 252,395
 235,292
 250,060
 235,292
        
TOTAL ASSETS 
$1,597,904
 
$1,576,588
 
$1,678,831
 
$1,576,588
        
See Notes to Financial Statements.        

ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT LIABILITIES        
Payable due to associated company 
$1,979
 
$1,979
 
$1,979
 
$1,979
Accounts payable:        
Associated companies 44,433
 43,416
 85,485
 43,416
Other 48,308
 36,686
 37,394
 36,686
Customer deposits 28,683
 28,667
 28,515
 28,667
Taxes accrued 
 4,068
 4,310
 4,068
Interest accrued 7,016
 6,366
 6,380
 6,366
Deferred fuel costs 1,217
 1,288
 9,616
 1,288
Current portion of unprotected excess accumulated deferred income taxes 25,220
 25,301
 15,439
 25,301
Other 6,611
 9,521
 7,182
 9,521
TOTAL CURRENT LIABILITIES 163,467
 157,292
 196,300
 157,292
        
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued 334,694
 323,595
 349,600
 323,595
Accumulated deferred investment tax credits 2,197
 2,219
 2,153
 2,219
Regulatory liability for income taxes - net 57,233
 60,249
 52,705
 60,249
Asset retirement cost liabilities 3,347
 3,291
 3,463
 3,291
Accumulated provisions 87,048
 86,594
 88,017
 86,594
Pension and other postretirement liabilities 3,920
 5,626
Long-term debt (includes securitization bonds of $63,681 as of March 31, 2019 and $63,620 as of December 31, 2018) 467,498
 467,358
Long-term debt (includes securitization bonds of $58,382 as of September 30, 2019 and $63,620 as of December 31, 2018) 462,273
 467,358
Long-term payable due to associated company 14,367
 14,367
 14,367
 14,367
Other 10,160
 11,047
 18,069
 16,673
TOTAL NON-CURRENT LIABILITIES 980,464
 974,346
 990,647
 974,346
        
Commitments and Contingencies        
        
EQUITY        
Member's equity 453,973
 444,950
 491,884
 444,950
TOTAL 453,973
 444,950
 491,884
 444,950
        
TOTAL LIABILITIES AND EQUITY 
$1,597,904
 
$1,576,588
 
$1,678,831
 
$1,576,588
        
See Notes to Financial Statements.        



ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the ThreeNine Months Ended March 31,September 30, 2019 and 2018
(Unaudited)
  
  
 Member’s Equity
 (In Thousands)
  
Balance at December 31, 2017

$415,548

  
Net income10,882

Common equity distributions(6,250)
Balance at March 31, 2018
420,180

Net income18,269
Common equity distributions(8,250)
Balance at June 30, 2018430,199
Net income21,407
Common equity distributions(9,250)
Balance at September 30, 2018
$420,180442,356

  
  
Balance at December 31, 2018

$444,950

  
Net income9,023

Balance at March 31, 2019
453,973

Net income13,003
Balance at June 30, 2019466,976
Net income24,908
Balance at September 30, 2019
$453,973491,884

  
See Notes to Financial Statements. 




ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIESSELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
            
 Three Months Ended Increase/  
 Three Months Ended Increase/  
Description 2019 2018 (Decrease) %
 2019 2018 (Decrease) %
 (Dollars In Millions)  
 (Dollars In Millions)  
Electric Operating Revenues:    
  
  
        
Residential 
$52
 
$65
 
($13) (20) 
$82
 
$86
 
($4) (5)
Commercial 46
 54
 (8) (15) 56
 62
 (6) (10)
Industrial 7
 8
 (1) (13) 9
 10
 (1) (10)
Governmental 16
 18
 (2) (11) 19
 20
 (1) (5)
Total billed retail 121
 145
 (24) (17) 166
 178
 (12) (7)
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 10
 13
 (3) (23) 7
 5
 2
 40
Other 
 (2) 2
 (100) 4
 1
 3
 300
Total 
$131
 
$156
 
($25) (16) 
$177
 
$184
 
($7) (4)
                
Billed Electric Energy Sales (GWh):  
  
  
  
  
  
  
  
Residential 511
 577
 (66) (11) 793
 779
 14
 2
Commercial 492
 524
 (32) (6) 645
 660
 (15) (2)
Industrial 97
 99
 (2) (2) 124
 128
 (4) (3)
Governmental 181
 181
 
 
 228
 225
 3
 1
Total retail 1,281
 1,381
 (100) (7) 1,790
 1,792
 (2) 
Sales for resale:  
  
  
  
  
  
  
  
Non-associated companies 528
 627
 (99) (16) 364
 281
 83
 30
Total 1,809
 2,008
 (199) (10) 2,154
 2,073
 81
 4
                
                
 Nine Months Ended Increase/  
 2019 2018 (Decrease) %
 (Dollars In Millions)  
Electric Operating Revenues:    
  
  
Residential 
$192
 
$209
 
($17) (8)
Commercial 156
 171
 (15) (9)
Industrial 24
 26
 (2) (8)
Governmental 54
 57
 (3) (5)
Total billed retail 426
 463
 (37) (8)
Sales for resale:  
  
  
  
Non-associated companies 26
 24
 2
 8
Other 13
 12
 1
 8
Total 
$465
 
$499
 
($34) (7)
        
Billed Electric Energy Sales (GWh):  
  
  
  
Residential 1,821
 1,846
 (25) (1)
Commercial 1,686
 1,711
 (25) (1)
Industrial 326
 338
 (12) (4)
Governmental 607
 591
 16
 3
Total retail 4,440
 4,486
 (46) (1)
Sales for resale:  
  
  
  
Non-associated companies 1,353
 1,218
 135
 11
Total 5,793
 5,704
 89
 2
        
        

ENTERGY TEXAS, INC. AND SUBSIDIARIES


MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS


Results of Operations


Net Income


Third Quarter 2019 Compared to Third Quarter 2018

Net income increased $4$7.4 million primarily due to higher net revenue, after excluding the effect of the return of unprotected excess accumulated deferred income taxes which is offset in income taxes,retail electric price, higher volume/weather, and higher other income, partially offset by higher other operation and maintenance expenses and higher depreciation and amortization expenses.


Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net Revenue

Net revenue consists of operating revenues net of: 1) fuel, fuel-relatedincome increased $19.5 million primarily due to higher retail electric price, higher volume/weather, higher other income, lower interest expense, and a lower effective income tax rate, partially offset by higher other operation and maintenance expenses and gas purchased for resale, 2) purchased power expenses,higher depreciation and 3) other regulatory charges.  amortization expenses.

Operating Revenues

Third Quarter 2019 Compared to Third Quarter 2018

Following is an analysis of the change in net revenueoperating revenues comparing the firstthird quarter 2019 to the firstthird quarter 2018:

 Amount
 (In Millions)
2018 net revenueoperating revenues

$144.9477.2

Fuel, rider, and other revenues that do not significantly affect net income(29.0)
Return of unprotected excess accumulated deferred income taxes to customers(22.330.9)
Volume/weather(3.58.6)
Retail electric price10.617.0
Other2.3

2019 net revenueoperating revenues

$132.0442.9



Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

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


The volume/weather variance is primarily due to a decreasean increase in industrial demand charges and an increase in usage during the unbilled sales period.

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Management's Financial Discussion and Analysis


The retail electric price variance is primarily due to an annuala base rate increase of $53.2 million effective October 2018 as approved by the PUCT. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case filing.


Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Following is an analysis of the change in operating revenues comparing the nine months ended September 30, 2019 to the nine months ended September 30, 2018:
Amount
(In Millions)
2018 operating revenues
$1,229.7
Fuel, rider, and other revenues that do not significantly affect net income(52.1)
Return of unprotected excess accumulated deferred income taxes to customers(73.5)
Volume/weather9.3
Retail electric price33.5
2019 operating revenues
$1,146.9

Entergy Texas’s results include revenues from rate mechanisms designed to recover fuel, purchased power, and other costs such that the revenues and expenses associated with these items generally offset and do not affect net income. “Fuel, rider, and other revenues that do not significantly affect net income” includes the revenue variance associated with these items.

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

The volume/weather variance is primarily due to an increase in usage during the unbilled sales period.

The retail electric price variance is primarily due to a base rate increase effective October 2018 as approved by the PUCT. See Note 2 to the financial statements in the Form 10-K for further discussion of the rate case filing.

Other Income Statement Variances


Third Quarter 2019 Compared to Third Quarter 2018

Other operation and maintenance expenses increased primarily due to:

a loss on the sale of assets in 2019 of $0.2 million as compared to a gain on the sale of assets of $2.1 million in 2018;
an increase of $4.3$1.7 million in fossil-fueled generation expenses primarily due to a higher scope of work performed during plant outages in 2019 as compared to 2018 and 2018;
an increase of $1$1.6 million in costs related to customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $1.4 million in vegetation maintenance costs;
an increase of $1.3 million in information technology costs primarily due to higher laborcosts related to improved infrastructure, enhanced security, and upgrades and maintenance; and

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an increase of $1.2 million in distribution operations and asset management costs primarily due to higher advanced metering customer education costs and higher software maintenancecontract costs in 2019 as compared to 2018.for meter reading services.


Depreciation and amortization expenses increased primarily as a result of new depreciation rates established in the settlement of the 2018 base rate case and additions to plant in service.


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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 2019, primarily due toincluding the Montgomery County Power Station project.


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 2019, including the Montgomery County Power Station project.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Other operation and maintenance expenses increased primarily due to:

an increase of $4.7 million in fossil-fueled generation expenses primarily due to a higher scope of work performed during plant outages in 2019 as compared to the same period in 2018;
an increase of $4.0 million in costs related to customer initiatives to explore new technologies and services and continuous customer improvement;
an increase of $3.2 million in information technology costs primarily due to higher costs related to improved infrastructure, enhanced security, and upgrades and maintenance;
an increase of $3.2 million in distribution operations and asset management costs primarily due to higher advanced metering customer education costs and higher contract costs for meter reading services; and
a loss on the sale of assets in 2019 of $0.3 million as compared to a gain on the sale of assets of $2.1 million in 2018.

Depreciation and amortization expenses increased primarily as a result of new depreciation rates established in the settlement of the 2018 base rate case and additions to plant in service.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2019, including the Montgomery County Power Station project.

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 2019, including the Montgomery County Power Station project.

Income Taxes


The effective income tax rate was (554.5%rates were (22.6%) for the firstthird quarter 2019 and (48.1%) for the nine months ended September 30, 2019. The differencedifferences in the effective income tax raterates for the firstthird quarter 2019 and the nine months ended September 30, 2019 versus the federal statutory rate of 21% waswere primarily due to the amortization of excess accumulated deferred income taxes.taxes and book and tax differences related to the allowance for equity funds used during construction. See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.


The effective income tax rate was 22.2%20.4% for the firstthird quarter 2018. The difference in the effective income tax rate for the firstthird quarter 2018 versus the federal statutory rate of 21% was primarily due to a write-off of a stock-based
compensation deferred tax asset in 2018 and state income taxes, 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.construction and certain book and tax differences related to utility plant items.



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The effective income tax rate was 21.1% for the nine months ended September 30, 2018. The difference in the effective income tax rate for the nine months ended September 30, 2018 versus the federal statutory rate of 21% was primarily due to the write-off of a stock-based compensation deferred tax asset in 2018 and the provision for uncertain tax positions, partially offset by book and tax differences related to the allowance for equity funds used during construction and certain book and tax differences related to utility plant items.

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 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.


Liquidity and Capital Resources


Cash Flow


Cash flows for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2019 20182019 2018
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$56
 
$115,513

$56
 
$115,513
      
Cash flow provided by (used in):      
Operating activities42,651
 1,048
174,881
 197,677
Investing activities(163,922) (52,129)(603,077) (233,850)
Financing activities143,444
 (25,456)520,418
 (58,843)
Net increase (decrease) in cash and cash equivalents22,173
 (76,537)92,222
 (95,016)
      
Cash and cash equivalents at end of period
$22,229
 
$38,976

$92,278
 
$20,497


Operating Activities


Net cash flow provided by operating activities increased $41.6decreased $22.8 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to the timing of recovery of fuel and purchased power costs, partially offset by the return of unprotected excess accumulated deferred income taxes to customers. See Note 2 to The decrease was partially offset by:

the financial statements in timing of recovery of fuel and purchased power costs;
the Form 10-K for further discussiontiming of regulatory activity regarding the Tax Cutscollection of receivables from customers; and Jobs Act.
a decrease of $8.1 million in pension contributions in 2019. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.



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Investing Activities


Net cash flow used in investing activities increased $111.8$369.2 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to:


an increase of $43.1$197.5 million in fossil-fueled generation construction expenditures primarily due to increased spending on the Montgomery County Power Station;
an increase of $37$100.9 million in transmission construction expenditures primarily due to a higher scope of work performed in 2019 as compared to 2018; and
money pool activity.


Increases in Entergy Texas’s receivable from the money pool are a use of cash flow, and Entergy Texas’s receivable from the money pool increased by $3.6$8.3 million for the threenine months ended March 31,September 30, 2019 compared to decreasing by $32.3$43.7 million for the threenine months ended March 31,September 30, 2018. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.


Financing Activities


Entergy Texas’s financing activities provided $143.4$520.4 million of cash for the threenine months ended March 31,September 30, 2019 compared to using $25.5$58.8 million of cash for the threenine months ended March 31,September 30, 2018 primarily due to to:

the issuance of $300 million of 4.0% Series first mortgage bonds and $400 million of 4.5% Series first mortgage bonds in January 2019;
the issuance of $300 million of 3.55% Series mortgage bonds in September 2019;
a capital contribution of $87.5 million received from Entergy Corporation in August 2019 in anticipation of upcoming construction expenditures, including Montgomery County Power Station; and
the issuance of $35 million aggregate liquidation value 5.375% Series A preferred stock in September 2019.

The increase was partially offset by the repayment, at maturity, of $500 million of 7.125% Series first mortgage bonds in February 2019 and money pool activity. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt. See Note 3 to the financial statements herein for more details on the issuance of preferred stock.


Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased by $22.4 million for the threenine months ended March 31,September 30, 2019.


Capital Structure


Entergy Texas’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Texas is primarily due to the net issuance of $200$500 million of first mortgage bonds in 2019.
2019, partially offset by an increase in equity.
March 31,
2019
 December 31, 2018September 30,
2019
 December 31, 2018
Debt to capital53.9% 51.6%53.7% 51.6%
Effect of excluding the securitization bonds(4.2%) (5.2%)(3.0%) (5.2%)
Debt to capital, excluding securitization bonds (a)49.7% 46.4%50.7% 46.4%
Effect of subtracting cash(0.4%) %(1.4%) %
Net debt to net capital, excluding securitization bonds (a)49.3% 46.4%49.3% 46.4%


(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.



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Net debt consists of debt less cash and cash equivalents.  Debt consists of financing lease obligations 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 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

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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 2020 through 2022 and currently anticipates making $1.8 billion in capital investments during that period.  The preliminary estimate includes specific investments such as the Montgomery County Power Station; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including advanced meters and related investments; system improvements; software and security; 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:


March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2017
(In Thousands)
$3,571 ($22,389) $12,590 $44,903
September 30,
2019
 
December 31,
2018
 
September 30,
2018
 
December 31,
2017
(In Thousands)
$8,299 ($22,389) $1,217 $44,903


See Note 4 to the financial statements in the Form 10-K for a description of the money pool.


Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in September 2023.2024.  The credit facility includes fronting commitments for the issuance of letters of credit against $30 million of the borrowing capacity of the facility. As of March 31,September 30, 2019, there were no cash borrowings and $1.3 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 March 31,September 30, 2019, an $11.7a $26.2 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.


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.


2018 Fuel and Purchased Power Cost Recovery

In September 2019, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period from April 2016 through March 2019. During the reconciliation period, Entergy Texas incurred approximately

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$1.6 billion in Texas jurisdictional eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. Entergy Texas estimated an under-recovery balance of approximately $25.8 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2019. The proceeding is currently pending.

Base Rate Case


In January 2019, Entergy Texas filed for recovery of rate case expenses totaling $7.2 million. The amounts requested primarily include internal and external expenses related to litigating the 2018 base rate case. Parties filed testimony in April 2019 recommending a disallowance ranging from $3.2 million to $4.2 million of the $7.2 million requested. In May 2019, Entergy Texas is evaluating its responsefiled rebuttal testimony responding to the parties’ positions. AIn September 2019 an order was issued abating the procedural schedule and scheduled hearing is scheduledto allow the finalization of a settlement in principle reached among the parties. The settlement provides for June 2019.a black box disallowance of $1.4 million. In the third quarter 2019, Entergy Texas recorded a provision for the 2018 base rate case expenses based on the settlement in principle. In October 2019 the settlement was filed for review by the PUCT.

Distribution Cost Recovery Factor (DCRF) Rider


In March 2019, Entergy Texas filed with the PUCT a request to set a new DCRF rider. The proposed new DCRF rider is designed to collect approximately $3.2 million annually from Entergy Texas’s retail customers based on its capital invested in distribution between January 1, 2018 and December 31, 2018. A procedural schedule hasIn September 2019 the PUCT issued an order approving rates, which had been established, with a hearingeffective on an interim basis since June 2019, at the level proposed in June 2019.Entergy Texas’s application.


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Transmission Cost Recovery Factor (TCRF) Rider


In December 2018, Entergy Texas filed with the PUCT a request to set a new TCRF rider. The proposed new TCRF rider is designed to collect approximately $2.7 million annually from Entergy Texas’s retail customers based on its capital invested in transmission between January 1, 2018 and September 30, 2018. In April 2019 parties filed testimony proposing a load growth adjustment, which would have fully offset Entergy Texas’s proposed TCRF revenue requirement. TheIn July 2019 the PUCT has previously ruledgranted Entergy Texas’s application as filed to begin recovery of the requested $2.7 million annual revenue requirement, rejecting opposing parties’ proposed adjustment; however, the PUCT found that load growth adjustmentsthe question of prudence of the actual investment costs should not be includeddetermined in Entergy Texas’s next rate case similar to the procedure used for the costs recovered through the DCRF rider. In October 2019 the PUCT issued an order on a TCRF.motion for rehearing, clarifying and affirming its prior order granting Entergy Texas’s application as filed. Also in October 2019 a second motion for rehearing was filed, and Entergy Texas filed a response in opposition to the motion. The second motion for interim ratesrehearing is pending before the PUCT.

In August 2019, Entergy Texas filed with the PUCT a request to be effective April 2019. In April 2019 the hearing onamend its TCRF rider. The proposed new TCRF rider is designed to collect approximately $19.4 million annually from Entergy Texas’s motionretail customers based on its capital invested in transmission between January 1, 2018 and June 30, 2019, which is $16.7 million in incremental annual revenue above the hearing on$2.7 million approved in the merits were held, and the ALJ suspended the date on which theprior pending TCRF would be put into permanent effect until July 2019, unless an earlier decision is issued by the PUCT. This matterproceeding. The proceeding is currently awaiting the ALJ’s proposal for decision.pending.


Federal Regulation


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



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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.


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, 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 Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.



ENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
    
   Three Months Ended Nine Months Ended
 2019 2018 2019 2018 2019 2018
 (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES            
Electric 
$340,474
 
$348,940
 
$442,877
 
$477,231
 
$1,146,931
 
$1,229,657
            
OPERATING EXPENSES            
Operation and Maintenance:            
Fuel, fuel-related expenses, and gas purchased for resale 48,103
 18,706
 64,211
 79,130
 129,285
 154,925
Purchased power 140,868
 159,692
 151,965
 153,673
 463,966
 463,933
Other operation and maintenance 59,626
 52,674
 69,937
 58,795
 190,989
 171,317
Taxes other than income taxes 18,640
 20,403
 20,870
 20,752
 60,773
 61,461
Depreciation and amortization 37,037
 30,766
 38,722
 31,365
 113,071
 93,272
Other regulatory charges - net 19,459
 25,617
 27,662
 33,550
 66,574
 85,064
TOTAL 323,733
 307,858
 373,367
 377,265
 1,024,658
 1,029,972
            
OPERATING INCOME 16,741
 41,082
 69,510
 99,966
 122,273
 199,685
            
OTHER INCOME            
Allowance for equity funds used during construction 5,081
 1,661
 7,454
 2,222
 18,948
 5,716
Interest and investment income 1,682
 555
 486
 601
 2,542
 1,698
Miscellaneous - net (363) 113
 115
 468
 980
 (154)
TOTAL 6,400
 2,329
 8,055
 3,291
 22,470
 7,260
            
INTEREST EXPENSE            
Interest expense 22,460
 22,051
 21,379
 21,760
 63,992
 65,646
Allowance for borrowed funds used during construction (2,580) (938) (3,534) (1,253) (9,370) (3,224)
TOTAL 19,880
 21,113
 17,845
 20,507
 54,622
 62,422
            
INCOME BEFORE INCOME TAXES 3,261
 22,298
 59,720
 82,750
 90,121
 144,523
            
Income taxes (18,081) 4,948
 (13,504) 16,904
 (43,381) 30,538
            
NET INCOME 
$21,342
 
$17,350
 73,224
 65,846
 133,502
 113,985
            
Preferred dividend requirements 110
 
 110
 
        
EARNINGS APPLICABLE TO COMMON STOCK 
$73,114
 
$65,846
 
$133,392
 
$113,985
        
See Notes to Financial Statements.            









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ENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Net income 
$21,342
 
$17,350
 
$133,502
 
$113,985
Adjustments to reconcile net income to net cash flow provided by operating activities:        
Depreciation and amortization 37,037
 30,766
 113,071
 93,272
Deferred income taxes, investment tax credits, and non-current taxes accrued (10,123) (21,607) 21,898
 640
Changes in assets and liabilities:        
Receivables 65,394
 9,190
 21,578
 (40,287)
Fuel inventory (173) (134) (1,476) 1,045
Accounts payable (57,447) (24,653) (58,792) (12,864)
Taxes accrued (9,465) 3,981
 3,545
 24,476
Interest accrued (4,638) (5,575) (11,478) (6,084)
Deferred fuel costs 8,331
 (28,626) (6,588) (33,734)
Other working capital accounts (913) 4,788
 (13,740) 891
Provisions for estimated losses 1,074
 (208) (3,470) 1,006
Other regulatory assets 1,358
 20,497
 63,793
 64,311
Other regulatory liabilities (24,365) 5,145
 (83,674) 15,313
Pension and other postretirement liabilities (1,120) (6,851) (7,209) (20,999)
Other assets and liabilities 16,359
 (3,015) 3,921
 (3,294)
Net cash flow provided by operating activities 42,651
 1,048
 174,881
 197,677
        
INVESTING ACTIVITIES        
Construction expenditures (176,186) (94,123) (622,342) (291,118)
Allowance for equity funds used during construction 5,111
 1,696
 19,029
 5,820
Proceeds from sale of assets 
 3,753
Changes in money pool receivable - net (3,571) 32,313
 (8,299) 43,686
Changes in securitization account 10,724
 7,985
 8,535
 4,009
Net cash flow used in investing activities (163,922) (52,129) (603,077) (233,850)
        
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt 692,633
 
 986,477
 
Retirement of long-term debt (525,841) (24,977) (563,246) (60,500)
Capital contribution from parent 87,500
 
Proceeds from issuance of preferred stock 33,486
 
Change in money pool payable - net (22,389) 
 (22,389) 
Other (959) (479) (1,410) 1,657
Net cash flow provided by (used in) financing activities 143,444
 (25,456) 520,418
 (58,843)
        
Net increase (decrease) in cash and cash equivalents 22,173
 (76,537) 92,222
 (95,016)
Cash and cash equivalents at beginning of period 56
 115,513
 56
 115,513
Cash and cash equivalents at end of period 
$22,229
 
$38,976
 
$92,278
 
$20,497
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid (received) during the period for:        
Interest - net of amount capitalized 
$26,002
 
$26,939
 
$73,752
 
$69,669
Income taxes 
$—
 
($1,624) 
$2,292
 
($624)
        
See Notes to Financial Statements.        



ENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSASSETS
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents:        
Cash 
$26
 
$26
 
$25
 
$26
Temporary cash investments 22,203
 30
 92,253
 30
Total cash and cash equivalents 22,229
 56
 92,278
 56
Securitization recovery trust account 29,461
 40,185
 31,649
 40,185
Accounts receivable:        
Customer 63,194
 69,714
 88,557
 69,714
Allowance for doubtful accounts (412) (461) (680) (461)
Associated companies 16,273
 64,441
 24,124
 64,441
Other 9,964
 12,275
 6,770
 12,275
Accrued unbilled revenues 46,415
 51,288
 65,207
 51,288
Total accounts receivable 135,434
 197,257
 183,978
 197,257
Fuel inventory - at average cost 42,840
 42,667
 44,143
 42,667
Materials and supplies - at average cost 43,560
 41,883
 43,774
 41,883
Prepayments and other 11,231
 15,903
 22,266
 15,903
TOTAL 284,755
 337,951
 418,088
 337,951
        
OTHER PROPERTY AND INVESTMENTS        
Investments in affiliates - at equity 436
 448
 413
 448
Non-utility property - at cost (less accumulated depreciation) 376
 376
 376
 376
Other 19,433
 19,218
 19,863
 19,218
TOTAL 20,245
 20,042
 20,652
 20,042
        
UTILITY PLANT        
Electric 4,804,948
 4,773,984
 5,028,850
 4,773,984
Construction work in progress 450,207
 325,193
 663,465
 325,193
TOTAL UTILITY PLANT 5,255,155
 5,099,177
 5,692,315
 5,099,177
Less - accumulated depreciation and amortization 1,694,292
 1,684,569
 1,745,046
 1,684,569
UTILITY PLANT - NET 3,560,863
 3,414,608
 3,947,269
 3,414,608
        
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
Other regulatory assets (includes securitization property of $219,904 as of March 31, 2019 and $236,336 as of December 31, 2018) 596,690
 598,048
Other regulatory assets (includes securitization property of $178,558 as of September 30, 2019 and $236,336 as of December 31, 2018) 534,255
 598,048
Other 31,171
 29,371
 32,861
 29,371
TOTAL 627,861
 627,419
 567,116
 627,419
        
TOTAL ASSETS 
$4,493,724
 
$4,400,020
 
$4,953,125
 
$4,400,020
        
See Notes to Financial Statements.  
  
  
  

ENTERGY TEXAS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSLIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT LIABILITIES        
Currently maturing long-term debt 
$—
 
$500,000
 
$—
 
$500,000
Accounts payable:        
Associated companies 48,588
 119,371
 45,090
 119,371
Other 158,286
 150,679
 169,788
 150,679
Customer deposits 40,967
 43,387
 40,304
 43,387
Taxes accrued 44,048
 53,513
 57,058
 53,513
Interest accrued 19,717
 24,355
 12,877
 24,355
Current portion of unprotected excess accumulated deferred income taxes 73,112
 87,627
 35,213
 87,627
Deferred fuel costs 28,028
 19,697
 13,109
 19,697
Other 9,233
 6,353
 8,786
 6,353
TOTAL 421,979
 1,004,982
 382,225
 1,004,982
        
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued 543,550
 552,535
 581,310
 552,535
Accumulated deferred investment tax credits 11,021
 11,176
 10,713
 11,176
Regulatory liability for income taxes - net 254,771
 264,623
 236,463
 264,623
Other regulatory liabilities 47,886
 47,884
 44,784
 47,884
Asset retirement cost liabilities 7,322
 7,222
 7,526
 7,222
Accumulated provisions 14,930
 13,856
 10,386
 13,856
Pension and other postretirement liabilities 3,699
 4,834
Long-term debt (includes securitization bonds of $257,887 as of March 31, 2019 and $283,659 as of December 31, 2018) 1,680,966
 1,013,735
Long-term debt (includes securitization bonds of $220,625 as of September 30, 2019 and $283,659 as of December 31, 2018) 1,938,303
 1,013,735
Other 63,856
 56,771
 64,635
 61,605
TOTAL 2,628,001
 1,972,636
 2,894,120
 1,972,636
        
Commitments and Contingencies        
        
COMMON EQUITY    
EQUITY    
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2019 and 2018 49,452
 49,452
 49,452
 49,452
Paid-in capital 596,994
 596,994
 682,980
 596,994
Retained earnings 797,298
 775,956
 909,348
 775,956
Total common shareholder's equity 1,641,780
 1,422,402
Preferred stock without sinking fund 35,000
 
TOTAL 1,443,744
 1,422,402
 1,676,780
 1,422,402
        
TOTAL LIABILITIES AND EQUITY 
$4,493,724
 
$4,400,020
 
$4,953,125
 
$4,400,020
        
See Notes to Financial Statements.        



ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2019 and 2018
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITYCONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
        
Common Equity    Common Equity  
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 TotalPreferred Stock 
Common
Stock
 
Paid-in
Capital
 
Retained
Earnings
 Total
(In Thousands)  (In Thousands)
                
Balance at December 31, 2017
$49,452
 
$596,994
 
$613,721
 
$1,260,167

$—
 
$49,452
 
$596,994
 
$613,721
 
$1,260,167
                
Net income
 
 17,350
 17,350

 
 
 17,350
 17,350
Balance at March 31, 2018
 49,452
 596,994
 631,071
 1,277,517
                
Balance at March 31, 2018
$49,452
 
$596,994
 
$631,071
 
$1,277,517
Net income
 
 
 30,789
 30,789
Balance at June 30, 2018
 49,452
 596,994
 661,860
 1,308,306
         
Net income
 
 
 65,846
 65,846
Balance at September 30, 2018
$—
 
$49,452
 
$596,994
 
$727,706
 
$1,374,152
                
                
Balance at December 31, 2018
$49,452
 
$596,994
 
$775,956
 
$1,422,402

$—
 
$49,452
 
$596,994
 
$775,956
 
$1,422,402
                
Net income
 
 21,342
 21,342

 
 
 21,342
 21,342
       
Balance at March 31, 2019
$49,452
 
$596,994
 
$797,298
 
$1,443,744

 49,452
 596,994
 797,298
 1,443,744
                
Net income
 
 
 38,936
 38,936
Balance at June 30, 2019
 49,452
 596,994
 836,234
 1,482,680
         
Net income
 
 
 73,224
 73,224
Capital contribution from parent
 
 87,500
 
 87,500
Preferred stock issuance35,000
 
 (1,514) 
 33,486
Preferred stock dividends
 
 
 (110) (110)
Balance at September 30, 2019
$35,000
 
$49,452
 
$682,980
 
$909,348
 
$1,676,780
         
See Notes to Financial Statements.                



ENTERGY TEXAS, INC. AND SUBSIDIARIESSELECTED OPERATING RESULTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
            
 Three Months Ended Increase/   Three Months Ended Increase/  
Description 2019 2018 (Decrease) %
 2019 2018 (Decrease) %
 (Dollars In Millions)   (Dollars In Millions)  
Electric Operating Revenues:                
Residential 
$148
 
$148
 
$—
 
 
$216
 
$224
 
($8) (4)
Commercial 79
 85
 (6) (7) 95
 111
 (16) (14)
Industrial 88
 83
 5
 6
 101
 109
 (8) (7)
Governmental 5
 6
 (1) (17) 5
 7
 (2) (29)
Total billed retail 320
 322
 (2) (1) 417
 451
 (34) (8)
Sales for resale:                
Associated companies 14
 13
 1
 8
 14
 18
 (4) (22)
Non-associated companies 3
 10
 (7) (70) 2
 5
 (3) (60)
Other 3
 4
 (1) (25) 10
 3
 7
 233
Total 
$340
 
$349
 
($9) (3) 
$443
 
$477
 
($34) (7)
                
Billed Electric Energy Sales (GWh):                
Residential 1,360
 1,474
 (114) (8) 1,994
 2,003
 (9) 
Commercial 1,046
 1,083
 (37) (3) 1,365
 1,392
 (27) (2)
Industrial 1,831
 1,832
 (1) 
 2,219
 2,156
 63
 3
Governmental 62
 70
 (8) (11) 69
 78
 (9) (12)
Total retail 4,299
 4,459
 (160) (4) 5,647
 5,629
 18
 
Sales for resale:                
Associated companies 402
 366
 36
 10
 372
 446
 (74) (17)
Non-associated companies 96
 194
 (98) (51) 148
 208
 (60) (29)
Total 4,797
 5,019
 (222) (4) 6,167
 6,283
 (116) (2)
        
        
 Nine Months Ended Increase/  
 2019 2018 (Decrease) %
 (Dollars In Millions)  
Electric Operating Revenues:        
Residential 
$510
 
$523
 
($13) (2)
Commercial 255
 291
 (36) (12)
Industrial 279
 295
 (16) (5)
Governmental 16
 19
 (3) (16)
Total billed retail 1,060
 1,128
 (68) (6)
Sales for resale:        
Associated companies 42
 46
 (4) (9)
Non-associated companies 6
 26
 (20) (77)
Other 39
 30
 9
 30
Total 
$1,147
 
$1,230
 
($83) (7)
        
Billed Electric Energy Sales (GWh):        
Residential 4,662
 4,789
 (127) (3)
Commercial 3,533
 3,610
 (77) (2)
Industrial 5,999
 6,024
 (25) 
Governmental 194
 220
 (26) (12)
Total retail 14,388
 14,643
 (255) (2)
Sales for resale:        
Associated companies 1,157
 1,199
 (42) (4)
Non-associated companies 300
 725
 (425) (59)
Total 15,845
 16,567
 (722) (4)

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 2019 Compared to Third Quarter 2018

Net income increased $1.3$2.1 million primarily due to a lower effective income tax rate.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Net income increased $4.4 million primarily due to the increase in operating revenues resulting from changes in rate base as compared to the prior year and a lower effective income tax rate.


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 2018 results of operations and financial position, the provisions of the Tax Act, and the uncertainties associated with accounting for the Tax Act, and Note 10 to the financial statements herein contains updates to that discussion. Note 2 to the financial statements in the Form 10-K contains a discussion of the regulatory proceedings that have considered the effects of the Tax Act.


Liquidity and Capital Resources


Cash Flow


Cash flows for the threenine months ended March 31,September 30, 2019 and 2018 were as follows:
2019 20182019 2018
(In Thousands)(In Thousands)
Cash and cash equivalents at beginning of period
$95,685
 
$287,187

$95,685
 
$287,187
      
Cash flow provided by (used in):      
Operating activities57,717
 65,371
224,675
 131,556
Investing activities70,709
 (85,956)15,896
 (169,573)
Financing activities(65,810) 12,097
(171,931) 5,371
Net increase (decrease) in cash and cash equivalents62,616
 (8,488)68,640
 (32,646)
      
Cash and cash equivalents at end of period
$158,301
 
$278,699

$164,325
 
$254,541




140188

Table of Contents
System Energy Resources, Inc.
Management's Financial Discussion and Analysis


Operating Activities


Net cash flow provided by operating activities decreasedincreased by $7.7$93.1 million for the threenine months ended March 31,September 30, 2019 compared to the threenine months ended March 31,September 30, 2018 primarily due to the timing of collection of receivables, offset by a decrease in spending of $3.7$47.9 million on nuclear refueling outages in 2019 as compared to the same period in 2018 and a decreasethe return of $3.4 millionthe unprotected excess accumulated deferred income taxes in pension contributions in 2019. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding.2018.


Investing Activities


System Energy’s investing activities provided $70.7$15.9 million of cash for the threenine months ended March 31,September 30, 2019 compared to using $86$169.6 million of cash for the threenine months ended March 31,September 30, 2018 primarily due to:to the following activity:


an increase of $92.5$121.8 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
money pool activity.a decrease of $75.5 million in nuclear construction expenditures as a result of spending in 2018 on Grand Gulf outage projects.

Decreases in System Energy’s receivable from the money pool are a source of cash flow and System Energy’s receivable from the money pool decreased by $81.6 million for the three months ended March 31, 2019 compared to decreasing by $21.5 million for the three months ended March 31, 2018.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.


Financing Activities


System Energy’s financing activities used $65.8$171.9 million of cash for the threenine months ended March 31,September 30, 2019 compared to providing $12.1$5.4 million of cash for the threenine months ended March 31,September 30, 2018 primarily due to the following activity:

net short-term borrowings of $25.3 million in 2018 on the nuclear fuel company variable interest entity’s credit facility;
the issuance in March 2018 of $100 million of 3.42% Series J notes by the System Energy nuclear fuel company variable interest entity;
an increase of $46 million in common stock dividends and distributions in 2019. Common stock dividends and distributions were lower in 2018 in anticipation of the excess accumulated deferred income taxes being returned to customers as a result of the Tax Cuts and Jobs Act;
an increase of $48 million in net repayments of long-term borrowings of $19.8 million in 2019 on the nuclear fuel company variable interest entity’s credit facility compared to facility; and
net repayments of long-termshort-term borrowings of $50$17.8 million in 2018 on the nuclear fuel company variable interest entity’s credit facility; andfacility.
a decrease of $17.7 million in common stock dividends and distributions in 2019.


In March 2019, System Energy issued $134 million of 2.50% Series 2019 revenue refunding bonds due April 2022. The proceeds were used to redeem, prior to maturity, $134 million of 5.875% Series 1998 pollution control revenue refunding bonds due April 2022. See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.


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Capital Structure


System Energy’s debt to capital ratio is shown in the following table. The decrease in the debt to capital ratio is primarily due to a decrease in retained earnings.
March 31, 2019 December 31, 2018
September 30,
2019
 December 31, 2018
Debt to capital46.1% 46.1%44.9% 46.1%
Effect of subtracting cash(7.4%) (4.0%)(8.2%) (4.0%)
Net debt to net capital38.7% 42.1%36.7% 42.1%



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Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt and common equity.  Net capital consists of capital less cash and cash equivalents.  System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition.  System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.


Uses and Sources of Capital


See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of System Energy’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.


System Energy is developing its capital investment plan for 2020 through 2022 and currently anticipates making $435 million in capital investments during that period. The preliminary 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:
March 31,
2019
 
December 31,
2018
 
March 31,
2018
 
December 31,
2017
(In Thousands)
$25,487 $107,122 $90,136 $111,667
September 30,
2019
 
December 31,
2018
 
September 30,
2018
 
December 31,
2017
(In Thousands)
$14,775 $107,122 $16,365 $111,667


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 September 2021. As of March 31,September 30, 2019, $94.1$53.6 million in letters of credit to support a like amount of commercial paper issuedloans 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.


Capital Funds Agreement

Pursuant to the terms of the Capital Funds Agreement, Entergy Corporation had agreed to supply System Energy with sufficient capital to (i) maintain System Energy’s equity capital at an amount equal to a minimum of 35% of its total capitalization (excluding short-term debt), (ii) permit the continued commercial operation of Grand Gulf, and (iii) pay in full when due all indebtedness for borrowed money of System Energy. Effective July 19, 2019, the Capital Funds Agreement was terminated.

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.




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Complaints Against System Energy


Return on Equity and Capital Structure Complaints


See the Form 10-K for a discussion of the return on equity complaints filed by the APSC and the MPSC and by the LPSC against System Energy. The LPSC’s complaint also includes a challenge to System Energy’s capital structure. In August 2018 the FERC issued an order dismissing the LPSC’s request to investigate System Energy’s capital structure and setting for hearing the return on equity complaint, with a refund effective date of April 2018. The portion of the LPSC’s complaint dealing with return on equity was subsequently consolidated with the APSC and MPSC complaint for hearing. The consolidated hearing has been scheduled for September 2019, and the parties are required to address an order (issued in a separate proceeding involving New England transmission owners) that proposed modifying the FERC’s standard methodology for determining return on equity. In September 2018, System Energy filed a request for rehearing and the LPSC filed a request for rehearing or reconsideration of the FERC’s August 2018 order. The LPSC’s request referenced an amended complaint that it filed on the same day raising the same capital structure claim the FERC had earlier dismissed. The FERC initiated a new proceeding for the amended capital structure complaint, and System Energy submitted a response in October 2018. In January 2019 the FERC set the amended capital structure complaint for settlement and hearing proceedings. Settlement procedures in the capital structure proceeding commenced in February 2019. As noted below, in June 2019 settlement discussions were terminated and the amended capital structure complaint was consolidated with the ongoing return on equity proceeding.


In January 2019 the LPSC and the APSC and MPSC filed direct testimony in the return on equity proceeding. For the refund period January 23, 2017 through April 23, 2018, the LPSC argues for an authorized return on equity for System Energy of 7.81% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.24%. For the refund period April 27, 2018 through July 27, 2019, and for application on a prospective basis, the LPSC argues for an authorized return on equity for System Energy of 7.97% and the APSC and MPSC argue for an authorized return on equity for System Energy of 8.41%. In March 2019, System Energy submitted answering testimony in the return on equity proceeding. For the first refund period, System Energy’s testimony argues for a return on equity of 10.10% (median) or 10.70% (midpoint). For the second refund period, System Energy’s testimony shows that the calculated returns on equity for the first period fall within the range of presumptively just and reasonable returns on equity, and thus the second complaint should be dismissed (and the first period return on equity used going forward). If the FERC nonetheless were to set a new return on equity for the second period (and going forward), System Energy argues the return on equity should be either 10.32% (median) or 10.69% (midpoint).


In May 2019 the FERC trial staff filed its direct and answering testimony in the return on equity proceeding. For the first refund period, the FERC trial staff calculates an authorized return on equity for System Energy of 9.89% based on the application of FERC’s proposed methodology. The FERC trial staff’s direct and answering testimony noted that an authorized return on equity of 9.89% for the first refund period was within the range of presumptively just and reasonable returns on equity for the second refund period, as calculated using a study period ending January 31, 2019 for the second refund period.

In June 2019, System Entergy filed testimony responding to the testimony filed by the FERC trial staff. Among other things, System Energy’s testimony rebutted arguments raised by the FERC trial staff and provided updated calculations for the second refund period based on the study period ending May 31, 2019. For that refund period, System Energy’s testimony shows that strict application of the return on equity methodology proposed by the FERC trial staff indicates that the second complaint would not be dismissed, and the new return on equity would be set at 9.65% (median) or 9.74% (midpoint). System Energy’s testimony argues that these results are insufficient in light of benchmarks such as state returns on equity and treasury bond yields, and instead proposes that the calculated returns on equity for the second period should be either 9.91% (median) or 10.3% (midpoint). System Energy’s testimony also argues that, under application of its proposed modified methodology, the 10.10% return on equity calculated for the first refund period would fall within the range of presumptively just and reasonable returns on equity for the second refund period. System Energy is recording a provision against revenue for the potential outcome of this proceeding.


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Also in June 2019, the FERC’s Chief ALJ issued an order terminating settlement discussions in the amended complaint addressing System Energy’s capital structure. The ALJ consolidated the amended complaint with the ongoing return on equity proceeding and set new procedural deadlines for the consolidated hearing, such that the hearing will commence in January 2020 and the initial decision will be due in June 2020.

In August 2019 the LPSC and the APSC and MPSC filed rebuttal testimony in the return on equity proceeding and direct and answering testimony relating to System Energy’s capital structure. The LPSC reargues for an authorized return on equity for System Energy of 7.81% for the first refund period and 7.97% for the second refund period. The APSC and MPSC argue for an authorized return on equity for System Energy of 8.26% for the first refund period and 8.32% for the second refund period. With respect to capital structure, the LPSC proposes that the FERC establish a hypothetical capital structure for SERI for ratemaking purposes. Specifically, the LPSC proposes that System Energy’s common equity ratio be set to Entergy Corporation’s equity ratio of 37% equity and 63% debt. In the alternative, the LPSC argues that the equity ratio should be no higher than 49%, the composite equity ratio of System Energy and the other Entergy operating companies who purchase under the Unit Power Sales Agreement. The APSC and MPSC recommended that 35.98% be set as the common equity ratio for System Energy. As an alternative, the APSC and MPSC proposed that System Energy’s common equity be set based on the median equity ratio of the proxy group for setting the return on equity. The median equity ratio of the proxy group proposed by the APSC and MPSC is 46.75%.

In September 2019 the FERC trial staff filed its rebuttal testimony in the return on equity proceeding. For the first refund period, the FERC trial staff calculates an authorized return on equity for System Energy of 9.40% based on the application of the FERC’s proposed methodology and an updated proxy group. For the second refund period, based on the study period ending May 31, 2019, the FERC trial staff rebuttal testimony argues for a return on equity of 9.63%. In September 2019 the FERC trial staff also filed direct and answering testimony relating to System Energy’s capital structure. The FERC trial staff argues that the average capital structure of the proxy group used to develop System Energy’s return on equity should be used to establish the capital structure. Using this approach, the FERC trial staff calculates the average capital structure for its proposed proxy group of 46.74% common equity, and 53.26% debt.
In October 2019, System Energy filed answering testimony disputing the FERC trial staff’s, the LPSC’s, and the APSC’s and MPSC’s arguments for the use of a hypothetical capital structure and arguing that the use of System Energy’s actual capital structure is just and reasonable.

Grand Gulf Sale-leaseback Renewal Complaint


As discussed in the Form 10-K, in May 2018 the LPSC filed a complaint against System Energy and Entergy Services related to System Energy’s renewal of a sale-leaseback transaction originally entered into in December 1988 for an 11.5% undivided interest in Grand Gulf Unit 1.


In February 2019 the presiding ALJ ruled that the hearing ordered by the FERC includes the issue of whether specific subcategories of accumulated deferred income tax should be included in, or excluded from, System Energy’s formula rate. In March 2019 the LPSC, MPSC, APSC, and City Council filed direct testimony. The LPSC testimony seeks refunds that include the renewal lease payments (approximately $17.2 million per year since July 2015), rate base reductions for accumulated deferred income taxes associated with uncertain tax positions (claimed to be approximately $334.5 million as of December 2018), and the cost of capital additions associated with the sale-leaseback interest (claimed to be approximately $274.8 million), as well as interest on those amounts. The direct testimony of the City Council and the APSC and MPSC address various issues raised by the LPSC. System Energy disputes that any refunds are owed for billings under the Unit Power Sales Agreement. A hearing has been scheduled for November 2019.



In June 2019 System Energy filed answering testimony in the sale-leaseback complaint proceeding arguing that the FERC should reject all claims for refunds.  Among other things, System Energy argued that claims for refunds of the costs of lease renewal payments and capital additions should be rejected because those costs were recovered consistent with the Unit Power Sales Agreement formula rate, System Energy was not over or double recovering any costs, and customers will save approximately $850 million over initial and renewal terms of the leases.  System Energy

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argued that claims for refunds associated with liabilities arising from uncertain tax positions should be rejected because the liabilities do not provide cost-free capital, the repayment timing of the liabilities is uncertain, and the outcome of the underlying tax positions is uncertain.  System Energy’s testimony also challenged the refund calculations supplied by the other parties.

In August 2019 the FERC trial staff filed direct and answering testimony seeking refunds for rate base reductions for liabilities associated with uncertain tax positions (claimed to be up to approximately $602 million plus interest). The FERC trial staff also argued that System Energy recovered $32 million more in depreciation expense for capital additions than it should have. In September 2019, System Energy filed cross-answering testimony disputing the FERC trial staff’s arguments for refunds, stating that the FERC trial staff’s position regarding depreciation rates for capital additions is not unreasonable and explaining that any change in depreciation expense is only one element of a Unit Power Sales Agreement rebilling calculation. Adjustments to depreciation expense in any rebilling under the Unit Power Sales Agreement formula rate will also involve changes to accumulated depreciation, accumulated deferred income taxes, and other formula elements as needed. In October 2019 the LPSC filed rebuttal testimony increasing the amount of refunds sought for liabilities associated with uncertain tax positions.  The LPSC now seeks approximately $512 million plus interest.  At the same time, the FERC trial staff filed rebuttal testimony conceding that it was no longer seeking up to $602 million related to the uncertain tax positions; instead, it is seeking approximately $511 million plus interest.  The LPSC also argued that adjustments to depreciation rates should affect rate base on a prospective basis only.

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 System Energy’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets and trust fund investments, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.


New Accounting Pronouncements


See “New Accounting Pronouncements” section of Note 1 to the financial statements in the Form 10-K for a discussion of new accounting pronouncements.

SYSTEM ENERGY RESOURCES, INC.INCOME STATEMENTS
For the Three Months Ended March 31, 2019 and 2018
For the Three and Nine Months Ended September 30, 2019 and 2018For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited)
    
   Three Months Ended Nine Months Ended
 2019 2018 2019 2018 2019 2018
 (In Thousands) (In Thousands) (In Thousands)
OPERATING REVENUES            
Electric 
$140,104
 
$148,443
 
$145,472
 
$78,965
 
$424,585
 
$339,864
            
OPERATING EXPENSES            
Operation and Maintenance:            
Fuel, fuel-related expenses, and gas purchased for resale 21,561
 28,425
 23,748
 14,484
 66,335
 44,939
Nuclear refueling outage expenses 8,186
 3,972
 8,412
 5,906
 25,013
 12,698
Other operation and maintenance 45,282
 45,339
 49,533
 48,969
 147,283
 143,003
Decommissioning 8,799
 8,457
 8,976
 8,626
 26,663
 25,624
Taxes other than income taxes 7,539
 7,097
 7,120
 7,106
 21,835
 21,069
Depreciation and amortization 26,574
 33,321
 26,613
 4,355
 79,761
 71,143
Other regulatory credits - net (9,205) (9,109)
Other regulatory charges (credits) - net (8,016) 7,398
 (27,059) (15,080)
TOTAL 108,736
 117,502
 116,386
 96,844
 339,831
 303,396
            
OPERATING INCOME 31,368
 30,941
OPERATING INCOME (LOSS) 29,086
 (17,879) 84,754
 36,468
            
OTHER INCOME            
Allowance for equity funds used during construction 1,589
 2,100
 2,251
 2,028
 5,518
 7,032
Interest and investment income 6,991
 6,886
 8,215
 23,738
 21,577
 33,567
Miscellaneous - net (1,228) (1,176) (1,300) (1,421) (4,018) (4,391)
TOTAL 7,352
 7,810
 9,166
 24,345
 23,077
 36,208
            
INTEREST EXPENSE            
Interest expense 9,397
 9,325
 8,546
 9,753
 26,467
 28,734
Allowance for borrowed funds used during construction (389) (532) (551) (515) (1,350) (1,783)
TOTAL 9,008
 8,793
 7,995
 9,238
 25,117
 26,951
            
INCOME BEFORE INCOME TAXES 29,712
 29,958
INCOME (LOSS) BEFORE INCOME TAXES 30,257
 (2,772) 82,714
 45,725
            
Income taxes 6,134
 7,650
 5,226
 (25,744) 9,633
 (22,942)
            
NET INCOME 
$23,578
 
$22,308
 
$25,031
 
$22,972
 
$73,081
 
$68,667
            
See Notes to Financial Statements.            




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SYSTEM ENERGY RESOURCES, INC.STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
OPERATING ACTIVITIES        
Net income 
$23,578
 
$22,308
 
$73,081
 
$68,667
Adjustments to reconcile net income to net cash flow provided by operating activities:        
Depreciation, amortization, and decommissioning, including nuclear fuel amortization 53,731
 66,323
 163,069
 133,877
Deferred income taxes, investment tax credits, and non-current taxes accrued 4,975
 7,929
 (2,426) 14,159
Changes in assets and liabilities:        
Receivables (7,613) 5,883
 (7,456) 20,806
Accounts payable (5,182) (9,632) 2,935
 22,637
Prepaid taxes and taxes accrued (13,575) (15,033) 14,579
 (1,017)
Interest accrued (3,150) 736
 (1,478) 2,311
Other working capital accounts 3,635
 (5,874) 3,411
 (52,524)
Other regulatory assets (3,730) (1,960) (9,121) (4,773)
Other regulatory liabilities 70,486
 (18,988) 90,118
 (36,119)
Pension and other postretirement liabilities 319
 (3,537) (5,013) (11,629)
Other assets and liabilities (65,757) 17,216
 (97,024) (24,839)
Net cash flow provided by operating activities 57,717
 65,371
 224,675
 131,556
        
INVESTING ACTIVITIES        
Construction expenditures (25,557) (30,707) (92,228) (166,458)
Allowance for equity funds used during construction 1,589
 2,100
 5,518
 7,032
Nuclear fuel purchases (3) (74,257) (2,046) (110,485)
Proceeds from the sale of nuclear fuel 18,280
 
 26,272
 12,867
Proceeds from nuclear decommissioning trust fund sales 56,988
 54,210
 348,606
 357,209
Investment in nuclear decommissioning trust funds (62,223) (58,833) (362,573) (365,040)
Changes in money pool receivable - net 81,635
 21,531
 92,347
 95,302
Net cash flow provided by (used in) investing activities 70,709
 (85,956) 15,896
 (169,573)
        
FINANCING ACTIVITIES        
Proceeds from the issuance of long-term debt 529,493
 100,000
 1,007,775
 211,985
Retirement of long-term debt (549,803) (50,002) (1,069,206) (124,304)
Changes in short-term borrowings - net 
 25,339
 
 (17,830)
Common stock dividends and distributions (45,500) (63,240) (110,500) (64,480)
Net cash flow provided by (used in) financing activities (65,810) 12,097
 (171,931) 5,371
        
Net increase (decrease) in cash and cash equivalents 62,616
 (8,488) 68,640
 (32,646)
Cash and cash equivalents at beginning of period 95,685
 287,187
 95,685
 287,187
Cash and cash equivalents at end of period 
$158,301
 
$278,699
 
$164,325
 
$254,541
        
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:        
Cash paid during the period for:        
Interest - net of amount capitalized 
$12,461
 
$8,592
 
$21,052
 
$10,308
        
See Notes to Financial Statements.        



SYSTEM ENERGY RESOURCES, INC.BALANCE SHEETSASSETS
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT ASSETS        
Cash and cash equivalents:        
Cash 
$57
 
$68
 
$79
 
$68
Temporary cash investments 158,244
 95,617
 164,246
 95,617
Total cash and cash equivalents 158,301
 95,685
 164,325
 95,685
Accounts receivable:        
Associated companies 74,667
 148,571
 62,740
 148,571
Other 5,272
 5,390
 6,330
 5,390
Total accounts receivable 79,939
 153,961
 69,070
 153,961
Materials and supplies - at average cost 101,609
 97,225
 111,927
 97,225
Deferred nuclear refueling outage costs 36,624
 44,424
 20,253
 44,424
Prepaid taxes 18,990
 5,415
 
 5,415
Prepayments and other 2,764
 2,985
 9,040
 2,985
TOTAL 398,227
 399,695
 374,615
 399,695
        
OTHER PROPERTY AND INVESTMENTS        
Decommissioning trust funds 951,334
 869,543
 1,002,261
 869,543
TOTAL 951,334
 869,543
 1,002,261
 869,543
        
UTILITY PLANT        
Electric 5,027,651
 5,036,116
 5,036,030
 5,036,116
Construction work in progress 82,554
 70,156
 141,858
 70,156
Nuclear fuel 195,023
 234,889
 158,745
 234,889
TOTAL UTILITY PLANT 5,305,228
 5,341,161
 5,336,633
 5,341,161
Less - accumulated depreciation and amortization 3,226,329
 3,212,080
 3,273,504
 3,212,080
UTILITY PLANT - NET 2,078,899
 2,129,081
 2,063,129
 2,129,081
        
DEFERRED DEBITS AND OTHER ASSETS        
Regulatory assets:        
Other regulatory assets 450,101
 446,371
 455,492
 446,371
Other 3,992
 4,124
 3,759
 4,124
TOTAL 454,093
 450,495
 459,251
 450,495
        
TOTAL ASSETS 
$3,882,553
 
$3,848,814
 
$3,899,256
 
$3,848,814
        
See Notes to Financial Statements.        

SYSTEM ENERGY RESOURCES, INC.BALANCE SHEETSLIABILITIES AND EQUITY
March 31, 2019 and December 31, 2018
September 30, 2019 and December 31, 2018September 30, 2019 and December 31, 2018
(Unaudited)
 2019 2018 2019 2018
 (In Thousands) (In Thousands)
CURRENT LIABILITIES        
Currently maturing long-term debt 
$8
 
$6
 
$10
 
$6
Accounts payable:        
Associated companies 7,596
 11,031
 11,475
 11,031
Other 39,660
 47,565
 61,391
 47,565
Taxes accrued 9,164
 
Interest accrued 10,145
 13,295
 11,817
 13,295
Current portion of unprotected excess accumulated deferred income taxes 7,396
 4,426
 
 4,426
Other 2,830
 2,832
 2,829
 2,832
TOTAL 67,635
 79,155
 96,686
 79,155
        
NON-CURRENT LIABILITIES        
Accumulated deferred income taxes and taxes accrued 813,026
 805,296
 811,875
 805,296
Accumulated deferred investment tax credits 38,354
 38,673
 37,714
 38,673
Regulatory liability for income taxes - net 152,289
 158,998
 144,639
 158,998
Other regulatory liabilities 456,112
 381,887
 490,790
 381,887
Decommissioning 904,800
 896,000
 922,663
 896,000
Pension and other postretirement liabilities 98,958
 98,639
 93,626
 98,639
Long-term debt 610,790
 630,744
 569,991
 630,744
Other 25,313
 22,224
 31,493
 22,224
TOTAL 3,099,642
 3,032,461
 3,102,791
 3,032,461
        
Commitments and Contingencies        
        
COMMON EQUITY        
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2019 and 2018 601,850
 601,850
 601,850
 601,850
Retained earnings 113,426
 135,348
 97,929
 135,348
TOTAL 715,276
 737,198
 699,779
 737,198
        
TOTAL LIABILITIES AND EQUITY 
$3,882,553
 
$3,848,814
 
$3,899,256
 
$3,848,814
        
See Notes to Financial Statements.        



SYSTEM ENERGY RESOURCES, INC.STATEMENTS OF CHANGES IN COMMON EQUITY
For the Three Months Ended March 31, 2019 and 2018
For the Nine Months Ended September 30, 2019 and 2018For the Nine Months Ended September 30, 2019 and 2018
(Unaudited)
      
Common Equity  Common Equity  
Common
Stock
 
Retained
Earnings
 Total
Common
Stock
 
Retained
Earnings
 Total
(In Thousands)(In Thousands)
          
Balance at December 31, 2017
$658,350
 
$52,459
 
$710,809

$658,350
 
$52,459
 
$710,809
          
Net income
 22,308
 22,308

 22,308
 22,308
Common stock dividends and distributions(56,500) (6,740) (63,240)(56,500) (6,740) (63,240)
Balance at March 31, 2018601,850
 68,027
 669,877
          
Balance at March 31, 2018
$601,850
 
$68,027
 
$669,877
Net income
 23,387
 23,387
Balance at June 30, 2018601,850
 91,414
 693,264
     
Net income
 22,972
 22,972
Common stock dividends and distributions
 (1,240) (1,240)
Balance at September 30, 2018
$601,850
 
$113,146
 
$714,996
          
          
Balance at December 31, 2018
$601,850
 
$135,348
 
$737,198

$601,850
 
$135,348
 
$737,198
          
Net income
 23,578
 23,578

 23,578
 23,578
Common stock dividends and distributions
 (45,500) (45,500)
     
Common stock dividends
 (45,500) (45,500)
Balance at March 31, 2019
$601,850
 
$113,426
 
$715,276
601,850
 113,426
 715,276
          
Net income
 24,472
 24,472
Common stock dividends
 (42,500) (42,500)
Balance at June 30, 2019601,850
 95,398
 697,248
     
Net income
 25,031
 25,031
Common stock dividends
 (22,500) (22,500)
Balance at September 30, 2019
$601,850
 
$97,929
 
$699,779
     
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 NoteNotes 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)
         
1/7/01/2019-1/2019-7/31/2019 

 

$—

 

 

$350,052,918

2/8/01/2019-2/28/2019

$—


$350,052,918
3/01/2019-3/2019-8/31/2019 

 

$—

 

 

$350,052,918

9/01/2019-9/30/2019

$—


$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 2019, Entergy withheld 76,735 shares of its common stock at $86.03 per share, 82,550 shares of its common stock at $86.51 per share, 38,326 shares of its common stock at $87.10 per share, 932 shares of its common stock at $89.19 per share, and 2,280 shares of its common stock at $93.25 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 is an update 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


In March 2019 filings with the NRC were made reporting on decommissioning funding for all of Entergy subsidiaries’ nuclear plants .plants.  Those reports showed that decommissioning funding for each of the nuclear plants met the NRC’s financial assurance requirements.


Environmental Regulation


Following are updates to the “Environmental Regulation” section of Part I, Item 1 of the Form 10-K.


Clean Air Act and Subsequent Amendments


Potential Legislative, Regulatory, and Judicial Developments


As discussed in the Form 10-K, Entergy continues to support national legislation that would increase planning certainty for electric utilities while addressing carbon dioxide emissions in a responsible and flexible manner. Entergy voluntarily conducted a climate scenario analysis and published a comprehensive report in March 2019. The report follows the framework and recommendations of the Task Force on Climate-related Disclosures, (TCFD), describing climate-related governance, strategy, risk management, and metrics and targets. Scenario analysis resulted in Entergy developing and publishing a new goal of reducing the Utility’s emission rate by 50 percent from 2000 levels by 2030.

Cross-State Air Pollution

In September 2016 the EPA finalized the Cross State Air Pollution Rule Update Rule to address interstate transport for the 2008 ozone NAAQS. Starting in 2017 the final rule requires reductions in summer nitrogen oxides (NOx) emissions. Several states, including Arkansas and Texas, filed a challenge to the Update Rule. In September 2019 the D.C. Circuit upheld the EPA’s underlying approach to the Update Rule but determined that it was inconsistent with the Clean Air Act because it failed to include deadlines consistent with downwind states’ deadlines for attainment. The court remanded the rule to the EPA for further consideration but did not vacate, so the rule remains in effect pending the EPA’s further review. Several petitions for reconsideration are still pending with the EPA, including one concerning whether the emissions budget for Mississippi should be increased.

New and Existing Source Performance Standards for Greenhouse Gas Emissions

As a part of a climate plan announced in June 2013, the EPA was directed to (i) reissue proposed carbon pollution standards for new power plants by September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollution standards, regulations, or guidelines, as appropriate, for modified, reconstructed, and existing power plants no later than June 1, 2014; (iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirement that states submit to the EPA the implementation plans required under Section 111(d) of the Clean Air Act and its implementing regulations by no later than June 30, 2016. In January 2014 the EPA issued the proposed New Source Performance Standards rule for new sources. In June 2014 the EPA issued proposed standards for existing power plants.  Entergy was actively engaged in the rulemaking process and 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, required 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 effectiveness of the rule pending review by the D.C. Circuit and, if applicable, by the U.S. Supreme Court. 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 proposed a new rule that would repeal the Clean Power Plan on the grounds that it exceeds the EPA’s statutory authority under the Clean Air Act. In December 2017 the EPA issued an advanced notice of proposed rulemaking regarding section 111(d), seeking comment on the form and content of a replacement for the Clean Power Plan, if one is promulgated. In July 2019 the EPA released its repeal and replacement of the Clean Power Plan. The Affordable Clean Energy Rule, which applies only to existing coal-fired electric generating units, determines that heat rate improvements are the best system of emission reductions and lists six candidate technologies for consideration by states at each coal unit. The rule provides states discretion in determining how the best system for emission reductions applies to individual units, including through the consideration of technical feasibility and the remaining useful life of the facility. In September 2019 the D.C. Circuit dismissed all of the litigation concerning the Clean Power Plan because that rule has been repealed and replaced by the Affordable Clean Energy Rule. Entergy is evaluating the final Affordable Clean Energy Rule’s impacts on its coal units and will monitor litigation challenging the rule. The EPA also has proposed a revision to the new source performance standard on greenhouse gas emissions that primarily impacts new coal units and, therefore, should not impact Entergy.

Groundwater at Certain Nuclear Sites


As discussed in the Form 10-K, in February 2016, Entergy disclosed that elevated tritium levels had been detected in samples from several monitoring wells that are part of Indian Point’s groundwater monitoring program.  Investigation of the source of elevated tritium determined that the source was related to a temporary system to process water in preparation for the regularly scheduled refueling outage at Indian Point 2. The NRC had issued a green notice of violation related to the adequacy of Entergy’s controls to prevent the introduction of radioactivity into the site groundwater. Entergy completed corrective actions and, in February 2019, the NRC concluded that Entergy had achieved full compliance and closed the violation.



Steam Electric Effluent Guidelines

The 2015 Steam Electric Effluent Limitations Guidelines (ELG) rule requires, among other things, that there be no discharge of bottom ash transport water. The no-discharge requirement contains no exceptions and could cause compliance problems for Entergy’s coal facilities during heavy storm events and under certain non-routine operational conditions. The ELG rule’s compliance dates currently are delayed while the EPA reconsiders the rule. Additionally, the Fifth Circuit Court of Appeals recently vacated and remanded the provisions of the rule related to legacy wastewater and leachate. A proposed rule revision on bottom ash transport water is expected in the third quarter 2019 which may allow some flexibility for storm events and non-routine operations, with a final rule expected by the end of the year. A separate rulemaking is expected to address the legacy wastewater and leachate issues. Despite the impending rulemaking, Entergy is implementing projects at its White Bluff and Independence plants to convert to zero-discharge systems to comply with the ELG rule and the coal combustion residuals restrictions on impoundments. Additionally, the Nelson 6 facility is implementing operational and maintenance measures to ensure its original zero-discharge design is maintained for compliance.


Item 6.  Exhibits
 4(a)3(a) -
4(b) -
4(c) -
4(d) -
   

 4(e)3(b) -
3(c) -
*4(a) -
*4(b) -
*4(c) -
*4(d) -
4(e) -
   
 4(f) -
4(g) -
   
 *31(a) -
   
 *31(b) -
   
 *31(c) -
   
 *31(d) -
   
 *31(e) -
   
 *31(f) -
   
 *31(g) -
   
 *31(h) -
   
 *31(i) -
   
 *31(j) -
   
 *31(k) -
*31(l) -
*31(m) -
*31(n) -
*32(a) -
*32(b) -
*32(c) -
*32(d) -
*32(e) -
*32(f) -
*32(g) -
*32(h) -
*32(i) -
*32(j) -
*32(k) -
*32(l) -
*32(m) -
*32(n) -
*101 INS -XBRL Instance Document.
*101 SCH -XBRL Taxonomy Extension Schema Document.
*101 PRE -XBRL Taxonomy Presentation Linkbase Document.
   

 *31(l) -
*31(m) -
*31(n) -
**32(a) -
**32(b) -
**32(c) -
**32(d) -
**32(e) -
**32(f) -
**32(g) -
**32(h) -
**32(i) -
**32(j) -
**32(k) -
**32(l) -
**32(m) -
**32(n) -
*101 INS -Inline XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*101 SCH -Inline XBRL Schema Document.
*101 PRE -Inline XBRL Presentation Linkbase Document.
*101 LAB -Inline XBRL Taxonomy Label Linkbase Document.
   
 *101 CAL -Inline XBRL Taxonomy Calculation Linkbase Document.
   
 *101 DEF -Inline XBRL Definition Linkbase Document.
*104 -Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibits 101).
___________________________
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, Entergy Corporation agrees to furnish to the Commission upon request any instrument with respect to long-term debt that is not registered or listed herein as an Exhibit because the total amount of securities authorized under such agreement does not exceed ten percent of the total assets of Entergy Corporation and its subsidiaries on a consolidated basis.
*Filed herewith.
**Furnished, not filed, herewith.

SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiaries.


ENTERGY CORPORATION
ENTERGY ARKANSAS, LLC
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, LLC
ENTERGY NEW ORLEANS, LLC
ENTERGY TEXAS, INC.
SYSTEM ENERGY RESOURCES, INC.
 
 
/s/ Alyson M. MountKimberly A. Fontan
Alyson M. Mount
Kimberly A. Fontan
Senior Vice President and Chief Accounting Officer

(For each Registrant and for each as

Principal Accounting Officer)




Date:    May 3,November 5, 2019




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