UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | | | |
(Mark One) | |
☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20222023
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 | | 1-35747 | ENTERGY NEW ORLEANS, LLC |
| (a Delaware corporation) 639 Loyola Avenue New Orleans, Louisiana 70113 Telephone (504) 576-4000 | | | (a Texas limited liability company) 1600 Perdido Street New Orleans, Louisiana 70112 Telephone (504) 670-3700 |
| 72-1229752 | | | 82-2212934 |
| | | | |
| | | | |
1-10764 | ENTERGY ARKANSAS, LLC | | 1-34360 | ENTERGY TEXAS, INC. |
| (a Texas limited liability company) 425 West Capitol Avenue Little Rock, Arkansas 72201 Telephone (501) 377-4000 | | | (a Texas corporation) 2107 Research Forest Drive The Woodlands, Texas 77380 Telephone (409) 981-2000 |
| 83-1918668 | | | 61-1435798 |
| | | | |
| | | | |
1-32718 | ENTERGY LOUISIANA, LLC | | 1-09067 | SYSTEM ENERGY RESOURCES, INC. |
| (a Texas limited liability company) 4809 Jefferson Highway Jefferson, Louisiana 70121 Telephone (504) 576-4000 | | | (an Arkansas corporation) 1340 Echelon Parkway Jackson, Mississippi 39213 Telephone (601) 368-5000 |
| 47-4469646 | | | 72-0752777 |
| | | | |
| | | | |
1-31508 | ENTERGY MISSISSIPPI, LLC | | | |
| (a Texas limited liability company) 308 East Pearl Street Jackson, Mississippi 39201 Telephone (601) 368-5000 | | | |
| 83-1950019 | | | |
| | | | |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | |
Registrant | Title of Class | Trading Symbol | Name of Each Exchange on Which Registered |
| | | |
Entergy Corporation | Common Stock, $0.01 Par Value | ETR | New York Stock Exchange |
| Common Stock, $0.01 Par Value | ETR | NYSE Chicago, Inc. |
| | | |
Entergy Arkansas, LLC | Mortgage Bonds, 4.875% Series due September 2066 | EAI | New York Stock Exchange |
| | | |
Entergy Louisiana, LLC | Mortgage Bonds, 4.875% Series due September 2066 | ELC | New York Stock Exchange |
| | | |
Entergy Mississippi, LLC | Mortgage Bonds, 4.90% Series due October 2066 | EMP | New York Stock Exchange |
| | | |
Entergy New Orleans, LLC | Mortgage Bonds, 5.0% Series due December 2052 | ENJ | New York Stock Exchange |
| Mortgage Bonds, 5.50% Series due April 2066 | ENO | New York Stock Exchange |
| | | |
Entergy Texas, Inc. | 5.375% Series A Preferred Stock, Cumulative, No Par Value (Liquidation Value $25 Per Share) | ETI/PR | New 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. Yes ☑ No ☐
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). Yes ☑ No ☐
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Large accelerated filer | | Accelerated filer | | Non-accelerated filer | | Smaller reporting company | | Emerging growth company |
Entergy Corporation | ü | | | | | | | | |
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. ☐
Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes ☐No ☑
| | | | | | | | |
Common Stock Outstanding | | Outstanding at April 29, 202228, 2023 |
Entergy Corporation | ($0.01 par value) | 203,374,308211,446,651 |
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, 2021,2022, filed by the individual registrants with the SEC, and should be read in conjunction therewith.
| | | | | |
| Page Number |
| |
| |
| |
| |
Part I. Financial Information |
| |
Entergy Corporation and Subsidiaries | |
| |
| |
| |
| |
| |
| |
Notes to Financial Statements | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Entergy Arkansas, LLC and Subsidiaries | |
| |
| |
| |
| |
| |
Entergy Louisiana, LLC and Subsidiaries | |
| |
| |
| | | | | |
| Page Number |
| |
| |
| |
| |
| |
Entergy Mississippi, LLC and Subsidiaries | |
| |
| |
| |
| |
| |
| |
Entergy New Orleans, LLC and Subsidiaries | |
| |
| |
| |
| |
| |
Entergy Texas, Inc. and Subsidiaries | |
| |
| |
| |
| |
| |
System Energy Resources, Inc. | |
| |
| |
| |
| |
| |
| |
Part II. Other Information |
| |
| |
| |
| |
| |
| |
| |
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, projections, 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,” “goal,” “commitment,” “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 undertakeeach registrant undertakes 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 (a) those factors discussed or incorporated by reference in Item 1A. Risk Factors in the Form 10-K and in this report, (b) those factors discussed or incorporated by reference in Management’s Financial Discussion and Analysis in the Form 10-K and in this report, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):
•resolution of pending and future rate cases and related litigation, 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, as well as delays in cost recovery resulting from these proceedings;
•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 absence of a minimum capacity obligation for load serving entities in MISO and the consequent ability of some load serving entities to “free ride” on the energy market without paying appropriate compensation for the capacity needed to produce that energy, the allocation of MISO system transmission upgrade costs, the MISO-wide base rate of return on equity allowed or any MISO-related charges and credits required by the FERC, 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 return on equity criteria, 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 owned or operated nuclear generating facilities, and nuclear materials and fuel, including with respect to the planned shutdown and sale of Palisades, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and 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, changing economic conditions, and emerging operating and industry issues, and the risks related to recovery of these costs and capital expenditures from Entergy’s customers (especially in an increasing cost environment);
•the commitment of substantial human and capital resources required for the safe and reliable operation and maintenance of Entergy’s nuclear generating facilities;
FORWARD-LOOKING INFORMATION (Continued)
•Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
•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 reporting, 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, domestic purchase requirements, or energy policies and related laws, regulations, and other governmental actions;
•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, (including from Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Hurricane Ida), 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, as well as any related unplanned outages;
•effects of climate change, including the potential for increases in extreme weather events and sea levels or coastal land and wetland loss;
•the risk that an incident at any nuclear generation facility in the U.S. could lead to the assessment of significant retrospective assessments and/or retrospective insurance premiums as a result of Entergy’s participation in a secondary financial protection system and a utility industry mutual insurance company;
•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, including completion ofby completing projects timely and within budget, and to obtain the anticipated performance or other benefits of such capital projects, and to manage its operation and maintenance costs;
•the effects of supply chain disruptions, including those driven byoriginating during the COVID-19 global pandemic or driven by trade-related governmental actions, on Entergy’s ability to complete its capital projects in a timely and cost-effective manner;
•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 events and circumstances that could influence economic conditions in those areas, including power prices and inflation, and the risk that anticipated load growth may not materialize;
•changes to federal income tax laws, regulations, and regulations,interpretive guidance, including the Inflation Reduction Act of 2022, and the continued impact of the Tax Cuts and Jobs Act of 2017, and itsany related intended andor unintended consequences on financial results and future cash flows;
•the effects of Entergy’s strategies to reduce tax payments;
FORWARD-LOOKING INFORMATION (Concluded)
•changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to and cost of capital and Entergy’s ability to refinance existing securities and fund investments and acquisitions;
FORWARD-LOOKING INFORMATION (Concluded)
•actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;
•changes in inflation and interest rates;rates and the impacts of inflation or a recession on our customers;
•the effects of litigation, including the outcome and resolution of the proceedings involving System Energy currently before the FERC and any appeals of FERC decisions in those proceedings;
•the effects of 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 government policies incentivizing development or utilization of the foregoing, 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;
•Entergy’s ability to effectively formulate and implement plans to reduce its carbon emission rate and aggregate carbon emissions, including its commitment to achieve net-zero carbon emissions by 2050, and the potential impact on its business and financial condition of attempting to achieve such objectives;
•the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, physical attacks on or other interference with facilities or infrastructure, 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;
•the effects of a global or geopolitical event or pandemic, such as the ongoing COVID-19 global pandemic and the military activities between Russia and Ukraine, including economic and societal disruptions; volatility in the capital markets (and any related increased cost of capital or any inability to access the capital markets or draw on available bank credit facilities); reduced demand for electricity, particularly from commercial and industrial customers; increased or unrecoverable costs; supply chain, vendor, and contractor disruptions;disruptions, including as a result of trade-related sanctions; delays in completion of capital or other construction projects, maintenance, and other operations activities, including prolonged or delayed outages; impacts to Entergy’s workforce availability, health, or safety; increased cybersecurity risks as a result of many employees telecommuting; increased late or uncollectible customer payments; regulatory delays; executive orders affecting, or increased regulation of, Entergy’s business; changes in credit ratings or outlooks as a result of any of the foregoing; or other adverse impacts on Entergy’s ability to execute on its business strategies and initiatives or, more generally, on Entergy’s results of operations, financial condition, and liquidity;
•Entergy’s ability to attract and retain talented management, directors, and employees with specialized skills;
•Entergy’s ability to attract, retain, and manage an appropriately qualified workforce;
•changes in accounting standards and corporate governance;governance best practices;
•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 benefitbenefits 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 shutdown and sale of 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; and
•Entergy and its subsidiaries’ ability to successfully execute on their business strategies, including their ability to complete strategic transactions that they may undertake.
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes are defined below:
| | | | | |
Abbreviation or Acronym | Term |
| |
ALJ | Administrative Law Judge |
ANO 1 and 2 | Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas |
APSC | Arkansas Public Service Commission |
ASU | Accounting Standards Update issued by the FASB |
Board | Board of Directors of Entergy Corporation |
Cajun | Cajun Electric Power Cooperative, Inc. |
capacity factor | Actual plant output divided by maximum potential plant output for the period |
City Council | Council of the City of New Orleans, Louisiana |
COVID-19 | The novel coronavirus disease declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention in March 2020 |
D.C. Circuit | U.S. Court of Appeals for the District of Columbia Circuit |
DOE | United States Department of Energy |
Entergy | Entergy Corporation and its direct and indirect subsidiaries |
Entergy Corporation | Entergy Corporation, a Delaware corporation |
Entergy Gulf States, Inc. | Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas |
Entergy Gulf States Louisiana | Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes. The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana. |
Entergy Louisiana | Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.purposes |
Entergy Texas | Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires. |
Entergy Wholesale Commodities | Entergy’s non-utility business segmentactivities 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 customerscustomers. In 2022 Entergy completed its multi-year strategy to exit the merchant nuclear power business and upon completion of all transition activities, effective January 1, 2023, Entergy Wholesale Commodifies is no longer a reportable segment. |
EPA | United States Environmental Protection Agency |
FASB | Financial Accounting Standards Board |
FERC | Federal Energy Regulatory Commission |
GAAP | Generally Accepted Accounting Principles |
Form 10-K | Annual Report on Form 10-K for the calendar year ended December 31, 20212022 filed with the SEC by Entergy Corporation and its Registrant Subsidiaries |
Grand Gulf | Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy |
GWh | Gigawatt-hour(s), which equals one million kilowatt-hours |
HLBV | Hypothetical liquidation at book value |
DEFINITIONS (Continued)
| | | | | |
Abbreviation or Acronym | Term |
| |
GWh | Gigawatt-hour(s), which equals one million kilowatt-hours |
HLBV | Hypothetical liquidation at book value |
Independence | Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC |
Indian Point 2 | Unit 2 of Indian Point Energy Center (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in April 2020 and was sold in May 2021 |
Indian Point 3 | Unit 3 of Indian Point Energy Center (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in April 2021 and was sold in May 2021 |
IRS | Internal Revenue Service |
ISO | Independent System Operator |
kW | Kilowatt, which equals one thousand watts |
kWh | Kilowatt-hour(s) |
LPSC | Louisiana Public Service Commission |
LURC | Louisiana Utilities Restoration Corporation |
MISO | Midcontinent Independent System Operator, Inc., a regional transmission organization |
MMBtu | One million British Thermal Units |
MPSC | Mississippi Public Service Commission |
MW | Megawatt(s), which equals one thousand kilowatts |
MWh | Megawatt-hour(s), which equals one thousand kilowatts |
Nelson Unit 6 | Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned by Entergy Louisiana (57.5%) and Entergy Texas (42.5%) and 10.9% of which is owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segmentEAM Nelson Holding, LLC |
Net debt to net capital ratio | Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents, which is a non-GAAP measure |
NRC | Nuclear Regulatory Commission |
Palisades | Palisades Nuclear Plant (nuclear), previously owned by an Entergy subsidiaryas part of Entergy’s non-utility business, which ceased power production in the Entergy Wholesale Commodities business segmentMay 2022 and was sold in June 2022 |
Parent & Other | The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments,segment, primarily consisting of the activities of the parent company, Entergy Corporation, and other business activity, including Entergy’s non-utility operations business which owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers and also provides decommissioning services to nuclear power plants owned by non-affiliated entities in the United States |
PPA | Purchased power agreement or power purchase agreement |
PUCT | Public Utility Commission of Texas |
Registrant Subsidiaries | Entergy Arkansas, LLC, Entergy Louisiana, LLC, Entergy Mississippi, LLC, Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc. |
River Bend | River Bend Station (nuclear), owned by Entergy Louisiana |
SEC | Securities and Exchange Commission |
System Agreement | Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016. |
System Energy | System Energy Resources, Inc. |
TWh | Terawatt-hour(s), which equals one billion kilowatt-hours |
DEFINITIONS (Concluded)
| | | | | |
Abbreviation or Acronym | Term |
| |
Unit Power Sales Agreement | Agreement, dated as of June 10, 1982, as amended and approved by the FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf |
DEFINITIONS (Concluded)
| | | | | |
Abbreviation or Acronym | Term |
| |
Utility | Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution |
Utility operating companies | Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas |
Vermont Yankee | Vermont Yankee Nuclear Power Station (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commoditiesas a part of Entergy’s non-utility business, segment, which ceased power production in December 2014 and was disposed of in January 2019 |
Waterford 3 | Unit No. 3 (nuclear) of the Waterford Steam Electric Station, owned by Entergy Louisiana |
weather-adjusted usage | Electric usage excluding the effects of deviations from normal weather |
White Bluff | White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas |
ENTERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Entergy operates primarily through two business segments:a single reportable segment, Utility. The 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.business in portions of Louisiana.
•The Entergy Wholesale Commodities business segment includesAs discussed in Note 13 to 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 andfinancial statements in the Form 10-K, for discussionEntergy completed its multi-year strategy to exit the merchant nuclear power business in 2022 and upon completion of the operation and planned shutdown and sale of each of theall transition activities, effective January 1, 2023, Entergy Wholesale Commodities nuclear power plants, including the planned shutdown and sale of Palisades, the only remaining operating plant inis no longer a reportable segment. Remaining business activity previously reported under Entergy Wholesale Commodities’ merchant nuclear fleet.
Commodities is now included under Parent & Other. Historical segment financial information presented herein has been restated for the first quarter 2022 to reflect the change in reportable segments. The change in reportable segments had no effect on Entergy’s consolidated financial statements or historical segment financial information for the Utility reportable segment. See Note 7 to the financial statements herein for discussion of and financial information regarding Entergy’s business segments.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Results of Operations
First Quarter 20222023 Compared to First Quarter 20212022
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing the first quarter 20222023 to the first quarter 20212022 showing how much the line item increased or (decreased) in comparison to the prior period:
| | |
Utility | | Entergy Wholesale Commodities | |
Parent & Other (a) | |
Entergy | |
Utility | | Parent & Other (a) | |
Entergy |
| | | (In Thousands) | | | (In Thousands) |
2021 Net Income (Loss) Attributable to Entergy Corporation | | $356,567 | | | $37,577 | | | ($59,579) | | | $334,565 | | |
2022 Net Income (Loss) Attributable to Entergy Corporation | | 2022 Net Income (Loss) Attributable to Entergy Corporation | | $340,462 | | | ($64,062) | | | $276,400 | |
| Operating revenues | Operating revenues | | 131,540 | | | (98,442) | | | (11) | | | 33,087 | | Operating revenues | | 219,836 | | | (116,702) | | | 103,134 | |
Fuel, fuel-related expenses, and gas purchased for resale | Fuel, fuel-related expenses, and gas purchased for resale | | 160,924 | | | 4,836 | | | 11 | | | 165,771 | | Fuel, fuel-related expenses, and gas purchased for resale | | 247,680 | | | (16,234) | | | 231,446 | |
Purchased power | Purchased power | | (105,937) | | | (4,160) | | | (11) | | | (110,108) | | Purchased power | | (36,976) | | | 5,638 | | | (31,338) | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | (60,704) | | | — | | | — | | | (60,704) | | Other regulatory charges (credits) - net | | 52,098 | | | — | | | 52,098 | |
Other operation and maintenance | Other operation and maintenance | | 26,207 | | | (57,721) | | | 3,540 | | | (27,974) | | Other operation and maintenance | | (8,723) | | | (38,563) | | | (47,286) | |
Asset write-offs, impairments, and related charges | | — | | | (2,529) | | | — | | | (2,529) | | |
Asset write-offs, impairments, and related charges (credits) | | Asset write-offs, impairments, and related charges (credits) | | — | | | (744) | | | (744) | |
Taxes other than income taxes | Taxes other than income taxes | | 20,344 | | | 3,069 | | | 33 | | | 23,446 | | Taxes other than income taxes | | 14,132 | | | (8,843) | | | 5,289 | |
Depreciation and amortization | Depreciation and amortization | | 29,121 | | | (4,219) | | | (449) | | | 24,453 | | Depreciation and amortization | | 22,152 | | | (7,208) | | | 14,944 | |
| Other income (deductions) | | (46,264) | | | (47,309) | | | (1,834) | | | (95,407) | | |
Other income | | Other income | | 10,763 | | | 4,634 | | | 15,397 | |
Interest expense | Interest expense | | 15,442 | | | (3,027) | | | 9,238 | | | 21,653 | | Interest expense | | 19,004 | | | 5,208 | | | 24,212 | |
Other expenses | Other expenses | | 1,698 | | | (39,029) | | | — | | | (37,331) | | Other expenses | | 7,706 | | | (25,030) | | | (17,324) | |
Income taxes | Income taxes | | 15,625 | | | (12,706) | | | (2,364) | | | 555 | | Income taxes | | (141,485) | | | (3,987) | | | (145,472) | |
Preferred dividend requirements of subsidiaries and noncontrolling interest | | (1,339) | | | — | | | (48) | | | (1,387) | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | | Preferred dividend requirements of subsidiaries and noncontrolling interests | | (1,829) | | | — | | | (1,829) | |
| 2022 Net Income (Loss) Attributable to Entergy Corporation | | $340,462 | | | $7,312 | | | ($71,374) | | | $276,400 | | |
2023 Net Income (Loss) Attributable to Entergy Corporation | | 2023 Net Income (Loss) Attributable to Entergy Corporation | | $397,302 | | | ($86,367) | | | $310,935 | |
(a)Parent & Other includes eliminations, which are primarily intersegment activity.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
First quarter 2023 results of operations include a $129 million reduction in income tax expense as a result of the Hurricane Ida securitization in March 2023, which also resulted in a $103 million ($76 million net-of-tax) regulatory charge, recorded at Utility, to reflect Entergy Louisiana’s obligation to provide credits to its customers as described in an LPSC ancillary order issued as part of the securitization regulatory proceeding. See Note 2 to the financial statements herein for further discussion of the Entergy Louisiana March 2023 storm securitization.
Operating Revenues
Utility
Following is an analysis of the change in operating revenues comparing the first quarter 20222023 to the first quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $2,5972,728 | |
Fuel, rider, and other revenues that do not significantly affect net income | 30161 | |
Retail electric price | 9186 | |
Storm restoration carrying costs | 31 | |
Return of unprotected excess accumulated deferred income taxes to customers | 2417 | |
Volume/weather | (14)(75) | |
20222023 operating revenues | $2,7282,948 | |
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 retail electric price variance is primarily due to:
•increasesan increase in Entergy Arkansas’s formula rate plan rates effective May 2021 and January 2022;2023;
•an increase in Entergy Louisiana’s formula rate plan revenues, including increases in the distribution and transmission recovery mechanisms, effective September 2021;2022;
•increases in Entergy Mississippi’s formula rate plan rates effective April 20212022 and July 2021;August 2022;
•an increase in Entergy New Orleans’s formula rate plan rates effective November 2021;September 2022; and
•increasesan increase in the transmission cost recovery factor rider effective March 2021 and March 2022 an increase in the distribution cost recovery factor rider effective January 2022, and an increase in the generation cost recovery rider effective January 2022, each at Entergy Texas.
See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the regulatory proceedings discussed above.
Storm restoration carrying costs represents the $31 million equity component of storm restoration carrying costs at Entergy Louisiana, recorded in first quarter 2023, recognized as part of the securitization of Hurricane Ida restoration costs in March 2023. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana March 2023 storm securitization.
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 the first quarter of 2022, $17 million was returned to customers through reductions in operating revenues as compared to $41 million inrevenues. There was no return of unprotected excess accumulated deferred income taxes for Entergy or the first quarter 2021.Registrant Subsidiaries for the three
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
months ended March 31, 2023. There iswas 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.
The volume/weather variance is primarily due to the effect of less favorable weather on residential sales and a decrease in weather-adjusted residential usage, including the effect of the COVID-19 pandemic on first quarter 2021, partially offset by increases in industrial and commercial usage. The increase in industrial usage was due to an increase in demand from cogeneration customers, an increase in demand from existing customers, primarily in the chemicals and pulp and paper industries as a result of prior year temporary plant shutdowns and operational issues, an increase in demand from expansion projects, primarily in the chemicals, transportation, and petroleum
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
refining industries, and an increase in demand from small industrial customers. The increase in commercial usage was primarily due to an increase in customers and the effect of the COVID-19 pandemic on businesses in first quarter 2021. The increased usage from these industrial and commercial customers has a relatively smaller effect on operating revenues because a larger portion of the revenues from those customers comes from fixed charges.sales.
Total electric energy sales for Utility for the three months ended March 31, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 8,454 | | | 8,663 | | | (2) | | Residential | 7,276 | | | 8,454 | | | (14) | |
Commercial | Commercial | 6,271 | | | 6,111 | | | 3 | | Commercial | 6,248 | | | 6,271 | | | — | |
Industrial | Industrial | 12,496 | | | 11,738 | | | 6 | | Industrial | 12,740 | | | 12,496 | | | 2 | |
Governmental | Governmental | 584 | | | 581 | | | 1 | | Governmental | 577 | | | 584 | | | (1) | |
Total retail | Total retail | 27,805 | | | 27,093 | | | 3 | | Total retail | 26,841 | | | 27,805 | | | (3) | |
Sales for resale | Sales for resale | 3,641 | | | 4,299 | | | (15) | | Sales for resale | 4,502 | | | 3,641 | | | 24 | |
Total | Total | 31,446 | | | 31,392 | | | — | | Total | 31,343 | | | 31,446 | | | — | |
See Note 13 to the financial statements herein for additional discussion of operating revenues.
Entergy Wholesale Commodities
Operating revenues for Entergy Wholesale Commodities decreased from $248 million for the first quarter2021 to $150 million for the first quarter 2022 primarily due to the shutdown of Indian Point 3 in April 2021.
Following are key performance measures for Entergy Wholesale Commodities for the first quarters 2022 and 2021:
| | | | | | | | | | | |
| 2022 | | 2021 |
Owned capacity (MW) (a) | 1,205 | | 2,246 |
GWh billed | 2,225 | | 4,413 |
| | | |
Entergy Wholesale Commodities Nuclear Fleet (b) | | | |
Capacity factor | 100% | | 99% |
GWh billed | 1,766 | | 3,988 |
Average energy price ($/MWh) | $59.21 | | $51.86 |
Average capacity price ($/kW-month) | $0.15 | | $0.23 |
| | | |
| | | |
(a)The reduction in owned capacity is due to the shutdown of the 1,041 MW Indian Point 3 plant in April 2021.
(b)The Entergy Wholesale Commodities nuclear power plants had no refueling outage days in the first quarters 2022 and 2021.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Other Income Statement Items
Utility
Other operation and maintenance expenses increaseddecreased from $602 million for the first quarter 2021 to $628 million for the first quarter 2022 to $620 million for the first quarter 2023 primarily due to:
•an increasea decrease of $6$17 million in customer service center supportcompensation and benefits costs primarily due to higher contracta revision to estimated incentive compensation expense in the first quarter 2023, lower healthcare claims activity in 2023, and a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rates used to value the benefit liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs;
•a decrease of $12 million in transmission expenses primarily due to a decrease in the amount of transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for further information on the recovery of these costs; and
•the effects of recording a final judgment in 2023 to resolve claims in the ANO damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $10 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation.
The decrease was partially offset by:
•an increase of $18 million in insurance expenses primarily due to lower nuclear insurance refunds;
•an increase of $5 million in nuclear generation expenses primarily due to a higher scope of work performed in 20222023 as compared to prior year partially offset by lower spending in 2022 on sanitation and social distancing protocols as a result of the COVID-19 pandemic;higher nuclear labor costs; and
•an increase of $4$5 million in transmission expenses, including higher vegetation maintenance costs;
•an increase of $3 million in distribution operationspower delivery expenses primarily due to higher reliability costs and higher safety and trainingmetering costs, partially offset by a decrease in meter reading expenses as a resultlower vegetation maintenance costs.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•several individually insignificant items.
The increase was partially offset by higher nuclear insurance refunds of $8 million.
Taxes other than income taxes increased primarily due to increases in franchise taxes and increases in ad valorem taxes resulting from higher assessments.assessments and increases in franchise taxes, partially offset by decreases in employment taxes.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other regulatory charges (credits) - net includesservice and updated depreciation rates used in calculating Grand Gulf plant depreciation and amortization expenses under the reversal in 2021 of the remaining $39 million regulatory liability for Entergy Arkansas’s 2019 historical year netting adjustment as part of its 2020 formula rate plan proceeding.Unit Power Sales Agreement, effective March 1, 2022, subject to refund. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2020 formula rate plan filing. Unit Power Sales Agreement.
Other regulatory charges (credits) - net includes a regulatory charge of $103 million, recorded by Entergy Louisiana in first quarter 2023, to reflect its obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana March 2023 storm securitization. In addition, Entergy records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust earnings plus asset retirement obligation relatedobligation-related costs collected in revenue.
Other income decreasedincreased primarily due to:
•an increase of $24 million in intercompany dividend income. The increase in intercompany dividend income results from the May 2022 Entergy Louisiana storm trust I investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana’s investment in affiliated preferred membership interests acquired in connection with previous securitizations of storm restoration costs. The intercompany dividend income on the affiliate preferred membership interests is eliminated for consolidation purposes and has no effect on net income since the investment is in another Entergy subsidiary; and
•an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2023.
The increase was partially offset by:
•a $15 million charge at Entergy Louisiana for the LURC’s 1% beneficial interest in the storm trust II established as part of the Entergy Louisiana March 2023 storm securitization; and
•an increase in net periodic pension and other postretirement benefits non-service pension costs primarily due to changessettlement charges recorded in decommissioning trust fund activity, including portfolio rebalancingfirst quarter 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs.
See Note 2 to the financial statements herein and in the Form 10-K for discussion of the decommissioning trust funds in the first quarter 2021.Entergy Louisiana securitizations.
Interest expense increased primarily due to:
•the issuance by Entergy Arkansas of $400$425 million of 3.35%5.15% Series mortgage bonds in March 2021;January 2023;
•the issuancesthe issuance by Entergy Louisiana of $500 million of 2.35%4.75% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021;August 2022; and
•the issuance by Entergy LouisianaTexas of $1 billion$325 million of 0.95%5.00% Series mortgage bonds in October 2021;
•the issuance by Entergy Mississippi of $200 million of 3.50% Series mortgage bonds in March 2021;
•the $1.2 billion unsecured term loan proceeds received by Entergy Louisiana in January 2022;
•the issuance by Entergy Mississippi of $200 million of 2.55% Series mortgage bonds in November 2021; and
•the issuances by Entergy New Orleans of $70 million of 4.51% Series mortgage bonds and $90 million of 4.19% Series mortgage bonds, each in November 2021.August 2022.
The increase was partially offset by the repayment by Entergy Arkansas of $350 million of 3.75% Series mortgage bonds in February 2021 and the repayment by Entergy Louisiana of $200 million of 4.8% Series mortgage bonds in May 2021.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Parent and Other
Entergy Wholesale CommoditiesOperating revenues decreased primarily due to the absence of revenues from Palisades, after it was shut down in May 2022.
Other operation and maintenance expenses decreased from $99 million for the first quarter 2021 to $41 million for the first quarter 2022 primarily due to:
•a decrease of $44 million resulting fromto the absence of expenses from Indian Point 3,Palisades, after it was shut down in April 2021; andMay 2022.
•a decrease of $10 million in severance and retention expenses. Severance and retention expenses were incurred in 2022 and 2021Taxes other than income taxes decreased primarily due to management’s strategydecreases in employment taxes primarily due to exit the Entergy Wholesale Commodities merchant power business.absence of expenses from Palisades, after its sale in June 2022.
See “Entergy Wholesale Commodities Exit from the Merchant Power Business” belowDepreciation and in the Form 10-K for a discussion of management’s strategy to shut down and sell all plants in Entergy Wholesale Commodities’ merchant nuclear fleet. See Note 7 to the financial statements herein for further discussion of severance and retention expenses.
Other incomeamortization expenses decreased primarily due to the absence of earningsdepreciation expense from the nuclear decommissioning trust funds that were transferred in the sale of the Indian Point Energy CenterPalisades, after it was shut down in May 2021 and lower gains2022.
Other income increased primarily due to losses on Palisades decommissioning trust fund investments partiallyin 2022, higher non-service pension income, and lower charitable contributions in 2023, substantially offset by lower non-service pension costs. the elimination for consolidation purposes of intercompany dividend income of $24 million, as discussed above. See Notes 8 and 9“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, for a discussion of decommissioning trust fund investments. Seeand Note 1411 to the financial statements in the Form 10-K for further discussion of the sale of the Indian Point Energy Center. See Note 6 to the financial statements herein for a discussion of pension and other postretirement benefits costs.
Other expenses decreased primarily due to the absence of decommissioning expense from Indian Point 2 and Indian Point 3, afternuclear refueling outage expense as a result of the sale of the Indian Point Energy CenterPalisades in May 2021. June 2022.
See Note 14 to the financial statements in the Form 10-K for furthera discussion of the shutdown and sale of the Indian Point Energy Center.Palisades plant.
Income Taxes
The effective income tax rates were 19.2%rate was (33.8%) for the first quarter 2022 and 16.3% for the first quarter 2021.2023. The differencesdifference in the effective income tax ratesrate for the first quarter 2022 and the first quarter 20212023 versus the federal statutory rate of 21% werewas primarily due to the reduction in income tax expense as a result of the securitization of Hurricane Ida storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. See Notes 2 and 10 to the financial statements herein for a discussion of the Entergy Louisiana March 2023 storm securitization under Act 293.
The effective income tax rate was 19.2% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 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 Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.
Entergy Wholesale Commodities Exit from the Merchant Power BusinessIncome Tax Legislation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power BusinessIncome Tax Legislation” in the Form 10-K for a discussion of management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant nuclear fleet. Following are updates to that discussion.Inflation Reduction Act of 2022.
In April 2022, Entergy and Nebraska Public Power District signed an agreement to mutually terminate the management support services contract, under which Entergy provides plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska, effective July 31, 2022.
Planned Shutdown and Sale of Palisades
As discussed in the Form 10-K, in July 2018, Entergy entered into a purchase and sale agreement to sell 100% of the equity interests in the subsidiary that owns Palisades and the Big Rock Point Site, for $1,000 (subject
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
to adjustment for net liabilities and other amounts) to a Holtec subsidiary. The sale will include the transfer of the nuclear decommissioning trust and obligation for spent fuel management and plant decommissioning.
Entergy intends to shut down Palisades permanently no later than May 31, 2022. Subject to the conditions discussed in the Form 10-K, the sale of Palisades is expected to close in mid-2022. As of March 31, 2022, Entergy’s adjusted net investment in Palisades was approximately ($100) million. The primary variables in the ultimate loss or gain that Entergy will incur on the transaction are the values of the nuclear decommissioning trust and the asset retirement obligations at closing, the financial results from plant operations until the closing, and the level of any unrealized deferred tax balances at closing.
Costs Associated with Exit of the Entergy Wholesale Commodities Business
Entergy expects to incur employee retention and severance expenses associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business of approximately $5 million in 2022, of which $4 million has been incurred as of March 31, 2022.
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 and Resources
Entergy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy as of March 31, 20222023 is primarily due to the net issuance of debt in 2022.2023.
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 70.5 | % | | 69.5 | % | Debt to capital | 67.4 | % | | 66.9 | % |
Effect of excluding securitization bonds | Effect of excluding securitization bonds | (0.1 | %) | | (0.1 | %) | Effect of excluding securitization bonds | (0.2 | %) | | (0.3 | %) |
Debt to capital, excluding securitization bonds (a) | 70.4 | % | | 69.4 | % | |
Debt to capital, excluding securitization bonds (non-GAAP) (a) | | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 67.2 | % | | 66.6 | % |
Effect of subtracting cash | Effect of subtracting cash | (0.5 | %) | | (0.3 | %) | Effect of subtracting cash | (1.7 | %) | | (0.1 | %) |
Net debt to net capital, excluding securitization bonds (a) | 69.9 | % | | 69.1 | % | |
Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 65.5 | % | | 66.5 | % |
(a)Calculation excludes the New Orleans and Texas securitization bonds, which are non-recourse to Entergy New Orleans and Entergy Texas, respectively.
As of March 31, 2022, 21.5%2023, 18.2% of the debt outstanding is at the parent company, Entergy Corporation 78%and 81.3% is at the Utility, andUtility. The remaining 0.5% is at Entergy Wholesale Commodities.of the debt outstanding relates to the Vermont Yankee credit facility, as discussed in Note 4 to the financial statements herein. Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, finance 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. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. 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 June 2026.2027. The facility includes fronting commitments for the issuance of letters of credit against $20 million of the
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
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 three months ended March 31, 20222023 was 1.81%6.12% on the drawn portion of the facility. As of March 31, 2022,2023, amounts outstanding and capacity available under the $3.5 billion credit facility are:
| | | | | | | | | | | | | | | | | | | | |
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) |
$3,500 | | $150 | | $3 | | $3,347 |
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
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
credit facility is different than the calculation of the debt to capital ratio above. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companiesRegistrant Subsidiaries (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit 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 Utility operating companies’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, 2022,2023, Entergy Corporation had $1.343 billion$865.6 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20222023 was 0.48%4.93%.
Entergy Mississippi had $33 million in its storm reserve escrow account at March 31, 2022.
In February 2022, Entergy New Orleans filed with the City Council a securitization application requesting that the City Council review Entergy New Orleans’s storm reserve and increase the storm reserve funding level to $150 million, to be funded through securitization. A City Council decision is expected in third quarter 2022.
Equity Issuances and Equity Distribution Program
As discussedSee “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources- Source of Capital -Equity Issuances and Equity Distribution Program” in the Form 10-K in January 2021, Entergy entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to time sharesfor a discussion of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of Entergy common stock, Entergy may also enter into forward sale agreements for the sale of its common stock. The aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement may not exceed an aggregate gross sales price of $1 billion. Through March 31, 2022, Entergy has utilized the equity distribution program either to sell or to enter into forward sale agreements with respect to shares of common stock with an aggregate gross sales price of approximately $630 million, of which approximately $430 million of aggregate gross sales price is the subject of forward sale agreements that have not been settled and is subject to adjustment pursuant to the forward sale agreements. In addition to settlement of existing forward sale agreements, Entergy Corporation currently expects to issue approximately $570 million of equity through 2024. See Note 3 to the financial statements herein for discussion of the forward sale agreements and common stock issuances and sales under the equity distribution program.
Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida (Entergy Louisiana)
As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild. In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs, and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing additional outages.In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages.
In April 2021,2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a supplemental filing updating the totalIda restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by these stormsHurricane Ida were estimated to be approximately $2.06$2.54 billion, including approximately $1.68$1.96 billion in capital costs and approximately $380$586 million in non-capital costs. Including carrying costs of $57 million through JanuaryDecember 2022, Entergy Louisiana was seeking an LPSC determination that $2.11$2.60 billion was prudently incurred and, therefore, was eligible for recovery from customers. Additionally,As part of this filing, Entergy Louisiana also was seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount was exclusive of the requested $3 million in carrying costs through December 2022. In total, Entergy Louisiana was requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, eligible for recovery from customers. As discussed in the Form 10-K, in March 2022 the LPSC determine that re-establishmentapproved financing of a $1 billion storm escrow account from which funds were withdrawn to the previously authorized amount of $290 million was appropriate.finance costs associated with Hurricane Ida restoration. In July 2021,June 2022, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.
In August 2021, Hurricane Ida caused extensive damage toOctober 2022 the LPSC staff recommended a finding that the requested storm restoration costs of $2.64 billion, including associated carrying costs of $59.1 million, were prudently incurred and are eligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s distribution and,plans to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application atsecuritize these costs, net of the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, Entergy Louisiana sought approval forfunds withdrawn from the creation and funding of a $1 billion restrictedstorm escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.
After filing of testimony by LPSC staff and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida, thedescribed above. The parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in FebruaryDecember 2022. The settlement agreement containedcontains the
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
following key terms: $2.1$2.57 billion of restoration costs from Hurricane Ida, Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and were eligible for recovery; carrying costs of $51$59.2 million were recoverable; a $290 million cash storm reserve should be re-established; a $1 billion reserve should be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana was authorized to finance $3.186$1.657 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. TheIn January 2023, the LPSC issued an order approvingapproved the stipulated settlement in March 2022. Assubject to certain modifications. These modifications include the recognition of accumulated deferred income tax benefits related to damaged assets and system restoration costs as a resultreduction of the financing order, in first quarter 2022,amount authorized to be financed utilizing the securitization process authorized by Act 55, as supplemented by Act 293, from $1.657 billion to $1.491 billion. These modifications did not affect the LPSC’s conclusion that all system restoration costs sought by Entergy Louisiana reclassified $1.339 billion from utility plantwere reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to other regulatory assets. The securitization process is expectedauthorize the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana, to be completedissue the bonds authorized in second quarter 2022.the LPSC’s financing order.
In April 2022,March 2023 the Hurricane Ida securitization financing closed, resulting in the issuance of approximately $1.491 billion principal amount of bonds by the LCDA and a remaining regulatory asset of $180 million to be recovered through the exclusion of the accumulated deferred income taxes related to the damaged assets and system restoration costs from the determination of future rates. The securitization was authorized pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust II (the storm trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 14,576,757.48 Class B preferred, non-voting membership interest units (the preferred membership interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2023 on the preferred membership interests issued to the storm trust II. These annual dividends received by the storm trust II will be distributed to Entergy Louisiana filed an applicationand the LURC, as beneficiaries of the storm trust II. Specifically, 1% of the annual dividends received by the storm trust II will be distributed to the LURC for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred membership interests have a stated annual cumulative cash dividend rate of 7.5% and a liquidation price of $100 per unit. The terms of the preferred membership interests include certain financial covenants to which Entergy Finance Company is subject. Semi-annual redemptions of the preferred membership interests, subject to certain conditions, are expected to occur over the next 15 years.
Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the LPSC relatingfirst billing cycle of April 2023 and the system restoration charge is expected to Hurricane Ida restoration costs. Total restoration costs forremain in place up to 15 years. Entergy and Entergy Louisiana do not report the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by Hurricane Ida currently are estimated to be approximately $2.54 billion, including approximately $1.96 billion in capital costs and approximately $586 million in non-capital costs. Including carrying costs through December 2022,collections as revenue because Entergy Louisiana is seeking an LPSC determinationmerely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that $2.60 billion was prudently incurred and, therefore, is eligible for recovery from customers. As part of this filing, Entergy Louisiana also is seeking an LPSC determination that an additional $32 million inthe system restoration costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zetacharge, as well as Winter Storm Uri was prudently incurred. Thisany funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust II is required to liquidate Entergy Finance Company preferred membership interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is exclusiveimmaterial.
From the proceeds from the issuance of the requested $3 million in carrying costs through December 2022. In total,preferred membership interests, Entergy Finance Company loaned approximately $1.5 billion to Entergy, which was indirectly contributed to Entergy Louisiana is requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, is eligible for recovery from customers. As discussed above, in March 2022 the LPSCas a capital contribution.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
approved financing of a $1 billion storm escrow that can be withdrawn to finance costs associated with Hurricane Ida restoration. Entergy Louisiana expects to supplement the April 2022 application with a request that the LPSC authorize Entergy Louisiana to finance the remaining storm restoration costs included in the April 2022 application, currently expected to be through the securitization process authorized by Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.
Hurricane Ida (Entergy New Orleans)
See “As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $129 million, after taking into account a provision for uncertain tax positions. IMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - n recognition of its obligations related toHurricane Ida” an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the Form 10-K for a discussionbenefits of Hurricane Ida, which caused significant damage to Entergy’s service area, including Entergy’s electrical grid. Entergy New Orleans expects to initiate its storm cost recovery proceeding in late second quarter 2022.the securitization with customers.
Hurricane Laura, Hurricane Delta, and Winter Storm Uri (Entergy Texas)
As discussed in the Form 10-K, in August 2020Note 3 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the securitization of certain system restoration costs, which were approved by the PUCT as eligible for securitization in December 2021. In November 2021 the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order consistent with the unopposed settlement. As a result of the financing order, in first quarter 2022, Entergy Texas reclassified $153 million from utility plant to other regulatory assets.
In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured system restoration bonds (securitization bonds). With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. Entergy Texas began cost recovery through the system restoration charge effective with the first billing cycle of May 2022 and the system restoration charge is expected to remain in place up to 15 years. See Note 412 to the financial statements herein, forEntergy Louisiana consolidates the storm trust II as a discussionvariable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In first quarter 2023, Entergy Louisiana recorded a charge of $15 million in other income to reflect the April 2022 issuance ofLURC’s beneficial interest in the securitization bonds.storm trust II.
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 20222023 through 2024.2025. Following are updates to that discussion. While
Renewables
Sunflower Solar
As discussed in the Form 10-K, in April 2020 the MPSC issued an order approving certification of the Sunflower Solar facility and its recovery through the interim capacity rate adjustment mechanism, subject to certain conditions. In May 2022 both Entergy Mississippi and the tax equity investor made capital contributions to the tax equity partnership that were then used to make an initial payment of $105 million for acquisition of the facility. Commercial operation at the Sunflower Solar facility commenced in September 2022. In April 2023 the final payment of $30.4 million for acquisition of the facility was made. See Note 14 to the financial statements in the Form 10-K for a discussion of Entergy Mississippi’s investment in the Sunflower Solar facility.
Walnut Bend Solar
As discussed in the Form 10-K, in July 2021, the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership for the purpose of acquiring the Walnut Bend Solar facility. In January 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is still assessingobtained or a tax equity partnership is no longer sought. The counter-party notified Entergy Arkansas that it was terminating the effect on its planned solar projects,project, though it was willing to consider an alternative for the site. Entergy Arkansas disputed the right of termination. Negotiations were conducted, including with respect to cost and schedule and to updates arising as a recently commenced investigationresult of the Inflation Reduction Act of 2022. In April 2023, Entergy Arkansas filed an application for an amended certificate of environmental compatibility and public need with the APSC seeking approval by June 2023 for the updates to the cost and schedule that were previously approved by the U.S. Department of Commerce into potential circumvention of duties and tariffs may resultAPSC. The project, if approved, is currently expected to achieve commercial operation in increased duties or tariffs on imported solar panels and has created supply chain disruptions which will affect the ultimate timing and could increase the cost of completion of these projects.2024.
West Memphis Solar Facility
As discussed in the Form 10-K, in October 2021 the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership.partnership for the purpose of acquiring the West Memphis Solar facility. In April 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Closing had been expected to occur in 2023. In March 2022 the counter-party notified Entergy Arkansas views the progressthat it was seeking changes to certain terms of the outreachbuild-own-transfer agreement, including both cost and schedule. In January 2023, Entergy Arkansas filed a supplemental application with the APSC seeking approval for a change in the transmission route and updates to potential tax equitythe cost and schedule that were previously approved by the APSC. In March 2023 the APSC approved Entergy Arkansas’s supplemental application. The project is currently expected to achieve commercial operation in 2024.
2022 Solar Portfolio and Expansion of the Geaux Green Option
In February 2023, Entergy Louisiana filed an application with the LPSC seeking certification of the Iberville/Coastal Prairie facility, which will provide 175 MW of capacity through a PPA with a third party, and the Sterlington facility, a 49 MW self-build project located near the deactivated Sterlington power plant. Entergy Louisiana is seeking to include these within the portfolio supporting the Geaux Green Option (Rider GGO) rate schedule to help fulfill customer interest in access to renewable energy. Entergy Louisiana has requested the costs of these facilities, as offset by Rider GGO revenues, be deemed eligible for recovery in accordance with the terms of the formula rate plan and fuel adjustment clause rate mechanisms that exist at the time the facilities are placed into service. The Louisiana Energy Users Group and the Alliance for Affordable Energy have intervened and discovery is underway. A procedural schedule has been established with a hearing scheduled for December 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Liquidity and Capital Resources- Capital Expenditure Plans and Other Uses of Capital - Renewables - 2021 Solar Certification and the Geaux Green Option” in the Form 10-K for further discussion of the Rider GGO.
Alternative RFP and Certification
In March 2023, Entergy Louisiana made the first phase of a bifurcated filing to seek approval from the LPSC for an alternative to the requests for proposals (RFP) process that would enable the acquisition of up to 3 GW of solar resources on a faster timeline than the current RFP and certification process allows. The initial phase of the filing established the need for the acquisition of additional resources and the need for an alternative to the RFP process. The second phase of the filing, which contains the details of the proposal for the alternative competitive procurement process and the information necessary to support certification, will be filed in May 2023. In addition to the acquisition of up to 3 GW of solar resources, the filing also seeks approval of a new renewable energy credits-based tariff. Several parties have intervened, and a status conference has been set for May 2023 at which time a procedural schedule is expected to be established.
System Resilience and Storm Hardening
Entergy Louisiana
As discussed in the Form 10-K, in December 2022, Entergy Louisiana filed an application with the LPSC seeking a public interest finding regarding Phase I of Entergy Louisiana’s Future Ready resilience plan and approval of a rider mechanism to recover the program’s costs.Phase I reflects the first five years of a ten-year resilience plan and includes investment of approximately $5 billion, including hardening investment, transmission dead-end structures, enhanced vegetation management, and telecommunications improvement.In April 2023 a procedural schedule was established with a hearing scheduled for January 2024.
The LPSC had previously opened a formal rulemaking proceeding in December 2021 to investigate efforts to improve resilience of electric utility infrastructure. In April 2023 the LPSC staff issued a draft rule in the rulemaking proceeding related to a requirement to file a grid resilience plan. The procedural schedule entered in the rulemaking proceeding contemplates adoption of a final rule in September 2023.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
investors and the current status of the discussions as consistent with its expectations for the timeline for achieving a tax equity partnership. Closing had been expected to occur in 2023. The counter-party has notified Entergy Arkansas that it is seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. Negotiations are ongoing, but at this time the project is not expected to achieve commercial operation in 2023.New Orleans
Driver Solar Facility
In April 2022, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the 250 MW Driver Solar Facility is in the public interest. The acquisition of Driver Solar will be contingent upon receiving all necessary regulatory and Board approvals. Entergy Arkansas requested a decision by the APSC by June 2022 and requested cost recovery through the formula rate plan rider. The APSC established a procedural schedule with a hearing scheduled in June 2022. The facility is expected to be in service by the end of 2024.
2021 Solar Certification and the Geaux Green Option
As discussed in the Form 10-K, in NovemberOctober 2021 the City Council passed a resolution and order establishing a docket and procedural schedule with respect to system resiliency and storm hardening. In July 2022, Entergy LouisianaNew Orleans filed an application with the LPSCCity Council a response identifying a plan for storm hardening and resiliency projects, including microgrids, to be implemented over ten years at an approximate cost of $1.5 billion. In February 2023 the City Council approved a revised procedural schedule requiring Entergy New Orleans to make a filing containing a narrowed list of proposed hardening projects, with final comments on that filing due July 2023. In April 2023, Entergy New Orleans filed the required application and supporting testimony seeking certificationCity Council approval of the first phase (five years and approval for the addition of four new solar photovoltaic resources with a combined nameplate capacity of 475 megawatts (the 2021 Solar Portfolio) and the implementationapproximately $559 million) of a new green tariff,ten-year infrastructure hardening plan totaling approximately $1 billion.Entergy New Orleans also sought, among other relief, City Council approval of a rider to recover from customers the Geaux Green Option (Rider GGO). The LPSC has established a procedural schedule that is expected to result in an LPSC decision by the end of 2022. In March 2022 direct testimony from Walmart, the Louisiana Energy Users Group (LEUG) and the LPSC staff was filed. Each party recommended that the LPSC approve the resources proposed in Entergy Louisiana’s application, and the LPSC staff witness indicated that the process through which Entergy Louisiana solicited or obtained the proposals for the resources complies with applicable LPSC orders. LPSC staff and LEUG’s witnesses made recommendations to modify the proposed Rider GGO and Entergy Louisiana’s proposed rate relief. In April 2022, LPSC staff and LEUG filed cross-answering testimony concerning the other party’s proposed modifications to Rider GGO and the proposed rate recovery. Discovery concerning these parties’ testimonies is ongoing.
Sunflower Solar Facility
As discussed in the Form 10-K, in November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi. 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. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have been met. In April 2020 the MPSC issued an order approving certification of the Sunflower Solar Facility and its recovery through Entergy Mississippi’s interim capacity rate adjustment mechanism, subject to certain conditions including: (i) that Entergy Mississippi pursue a partnership structure through which the partnership would acquire and own the facility under the build-own-transfer agreement, and (ii) that if Entergy Mississippi does not consummate the partnership structure under the terms of the order, there will be a cap of $136 million on the level of recoverable costs. In April 2022, Entergy Mississippi confirmed mechanical completion of the Sunflower Solar Facility. The initial closing is targeted to occur in May 2022. In conjunction with closing, Entergy Mississippi is executing a partnership structure through which the partnership will acquire and own the Sunflower Solar Facility. Final payment of the purchase price will be made upon substantial completion of the facility, which is currently expected in third quarter 2022.
Orange County Advanced Power Station
As discussed in the Form 10-K, in September 2021, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Orange County Advanced Power Station, a new 1,215 MW combined-cycle combustion turbine facility to be
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
located in Bridge City, Texas at an initially-estimated expected total cost of $1.2 billion inclusive of the estimated costs of the generation facilities, transmission upgrades, contingency, an allowance for funds used during construction, and necessary regulatory expenses, among others. The project includes combustion turbine technology with dual fuel capability, able to co-fire up to 30% hydrogen by volume upon commercial operation and upgradable to support 100% hydrogen operations in the future. In December 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2022 certain intervenors filed testimony opposing the hydrogen co-firing component of the proposed project and others filed opposing the project outright. Also in March 2022, PUCT staff filed testimony opposing the hydrogen co-firing component of the proposed project, but otherwise taking no specific position on the merits of the project. The PUCT staff also proposed that the PUCT establish a maximum amount that Entergy Texas may recover in rates attributable to the project. In April 2022, Entergy Texas filed rebuttal testimony addressing and rebutting these various arguments. Also in April 2022 the ALJs with the State Office of Administrative Hearings approved a continuance of the hearing on the merits from April 2022 to June 2022, providing Entergy Texas an opportunity to accelerate the determination and fixing of pricing for the Orange County Advanced Power Station prior to the hearing. A final order by the PUCT is expected in third or fourth quarter of 2022. Entergy Texas also is pursuing environmental permitting that is required prior to the commencement of construction. Subject to receipt of required regulatory approvals, permits, and other conditions, the facility is expected to be in service by May 2026.infrastructure hardening plan.
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 April 20222023 meeting, the Board declared a dividend of $1.01$1.07 per share, which is the same quarterly dividend per share that Entergy has paid since the third quarter 2021.2022.
Cash Flow Activity
As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | $443 | | | $1,759 | | Cash and cash equivalents at beginning of period | $224 | | | $443 | |
| Net cash provided by (used in): | Net cash provided by (used in): | | | | Net cash provided by (used in): | | | |
Operating activities | Operating activities | 538 | | | (49) | | Operating activities | 960 | | | 538 | |
Investing activities | Investing activities | (1,551) | | | (1,513) | | Investing activities | (1,283) | | | (1,551) | |
Financing activities | Financing activities | 1,272 | | | 1,546 | | Financing activities | 2,070 | | | 1,272 | |
Net increase (decrease) in cash and cash equivalents | 259 | | | (16) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 1,747 | | | 259 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $702 | | | $1,743 | | Cash and cash equivalents at end of period | $1,971 | | | $702 | |
Operating Activities
Entergy’sNet cash flow provided by operating activities provided $538increased $422 million of cash for the three months ended March 31, 20222023 compared to using $49 million of cash for the three months ended March 31, 20212022 primarily due to the following activity:to:
•higher collections from Utility customers;
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
•decreased fuel costs, including costs relateda decrease of $162 million in storm spending primarily due to Winter Storm UriHurricane Ida restoration efforts in 2021.2022. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuelHurricane Ida; and purchased power cost recovery;
•a decrease of $84$35 million in pension contributions in 20222023 as compared to the same period in 2021.2022. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 11 to the financial statements in the Form 10-K, and Note 6 to the financial statements herein for a discussion of qualified pension and other postretirement benefits funding; andfunding.
•
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
The increase of $43was partially offset by $51 million in proceeds received in 2022 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed.expensed and an increase of $29 million in interest paid. See Note 1 to the financial statements herein and Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
The above activity was partially offset by:
•an increase of approximately $128 million in storm spending primarily due to Hurricane Ida. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” in the Form 10-K for discussion of storm restoration efforts; and
•lower Entergy Wholesale Commodities revenues in 2022.
Investing Activities
Net cash flow used in investing activities increased $38decreased $268 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to:
•a decrease of $379 million in distribution construction expenditures primarily due to lower capital expenditures for storm restoration in 2023, partially offset by higher construction expenditures as a result of increased investment in the reliability and infrastructure of Entergy’s distribution system in 2023; and
•a decrease of $33 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2023.
The decrease was partially offset by:
•an increase of $50 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2022;
•a decrease of $44 million in net receipts from storm reserve escrow accounts;2023;
•an increase of $35 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
•an increase of $27 million in information technology capital expenditures primarily due to increased spending on various technology projects in 2022.
The increase was partially offset by:
•a decrease of $92 million in transmission construction expenditures primarily due to lower capital expenditures for storm restoration in 2022; and
•a decrease of $25$44 million in non-nuclear generation construction expenditures primarily due to higher spending in 2021 on the MontgomeryOrange County Advanced Power Station project.and a higher scope of work on projects performed in 2023 as compared to 2022, including during plant outages; and
•$32 million in proceeds received from the DOE in 2022 resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements in the Form 10-K for discussion of the spent nuclear fuel litigation.
Financing Activities
Net cash flow provided by financing activities decreased $274increased $798 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to proceeds of $1,458 million received by the storm trust II in the Entergy Louisiana March 2023 storm securitization. The increase was partially offset by long-term debt activity providing approximately $780 million of cash in 2023 compared to providing approximately $1,329 million of cash in 2022 compared to providing approximately $2,330 millionand a decrease of cash in 2021. The decrease was partially offset by an increase of $741$104 million in net issuances of commercial paper in 20222023 compared to 2021. For2022. See Note 2 to the financial statements herein for a discussion of the Entergy Louisiana March 2023 storm securitization. See Note 4 to the financial statements herein and Notes 4 and 5 to the financial statements in the Form 10-K for details of Entergy’s commercial paper program and long-term debt, see Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K.debt.
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.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
State and Local Rate Regulation and Fuel-Cost Recovery
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding these proceedings.
Entergy Corporation and Subsidiaries
Management's Financial Discussion and Analysis
Federal Regulation
See Note 2 to the financial statements herein for updates to the discussion in the Form 10-K regarding federal regulatory proceedings.
Market and Credit Risk Sensitive Instruments
Entergy Wholesale Commodities Portfolio See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS –Market and Credit Risk Sensitive Instruments” in the Form 10-K for a discussion of market and credit risk sensitive instruments. Following is an update to that discussion.
Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plantsEntergy’s non-utility operations contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements. 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, 2022,2023, based on power prices at that time, Entergy had liquidity exposure of $26$10 million under the guarantees in place supporting Entergy Wholesale CommoditiesEntergy’s non-utility operations transactions and $8$9 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of March 31, 2022, Entergy would have been required to provide approximately $30 million of additional cash or letters of credit under some of the agreements. As of March 31, 2022, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by an insignificant amount for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.
As of March 31, 2022, substantially all of the credit exposure associated with the planned energy output under contract for the Palisades plant 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.
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, 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 SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | | |
| | | |
| 2023 | | 2022 | | | | |
| (In Thousands, Except Share Data) |
OPERATING REVENUES | | | | | | | |
Electric | $2,883,411 | | | $2,655,776 | | | | | |
Natural gas | 64,581 | | | 72,361 | | | | | |
Other | 33,067 | | | 149,788 | | | | | |
TOTAL | 2,981,059 | | | 2,877,925 | | | | | |
| | | | | | | |
OPERATING EXPENSES | | | | | | | |
Operation and Maintenance: | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | 898,384 | | | 666,938 | | | | | |
Purchased power | 238,288 | | | 269,626 | | | | | |
Nuclear refueling outage expenses | 37,233 | | | 43,002 | | | | | |
Other operation and maintenance | 631,526 | | | 678,812 | | | | | |
Asset write-offs, impairments, and related charges | — | | | 744 | | | | | |
Decommissioning | 50,493 | | | 62,048 | | | | | |
Taxes other than income taxes | 185,437 | | | 180,148 | | | | | |
Depreciation and amortization | 453,916 | | | 438,972 | | | | | |
Other regulatory charges (credits) - net | 23,673 | | | (28,425) | | | | | |
TOTAL | 2,518,950 | | | 2,311,865 | | | | | |
| | | | | | | |
OPERATING INCOME | 462,109 | | | 566,060 | | | | | |
| | | | | | | |
OTHER INCOME | | | | | | | |
Allowance for equity funds used during construction | 23,146 | | | 15,871 | | | | | |
Interest and investment income (loss) | 48,259 | | | (21,918) | | | | | |
Miscellaneous - net | (54,452) | | | 7,603 | | | | | |
TOTAL | 16,953 | | | 1,556 | | | | | |
| | | | | | | |
INTEREST EXPENSE | | | | | | | |
Interest expense | 255,329 | | | 227,622 | | | | | |
Allowance for borrowed funds used during construction | (9,591) | | | (6,096) | | | | | |
TOTAL | 245,738 | | | 221,526 | | | | | |
| | | | | | | |
INCOME BEFORE INCOME TAXES | 233,324 | | | 346,090 | | | | | |
| | | | | | | |
Income taxes | (78,975) | | | 66,497 | | | | | |
| | | | | | | |
CONSOLIDATED NET INCOME | 312,299 | | | 279,593 | | | | | |
| | | | | | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | 1,364 | | | 3,193 | | | | | |
| | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | $310,935 | | | $276,400 | | | | | |
| | | | | | | |
Earnings per average common share: | | | | | | | |
Basic | $1.47 | | | $1.36 | | | | | |
Diluted | $1.47 | | | $1.36 | | | | | |
| | | | | | | |
Basic average number of common shares outstanding | 211,350,705 | | | 202,943,628 | | | | | |
Diluted average number of common shares outstanding | 212,146,507 | | | 203,888,483 | | | | | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | | |
| | | |
| | | | | 2022 | | 2021 |
| | | | | (In Thousands, Except Share Data) |
OPERATING REVENUES | | | | | | | |
Electric | | | | | $2,655,776 | | | $2,538,420 | |
Natural gas | | | | | 72,361 | | | 58,168 | |
Competitive businesses | | | | | 149,788 | | | 248,250 | |
TOTAL | | | | | 2,877,925 | | | 2,844,838 | |
| | | | | | | |
OPERATING EXPENSES | | | | | | | |
Operation and Maintenance: | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | 666,938 | | | 501,167 | |
Purchased power | | | | | 269,626 | | | 379,734 | |
Nuclear refueling outage expenses | | | | | 43,002 | | | 43,739 | |
Other operation and maintenance | | | | | 678,812 | | | 706,786 | |
Asset write-offs, impairments, and related charges | | | | | 744 | | | 3,273 | |
Decommissioning | | | | | 62,048 | | | 98,642 | |
Taxes other than income taxes | | | | | 180,148 | | | 156,702 | |
Depreciation and amortization | | | | | 438,972 | | | 414,519 | |
Other regulatory charges (credits) - net | | | | | (28,425) | | | 32,279 | |
TOTAL | | | | | 2,311,865 | | | 2,336,841 | |
| | | | | | | |
OPERATING INCOME | | | | | 566,060 | | | 507,997 | |
| | | | | | | |
OTHER INCOME | | | | | | | |
Allowance for equity funds used during construction | | | | | 15,871 | | | 14,577 | |
Interest and investment income (loss) | | | | | (21,918) | | | 143,315 | |
Miscellaneous - net | | | | | 7,603 | | | (60,929) | |
TOTAL | | | | | 1,556 | | | 96,963 | |
| | | | | | | |
INTEREST EXPENSE | | | | | | | |
Interest expense | | | | | 227,622 | | | 205,886 | |
Allowance for borrowed funds used during construction | | | | | (6,096) | | | (6,013) | |
TOTAL | | | | | 221,526 | | | 199,873 | |
| | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | 346,090 | | | 405,087 | |
| | | | | | | |
Income taxes | | | | | 66,497 | | | 65,942 | |
| | | | | | | |
CONSOLIDATED NET INCOME | | | | | 279,593 | | | 339,145 | |
| | | | | | | |
Preferred dividend requirements of subsidiaries and noncontrolling interest | | | | | 3,193 | | | 4,580 | |
| | | | | | | |
NET INCOME ATTRIBUTABLE TO ENTERGY CORPORATION | | | | | $276,400 | | | $334,565 | |
| | | | | | | |
Earnings per average common share: | | | | | | | |
Basic | | | | | $1.36 | | | $1.67 | |
Diluted | | | | | $1.36 | | | $1.66 | |
| | | | | | | |
Basic average number of common shares outstanding | | | | | 202,943,628 | | | 200,525,549 | |
Diluted average number of common shares outstanding | | | | | 203,888,483 | | | 201,059,665 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | | | | |
| | | |
| 2023 | | 2022 | | | | |
| | | | | | | |
| (In Thousands) |
| | | | | | | |
Net Income | $312,299 | | | $279,593 | | | | | |
| | | | | | | |
Other comprehensive income (loss) | | | | | | | |
Cash flow hedges net unrealized gain (net of tax benefit of $— and $—) | — | | | 24 | | | | | |
Pension and other postretirement liabilities (net of tax expense of $731 and $2,542) | 2,027 | | | 8,328 | | | | | |
Net unrealized investment loss (net of tax benefit of $— and $7,221) | — | | | (12,402) | | | | | |
Other comprehensive income (loss) | 2,027 | | | (4,050) | | | | | |
| | | | | | | |
Comprehensive Income | 314,326 | | | 275,543 | | | | | |
Preferred dividend requirements of subsidiaries and noncontrolling interests | 1,364 | | | 3,193 | | | | | |
Comprehensive Income Attributable to Entergy Corporation | $312,962 | | | $272,350 | | | | | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
(Page left blank intentionally)
| | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | | | | |
| | | |
| | | | | 2022 | | 2021 |
| | | | | | | |
| | | | | (In Thousands) |
| | | | | | | |
Net Income | | | | | $279,593 | | | $339,145 | |
| | | | | | | |
Other comprehensive loss | | | | | | | |
Cash flow hedges net unrealized gain (loss) (net of tax benefit of $— and $7,869) | | | | | 24 | | | (29,580) | |
Pension and other postretirement liabilities (net of tax expense of $2,542, and $6,314) | | | | | 8,328 | | | 22,967 | |
Net unrealized investment loss (net of tax benefit of $7,221 and $25,581) | | | | | (12,402) | | | (44,687) | |
Other comprehensive loss | | | | | (4,050) | | | (51,300) | |
| | | | | | | |
Comprehensive Income | | | | | 275,543 | | | 287,845 | |
Preferred dividend requirements of subsidiaries and noncontrolling interest | | | | | 3,193 | | | 4,580 | |
Comprehensive Income Attributable to Entergy Corporation | | | | | $272,350 | | | $283,265 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Consolidated net income | | $312,299 | | | $279,593 | |
Adjustments to reconcile consolidated net income to net cash flow provided by operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 553,224 | | | 561,731 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | (98,244) | | | 70,780 | |
Asset write-offs, impairments, and related charges | | — | | | 744 | |
| | | | |
Changes in working capital: | | | | |
Receivables | | 272,533 | | | 122,987 | |
Fuel inventory | | (29,484) | | | 14,795 | |
Accounts payable | | (339,963) | | | (283,175) | |
Taxes accrued | | (66,717) | | | (79,941) | |
Interest accrued | | 30,627 | | | 32,862 | |
Deferred fuel costs | | 442,598 | | | (58,932) | |
Other working capital accounts | | (67,971) | | | (95,033) | |
Changes in provisions for estimated losses | | 25 | | | 8,206 | |
Changes in other regulatory assets | | 542,694 | | | (1,424,270) | |
Changes in other regulatory liabilities | | 136,685 | | | (250,358) | |
Effect of securitization on regulatory asset | | (491,150) | | | 1,491,942 | |
| | | | |
Changes in pension and other postretirement liabilities | | (64,088) | | | (101,641) | |
Other | | (173,525) | | | 247,676 | |
Net cash flow provided by operating activities | | 959,543 | | | 537,966 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction/capital expenditures | | (1,175,657) | | | (1,501,578) | |
Allowance for equity funds used during construction | | 23,146 | | | 15,871 | |
Nuclear fuel purchases | | (90,809) | | | (83,326) | |
| | | | |
| | | | |
Litigation proceeds from settlement agreement | | — | | | 9,829 | |
Changes in securitization account | | (3,904) | | | 13,532 | |
Payments to storm reserve escrow account | | (4,196) | | | — | |
| | | | |
Increase in other investments | | (3,462) | | | (11,862) | |
Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | — | | | 32,367 | |
Proceeds from nuclear decommissioning trust fund sales | | 204,128 | | | 479,937 | |
Investment in nuclear decommissioning trust funds | | (232,837) | | | (505,989) | |
Net cash flow used in investing activities | | (1,283,591) | | | (1,551,219) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of: | | | | |
Long-term debt | | 1,614,522 | | | 2,553,369 | |
| | | | |
Treasury stock | | 4,017 | | | 9,629 | |
| | | | |
Retirement of long-term debt | | (834,530) | | | (1,224,091) | |
| | | | |
| | | | |
Changes in credit borrowings and commercial paper - net | | 37,995 | | | 141,634 | |
| | | | |
Proceeds from trust related to securitization | | 1,457,676 | | | — | |
Other | | 21,490 | | | 1,382 | |
Dividends paid: | | | | |
Common stock | | (226,194) | | | (205,058) | |
Preferred stock | | (4,580) | | | (4,580) | |
Net cash flow provided by financing activities | | 2,070,396 | | | 1,272,285 | |
| | | | |
| | | | |
| | | | |
Net increase in cash and cash equivalents | | 1,746,348 | | | 259,032 | |
| | | | |
Cash and cash equivalents at beginning of period | | 224,164 | | | 442,559 | |
| | | | |
Cash and cash equivalents at end of period | | $1,970,512 | | | $701,591 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $215,082 | | | $186,269 | |
Income taxes | | ($5,352) | | | ($11,505) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Consolidated net income | | $279,593 | | | $339,145 | |
Adjustments to reconcile consolidated net income to net cash flow provided by (used in) operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 561,731 | | | 580,571 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | 70,780 | | | 240,431 | |
Asset write-offs, impairments, and related charges | | 744 | | | 3,278 | |
| | | | |
Changes in working capital: | | | | |
Receivables | | 122,987 | | | (52,690) | |
Fuel inventory | | 14,795 | | | 26,878 | |
Accounts payable | | (283,175) | | | (175,651) | |
Taxes accrued | | (79,941) | | | (231,182) | |
Interest accrued | | 32,862 | | | (3,778) | |
Deferred fuel costs | | (58,932) | | | (353,099) | |
Other working capital accounts | | (95,033) | | | (43,582) | |
Changes in provisions for estimated losses | | 8,206 | | | (60,923) | |
Changes in other regulatory assets | | (1,424,270) | | | 89,910 | |
Changes in other regulatory liabilities | | (250,358) | | | (14,464) | |
Storm restoration costs approved for securitization recognized as regulatory asset | | 1,491,942 | | | — | |
Changes in pension and other postretirement liabilities | | (101,641) | | | (166,733) | |
Other | | 247,676 | | | (227,676) | |
Net cash flow provided by (used in) operating activities | | 537,966 | | | (49,565) | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction/capital expenditures | | (1,501,578) | | | (1,552,103) | |
Allowance for equity funds used during construction | | 15,871 | | | 14,577 | |
Nuclear fuel purchases | | (83,326) | | | (47,916) | |
| | | | |
| | | | |
Litigation proceeds from settlement agreement | | 9,829 | | | — | |
Changes in securitization account | | 13,532 | | | (1,304) | |
Payments to storm reserve escrow account | | — | | | (10) | |
Receipts from storm reserve escrow account | | — | | | 44,205 | |
Decrease (increase) in other investments | | (11,862) | | | 12,521 | |
Litigation proceeds for reimbursement of spent nuclear fuel storage costs | | 32,367 | | | 15,735 | |
Proceeds from nuclear decommissioning trust fund sales | | 479,937 | | | 3,225,510 | |
Investment in nuclear decommissioning trust funds | | (505,989) | | | (3,224,487) | |
Net cash flow used in investing activities | | (1,551,219) | | | (1,513,272) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $62,724 | | | $115,290 | |
Temporary cash investments | | 1,907,788 | | | 108,874 | |
Total cash and cash equivalents | | 1,970,512 | | | 224,164 | |
Accounts receivable: | | | | |
Customer | | 629,700 | | | 788,552 | |
Allowance for doubtful accounts | | (23,338) | | | (30,856) | |
Other | | 197,554 | | | 241,702 | |
Accrued unbilled revenues | | 436,741 | | | 495,859 | |
Total accounts receivable | | 1,240,657 | | | 1,495,257 | |
Deferred fuel costs | | 282,429 | | | 710,401 | |
Fuel inventory - at average cost | | 177,116 | | | 147,632 | |
Materials and supplies - at average cost | | 1,233,487 | | | 1,183,308 | |
Deferred nuclear refueling outage costs | | 155,688 | | | 143,653 | |
Prepayments and other | | 206,353 | | | 190,611 | |
TOTAL | | 5,266,242 | | | 4,095,026 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
| | | | |
Decommissioning trust funds | | 4,349,892 | | | 4,121,864 | |
Non-utility property - at cost (less accumulated depreciation) | | 400,579 | | | 366,405 | |
Storm reserve escrow account | | 406,150 | | | 401,955 | |
Other | | 101,498 | | | 102,259 | |
TOTAL | | 5,258,119 | | | 4,992,483 | |
| | | | |
PROPERTY, PLANT, AND EQUIPMENT | | | | |
Electric | | 64,249,378 | | | 64,646,911 | |
| | | | |
Natural gas | | 697,771 | | | 691,970 | |
Construction work in progress | | 2,157,341 | | | 1,844,171 | |
Nuclear fuel | | 587,956 | | | 582,119 | |
TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 67,692,446 | | | 67,765,171 | |
Less - accumulated depreciation and amortization | | 25,570,360 | | | 25,288,047 | |
PROPERTY, PLANT, AND EQUIPMENT - NET | | 42,122,086 | | | 42,477,124 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $273,181 as of March 31, 2023 and $282,886 as of December 31, 2022) | | 5,493,703 | | | 6,036,397 | |
Deferred fuel costs | | 241,085 | | | 241,085 | |
Goodwill | | 377,172 | | | 377,172 | |
Accumulated deferred income taxes | | 82,529 | | | 84,100 | |
Other | | 362,340 | | | 291,804 | |
TOTAL | | 6,556,829 | | | 7,030,558 | |
| | | | |
TOTAL ASSETS | | $59,203,276 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of: | | | | |
Long-term debt | | 2,553,369 | | | 3,676,242 | |
| | | | |
Treasury stock | | 9,629 | | | 979 | |
| | | | |
Retirement of long-term debt | | (1,224,091) | | | (1,346,172) | |
| | | | |
| | | | |
Changes in credit borrowings and commercial paper - net | | 141,634 | | | (599,860) | |
Other | | 1,382 | | | 10,380 | |
Dividends paid: | | | | |
Common stock | | (205,058) | | | (190,595) | |
Preferred stock | | (4,580) | | | (4,580) | |
Net cash flow provided by financing activities | | 1,272,285 | | | 1,546,394 | |
| | | | |
| | | | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | 259,032 | | | (16,443) | |
| | | | |
Cash and cash equivalents at beginning of period | | 442,559 | | | 1,759,099 | |
| | | | |
Cash and cash equivalents at end of period | | $701,591 | | | $1,742,656 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $186,269 | | | $202,451 | |
Income taxes | | ($11,505) | | | $9,015 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $2,259,046 | | | $2,309,037 | |
Notes payable and commercial paper | | 865,616 | | | 827,621 | |
Accounts payable | | 1,385,949 | | | 1,777,590 | |
Customer deposits | | 429,211 | | | 424,723 | |
Taxes accrued | | 357,374 | | | 424,091 | |
Interest accrued | | 225,891 | | | 195,264 | |
Deferred fuel costs | | 14,626 | | | — | |
| | | | |
Pension and other postretirement liabilities | | 87,588 | | | 104,845 | |
| | | | |
Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
Other | | 200,028 | | | 202,779 | |
TOTAL | | 5,825,329 | | | 6,369,447 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 4,738,377 | | | 4,818,837 | |
Accumulated deferred investment tax credits | | 209,128 | | | 211,220 | |
| | | | |
Regulatory liability for income taxes - net | | 1,234,992 | | | 1,258,276 | |
Other regulatory liabilities | | 2,588,056 | | | 2,324,590 | |
Decommissioning and asset retirement cost liabilities | | 4,325,106 | | | 4,271,531 | |
Accumulated provisions | | 531,226 | | | 531,201 | |
Pension and other postretirement liabilities | | 1,166,724 | | | 1,213,555 | |
Long-term debt (includes securitization bonds of $292,912 as of March 31, 2023 and $292,760 as of December 31, 2022) | | 24,464,263 | | | 23,623,512 | |
Other | | 733,737 | | | 688,720 | |
TOTAL | | 39,991,609 | | | 38,941,442 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
Subsidiaries' preferred stock without sinking fund | | 219,410 | | | 219,410 | |
| | | | |
EQUITY | | | | |
Preferred stock, no par value, authorized 1,000,000 shares in 2023 and 2022; issued shares in 2023 and 2022 - none | | — | | | — | |
Common stock, $.01 par value, authorized 499,000,000 shares in 2023 and 2022; issued 279,653,929 shares in 2023 and 2022 | | 2,797 | | | 2,797 | |
Paid-in capital | | 7,617,777 | | | 7,632,895 | |
Retained earnings | | 10,586,782 | | | 10,502,041 | |
Accumulated other comprehensive loss | | (189,727) | | | (191,754) | |
Less - treasury stock, at cost (68,207,883 shares in 2023 and 68,477,429 shares in 2022) | | 4,959,395 | | | 4,978,994 | |
Total common shareholders' equity | | 13,058,234 | | | 12,966,985 | |
Subsidiaries' preferred stock without sinking fund and noncontrolling interests | | 108,694 | | | 97,907 | |
TOTAL | | 13,166,928 | | | 13,064,892 | |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $59,203,276 | | | $58,595,191 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $76,146 | | | $44,944 | |
Temporary cash investments | | 625,445 | | | 397,615 | |
Total cash and cash equivalents | | 701,591 | | | 442,559 | |
Accounts receivable: | | | | |
Customer | | 668,620 | | | 786,866 | |
Allowance for doubtful accounts | | (31,486) | | | (68,608) | |
Other | | 171,858 | | | 231,843 | |
Accrued unbilled revenues | | 406,010 | | | 420,255 | |
Total accounts receivable | | 1,215,002 | | | 1,370,356 | |
Deferred fuel costs | | 375,670 | | | 324,394 | |
Fuel inventory - at average cost | | 139,780 | | | 154,575 | |
Materials and supplies - at average cost | | 1,066,535 | | | 1,041,515 | |
Deferred nuclear refueling outage costs | | 125,192 | | | 133,422 | |
Prepayments and other | | 215,231 | | | 156,774 | |
TOTAL | | 3,839,001 | | | 3,623,595 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
| | | | |
Decommissioning trust funds | | 5,210,130 | | | 5,514,016 | |
Non-utility property - at cost (less accumulated depreciation) | | 357,092 | | | 357,576 | |
Other | | 159,728 | | | 159,455 | |
TOTAL | | 5,726,950 | | | 6,031,047 | |
| | | | |
PROPERTY, PLANT, AND EQUIPMENT | | | | |
Electric | | 63,405,911 | | | 64,263,250 | |
| | | | |
Natural gas | | 666,646 | | | 658,989 | |
Construction work in progress | | 1,556,651 | | | 1,511,966 | |
Nuclear fuel | | 547,706 | | | 577,006 | |
TOTAL PROPERTY, PLANT, AND EQUIPMENT | | 66,176,914 | | | 67,011,211 | |
Less - accumulated depreciation and amortization | | 24,982,767 | | | 24,767,051 | |
PROPERTY, PLANT, AND EQUIPMENT - NET | | 41,194,147 | | | 42,244,160 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $34,145 as of March 31, 2022 and $49,579 as of December 31, 2021) | | 8,037,526 | | | 6,613,256 | |
Deferred fuel costs | | 241,002 | | | 240,953 | |
Goodwill | | 377,172 | | | 377,172 | |
Accumulated deferred income taxes | | 58,388 | | | 54,186 | |
Other | | 359,340 | | | 269,873 | |
TOTAL | | 9,073,428 | | | 7,555,440 | |
| | | | |
TOTAL ASSETS | | $59,833,526 | | | $59,454,242 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $1,039,335 | | | $1,039,329 | |
Notes payable and commercial paper | | 1,342,811 | | | 1,201,177 | |
Accounts payable | | 1,741,052 | | | 2,610,132 | |
Customer deposits | | 402,600 | | | 395,184 | |
Taxes accrued | | 339,887 | | | 419,828 | |
Interest accrued | | 224,013 | | | 191,151 | |
Deferred fuel costs | | — | | | 7,607 | |
| | | | |
Pension and other postretirement liabilities | | 60,249 | | | 68,336 | |
Current portion of unprotected excess accumulated deferred income taxes | | 35,241 | | | 53,385 | |
Other | | 177,997 | | | 204,613 | |
TOTAL | | 5,363,185 | | | 6,190,742 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 4,796,208 | | | 4,706,797 | |
Accumulated deferred investment tax credits | | 209,921 | | | 211,975 | |
| | | | |
Regulatory liability for income taxes-net | | 1,233,417 | | | 1,255,692 | |
Other regulatory liabilities | | 2,433,906 | | | 2,643,845 | |
Decommissioning and asset retirement cost liabilities | | 4,816,524 | | | 4,757,084 | |
Accumulated provisions | | 165,328 | | | 157,122 | |
Pension and other postretirement liabilities | | 1,855,771 | | | 1,949,325 | |
Long-term debt (includes securitization bonds of $54,674 as of March 31, 2022 and $83,639 as of December 31, 2021) | | 26,176,449 | | | 24,841,572 | |
Other | | 786,581 | | | 815,284 | |
TOTAL | | 42,474,105 | | | 41,338,696 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
Subsidiaries' preferred stock without sinking fund | | 219,410 | | | 219,410 | |
| | | | |
EQUITY | | | | |
Preferred stock, no par value, authorized 1,000,000 shares in 2022 and 2021; issued shares in 2022 and 2021 - none | | — | | | — | |
Common stock, $.01 par value, authorized 499,000,000 shares in 2022 and 2021; issued 271,965,510 shares in 2022 and 2021 | | 2,720 | | | 2,720 | |
Paid-in capital | | 6,735,154 | | | 6,766,239 | |
Retained earnings | | 10,311,894 | | | 10,240,552 | |
Accumulated other comprehensive loss | | (336,578) | | | (332,528) | |
Less - treasury stock, at cost (68,808,788 shares in 2022 and 69,312,326 shares in 2021) | | 5,003,087 | | | 5,039,699 | |
Total common shareholders' equity | | 11,710,103 | | | 11,637,284 | |
Subsidiaries' preferred stock without sinking fund and noncontrolling interest | | 66,723 | | | 68,110 | |
TOTAL | | 11,776,826 | | | 11,705,394 | |
| | | | |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | | $59,833,526 | | | $59,454,242 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY CORPORATION AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 20222023 and 20212022 |
(Unaudited) |
| | | | | |
| | | Common Shareholders’ Equity | | |
| Subsidiaries’ Preferred Stock and Noncontrolling InterestInterests | | Common Stock | | Treasury Stock | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total |
| (In Thousands) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
| | | | | | Balance at December 31, 2020 | $35,000 | | | $2,700 | | | ($5,074,456) | | | $6,549,923 | | | $9,897,182 | | | ($449,207) | | | $10,961,142 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | $68,110 | | | $2,720 | | | ($5,039,699) | | | $6,766,239 | | | $10,240,552 | | | ($332,528) | | | $11,705,394 | |
| Consolidated net income (a) | Consolidated net income (a) | 4,580 | | | — | | | — | | | — | | | 334,565 | | | — | | | 339,145 | | Consolidated net income (a) | 3,193 | | | — | | | — | | | — | | | 276,400 | | | — | | | 279,593 | |
Other comprehensive loss | Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (51,300) | | | (51,300) | | Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (4,050) | | | (4,050) | |
Common stock issuances related to stock plans | Common stock issuances related to stock plans | — | | | — | | | 28,235 | | | (29,871) | | | — | | | — | | | (1,636) | | Common stock issuances related to stock plans | — | | | — | | | 36,612 | | | (31,085) | | | — | | | — | | | 5,527 | |
Common stock dividends declared | Common stock dividends declared | — | | | — | | | — | | | — | | | (190,595) | | | — | | | (190,595) | | Common stock dividends declared | — | | | — | | | — | | | — | | | (205,058) | | | — | | | (205,058) | |
Preferred dividend requirements of subsidiaries (a) | Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | | Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at March 31, 2021 | $35,000 | | | $2,700 | | | ($5,046,221) | | | $6,520,052 | | | $10,041,152 | | | ($500,507) | | | $11,052,176 | | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | $66,723 | | | $2,720 | | | ($5,003,087) | | | $6,735,154 | | | $10,311,894 | | | ($336,578) | | | $11,776,826 | |
| | | | | | |
| Balance at December 31, 2021 | $68,110 | | | $2,720 | | | ($5,039,699) | | | $6,766,239 | | | $10,240,552 | | | ($332,528) | | | $11,705,394 | |
| | | | | Balance at December 31, 2022 | | Balance at December 31, 2022 | $97,907 | | | $2,797 | | | ($4,978,994) | | | $7,632,895 | | | $10,502,041 | | | ($191,754) | | | $13,064,892 |
| Consolidated net income (a) | Consolidated net income (a) | 3,193 | | | — | | | — | | | — | | | 276,400 | | | — | | | 279,593 | | Consolidated net income (a) | 1,364 | | | — | | | — | | | — | | | 310,935 | | | — | | | 312,299 | |
Other comprehensive loss | — | | | — | | | — | | | — | | | — | | | (4,050) | | | (4,050) | | |
Other comprehensive income | | Other comprehensive income | — | | | — | | | — | | | — | | | — | | | 2,027 | | | 2,027 | |
Common stock issuances related to stock plans | Common stock issuances related to stock plans | — | | | — | | | 36,612 | | | (31,085) | | | — | | | — | | | 5,527 | | Common stock issuances related to stock plans | — | | | — | | | 19,599 | | | (15,118) | | | — | | | — | | | 4,481 | |
Common stock dividends declared | Common stock dividends declared | — | | | — | | | — | | | — | | | (205,058) | | | — | | | (205,058) | | Common stock dividends declared | — | | | — | | | — | | | — | | | (226,194) | | | — | | | (226,194) | |
Beneficial interest in storm trust | | Beneficial interest in storm trust | 14,577 | | | — | | | — | | | — | | | — | | | — | | | 14,577 | |
Distributions to noncontrolling interests | | Distributions to noncontrolling interests | (574) | | | — | | | — | | | — | | | — | | | — | | | (574) | |
Preferred dividend requirements of subsidiaries (a) | Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | | Preferred dividend requirements of subsidiaries (a) | (4,580) | | | — | | | — | | | — | | | — | | | — | | | (4,580) | |
Balance at March 31, 2022 | $66,723 | | | $2,720 | | | ($5,003,087) | | | $6,735,154 | | | $10,311,894 | | | ($336,578) | | | $11,776,826 | | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | $108,694 | | | $2,797 | | | ($4,959,395) | | | $7,617,777 | | | $10,586,782 | | | ($189,727) | | | $13,166,928 | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| (a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2022 and first quarter 2021 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | |
(a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2023 and first quarter 2022 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. | | (a) Consolidated net income and preferred dividend requirements of subsidiaries for first quarter 2023 and first quarter 2022 each includes $4 million of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity. |
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 authorities, 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.
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.
In October 2021March 2023 the DOE submitted an offer of judgment to resolve claims in the fourth round ANO damages case. The $41 million offer was accepted by Entergy Arkansas, and the U.S. Court of Federal Claims issued a final judgment in thethat amount of $83 million in favor of Entergy Nuclear Indian Point 2, LLCArkansas and Entergy Nuclear Indian Point 3, LLC against the DOE in the Indian Point Unit 2 third round and Unit 3 second round combined damages case.DOE. Entergy Arkansas received payment from the U.S. Treasury in January 2022.April 2023. The effecteffects of recording the judgment was a reductionwere reductions to asset write-offs, impairments,plant, nuclear fuel expense, other operation and related charges.maintenance expense, materials and supplies, and taxes other than income taxes. The ANO damages awarded included $32$18 million related to costs previously recorded as plant, $47capitalized, $10 million related to costs previously recorded as other operation and maintenance expenses,expense, $8 million related to costs previously recorded as nuclear fuel expense, $3 million related to costs previously recorded as materials and $4supplies, and $2 million related to costs previously recorded as taxes other than income taxes.
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.
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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Employment and Labor-related Proceedings
See Note 8 to the financial statements in the Form 10-K for information on Entergy’s employment and labor-related proceedings.
Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)
See Note 8 to the financial statements in the Form 10-K for information regarding asbestos litigation.
Grand Gulf - Related Agreements
See Note 8 to the financial statements in the Form 10-K for information regarding Grand Gulf-related agreements.
Nelson Industrial Steam Company
Entergy Louisiana is a partner in the Nelson Industrial Steam Company (NISCO) partnership which owns two petroleum coke generating units. In April 2023 these generating units suspended operations in the MISO market, and Entergy Louisiana currently is working with the partners to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. Entergy Louisiana is evaluating the effect of this on its financial condition, results of operations, and cash flows but at this time does not expect the effects to be material.
NOTE 2. RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Regulatory Assets and Regulatory Liabilities
See Note 2 to the financial statements in the Form 10-K for information regarding regulatory assets and regulatory liabilities in the Utility business presented on the balance sheets of Entergy and the Registrant Subsidiaries. The following are updates to that discussion.
Fuel and purchased power cost recovery
Entergy Arkansas
Energy Cost Recovery Rider
In March 2022,2023, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase from $0.00959$0.01639 per kWh to $0.01785$0.01883 per kWh. The primary reason for the rate increase is a large under-recoveryunder-recovered balance as a result of higher natural gas prices in 2021, particularly in the fourth quarter 2021. At the request of the APSC general staff, Entergy Arkansas deferred its request for recovery of2022 and a $32 million from the under-recoverydeferral related to the 2021 February winter storms untilconsistent with APSC general staff’s request in 2022. The under-recovered balance included in the filing was partially offset by the proceeds of the $41.7 million refund that System Energy made to Entergy Arkansas in January 2023 energy cost rate redetermination, unless a request for an interim adjustmentrelated to the energy cost recovery rider is necessary. This resultedsale-leaseback renewal costs and depreciation litigation as calculated in aSystem Energy’s January 2023 compliance report filed with the FERC. The redetermined rate of $0.016390$0.01883 per kWh which became effective with the first billing cycle in April 20222023 through the normal operation of the tariff. See Note 2 to the financial statements in the Form 10-K for information on the 2021 February winter storm investigation proceeding.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Texas
As discussed in the Form 10-K, in September 2022, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. As of the end of the reconciliation period, Entergy Texas’s cumulative under-recovery balance was approximately $103.1 million, including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2022, pending future surcharges or refunds as approved by the PUCT. In November 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2023 municipal intervenors filed testimony proposing a $5.2 million disallowance for fuel purchased during Winter Storm Uri.PUCT staff proposed no disallowance. Entergy Texas filed rebuttal testimony in April 2023 and a hearing on the merits is set for May 2023. A PUCT decision is expected in September 2023.
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)
COVID-19 Orders
See Note 2 to the financial statements in the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. As of March 31, 2022,2023, Entergy Arkansas had a regulatory asset of $34.4$39 million for costs associated with the COVID-19 pandemic.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Filings with the LPSC (Entergy Louisiana)
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subjectApril 2023, Entergy Louisiana filed an application proposing to utilize approximately $1.6 billion in certain low interest debt to generate earnings to apply toward the reduction of the COVID-19 regulatory asset. In that filing, Entergy Louisiana proposed to delay repayment of certain shorter-term first mortgage bonds that were issued to finance storm restoration costs until the costs could be securitized, and to invest the funds that otherwise would be used to repay those bonds in the money pool to take advantage of the spread between prevailing interest rates on investments in the money pool and the interest rates on the bonds. In the event the LPSC review and approval, of losses and expenses incurred dueapproves Entergy Louisiana’s requested relief, subsequent filings will be required to compliance with the LPSC’s COVID-19 orders. Utilities seeking to recover the regulatory asset must formally petitionpermit the LPSC to do so, identifyingreview the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval.COVID-19 regulatory asset. As of March 31, 2022,2023, Entergy Louisiana had a regulatory asset of $47.8 million for costs associated with the COVID-19COVID-19 pandemic.
Filings with the MPSC (Entergy Mississippi)
2022Retail Rates
2023 Formula Rate Plan Filing
In March 2022,2023, Entergy Mississippi submitted its formula rate plan 20222023 test year filing and 20212022 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 20212022 calendar year to be below the formula rate plan bandwidth and projected earned return for the 20222023 calendar year to be below the
Entergy Corporation and Subsidiaries
Notes to Financial Statements
formula rate plan bandwidth.The 20222023 test year filing shows a $69$39.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equityrate base to the specified point of adjustment of 6.70% return on rate base,6.67%, within the formula rate plan bandwidth.The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $48.6 million. The 20212022 look-back filing compares actual 20212022 results to the approved benchmark return on rate base and reflects the need for a $34.5$19.8 million interimtemporary increase in formula rate plan revenues. revenues, including the refund of a $1.3 million over-recovery resulting from the demand-side management costs true-up for 2022.In fourth quarter 2021,2022, Entergy Mississippi recorded a regulatory asset of $19$18.2 million to reflect the then-current estimate in connection with the look-back feature of the formula rate plan. plan to reflect that the 2022 estimated earned return was below the formula rate plan bandwidth.In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $24.3$27.9 million interim rate increase, reflecting a cap equal to 2% of 20212022 retail revenues, effective in April 2022, subject to refund, pending a final MPSC order. A final order is expected in the second quarter 2022, with the resulting final rates, including amounts above the 2% cap of 2021 retail revenues, effective July 2022.
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses.As of March 31, 2022, Entergy Mississippi had a regulatory asset of $14.1 million for costs associated with the COVID-19 pandemic.2023.
Filings with the City Council (Entergy New Orleans)
2022Retail Rates
2023 Formula Rate Plan Filing
In April 2022,2023, Entergy New Orleans submitted to the City Council its formula rate plan 20212022 test year filing. The 20212022 test year evaluation report produced an electric earned return on equity of 6.88%7.34% and a gas earned return on equity of 3.52% compared to the authorized return on equity for each of 9.35%. Entergy New Orleans seeks approval of a $40.2$25.6 million rate increase based on the formula set by the City Council in the 2018 rate case. The formula results in an increase in authorized electric revenues of $32.3$17.4 million and an increase in authorized gas revenues of $3.2$8.2 million. Entergy New Orleans also seeks to commence collecting $4.7$3.4 million in electric revenues that were previously approved by the City Council for collection through the formula rate plan. The filing is subject to review by the City Council and other parties over a 75-day review period, followed by a 25-day period to resolve any disputes among the parties. Resulting rates will be effective with the first billing cycle of September 20222023 pursuant to the formula rate plan
Entergy Corporation and Subsidiaries
Notes to Financial Statements
tariff. For any disputed rate adjustments, however, the City Council would set a procedural schedule that would extend the process for City Council approval of disputed rate adjustments.
COVID-19 Orders
As discussed in the Form 10-K, in May 2020 the City Council issued an accounting order authorizing Entergy New Orleans to establish a regulatory asset for incremental COVID-19-related expenses. As of March 31, 2022, Entergy New Orleans had a regulatory asset of $14.5 million for costs associated with the COVID-19 pandemic.
Filings with the PUCT and Texas Cities (Entergy Texas)
Distribution Cost Recovery Factor (DCRF) RiderRetail Rates
As discussed in the Form 10-K, in August 2021, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $40.2 million annually, or $13.9 million in incremental annual revenues beyond Entergy Texas’s currently effective DCRF rider based on its capital invested in distribution between September 1, 2020 and June 30, 2021. In September 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing scheduled in December 2021. In December 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding, including a motion for interim rates to take effect for usage on and after January 24, 2022. Also, in December 2021, the ALJ with the State Office of Administrative Hearings issued an order granting the motion for interim rates, which went into effect in January 2022, admitting evidence, and remanding the proceeding to the PUCT to consider the settlement. In March 2022 the PUCT issued an order approving the settlement.
Generation Cost Recovery Rider
As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider to begin recovering a return of and on its generation capital investment in the Montgomery County Power Station through August 31, 2020, which was approved by2022 the PUCT on an interim basis in January 2021. In March 2021, Entergy Texas filed to update its generation cost recovery rider to include its generation capital investment in Montgomery County Power Station after August 31, 2020 and an unopposed settlement agreement filed on behalf of the parties by Entergy Texas in October 2021 was approved by the PUCT in January 2022. In February 2022, Entergy Texas filed a relate-back rider to collect over five months an additional approximately $5 million, which is the difference between the interim revenue requirement approved in January 2021 and the revenue requirement approved in January 2022 that reflects Entergy Texas’s full generation capital investment and ownership in Montgomery County Power Station on January 1, 2021, plus carrying costs from January 2021 through January 2022 when the updated revenue requirement took effect. In April 2022, Entergy Texas and PUCT staff filed a joint proposed order that supports approval of Entergy Texas’s as-filed request.
In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to reflect its acquisition of the Hardin County Peaking Facility, which closed in June 2021. Because Hardin was to be acquired in the future, the initial generation cost recovery rider rates proposed in the application represented no change from the generation cost recovery rider rates established in Entergy Texas’s previous generation cost recovery rider proceeding. In July 2021 the PUCT issued an order approving the application. In August 2021, Entergy Texas filed an update application to recover its actual investment in the acquisition of the Hardin County Peaking Facility. In September 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing scheduled in April 2022. In January 2022, Entergy Texas filed an update to its application to align the requested revenue requirement with the terms of the generation cost recovery rider settlement approved by the PUCT in January 2022. In March 2022, Entergy Texas filed on
Entergy Corporation and Subsidiaries
Notes to Financial Statements
behalf of the parties an unopposed motion, which motion was granted by the ALJ with the State Office of Administrative Hearings, to abate the procedural schedule indicating that the parties had reached an agreement in principle. In April 2022, Entergy Texas filed on behalf of the parties a unanimous settlement agreement that would adjust itsadjusting Entergy Texas’s generation cost recovery rider to recover an annual revenue requirement of approximately $92.8 million which is $4.5 million in incremental annual revenue above the $88.3 million approved in January 2022, related to Entergy Texas’s actual investment in the acquisition of the Hardin County Peaking Facility.Facility, and rates became effective. In September 2022, Entergy Texas filed a relate-back rider designed to collect over three months an additional approximately $5.7 million, which is the revenue requirement, plus carrying costs, associated with Entergy Texas’s acquisition of Hardin County Peaking Facility from June 2021 through August 2022 when the updated revenue requirement took effect. In April 2023 the PUCT approved Entergy Texas’s as-filed request.
COVID-19 Orders
As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings, the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As part of its 2022 base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022. As of
Entergy Corporation and Subsidiaries
Notes to Financial Statements
March 31, 2022,2023, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic.
Entergy Arkansas Opportunity Sales Proceeding
See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in September 2020, EntergyJanuary 2023, Arkansas Electric Energy Consumers, Inc., an industrial customer association, filed a complaint innotice of appeal of the U.S. District Court for the Eastern District of Arkansas challenging the APSC’sArkansas’s order denying its motion to intervene to the United States Court of Appeals for the Eighth Circuit and a motion with the district court to stay the proceedings pending the appeal, which was denied. In February 2023, Arkansas Electric Energy Consumers, Inc. filed a motion with the United States Court of Appeals for the Eighth District to stay the proceedings pending the appeal, which also was denied. The trial was held in February 2023. Following the trial, Entergy Arkansas filed a motion with the United States Court of Appeals for the Eighth District to expedite the appeal filed by Arkansas Electric Energy Consumers, Inc. The court granted Entergy Arkansas’s request to recover the costs of the opportunity sales payments made to the other Utility operating companies. In October 2020 the APSC filed a motion to dismiss Entergy Arkansas’s complaint. In March 2022 the court denied the APSC’s motion to dismiss and in April 2022, issued a scheduling order including a trial date in Februaryoral arguments are scheduled for June 2023.
Complaints Against System Energy
See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. The following are updates to that discussion.
Return on Equity and Capital Structure Complaints
As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding initiated by the LPSC, the MPSC, the APSC, and the City Council against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $61$38 million, which includes interest through March 31, 2022,2023, and the estimated resulting annual rate reduction would be approximately $50approximately $31 million. As a result of the 2022 settlement agreement with the MPSC, both the estimated refund and rate reduction exclude Entergy Mississippi's portion. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement.The estimated refund will continue to accrue interest until a final FERC decision is issued. Based on the course of the proceeding to date, System Energy has recorded a provision of $38 million, including interest, as of March 31, 2022.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on
Entergy Corporation and Subsidiaries
Notes to Financial Statements
exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021 the LPSC, APSC, MPSC, City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions were filed in May 2021 by System Energy, the FERC trial staff, the LPSC, APSC, MPSC, and the City Council. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue
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. The APSC, the MPSC, and the City Council subsequently intervened in the proceeding. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things,decision, and in December 2022 the ALJ determined thatFERC issued an order on the ALJ’s initial decision, which affirmed it in part and modified it in part. The FERC’s order directed System Energy to calculate refunds were due on three main issues. First, with regardissues, and to provide a compliance report detailing the calculations. The FERC’s order also disallows the future recovery of sale-leaseback renewal costs, which is estimated at approximately $11.5 million annually for purchases from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans through July 2036. The three refund issues are rental expenses related to the lease renewal payments, the ALJ determined that System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of the leased assets in the cost of service. The ALJ did not calculate a valuesale-leaseback arrangements; refunds, if any, for the refund expected as a resultrevenue requirement impact of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities areincluding accumulated deferred income taxes resulting from the decommissioning uncertain tax positions from 2004 through the present; and refunds for the net effect of correcting the depreciation inputs for capital additions attributable to the portion of plant subject to the sale-leaseback.
In January 2023, System Energy filed its compliance report with the FERC. With respect to the sale-leaseback renewal costs, System Energy calculated a refund of $89.8 million, which represented all of the sale-leaseback renewal rental costs that System Energy recovered in rates, with interest. With respect to the decommissioning uncertain tax position issue, System Energy calculated that no additional refunds are owed because it had already provided a one-time historical credit (for the period January 2016 through September 2020) of $25.2 million based on the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position, and because it has been providing an ongoing rate base credit for the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position since October 2020. With respect to the depreciation refund, System Energy calculated a refund of $13.7 million, which is the net total of a refund to customers for excess depreciation expense previously collected, plus interest, offset by the additional return on rate base that System Energy previously did not collect, without interest. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the regulatory charge and corresponding regulatory liability recorded in June 2022 related to these proceedings. In January 2023, System Energy paid the refunds of $103.5 million, which included refunds of $41.7 million to Entergy Arkansas, $27.8 million to Entergy Louisiana, and $34 million to Entergy New Orleans. Based on the December 2022 FERC order and analysis of the remaining litigation, management determined that System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue throughregulatory liability related to complaints against System Energy as of March 31, 2022,2023 is approximately $422 million, plus interest, which is approximately $135 million through March 31, 2022. The ALJ also found that System Energy should include liabilities associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings retroactively and prospectively, but that System Energy should not be permitted to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue, System Energy estimates refunds of approximately $19 million, which includes interest through March 31, 2022.adequate.
The ALJ initial decision is an interim stepIn January 2023, System Energy filed a request for rehearing of the FERC’s determinations in the FERC litigation process,December 2022 order on sale-leaseback refund issues and an ALJ’s determinations made in an initial decision are not controllingfuture lease cost disallowances, the FERC’s prospective policy on uncertain tax positions, and the FERC. The ALJproper accounting of System Energy’s accumulated deferred income taxes adjustment for the Tax Cuts and Jobs Act of 2017; and a motion for confirmation of its interpretation of the December 2022 order’s remedy concerning the decommissioning tax position. In January 2023 the retail regulators filed a motion for confirmation of their interpretation of the refund requirement in the initial decision acknowledges that these are issues of first impression before the FERC. The case is pending beforeDecember 2022 FERC order and a provisional request for rehearing. In February 2023 the FERC issued a notice that the rehearing requests have been deemed denied by operation of law. The deemed denial of the rehearing request initiates the sixty-day period in which willaggrieved parties may petition for federal appellate court review of the case and issue an order on the proceeding, andunderlying FERC orders; however the FERC may accept, reject, or modifyissue a substantive order on rehearing as long as it continues to have jurisdiction over the ALJ’s initial decisioncase. In March 2023, System Energy filed in whole orthe United States Court of Appeals for the Fifth Circuit a petition for review of the December 2022 order. In March 2023, System Energy also filed an unopposed motion to stay the proceeding in part. Refunds, if any, that might be required will only become due afterthe Fifth Circuit pending the FERC’s disposition of the pending motions, and the court granted the motion to stay.
In February 2023, System Energy submitted a tariff compliance filing with the FERC issuesto clarify that, consistent with the releases provided in the MPSC settlement, Entergy Mississippi will continue to be charged for its order reviewingallocation of the initial decision.sale-leaseback renewal costs under the Unit Power Sales Agreement. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement. In March 2023, the MPSC filed a
Entergy Corporation and Subsidiaries
Notes to Financial Statements
protest to System Energy’s tariff compliance filing. The MPSC argues that the settlement did not specifically address post-settlement sale-leaseback renewal costs and that the sale-leaseback renewal costs may not be recovered under the Unit Power Sales Agreement. Entergy Mississippi’s allocated sale-leaseback renewal costs are estimated at $5.7 million annually for the remaining term of the sale-leaseback renewal.
LPSC Authorization of Additional Complaints
As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at the FERC related to the rates charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power Sales Agreement. The following are updates to that discussion.
Unit Power Sales Agreement Complaint
TheAs discussed in the Form 10-K, the first of the additional complaints was filed by the LPSC, the APSC, the MPSC, and the City Council in September 2020. The first complaint raises two sets of rate allegations: violations of the filed rate and a corresponding request for refunds for prior periods; and elements of the Unit Power Sales Agreement are unjust and unreasonable and a corresponding request for refunds for the 15-month refund period and changes to the Unit Power Sales Agreement prospectively. In May 2021 the FERC issued an order addressing the complaint, establishing a refund effective date of September 21, 2020, establishing hearing procedures, and holding those procedures in
Entergy Corporation and Subsidiaries
Notes to Financial Statements
abeyance pending the FERC’s review of the initial decision in the Grand Gulf sale-leaseback renewal complaint discussed above. System Energy agreed that the hearing should be held in abeyance but sought rehearing of the FERC’s decision as related to matters set for hearing that were beyond the scope of the FERC’s jurisdiction or authority. The complainants sought rehearing of the FERC’s decision to hold the hearing in abeyance and filed a motion to proceed, which motion System Energy subsequently opposed. In June 2021, System Energy’s request for rehearing was denied by operation of law, and System Energy filed an appeal of the FERC’s orders in the Court of Appeals for the Fifth Circuit. The appeal was initially stayed for a period of 90 days, but the stay expired. In November 2021 the Fifth Circuit dismissed the appeal as premature.
In November 2021 the LPSC, the APSC, and the City Council filed direct testimony and requested the FERC to order refunds for prior periods and prospective amendments to the Unit Power Sales Agreement. The LPSC’s refund claims include, among other things, allegations that: (1) System Energy should not have included certain sale-leaseback transaction costsfiled answering testimony in prepayments; (2)January 2022. In March 2022, the FERC trial staff filed direct and answering testimony recommending refunds and prospective modifications to the Unit Power Sales Agreement.
In April 2022, System Energy should have credited rate basefiled cross-answering testimony in response to reflect the time value of moneyFERC trial staff’s recommendations. In June 2022, the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the advance collection of lease payments; (3) System Energy incorrectly included refueling outage costs that were recorded in account 174 in rate base; and (4) System Energy should have excluded several accumulated deferred income tax balances in account 190 from rate base.190. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the FERC trial staff’s testimony and to oppose its revised recommendation.
In May 2022, the LPSC, the APSC, and the City Council filed rebuttal testimony and asserted new claims. In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony and for the hearing to begin in September 2022. The LPSChearing concluded in December 2022. Also in December 2022, a motion to extend the briefing schedule and the deadline for the initial decision was granted. The initial decision is also seekingdue in May 2023.
In November 2022, System Energy filed a retroactive adjustment to retained earnings and capital structure in conjunctionpartial settlement agreement with the implementation of its proposed refunds. In addition,APSC, the City Council, and the LPSC seeks amendments tothat resolves the following issues raised in the Unit Power Sales Agreement going forward to address below-the-linecomplaint: advance collection of lease payments, aircraft costs, executive incentive compensation, the working capital allowance, litigationmoney pool borrowings, advertising expenses, deferred nuclear refueling outage costs, industry association dues, and the 2019 termination of the capital funds agreement. The APSC argues that: (1) System Energy should have included borrowings from the Entergy System money pool in its determination of short-term debt in its cost of capital; and (2) System Energy should credit customers with System Energy’s allocation of earnings on money pool investments. The City Council allegessettlement provides that System Energy has maintained excess cash on hand in the money pool and that retention of excess cash was imprudent. Based on this allegation, the City Council’s witness recommendswill provide a black-box refund of approximately $98.8$18 million (inclusive of interest), plus additional refund amounts with interest to be calculated for certain issues to be distributed to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans as the period 2004-September 2021 orUtility operating companies other alternative relief. The City Council further recommends that the FERC impose a hypothetical equity ratio such as 48.15% equity to capital on a prospective basis.
In January 2022, System Energy filed answering testimony arguing that the FERC should not order refunds for prior periods or any prospective amendments tothan Entergy Mississippi purchasing under the Unit Power Sales Agreement. In responseThe settlement further provides that if the APSC, the City Council, or the LPSC agrees to the LPSC’s refund claims,global settlement System Energy argues, amongentered into with the MPSC (see “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement), and such global settlement includes a black-box refund amount, then the black-box refund for this settlement agreement shall not be incremental or in addition to the global black-box refund amount. The settlement agreement addresses other things, that (1) the inclusion of sale-leaseback transaction costs in prepayments was correct; (2) the filed rate doctrine bars the request for a retroactive creditmatters as well, including adjustments to rate base for the time valuebeginning in October 2022, exclusion of money associated with the advance collection of lease payments; (3) an accounting misclassification for deferred refueling outagecertain other costs, has been corrected, caused no harm to customers, and requires no refunds; and (4) its accounting and ratemaking treatment of specified accumulated deferred income tax balances in account 190 has been correct. System Energy further responds that no retroactive adjustment to retained earnings or capital structure should be ordered because there is no general policy requiring such a remedy and there was no showing that the retained earnings element of the capital structure was incorrectly implemented. Further, System Energy presented evidence that all of the costs that are being challenged were long known to the retail regulators and were approved by them for inclusion in retail rates, and the attempt to retroactively challenge these costs, some of which have been included in rates for decades, is unjust and unreasonable. In response to the LPSC’s proposed going-forward adjustments, System Energy presents evidence to show that none of the proposed adjustments are needed. On the issue of below-the-line expenses, during discovery procedures, System Energy identified a historical allocation error in certain months and agreed to provide a bill credit to customers to correct the error. In response to the APSC’s claims, System Energy argues that the Unit Power Sales Agreement does not include System Energy’s borrowings from the Entergy System money pool or earnings on deposits to the Entergy System money pool in the determination of the cost of capital; and accordingly, no refunds are appropriate on those issues. In response to the City Council’s claims, System Energy argues that it has reasonably managed its cash and that the City Council’s theory of cash management is defective because it fails to adequately consider the relevant cash needs of System Energy and it makes faulty presumptions about the operation of the Entergy System money pool. System Energy further points out that the issue of its capital structure is already subject to pending FERC litigation.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
In March 2022inclusion of money pool borrowings, if any, in short-term debt within the FERC trial staff filed direct and answering testimonycost of capital calculation used in response to the LPSC, APSC, and City Council’s direct testimony. In its testimony, the FERC trial staff recommends refunds for two primary reasons: (1) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with rate refunds; and (2) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with a deemed contract satisfaction and reissuance that occurred in 2005. The FERC trial staff recommends refunds of $84.1 million, exclusive of any tax gross-up or FERC interest. In addition, the FERC trial staff recommends the following prospective modifications to the Unit Power Sales Agreement: (1) inclusion of a rate base credit to recognize the time value of money associated with the advance collection of lease payments; (2) exclusion of executive incentive compensation costs for members of the Office of the Chief Executive and long-term performance unit costs where awards are based solely or primarily on financial metrics; and (3) exclusion of unvested, accrued amounts for stock options, performance units, and restricted stock awards. With respect to issues that ultimately concern the reasonableness of System Energy’s rate of return,Agreement. In April 2023, the FERC trial staff states that it is unnecessary to consider such issuesapproved the settlement agreement. The refund provided for in this proceeding,the settlement agreement will be included in light of the pending case concerning System Energy’s return on equity and capital structure. On all other material issues raised by the LPSC, APSC, and City Council, the FERC trial staff recommends either no refunds or no modification toMay 2023 service month bills under the Unit Power Sales Agreement.
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 20202021 Calendar Year Bills
System Energy’s Unit Power Sales Agreement includes formula rate protocols that provide for the disclosure of cost inputs, an opportunity for informal discovery procedures, and a challenge process. In February 2022,March 2023, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC, the APSC, the MPSC,and the City Council and the Mississippi Public Utilities Staff filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2020.2021. The formal challenge alleges: (1) that it was imprudent for System Energy to accept the IRS’s partial acceptance of a previously uncertain tax position; (2) that System Energy should have delayed recordingused incorrect inputs for retained earnings that are used to determine the result of the IRS’s partial acceptance of the previously uncertain tax position until after internal tax allocation payments were made;capital structure; (3) that the equity ratio charged in rates was excessive; (4) that sale-leaseback rental payments should have been excluded from rates; and (5)(4) that all issues in the ongoing Unit Power Sales Agreement Complaintcomplaint proceeding should also be reflected in calendar year 20202021 bills. While System Energy disagreesThe first, third, and fourth allegations are identical to issues that any refunds are owed for the 2020 calendar year bills,were raised in the formal challenge estimatesto the calendar year 2020 bills. The formal challenge to the calendar year 2021 bills states that the financial impact of the first through fourth allegationsallegation is approximately $53 million;“tens of millions of dollars,” but it does not provide an estimate of the financial impact of the fifth allegation.remaining allegations.
In March 2022,May 2023, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.
Storm Cost Recovery Filings with Retail Regulators
See Note 2 to the financial statements in the Form 10-K for discussion regarding storm cost recovery filings. The following are updatesis an update to that discussion.
Entergy Louisiana
Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida
As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild. In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice
Entergy Corporation and Subsidiaries
Notes to Financial Statements
accumulation sagged or downed trees, limbs, and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing additional outages.In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages.
In April 2021,2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a supplemental filing updating the totalIda restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by these stormsHurricane Ida were estimated to be approximately $2.06$2.54 billion, including approximately $1.68$1.96 billion in capital costs and approximately $380$586 million in non-capital costs. Including carrying costs of $57 million through JanuaryDecember 2022, Entergy Louisiana was seeking an LPSC determination that $2.11$2.60 billion was prudently incurred and, therefore, was eligible for recovery from customers. Additionally,As part of this filing, Entergy Louisiana also was seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount was exclusive of the requested $3 million in carrying costs through December
Entergy Corporation and Subsidiaries
Notes to Financial Statements
2022. In total, Entergy Louisiana was requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, eligible for recovery from customers. As discussed in the Form 10-K, in March 2022 the LPSC determine that re-establishmentapproved financing of a $1 billion storm escrow account from which funds were withdrawn to the previously authorized amount of $290 million was appropriate.finance costs associated with Hurricane Ida restoration. In July 2021,June 2022, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.
In August 2021, Hurricane Ida caused extensive damage toOctober 2022 the LPSC staff recommended a finding that the requested storm restoration costs of $2.64 billion, including associated carrying costs of $59.1 million, were prudently incurred and are eligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s distribution and,plans to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application atsecuritize these costs, net of the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, Entergy Louisiana sought approval forfunds withdrawn from the creation and funding of a $1 billion restrictedstorm escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.
After filing of testimony by LPSC staff and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida, thedescribed above. The parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in FebruaryDecember 2022. The settlement agreement containedcontains the following key terms: $2.1$2.57 billion of restoration costs from Hurricane Ida, Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and were eligible for recovery; carrying costs of $51$59.2 million were recoverable; a $290 million cash storm reserve should be re-established; a $1 billion reserve should be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana was authorized to finance $3.186$1.657 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. TheIn January 2023 the LPSC issued an order approvingapproved the stipulated settlement in March 2022. Assubject to certain modifications. These modifications include the recognition of accumulated deferred income tax benefits related to damaged assets and system restoration costs as a resultreduction of the financing order, in first quarter 2022,amount authorized to be financed utilizing the securitization process authorized by Act 55, as supplemented by Act 293, from $1.657 billion to $1.491 billion. These modifications did not affect the LPSC’s conclusion that all system restoration costs sought by Entergy Louisiana reclassified $1.339 billion from utility plantwere reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to other regulatory assets. The securitization process is expectedauthorize the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana, to be completedissue the bonds authorized in second quarter 2022.the LPSC’s financing order.
In April 2022,March 2023 the Hurricane Ida securitization financing closed, resulting in the issuance of approximately $1.491 billion principal amount of bonds by the LCDA and a remaining regulatory asset of $180 million to be recovered through the exclusion of the accumulated deferred income taxes related to damaged assets and system restoration costs from the determination of future rates. The securitization was authorized pursuant to the Louisiana Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust II (the storm trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 14,576,757.48 Class B preferred, non-voting membership interest units (the preferred membership interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2023 on the preferred membership interests issued to the storm trust II. These annual dividends received by the storm trust II will be distributed to Entergy Louisiana filed an application withand the LPSC relatingLURC, as beneficiaries of the storm trust II. Specifically, 1% of the annual dividends received by the storm trust II will be distributed to Hurricane Ida restoration costs. Total restoration coststhe LURC for the repair and/or replacementbenefit of Entergy Louisiana’s electric facilities damaged by Hurricane Ida currently are estimatedcustomers, and 99% will be distributed to be approximately $2.54 billion, including approximately $1.96 billion in capital costs and approximately $586 million in non-capital costs. Including carrying costs through December 2022, Entergy Louisiana, net of storm trust expenses. The preferred membership interests have a stated annual cumulative cash dividend rate of 7.5% and a liquidation price of $100 per unit. The terms of the preferred membership interests include certain financial covenants to which Entergy Finance Company is seeking an LPSC determination that $2.60 billion was prudently incurredsubject. Semi-annual redemptions of the preferred membership interests, subject to certain conditions, are expected to occur over the next 15 years.
Entergy and therefore,Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is eligible for recoverythe right granted by law to the LURC to collect a system restoration charge from customers. As part of this filing,The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana also is seeking an LPSC determination that an additional $32 million incollects the system restoration costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount is exclusivecharge on behalf of the requested $3 million in carrying costs through December 2022. In total,LURC and remits the collections to the bond indenture trustee. Entergy Louisiana is requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, is eligible for recovery from customers. As discussed above, in March 2022 the LPSC approved financing of a $1 billion storm escrow that can be withdrawn to finance costs associated with Hurricane Ida restoration. Entergy Louisiana expects to supplement the April 2022 application with a request that the LPSC authorize Entergy Louisiana to finance the remaining storm restoration costs included in the April 2022 application,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
currently expected to be through the securitization process authorized by Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.
Entergy Texas
Hurricane Laura, Hurricane Delta, and Winter Storm Uri
As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the securitization of certain system restoration costs, which were approved by the PUCT as eligible for securitization in December 2021. In November 2021 the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order consistent with the unopposed settlement. As a result of the financing order, in first quarter 2022, Entergy Texas reclassified $153 million from utility plant to other regulatory assets.
In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured system restoration bonds (securitization bonds). With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. Entergy Texas began cost recovery throughcollecting the system restoration charge effective with the first billing cycle of May 2022April 2023 and the system restoration charge is expected to remain in place up to 15 years. SeeEntergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust II is required to liquidate Entergy Finance Company preferred membership interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.
From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company loaned approximately $1.5 billion to Entergy, which was indirectly contributed to Entergy Louisiana as a capital contribution.
As discussed in Note 410 to the financial statements herein, the securitization resulted in recognition of a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a discussionnet reduction of the April 2022 issuanceincome tax expense of $129 million, after taking into account a provision for uncertain tax positions. In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization bonds.regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.
As discussed in Note 3 and Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust II as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In first quarter 2023, Entergy Louisiana recorded a charge of $14.6 million in other income to reflect the LURC’s beneficial interest in the storm trust II.
NOTE 3. EQUITY (Entergy Corporation and Entergy Louisiana)
Common Stock
Earnings per Share
The following table presents Entergy’s basic and diluted earnings per share calculations included on the consolidated income statements:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2022 | | 2021 |
| (In Millions, Except Per Share Data) |
| Income | | Shares | | $/share | | Income | | Shares | | $/share |
Basic earnings per share | | | | | | | | | | | |
Net income attributable to Entergy Corporation | $276.4 | | | 202.9 | | | $1.36 | | | $334.6 | | | 200.5 | | | $1.67 | |
Average dilutive effect of: | | | | | | | | | | | |
Stock options | | | 0.5 | | | — | | | | | 0.4 | | | (0.01) | |
Other equity plans | | | 0.4 | | | — | | | | | 0.2 | | | — | |
Equity forwards | | | 0.1 | | | — | | | | | — | | | — | |
Diluted earnings per share | $276.4 | | | 203.9 | | | $1.36 | | | $334.6 | | | 201.1 | | | $1.66 | |
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, |
| 2023 | | 2022 |
| (In Millions, Except Per Share Data) |
| Income | | Shares | | $/share | | Income | | Shares | | $/share |
Basic earnings per share | | | | | | | | | | | |
Net income attributable to Entergy Corporation | $310.9 | | | 211.4 | | | $1.47 | | | $276.4 | | | 202.9 | | | $1.36 | |
Average dilutive effect of: | | | | | | | | | | | |
Stock options | | | 0.3 | | | — | | | | | 0.5 | | | — | |
Other equity plans | | | 0.4 | | | — | | | | | 0.4 | | | — | |
Equity forwards | | | — | | | — | | | | | 0.1 | | | — | |
Diluted earnings per share | $310.9 | | | 212.1 | | | $1.47 | | | $276.4 | | | 203.9 | | | $1.36 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The number of stock options not included in the calculation of diluted common shares outstanding due to their antidilutive effect was approximately 1.2 million for the three months ended March 31, 2023 and approximately 0.9 million for the three months ended March 31, 2022 and approximately 1 million for the three months ended March 31, 2021.2022.
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 $1.07 for the three months ended March 31, 2023 and $1.01 for the three months ended March 31, 2022 and $0.95 for the three months ended March 31, 2021.2022.
Equity Distribution Program
In January 2021, Entergy entered into an equity distribution sales agreement with several counterparties establishing an at the market equity distribution program, pursuant to which Entergy may offer and sell from time to time shares of its common stock. The sales agreement provides that, in addition to the issuance and sale of shares of Entergy common stock, Entergy may enter into forward sale agreements for the sale of its common stock. The aggregate number of shares of common stock sold under this sales agreement and under any forward sale agreement may not exceed an aggregate gross sales price of $1 billion,$2 billion. As of whichMarch 31, 2023, shares at an aggregate gross sales price of approximately $633$1,077.8 million hashave been sold through March 31, 2022. See Note 7 to the financial statements in the Form 10-K for discussion of the common stock issued and unsettled forward sale agreements entered into during 2021. For the three months ended March 31, 2022, there were no shares of common stock issued under the at the market equity distribution program.
In March 2022, Entergy entered into a forward sale agreement for 1,538,010 shares of common stock. No amounts have or will bewere recorded on Entergy’s balance sheet with respect to the equity offering until settlements of the equity forward sale agreement occur.occurred in November 2022. The forward sale agreement requiresrequired Entergy to, at its election prior to September 29, 2023, either (i) physically settle the transactions by issuing the total of 1,538,010 shares of its common stock to the forward counterparty in exchange for net proceeds at the then-applicable forward sale price specified by the agreement (initially approximately $108.14 per share) or (ii) net settle the transaction in whole or in part through the delivery or receipt of cash or shares. The forward sale price iswas subject to adjustment on a daily basis based on a floating interest rate factor and will decrease by other fixed amounts specified in the agreement. In connection with the forward sale agreement, the forward seller, or its affiliates, borrowed from third parties and sold 1,538,010 shares of Entergy Corporation’s common stock. The gross sales price of these shares totaled approximately $168 million. In connection with the sale of these shares, Entergy paid the forward sellers fees of approximately $1.7 million, which have not been deducted from the gross sales price. Entergy did not receive any proceeds from such sales of borrowed shares.
Until settlement of the forward sale agreement,agreements, earnings per share dilution resulting from the agreement, if any, will bewas 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. For the three months ended March 31, 2022, 1,775,251 shares under the forward sale agreements were not included in the calculation of diluted earnings per share because their effect would have been antidilutive.
In November 2022, Entergy physically settled its obligations under the forward sale agreements by delivering 7,688,419 shares of common stock in exchange for cash proceeds of $853.3 million. See Note 7 to the financial statements in the Form 10-K for discussion of the common stock issued and forward sale agreements settled under the market equity distribution program. There were no shares of common stock issued under the at the market equity distribution program for the three months ended March 31, 2023, and there were no forward sale agreements in place as of March 31, 2023.
Treasury Stock
During the three months ended March 31, 2022,2023, Entergy Corporation issued 503,538269,546 shares of its previously repurchased common stock to satisfy stock option exercises, vesting of shares of restricted stock, and
Entergy Corporation and Subsidiaries
Notes to Financial Statements
other stock-based awards. Entergy Corporation did not repurchase any of its common stock during the three months ended March 31, 2022.2023.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Retained Earnings
On April 11, 2022,10, 2023, Entergy Corporation’s Board of Directors declared a common stock dividend of $1.01$1.07 per share, payable on June 1, 20222023 to holders of record as of May 5, 2022.4, 2023.
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, 2022 by component:2023:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Pension and Other Postretirement Liabilities |
| (In Thousands) |
Beginning balance, January 1, 2023 | | | | | ($191,754) | |
| |
| |
Amounts reclassified from accumulated other comprehensive income (loss) | | | | 2,027 | |
Net other comprehensive income for the period | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| 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, January 1, 2022 | ($1,035) | | | ($338,647) | | | $7,154 | | | | | ($332,528) | |
| | | | | | | | | |
Other comprehensive income (loss) before reclassifications | (14) | | | — | | | (15,875) | | | | | (15,889) | |
Amounts reclassified from accumulated other comprehensive income (loss) | 38 | | | 8,328 | | | 3,473 | | | | | 11,839 | |
Net other comprehensive income (loss) for the period | 24 | | | 8,328 | | | (12,402) | | | | | (4,050) | |
| | | | | | | | | |
Ending balance, March 31, 2022 | ($1,011) | | | ($330,319) | | | ($5,248) | | | | | ($336,578) | |
2,027
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
| |
Ending balance, March 31, 2023 | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | ($189,727) | |
The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the three months ended March 31, 20212022 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) | | Cash flow hedges net unrealized gain (loss) | | Pension and other postretirement liabilities | | Net unrealized investment gain (loss) | | | Total Accumulated Other Comprehensive Income (Loss) |
| | (In Thousands) | | (In Thousands) |
| Beginning balance, January 1, 2021 | $28,719 | | | ($534,576) | | | $56,650 | | | | ($449,207) | | |
Beginning balance, January 1, 2022 | | Beginning balance, January 1, 2022 | ($1,035) | | | ($338,647) | | | $7,154 | | | | ($332,528) | |
| Other comprehensive income (loss) before reclassifications | Other comprehensive income (loss) before reclassifications | 1,482 | | | — | | | (45,301) | | | | (43,819) | | Other comprehensive income (loss) before reclassifications | (14) | | | — | | | (15,875) | | | | (15,889) | |
Amounts reclassified from accumulated other comprehensive income (loss) | Amounts reclassified from accumulated other comprehensive income (loss) | (31,062) | | | 22,967 | | | 614 | | | | (7,481) | | Amounts reclassified from accumulated other comprehensive income (loss) | 38 | | | 8,328 | | | 3,473 | | | | 11,839 | |
Net other comprehensive income (loss) for the period | Net other comprehensive income (loss) for the period | (29,580) | | | 22,967 | | | (44,687) | | | | (51,300) | | Net other comprehensive income (loss) for the period | 24 | | | 8,328 | | | (12,402) | | | | (4,050) | |
| Ending balance, March 31, 2021 | ($861) | | | ($511,609) | | | $11,963 | | | | ($500,507) | | |
Ending balance, March 31, 2022 | | Ending balance, March 31, 2022 | ($1,011) | | | ($330,319) | | | ($5,248) | | | | ($336,578) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the three months ended March 31, 2023 and 2022:
| | | | | | | | | | | | | | |
| | Pension and Other Postretirement Liabilities |
| | 2023 | | 2022 |
| | (In Thousands) |
Beginning balance, January 1, | | $55,370 | | | $8,278 | |
| | | | |
| | | | |
Amounts reclassified from accumulated other comprehensive income (loss) | | (786) | | | (613) | |
Net other comprehensive income (loss) for the period | | (786) | | | (613) | |
| | | | |
| | | | |
| | | | |
Ending balance, March 31, | | $54,584 | | | $7,665 | |
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31, 2023 and 2022 and 2021:
| | | | | | | | | | | | | | |
| | Pension and Other Postretirement Liabilities |
| | 2022 | | 2021 |
| | (In Thousands) |
Beginning balance, January 1, | | $8,278 | | | $4,327 | |
| | | | |
| | | | |
Amounts reclassified from accumulated other comprehensive income (loss) | | (613) | | | (407) | |
Net other comprehensive income (loss) for the period | | (613) | | | (407) | |
| | | | |
| | | | |
| | | | |
Ending balance, March 31, | | $7,665 | | | $3,920 | |
were as follows:Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy for the three months ended March 31, 2022 and 2021 were as follows:
| | | Amounts reclassified from AOCI | | Income Statement Location | | Amounts reclassified from AOCI | | Income Statement Location |
| | 2022 | | 2021 | | | | 2023 | | 2022 | | |
| | (In Thousands) | | | (In Thousands) | |
Cash flow hedges net unrealized gain (loss) | | |
Power contracts | $— | | | $39,367 | | | Competitive business operating revenues | |
Cash flow hedges net unrealized loss | | Cash flow hedges net unrealized loss | |
| Interest rate swaps | Interest rate swaps | (48) | | | (48) | | | Miscellaneous - net | Interest rate swaps | $— | | | ($48) | | | Miscellaneous - net |
Total realized gain (loss) on cash flow hedges | (48) | | | 39,319 | | | |
Total realized loss on cash flow hedges | | Total realized loss on cash flow hedges | — | | | (48) | | |
Income taxes | Income taxes | 10 | | | (8,257) | | | Income taxes | Income taxes | — | | | 10 | | | Income taxes |
Total realized gain (loss) on cash flow hedges (net of tax) | ($38) | | | $31,062 | | | |
Total realized loss on cash flow hedges (net of tax) | | Total realized loss on cash flow hedges (net of tax) | $— | | | ($38) | | |
| Pension and other postretirement liabilities | Pension and other postretirement liabilities | | Pension and other postretirement liabilities | |
Amortization of prior-service credit | Amortization of prior-service credit | $3,837 | | | $5,248 | | | (a) | Amortization of prior-service credit | $3,397 | | | $3,837 | | | (a) |
Amortization of loss | (13,925) | | | (34,529) | | | (a) | |
Amortization of gain (loss) | | Amortization of gain (loss) | 1,661 | | | (13,925) | | | (a) |
| Settlement loss | Settlement loss | (782) | | | — | | | (a) | Settlement loss | (7,816) | | | (782) | | | (a) |
Total amortization | Total amortization | (10,870) | | | (29,281) | | | Total amortization | (2,758) | | | (10,870) | | |
Income taxes | Income taxes | 2,542 | | | 6,314 | | | Income taxes | Income taxes | 731 | | | 2,542 | | | Income taxes |
Total amortization (net of tax) | Total amortization (net of tax) | ($8,328) | | | ($22,967) | | | Total amortization (net of tax) | ($2,027) | | | ($8,328) | | |
| Net unrealized investment gain (loss) | | |
Realized gain (loss) | ($5,495) | | | ($972) | | | Interest and investment income | |
Net unrealized investment loss | | Net unrealized investment loss | |
Realized loss | | Realized loss | $— | | | ($5,495) | | | Interest and investment income |
Income taxes | Income taxes | 2,022 | | | 358 | | | Income taxes | Income taxes | — | | | 2,022 | | | Income taxes |
Total realized investment gain (loss) (net of tax) | ($3,473) | | | ($614) | | | |
Total realized investment loss (net of tax) | | Total realized investment loss (net of tax) | $— | | | ($3,473) | | |
| Total reclassifications for the period (net of tax) | Total reclassifications for the period (net of tax) | ($11,839) | | | $7,481 | | | Total reclassifications for the period (net of tax) | ($2,027) | | | ($11,839) | | |
(a)These accumulated other comprehensive income (loss) components were included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended March 31, 2023 and 2022 were as follows:
Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) into income for Entergy Louisiana for the three months ended March 31, 2022 and 2021 were as follows:
| | | Amounts reclassified from AOCI | | Income Statement Location | | Amounts reclassified from AOCI | | Income Statement Location |
| | 2022 | | 2021 | | | | 2023 | | 2022 | | |
| | (In Thousands) | | | (In Thousands) | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | Pension and other postretirement liabilities | |
Amortization of prior-service credit | Amortization of prior-service credit | | $1,158 | | | $1,230 | | | (a) | Amortization of prior-service credit | | $951 | | | $1,158 | | | (a) |
Amortization of loss | | (319) | | | (679) | | | (a) | |
| Amortization of gain (loss) | | Amortization of gain (loss) | | 1,565 | | | (319) | | | (a) |
Settlement loss | | Settlement loss | | (1,440) | | | — | | | (a) |
Total amortization | Total amortization | | 839 | | | 551 | | | Total amortization | | 1,076 | | | 839 | | |
Income taxes | Income taxes | | (226) | | | (144) | | | Income taxes | Income taxes | | (290) | | | (226) | | | Income taxes |
Total amortization (net of tax) | Total amortization (net of tax) | | 613 | | | 407 | | | Total amortization (net of tax) | | 786 | | | 613 | | |
| Total reclassifications for the period (net of tax) | Total reclassifications for the period (net of tax) | | $613 | | | $407 | | | Total reclassifications for the period (net of tax) | | $786 | | | $613 | | |
(a)These accumulated other comprehensive income (loss) components were included in the computation of net periodic pension and other postretirement cost. See Note 6 to the financial statements herein for additional details.
Noncontrolling Interests
The dollar value of noncontrolling interests for Entergy Louisiana as of March 31, 2023 and December 31, 2022 is presented below:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Thousands) |
Entergy Louisiana Noncontrolling Interests | | | |
Restoration Law Trust I (a) | $31,813 | | | $31,735 | |
Restoration Law Trust II (b) | 14,583 | | | — | |
Total Noncontrolling Interests | $46,396 | | | $31,735 | |
(a)See Note 17 to the financial statements in the Form 10-K for discussion of Restoration Law Trust I.
(b)Restoration Law Trust II (the storm trust II) was established as part of the Act 293 securitization of Entergy Louisiana’s Hurricane Ida storm restoration costs. The storm trust II holds preferred membership interests issued by Entergy Finance Company, and Entergy Finance Company is required to make annual distributions (dividends) on the preferred membership interests. These annual dividends paid on the Entergy Finance Company preferred membership interests will be distributed 1% to the LURC and 99% to Entergy Louisiana. Entergy Louisiana, as the primary beneficiary, consolidates the storm trust II and the LURC’s 1% beneficial interest in noncontrolling interests in the consolidated financial statements for Entergy Louisiana and Entergy. See Note 2 to the financial statements herein for a discussion of the Entergy Louisiana March 2023 storm securitization.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 June 2026.2027. 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 three months ended March 31, 20222023 was 1.81%6.12% on the drawn portion of the facility. As of March 31, 2022,2023, amounts outstanding and capacity available under the $3.5 billion credit facility are:
| | | | | | | | | | | | | | | | | | | | |
Capacity | | Borrowings | | Letters of Credit | | Capacity Available |
(In Millions) |
$3,500 | | $150 | | $3 | | $3,347 |
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 Entergy Corporation credit facility’s maturity date may occur.
Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion. As of March 31, 2022,2023, Entergy Corporation had $1.343 billion$865.6 million of commercial paper outstanding. The weighted-average interest rate for the three months ended March 31, 20222023 was 0.48%4.93%.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of March 31, 20222023 as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Company | | Expiration Date | | Amount of Facility | | Interest Rate (a) | | Amount Drawn as of March 31, 20222023 | | Letters of Credit Outstanding as of March 31, 20222023 |
Entergy Arkansas | | April 20222023 (e) | | $25 million (b) | | 3.00%6.56% | | $— | | $— |
Entergy Arkansas | | June 20262027 | | $150 million (c) | | 1.58%6.03% | | $— | | $— |
Entergy Louisiana | | June 20262027 | | $350 million (c) | | 1.71%6.16% | | $— | | $— |
Entergy Mississippi | | April 20222023 (f) | | $37.545 million (d) | | 1.96%6.41% | | $— | | $— |
Entergy Mississippi | | April 20222023 (f) | | $3540 million (d) | | 1.96%6.41% | | $— | | $— |
Entergy Mississippi | | April 20222023 (f) | | $10 million (d) | | 1.96%6.41% | | $— | | $— |
Entergy Mississippi | | July 2024 | | $150 million | | 5.98% | | $100 million | | $— |
Entergy New Orleans | | June 2024 | | $25 million (c) | | 2.08%6.47% | | $— | | $— |
Entergy Texas | | June 20262027 | | $150 million (c) | | 1.71%6.16% | | $— | | $1.31.1 million |
(a)The interest rate is the estimated interest rate as of March 31, 20222023 that would have been applied to outstanding borrowings under the facility.
(b)Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(d)Borrowings under the short-term Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option.
(e)In April 2022,2023, Entergy Arkansas renewed and extended the expiration of the credit facility to July 2022.April 2024.
(f)In April 2022,2023, Entergy Mississippi renewed its three existing short-term credit facilities, increased the aggregate amount available under the facilities to $95 million, and extended the expiration date of eachthe credit facilityfacilities to AprilJuly 2023. Also in April 2022, Entergy Mississippi entered into a long-term credit facility in the amount of $150 million with an expiration date of July 2024. The interest rates for these facilities will be based on the Secured Overnight Financing Rate.
The commitment fees on the credit facilities range from 0.075% to 0.375% of the undrawn commitment amount for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas, and of the entire facility amount for Entergy New Orleans. 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 an uncommitted standby letter of credit facility as a means to post collateral to support its
Entergy Corporation and Subsidiaries
Notes to Financial Statements
obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of March 31, 2022:2023:
| | | | | | | | | | | | | | | | | | | | |
Company | | Amount of Uncommitted Facility | | Letter of Credit Fee | | Letters of Credit Issued as of March 31, 20222023 (a) (b) |
Entergy Arkansas | | $25 million | | 0.78% | | $7.55.6 million |
Entergy Louisiana | | $125 million | | 0.78% | | $11.020 million |
Entergy Mississippi | | $65 million | | 0.78% | | $2.36.7 million |
Entergy New Orleans | | $15 million | | 1.00%1.625% | | $1.01 million |
Entergy Texas | | $80 million | | 0.875% | | $79.68.8 million |
(a)As of March 31, 2022,2023, letters of credit posted with MISO covered financial transmission right exposure of $0.1 million for Entergy Arkansas, $0.3 million for Entergy ArkansasMississippi, and $0.4$0.5 million for Entergy Mississippi.Texas. See Note 8 to the financial statements herein for discussion of financial transmission rights.
(b)As of March 31, 2022,2023, in addition to the $2.3$6.7 million MISO letterletters of credit, Entergy Mississippi has $1had $9.2 million ofin non-MISO letters of credit outstanding under this facility.
The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC. The currentAs of March 31, 2023, the FERC-authorized short-term borrowing limits for Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas and System Energy arewere effective through October 2023. The FERC-authorized short-term borrowing limit for System Energy is effective through March 2025. In April 2023, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas received FERC-authorized short-term borrowing limits effective through April 2025. 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-companyintercompany borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings. Borrowings from internal and external short-term borrowings combined may not exceed the FERC-authorized limits. The following were the FERC-authorized limits for short-term borrowings and the outstanding short-term
Entergy Corporation and Subsidiaries
Notes to Financial Statements
borrowings as of March 31, 20222023 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:
| | | | | | | | | | | |
| Authorized | | Borrowings |
| (In Millions) |
Entergy Arkansas | $250 | | $— |
Entergy Louisiana | $450 | | $— |
Entergy Mississippi | $200 | | $22 |
Entergy New Orleans | $150 | | $— |
Entergy Texas | $200 | | $171 |
System Energy | $200 | | $— |
| | | | | | | | | | | |
| Authorized | | Borrowings |
| (In Millions) |
Entergy Arkansas | $250 | | $— |
Entergy Louisiana | $450 | | $— |
Entergy Mississippi | $200 | | $— |
Entergy New Orleans | $150 | | $— |
Entergy Texas | $200 | | $— |
System Energy | $200 | | $— |
Vermont Yankee Credit Facility (Entergy Corporation)
In January 2019, Entergy Nuclear Vermont Yankee was transferred to NorthStar and its credit facility was assumed by Entergy Assets Management Operations, LLC (formerly Vermont Yankee Asset Retirement, 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 December 2022.2023. The commitment fee is currently 0.20% of the undrawn commitment amount. As of March 31, 2022,2023, $139 million in cash borrowings were outstanding under the credit facility. The weighted average interest rate for the three months ended March 31, 20222023 was 1.72%6.14% on the drawn portion of the facility. See Note 14 to the financial statements in the Form 10-K for discussion of the transfer of Entergy Nuclear Vermont Yankee to NorthStar.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)
See Note 17 to the financial statements in the Form 10-K for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIEs). To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs also issue commercial paper, details of which follow as of March 31, 2022:2023:
| Company | Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of March 31, 2022 | Company | | Expiration Date | | Amount of Facility | | Weighted Average Interest Rate on Borrowings (a) | | Amount Outstanding as of March 31, 2023 |
| | | | | (Dollars in Millions) | | | | | (Dollars in Millions) |
Entergy Arkansas VIE | Entergy Arkansas VIE | | June 2024 | | $80 | | 1.10% | | $— | Entergy Arkansas VIE | | June 2025 | | $80 | | 5.70% | | $31.5 |
Entergy Louisiana River Bend VIE | Entergy Louisiana River Bend VIE | | June 2024 | | $105 | | 1.14% | | $30.8 | Entergy Louisiana River Bend VIE | | June 2025 | | $105 | | 5.67% | | $58.5 |
Entergy Louisiana Waterford VIE | Entergy Louisiana Waterford VIE | | June 2024 | | $105 | | 1.15% | | $82.1 | Entergy Louisiana Waterford VIE | | June 2025 | | $105 | | 5.59% | | $52.1 |
System Energy VIE | System Energy VIE | | June 2024 | | $120 | | 1.17% | | $100 | System Energy VIE | | June 2025 | | $120 | | 5.59% | | $55.9 |
(a)Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company variable interest entitiesVIEs for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel company variable interest entityVIE for Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility.
The commitment fees on the credit facilities are 0.100% 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. Each lessee is in compliance with this covenant.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The nuclear fuel company variable interest entitiesVIEs had notes payable that were included in debt on the respective balance sheets as of March 31, 20222023 as follows:
| | | | | | | | | | | | | | |
Company | | Description | | Amount |
Entergy Arkansas VIE | | 3.17% Series M due December 2023 | | $40 million |
Entergy Arkansas VIE | | 1.84% Series N due July 2026 | | $90 million |
Entergy Louisiana River Bend VIE | | 2.51% Series V due June 2027 | | $70 million |
Entergy Louisiana Waterford VIE | | 3.22% Series I due December 2023 | | $20 million |
System Energy VIE | | 2.05% Series K due September 2027 | | $90 million |
In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’VIEs’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.
As of March 31, 2023, Entergy Arkansas and Entergy Louisiana each had financing authorization from the FERC that extended through October 2023 and System Energy each has obtained financing authorization from the FERC that extends through October 2023March 2025 for issuances by its nuclear fuel company variable interest entities.VIEs. In April 2023, Entergy Arkansas and Entergy Louisiana obtained financing authorizations from the FERC that extend through April 2025.
Debt Issuances and Retirements
(Entergy Arkansas)
In March 2022,January 2023, Entergy Arkansas issued $200$425 million of 4.20%5.15% Series mortgage bonds due April 2049.January 2033. Entergy Arkansas expects to use the proceeds, together with other funds, to repay, on or prior to maturity, its $250 million of 3.05% Series mortgage bonds due June 2023 and for general corporate purposes, including the repayment of borrowings from the Entergy System money pool.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
purposes.
(Entergy Louisiana)System Energy)
In December 2021, Entergy Louisiana entered into a term loan credit agreement providing a $1.2 billion unsecuredMarch 2023, System Energy issued $325 million of 6.00% Series mortgage bonds due April 2028. System Energy used the proceeds, together with other funds, to repay, prior to maturity, its $50 million term loan due June 2023. The term loan bears interestNovember 2023, and to repay, at a variable interest rate based on an adjusted term Secured Overnight Financing Rate plus the applicable margin. The weighted average interest rate for the three months ended March 31, 2022 was 0.976%. Entergy Louisiana received the funds in January 2022maturity, its $250 million of 4.10% Series mortgage bonds due April 2023, and used the proceeds for general corporate purposes, including storm restoration costs related to Hurricane Ida.purposes.
Entergy Texas Securitization Bonds
In January 2022, the PUCT authorized the issuance of securitization bonds to recover $242.9 million of Entergy Texas’ Hurricanes Laura and Delta and Winter Storm Uri restoration costs, plus carrying costs, plus $13.3 million relating to a system restoration regulatory asset, plus up-front qualified costs. In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured restoration bonds (securitization bonds), as follows:
| | | | | |
| Amount |
| (In Thousands) |
Senior Secured Restoration Bonds: | |
Tranche A-1 (3.051%) due December 2028 | $100,000 | |
Tranche A-2 (3.697%) due December 2036 | 190,850 | |
Total senior secured restoration bonds | $290,850 | |
Although the principal amount of each tranche is not due until the dates given above, Entergy Texas Restoration Funding II expects to make principal payments on the securitization bonds over the next five years in the amounts of $12.3 million for 2022, $17.8 million for 2023, $18.3 million for 2024, $18.8 million for 2025, and $19.4 million for 2026. All of the expected principal payments for 2022-2026 are for Tranche A-1.
With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. Entergy Texas expects to use the proceeds to reduce its outstanding debt. The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding II, including the transition property, and the creditors of Entergy Texas Restoration Funding II do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to Entergy Texas Restoration Funding II except to remit system restoration charge collections.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Fair Value
The book value and the fair value of long-term debt for Entergy Corporation and the Registrant Subsidiaries as of March 31, 20222023 were as follows:
| | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) |
| | (In Thousands) | | (In Thousands) |
Entergy | Entergy | $27,215,784 | | | $26,731,277 | | Entergy | $26,723,309 | | | $24,057,455 | |
Entergy Arkansas | Entergy Arkansas | $4,163,602 | | | $4,101,516 | | Entergy Arkansas | $4,620,604 | | | $4,126,440 | |
Entergy Louisiana | Entergy Louisiana | $12,022,131 | | | $11,959,123 | | Entergy Louisiana | $10,690,832 | | | $9,718,246 | |
Entergy Mississippi | Entergy Mississippi | $2,180,197 | | | $2,152,275 | | Entergy Mississippi | $2,431,365 | | | $2,156,919 | |
Entergy New Orleans | Entergy New Orleans | $788,501 | | | $775,566 | | Entergy New Orleans | $766,242 | | | $711,545 | |
Entergy Texas | Entergy Texas | $2,325,371 | | | $2,254,487 | | Entergy Texas | $2,896,522 | | | $2,566,690 | |
System Energy | System Energy | $805,353 | | | $769,552 | | System Energy | $1,020,211 | | | $979,621 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(a)Fair values were 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, 20212022 were as follows:
| | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) | | Book Value of Long-Term Debt | | Fair Value of Long-Term Debt (a) |
| | (In Thousands) | | (In Thousands) |
Entergy | Entergy | $25,880,901 | | | $27,061,171 | | Entergy | $25,932,549 | | | $22,573,837 | |
Entergy Arkansas | Entergy Arkansas | $3,958,862 | | | $4,176,577 | | Entergy Arkansas | $4,166,500 | | | $3,538,930 | |
Entergy Louisiana | Entergy Louisiana | $10,914,346 | | | $11,492,650 | | Entergy Louisiana | $10,698,922 | | | $9,444,665 | |
Entergy Mississippi | Entergy Mississippi | $2,179,989 | | | $2,346,230 | | Entergy Mississippi | $2,331,096 | | | $1,987,154 | |
Entergy New Orleans | Entergy New Orleans | $788,165 | | | $765,538 | | Entergy New Orleans | $775,632 | | | $707,872 | |
Entergy Texas | Entergy Texas | $2,354,148 | | | $2,483,995 | | Entergy Texas | $2,895,913 | | | $2,485,705 | |
System Energy | System Energy | $741,296 | | | $743,040 | | System Energy | $777,905 | | | $702,473 | |
(a)Fair values were 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.
Stock Options
Entergy granted options on 444,028281,874 shares of its common stock under the 2019 Omnibus Incentive Plan during the first quarter 20222023 with a fair value of $16.25$20.07 per option. As of March 31, 2022,2023, there were options on 3,128,3042,985,788 shares of common stock outstanding with a weighted-average exercise price of $94.35.$97.57. The intrinsic value, which has no effect on net income, of the outstanding stock options is calculated by the positive difference
Entergy Corporation and Subsidiaries
Notes to Financial Statements
between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of March 31, 2022.2023. The aggregate intrinsic value of the stock options outstanding as of March 31, 20222023 was $77.6$42.8 million.
The following table includes financial information for outstanding stock options for the three months ended March 31, 20222023 and 2021:2022:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Compensation expense included in Entergy’s consolidated net income | Compensation expense included in Entergy’s consolidated net income | $1.1 | | | $1.0 | | Compensation expense included in Entergy’s consolidated net income | $1.1 | | | $1.1 | |
Tax benefit recognized in Entergy’s consolidated net income | Tax benefit recognized in Entergy’s consolidated net income | $0.3 | | | $0.3 | | Tax benefit recognized in Entergy’s consolidated net income | $0.3 | | | $0.3 | |
Compensation cost capitalized as part of fixed assets and materials and supplies | Compensation cost capitalized as part of fixed assets and materials and supplies | $0.4 | | | $0.4 | | Compensation cost capitalized as part of fixed assets and materials and supplies | $0.5 | | | $0.4 | |
Other Equity Awards
In January 20222023 the Board approved and Entergy granted 328,849345,983 restricted stock awards and 170,966143,212 long-term incentive awards under the 2019 Omnibus Incentive Plan. The restricted stock awards were made effective on January 27, 202226, 2023 and were valued at $109.59$108.47 per share, which was the closing price of Entergy’s
Entergy Corporation and Subsidiaries
Notes to Financial Statements
common stock on that 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. One-third of the restricted stock awards and accrued dividends will vest upon each anniversary of the grant date.
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. To emphasize the importance of strong cash generation for the long-term health of its business, a credit measure – adjusted funds from operations/debt ratio – was selected as one of the performance measures for the 2022-20242023-2025 performance period. Performance will be measured based 80eighty percent on relative total shareholder return and 20twenty percent on the credit measure. The performance units were granted on January 27, 202226, 2023 and 80eighty percent were valued at $138.99$130.65 per share based on various factors, primarily market conditions; and 20twenty percent were valued at $109.59$108.47 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.
The following table includes financial information for other outstanding equity awards for the three months ended March 31, 20222023 and 2021:2022:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Compensation expense included in Entergy’s consolidated net income | Compensation expense included in Entergy’s consolidated net income | $11.4 | | | $10.8 | | Compensation expense included in Entergy’s consolidated net income | $7.7 | | | $11.4 | |
Tax benefit recognized in Entergy’s consolidated net income | Tax benefit recognized in Entergy’s consolidated net income | $2.9 | | | $2.7 | | Tax benefit recognized in Entergy’s consolidated net income | $2.0 | | | $2.9 | |
Compensation cost capitalized as part of fixed assets and materials and supplies | Compensation cost capitalized as part of fixed assets and materials and supplies | $4.4 | | | $4.0 | | Compensation cost capitalized as part of fixed assets and materials and supplies | $3.2 | | | $4.4 | |
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 costs, including amounts capitalized, for the first quarters of 20222023 and 2021,2022, included the following components:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Service cost - benefits earned during the period | Service cost - benefits earned during the period | $37,660 | | | $45,241 | | Service cost - benefits earned during the period | $25,678 | | | $37,660 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | 51,119 | | | 46,099 | | Interest cost on projected benefit obligation | 75,701 | | | 51,119 | |
Expected return on assets | Expected return on assets | (103,607) | | | (105,713) | | Expected return on assets | (98,133) | | | (103,607) | |
| Amortization of net loss | Amortization of net loss | 60,579 | | | 104,392 | | Amortization of net loss | 22,347 | | | 60,579 | |
| Settlement charges | | Settlement charges | 138,427 | | | — | |
| Net pension costs | Net pension costs | $45,751 | | | $90,019 | | Net pension costs | $164,020 | | | $45,751 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries’ qualified pension costs, including amounts capitalized, for their employees for the first quarters of 20222023 and 2021,2022, included the following components:
| 2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
2023 | | 2023 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) | | | (In Thousands) |
Service cost - benefits earned during the period | Service cost - benefits earned during the period | | $6,858 | | | $9,137 | | | $2,130 | | | $752 | | | $1,632 | | | $2,045 | | Service cost - benefits earned during the period | | $4,749 | | | $6,280 | | | $1,482 | | | $491 | | | $1,107 | | | $1,467 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | | 9,317 | | | 10,499 | | | 2,678 | | | 1,139 | | | 2,175 | | | 2,338 | | Interest cost on projected benefit obligation | | 14,280 | | | 15,379 | | | 3,930 | | | 1,715 | | | 3,242 | | | 3,528 | |
Expected return on assets | Expected return on assets | | (19,247) | | | (21,133) | | | (5,203) | | | (2,515) | | | (4,937) | | | (4,623) | | Expected return on assets | | (18,076) | | | (19,233) | | | (4,884) | | | (2,267) | | | (4,152) | | | (4,538) | |
| Amortization of net loss | Amortization of net loss | | 13,426 | | | 12,597 | | | 3,810 | | | 1,368 | | | 2,555 | | | 3,266 | | Amortization of net loss | | 6,969 | | | 4,964 | | | 1,765 | | | 513 | | | 990 | | | 1,461 | |
| Settlement charges | | Settlement charges | | 22,174 | | | 35,999 | | | 11,655 | | | 1,693 | | | 9,678 | | | 4,799 | |
Net pension cost | Net pension cost | | $10,354 | | | $11,100 | | | $3,415 | | | $744 | | | $1,425 | | | $3,026 | | Net pension cost | | $30,096 | | | $43,389 | | | $13,948 | | | $2,145 | | | $10,865 | | | $6,717 | |
| 2021 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | |
2022 | | 2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) | | | (In Thousands) |
Service cost - benefits earned during the period | Service cost - benefits earned during the period | | $7,418 | | | $10,043 | | | $2,364 | | | $796 | | | $1,801 | | | $2,314 | | Service cost - benefits earned during the period | | $6,858 | | | $9,137 | | | $2,130 | | | $752 | | | $1,632 | | | $2,045 | |
Interest cost on projected benefit obligation | Interest cost on projected benefit obligation | | 8,341 | | | 9,562 | | | 2,462 | | | 1,029 | | | 1,949 | | | 2,142 | | Interest cost on projected benefit obligation | | 9,317 | | | 10,499 | | | 2,678 | | | 1,139 | | | 2,175 | | | 2,338 | |
Expected return on assets | Expected return on assets | | (19,670) | | | (22,538) | | | (5,587) | | | (2,622) | | | (5,237) | | | (4,778) | | Expected return on assets | | (19,247) | | | (21,133) | | | (5,203) | | | (2,515) | | | (4,937) | | | (4,623) | |
| Amortization of net loss | Amortization of net loss | | 19,303 | | | 19,204 | | | 5,668 | | | 2,270 | | | 3,711 | | | 5,326 | | Amortization of net loss | | 13,426 | | | 12,597 | | | 3,810 | | | 1,368 | | | 2,555 | | | 3,266 | |
| Net pension cost | Net pension cost | | $15,392 | | | $16,271 | | | $4,907 | | | $1,473 | | | $2,224 | | | $5,004 | | Net pension cost | | $10,354 | | | $11,100 | | | $3,415 | | | $744 | | | $1,425 | | | $3,026 | |
Non-Qualified Net Pension Cost
Entergy recognized $10.2$9.2 million and $4.6$10.2 million in pension cost for its non-qualified pension plans in the first quarters of 20222023 and 2021,2022, respectively. Reflected in the pension cost for non-qualified pension plans in the first quarterquarters of 2023 and 2022 were settlement charges of $4.8 million and $5.3 million, related to the payment of lump sum benefits out of the plan. In the first quarter of 2021 there were no settlement chargesrespectively, related to the payment of lump sum benefits out of the plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Registrant Subsidiaries recognized the following pension cost for their employees for their non-qualified pension plans for the first quarters of 20222023 and 2021:2022:
| | | 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) |
2023 | | 2023 | $450 | | | $27 | | | $552 | | | $33 | | | $63 | |
2022 | 2022 | $72 | | | $27 | | | $80 | | | $29 | | | $215 | | 2022 | $72 | | | $27 | | | $80 | | | $29 | | | $215 | |
2021 | $90 | | | $44 | | | $96 | | | $8 | | | $115 | | |
Reflected in Entergy Arkansas’ non-qualified pension costs in the first quarter of 2023 were settlement charges of $379 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Mississippi’s non-qualified pension costs in the first quarter of 2023 were settlement charges of $453 thousand related to the payment of lump sum benefits out of the plan. Reflected in Entergy Texas’ non-qualified pension costs in the first quarter of 2022 were settlement charges of $119 thousand related to the payment of lump sum benefits out of the plan.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Components of Net Other Postretirement Benefit Cost (Income)
Entergy’s other postretirement benefit income, including amounts capitalized, for the first quarters of 20222023 and 2021,2022, included the following components:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Service cost - benefits earned during the period | Service cost - benefits earned during the period | $6,184 | | | $6,645 | | Service cost - benefits earned during the period | $3,664 | | | $6,184 | |
Interest cost on accumulated postretirement benefit obligation (APBO) | Interest cost on accumulated postretirement benefit obligation (APBO) | 6,827 | | | 5,320 | | Interest cost on accumulated postretirement benefit obligation (APBO) | 10,568 | | | 6,827 | |
Expected return on assets | Expected return on assets | (10,855) | | | (10,805) | | Expected return on assets | (9,183) | | | (10,855) | |
| Amortization of prior service credit | Amortization of prior service credit | (6,388) | | | (8,267) | | Amortization of prior service credit | (5,640) | | | (6,388) | |
Amortization of net loss | 1,083 | | | 713 | | |
Amortization of net (gain)/loss | | Amortization of net (gain)/loss | (2,862) | | | 1,083 | |
Net other postretirement benefit income | Net other postretirement benefit income | ($3,149) | | | ($6,394) | | Net other postretirement benefit income | ($3,453) | | | ($3,149) | |
The Registrant Subsidiaries’ other postretirement benefit cost (income), including amounts capitalized, for their employees for the first quarters of 20222023 and 2021,2022, included the following components:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Service cost - benefits earned during the period | | $741 | | | $845 | | | $220 | | | $59 | | | $202 | | | $189 | |
Interest cost on APBO | | 2,001 | | | 2,233 | | | 543 | | | 290 | | | 649 | | | 432 | |
Expected return on assets | | (3,778) | | | — | | | (1,179) | | | (1,316) | | | (2,194) | | | (634) | |
Amortization of prior service cost/(credit) | | 524 | | | (951) | | | (239) | | | (229) | | | (1,093) | | | (73) | |
Amortization of net (gain) loss | | 43 | | | (1,764) | | | 21 | | | 117 | | | 229 | | | — | |
Net other postretirement benefit cost (income) | | ($469) | | | $363 | | | ($634) | | | ($1,079) | | | ($2,207) | | | ($86) | |
| 2022 | 2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy | 2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | | (In Thousands) | | | (In Thousands) |
Service cost - benefits earned during the period | Service cost - benefits earned during the period | | $1,114 | | | $1,408 | | | $339 | | | $99 | | | $331 | | | $310 | | Service cost - benefits earned during the period | | $1,114 | | | $1,408 | | | $339 | | | $99 | | | $331 | | | $310 | |
Interest cost on APBO | Interest cost on APBO | | 1,263 | | | 1,443 | | | 350 | | | 174 | | | 399 | | | 279 | | Interest cost on APBO | | 1,263 | | | 1,443 | | | 350 | | | 174 | | | 399 | | | 279 | |
Expected return on assets | Expected return on assets | | (4,483) | | | — | | | (1,394) | | | (1,499) | | | (2,568) | | | (791) | | Expected return on assets | | (4,483) | | | — | | | (1,394) | | | (1,499) | | | (2,568) | | | (791) | |
Amortization of prior service credit | | 471 | | | (1,158) | | | (443) | | | (229) | | | (1,093) | | | (80) | | |
| Amortization of prior service cost/(credit) | | Amortization of prior service cost/(credit) | | 471 | | | (1,158) | | | (443) | | | (229) | | | (1,093) | | | (80) | |
Amortization of net (gain) loss | Amortization of net (gain) loss | | 218 | | | (186) | | | 56 | | | (225) | | | 162 | | | 30 | | Amortization of net (gain) loss | | 218 | | | (186) | | | 56 | | | (225) | | | 162 | | | 30 | |
Net other postretirement benefit cost (income) | Net other postretirement benefit cost (income) | | ($1,417) | | | $1,507 | | | ($1,092) | | | ($1,680) | | | ($2,769) | | | ($252) | | Net other postretirement benefit cost (income) | | ($1,417) | | | $1,507 | | | ($1,092) | | | ($1,680) | | | ($2,769) | | | ($252) | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| | (In Thousands) |
Service cost - benefits earned during the period | | $1,034 | | | $1,544 | | | $362 | | | $109 | | | $346 | | | $335 | |
Interest cost on APBO | | 932 | | | 1,130 | | | 278 | | | 130 | | | 317 | | | 220 | |
Expected return on assets | | (4,505) | | | — | | | (1,384) | | | (1,438) | | | (2,548) | | | (789) | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Amortization of prior service credit | | (280) | | | (1,230) | | | (444) | | | (229) | | | (936) | | | (109) | |
Amortization of net (gain) loss | | 49 | | | (91) | | | 19 | | | (178) | | | 100 | | | 15 | |
Net other postretirement benefit cost (income) | | ($2,770) | | | $1,353 | | | ($1,169) | | | ($1,606) | | | ($2,721) | | | ($328) | |
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 first quarters of 2022three months ended March 31, 2023 and 2021:2022:
| 2022 | | Qualified Pension Costs | | Other Postretirement Costs | | Non-Qualified Pension Costs | | Total | |
2023 | | 2023 | | Qualified Pension Costs | | Other Postretirement Costs | | Non-Qualified Pension Costs | | Total |
| | | (In Thousands) | | | | | (In Thousands) | | |
Entergy | Entergy | | Entergy | |
Amortization of prior service (cost) credit | Amortization of prior service (cost) credit | | $— | | | $4,014 | | | ($177) | | | $3,837 | | Amortization of prior service (cost) credit | | $— | | | $3,510 | | | ($113) | | | $3,397 | |
Amortization of net loss | | (12,910) | | | (596) | | | (419) | | | (13,925) | | |
Amortization of net gain (loss) | | Amortization of net gain (loss) | | (1,040) | | | 2,898 | | | (197) | | | 1,661 | |
| Settlement loss | Settlement loss | | — | | | — | | | (782) | | | (782) | | Settlement loss | | (6,647) | | | — | | | (1,169) | | | (7,816) | |
| | ($12,910) | | | $3,418 | | | ($1,378) | | | ($10,870) | | | ($7,687) | | | $6,408 | | | ($1,479) | | | ($2,758) | |
Entergy Louisiana | Entergy Louisiana | | | | | | | | | Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | Amortization of prior service credit | | $— | | | $1,158 | | | $— | | | $1,158 | | Amortization of prior service credit | | $— | | | $951 | | | $— | | | $951 | |
Amortization of net gain (loss) | Amortization of net gain (loss) | | (504) | | | 186 | | | (1) | | | (319) | | Amortization of net gain (loss) | | (199) | | | 1,764 | | | — | | | 1,565 | |
Settlement loss | | Settlement loss | | (1,440) | | | — | | | — | | | (1,440) | |
| | | ($1,639) | | | $2,715 | | | $— | | | $1,076 | |
| ($504) | | | $1,344 | | | ($1) | | | $839 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Qualified Pension Costs | | Other Postretirement Costs | | Non-Qualified Pension Costs | | Total |
| | (In Thousands) | | |
Entergy | | | | | | | | |
Amortization of prior service (cost) credit | | $— | | | $5,288 | | | ($40) | | | $5,248 | |
Amortization of net loss | | (33,439) | | | (495) | | | (595) | | | (34,529) | |
| | | | | | | | |
| | | | | | | | |
| | ($33,439) | | | $4,793 | | | ($635) | | | ($29,281) | |
Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | | $— | | | $1,230 | | | $— | | | $1,230 | |
Amortization of net gain (loss) | | (769) | | | 91 | | | (1) | | | (679) | |
| | | | | | | | |
| | ($769) | | | $1,321 | | | ($1) | | | $551 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Qualified Pension Costs | | Other Postretirement Costs | | Non-Qualified Pension Costs | | Total |
| | (In Thousands) | | |
Entergy | | | | | | | | |
Amortization of prior service (cost) credit | | $— | | | $4,014 | | | ($177) | | | $3,837 | |
Amortization of net loss | | (12,910) | | | (596) | | | (419) | | | (13,925) | |
| | | | | | | | |
Settlement loss | | — | | | — | | | (782) | | | (782) | |
| | ($12,910) | | | $3,418 | | | ($1,378) | | | ($10,870) | |
Entergy Louisiana | | | | | | | | |
Amortization of prior service credit | | $— | | | $1,158 | | | $— | | | $1,158 | |
Amortization of net gain (loss) | | (504) | | | 186 | | | (1) | | | (319) | |
| | | | | | | | |
| | ($504) | | | $1,344 | | | ($1) | | | $839 | |
Accounting for Pension and Other Postretirement Benefits
In accordance with ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” the other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations and are presented by Entergy in miscellaneous - net in other income.
Qualified Pension Settlement Costs
Year-to-date lump sum benefit payments from the Entergy Corporation Retirement Plan for Bargaining Employees and the Entergy Corporation Retirement Plan for Non-Bargaining Employees exceeded the sum of the Plans’ 2023 service and interest cost, resulting in settlement costs. In accordance with accounting standards, settlement accounting requires immediate recognition of the portion of previously unrecognized losses associated with the settled portion of the plan’s pension liability. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy New Orleans, Entergy Texas, and System Energy each participate in one or both of the Entergy Corporation Retirement Plan for Bargaining Employees and the Entergy Corporation Retirement Plan for Non-Bargaining Employees and incurred settlement costs. Similar to other pension costs, the settlement costs were included with employee labor costs and charged to expense and capital in the same manner that labor costs were charged. Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans each received regulatory approval to defer the expense portion of the settlement costs, with future amortization of the deferred settlement expense over the period in which the expense otherwise would be recorded had the immediate recognition not occurred.
Entergy Texas Reserve
In September 2020, Entergy Texas elected to establish a reserve, in accordance with PUCT regulations, for the difference between the amount recorded for pension and other postretirement benefits expense under generally accepted accounting principles during 2019, the first year that rates from Entergy Texas’s last general rate proceeding were in effect, and the annual amount of actuarially determined pension and other postretirement benefits chargeable to Entergy Texas’s expense. The reserve amount will be evaluatedwas included in the next scheduled PUCTbase rate case and a reasonable amortization period will be determined bythat was filed with the PUCT at that time.in July 2022. At March 31, 2022,2023, the balance in this reserve was approximately $14.5$39.9 million.
Employer Contributions
Based on current assumptions, Entergy expects to contribute $200$267 million to its qualified pension plans in 2022.2023. As of March 31, 2022,2023, Entergy had contributed $67.9$33 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 2022:2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| (In Thousands) |
Expected 2022 pension contributions | $40,840 | | | $22,917 | | | $12,852 | | | $922 | | | $1,924 | | | $12,760 | |
Pension contributions made through March 2022 | $15,096 | | | $10,241 | | | $2,972 | | | $922 | | | $1,340 | | | $3,996 | |
Remaining estimated pension contributions to be made in 2022 | $25,744 | | | $12,676 | | | $9,880 | | | $— | | | $584 | | | $8,764 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | System Energy |
| (In Thousands) |
Expected 2023 pension contributions | $54,468 | | | $44,565 | | | $21,110 | | | $1,420 | | | $5,314 | | | $15,543 | |
Pension contributions made through March 2023 | $6,436 | | | $3,169 | | | $2,470 | | | $— | | | $146 | | | $2,191 | |
Remaining estimated pension contributions to be made in 2023 | $48,032 | | | $41,396 | | | $18,640 | | | $1,420 | | | $5,168 | | | $13,352 | |
NOTE 7. BUSINESS SEGMENT INFORMATION (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Entergy’sEntergy has a single reportable segments as of March 31, 2022 weresegment, Utility, and Entergy Wholesale Commodities. Utilitywhich includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and operation of a small natural gas utility servicedistribution business in portions of Louisiana. Entergy Wholesale CommoditiesThe Utility segment reflects management’s primary basis of organization with a predominant focus on its utility operations in the Gulf South. Parent & Other includes the ownership, operation,parent company, Entergy Corporation, 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 ofother business activity, including Entergy’s non-utility operations business which owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.customers and also provides decommissioning services to nuclear power plants owned by non-affiliated entities in the United States.
As discussed in Note 13 to the financial statements in the Form 10-K, Entergy completed its multi-year strategy to exit the merchant nuclear power business in 2022 and upon completion of all transition activities, effective January 1, 2023, Entergy Wholesale Commodities is no longer a reportable segment. See Note 13 and Note 14 to the financial statements in the Form 10-K for discussion of the planned shutdownasset impairments and sale of each of the Entergy Wholesale Commodities nuclear power plants, including the planned shutdown and sale of Palisades, the only remaining operating plant in Entergy Wholesale Commodities’ merchant nuclear fleet as of March 31, 2022. “All Other” includes the parent company, Entergy Corporation, and other business activity.restructuring
Entergy Corporation and Subsidiaries
Notes to Financial Statements
charges related to the decision to exit the merchant nuclear power business. Remaining business activity previously reported under Entergy Wholesale Commodities is now included under Parent & Other. Historical segment financial information presented herein has been restated for the first quarter 2022 to reflect the change in reportable segments. The change in reportable segments had no effect on Entergy’s consolidated financial statements or historical segment financial information for the Utility reportable segment.
Entergy’s segment financial information for the first quarters of 20222023 and 20212022 were as follows:
| | | Utility | | Entergy Wholesale Commodities | | All Other | | Eliminations | | Consolidated | | Utility | | Parent & Other | | Eliminations | | Consolidated |
| | (In Thousands) | | (In Thousands) |
2023 | | 2023 | |
Operating revenues | | Operating revenues | | $2,947,992 | | | $33,070 | | | ($3) | | | $2,981,059 | |
Income taxes | | Income taxes | | ($66,126) | | | ($12,849) | | | $— | | | ($78,975) | |
Consolidated net income (loss) | | Consolidated net income (loss) | | $398,167 | | | ($30,394) | | | ($55,474) | | | $312,299 | |
Total assets as of March 31, 2023 | | Total assets as of March 31, 2023 | | $63,443,534 | | | $860,341 | | | ($5,100,599) | | | $59,203,276 | |
2022 | 2022 | | 2022 | |
Operating revenues | Operating revenues | | $2,728,156 | | | $149,777 | | | $— | | | ($8) | | | $2,877,925 | | Operating revenues | | $2,728,156 | | | $149,777 | | | ($8) | | | $2,877,925 | |
Income taxes | Income taxes | | $75,359 | | | $2,854 | | | ($11,716) | | | $— | | | $66,497 | | Income taxes | | $75,359 | | | ($8,862) | | | $— | | | $66,497 | |
Consolidated net income (loss) | Consolidated net income (loss) | | $343,156 | | | $7,859 | | | ($39,476) | | | ($31,946) | | | $279,593 | | Consolidated net income (loss) | | $343,156 | | | ($31,617) | | | ($31,946) | | | $279,593 | |
Total assets as of March 31, 2022 | | $61,684,609 | | | $1,137,843 | | | $601,479 | | | ($3,590,405) | | | $59,833,526 | | |
2021 | | |
Operating revenues | | $2,596,616 | | | $248,219 | | | $23 | | | ($20) | | | $2,844,838 | | |
Income taxes | | $59,734 | | | $15,560 | | | ($9,352) | | | $— | | | $65,942 | | |
Consolidated net income (loss) | | $360,600 | | | $38,124 | | | ($27,680) | | | ($31,899) | | | $339,145 | | |
Total assets as of December 31, 2021 | | $59,733,625 | | | $1,242,675 | | | $561,168 | | | ($2,083,226) | | | $59,454,242 | | |
Total assets as of December 31, 2022 | | Total assets as of December 31, 2022 | | $61,399,243 | | | $884,442 | | | ($3,688,494) | | | $58,595,191 | |
The Entergy Wholesale Commodities business is sometimes referred to as the “competitive businesses.” Eliminations are primarily intersegment activity. Almost all of Entergy’s goodwill is related to the Utility segment.
As discussed in Note 13 to the financial statements in the Form 10-K, Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to shut down and sell all of its plants in the merchant nuclear fleet resulting in the cessation of merchant power generation at all Entergy Wholesale Commodities nuclear power plants owned and operated by Entergy by mid-2022. The decisions to shut down these plants and the related 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 first quarters of 2022 and 2021 were comprised of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2022 | | 2021 |
| 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, | $37 | | | $— | | | $37 | | | $145 | | | $14 | | | $159 | |
Restructuring costs accrued | 4 | | | — | | | 4 | | | 13 | | | — | | | 13 | |
Cash paid out | — | | | — | | | — | | | 1 | | | — | | | 1 | |
Balance as of March 31, | $41 | | | $— | | | $41 | | | $157 | | | $14 | | | $171 | |
In addition, Entergy Wholesale Commodities incurred $1 million in the first quarter 2022 and $3 million in the first quarter 2021 of impairment and other related charges associated with these strategic decisions and transactions.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy expects to incur employee retention and severance expenses associated with management’s strategy to exit the Entergy Wholesale Commodities merchant power business of approximately $5 million in 2022, of which $4 million has been incurred as of March 31, 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 isare 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. Management allocates resources and assesses financial performance on a consolidated basis.
NOTE 8. RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Market Risk
In the normal course of business, Entergy is exposed to a number of market risks. Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument. All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity price risk, equity price, and interest rate risk. Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.
The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs, that are recovered from customers.
As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers. Entergy Wholesale Commodities entered into forward contracts with its customers and also sold energy and capacity in the day ahead or spot markets. In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities used a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk. When the market price fell, the combination of financial contracts was expected to settle in gains that offset lower revenue from generation, which resulted in a more predictable cash flow.
Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio.
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
rolling net exposure during the stated periods. These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.
Derivatives
Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions. Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements. Financially-settled cash flow hedges can include natural gas and electricity swaps and options. 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 entered 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 settled against day-ahead power pool prices were used to manage price exposure for Entergy Wholesale Commodities generation. Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 99% for the balance of 2022, all of which is sold under normal purchase/normal sale contracts. Total planned generation for the balance of 2022 is 1.1 TWh.
Entergy used standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitated the netting of cash flows associated with a single counterparty and may have included collateral requirements. Cash, letters of credit, and parental/affiliate guarantees were obtained as security from counterparties in order to mitigate credit risk. The collateral agreements required a counterparty to post cash or letters of credit in the event an exposure exceeded an established threshold. The threshold represented an unsecured credit limit, which may have been supported by a parental/affiliate guarantee, as determined in accordance with Entergy’s credit policy. In addition, collateral agreements allowed for termination and liquidation of all positions in the event of a failure or inability to post collateral.
Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contained provisions that required 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 was an Entergy Corporation guarantee. If the Entergy Corporation credit rating fell below investment grade, Entergy would have had to post collateral equal to the estimated outstanding liability under the contract at the applicable date. There were no outstanding derivative contracts held by Entergy Wholesale Commodities as of March 31, 2022 and December 31, 2021. As of March 31, 2022, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. As of December 31, 2021, $8 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties.
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, 20222023 is 2 years1 year, each, for Entergy Louisiana and the maximum length of time over which Entergy has executed natural gas swaps as of March 31, 2022 is 7 months for Entergy Mississippi. The total volume of natural gas swaps and options outstanding as of March 31, 20222023 is 37,339,10028,141,800 MMBtu for Entergy, including 14,620,0007,320,000 MMBtu for Entergy Louisiana and 22,719,10020,821,800 MMBtu for Entergy Mississippi. 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
During the second quarter 2021,2022, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 20212022 through May 31, 2022.2023. Financial transmission rights are derivative instruments that 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 CommoditiesEntergy’s non-utility operations 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, 20222023 is 23,30324,016 GWh for Entergy, including 4,9695,351 GWh for Entergy Arkansas, 10,68111,049 GWh for Entergy Louisiana, 2,5292,592 GWh for Entergy Mississippi, 1,0701,054 GWh for Entergy New Orleans, and 3,9593,939 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 CommoditiesEntergy’s non-utility operations is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale CommoditiesEntergy’s non-utility operations as of March 31, 20222023 and December 31, 2021.2022. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Mississippi,
Entergy Corporation and Subsidiaries
Notes to Financial Statements
and Entergy MississippiTexas as of March 31, 20222023 and for Entergy Mississippi, Entergy New Orleans, and Entergy Texas as of December 31, 2021.2022.
The fair values of Entergy’s derivative instruments innot designated as hedging instruments on the consolidated balance sheet as of March 31, 2023 and December 31, 2022 are shown in the tabletables below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Business |
| | | | (In Millions) | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Derivatives not designated as hedging instruments | | | | | | | | | | |
Assets: | | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Natural gas swaps and options | | Prepayments and other | | $54 | | $— | | $54 | | Utility |
Natural gas swaps and options | | Other deferred debits and other assets | | $8 | | $— | | $8 | | Utility |
Financial transmission rights | | Prepayments and other | | $2 | | ($1) | | $1 | | Utility and Entergy Wholesale Commodities |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) |
| | | | (In Millions) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
2023 | | | | | | | | |
Assets: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Natural gas swaps and options | | Prepayments and other | | $2 | | $— | | $2 |
| | | | | | | | |
Financial transmission rights | | Prepayments and other | | $8 | | ($1) | | $7 |
| | | | | | | | |
Liabilities: | | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Natural gas swaps and options | | Other current liabilities | | $22 | | $— | | $22 |
| | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2021 are shown in the table below.
| Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Business | |
| | | | | (In Millions) | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Derivatives not designated as hedging instruments | | | | | | | | | |
| 2022 | | 2022 | |
Assets: | Assets: | | | | | | | | | Assets: | | | | | | | |
| Natural gas swaps and options | Natural gas swaps and options | | Prepayments and other | | $6 | | $— | | $6 | | Utility | Natural gas swaps and options | | Prepayments and other | | $13 | | $— | | $13 |
Natural gas swaps and options | Natural gas swaps and options | | Other deferred debits and other assets | | $5 | | $— | | $5 | | Utility | Natural gas swaps and options | | Other deferred debits and other assets | | $3 | | $— | | $3 |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $4 | | $— | | $4 | | Utility and Entergy Wholesale Commodities | Financial transmission rights | | Prepayments and other | | $21 | | ($2) | | $19 |
| Liabilities: | Liabilities: | | | | | | | | | Liabilities: | | | | | | | |
| Natural gas swaps and options | Natural gas swaps and options | | Other current liabilities | | $7 | | $— | | $7 | | Utility | Natural gas swaps and options | | Other current liabilities | | $25 | | $— | | $25 |
|
(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 SheetSheets
(d)Excludes cash collateral in the amount of $8 million posted as of March 31, 2022 and $8 million posted as of December 31, 2021.2022. Also excludes letters of credit in the amount of $1 million posted as of March 31, 2022.
As discussed above, the Entergy Wholesale Commodities portfolio2023 and $3 million posted as of derivative instruments expired in April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio. The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the three months ended MarchDecember 31, 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | |
Instrument | | Amount of gain (loss) recognized in other comprehensive income | | Income Statement location | | Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a) |
| | (In Millions) | | | | (In Millions) |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Electricity swaps and options | | $2 | | Competitive businesses operating revenues | | $39 |
(a)Before taxes of $8 million for the three months ended March 31, 20212022.
Prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments, Entergy may have effectively liquidated 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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
comprehensive income prior to de-designation would have continued to be deferred in other comprehensive income until they were included in income as the original hedged transaction occurred. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract were recorded as assets or liabilities on the balance sheet and offset as they flowed through to earnings.
The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | | | | | | | | | | | | |
Instrument | | Income Statement location | | Amount of gain (loss) recorded in the income statement |
| | | | (In Millions) |
2023 | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | ($37) |
Financial transmission rights | | Purchased power expense | (b) | $16 |
| | | | |
| | | | |
2022 | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $55 |
Financial transmission rights | | Purchased power expense | (b) | $23 |
| | | | |
| | | | |
2021 | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | (a) | $7 |
Financial transmission rights | | Purchased power | (b) | $128 |
Electricity swaps and options (c) | | Competitive business operating revenues | | ($2) |
(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)There were no gains (losses) recognized in accumulated other comprehensive income from electricity swaps and options prior to the expiration of the Entergy Wholesale Commodities portfolio of derivative instruments in April 2021.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of March 31, 20222023 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 | Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant | Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant |
| | | | | (In Millions) | | | | | | | (In Millions) | | |
Assets: | Assets: | | Assets: | |
Natural gas swaps and options | Natural gas swaps and options | | Prepayments and other | | $19.3 | | $— | | $19.3 | | Entergy Louisiana | Natural gas swaps and options | | Prepayments and other | | $2.4 | | $— | | $2.4 | | Entergy Louisiana |
Natural gas swaps and options | | Other deferred debits and other assets | | $8.3 | | $— | | $8.3 | | Entergy Louisiana | |
Natural gas swaps | | Prepayments and other | | $35.0 | | $— | | $35.0 | | Entergy Mississippi | |
| | | Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.6 | | ($0.2) | | $0.4 | | Entergy Arkansas | Financial transmission rights | | Prepayments and other | | $4.0 | | $— | | $4.0 | | Entergy Arkansas |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.3 | | $— | | $0.3 | | Entergy Louisiana | Financial transmission rights | | Prepayments and other | | $2.7 | | ($0.2) | | $2.5 | | Entergy Louisiana |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.2 | | $— | | $0.2 | | Entergy Mississippi | Financial transmission rights | | Prepayments and other | | $0.2 | | $— | | $0.2 | | Entergy Mississippi |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.1 | | $— | | $0.1 | | Entergy New Orleans | Financial transmission rights | | Prepayments and other | | $0.3 | | $— | | $0.3 | | Entergy New Orleans |
Financial transmission rights | | Prepayments and other | | $0.5 | | $— | | $0.5 | | Entergy Texas | |
| Liabilities: | | Liabilities: | |
| Natural gas swaps | | Natural gas swaps | | Other current liabilities | | ($21.8) | | $— | | ($21.8) | | Entergy Mississippi |
| Financial transmission rights | | Financial transmission rights | | Other current liabilities | | $0.4 | | ($0.5) | | ($0.1) | | Entergy Texas |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 20212022 were as follows:
| Instrument | Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant | Instrument | | Balance Sheet Location | | Gross Fair Value (a) | | Offsetting Position (b) | | Net Fair Value (c) (d) | | Registrant |
| | | | | (In Millions) | | | | | | | (In Millions) | | |
Assets: | Assets: | | Assets: | |
Natural gas swaps and options | Natural gas swaps and options | | Prepayments and other | | $5.7 | | $— | | $5.7 | | Entergy Louisiana | Natural gas swaps and options | | Prepayments and other | | $13.1 | | $— | | $13.1 | | Entergy Louisiana |
Natural gas swaps and options | Natural gas swaps and options | | Other deferred debits and other assets | | $5.3 | | $— | | $5.3 | | Entergy Louisiana | Natural gas swaps and options | | Other deferred debits and other assets | | $3.4 | | $— | | $3.4 | | Entergy Louisiana |
| | Financial transmission rights | Financial transmission rights | | Prepayments and other | | $2.3 | | $— | | $2.3 | | Entergy Arkansas | Financial transmission rights | | Prepayments and other | | $10.3 | | $— | | $10.3 | | Entergy Arkansas |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.6 | | $— | | $0.6 | | Entergy Louisiana | Financial transmission rights | | Prepayments and other | | $7.7 | | ($0.4) | | $7.3 | | Entergy Louisiana |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.3 | | $— | | $0.3 | | Entergy Mississippi | Financial transmission rights | | Prepayments and other | | $0.6 | | $— | | $0.6 | | Entergy Mississippi |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.1 | | $— | | $0.1 | | Entergy New Orleans | Financial transmission rights | | Prepayments and other | | $0.8 | | $— | | $0.8 | | Entergy New Orleans |
Financial transmission rights | Financial transmission rights | | Prepayments and other | | $0.8 | | $— | | $0.8 | | Entergy Texas | Financial transmission rights | | Prepayments and other | | $1.2 | | ($1.1) | | $0.1 | | Entergy Texas |
| Liabilities: | Liabilities: | | Liabilities: | |
| Natural gas swaps | Natural gas swaps | | Other current liabilities | | $6.7 | | $— | | $6.7 | | Entergy Mississippi | Natural gas swaps | | Other current liabilities | | $24.0 | | $— | | $24.0 | | Entergy Mississippi |
Natural gas swaps | Natural gas swaps | | Other current liabilities | | $0.5 | | $— | | $0.5 | | Entergy New Orleans | Natural gas swaps | | Other current liabilities | | $1.5 | | $— | | $1.5 | | 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, 2022,2023, letters of credit posted with MISO covered financial transmission rights exposure of $0.1 million for Entergy Arkansas, $0.3 million for Entergy ArkansasMississippi, and $0.4$0.5 million for Entergy Mississippi.Texas. As of December 31, 2021,2022, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Mississippi, $0.2 million for Entergy New Orleans, and $0.1$2.4 million for Entergy Texas.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | | | | | | | | | | | | | | | | | | |
Instrument | | Income Statement Location | | Amount of gain (loss) recorded in the income statement | | Registrant |
| | | | (In Millions) | | |
2023 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | ($6.6) | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($28.6) | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($2.2) | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $3.9 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $8.8 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $1.5 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $0.9 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $0.7 | (b) | Entergy Texas |
| | | | | | |
2022 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $11.1 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $42.8 | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $1.1 | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power expense | | $7.5 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power expense | | $9.4 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power expense | | $1.0 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power expense | | $0.8 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power expense | | $3.8 | (b) | Entergy Texas |
| | | | | | |
2021 | | | | | | |
Natural gas swaps and options | | Fuel, fuel-related expenses, and gas purchased for resale | | $1.8 | (a) | Entergy Louisiana |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | $5.2 | (a) | Entergy Mississippi |
Natural gas swaps | | Fuel, fuel-related expenses, and gas purchased for resale | | ($0.1) | (a) | Entergy New Orleans |
| | | | | | |
Financial transmission rights | | Purchased power | | $26.1 | (b) | Entergy Arkansas |
Financial transmission rights | | Purchased power | | $12.3 | (b) | Entergy Louisiana |
Financial transmission rights | | Purchased power | | $7.2 | (b) | Entergy Mississippi |
Financial transmission rights | | Purchased power | | $1.3 | (b) | Entergy New Orleans |
Financial transmission rights | | Purchased power | | $77.9 | (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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 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.rights.
Consistent with management’s strategy to shut down and sell all plants in the Entergy Wholesale Commodities merchant fleet, the Entergy Wholesale Commodities portfolio of derivative instruments expired in
Entergy Corporation and Subsidiaries
Notes to Financial Statements
April 2021, which was the settlement date for the last financial derivative contracts in the Entergy Wholesale Commodities portfolio.
The values for power contract assets or liabilities prior to expiration in April 2021 were 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 were classified as Level 3 assets and liabilities. The valuations of these assets and liabilities were performed by the Office of Corporate Risk Oversight and the Entergy Wholesale Commodities Accounting group. The primary related functions of the Office of Corporate Risk Oversight included: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system. The Office of Corporate Risk Oversight was also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis. The Entergy Wholesale Commodities Accounting group performed functions related to market and counterparty settlements, revenue reporting and analysis, and financial accounting. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer while the Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The amounts reflected as the fair value of electricity swaps were based on the estimated amount that the contracts were 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 equaled the estimated amount receivable to or payable by Entergy if the contracts were settled at that date. These derivative contracts included cash flow hedges that swapped fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business. The fair values were 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 were recorded as derivative contract assets or liabilities. For contracts that had unit contingent terms, a further discount was 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 were valued based on a Black Scholes model, and were calculated at the end of each month for accounting purposes. Inputs to the valuation included end of day forward market prices for the period when the transactions settled, implied volatilities based on market volatilities provided by a third-party data aggregator, and U.S. Treasury rates for a risk-free return rate. As described further below, prices and implied volatilities were reviewed and could be adjusted if it was determined that there was a better representation of fair value.
On a daily basis, the Office of Corporate Risk Oversight calculated the mark-to-market for electricity swaps and options. The Office of Corporate Risk Oversight also validated forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions. Significant differences were 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 were also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities. Moreover, on a quarterly basis, the Office of Corporate Risk Oversight confirmed the mark-to-market calculations and prepared price scenarios and credit downgrade scenario analysis. The scenario analysis was communicated to senior management within Entergy and within Entergy Wholesale Commodities. Finally, for all proposed derivative transactions, an analysis was completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio. In particular, the credit and liquidity effects were calculated for this analysis. This analysis was communicated to senior management within Entergy and Entergy Wholesale Commodities.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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 Office of Corporate Risk Oversight. The values are calculated internally and verified against
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the data published by MISO. Entergy’s Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Office of Corporate Risk Oversight reports to the Vice President and Treasurer. The Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.
The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 20222023 and December 31, 2021.2022. 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.
| 2022 | | Level 1 | | Level 2 | | Level 3 | | Total | |
2023 | | 2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
Assets: | Assets: | | Assets: | |
Temporary cash investments | Temporary cash investments | | $625 | | | $— | | | $— | | | $625 | | Temporary cash investments | | $1,908 | | | $— | | | $— | | | $1,908 | |
| Decommissioning trust funds (a): | Decommissioning trust funds (a): | | Decommissioning trust funds (a): | |
Temporary cash investments | | Temporary cash investments | | 1 | | | — | | | — | | | 1 | |
Equity securities | Equity securities | | 103 | | | — | | | — | | | 103 | | Equity securities | | 26 | | | — | | | — | | | 26 | |
Debt securities (b) | | 736 | | | 1,334 | | | — | | | 2,070 | | |
Common trusts (c) | | 3,040 | | |
Debt securities | | Debt securities | | 571 | | | 1,136 | | | — | | | 1,707 | |
Common trusts (b) | | Common trusts (b) | | 2,616 | |
| Securitization recovery trust account | Securitization recovery trust account | | 15 | | | — | | | — | | | 15 | | Securitization recovery trust account | | 17 | | | — | | | — | | | 17 | |
Escrow accounts | Escrow accounts | | 49 | | | — | | | — | | | 49 | | Escrow accounts | | 406 | | | — | | | — | | | 406 | |
Gas hedge contracts | Gas hedge contracts | | 54 | | | 8 | | | — | | | 62 | | Gas hedge contracts | | 2 | | | — | | | — | | | 2 | |
Financial transmission rights | Financial transmission rights | | — | | | — | | | 1 | | | 1 | | Financial transmission rights | | — | | | — | | | 7 | | | 7 | |
| | $1,582 | | | $1,342 | | | $1 | | | $5,965 | | | $2,931 | | | $1,136 | | | $7 | | | $6,690 | |
| Liabilities: | | Liabilities: | |
| Gas hedge contracts | | Gas hedge contracts | | $22 | | | $— | | | $— | | | $22 | |
|
| 2021 | | Level 1 | | Level 2 | | Level 3 | | Total | |
2022 | | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
Assets: | Assets: | | | | | | | | | Assets: | | | | | | | | |
Temporary cash investments | Temporary cash investments | | $398 | | | $— | | | $— | | | $398 | | Temporary cash investments | | $109 | | | $— | | | $— | | | $109 | |
Decommissioning trust funds (a): | Decommissioning trust funds (a): | | | | | | | | | Decommissioning trust funds (a): | | | | | | | | |
Equity securities | Equity securities | | 132 | | | — | | | — | | | 132 | | Equity securities | | 24 | | | — | | | — | | | 24 | |
Debt securities (b) | Debt securities (b) | | 770 | | | 1,407 | | | — | | | 2,177 | | Debt securities (b) | | 534 | | | 1,122 | | | — | | | 1,656 | |
Common trusts (c)(b) | Common trusts (c)(b) | | 3,205 | | Common trusts (c)(b) | | 2,442 | |
| Securitization recovery trust account | Securitization recovery trust account | | 29 | | | — | | | — | | | 29 | | Securitization recovery trust account | | 13 | | | — | | | — | | | 13 | |
Escrow accounts | Escrow accounts | | 49 | | | — | | | — | | | 49 | | Escrow accounts | | 402 | | | — | | | — | | | 402 | |
Gas hedge contracts | Gas hedge contracts | | 6 | | | 5 | | | — | | | 11 | | Gas hedge contracts | | 13 | | | 3 | | | — | | | 16 | |
Financial transmission rights | Financial transmission rights | | — | | | — | | | 4 | | | 4 | | Financial transmission rights | | — | | | — | | | 19 | | | 19 | |
| | | $1,384 | | | $1,412 | | | $4 | | | $6,005 | | | | $1,095 | | | $1,125 | | | $19 | | | $4,681 | |
Liabilities: | Liabilities: | | | | | | | | | Liabilities: | | | | | | | | |
| Gas hedge contracts | Gas hedge contracts | | $7 | | | $— | | | $— | | | $7 | | Gas hedge contracts | | $25 | | | $— | | | $— | | | $25 | |
|
(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)The decommissioning trust funds fair value presented herein does not include the recognition pursuant to ASU 2016-13 of a credit loss valuation allowance of $3.2 million as of March 31, 2022 and $0.4 million as
Entergy Corporation and Subsidiaries
Notes to Financial Statements
of December 31, 2021 on debtand corporate securities. See Note 9 to the financial statements herein for additional information on the allowance for expected credit losses.investment portfolios.
(c)(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 derivativesfinancial transmission rights classified as Level 3 in the fair value hierarchy for the three months ended March 31, 20222023 and 2021:2022:
| | | | | | | | | | | | | | | | | | | |
| | | 2022 | | 2021 |
| | | Financial transmission rights | | Power Contracts | | Financial transmission rights |
| | | (In Millions) |
Balance as of January 1, | | | $4 | | | $38 | | | $9 | |
Total gains (losses) for the period (a) | | | | | | | |
Included in earnings | | | — | | | (2) | | | 4 | |
Included in other comprehensive income | | | — | | | 2 | | | — | |
Included as a regulatory liability/asset | | | 20 | | | — | | | 119 | |
| | | | | | | |
| | | | | | | |
Settlements | | | (23) | | | (38) | | | (128) | |
Balance as of March 31, | | | $1 | | | $— | | | $4 | |
(a)Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period was $0.7 million for the three months ended March 31, 2021. | | | | | | | | | | | | | |
| | | 2023 | | 2022 |
| | | | | |
| | | (In Millions) |
Balance as of January 1, | | | $19 | | | $4 | |
Total gains (losses) for the period | | | | | |
| | | | | |
| | | | | |
Included as a regulatory liability/asset | | | 4 | | | 20 | |
| | | | | |
| | | | | |
Settlements | | | (16) | | | (23) | |
Balance as of March 31, | | | $7 | | | $1 | |
The fair values of the Level 3 financial transmission rights are based on unobservable inputs calculated internally and verified against historical pricing data published by MISO.
The following table sets forth, an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Significant Unobservable Input | | Transaction Type | | Position | | Change to Input | | Effect on Fair Value |
Unit contingent discount | | Electricity swaps | | Sell | | Increase (Decrease) | | Decrease (Increase) |
| | | | | | | | |
| | | | | | | | |
The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets and liabilities that are accounted for at fair value on a recurring basis as of March 31, 20222023 and December 31, 2021.2022. 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
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $156.7 | | | $— | | | $— | | | $156.7 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 10.4 | | | — | | | — | | | 10.4 | |
Debt securities | | 135.9 | | | 343.5 | | | — | | | 479.4 | |
Common trusts (b) | | | | | | | | 775.7 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 4.0 | | | 4.0 | |
| | $303.0 | | | $343.5 | | | $4.0 | | | $1,426.2 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Arkansas
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $107.2 | | | $— | | | $— | | | $107.2 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 2.7 | | | — | | | — | | | 2.7 | |
Debt securities | | 132.4 | | | 376.9 | | | — | | | 509.3 | |
Common trusts (b) | | | | | | | | 848.6 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 0.4 | | | 0.4 | |
| | $242.3 | | | $376.9 | | | $0.4 | | | $1,468.2 | |
| 2021 | | Level 1 | | Level 2 | | Level 3 | | Total | |
2022 | | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
Assets: | Assets: | | Assets: | |
Temporary cash investments | Temporary cash investments | | $4.8 | | | $— | | | $— | | | $4.8 | | Temporary cash investments | | $3.4 | | | $— | | | $— | | | $3.4 | |
Decommissioning trust funds (a): | Decommissioning trust funds (a): | | Decommissioning trust funds (a): | |
Equity securities | Equity securities | | 16.7 | | | — | | | — | | | 16.7 | | Equity securities | | 4.5 | | | — | | | — | | | 4.5 | |
Debt securities | Debt securities | | 119.5 | | | 406.8 | | | — | | | 526.3 | | Debt securities | | 126.8 | | | 343.9 | | | — | | | 470.7 | |
Common trusts (b) | Common trusts (b) | | 895.4 | | Common trusts (b) | | 724.7 | |
| Financial transmission rights | Financial transmission rights | | — | | | — | | | 2.3 | | | 2.3 | | Financial transmission rights | | — | | | — | | | 10.3 | | | 10.3 | |
| | $141.0 | | | $406.8 | | | $2.3 | | | $1,445.5 | | | $134.7 | | | $343.9 | | | $10.3 | | | $1,213.6 | |
Entergy Louisiana
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $140.7 | | | $— | | | $— | | | $140.7 | |
| | | | | | | | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 22.8 | | | — | | | — | | | 22.8 | |
Debt securities | | 230.0 | | | 517.5 | | | — | | | 747.5 | |
Common trusts (b) | | | | | | | | 1,235.1 | |
| | | | | | | | |
| | | | | | | | |
Gas hedge contracts | | 19.3 | | | 8.3 | | | — | | | 27.6 | |
Financial transmission rights | | — | | | — | | | 0.3 | | | 0.3 | |
| | $412.8 | | | $525.8 | | | $0.3 | | | $2,174.0 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $1,079.3 | | | $— | | | $— | | | $1,079.3 | |
| | | | | | | | |
Decommissioning trust funds (a): | | | | | | | | |
Temporary cash investments | | 1.5 | | | — | | | — | | | 1.5 | |
Equity securities | | 7.5 | | | — | | | — | | | 7.5 | |
Debt securities | | 230.7 | | | 528.3 | | | — | | | 759.0 | |
Common trusts (b) | | | | | | | | 1,111.6 | |
Escrow accounts | | 296.4 | | | — | | | — | | | 296.4 | |
| | | | | | | | |
Gas hedge contracts | | 2.4 | | | — | | | — | | | 2.4 | |
Financial transmission rights | | — | | | — | | | 2.5 | | | 2.5 | |
| | $1,617.8 | | | $528.3 | | | $2.5 | | | $3,260.2 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $6.3 | | | $— | | | $— | | | $6.3 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 16.8 | | | — | | | — | | | 16.8 | |
Debt securities | | 209.4 | | | 515.7 | | | — | | | 725.1 | |
Common trusts (b) | | | | | | | | 1,037.2 | |
Escrow accounts | | 293.4 | | | — | | | — | | | 293.4 | |
| | | | | | | | |
Gas hedge contracts | | 13.1 | | | 3.4 | | | — | | | 16.5 | |
Financial transmission rights | | — | | | — | | | 7.3 | | | 7.3 | |
| | $539.0 | | | $519.1 | | | $7.3 | | | $2,102.6 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $18.4 | | | $— | | | $— | | | $18.4 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 20.2 | | | — | | | — | | | 20.2 | |
Debt securities | | 262.6 | | | 531.6 | | | — | | | 794.2 | |
Common trusts (b) | | | | | | | | 1,300.1 | |
| | | | | | | | |
| | | | | | | | |
Gas hedge contracts | | 5.7 | | | 5.3 | | | — | | | 11.0 | |
Financial transmission rights | | — | | | — | | | 0.6 | | | 0.6 | |
| | $306.9 | | | $536.9 | | | $0.6 | | | $2,144.5 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Entergy Mississippi
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
| | | | | | | | |
Escrow accounts | | $48.9 | | | $— | | | $— | | | $48.9 | |
Gas hedge contracts | | 35.0 | | | — | | | — | | | 35.0 | |
Financial transmission rights | | — | | | — | | | 0.2 | | | 0.2 | |
| | $83.9 | | | $— | | | $0.2 | | | $84.1 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $35.3 | | | $— | | | $— | | | $35.3 | |
Escrow accounts | | 33.9 | | | — | | | — | | | 33.9 | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 0.2 | | | 0.2 | |
| | $69.2 | | | $— | | | $0.2 | | | $69.4 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Gas hedge contracts | | $21.8 | | | $— | | | $— | | | $21.8 | |
| 2021 | | Level 1 | | Level 2 | | Level 3 | | Total | |
2022 | | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
Assets: | Assets: | | Assets: | |
Temporary cash investments | Temporary cash investments | | $47.6 | | | $— | | | $— | | | $47.6 | | Temporary cash investments | | $17.0 | | | $— | | | $— | | | $17.0 | |
Escrow accounts | Escrow accounts | | 48.9 | | | — | | | — | | | 48.9 | | Escrow accounts | | 33.5 | | | — | | | — | | | 33.5 | |
| Financial transmission rights | Financial transmission rights | | — | | | — | | | 0.3 | | | 0.3 | | Financial transmission rights | | — | | | — | | | 0.6 | | | 0.6 | |
| | | $96.5 | | | $— | | | $0.3 | | | $96.8 | | | | $50.5 | | | $— | | | $0.6 | | | $51.1 | |
| Liabilities: | Liabilities: | | Liabilities: | |
Gas hedge contracts | Gas hedge contracts | | $6.7 | | | $— | | | $— | | | $6.7 | | Gas hedge contracts | | $24.0 | | | $— | | | $— | | | $24.0 | |
Entergy New Orleans
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $31.1 | | | $— | | | $— | | | $31.1 | |
Securitization recovery trust account | | 5.1 | | | — | | | — | | | 5.1 | |
| | | | | | | | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 0.1 | | | 0.1 | |
| | $36.2 | | | $— | | | $0.1 | | | $36.3 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $175.5 | | | $— | | | $— | | | $175.5 | |
Securitization recovery trust account | | 5.3 | | | — | | | — | | | 5.3 | |
Escrow accounts | | 75.8 | | | — | | | — | | | 75.8 | |
| | | | | | | | |
Financial transmission rights | | — | | | — | | | 0.3 | | | 0.3 | |
| | $256.6 | | | $— | | | $0.3 | | | $256.9 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| 2021 | | Level 1 | | Level 2 | | Level 3 | | Total | |
2022 | | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
Assets: | Assets: | | Assets: | |
Temporary cash investments | Temporary cash investments | | $42.8 | | | $— | | | $— | | | $42.8 | | Temporary cash investments | | $4.4 | | | $— | | | $— | | | $4.4 | |
Securitization recovery trust account | Securitization recovery trust account | | 2.0 | | | — | | | — | | | 2.0 | | Securitization recovery trust account | | 2.2 | | | — | | | — | | | 2.2 | |
| Escrow accounts | | Escrow accounts | | 75.0 | | | — | | | — | | | 75.0 | |
| Financial transmission rights | Financial transmission rights | | — | | | — | | | 0.1 | | | 0.1 | | Financial transmission rights | | — | | | — | | | 0.8 | | | 0.8 | |
| | $44.8 | | | $— | | | $0.1 | | | $44.9 | | | $81.6 | | | $— | | | $0.8 | | | $82.4 | |
| Liabilities: | Liabilities: | | Liabilities: | |
Gas hedge contracts | Gas hedge contracts | | $0.5 | | | $— | | | $— | | | $0.5 | | Gas hedge contracts | | $1.5 | | | $— | | | $— | | | $1.5 | |
Entergy Texas
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
| | | | | | | | |
Securitization recovery trust account | | $10.0 | | | $— | | | $— | | | $10.0 | |
Financial transmission rights | | — | | | — | | | 0.5 | | | 0.5 | |
| | $10.0 | | | $— | | | $0.5 | | | $10.5 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $91.2 | | | $— | | | $— | | | $91.2 | |
Securitization recovery trust account | | 11.7 | | | — | | | — | | | 11.7 | |
| | | | | | | | |
| | $102.9 | | | $— | | | $— | | | $102.9 | |
| | | | | | | | |
Liabilities: | | | | | | | | |
Financial transmission rights | | $— | | | $— | | | $0.1 | | | $0.1 | |
| 2021 | | Level 1 | | Level 2 | | Level 3 | | Total | |
2022 | | 2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | | (In Millions) | | | (In Millions) |
Assets: | Assets: | | Assets: | |
| Temporary cash investments | | Temporary cash investments | | $3.0 | | | $— | | | $— | | | $3.0 | |
Securitization recovery trust account | Securitization recovery trust account | | $26.6 | | | $— | | | $— | | | $26.6 | | Securitization recovery trust account | | 10.9 | | | — | | | — | | | 10.9 | |
Financial transmission rights | Financial transmission rights | | — | | | — | | | 0.8 | | | 0.8 | | Financial transmission rights | | — | | | — | | | 0.1 | | | 0.1 | |
| | $26.6 | | | $— | | | $0.8 | | | $27.4 | | | $13.9 | | | $— | | | $0.1 | | | $14.0 | |
|
System Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $98.2 | | | $— | | | $— | | | $98.2 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 4.9 | | | — | | | — | | | 4.9 | |
Debt Securities | | 251.5 | | | 248.1 | | | — | | | 499.6 | |
Common trusts (b) | | | | | | | | 803.7 | |
| | $354.6 | | | $248.1 | | | $— | | | $1,406.4 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $89.1 | | | $— | | | $— | | | $89.1 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 12.9 | | | — | | | — | | | 12.9 | |
Debt securities | | 273.0 | | | 251.5 | | | — | | | 524.5 | |
Common trusts (b) | | | | | | | | 847.9 | |
| | $375.0 | | | $251.5 | | | $— | | | $1,474.4 | |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Millions) |
Balance as of January 1, | $2.3 | | | $0.6 | | | $0.3 | | | $0.1 | | | $0.8 | |
| | | | | | | | | |
Gains (losses) included as a regulatory liability/asset | 5.6 | | | 9.1 | | | 0.9 | | | 0.8 | | | 3.5 | |
Settlements | (7.5) | | | (9.4) | | | (1.0) | | | (0.8) | | | (3.8) | |
Balance as of March 31, | $0.4 | | | $0.3 | | | $0.2 | | | $0.1 | | | $0.5 | |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Millions) |
Balance as of January 1, | $2.7 | | | $4.2 | | | $0.6 | | | $0.1 | | | $1.6 | |
| | | | | | | | | |
Gains (losses) included as a regulatory liability/asset | 24.8 | | | 9.3 | | | 6.9 | | | 1.2 | | | 76.8 | |
Settlements | (26.1) | | | (12.3) | | | (7.2) | | | (1.2) | | | (77.9) | |
Balance as of March 31, | $1.4 | | | $1.2 | | | $0.3 | | | $0.1 | | | $0.5 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, and Palisades. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana 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 the Entergy Wholesale Commodities nuclear plants 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. 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 months ended March 31, 2022 on equity securities still held as of March 31, 2022 were ($175) million. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.
The available-for-sale securities held as of March 31, 2022 and December 31, 2021 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2022 | | | | | | |
Debt Securities | | $2,070 | | | $15 | | | $99 | |
| | | | | | |
2021 | | | | | | |
Debt Securities | | $2,177 | | | $65 | | | $12 | |
The unrealized gains/(losses) above are reported before deferred taxes of ($5) million as of March 31, 2022 and $2 million as of December 31, 2021 for debt securities. The amortized cost of available-for-sale debt securities was $2,153 million as of March 31, 2022 and $2,125 million as of December 31, 2021. As of March 31, 2022, available-for-sale debt securities had an average coupon rate of approximately 2.77%, an average duration of approximately 6.63 years, and an average maturity of approximately 10.40 years.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
Less than 12 months | | $1,419 | | | $83 | | | $770 | | | $8 | |
More than 12 months | | 119 | | | 16 | | | 99 | | | 4 | |
Total | | $1,538 | | | $99 | | | $869 | | | $12 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2022 and December 31, 2021 were as follows:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In Millions) |
Less than 1 year | $76 | | | $— | |
1 year - 5 years | 692 | | | 473 | |
5 years - 10 years | 600 | | | 655 | |
10 years - 15 years | 150 | | | 389 | |
15 years - 20 years | 158 | | | 130 | |
20 years+ | 394 | | | 530 | |
Total | $2,070 | | | $2,177 | |
During the three months ended March 31, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $303 million and $524 million, respectively. During the three months ended March 31, 2022 and 2021, gross gains of $1 million and $11 million, respectively, and gross losses of $12 million and $11 million, respectively, related to available-for-sale securities were reclassified out of other comprehensive income or other regulatory liabilities/assets into earnings.
The fair value of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plant as of March 31, 2022 and December 31, 2021 was $539 million and $576 million, respectively, for Palisades. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, 2022 and December 31, 2021 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2022 | | | | | | |
Debt Securities | | $509.3 | | | $1.4 | | | $28.3 | |
| | | | | | |
2021 | | | | | | |
Debt Securities | | $526.3 | | | $11.4 | | | $4.7 | |
The amortized cost of available-for-sale debt securities was $536.2 million as of March 31, 2022 and $519.6 million as of December 31, 2021. As of March 31, 2022, the available-for-sale debt securities had an average coupon rate of approximately 2.28%, an average duration of approximately 6.49 years, and an average maturity of approximately 7.74 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2022 on equity securities still held as of March 31, 2022 were ($50.5) million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
Less than 12 months | | $332.9 | | | $21.3 | | | $183.8 | | | $2.9 | |
More than 12 months | | 55.8 | | | 7.0 | | | 39.5 | | | 1.8 | |
Total | | $388.7 | | | $28.3 | | | $223.3 | | | $4.7 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2022 and December 31, 2021 were as follows:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In Millions) |
Less than 1 year | $33.8 | | | $— | |
1 year - 5 years | 153.6 | | | 91.7 | |
5 years - 10 years | 220.8 | | | 217.4 | |
10 years - 15 years | 47.9 | | | 146.0 | |
15 years - 20 years | 27.3 | | | 35.7 | |
20 years+ | 25.9 | | | 35.5 | |
Total | $509.3 | | | $526.3 | |
During the three months ended March 31, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $7.2 million and $13.8 million, respectively. During the three months ended March 31, 2022 and 2021, gross gains of $0.03 million and $0.8 million, respectively, and gross losses of $0.2 million and $0.1 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, 2022 and December 31, 2021 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2022 | | | | | | |
Debt Securities | | $747.5 | | | $9.7 | | | $30.2 | |
| | | | | | |
2021 | | | | | | |
Debt Securities | | $794.2 | | | $31.3 | | | $3.3 | |
The amortized cost of available-for-sale debt securities was $767.9 million as of March 31, 2022 and $766.3 million as of December 31, 2021. As of March 31, 2022, the available-for-sale debt securities had an average coupon rate of approximately 3.37%, an average duration of approximately 6.36 years, and an average maturity of approximately 12.16 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2022 on equity securities still held as of March 31, 2022 were ($70) million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2022 and December 31, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
Less than 12 months | | $427.4 | | | $25.1 | | | $206.9 | | | $1.4 | |
More than 12 months | | 41.2 | | | 5.1 | | | 42.9 | | | 1.9 | |
Total | | $468.6 | | | $30.2 | | | $249.8 | | | $3.3 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2022 and December 31, 2021 were as follows:
| | | | | | | | | | | |
| 2022 | | 2021 |
| (In Millions) |
Less than 1 year | $29.2 | | | $— | |
1 year - 5 years | 193.9 | | | 157.8 | |
5 years - 10 years | 170.0 | | | 173.0 | |
10 years - 15 years | 68.5 | | | 123.0 | |
15 years - 20 years | 82.9 | | | 80.2 | |
20 years+ | 203.0 | | | 260.2 | |
Total | $747.5 | | | $794.2 | |
During the three months ended March 31, 2022 and 2021, proceeds from the dispositions of available-for-sale securities amounted to $120.5 million and $108.4 million, respectively. During the three months ended March 31, 2022 and 2021, gross gains of $0.9 million and $3.3 million, respectively, and gross losses of $5.5 million and $3.2 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
System Energy
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $259.3 | | | $— | | | $— | | | $259.3 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 8.3 | | | — | | | — | | | 8.3 | |
Debt securities | | 204.0 | | | 264.1 | | | — | | | 468.1 | |
Common trusts (b) | | | | | | | | 728.4 | |
| | $471.6 | | | $264.1 | | | $— | | | $1,464.1 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Level 1 | | Level 2 | | Level 3 | | Total |
| | (In Millions) |
Assets: | | | | | | | | |
Temporary cash investments | | $2.9 | | | $— | | | $— | | | $2.9 | |
Decommissioning trust funds (a): | | | | | | | | |
Equity securities | | 2.8 | | | — | | | — | | | 2.8 | |
Debt securities | | 197.5 | | | 262.2 | | | — | | | 459.7 | |
Common trusts (b) | | | | | | | | 680.4 | |
| | $203.2 | | | $262.2 | | | $— | | | $1,145.8 | |
(a)The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices. Fixed income securities are held in various governmental and corporate securities. See Note 9 to the financial statements herein for additional information on the investment portfolios.
(b)Common trust funds are not publicly quoted and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2023.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Millions) |
Balance as of January 1, | $10.3 | | | $7.3 | | | $0.6 | | | $0.8 | | | $0.1 | |
| | | | | | | | | |
Gains (losses) included as a regulatory liability/asset | (2.4) | | | 4.0 | | | 1.1 | | | 0.4 | | | 0.5 | |
Settlements | (3.9) | | | (8.8) | | | (1.5) | | | (0.9) | | | (0.7) | |
Balance as of March 31, | $4.0 | | | $2.5 | | | $0.2 | | | $0.3 | | | ($0.1) | |
The following table sets forth a reconciliation of changes in the net assets for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the three months ended March 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| (In Millions) |
Balance as of January 1, | $2.3 | | | $0.6 | | | $0.3 | | | $0.1 | | | $0.8 | |
| | | | | | | | | |
Gains (losses) included as a regulatory liability/asset | 5.6 | | | 9.1 | | | 0.9 | | | 0.8 | | | 3.5 | |
Settlements | (7.5) | | | (9.4) | | | (1.0) | | | (0.8) | | | (3.8) | |
Balance as of March 31, | $0.4 | | | $0.3 | | | $0.2 | | | $0.1 | | | $0.5 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
NOTE 9. DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System EnergyEnergy)
The NRC requires Entergy subsidiaries to maintain nuclear decommissioning trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, and Grand Gulf. Entergy’s nuclear decommissioning trust funds invest in equity securities, fixed-rate debt securities, and cash and cash equivalents.
Entergy records decommissioning trust funds on the balance sheet at their fair value. Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets. For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana 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 the Palisades non-utility nuclear plant did not meet the criteria for regulatory accounting treatment. Accordingly, unrealized gains/(losses) recorded on the equity securities in the trust funds were 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. 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.
As discussed in Note 14 to the financial statements in the Form 10-K, in June 2022, Entergy completed the sale of Palisades to Holtec. As part of the transaction, Entergy transferred the Palisades decommissioning trust fund to Holtec. The disposition-date fair value of the decommissioning trust fund was approximately $552 million.
The unrealized gains/(losses) recognized during the three months ended March 31, 2023 on equity securities still held as of March 31, 2023 were $161 million. The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index. The debt securities are generally held in individual government and credit issuances.
The available-for-sale securities held as of March 31, 2023 and December 31, 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2023 | | | | | | |
Debt Securities | | $1,707 | | | $8 | | | $160 | |
| | | | | | |
2022 | | | | | | |
Debt Securities | | $1,655 | | | $4 | | | $201 | |
As of March 31, 2023 and December 31, 2022, there were no deferred taxes on unrealized gains/(losses). The amortized cost of available-for-sale debt securities was $1,858 million as of March 31, 2023 and $1,852 million as of December 31, 2022. As of March 31, 2023, available-for-sale debt securities had an average coupon rate of approximately 3.07%, an average duration of approximately 6.45 years, and an average maturity of approximately 10.81 years.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
Less than 12 months | | $391 | | | $13 | | | $840 | | | $63 | |
More than 12 months | | 961 | | | 147 | | | 666 | | | 138 | |
Total | | $1,352 | | | $160 | | | $1,506 | | | $201 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2023 and December 31, 2022 were as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
Less than 1 year | $70 | | | $62 | |
1 year - 5 years | 516 | | | 520 | |
5 years - 10 years | 496 | | | 461 | |
10 years - 15 years | 111 | | | 117 | |
15 years - 20 years | 161 | | | 161 | |
20 years+ | 353 | | | 334 | |
Total | $1,707 | | | $1,655 | |
During the three months ended March 31, 2023 and 2022, proceeds from the dispositions of available-for-sale debt securities amounted to $124 million and $303 million, respectively. During the three months ended March 31, 2023, there were no gross gains and $9 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended March 31, 2022, there were gross gains of $1 million and gross losses of $12 million reclassified out of other regulatory liabilities/assets into earnings.
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, 20222023 and December 31, 20212022 are summarized as follows:
| | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses | | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) | | (In Millions) |
2023 | | 2023 | |
Debt Securities | | Debt Securities | | $479.4 | | | $0.9 | | | $56.8 | |
| 2022 | 2022 | | 2022 | |
Debt Securities | Debt Securities | | $499.6 | | | $1.9 | | | $27.6 | | Debt Securities | | $470.7 | | | $0.2 | | | $69.3 | |
| 2021 | | |
Debt Securities | | $524.5 | | | $11.8 | | | $2.9 | | |
The amortized cost of available-for-sale debt securities was $525.3$535.4 million as of March 31, 20222023 and $515.6$539.8 million as of December 31, 2021.2022. As of March 31, 2022,2023, the available-for-sale debt securities had an
Entergy Corporation and Subsidiaries
Notes to Financial Statements
average coupon rate of approximately 2.38%, an average duration of approximately 6.976.04 years, and an average maturity of approximately 9.877.51 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 20222023 on equity securities still held as of March 31, 20222023 were ($47.7)$47.3 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 20222023 and December 31, 2021:2022:
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) | | (In Millions) |
Less than 12 months | Less than 12 months | | $418.4 | | | $25.5 | | | $276.6 | | | $2.3 | | Less than 12 months | | $52.3 | | | $1.4 | | | $197.6 | | | $18.8 | |
More than 12 months | More than 12 months | | 13.3 | | | 2.1 | | | 11.3 | | | 0.6 | | More than 12 months | | 380.4 | | | 55.4 | | | 260.1 | | | 50.5 | |
Total | Total | | $431.7 | | | $27.6 | | | $287.9 | | | $2.9 | | Total | | $432.7 | | | $56.8 | | | $457.7 | | | $69.3 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 20222023 and December 31, 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Millions) | | (In Millions) |
Less than 1 year | Less than 1 year | $6.9 | | | $— | | Less than 1 year | $28.7 | | | $21.2 | |
1 year - 5 years | 1 year - 5 years | 217.3 | | | 156.8 | | 1 year - 5 years | 153.6 | | | 159.7 | |
5 years - 10 years | 5 years - 10 years | 136.1 | | | 161.8 | | 5 years - 10 years | 194.2 | | | 191.7 | |
10 years - 15 years | 10 years - 15 years | 9.5 | | | 58.6 | | 10 years - 15 years | 41.6 | | | 38.0 | |
15 years - 20 years | 15 years - 20 years | 31.1 | | | 1.9 | | 15 years - 20 years | 43.0 | | | 42.6 | |
20 years+ | 20 years+ | 98.7 | | | 145.4 | | 20 years+ | 18.3 | | | 17.5 | |
Total | Total | $499.6 | | | $524.5 | | Total | $479.4 | | | $470.7 | |
During the three months ended March 31, 20222023 and 2021,2022, proceeds from the dispositions of available-for-sale debt securities amounted to $36.2$15.7 million and $74.1$7.2 million, respectively. During the three months ended March 31, 2023, there were no gross gains and $1.6 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended March 31, 2022, there were gross gains of $0.03 million and 2021,gross losses of $0.2 million reclassified out of other regulatory liabilities/assets into earnings.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy Louisiana
Entergy Louisiana holds equity securities and available-for-sale debt securities in nuclear decommissioning trust accounts. The available-for-sale securities held as of March 31, 2023 and December 31, 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2023 | | | | | | |
Debt Securities | | $759.0 | | | $5.4 | | | $50.4 | |
| | | | | | |
2022 | | | | | | |
Debt Securities | | $725.1 | | | $3.5 | | | $67.5 | |
The amortized cost of available-for-sale debt securities was $804.1 million as of March 31, 2023 and $789.1 million as of December 31, 2022. As of March 31, 2023, the available-for-sale debt securities had an average coupon rate of approximately 3.72%, an average duration of approximately 6.64 years, and an average maturity of approximately 13.12 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2023 on equity securities still held as of March 31, 2023 were $69.4 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| | (In Millions) |
Less than 12 months | | $258.1 | | | $6.7 | | | $409.9 | | | $24.6 | |
More than 12 months | | 304.8 | | | 43.7 | | | 207.5 | | | 42.9 | |
Total | | $562.9 | | | $50.4 | | | $617.4 | | | $67.5 | |
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2023 and December 31, 2022 were as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
Less than 1 year | $37.1 | | | $33.6 | |
1 year - 5 years | 168.4 | | | 159.1 | |
5 years - 10 years | 176.4 | | | 161.7 | |
10 years - 15 years | 62.8 | | | 67.1 | |
15 years - 20 years | 80.0 | | | 83.3 | |
20 years+ | 234.3 | | | 220.3 | |
Total | $759.0 | | | $725.1 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
During the three months ended March 31, 2023 and 2022, proceeds from the dispositions of available-for-sale debt securities amounted to $67.4 million and $120.5 million, respectively. During the three months ended March 31, 2023 and 2022, gross gains of $0.4 million and $0.9 million, respectively, and gross losses of $4.9 million and $5.5 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
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, 2023 and December 31, 2022 are summarized as follows:
| | | | | | | | | | | | | | | | | | | | |
| | Fair Value | | Total Unrealized Gains | | Total Unrealized Losses |
| | (In Millions) |
2023 | | | | | | |
Debt Securities | | $468.1 | | | $2.1 | | | $52.6 | |
| | | | | | |
2022 | | | | | | |
Debt Securities | | $459.7 | | | $0.7 | | | $63.7 | |
The amortized cost of available-for-sale debt securities was $518.6 million as of March 31, 2023 and $522.7 million as of December 31, 2022. As of March 31, 2023, the available-for-sale debt securities had an average coupon rate of approximately 2.74%, an average duration of approximately 6.56 years, and an average maturity of approximately 10.51 years.
The unrealized gains/(losses) recognized during the three months ended March 31, 2023 on equity securities still held as of March 31, 2023 were $44.5 million. The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index. A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.
The fair value and gross unrealized losses of available-for-sale debt securities, summarized by length of time that the securities had been in a continuous loss position, were as follows as of March 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2023 | | December 31, 2022 |
| | Fair Value | | Gross Unrealized Losses | | Fair Value | | Gross Unrealized Losses |
| (In Millions) |
Less than 12 months | | $80.8 | | | $4.3 | | | $231.9 | | | $19.2 | |
More than 12 months | | 275.2 | | | 48.3 | | | 198.0 | | | 44.5 | |
Total | | $356.0 | | | $52.6 | | | $429.9 | | | $63.7 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The fair value of available-for-sale debt securities, summarized by contractual maturities, as of March 31, 2023 and December 31, 2022 were as follows:
| | | | | | | | | | | |
| 2023 | | 2022 |
| (In Millions) |
Less than 1 year | $3.8 | | | $6.8 | |
1 year - 5 years | 193.9 | | | 201.7 | |
5 years - 10 years | 125.2 | | | 107.1 | |
10 years - 15 years | 6.8 | | | 11.7 | |
15 years - 20 years | 38.1 | | | 35.0 | |
20 years+ | 100.3 | | | 97.4 | |
Total | $468.1 | | | $459.7 | |
During the three months ended March 31, 2023 and 2022, proceeds from the dispositions of available-for-sale debt securities amounted to $41.3 million and $36.2 million, respectively. During the three months ended March 31, 2023, there were no gross gains and $2.3 million in gross losses reclassified out of other regulatory liabilities/assets into earnings. During the three months ended March 31, 2022, there were gross gains of $0.1 million and $1.2 million, respectively, and gross losses of $0.7 million and $1.6 million, respectively, related to available-for-sale securities were reclassified out of other regulatory liabilities/assets into earnings.
Allowance for expected credit losses
Entergy estimates the expected credit losses for its available-for-sale securities based on the current credit rating and remaining life of the securities. To the extent an individual security is determined to be uncollectible, it is written off against this allowance. Entergy’s available-for-sale securities are held in trusts managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments. Specifically, available-for-sale securities are subject to credit worthiness restrictions, with requirements for both the average credit rating of the portfolio and minimum credit ratings for individual debt securities. As of March 31, 2022 and December 31, 2021, Entergy’sEntergy did not have an allowance for expected credit losses related to available-for-sale securities were $3.2 millionas of March 31, 2023 and $0.4 million, respectively.December 31, 2022. Entergy did not record any impairments of available-for-sale debt securities for the three months ended March 31, 2023. Entergy recorded $1.5 million in impairments of available-for-sale debt securities for the three months ended March 31, 2022.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Entergy did not record any impairments of available-for-sale debt securities for the three months ended March 31, 2021.
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 second quarter 2018, the 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 and other means approved by their respective regulatory authorities. 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 manner of regulatory accounting affects the effective tax rate for the period as compared to the statutory tax rate. TheThere was no return of unprotected excess accumulated deferred income taxes reduced Entergy’s andfor Entergy or the Registrant Subsidiaries’Subsidiaries for the three months ended March 31, 2023. For the three months ended March 31, 2022, the return of unprotected excess accumulated deferred income taxes reduced
Entergy Corporation and Subsidiaries
Notes to Financial Statements
the regulatory liability for income taxes as follows:by $17 million for Entergy, including $9 million for Entergy Louisiana, $1 million for Entergy New Orleans, and $7 million for Entergy Texas.
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
| (In Millions) |
Entergy | $17 | | | $41 | | | | | |
Entergy Arkansas | $— | | | $8 | | | | | |
Entergy Louisiana | $9 | | | $8 | | | | | |
| | | | | | | |
Entergy New Orleans | $1 | | | $— | | | | | |
Entergy Texas | $7 | | | $7 | | | | | |
System Energy | $— | | | $18 | | | | | |
Other Tax Matters
Act 293 Securitization
As described in Note 2 to the financial statements herein, Entergy Louisiana implemented a securitization authorized under Act 293 of the Louisiana Legislature’s Regular Session of 2021 in the first quarter 2023. Act 293 provides that the LURC contribute the net bond proceeds to a LURC-sponsored trust. Over the 15-year term of the Act 293 bonds, the storm trust II will make distributions to Entergy Louisiana, a beneficiary of the storm trust II, that will not be taxable to Entergy Louisiana. Additionally, Entergy Louisiana will not include the receipt of the system restoration charges in taxable income because the right to receive the system restoration charges has been granted directly to the LURC, and Entergy Louisiana only acts as an agent to collect those charges on behalf of the LURC.
Accordingly, the securitization provides for a tax accounting permanent difference resulting in a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $129 million, after taking into account a provision for uncertain tax positions.
In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with its customers. See Note 2 to the financial statements herein for discussion of the Entergy Louisiana March 2023 storm securitization.
Arkansas Corporate Income Tax Rate Change
In April 2023, Arkansas Act 532 reduced the Arkansas corporate income tax rate from 5.3% to 5.1%. In accordance with GAAP, the adoption of the rate change will be recorded in the second quarter of 2023. The rate change is not expected to have a significant effect on the financial position, results of operations, or cash flows of Entergy Arkansas, the Utility, or Entergy.
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, 20222023 were $402$426 million for Entergy, $33.5$64.4 million for Entergy Arkansas, $239.7$117.3 million for Entergy Louisiana, $13.8$57.6 million for Entergy Mississippi, $4$5.7 million for Entergy New Orleans, $35.1$104.8 million for Entergy Texas, and $34.5$36.6 million for System Energy. Construction expenditures included in accounts payable at December 31, 20212022 were $723$459 million for Entergy, $35.6$93.2 million for Entergy Arkansas, $507.9$154.3 million for Entergy Louisiana, $26.5$59.5 million for Entergy Mississippi, $73.1$11.2 million for Entergy New Orleans, $68.9 million for Entergy Texas, and $23.4$29 million for System Energy.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, commercial paper borrowings, and long-term debt. See Note 6 to the financial statements in the Form 10-K and Note 3 to the financial statements herein for discussion of noncontrolling interests.
Restoration Law Trust I (the storm trust I), a trust consolidated by Entergy Louisiana, is a variable interest entity and Entergy Louisiana is the primary beneficiary. As of March 31, 2023 and December 31, 2022, the primary asset held by the storm trust I was $3.1 billion and $3.2 billion, respectively, of outstanding Entergy Finance Company preferred membership interests, which is reflected as an investment in affiliate preferred membership interests on the consolidated balance sheet of Entergy Louisiana. The LURC’s 1% beneficial interest in the storm trust I is presented as noncontrolling interest in the consolidated balance sheets of Entergy and Entergy Louisiana, with balances of $31.8 million as of March 31, 2023 and $31.7 million as of December 31, 2022.
Restoration Law Trust II (the storm trust II), a trust consolidated by Entergy Louisiana, is a variable interest entity and Entergy Louisiana is the primary beneficiary. The storm trust II was established as part of the Act 293 securitization of Entergy Louisiana’s Hurricane Ida restoration costs, less Hurricane Ida amounts previously financed in May 2022 in a prior securitization transaction. Entergy Louisiana is the primary beneficiary of the storm trust II because it was created to facilitate the financing of Entergy Louisiana’s storm restoration costs and Entergy Louisiana is entitled to receive a majority of the proceeds received by the storm trust II. As of March 31, 2023, the primary asset held by the storm trust II is the $1.5 billion of outstanding Entergy Finance Company preferred membership interests, which is reflected as an investment in affiliate preferred membership interests on the consolidated balance sheet of Entergy Louisiana. The holders of the securitization bonds do not have recourse to the assets or revenues of the storm trust II or to any Entergy affiliate and the bonds are not reflected in the consolidated balance sheets of Entergy or Entergy Louisiana. The LURC’s 1% beneficial interest in the storm trust II is presented as noncontrolling interest in the consolidated balance sheets of Entergy and Entergy Louisiana, with a balance of $14.6 million as of March 31, 2023. See Note 2 to the financial statements herein for additional discussion of the securitization bonds and the preferred membership interests.
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 5 to the financial statements in the Form 10-K. System Energy made payments under this arrangement, including interest, of $8.6 million in each of the three months ended March 31, 20222023 and the three months ended March 31, 2021.2022.
AR Searcy Partnership, LLC, is a tax equity partnership that qualifies as a variable interest entity, which Entergy Arkansas is required to consolidate as it is the primary beneficiary. See Note 14 to the financial statements in the Form 10-K for additional discussion on the establishment of AR Searcy Partnership, LLC and the acquisition of the Searcy Solar Facility. The entity is a VIE because the membership interests do not give Entergy Arkansas or the third party tax equity investor substantive kick out rights typical of equity owners. Entergy Arkansas is the primary beneficiary of the partnership because it is the managing member and has the right to a majority of the operating income of the partnership. See Note 1 to the financial statements in the Form 10-K for further discussion on the presentation of the third party tax equity partner’s noncontrolling interest and the HLBV method of accounting used to account for Entergy Arkansas’s investment in AR Searcy Partnership, LLC. As of March 31, 2022,2023, AR Searcy Partnership, LLC recorded assets equal to $142$137.6 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $113$110 million. As of December 31, 2022, AR Searcy Partnership, LLC recorded assets equal to $138.3 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Arkansas’s ownership interest in the partnership was approximately $109 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest.
MS Sunflower Partnership, LLC, is a tax equity partnership that qualifies as a variable interest entity, which Entergy Mississippi is required to consolidate as it is the primary beneficiary. As of March 31, 2023, MS Sunflower Partnership, LLC recorded assets equal to $152.6 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy Mississippi’s ownership interest in the partnership was approximately $117.8 million. As of December 31, 2022, MS Sunflower Partnership, LLC recorded assets equal to $154.5 million, primarily consisting of property, plant, and equipment, and the carrying value of Entergy
Entergy Corporation and Subsidiaries
Notes to Financial Statements
Mississippi’s ownership interest in the partnership was approximately $117.2 million. The tax equity investor’s ownership interest is recorded as noncontrolling interest.
NOTE 13. REVENUE (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
Operating Revenues
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, 20222023 and 2021 were as follows:
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | | |
| | | | | | | |
| | (In Thousands) | | | |
Utility: | | | | | | | |
Residential | | $986,023 | | | $966,855 | | | | |
Commercial | | 634,626 | | | 572,676 | | | | |
Industrial | | 743,634 | | | 597,652 | | | | |
Governmental | | 57,292 | | | 56,798 | | | | |
Total billed retail | | 2,421,575 | | | 2,193,981 | | | | |
| | | | | | | |
Sales for resale (a) | | 128,959 | | | 205,075 | | | | |
Other electric revenues (b) | | 93,880 | | | 80,261 | | | | |
Revenues from contracts with customers | | 2,644,414 | | | 2,479,317 | | | | |
Other revenues (c) | | 11,362 | | | 59,103 | | | | |
Total electric revenues | | 2,655,776 | | | 2,538,420 | | | | |
| | | | | | | |
Natural gas | | 72,361 | | | 58,168 | | | | |
| | | | | | | |
Entergy Wholesale Commodities: | | | | | | | |
Competitive businesses sales from contracts with customers (a) | | 144,823 | | | 232,113 | | | | |
Other revenues (c) | | 4,965 | | | 16,137 | | | | |
Total competitive businesses revenues | | 149,788 | | | 248,250 | | | | |
| | | | | | | |
Total operating revenues | | $2,877,925 | | | $2,844,838 | | | | |
r 30, 2021 and 20202022 were as follows:
| | | | | | | | | | | | | | |
| | 2023 | | 2022 |
| | (In Thousands) |
Utility: | | | | |
Residential | | $1,041,460 | | | $986,023 | |
Commercial | | 714,300 | | | 634,626 | |
Industrial | | 863,723 | | | 743,634 | |
Governmental | | 67,337 | | | 57,292 | |
Total billed retail | | 2,686,820 | | | 2,421,575 | |
| | | | |
Sales for resale (a) | | 107,947 | | | 128,959 | |
Other electric revenues (b) | | 44,457 | | | 93,880 | |
Revenues from contracts with customers | | 2,839,224 | | | 2,644,414 | |
Other Utility revenues (c) | | 44,187 | | | 11,362 | |
Electric revenues | | 2,883,411 | | | 2,655,776 | |
| | | | |
Natural gas revenues | | 64,581 | | | 72,361 | |
| | | | |
Other revenues (d) | | 33,067 | | | 149,788 | |
| | | | |
Total operating revenues | | $2,981,059 | | | $2,877,925 | |
Entergy Corporation and Subsidiaries
Notes to Financial Statements
The Utility operating companies’ total revenues for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | |
Residential | | $227,786 | | | $353,567 | | | $152,939 | | | $58,658 | | | $193,073 | |
Commercial | | 113,238 | | | 257,591 | | | 110,661 | | | 45,572 | | | 107,564 | |
Industrial | | 109,675 | | | 451,954 | | | 39,157 | | | 6,272 | | | 136,576 | |
Governmental | | 4,460 | | | 19,016 | | | 12,000 | | | 15,033 | | | 6,783 | |
Total billed retail | | 455,159 | | | 1,082,128 | | | 314,757 | | | 125,535 | | | 443,996 | |
Sales for resale (a) | | 70,414 | | | 107,701 | | | 21,641 | | | 26,540 | | | 17,644 | |
Other electric revenues (b) | | 30,572 | | | 41,482 | | | 10,337 | | | 1,393 | | | 11,449 | |
Revenues from contracts with customers | | 556,145 | | | 1,231,311 | | | 346,735 | | | 153,468 | | | 473,089 | |
Other revenues (c) | | 2,811 | | | 5,926 | | | 2,294 | | | 1,178 | | | (607) | |
Total electric revenues | | 558,956 | | | 1,237,237 | | | 349,029 | | | 154,646 | | | 472,482 | |
Natural gas | | — | | | 28,735 | | | — | | | 43,626 | | | — | |
Total operating revenues | | $558,956 | | | $1,265,972 | | | $349,029 | | | $198,272 | | | $472,482 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2021 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | |
Residential | | $237,182 | | | $335,760 | | | $147,636 | | | $66,427 | | | $179,850 | |
Commercial | | 106,416 | | | 224,649 | | | 97,936 | | | 47,799 | | | 95,876 | |
Industrial | | 103,412 | | | 347,009 | | | 33,980 | | | 6,789 | | | 106,462 | |
Governmental | | 4,256 | | | 18,616 | | | 10,543 | | | 16,380 | | | 7,003 | |
Total billed retail | | 451,266 | | | 926,034 | | | 290,095 | | | 137,395 | | | 389,191 | |
Sales for resale (a) | | 110,085 | | | 80,428 | | | 40,311 | | | 4,696 | | | 74,073 | |
Other electric revenues (b) | | 19,583 | | | 43,910 | | | 3,950 | | | (3,359) | | | 17,529 | |
Revenues from contracts with customers | | 580,934 | | | 1,050,372 | | | 334,356 | | | 138,732 | | | 480,793 | |
Other revenues (c) | | 2,452 | | | 29,291 | | | 2,263 | | | 416 | | | (573) | |
Total electric revenues | | 583,386 | | | 1,079,663 | | | 336,619 | | | 139,148 | | | 480,220 | |
Natural gas | | — | | | 27,981 | | | — | | | 30,187 | | | — | |
Total operating revenues | | $583,386 | | | $1,107,644 | | | $336,619 | | | $169,335 | | | $480,220 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2023 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | |
Residential | | $239,499 | | | $360,647 | | | $169,389 | | | $63,566 | | | $208,359 | |
Commercial | | 125,336 | | | 278,178 | | | 133,676 | | | 54,069 | | | 123,041 | |
Industrial | | 131,237 | | | 509,904 | | | 51,415 | | | 7,413 | | | 163,754 | |
Governmental | | 4,660 | | | 23,074 | | | 13,883 | | | 17,798 | | | 7,922 | |
Total billed retail | | 500,732 | | | 1,171,803 | | | 368,363 | | | 142,846 | | | 503,076 | |
Sales for resale (a) | | 66,018 | | | 83,237 | | | 38,743 | | | 24,910 | | | 2,445 | |
Other electric revenues (b) | | 13,718 | | | 26,567 | | | 2,874 | | | 417 | | | 2,224 | |
Revenues from contracts with customers | | 580,468 | | | 1,281,607 | | | 409,980 | | | 168,173 | | | 507,745 | |
Other Utility revenues (c) | | 2,281 | | | 38,145 | | | 2,448 | | | 1,522 | | | (239) | |
Electric revenues | | 582,749 | | | 1,319,752 | | | 412,428 | | | 169,695 | | | 507,506 | |
Natural gas revenues | | — | | | 25,456 | | | — | | | 39,125 | | | — | |
Total operating revenues | | $582,749 | | | $1,345,208 | | | $412,428 | | | $208,820 | | | $507,506 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
2022 | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Thousands) |
| | | | | | | | | | |
Residential | | $227,786 | | | $353,567 | | | $152,939 | | | $58,658 | | | $193,073 | |
Commercial | | 113,238 | | | 257,591 | | | 110,661 | | | 45,572 | | | 107,564 | |
Industrial | | 109,675 | | | 451,954 | | | 39,157 | | | 6,272 | | | 136,576 | |
Governmental | | 4,460 | | | 19,016 | | | 12,000 | | | 15,033 | | | 6,783 | |
Total billed retail | | 455,159 | | | 1,082,128 | | | 314,757 | | | 125,535 | | | 443,996 | |
Sales for resale (a) | | 70,414 | | | 107,701 | | | 21,641 | | | 26,540 | | | 17,644 | |
Other electric revenues (b) | | 30,572 | | | 41,482 | | | 10,337 | | | 1,393 | | | 11,449 | |
Revenues from contracts with customers | | 556,145 | | | 1,231,311 | | | 346,735 | | | 153,468 | | | 473,089 | |
Other Utility revenues (c) | | 2,811 | | | 5,926 | | | 2,294 | | | 1,178 | | | (607) | |
Electric revenues | | 558,956 | | | 1,237,237 | | | 349,029 | | | 154,646 | | | 472,482 | |
Natural gas revenues | | — | | | 28,735 | | | — | | | 43,626 | | | — | |
Total operating revenues | | $558,956 | | | $1,265,972 | | | $349,029 | | | $198,272 | | | $472,482 | |
(a)Sales for resale and competitive businesses sales includeincludes 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.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(b)Other electric revenues consist primarily of transmission and ancillary services provided to participants of an ISO-administered market, unbilled revenue, and unbilled revenue.certain customer credits as directed by regulators.
Entergy Corporation and Subsidiaries
Notes to Financial Statements
(c)Other Utility revenues include the equity component of carrying costs related to securitization, settlement of financial hedges, occasional sales of inventory, alternative revenue programs, provisions for revenue subject to refund, and late fees.
(d)Other revenues includes competitive business sales including day-ahead sale of energy in a market administered by an ISO, operation and management services fees, and amortization of a below-market power purchase agreement.
Allowance for doubtful accounts
The allowance for doubtful accounts reflects Entergy’s best estimate of expected losses on its accounts receivable balances. Due to the essential nature of utility services, Entergy has historically experienced a low rate of default on its accounts receivables. Due to the effect of the COVID-19 pandemic on customer receivables, however, Entergy recorded an increase in 2020 in its allowance for doubtful accounts. The following tables set forth a reconciliation of changes in the allowance for doubtful accounts for the three months ended March 31, 20222023 and 2021.2022.
| | | Entergy | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) | | (In Millions) |
Balance as of December 31, 2021 | $68.6 | | | $13.1 | | | $29.2 | | | $7.2 | | | $13.3 | | | $5.8 | | |
Balance as of December 31, 2022 | | Balance as of December 31, 2022 | $30.9 | | | $6.5 | | | $7.6 | | | $2.5 | | | $11.9 | | | $2.4 | |
Provisions | Provisions | (5.9) | | | 3.7 | | | (6.1) | | | (0.9) | | | (2.4) | | | (0.2) | | Provisions | 6.1 | | | 1.3 | | | 4.0 | | | 0.7 | | | (1.1) | | | 1.2 | |
Write-offs | Write-offs | (45.3) | | | (14.4) | | | (17.5) | | | (4.1) | | | (5.4) | | | (3.9) | | Write-offs | (34.4) | | | (9.4) | | | (15.1) | | | (1.7) | | | (3.4) | | | (4.8) | |
Recoveries | Recoveries | 14.1 | | | 4.1 | | | 5.5 | | | 1.2 | | | 2.2 | | | 1.1 | | Recoveries | 20.7 | | | 6.9 | | | 9.2 | | | 0.7 | | | 0.9 | | | 3.0 | |
Balance as of March 31, 2022 | $31.5 | | | $6.5 | | | $11.1 | | | $3.4 | | | $7.7 | | | $2.8 | | |
Balance as of March 31, 2023 | | Balance as of March 31, 2023 | $23.3 | | | $5.3 | | | $5.7 | | | $2.2 | | | $8.3 | | | $1.8 | |
| | | Entergy | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas | | Entergy | | Entergy Arkansas | | Entergy Louisiana | | Entergy Mississippi | | Entergy New Orleans | | Entergy Texas |
| | (In Millions) | | (In Millions) |
Balance as of December 31, 2020 | $117.7 | | | $18.3 | | | $45.7 | | | $19.5 | | | $17.4 | | | $16.8 | | |
Balance as of December 31, 2021 | | Balance as of December 31, 2021 | $68.6 | | | $13.1 | | | $29.2 | | | $7.2 | | | $13.3 | | | $5.8 | |
Provisions(a) | Provisions(a) | 3.2 | | | 2.4 | | | 2.3 | | | (2.2) | | | 1.8 | | | (1.1) | | Provisions(a) | (5.9) | | | 3.7 | | | (6.1) | | | (0.9) | | | (2.4) | | | (0.2) | |
Write-offs | Write-offs | (3.8) | | | (0.1) | | | (2.1) | | | (0.8) | | | — | | | (0.8) | | Write-offs | (45.3) | | | (14.4) | | | (17.5) | | | (4.1) | | | (5.4) | | | (3.9) | |
Recoveries | Recoveries | 1.9 | | | 0.6 | | | 0.7 | | | 0.3 | | | 0.2 | | | 0.1 | | Recoveries | 14.1 | | | 4.1 | | | 5.5 | | | 1.2 | | | 2.2 | | | 1.1 | |
Balance as of March 31, 2021 | $119.0 | | | $21.2 | | | $46.6 | | | $16.8 | | | $19.4 | | | $15.0 | | |
Balance as of March 31, 2022 | | Balance as of March 31, 2022 | $31.5 | | | $6.5 | | | $11.1 | | | $3.4 | | | $7.7 | | | $2.8 | |
(a)Provisions include estimated incremental bad debt expenses, and revisions to those estimates, resulting from the COVID-19 pandemic of ($11.0) million for Entergy, $1.8 million for Entergy Arkansas, ($8.5) million for Entergy Louisiana, ($3.0) million for Entergy New Orleans, and ($1.3) million for Entergy Texas that have been deferred as regulatory assets. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the COVID-19 orders issued by retail regulators.
The allowance for currently expected credit losses is calculated as the historical rate of customer write-offs multiplied by the current accounts receivable balance, taking into account the length of time the receivable balances have been outstanding. Although theThe rate of customer write-offs has historically experienced minimal variation, there were increases in customer write-offs beginning in second quarter 2021 primarily resulting from the effects ofalthough general economic conditions, such as the COVID-19 pandemic.pandemic or other economic hardships, can affect the rate of customer write-offs. Management monitors the current condition of individual customer accounts to manage collections and ensure bad debt expense is recorded in a timely manner.
________________
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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
Entergy Corporation and Subsidiaries
Notes to Financial Statements
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, 2022,2023, 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(each individually a “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’Registrant’s 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, 20222023 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
Net income decreased $27.5$6.2 million primarily due to the reversal in 2021 of the remaining regulatory liability for the formula rate plan 2019 historical year netting adjustmentlower volume/weather and higher depreciation and amortization expenses,interest expense, partially offset by higher retail electric price.price and higher other income.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20222023 to the first quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $583.4559.0 | |
Fuel, rider, and other revenues that do not significantly affect net income | (55.4) | |
Volume/weather | (3.1) | |
Return of unprotected excess accumulated deferred income taxes to customers | 8.026.0 | |
Retail electric price | 26.119.4 | |
| |
2022Volume/weather | (21.7) | |
2023 operating revenues | $559.0582.7 | |
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 volume/weather variance is primarily due to the effect of less favorable weather on residential sales, partially offset by increases in commercial and industrial usage. The increase in commercial usage was primarily due to an increase in customers and the effect of the COVID-19 pandemic on businesses in first quarter 2021. The increase in industrial usage was primarily due to an increase in demand from existing customers, primarily in the wood products and petroleum refining industries.
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 first quarter 2021, $8 million was returned to customers. 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 retail electric price variance is primarily due to increasesan increase in formula rate plan rates effective May 2021 and January 2022.2023. See Note 2 to the financial statements in the Form 10-K for further discussion of the 2020 formula rate plan filing and the 20212022 formula rate plan filing.
The volume/weather variance is primarily due to the effect of less favorable weather on residential sales.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Total electric energy sales for Entergy Arkansas for the three months ended March 31, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 2,092 | | | 2,185 | | | (4) | | Residential | 1,802 | | | 2,092 | | | (14) | |
Commercial | Commercial | 1,307 | | | 1,262 | | | 4 | | Commercial | 1,239 | | | 1,307 | | | (5) | |
Industrial | Industrial | 1,972 | | | 1,947 | | | 1 | | Industrial | 2,050 | | | 1,972 | | | 4 | |
Governmental | Governmental | 55 | | | 54 | | | 2 | | Governmental | 46 | | | 55 | | | (16) | |
Total retail | Total retail | 5,426 | | | 5,448 | | | — | | Total retail | 5,137 | | | 5,426 | | | (5) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 486 | | | 597 | | | (19) | | Associated companies | 564 | | | 486 | | | 16 | |
Non-associated companies | Non-associated companies | 1,391 | | | 2,030 | | | (31) | | Non-associated companies | 1,568 | | | 1,391 | | | 13 | |
Total | Total | 7,303 | | | 8,075 | | | (10) | | Total | 7,269 | | | 7,303 | | | — | |
See Note 13 to the financial statements herein for additional discussion of Entergy Arkansas’s operating revenues.
Other Income Statement Variances
DepreciationOther operation and amortizationmaintenance expenses increaseddecreased slightly primarily due to:
•the effects of recording a final judgment in 2023 to resolve claims in the ANO damages case against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $10.3 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expenses. See Note 1 to the financial statements herein for discussion of the spent nuclear fuel litigation; and
•a decrease of $4.7 million in compensation and benefits costs primarily due to additionsa revision to plantestimated incentive compensation expense in service, including the Searcy Solar facility, which was placedfirst quarter 2023 and a decrease in servicenet periodic pension and other postretirement benefits costs as a result of an increase in December 2021.
the discount rates used to value the benefit liabilities. See “
Other regulatory charges (credits)MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - net includesCritical Accounting Estimates” in the reversal in 2021 ofForm 10-K, Note 6 to the remaining $38.8 million regulatory liability for the 2019 historical year netting adjustment as part of its 2020 formula rate plan proceeding. Seefinancial statements herein, and Note 211 to the financial statements in the Form 10-K for further discussion of the 2020 formula rate plan filing. In addition, Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-relatedpension and other postretirement benefits costs.
The decrease was substantially offset by an increase of $8.2 million in insurance expenses primarily due to lower nuclear insurance refunds received in 2023 and nuclear decommissioning trust earnings plus asset retirement obligation relatedan increase of $6.7 million in power delivery expenses primarily due to higher reliability costs, collected in revenue.higher vegetation maintenance costs, and higher metering costs.
Other income decreasedincreased primarily due to changesan increase in decommissioning trust fund activity, including portfolio rebalancing of the ANO 1 and ANO 2 decommissioning trust fundsinterest earned on money pool investments, an increase in the first quarter 2021.allowance for equity funds used during construction due to higher construction work in progress in 2023, and higher interest income from carrying costs related to the deferred fuel balance.
Noncontrolling interest reflects the earnings or losses attributableInterest expense increased primarily due to the noncontrolling interest partnerissuance of the tax equity partnership for the Searcy Solar facility under HLBV accounting. Entergy Arkansas has recorded a regulatory charge$425 million of $1.5 million5.15% Series mortgage bonds in first quarter 2022 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of accounting and the earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of the HLBV method of accounting.January 2023.
Income Taxes
The effective income tax rate was 14.9% for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the amortization of
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
state accumulated deferred income taxes as a result of tax rate changes, and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes.
The effective income tax rate was 22.6% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 17.3% for the first quarter 2021. The difference in the effective income tax rate for the first quarter 2021 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 Notes 2 and 3 to theIncome Tax Legislation
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
financial statementsMANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.Inflation Reduction Act of 2022.
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | $12,915 | | | $192,128 | | Cash and cash equivalents at beginning of period | $5,278 | | | $12,915 | |
| Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
Operating activities | Operating activities | 247,426 | | | 91,573 | | Operating activities | 274,037 | | | 247,426 | |
Investing activities | Investing activities | (214,477) | | | (162,611) | | Investing activities | (306,032) | | | (214,477) | |
Financing activities | Financing activities | 64,167 | | | 2,690 | | Financing activities | 186,302 | | | 64,167 | |
Net increase (decrease) in cash and cash equivalents | 97,116 | | | (68,348) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 154,307 | | | 97,116 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $110,031 | | | $123,780 | | Cash and cash equivalents at end of period | $159,585 | | | $110,031 | |
Operating Activities
Net cash flow provided by operating activities increased $155.9$26.6 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to:
•higher collections from customers;
•decreasedthe timing of recovery of fuel costs, including costs related to Winter Storm Uri in 2021.and purchased power costs. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•a decreasethe refund of $9.7$41.7 million, which was applied to the under-recovered deferred fuel balance, received from System Energy in storm spendingJanuary 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in 2022 primarily dueSystem Energy’s January 2023 compliance report filed with the FERC. See Note 2 to increased spending on Winter Storm Uri restoration effortsthe financial statements herein and in 2021;the Form 10-K for further discussion of these refunds and the related proceedings; and
•a decrease of $6.3$8.7 million in pension contributions in 2022.2023.
The increase was partially offset by the timing of payments to vendors and an increase in spending of $4 million on nuclear refueling outages in 2023. 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.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities increased $51.9$91.6 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to:
•money pool activity;
•an increase of $14$56.9 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration partially offset by lower spendingin 2023 and increased investment in the reliability and infrastructure of Entergy Arkansas’s distribution system;
•an increase of $29 million in transmission construction expenditures primarily due to a higher scope of work on advanced metering infrastructureprojects performed in 2023 as compared to 2022; and
•an increase of $10.2 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2022.
The increase was partially offset by a decrease of $11.5$48.3 million as a result of fluctuations in nuclear fuel activity primarily due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle.
The increase was partially offset by money pool activity.
78
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 increased $11 million for the three months ended March 31, 2023 compared to increasing by $60 million for the three months ended March 31, 2022 compared to increasing by $12.5 million for the three months ended March 31, 2021.2022. The money pool is an inter-companyintercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities increased $61.5$122.1 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to:
•to the repayment, at maturity,issuance of $350$425 million of 3.75%5.15% Series mortgage bonds due February 2021;in January 2023 and net borrowings of $31.5 million in 2023 compared to net repayments of $4.8 million in 2022 on the nuclear fuel company variable interest entity’s credit facility. The increase was partially offset by:
•the issuance of $200 million of 4.20% Series mortgage bonds in March 2022;
•$80 million in common equity distributions paid in 2023 in order to maintain Entergy Arkansas’s capital structure; and
•the repayment, at maturity, of $45 million of 2.375% Series governmental bonds due January 2021.
The increase was partially offset by the issuance of $400 million of 3.35% Series mortgage bonds in March 2021 and money pool activity.
Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased $180.8 million for the three months ended March 31, 2023 compared to decreasing by $139.9 million for the three months ended March 31, 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.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy Arkansas’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio for Entergy Arkansas is primarily due to the issuance of long-term debt in 2022.2023.
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 53.4 | % | | 52.6 | % | Debt to capital | 55.1 | % | | 52.5 | % |
Effect of subtracting cash | Effect of subtracting cash | (0.6 | %) | | — | % | Effect of subtracting cash | (0.9 | %) | | — | % |
Net debt to net capital | 52.8 | % | | 52.6 | % | |
Net debt to net capital (non-GAAP) | | Net debt to net capital (non-GAAP) | 54.2 | % | | 52.5 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance 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 ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition. The net debt to net capital ratio is a non-GAAP measure. Entergy Arkansas also 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 Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Arkansas’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Arkansas’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31, 2022 | | December 31, 2021 | | March 31, 2021 | | December 31, 2020 |
(In Thousands) |
$59,981 | | ($139,904) | | $15,610 | | $3,110 |
| | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
(In Thousands) |
$11,035 | | ($180,795) | | $59,981 | | ($139,904) |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in June 2026.2027. Entergy Arkansas also has a $25 million credit facility scheduled to expire in July 2022.April 2024. 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, 2022,2023, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of March 31, 2022, $7.52023, $5.6 million in letters of credit were outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements herein for further 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 June 2024.2025. As of March 31, 2022, there2023, $31.5 million in loans were no loans outstanding under the credit facility for the Entergy Arkansas nuclear fuel company variable interest entity. See Note 4 to the financial statements herein for further discussion of the nuclear fuel company variable interest entity credit facility.
Entergy Arkansas, LLC and discussionSubsidiaries
Management's Financial Discussion and Analysis
Walnut Bend Solar
As discussed in the Form 10-K, under “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources- Uses of Capital,” that sets forthin July 2021, the amounts of planned construction and other capital investments for 2022 through 2024. WhileAPSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership for the purpose of acquiring the Walnut Bend Solar facility. In January 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is still assessingobtained or a tax equity partnership is no longer sought. The counter-party notified Entergy Arkansas that it was terminating the effect on its planned solar projects,project, though it was willing to consider an alternative for the site. Entergy Arkansas disputed the right of termination. Negotiations were conducted, including with respect to cost and schedule and to updates arising as a recently commenced investigationresult of the Inflation Reduction Act of 2022. In April 2023, Entergy Arkansas filed an application for an amended certificate of environmental compatibility and public need with the APSC seeking approval by June 2023 for the updates to the cost and schedule that were previously approved by the U.S. Department of Commerce into potential circumvention of duties and tariffs may resultAPSC. The project, if approved, is currently expected to achieve commercial operation in increased duties or tariffs on imported solar panels and has created supply chain disruptions which will affect the ultimate timing and could increase the cost of completion of these projects.2024.
West Memphis Solar Facility
As discussed in the Form 10-K, in October 2021 the APSC directed Entergy Arkansas to file a report within 180 days detailing its efforts to obtain a tax equity partnership.partnership for the purpose of acquiring the West Memphis Solar facility. In April 2022, Entergy Arkansas filed its tax equity partnership status report and will file subsequent reports until a tax equity partnership is obtained or a tax equity partnership is no longer sought. Entergy Arkansas views the progress of the outreach to potential tax equity investors and the current status of the discussions as consistent with its expectations for the timeline for achieving a tax equity partnership. Closing had been expected to occur in 2023. TheIn March 2022 the counter-party has notified Entergy Arkansas that it iswas seeking changes to certain terms of the build-own-transfer agreement, including both cost and schedule. Negotiations are ongoing, but at this timeIn January 2023, Entergy Arkansas filed a supplemental application with the APSC seeking approval for a change in the transmission route and updates to the cost and schedule that were previously approved by the APSC. In March 2023 the APSC approved Entergy Arkansas’s supplemental application. The project is notcurrently expected to achieve commercial operation in 2023.
Driver Solar Facility
In April 2022, Entergy Arkansas filed a petition with the APSC seeking a finding that the purchase of the 250 MW Driver Solar Facility is in the public interest. The acquisition of Driver Solar will be contingent upon receiving all necessary regulatory and Board approvals. Entergy Arkansas requested a decision by the APSC by June 2022 and requested cost recovery through the formula rate plan rider. The APSC established a procedural schedule with a hearing scheduled in June 2022. The facility is expected to be in service by the end of 2024.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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.
Energy Cost Recovery Rider
In March 2022,2023, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase from $0.00959$0.01639 per kWh to $0.01785$0.01883 per kWh. The primary reason for the rate increase is a large under-recoveryunder-recovered balance as a result of higher natural gas prices in 2021, particularly in the fourth quarter 2021. At the request of the APSC general staff, Entergy Arkansas deferred its request for recovery of2022 and a $32 million from the under-recoverydeferral related to the 2021 February winter storms untilconsistent with APSC general staff’s request in 2022. The under-recovered balance included in the filing was partially offset by the proceeds of the $41.7 million refund that System Energy made to Entergy Arkansas in January 2023 energy cost rate redetermination, unless a request for an interim adjustmentrelated to the energy cost recovery rider is necessary. This resultedsale-leaseback renewal costs and depreciation litigation as calculated in aSystem Energy’s January 2023 compliance report filed with the FERC. The redetermined rate of $0.016390$0.01883 per kWh which became effective with the first billing cycle in April 20222023 through the normal operation of the tariff. See Note 2 to the financial statements in the Form 10-K for information on the 2021 February winter storm investigation proceeding.
Opportunity Sales Proceeding
See Note 2 to the financial statements in the Form 10-K for discussion of the Entergy Arkansas opportunity sales proceeding. As discussed in the Form 10-K, in January 2023, Arkansas Electric Energy Consumers, Inc., an industrial customer association, filed a notice of appeal of the U.S. District Court for the Eastern District of Arkansas’s order denying its motion to intervene to the United States Court of Appeals for the Eighth Circuit and a motion with the district court to stay the proceedings pending the appeal, which was denied. In February 2023,
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Arkansas Electric Energy Consumers, Inc. filed a motion with the United States Court of Appeals for the Eighth District to stay the proceedings pending the appeal, which also was denied. The trial was held in February 2023. Following the trial, Entergy Arkansas filed a motion with the United States Court of Appeals for the Eighth District to expedite the appeal filed by Arkansas Electric Energy Consumers, Inc. The court granted Entergy Arkansas’s request and oral arguments are scheduled for June 2023.
Net Metering Legislation
As discussed in the Form 10-K, 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 allows 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 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 costs to customers. A hearing was held in December 2019, with utilities, including Entergy Arkansas, cooperatives, the Arkansas Attorney General, and industrial customers advocating the need for establishment of a reasonable rate structure that takes into account impacts to non-net metering customers; an additional hearing was conducted in February 2020 for purposes of public comment only. The APSC issued an order in June 2020, and in July 2020 several parties, including Entergy Arkansas, filed for rehearing on multiple grounds, including for the reasons that it imposes an unreasonable rate structure and allows facilities to net meter that do not meet the statutory definition of net metering facilities. After granting the rehearing requests, the APSC issued an order in September 2020 Entergy Arkansas filed a complaint in the U.S. District Court for the Eastern District of Arkansas challenging the APSC’s order denying Entergy Arkansas’s request to recover the costs of the opportunity sales payments made to the other Utility operating companies.largely upholding its June 2020 order. In October 2020, Entergy Arkansas and several other parties filed an appeal of the APSC’s September 2020 order. In January 2021, Entergy Arkansas, pursuant to an APSC order, filed an updated net metering tariff, which was approved in February 2021. In May 2021, Entergy Arkansas filed a motion to dismiss its pending judicial appeal of the APSC’s September 2020 order on rehearing in the proceeding addressing its net metering rules. In June 2021 the Arkansas Court of Appeals granted the motion and dismissed Entergy Arkansas’s complaint.appeal, although other appeals of the September 2020 APSC order remained before the court. In MarchMay 2022 the court deniedissued an order affirming the APSC’s motiondecision in part and reversing in part. In June 2022 the APSC sought rehearing from the court with respect to dismissthe court’s ruling on a grid charge, which the court of appeals denied in July 2022. One of the cooperative appellants filed a further appeal to the Arkansas Supreme Court in July 2022, which the court decided not to hear.
In September 2022 the APSC opened a rulemaking concerning proposed amendments to the net metering rules to address the expiration on December 31, 2022 of the automatic grandfathering of the existing net metering rate structure. Entergy Arkansas and other utility parties filed initial briefs and comments setting forth that the statute imposing the expiration of the automatic grandfathering is not ambiguous and that the APSC does not have the authority to extend the grandfathering period, and the hearing was held in October 2022. In December 2022 the APSC issued an order attempting to modify the net metering rules and purporting to allow for the potential for grandfathering after December 31, 2022. More than thirty applicants filed individual net metering applications in December 2022 seeking to be considered under the APSC’s order, although the APSC issued an order in January 2023 holding those applications in abeyance. Several parties, including Entergy Arkansas, sought rehearing, and the Arkansas’s Governor’s executive order limiting new rulemakings calls into question how the APSC’s order to adopt new rules may be effectuated.
Also in September 2022 the APSC opened another proceeding to investigate the issue of potential cost shifting arising as a result of net metering. Investor owned utilities and some cooperatives were required to make and did make filings in October 2022 with supporting documentation as to the amount and extent of cost shifting and the manner in which they would design tariffs to recover those costs on behalf of non-net metering customers.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Responses to the utility and cooperative filings were filed in January 2023, and utilities filed their further responses in February 2023.
An Arkansas law was enacted effective March 2023 that revises the billing arrangements for net metering facilities in order to reduce the cost shift to non-net metering customers. The new law also imposes a new limit of 5 MW for future net metering facilities, allows utilities to recover net metering credits in the same manner as fuel, and grandfathers certain net metering facilities that are online or in process to be online by September 2024. Entergy Arkansas joined other utilities in a motion in April 2022, issued a scheduling order including a trial date2023 to close the current APSC docket related to potential cost shifting in Februarylight of the new law. The APSC must approve revisions to the utilities’ tariffs to conform to the new law no later than December 2023.
COVID-19 Orders
See Note 2 to the financial statements in the Form 10-K for discussion of APSC orders issued in light of the COVID-19 pandemic. As of March 31, 2022,2023, Entergy Arkansas had a regulatory asset of $34.4$39 million for costs associated with the COVID-19 pandemic.
Remaining Useful Lives Review
In response to 2021 legislation, the APSC opened a proceeding in December 2022 to establish a procedure to evaluate life extensions of all utility generation units and opened a separate docket to evaluate life extensions for White Bluff, Independence, and the Lake Catherine plant. In January 2023, Entergy Arkansas and one other party filed for rehearing of the order in the general proceeding, and Entergy Arkansas moved to dismiss the separate docket. In February 2023 the APSC granted rehearing in the general proceeding. A new law passed in April 2023 changed the requirements for the APSC to perform these evaluations, thus eliminating the need for the current APSC proceedings, and the APSC cancelled the procedural schedule. See “Regulation of Entergy’s Business - Environmental Regulation - National Ambient Air Quality Standards - Regional Haze” in Part I, Item 1 in the Form 10-K for further discussion related to these plants.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Arkansas’s accounting for nuclear decommissioning costs, utility regulatory accounting, impairment of long-lived assets, taxation and uncertain tax positions, qualified pension and other postretirement benefits, and other contingencies.
Entergy Arkansas, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | |
| | | | |
| | | | | | 2022 | | 2021 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $558,956 | | | $583,386 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 86,225 | | | 126,181 | |
Purchased power | | | | | | 57,471 | | | 70,221 | |
Nuclear refueling outage expenses | | | | | | 14,070 | | | 12,647 | |
Other operation and maintenance | | | | | | 157,257 | | | 154,908 | |
Decommissioning | | | | | | 20,129 | | | 19,000 | |
Taxes other than income taxes | | | | | | 33,202 | | | 29,743 | |
Depreciation and amortization | | | | | | 95,610 | | | 88,279 | |
Other regulatory charges (credits) - net | | | | | | (20,542) | | | (37,467) | |
TOTAL | | | | | | 443,422 | | | 463,512 | |
| | | | | | | | |
OPERATING INCOME | | | | | | 115,534 | | | 119,874 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 3,055 | | | 2,993 | |
Interest and investment income | | | | | | 6,320 | | | 27,887 | |
Miscellaneous - net | | | | | | (5,392) | | | (5,791) | |
TOTAL | | | | | | 3,983 | | | 25,089 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 36,047 | | | 33,786 | |
Allowance for borrowed funds used during construction | | | | | | (1,214) | | | (1,290) | |
TOTAL | | | | | | 34,833 | | | 32,496 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 84,684 | | | 112,467 | |
| | | | | | | | |
Income taxes | | | | | | 19,117 | | | 19,430 | |
| | | | | | | | |
NET INCOME | | | | | | 65,567 | | | 93,037 | |
| | | | | | | | |
Net loss attributable to noncontrolling interest | | | | | | (1,387) | | | — | |
| | | | | | | | |
EARNINGS APPLICABLE TO MEMBER'S EQUITY | | | | | | $66,954 | | | $93,037 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | |
| | | | |
| | | | | | 2023 | | 2022 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $582,749 | | | $558,956 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 113,509 | | | 86,225 | |
Purchased power | | | | | | 64,751 | | | 57,471 | |
Nuclear refueling outage expenses | | | | | | 15,341 | | | 14,070 | |
Other operation and maintenance | | | | | | 156,819 | | | 157,257 | |
Decommissioning | | | | | | 21,350 | | | 20,129 | |
Taxes other than income taxes | | | | | | 32,351 | | | 33,202 | |
Depreciation and amortization | | | | | | 96,441 | | | 95,610 | |
Other regulatory charges (credits) - net | | | | | | (20,844) | | | (20,542) | |
TOTAL | | | | | | 479,718 | | | 443,422 | |
| | | | | | | | |
OPERATING INCOME | | | | | | 103,031 | | | 115,534 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 4,843 | | | 3,055 | |
Interest and investment income | | | | | | 7,479 | | | 6,320 | |
Miscellaneous - net | | | | | | (2,100) | | | (5,392) | |
TOTAL | | | | | | 10,222 | | | 3,983 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 45,367 | | | 36,047 | |
Allowance for borrowed funds used during construction | | | | | | (1,945) | | | (1,214) | |
TOTAL | | | | | | 43,422 | | | 34,833 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 69,831 | | | 84,684 | |
| | | | | | | | |
Income taxes | | | | | | 10,434 | | | 19,117 | |
| | | | | | | | |
NET INCOME | | | | | | 59,397 | | | 65,567 | |
| | | | | | | | |
Net loss attributable to noncontrolling interest | | | | | | (1,629) | | | (1,387) | |
| | | | | | | | |
EARNINGS APPLICABLE TO MEMBER'S EQUITY | | | | | | $61,026 | | | $66,954 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
(Page left blank intentionally)
| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2022 and 2021 | |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $65,567 | | | $93,037 | | Net income | | $59,397 | | | $65,567 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | Adjustments to reconcile net income to net cash flow provided by operating activities: | | Adjustments to reconcile net income to net cash flow provided by operating activities: | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 133,634 | | | 126,630 | | Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 134,779 | | | 133,634 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 11,776 | | | 42,885 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 15,495 | | | 11,776 | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | 23,583 | | | (56,256) | | Receivables | | 57,003 | | | 23,583 | |
Fuel inventory | Fuel inventory | | 7,199 | | | 17,930 | | Fuel inventory | | (15,255) | | | 7,199 | |
Accounts payable | Accounts payable | | (33,409) | | | (21,622) | | Accounts payable | | (58,227) | | | (33,409) | |
Taxes accrued | Taxes accrued | | 27,209 | | | 8,365 | | Taxes accrued | | 10,647 | | | 27,209 | |
Interest accrued | Interest accrued | | 32,233 | | | 18,837 | | Interest accrued | | 35,905 | | | 32,233 | |
Deferred fuel costs | Deferred fuel costs | | (16,954) | | | (55,704) | | Deferred fuel costs | | 87,581 | | | (16,954) | |
Other working capital accounts | Other working capital accounts | | 3,794 | | | (8,025) | | Other working capital accounts | | (3,948) | | | 3,794 | |
Provisions for estimated losses | Provisions for estimated losses | | (309) | | | (12,383) | | Provisions for estimated losses | | (6,600) | | | (309) | |
Other regulatory assets | Other regulatory assets | | (7,198) | | | 42,388 | | Other regulatory assets | | (27,001) | | | (7,198) | |
Other regulatory liabilities | Other regulatory liabilities | | (91,068) | | | (38,604) | | Other regulatory liabilities | | 45,201 | | | (91,068) | |
| Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (19,852) | | | (25,116) | | Pension and other postretirement liabilities | | (7,998) | | | (19,852) | |
Other assets and liabilities | Other assets and liabilities | | 111,221 | | | (40,789) | | Other assets and liabilities | | (52,942) | | | 111,221 | |
Net cash flow provided by operating activities | Net cash flow provided by operating activities | | 247,426 | | | 91,573 | | Net cash flow provided by operating activities | | 274,037 | | | 247,426 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (162,108) | | | (146,334) | | Construction expenditures | | (255,248) | | | (162,108) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 3,055 | | | 2,993 | | Allowance for equity funds used during construction | | 4,843 | | | 3,055 | |
| Nuclear fuel purchases | Nuclear fuel purchases | | (27,258) | | | (17,621) | | Nuclear fuel purchases | | (55,974) | | | (27,258) | |
Proceeds from sale of nuclear fuel | Proceeds from sale of nuclear fuel | | 37,157 | | | 16,059 | | Proceeds from sale of nuclear fuel | | 17,549 | | | 37,157 | |
Proceeds from nuclear decommissioning trust fund sales | Proceeds from nuclear decommissioning trust fund sales | | 64,608 | | | 143,575 | | Proceeds from nuclear decommissioning trust fund sales | | 32,798 | | | 64,608 | |
Investment in nuclear decommissioning trust funds | Investment in nuclear decommissioning trust funds | | (69,950) | | | (148,783) | | Investment in nuclear decommissioning trust funds | | (38,948) | | | (69,950) | |
Changes in money pool receivable - net | Changes in money pool receivable - net | | (59,981) | | | (12,500) | | Changes in money pool receivable - net | | (11,035) | | | (59,981) | |
| Other | | Other | | (17) | | | — | |
Net cash flow used in investing activities | Net cash flow used in investing activities | | (214,477) | | | (162,611) | | Net cash flow used in investing activities | | (306,032) | | | (214,477) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | 212,060 | | | 604,760 | | Proceeds from the issuance of long-term debt | | 514,206 | | | 212,060 | |
| Retirement of long-term debt | Retirement of long-term debt | | (7,506) | | | (613,706) | | Retirement of long-term debt | | (62,505) | | | (7,506) | |
| Change in money pool payable - net | Change in money pool payable - net | | (139,904) | | | — | | Change in money pool payable - net | | (180,795) | | | (139,904) | |
| Common equity distributions paid | | Common equity distributions paid | | (80,000) | | | — | |
| Other | Other | | (483) | | | 11,636 | | Other | | (4,604) | | | (483) | |
Net cash flow provided by financing activities | | 64,167 | | | 2,690 | | |
Net cash flow provided in financing activities | | Net cash flow provided in financing activities | | 186,302 | | | 64,167 | |
| Net increase (decrease) in cash and cash equivalents | | 97,116 | | | (68,348) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | | 154,307 | | | 97,116 | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | 12,915 | | | 192,128 | | Cash and cash equivalents at beginning of period | | 5,278 | | | 12,915 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $110,031 | | | $123,780 | | Cash and cash equivalents at end of period | | $159,585 | | | $110,031 | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | |
Cash paid during the period for: | Cash paid during the period for: | | Cash paid during the period for: | |
Interest - net of amount capitalized | Interest - net of amount capitalized | | $3,227 | | | $14,359 | | Interest - net of amount capitalized | | $8,823 | | | $3,227 | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
ASSETS | ASSETS | ASSETS |
March 31, 2022 and December 31, 2021 | |
March 31, 2023 and December 31, 2022 | | March 31, 2023 and December 31, 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
CURRENT ASSETS | CURRENT ASSETS | | CURRENT ASSETS | |
Cash and cash equivalents: | Cash and cash equivalents: | | Cash and cash equivalents: | |
Cash | Cash | | $2,852 | | | $8,155 | | Cash | | $2,871 | | | $1,911 | |
Temporary cash investments | Temporary cash investments | | 107,179 | | | 4,760 | | Temporary cash investments | | 156,714 | | | 3,367 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 110,031 | | | 12,915 | | Total cash and cash equivalents | | 159,585 | | | 5,278 | |
| Accounts receivable: | Accounts receivable: | | | | | Accounts receivable: | | | | |
Customer | Customer | | 136,178 | | | 154,412 | | Customer | | 129,852 | | | 140,513 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | | (6,513) | | | (13,072) | | Allowance for doubtful accounts | | (5,255) | | | (6,528) | |
Associated companies | Associated companies | | 91,621 | | | 29,587 | | Associated companies | | 51,962 | | | 45,336 | |
Other | Other | | 43,337 | | | 51,064 | | Other | | 94,252 | | | 101,096 | |
Accrued unbilled revenues | Accrued unbilled revenues | | 95,429 | | | 101,663 | | Accrued unbilled revenues | | 98,387 | | | 116,816 | |
Total accounts receivable | Total accounts receivable | | 360,052 | | | 323,654 | | Total accounts receivable | | 369,198 | | | 397,233 | |
| Deferred fuel costs | Deferred fuel costs | | 125,767 | | | 108,862 | | Deferred fuel costs | | 52,158 | | | 139,739 | |
Fuel inventory - at average cost | Fuel inventory - at average cost | | 43,693 | | | 50,892 | | Fuel inventory - at average cost | | 66,399 | | | 51,144 | |
Materials and supplies - at average cost | Materials and supplies - at average cost | | 262,292 | | | 247,980 | | Materials and supplies - at average cost | | 304,342 | | | 288,260 | |
Deferred nuclear refueling outage costs | Deferred nuclear refueling outage costs | | 51,655 | | | 65,318 | | Deferred nuclear refueling outage costs | | 47,143 | | | 56,443 | |
| Prepayments and other | Prepayments and other | | 14,614 | | | 14,863 | | Prepayments and other | | 26,120 | | | 26,576 | |
TOTAL | TOTAL | | 968,104 | | | 824,484 | | TOTAL | | 1,024,945 | | | 964,673 | |
| OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | | OTHER PROPERTY AND INVESTMENTS | |
Decommissioning trust funds | Decommissioning trust funds | | 1,360,604 | | | 1,438,416 | | Decommissioning trust funds | | 1,265,519 | | | 1,199,860 | |
| Other | Other | | 791 | | | 947 | | Other | | 2,430 | | | 2,414 | |
TOTAL | TOTAL | | 1,361,395 | | | 1,439,363 | | TOTAL | | 1,267,949 | | | 1,202,274 | |
| UTILITY PLANT | UTILITY PLANT | | UTILITY PLANT | |
Electric | Electric | | 13,637,936 | | | 13,578,297 | | Electric | | 14,226,705 | | | 14,077,844 | |
| Construction work in progress | Construction work in progress | | 306,933 | | | 241,127 | | Construction work in progress | | 448,820 | | | 417,244 | |
Nuclear fuel | Nuclear fuel | | 132,841 | | | 182,055 | | Nuclear fuel | | 185,531 | | | 176,174 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 14,077,710 | | | 14,001,479 | | TOTAL UTILITY PLANT | | 14,861,056 | | | 14,671,262 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 5,539,188 | | | 5,472,296 | | Less - accumulated depreciation and amortization | | 5,804,506 | | | 5,729,304 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 8,538,522 | | | 8,529,183 | | UTILITY PLANT - NET | | 9,056,550 | | | 8,941,958 | |
| DEFERRED DEBITS AND OTHER ASSETS | DEFERRED DEBITS AND OTHER ASSETS | | DEFERRED DEBITS AND OTHER ASSETS | |
Regulatory assets: | Regulatory assets: | | Regulatory assets: | |
| Other regulatory assets | Other regulatory assets | | 1,696,876 | | | 1,689,678 | | Other regulatory assets | | 1,837,282 | | | 1,810,281 | |
Deferred fuel costs | Deferred fuel costs | | 68,800 | | | 68,751 | | Deferred fuel costs | | 68,883 | | | 68,883 | |
Other | Other | | 22,042 | | | 13,660 | | Other | | 24,821 | | | 18,507 | |
TOTAL | TOTAL | | 1,787,718 | | | 1,772,089 | | TOTAL | | 1,930,986 | | | 1,897,671 | |
| TOTAL ASSETS | TOTAL ASSETS | | $12,655,739 | | | $12,565,119 | | TOTAL ASSETS | | $13,280,430 | | | $13,006,576 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
March 31, 2022 and December 31, 2021 | |
March 31, 2023 and December 31, 2022 | | March 31, 2023 and December 31, 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
CURRENT LIABILITIES | CURRENT LIABILITIES | | CURRENT LIABILITIES | |
| Currently maturing long-term debt | | Currently maturing long-term debt | | $290,000 | | | $290,000 | |
| Accounts payable: | Accounts payable: | | Accounts payable: | |
Associated companies | Associated companies | | $46,527 | | | $217,310 | | Associated companies | | 65,002 | | | 276,362 | |
Other | Other | | 187,777 | | | 190,476 | | Other | | 241,282 | | | 310,339 | |
Customer deposits | Customer deposits | | 95,178 | | | 92,511 | | Customer deposits | | 103,891 | | | 102,799 | |
Taxes accrued | Taxes accrued | | 116,799 | | | 89,590 | | Taxes accrued | | 111,173 | | | 100,526 | |
| Interest accrued | Interest accrued | | 49,341 | | | 17,108 | | Interest accrued | | 54,721 | | | 18,816 | |
| Other | Other | | 40,881 | | | 38,901 | | Other | | 44,772 | | | 43,394 | |
TOTAL | TOTAL | | 536,503 | | | 645,896 | | TOTAL | | 910,841 | | | 1,142,236 | |
| NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | NON-CURRENT LIABILITIES | |
Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 1,436,824 | | | 1,416,201 | | Accumulated deferred income taxes and taxes accrued | | 1,522,328 | | | 1,498,234 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 28,998 | | | 29,299 | | Accumulated deferred investment tax credits | | 28,171 | | | 28,472 | |
Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 427,203 | | | 431,655 | | Regulatory liability for income taxes - net | | 422,376 | | | 435,157 | |
Other regulatory liabilities | Other regulatory liabilities | | 656,698 | | | 743,314 | | Other regulatory liabilities | | 533,740 | | | 475,758 | |
Decommissioning | Decommissioning | | 1,410,540 | | | 1,390,410 | | Decommissioning | | 1,494,086 | | | 1,472,736 | |
Accumulated provisions | Accumulated provisions | | 76,775 | | | 77,084 | | Accumulated provisions | | 73,398 | | | 79,998 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | 165,903 | | | 185,789 | | Pension and other postretirement liabilities | | 109,991 | | | 118,020 | |
Long-term debt | Long-term debt | | 4,163,602 | | | 3,958,862 | | Long-term debt | | 4,330,604 | | | 3,876,500 | |
Other | Other | | 111,271 | | | 110,754 | | Other | | 93,787 | | | 97,650 | |
TOTAL | TOTAL | | 8,477,814 | | | 8,343,368 | | TOTAL | | 8,608,481 | | | 8,082,525 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| | EQUITY | EQUITY | | EQUITY | |
Member's equity | Member's equity | | 3,609,699 | | | 3,542,745 | | Member's equity | | 3,735,016 | | | 3,753,990 | |
Noncontrolling interest | Noncontrolling interest | | 31,723 | | | 33,110 | | Noncontrolling interest | | 26,092 | | | 27,825 | |
TOTAL | TOTAL | | 3,641,422 | | | 3,575,855 | | TOTAL | | 3,761,108 | | | 3,781,815 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $12,655,739 | | | $12,565,119 | | TOTAL LIABILITIES AND EQUITY | | $13,280,430 | | | $13,006,576 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES | ENTERGY ARKANSAS, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY | |
For the Three Months Ended March 31, 2022 and 2021 | |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | Noncontrolling Interest | | Member's Equity | | Total | |
| (In Thousands) | |
| Balance at December 31, 2020 | $— | | | $3,276,169 | | | $3,276,169 | | |
| Net income | — | | | 93,037 | | | 93,037 | | |
| Balance at March 31, 2021 | $— | | | $3,369,206 | | | $3,369,206 | | |
| | | | Noncontrolling Interest | | Member's Equity | | Total |
| | | | | | | | (In Thousands) |
| Balance at December 31, 2021 | Balance at December 31, 2021 | $33,110 | | | $3,542,745 | | | $3,575,855 | | Balance at December 31, 2021 | $33,110 | | | $3,542,745 | | | $3,575,855 | |
| Net income (loss) | Net income (loss) | (1,387) | | | 66,954 | | | 65,567 | | Net income (loss) | (1,387) | | | 66,954 | | | 65,567 | |
| Balance at March 31, 2022 | Balance at March 31, 2022 | $31,723 | | | $3,609,699 | | | $3,641,422 | | Balance at March 31, 2022 | $31,723 | | | $3,609,699 | | | $3,641,422 | |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | $27,825 | | | $3,753,990 | | | $3,781,815 | |
| Net income (loss) | | Net income (loss) | (1,629) | | | 61,026 | | | 59,397 | |
| Common equity distributions | | Common equity distributions | — | | | (80,000) | | | (80,000) | |
| Distributions to noncontrolling interest | | Distributions to noncontrolling interest | (104) | | | — | | | (104) | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | $26,092 | | | $3,735,016 | | | $3,761,108 | |
| | | See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income decreased $15.8increased $93.2 million primarilyprimarily due to higher other operation and maintenance expenses, higher interestthe net effects of Entergy Louisiana’s storm cost securitization in March 2023, including a $133.4 million reduction in income tax expense, higher taxes other than income taxes, higher depreciation and amortization expenses, and lower volume/weather. The decrease was partially offset by higher retail electric price.a $103.4 million ($76.4 million net-of-tax) regulatory charge to reflect Entergy Louisiana’s obligation to share the benefits of the securitization with customers. See Note 2 to the financial statements herein for discussion of the March 2023 storm securitization.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20222023 to the first quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $1,107.61,266.0 | |
Fuel, rider, and other revenues that do not significantly affect net income | 153.529.3 | |
Retail electric price | 17.240.9 | |
Storm restoration carrying costs | 30.6 | |
Volume/weather | (12.3)(21.6) | |
| |
20222023 operating revenues | $1,266.01,345.2 | |
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, including increases in the transmissiondistribution and distributiontransmission recovery mechanisms, effective September 2021.2022. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan proceedings.proceeding.
Storm restoration carrying costs represents the equity component of storm restoration carrying costs, recorded in first quarter 2023, recognized as part of the securitization of Hurricane Ida restoration costs in March 2023. See Note 2 to the financial statements herein for discussion of the March 2023 storm securitization.
The volume/weather variance is primarily due to the effect of less favorable weather on residential sales asales.
nd a decrease in weather-adjusted residential usage, including the effect of the COVID-19 pandemic on first quarter 2021, partially offset by increases in industrial and commercial usage.The increase in industrial usage was primarily due to increased demand from expansion projects, primarily in the chemicals, petroleum refining, and transportation industries, increased demand from existing customers, primarily in the chemicals and pulp and paper industries as a result of prior year temporary plant shutdowns and operational issues, and an increase in demand from cogeneration customers. The increase in commercial usage was primarily due to the effect of the COVID-19 pandemic on businesses in first quarter 2021. The increased usage from these industrial and commercial customers has a relatively smaller effect on operating revenues because a larger portion of the revenues from those customers comes from fixed charges.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Total electric energy sales for Entergy Louisiana for the three months ended March 31,2022 2023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 3,069 | | | 3,197 | | | (4) | | Residential | 2,685 | | | 3,069 | | | (13) | |
Commercial | Commercial | 2,421 | | | 2,395 | | | 1 | | Commercial | 2,447 | | | 2,421 | | | 1 | |
Industrial | Industrial | 7,606 | | | 7,208 | | | 6 | | Industrial | 7,832 | | | 7,606 | | | 3 | |
Governmental | Governmental | 191 | | | 196 | | | (3) | | Governmental | 194 | | | 191 | | | 2 | |
Total retail | Total retail | 13,287 | | | 12,996 | | | 2 | | Total retail | 13,158 | | | 13,287 | | | (1) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 1,341 | | | 959 | | | 40 | | Associated companies | 1,677 | | | 1,341 | | | 25 | |
Non-associated companies | Non-associated companies | 853 | | | 386 | | | 121 | | Non-associated companies | 224 | | | 853 | | | (74) | |
Total | Total | 15,481 | | | 14,341 | | | 8 | | Total | 15,059 | | | 15,481 | | | (3) | |
See Note 13 to the financial statements herein for additional discussion of Entergy Louisiana’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increaseddecreased primarily due to:
•an increasea decrease of $7.3$6.3 million in distribution operations expensescompensation and benefits costs primarily due to higher reliability costs, higher safetya revision to estimated incentive-based compensation accruals expense in the first quarter 2023 and training costs, and higher vegetation maintenance costs, partially offset by a decrease in meter reading expensesnet periodic pension and other postretirement benefits costs as a result of an increase in the deploymentdiscount rates used to value the benefit liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of advanced metering systems;pension and other postretirement benefits costs; and
•an increasea decrease of $2.6$5.6 million in nuclear generationtransmission expenses primarily due to a higher scopedecrease in the amount of work performedtransmission costs allocated by MISO. See Note 2 to the financial statements in 2022 as compared to prior year, partially offset by lower spending in 2022the Form 10-K for further information on sanitation and social distancing protocols as a resultthe recovery of the COVID-19 pandemic;
•an increase of $2.3 million in transmission expenses, including an increase in vegetation maintenance costs; and
•an increase of $2.3 million in customer service center support costs primarily due to higher contractthese costs.
The increasedecrease was partially offset by higher nuclear insurance refundsan increase of $2.6 million and a decrease of $2.6$5 million in non-nuclear generationinsurance expenses primarily due to a lower scope of work performed in 2022 as compared to the same period in 2021.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and increases in franchise taxes.nuclear insurance refunds.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other income decreased primarily dueregulatory charges (credits) - net includes a regulatory charge of $103.4 million, recorded in first quarter 2023, to changesreflect Entergy Louisiana’s obligation to provide credits to its customers as described in an LPSC ancillary order issued in the Hurricane Ida securitization regulatory proceeding. See Note 2 to the financial statements herein for discussion of the March 2023 storm securitization. In addition, Entergy Louisiana records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and nuclear decommissioning trust fund activity, including portfolio rebalancing of the Waterford 3 and River Bend decommissioning trust fundsearnings plus asset retirement obligation-related costs collected in the first quarter of 2021.revenue.
Interest expense increased primarily due to:
•the issuances of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, each in March 2021;
•the $1.2 billion unsecured term loan proceeds received in January 2022; and
•the issuance of $1 billion of 0.95% Series mortgage bonds in October 2021.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Other income increased primarily due to an increase of $23.5 million in affiliated dividend income resulting from the May 2022 storm trust I investment of securitization proceeds in affiliated preferred membership interests, partially offset by the liquidation of Entergy Louisiana’s investment in affiliated preferred membership interests in connection with previous securitizations of storm restoration costs. The increase was partially offset by a $14.6 million charge for the repaymentLURC’s 1% beneficial interest in the storm trust II established as part of $200the March 2023 storm securitization. See Note 2 to the financial statements herein and in the Form 10-K for discussion of the securitizations.
Interest expense increased primarily due to the issuance by Entergy Louisiana of $500 million of 4.8%4.75% Series mortgage bonds in May 2021.August 2022.
Income Taxes
The effective income tax rates were 16.9%rate was (83.2%) for the first quarter 2022 and 18.5% for the first quarter 2021.2023. The differencesdifference in the effective income tax ratesrate for the first quarter 2022 and the first quarter 20212023 versus the federal statutory rate of 21% werewas primarily due to the reduction in income tax expense as a result of the March 2023 securitization of storm costs pursuant to Louisiana Act 55, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021, book and tax differences related to the non-taxable income distributions earned on preferred membership interests, and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of tax rate changes. See Notes 2 and 10 to the financial statements herein for a discussion of the March 2023 storm securitization under Act 293.
The effective income tax rate was 16.9% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to book and tax differences related to the non-taxable income distributions earned on preferred membership interests, certain book and tax differences related to utility plant items, and the amortization of excess accumulated deferred income taxes, 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.
Income Tax Legislation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the Inflation Reduction Act of 2022.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | $18,573 | | | $728,020 | | Cash and cash equivalents at beginning of period | $56,613 | | | $18,573 | |
| Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
Operating activities | Operating activities | 183,126 | | | (54,598) | | Operating activities | 539,761 | | | 183,126 | |
Investing activities | Investing activities | (1,032,121) | | | (1,098,466) | | Investing activities | (2,038,403) | | | (1,032,121) | |
Financing activities | Financing activities | 987,069 | | | 1,026,860 | | Financing activities | 2,521,881 | | | 987,069 | |
Net increase (decrease) in cash and cash equivalents | 138,074 | | | (126,204) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 1,023,239 | | | 138,074 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $156,647 | | | $601,816 | | Cash and cash equivalents at end of period | $1,079,852 | | | $156,647 | |
Operating Activities
Entergy Louisiana’sNet cash flow provided by operating activities provided $183.1increased $356.6 million of cash for the three months ended March 31, 20222023 compared to using $54.6 million of cash for the three months ended March 31, 20212022 primarily due to the following activity:to:
•higher collections from customers;
•timinga decrease of recovery$151.8 million in storm spending, primarily due to Hurricane Ida restoration efforts in 2022;
•the refund of $27.8 million received from System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refunds and related proceedings;
•lower fuel costs. See Note 2 to the financial statements in the Form 10-K for a discussion of fuel and purchased power costs;
•a decrease of $20 million in spending on nuclear refueling outages;cost recovery; and
•a decrease of $18.9$7.1 million in pension contributions in 2022.2023. 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 above activityincrease was partially offset by by:
•the timing of payments to vendors;
•an increase of approximately $139$20.9 million in storm spending on nuclear refueling outages; and
•an increase of $16 million in interest paid in 2023 as compared to 2022.
Investing Activities
Net cash flow used in investing activities increased $1,006.3 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to:
•the $1,457.7 million purchase by the storm trust II of preferred membership interests issued by an Entergy affiliate. See Note 2 to Hurricane Ida restoration efforts. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” in the Form 10-K financial statements herein for a discussion of Entergy Louisiana’s March 2023 securitization of storm restoration efforts.costs and the storm trust II’s investment in preferred membership interests;
•an increase of $72.5 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2023;
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $66.3 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to:
•a decreasean increase of $60.9$22.8 million in transmissionnon-nuclear generation construction expenditures primarily due to a higher capital expenditures for storm restorationscope of work on projects performed in 2021;
•a decrease of $24.9 million in nuclear decommissioning trust fund activity2023 as a result of a lump sum contribution in 2021 for amounts collected over a 17-month period. See Note 2 in the Form 10-K for a discussion of nuclear decommissioning expense recovery;compared to 2022, including during plant outages; and
•a decreasean increase of $23.2$26.1 million as a result of fluctuations in nuclear fuel activity, primarily due to variations from year to year in the timing and pricing of fuel reload requirements, materials and services deliveries, and the timing of cash payments during the nuclear fuel cycle.
The decreaseincrease was partially offset by:
•an increasea decrease of $35.1$439.6 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2022, partially offset by lower spendinghigher construction expenditures as a result of increased investment in 2022 on advanced metering infrastructure;the reliability and infrastructure of Entergy Louisiana’s distribution system;
•an increasea decrease of $11.1$105 million in information technology capitaltransmission construction expenditures primarily due to increased spending on various technology projectslower capital expenditures for storm restoration in 2022; and
•an increasethe $46.6 million redemption of $9 millionpreferred membership interests held by the storm trust I, as part of periodic redemptions that are expected to occur, subject to certain conditions, for the preferred membership interests that were issued in nuclear construction expenditures primarily dueconnection with the May 2022 storm securitization. See Note 2 to higher capital expendituresthe financial statements in the Form 10-K for a discussion of the Entergy Louisiana May 2022 storm restorationsecuritization and the storm trust I’s investment in 2022.preferred membership interests.
Financing Activities
Net cash flow provided by financing activities decreased $39.8increased $1,534.8 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to:
•proceeds from securitization of approximately $1.5 billion received by the issuancestorm trust II for the closing of $500 million of 2.35% Series mortgage bonds and $500 million of 3.10% Series mortgage bonds, eachthe storm securitization in March 2021;2023;
•net repaymentsa capital contribution of long-term borrowings of $30.6 millionapproximately $1.5 billion received indirectly from Entergy Corporation in 2022 comparedMarch 2023 related to net long-term borrowings of $85.5 million in 2021 on the nuclear fuel company variable interest entities’ credit facilities;March 2023 storm securitization; and
•$125a decrease of $75 million in common equity distributions2023 in 2022 to return tonet repayments on Entergy Corporation the $125 million capital contribution received in December 2021 to assist in paying for costs associated with Hurricane Ida.Louisiana’s revolving credit facility.
The decreaseincrease was partially offset by the $1.2by:
•$1.2 billion of proceeds received from an unsecured term loan in January 20222022;
•money pool activity; and
•an increase of $35.3 million in common equity distributions in 2023 primarily to maintain Entergy Louisiana’s targeted capital structure.
Decreases in Entergy Louisiana’s payable to the repaymentmoney pool are a use of cash flow, and Entergy Louisiana Waterford VIE’s $40Louisiana’s payable to the money pool decreased $226.1 million of 3.92% Series H secured notes in February 2021.2023. The money pool is an intercompany 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. See Note 2 to the financial statements herein for a discussion of the March 2023 storm securitization.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Capital Structure
Entergy Louisiana’s debt to capital ratio is shown in the following table. The increasedecrease in the debt to capital ratio for Entergy Louisiana is primarily due to the $1.2$1.5 billion unsecured term loan proceedscapital contribution received indirectly from Entergy Corporation in January 2022.March 2023.
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 59.5 | % | | 57.2 | % | Debt to capital | 49.2 | % | | 53.0 | % |
| Effect of subtracting cash | Effect of subtracting cash | (0.3 | %) | | 0.0 | % | Effect of subtracting cash | (2.6 | %) | | (0.1 | %) |
Net debt to net capital | 59.2 | % | | 57.2 | % | |
Net debt to net capital (non-GAAP) | | Net debt to net capital (non-GAAP) | 46.6 | % | | 52.9 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance 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 Louisiana uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition. The net debt to net capital ratio is a non-GAAP measure. Entergy Louisiana also 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 Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Louisiana’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Louisiana’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31, 2022 | | December 31, 2021 | | March 31, 2021 | | December 31, 2020 |
(In Thousands) |
$81,160 | | $14,539 | | $75,772 | | $13,426 |
| | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
(In Thousands) |
$77,354 | | ($226,114) | | $81,160 | | $14,539 |
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 June 2026.2027. The credit facility includes fronting commitments for the issuance of letters of credit against $15 million of the borrowing capacity of the facility. As of March 31, 2022,2023, 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, 2022, $112023, $20 million in letters of credit were 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 June 2024.2025. As of March 31, 2022, $30.82023, $58.5 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, 2022, $82.12023, $52.1 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.
See the table and discussion in the Form 10-K under “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS -Liquidity and Capital Resources- Uses of Capital,” that sets forth the amounts of planned
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
construction and other capital investments for 2022 through 2024. While Entergy Louisiana is still assessing the effect on its planned solar projects, a recently commenced investigation by the U.S. Department of Commerce into potential circumvention of duties and tariffs may result in increased duties or tariffs on imported solar panels and has created supply chain disruptions which will affect the ultimate timing and could increase the cost of completion of these projects.
2021 Solar Certification and the Geaux Green Option
As discussed in the Form 10-K, in November 2021, Entergy Louisiana filed an application with the LPSC seeking certification of and approval for the addition of four new solar photovoltaic resources with a combined nameplate capacity of 475 megawatts (the 2021 Solar Portfolio) and the implementation of a new green tariff, the Geaux Green Option (Rider GGO). The LPSC has established a procedural schedule that is expected to result in an LPSC decision by the end of 2022. In March 2022 direct testimony from Walmart, the Louisiana Energy Users Group (LEUG) and the LPSC staff was filed. Each party recommended that the LPSC approve the resources proposed in Entergy Louisiana’s application, and the LPSC staff witness indicated that the process through which Entergy Louisiana solicited or obtained the proposals for the resources complies with applicable LPSC orders. LPSC staff and LEUG’s witnesses made recommendations to modify the proposed Rider GGO and Entergy Louisiana’s proposed rate relief. In April 2022, LPSC staff and LEUG filed cross-answering testimony concerning the other party’s proposed modifications to Rider GGO and the proposed rate recovery. Discovery concerning these parties’ testimonies is ongoing.
Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida
As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura, Hurricane Delta, and Hurricane Zeta caused significant damage to portions of Entergy Louisiana’s service area. The storms resulted in widespread outages, significant damage to distribution and transmission infrastructure, and the loss of sales during the outages. Additionally, as a result of Hurricane Laura’s extensive damage to the grid infrastructure serving the impacted area, large portions of the underlying transmission system required nearly a complete rebuild. In February 2021 two winter storms (collectively, Winter Storm Uri) brought freezing rain and ice to Louisiana. Ice accumulation sagged or downed trees, limbs, and power lines, causing damage to Entergy Louisiana’s transmission and distribution systems. The additional weight of ice caused trees and limbs to fall into power lines and other electric equipment. When the ice melted, it affected vegetation and electrical equipment, causing additional outages.In August 2021, Hurricane Ida caused extensive damage to Entergy Louisiana’s distribution and, to a lesser extent, transmission systems resulting in widespread power outages.
In April 2021,2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri restoration costs and in July 2021, Entergy Louisiana made a supplemental filing updating the totalIda restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by these stormsHurricane Ida were estimated to be approximately $2.06$2.54 billion, including approximately $1.68$1.96 billion in capital costs and approximately $380$586 million in non-capital costs. Including carrying costs of $57 million through JanuaryDecember 2022, Entergy Louisiana was seeking an LPSC determination that $2.11$2.60 billion was prudently incurred and, therefore, was eligible for recovery from customers. Additionally,As part of this filing, Entergy Louisiana also was seeking an LPSC determination that an additional $32 million in costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount was exclusive of the requested $3 million in carrying costs through December 2022. In total, Entergy Louisiana was requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, eligible for recovery from customers. As discussed in the Form 10-K, in March 2022 the LPSC determine that re-establishmentapproved financing of a $1 billion storm escrow account from which funds were withdrawn to the previously authorized amount of $290 million was appropriate.finance costs associated with Hurricane Ida restoration. In July 2021,June 2022, Entergy Louisiana supplemented the application with a request regarding the financing and recovery of the recoverable storm restoration costs. Specifically, Entergy Louisiana requested approval to securitize its restoration costs pursuant to Louisiana Act 55 financing, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021.
Entergy Louisiana, LLC$2.64 billion, including associated carrying costs of $59.1 million, were prudently incurred and Subsidiaries
Management's Financial Discussion and Analysis
In August 2021, Hurricane Ida caused extensive damage toare eligible for recovery from customers. The LPSC staff further recommended approval of Entergy Louisiana’s distribution and,plans to a lesser extent, transmission systems resulting in widespread power outages. In September 2021, Entergy Louisiana filed an application atsecuritize these costs, net of the LPSC seeking approval of certain ratemaking adjustments in connection with the issuance of approximately $1 billion of shorter-term mortgage bonds to provide interim financing for restoration costs associated with Hurricane Ida, which bonds were issued in October 2021. Also in September 2021, Entergy Louisiana sought approval forfunds withdrawn from the creation and funding of a $1 billion restrictedstorm escrow account for Hurricane Ida restoration costs, subject to a subsequent prudence review.
After filing of testimony by LPSC staff and intervenors, which generally supported or did not oppose Entergy Louisiana’s requests in regard to Hurricane Laura, Hurricane Delta, Hurricane Zeta, Winter Storm Uri, and Hurricane Ida, thedescribed above. The parties negotiated and executed an uncontested stipulated settlement which was filed with the LPSC in FebruaryDecember 2022. The settlement agreement containedcontains the following key terms: $2.1$2.57 billion of restoration costs from Hurricane Ida, Hurricane Laura, Hurricane Delta, Hurricane Zeta, and Winter Storm Uri were prudently incurred and were eligible for recovery; carrying costs of $51$59.2 million were recoverable; a $290 million cash storm reserve should be re-established; a $1 billion reserve should be established to partially pay for Hurricane Ida restoration costs; and Entergy Louisiana was authorized to finance $3.186$1.657 billion utilizing the securitization process authorized by Act 55, as supplemented by Act 293. The LPSC issued an order approving the settlement in March 2022. As a result of the financing order, in first quarter 2022, Entergy Louisiana reclassified $1.339 billion from utility plant to other regulatory assets. The securitization process is expected to be completed in second quarter 2022.
In April 2022, Entergy Louisiana filed an application with the LPSC relating to Hurricane Ida restoration costs. Total restoration costs for the repair and/or replacement of Entergy Louisiana’s electric facilities damaged by Hurricane Ida currently are estimated to be approximately $2.54 billion, including approximately $1.96 billion in capital costs and approximately $586 million in non-capital costs. Including carrying costs through December 2022, Entergy Louisiana is seeking an LPSC determination that $2.60 billion was prudently incurred and, therefore, is eligible for recovery from customers. As part of this filing, Entergy Louisiana also is seeking an LPSC determination that an additional $32 million in restoration costs associated with the restoration of Entergy Louisiana’s electric facilities damaged by Hurricane Laura, Hurricane Delta, and Hurricane Zeta as well as Winter Storm Uri was prudently incurred. This amount is exclusive of the requested $3 million in carrying costs through December 2022. In total, Entergy Louisiana is requesting an LPSC determination that $2.64 billion was prudently incurred and, therefore, is eligible for recovery from customers. As discussed above, in March 2022January 2023, the LPSC approved financingthe stipulated settlement subject to certain modifications. These modifications include the recognition of a $1 billion storm escrow that can be withdrawnaccumulated deferred income tax benefits related to finance costs associated with Hurricane Ida restoration. Entergy Louisiana expects to supplement the April 2022 application with a request that the LPSC authorize Entergy Louisiana to finance the remaining stormdamaged assets and system restoration costs included inas a reduction of the April 2022 application, currently expectedamount authorized to be throughfinanced utilizing the securitization process authorized by Louisiana Act 55, as supplemented by Act 293, from $1.657 billion to $1.491 billion. These modifications did not affect the LPSC’s conclusion that all system restoration costs sought by Entergy Louisiana were reasonable and prudent. In February 2023 the Louisiana Bond Commission voted to authorize the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA), a political subdivision of the State of Louisiana, to issue the bonds authorized in the LPSC’s financing order.
In March 2023 the Hurricane Ida securitization financing closed, resulting in the issuance of approximately $1.491 billion principal amount of bonds by the LCDA and a remaining regulatory asset of $180 million to be recovered through the exclusion of the accumulated deferred income taxes related to the damaged assets and system restoration costs from the determination of future rates. The securitization was authorized pursuant to the Louisiana
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Utilities Restoration Corporation Act, Part VIII of Chapter 9 of Title 45 of the Louisiana Revised Statutes, as supplemented by Act 293 of the Louisiana Legislature’s Regular Session of 2021. The LCDA loaned the proceeds to the LURC. Pursuant to Act 293, the LURC contributed the net bond proceeds to a State legislatively authorized and LURC-sponsored trust, Restoration Law Trust II (the storm trust II).
Pursuant to Act 293, the net proceeds of the bonds were used by the storm trust II to purchase 14,576,757.48 Class B preferred, non-voting membership interest units (the preferred membership interests) issued by Entergy Finance Company, LLC, a majority-owned indirect subsidiary of Entergy. Entergy Finance Company is required to make annual distributions (dividends) commencing on December 15, 2023 on the preferred membership interests issued to the storm trust II. These annual dividends received by the storm trust II will be distributed to Entergy Louisiana and the LURC, as beneficiaries of the storm trust II. Specifically, 1% of the annual dividends received by the storm trust II will be distributed to the LURC for the benefit of customers, and 99% will be distributed to Entergy Louisiana, net of storm trust expenses. The preferred membership interests have a stated annual cumulative cash dividend rate of 7.5% and a liquidation price of $100 per unit. The terms of the preferred membership interests include certain financial covenants to which Entergy Finance Company is subject. Semi-annual redemptions of the preferred membership interests, subject to certain conditions, are expected to occur over the next 15 years.
Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA. The bonds are secured by system restoration property, which is the right granted by law to the LURC to collect a system restoration charge from customers. The system restoration charge is adjusted at least semi-annually to ensure that it is sufficient to service the bonds. Entergy Louisiana collects the system restoration charge on behalf of the LURC and remits the collections to the bond indenture trustee. Entergy Louisiana began collecting the system restoration charge effective with the first billing cycle of April 2023 and the system restoration charge is expected to remain in place up to 15 years. Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as a billing and collection agent for the LCDA and the LURC. In the remote possibility that the system restoration charge, as well as any funds in the excess subaccount and funds in the debt service reserve account, are insufficient to service the bonds resulting in a payment default, the storm trust II is required to liquidate Entergy Finance Company preferred membership interests in an amount equal to what would be required to cure the default. The estimated value of this indirect guarantee is immaterial.
From the proceeds from the issuance of the preferred membership interests, Entergy Finance Company loaned approximately $1.5 billion to Entergy, which was indirectly contributed to Entergy Louisiana as a capital contribution.
As discussed in Note 10 to the financial statements herein, the securitization resulted in recognition of a net reduction of income tax expense of approximately $133 million, after taking into account a provision for uncertain tax positions, by Entergy Louisiana. Entergy’s recognition of reduced income tax expense was offset by other tax charges resulting in a net reduction of income tax expense of $129 million, after taking into account a provision for uncertain tax positions. In recognition of its obligations related to an LPSC ancillary order issued as part of the securitization regulatory proceeding, Entergy Louisiana recorded in first quarter 2023 a $103 million ($76 million net-of-tax) regulatory charge and a corresponding regulatory liability to reflect its obligation to share the benefits of the securitization with customers.
As discussed in Note 3 and Note 12 to the financial statements herein, Entergy Louisiana consolidates the storm trust II as a variable interest entity and the LURC’s 1% beneficial interest is shown as noncontrolling interest in the financial statements. In first quarter 2023, Entergy Louisiana recorded a charge of $15 million in other income to reflect the LURC’s beneficial interest in the storm trust II.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
System Resilience and Storm Hardening
As discussed in the Form 10-K, in December 2022, Entergy Louisiana filed an application with the LPSC seeking a public interest finding regarding Phase I of Entergy Louisiana’s Future Ready resilience plan and approval of a rider mechanism to recover the program’s costs.Phase I reflects the first five years of a ten-year resilience plan and includes investment of approximately $5 billion, including hardening investment, transmission dead-end structures, enhanced vegetation management, and telecommunications improvement.In April 2023 a procedural schedule was established with a hearing scheduled for January 2024.
The LPSC had previously opened a formal rulemaking proceeding in December 2021 to investigate efforts to improve resilience of electric utility infrastructure. In April 2023 the LPSC staff issued a draft rule in the rulemaking proceeding related to a requirement to file a grid resilience plan. The procedural schedule entered in the rulemaking proceeding contemplates adoption of a final rule in September 2023.
2022 Solar Portfolio and Expansion of the Geaux Green Option
In February 2023, Entergy Louisiana filed an application with the LPSC seeking certification of the Iberville/Coastal Prairie facility, which will provide 175 MW of capacity through a PPA with a third party, and the Sterlington facility, a 49 MW self-build project located near the deactivated Sterlington power plant. Entergy Louisiana is seeking to include these within the portfolio supporting the Geaux Green Option (Rider GGO) rate schedule to help fulfill customer interest in access to renewable energy. Entergy Louisiana has requested the costs of these facilities, as offset by Rider GGO revenues, be deemed eligible for recovery in accordance with the terms of the formula rate plan and fuel adjustment clause rate mechanisms that exist at the time the facilities are placed into service. The Louisiana Energy Users Group and the Alliance for Affordable Energy have intervened and discovery is underway. A procedural schedule has been established with a hearing scheduled for December 2023. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Liquidity and Capital Resources- Uses of Capital - 2021 Solar Certification and the Geaux Green Option” in the Form 10-K for further discussion of the Rider GGO.
Alternative RFP and Certification
In March 2023, Entergy Louisiana made the first phase of a bifurcated filing to seek approval from the LPSC for an alternative to the requests for proposals (RFP) process that would enable the acquisition of up to 3 GW of solar resources on a faster timeline than the current RFP and certification process allows. The initial phase of the filing established the need for the acquisition of additional resources and the need for an alternative to the RFP process. The second phase of the filing, which contains the details of the proposal for the alternative competitive procurement process and the information necessary to support certification, will be filed in May 2023. In addition to the acquisition of up to 3 GW of solar resources, the filing also seeks approval of a new renewable energy credits-based tariff. Several parties have intervened, and a status conference has been set for May 2023 at which time a procedural schedule is expected to be established.
Nelson Industrial Steam Company
Entergy Louisiana is a partner in the Nelson Industrial Steam Company (NISCO) partnership which owns two petroleum coke generating units. In April 2023 these generating units suspended operations in the MISO market, and Entergy Louisiana currently is working with the partners to wind up the NISCO partnership, which will ultimately result in ownership of the generating units transferring to Entergy Louisiana. Entergy Louisiana is evaluating the effect of this on its financial condition, results of operations, and cash flows but at this time does not expect the effects to be material.
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 costfuel-cost recovery. The following are updatesis an update to that discussion.
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the LPSC issued an order authorizing utilities to record as a regulatory asset expenses incurred from the suspension of disconnections and collection of late fees imposed by LPSC orders associated with the COVID-19 pandemic. In addition, utilities may seek future recovery, subjectApril 2023, Entergy Louisiana filed an application proposing to utilize approximately $1.6 billion in certain low interest debt to generate earnings to apply toward the reduction of the COVID-19 regulatory asset. In that filing, Entergy Louisiana proposed to delay repayment of certain shorter-term first mortgage bonds that were issued to finance storm restoration costs until the costs could be securitized, and to invest the funds that otherwise would be used to repay those bonds in the money pool to take advantage of the spread between prevailing interest rates on investments in the money pool and the interest rates on the bonds. In the event the LPSC review and approval, of losses and expenses incurred dueapproves Entergy Louisiana’s requested relief, subsequent filings will be required to compliance with the LPSC’s COVID-19 orders. Utilities seeking to recover the regulatory asset must formally petitionpermit the LPSC to do so, identifyingreview the direct and indirect costs for which recovery is sought. Any such request is subject to LPSC review and approval.COVID-19 regulatory asset. As of
Entergy Louisiana, LLC and Subsidiaries
Management's Financial Discussion and Analysis
March 31, 2022,2023, Entergy Louisiana had a regulatory asset of $47.8 million for costs associated with the COVID-19 pandemic.
Industrial and Commercial Customers
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Industrial and Commercial Customers” in the Form 10-K for a discussion of industrial and commercial customers.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
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, 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 LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | | | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | | | 2023 | | 2022 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $1,319,752 | | | $1,237,237 | |
Natural gas | | | | | | 25,456 | | | 28,735 | |
TOTAL | | | | | | 1,345,208 | | | 1,265,972 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 375,270 | | | 362,074 | |
Purchased power | | | | | | 194,934 | | | 176,197 | |
Nuclear refueling outage expenses | | | | | | 15,273 | | | 11,947 | |
Other operation and maintenance | | | | | | 246,371 | | | 254,001 | |
Decommissioning | | | | | | 18,586 | | | 17,688 | |
Taxes other than income taxes | | | | | | 63,955 | | | 61,615 | |
Depreciation and amortization | | | | | | 176,095 | | | 169,083 | |
Other regulatory charges (credits) - net | | | | | | 73,996 | | | (20,897) | |
TOTAL | | | | | | 1,164,480 | | | 1,031,708 | |
| | | | | | | | |
OPERATING INCOME | | | | | | 180,728 | | | 234,264 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 9,061 | | | 6,726 | |
Interest and investment income (loss) | | | | | | 28,843 | | | (15,998) | |
Interest and investment income - affiliated | | | | | | 55,426 | | | 31,898 | |
Miscellaneous - net | | | | | | (48,085) | | | 15,517 | |
TOTAL | | | | | | 45,245 | | | 38,143 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 97,171 | | | 93,784 | |
Allowance for borrowed funds used during construction | | | | | | (4,393) | | | (3,026) | |
TOTAL | | | | | | 92,778 | | | 90,758 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 133,195 | | | 181,649 | |
| | | | | | | | |
Income taxes | | | | | | (110,829) | | | 30,789 | |
| | | | | | | | |
NET INCOME | | | | | | 244,024 | | | 150,860 | |
| | | | | | | | |
Net income attributable to noncontrolling interests | | | | | | 554 | | | — | |
| | | | | | | | |
EARNINGS APPLICABLE TO MEMBER'S EQUITY | | | | | | $243,470 | | | $150,860 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | | | | |
| | | |
| | | |
| | | |
| | | | | 2023 | | 2022 |
| | | (In Thousands) |
| | | | | | | |
Net Income | | | | | $244,024 | | | $150,860 | |
| | | | | | | |
Other comprehensive loss | | | | | | | |
Pension and other postretirement liabilities (net of tax benefit of $290 and $226) | | | | | (786) | | | (613) | |
Other comprehensive loss | | | | | (786) | | | (613) | |
| | | | | | | |
Comprehensive Income | | | | | 243,238 | | | 150,247 | |
Net income attributable to noncontrolling interests | | | | | 554 | | | — | |
Comprehensive Income Applicable to Member’s Equity | | | | | $242,684 | | | $150,247 | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | |
| | | | |
| | | | |
| | | | |
| | 2022 | | 2021 | | | | |
| | (In Thousands) | | |
OPERATING REVENUES | | | | | | | | |
Electric | | $1,237,237 | | | $1,079,663 | | | | | |
Natural gas | | 28,735 | | | 27,981 | | | | | |
TOTAL | | 1,265,972 | | | 1,107,644 | | | | | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | 362,074 | | | 145,234 | | | | | |
Purchased power | | 176,197 | | | 209,961 | | | | | |
Nuclear refueling outage expenses | | 11,947 | | | 13,282 | | | | | |
Other operation and maintenance | | 254,001 | | | 237,483 | | | | | |
Decommissioning | | 17,688 | | | 16,823 | | | | | |
Taxes other than income taxes | | 61,615 | | | 52,484 | | | | | |
Depreciation and amortization | | 169,083 | | | 160,813 | | | | | |
Other regulatory charges (credits) - net | | (20,897) | | | 31,097 | | | | | |
TOTAL | | 1,031,708 | | | 867,177 | | | | | |
| | | | | | | | |
OPERATING INCOME | | 234,264 | | | 240,467 | | | | | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | 6,726 | | | 6,101 | | | | | |
Interest and investment income | | 15,900 | | | 72,515 | | | | | |
Miscellaneous - net | | 15,517 | | | (34,638) | | | | | |
TOTAL | | 38,143 | | | 43,978 | | | | | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | 93,784 | | | 82,806 | | | | | |
Allowance for borrowed funds used during construction | | (3,026) | | | (2,759) | | | | | |
TOTAL | | 90,758 | | | 80,047 | | | | | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | 181,649 | | | 204,398 | | | | | |
| | | | | | | | |
Income taxes | | 30,789 | | | 37,772 | | | | | |
| | | | | | | | |
NET INCOME | | $150,860 | | | $166,626 | | | | | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | |
| | 2023 | | 2022 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Net income | | $244,024 | | | $150,860 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 210,138 | | | 213,022 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | (70,518) | | | 95,785 | |
Changes in working capital: | | | | |
Receivables | | 119,726 | | | 71,237 | |
Fuel inventory | | (4,489) | | | (46) | |
Accounts payable | | (127,171) | | | (262,042) | |
Taxes accrued | | 11,627 | | | (42,950) | |
Interest accrued | | (12,730) | | | (857) | |
Deferred fuel costs | | 173,809 | | | 498 | |
Other working capital accounts | | (99,650) | | | (24,241) | |
Changes in provisions for estimated losses | | 2,050 | | | 2,694 | |
Changes in other regulatory assets | | 492,055 | | | (1,336,616) | |
Changes in other regulatory liabilities | | 155,296 | | | (67,164) | |
Effect of securitization on regulatory asset | | (491,150) | | | 1,338,559 | |
| | | | |
| | | | |
Changes in pension and other postretirement liabilities | | (3,556) | | | (11,608) | |
Other | | (59,700) | | | 55,995 | |
Net cash flow provided by operating activities | | 539,761 | | | 183,126 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction expenditures | | (484,581) | | | (935,692) | |
Allowance for equity funds used during construction | | 9,061 | | | 6,726 | |
| | | | |
| | | | |
Nuclear fuel purchases | | (72,003) | | | (55,913) | |
Proceeds from sale of nuclear fuel | | 16,637 | | | 26,681 | |
| | | | |
| | | | |
Payments to storm reserve escrow account | | (3,037) | | | — | |
Purchase of preferred membership interests of affiliate | | (1,457,676) | | | — | |
Redemption of preferred membership interests of affiliate | | 46,643 | | | — | |
| | | | |
Proceeds from nuclear decommissioning trust fund sales | | 111,263 | | | 155,269 | |
Investment in nuclear decommissioning trust funds | | (127,338) | | | (168,283) | |
Changes in money pool receivable - net | | (77,354) | | | (66,621) | |
| | | | |
Litigation proceeds from settlement agreement | | — | | | 5,695 | |
| | | | |
| | | | |
Other | | (18) | | | 17 | |
Net cash flow used in investing activities | | (2,038,403) | | | (1,032,121) | |
| | | | |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of long-term debt | | 526,764 | | | 1,506,637 | |
Retirement of long-term debt | | (540,008) | | | (401,411) | |
Proceeds received by storm trust related to securitization | | 1,457,676 | | | — | |
Capital contribution from parent | | 1,457,676 | | | — | |
| | | | |
| | | | |
| | | | |
Change in money pool payable - net | | (226,114) | | | — | |
| | | | |
Common equity distributions paid | | (160,250) | | | (125,000) | |
| | | | |
Other | | 6,137 | | | 6,843 | |
Net cash flow provided by financing activities | | 2,521,881 | | | 987,069 | |
| | | | |
Net increase in cash and cash equivalents | | 1,023,239 | | | 138,074 | |
Cash and cash equivalents at beginning of period | | 56,613 | | | 18,573 | |
Cash and cash equivalents at end of period | | $1,079,852 | | | $156,647 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $107,408 | | | $91,441 | |
Income taxes | | ($6,037) | | | $— | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | |
| | | |
| | | |
| 2022 | | 2021 | | | | |
| (In Thousands) | | |
| | | | | | | |
Net Income | $150,860 | | | $166,626 | | | | | |
Other comprehensive loss | | | | | | | |
Pension and other postretirement liabilities (net of tax benefit of $226 and $144) | (613) | | | (407) | | | | | |
Other comprehensive loss | (613) | | | (407) | | | | | |
Comprehensive Income | $150,247 | | | $166,219 | | | | | |
| | | | | | | |
See Notes to Financial Statements. | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $503 | | | $50,318 | |
Temporary cash investments | | 1,079,349 | | | 6,295 | |
Total cash and cash equivalents | | 1,079,852 | | | 56,613 | |
| | | | |
Accounts receivable: | | | | |
Customer | | 252,121 | | | 339,291 | |
Allowance for doubtful accounts | | (5,667) | | | (7,595) | |
Associated companies | | 166,204 | | | 88,896 | |
Other | | 34,003 | | | 53,241 | |
Accrued unbilled revenues | | 183,877 | | | 199,077 | |
Total accounts receivable | | 630,538 | | | 672,910 | |
| | | | |
Deferred fuel costs | | — | | | 159,183 | |
Fuel inventory | | 46,348 | | | 41,859 | |
Materials and supplies - at average cost | | 582,975 | | | 555,860 | |
Deferred nuclear refueling outage costs | | 82,201 | | | 53,833 | |
| | | | |
| | | | |
| | | | |
Prepayments and other | | 122,373 | | | 76,646 | |
TOTAL | | 2,544,287 | | | 1,616,904 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Investment in affiliate preferred membership interests | | 4,574,605 | | | 3,163,572 | |
Decommissioning trust funds | | 1,879,612 | | | 1,779,090 | |
Storm reserve escrow account | | 296,443 | | | 293,406 | |
Non-utility property - at cost (less accumulated depreciation) | | 384,988 | | | 350,723 | |
| | | | |
Other | | 15,681 | | | 19,679 | |
TOTAL | | 7,151,329 | | | 5,606,470 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 26,752,076 | | | 27,498,136 | |
| | | | |
Natural gas | | 304,956 | | | 301,719 | |
| | | | |
Construction work in progress | | 822,944 | | | 736,969 | |
Nuclear fuel | | 240,301 | | | 212,941 | |
TOTAL UTILITY PLANT | | 28,120,277 | | | 28,749,765 | |
Less - accumulated depreciation and amortization | | 10,144,497 | | | 10,087,942 | |
UTILITY PLANT - NET | | 17,975,780 | | | 18,661,823 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets | | 1,564,124 | | | 2,056,179 | |
Deferred fuel costs | | 168,122 | | | 168,122 | |
Other | | 45,231 | | | 35,057 | |
TOTAL | | 1,777,477 | | | 2,259,358 | |
| | | | |
TOTAL ASSETS | | $29,448,873 | | | $28,144,555 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | |
| | 2022 | | 2021 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Net income | | $150,860 | | | $166,626 | |
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 213,022 | | | 198,868 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | 95,785 | | | 67,823 | |
Changes in working capital: | | | | |
Receivables | | 71,237 | | | (13,080) | |
Fuel inventory | | (46) | | | 1,194 | |
Accounts payable | | (262,042) | | | (126,070) | |
Taxes accrued | | (42,950) | | | 20,619 | |
Interest accrued | | (857) | | | (9,163) | |
Deferred fuel costs | | 498 | | | (203,815) | |
Other working capital accounts | | (24,241) | | | (25,628) | |
Changes in provisions for estimated losses | | 2,694 | | | (258) | |
Changes in other regulatory assets | | (1,336,616) | | | (70,784) | |
Changes in other regulatory liabilities | | (67,164) | | | 22,503 | |
Storm restoration costs approved for securitization recognized as regulatory asset | | 1,338,559 | | | — | |
Changes in pension and other postretirement liabilities | | (11,608) | | | (30,745) | |
Other | | 55,995 | | | (52,688) | |
Net cash flow provided by (used in) operating activities | | 183,126 | | | (54,598) | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction expenditures | | (935,692) | | | (945,831) | |
Allowance for equity funds used during construction | | 6,726 | | | 6,101 | |
| | | | |
| | | | |
Nuclear fuel purchases | | (55,913) | | | (52,435) | |
Proceeds from the sale of nuclear fuel | | 26,681 | | | — | |
| | | | |
| | | | |
| | | | |
| | | | |
Changes to securitization account | | — | | | (6,050) | |
Proceeds from nuclear decommissioning trust fund sales | | 155,269 | | | 291,275 | |
Investment in nuclear decommissioning trust funds | | (168,283) | | | (329,180) | |
Changes in money pool receivable - net | | (66,621) | | | (62,346) | |
| | | | |
Litigation proceeds from settlement agreement | | 5,695 | | | — | |
| | | | |
Other | | 17 | | | — | |
| | | | |
| | | | |
Net cash flow used in investing activities | | (1,032,121) | | | (1,098,466) | |
| | | | |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of long-term debt | | 1,506,637 | | | 1,399,245 | |
Retirement of long-term debt | | (401,411) | | | (368,707) | |
| | | | |
| | | | |
| | | | |
| | | | |
Distributions paid: | | | | |
Common equity | | (125,000) | | | — | |
| | | | |
Other | | 6,843 | | | (3,678) | |
Net cash flow provided by financing activities | | 987,069 | | | 1,026,860 | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | 138,074 | | | (126,204) | |
Cash and cash equivalents at beginning of period | | 18,573 | | | 728,020 | |
Cash and cash equivalents at end of period | | $156,647 | | | $601,816 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid during the period for: | | | | |
Interest - net of amount capitalized | | $91,441 | | | $89,432 | |
| | | | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $1,010,000 | | | $1,010,000 | |
| | | | |
Accounts payable: | | | | |
Associated companies | | 99,730 | | | 356,688 | |
Other | | 447,572 | | | 589,355 | |
Customer deposits | | 164,075 | | | 161,666 | |
Taxes accrued | | 47,631 | | | 36,004 | |
| | | | |
Interest accrued | | 88,606 | | | 101,336 | |
Deferred fuel costs | | 14,626 | | | — | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Other | | 68,663 | | | 72,525 | |
TOTAL | | 1,940,903 | | | 2,327,574 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 2,296,882 | | | 2,374,878 | |
Accumulated deferred investment tax credits | | 96,711 | | | 97,868 | |
Regulatory liability for income taxes - net | | 332,896 | | | 337,836 | |
| | | | |
Other regulatory liabilities | | 1,198,198 | | | 1,037,962 | |
Decommissioning | | 1,758,469 | | | 1,736,801 | |
Accumulated provisions | | 318,364 | | | 316,314 | |
Pension and other postretirement liabilities | | 386,209 | | | 389,631 | |
Long-term debt | | 9,680,832 | | | 9,688,922 | |
| | | | |
Other | | 391,218 | | | 343,321 | |
TOTAL | | 16,459,779 | | | 16,323,533 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
EQUITY | | | | |
| | | | |
Member's equity | | 10,947,211 | | | 9,406,343 | |
Accumulated other comprehensive income | | 54,584 | | | 55,370 | |
Noncontrolling interests | | 46,396 | | | 31,735 | |
TOTAL | | 11,048,191 | | | 9,493,448 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $29,448,873 | | | $28,144,555 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | | | |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $15,933 | | | $195 | |
Temporary cash investments | | 140,714 | | | 18,378 | |
Total cash and cash equivalents | | 156,647 | | | 18,573 | |
| | | | |
Accounts receivable: | | | | |
Customer | | 256,931 | | | 355,265 | |
Allowance for doubtful accounts | | (11,092) | | | (29,231) | |
Associated companies | | 159,787 | | | 96,539 | |
Other | | 49,735 | | | 36,674 | |
Accrued unbilled revenues | | 174,038 | | | 174,768 | |
Total accounts receivable | | 629,399 | | | 634,015 | |
| | | | |
Deferred fuel costs | | 44,876 | | | 45,374 | |
Fuel inventory | | 43,004 | | | 42,958 | |
Materials and supplies - at average cost | | 490,752 | | | 485,325 | |
Deferred nuclear refueling outage costs | | 33,947 | | | 39,582 | |
| | | | |
| | | | |
| | | | |
Prepayments and other | | 58,384 | | | 44,187 | |
TOTAL | | 1,457,009 | | | 1,310,014 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Investment in affiliate preferred membership interests | | 1,390,587 | | | 1,390,587 | |
Decommissioning trust funds | | 2,005,369 | | | 2,114,523 | |
| | | | |
Non-utility property - at cost (less accumulated depreciation) | | 338,365 | | | 337,247 | |
| | | | |
Other | | 13,812 | | | 13,744 | |
TOTAL | | 3,748,133 | | | 3,856,101 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 27,252,039 | | | 28,055,038 | |
| | | | |
Natural gas | | 288,820 | | | 285,006 | |
| | | | |
Construction work in progress | | 721,536 | | | 847,924 | |
Nuclear fuel | | 200,163 | | | 209,418 | |
TOTAL UTILITY PLANT | | 28,462,558 | | | 29,397,386 | |
Less - accumulated depreciation and amortization | | 9,940,422 | | | 9,860,252 | |
UTILITY PLANT - NET | | 18,522,136 | | | 19,537,134 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets | | 4,113,282 | | | 2,776,666 | |
Deferred fuel costs | | 168,122 | | | 168,122 | |
Other | | 39,358 | | | 27,801 | |
TOTAL | | 4,320,762 | | | 2,972,589 | |
| | | | |
TOTAL ASSETS | | $28,048,040 | | | $27,675,838 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | | | | |
| | | Noncontrolling Interests | | Member’s Equity | | Accumulated Other Comprehensive Income | | Total |
| | | (In Thousands) |
| | | | | | | | | |
Balance at December 31, 2021 | | | $— | | | $8,172,294 | | | $8,278 | | | $8,180,572 | |
| | | | | | | | | |
Net income | | | — | | | 150,860 | | | — | | | 150,860 | |
Other comprehensive loss | | | — | | | — | | | (613) | | | (613) | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Distributions declared on common equity | | | — | | | (125,000) | | | — | | | (125,000) | |
| | | | | | | | | |
| | | | | | | | | |
Other | | | — | | | (13) | | | — | | | (13) | |
Balance at March 31, 2022 | | | — | | | 8,198,141 | | | 7,665 | | | 8,205,806 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2022 | | | $31,735 | | | $9,406,343 | | | $55,370 | | | $9,493,448 | |
| | | | | | | | | |
Net income | | | 554 | | | 243,470 | | | — | | | 244,024 | |
Other comprehensive loss | | | — | | | — | | | (786) | | | (786) | |
| | | | | | | | | |
Contributions from parent | | | — | | | 1,457,676 | | | — | | | 1,457,676 | |
Common equity distributions | | | — | | | (160,250) | | | — | | | (160,250) | |
| | | | | | | | | |
Beneficial interest in storm trust | | | 14,577 | | | — | | | — | | | 14,577 | |
Distribution to LURC | | | (470) | | | — | | | — | | | (470) | |
Other | | | — | | | (28) | | | — | | | (28) | |
Balance at March 31, 2023 | | | $46,396 | | | $10,947,211 | | | $54,584 | | | $11,048,191 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | | | |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $200,000 | | | $200,000 | |
| | | | |
Accounts payable: | | | | |
Associated companies | | 81,781 | | | 183,172 | |
Other | | 872,120 | | | 1,481,902 | |
Customer deposits | | 153,109 | | | 150,697 | |
Taxes accrued | | 21,298 | | | 64,248 | |
| | | | |
Interest accrued | | 92,195 | | | 93,052 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Current portion of unprotected excess accumulated deferred income taxes | | 15,182 | | | 24,291 | |
Other | | 56,709 | | | 68,995 | |
TOTAL | | 1,492,394 | | | 2,266,357 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 2,523,361 | | | 2,433,854 | |
Accumulated deferred investment tax credits | | 101,408 | | | 102,588 | |
Regulatory liability for income taxes - net | | 307,779 | | | 313,693 | |
| | | | |
Other regulatory liabilities | | 990,456 | | | 1,042,597 | |
Decommissioning | | 1,673,809 | | | 1,653,198 | |
Accumulated provisions | | 27,185 | | | 24,490 | |
Pension and other postretirement liabilities | | 516,628 | | | 528,213 | |
Long-term debt | | 11,822,131 | | | 10,714,346 | |
| | | | |
Other | | 387,083 | | | 415,930 | |
TOTAL | | 18,349,840 | | | 17,228,909 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
EQUITY | | | | |
| | | | |
Member's equity | | 8,198,141 | | | 8,172,294 | |
Accumulated other comprehensive income | | 7,665 | | | 8,278 | |
TOTAL | | 8,205,806 | | | 8,180,572 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $28,048,040 | | | $27,675,838 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | |
ENTERGY LOUISIANA, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | |
| Common Equity | | |
| Member’s Equity | | Accumulated Other Comprehensive Income | | Total |
| (In Thousands) |
| | | | | |
Balance at December 31, 2020 | $7,453,361 | | | $4,327 | | | $7,457,688 | |
| | | | | |
Net income | 166,626 | | | — | | | 166,626 | |
Other comprehensive loss | — | | | (407) | | | (407) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other | (16) | | | — | | | (16) | |
Balance at March 31, 2021 | $7,619,971 | | | $3,920 | | | $7,623,891 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Balance at December 31, 2021 | $8,172,294 | | | $8,278 | | | $8,180,572 | |
| | | | | |
Net income | 150,860 | | | — | | | 150,860 | |
Other comprehensive loss | — | | | (613) | | | (613) | |
| | | | | |
| | | | | |
Distributions declared on common equity | (125,000) | | | — | | | (125,000) | |
| | | | | |
| | | | | |
Other | (13) | | | — | | | (13) | |
Balance at March 31, 2022 | $8,198,141 | | | $7,665 | | | $8,205,806 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Financial Statements. | | | | | |
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income increased $4.4decreased $9.4 million primarily due to lower volume/weather, higher retail electric price, partially offset byother operation and maintenance expenses, higher depreciation and amortization expenses, and higher interest expenses.expense, partially offset by higher retail electric price.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20222023 to the first quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $336.6349.0 | |
Fuel, rider, and other revenues that do not significantly affect net income | (2.2)65.5 | |
Retail electric price | 16.412.1 | |
Volume/weather | (1.8)(14.2) | |
| |
20222023 operating revenues | $349.0412.4 | |
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 retail electric price variance is primarily due to increases in formula rate plan rates effective April 20212022 and July 2021.August 2022. See Note 2 to the financial statements in the Form 10-K for further discussion of the formula rate plan filings.
The volume/weather variance is primarily due to a decrease in weather-adjusted residential usage, including the effect of the COVID-19 pandemic on first quarter 2021, partially offset by the effect of moreless favorable weather on residential and commercial sales.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Total electric energy sales for Entergy Mississippi for the three months ended March 31, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 1,295 | | | 1,349 | | | (4) | | Residential | 1,089 | | | 1,295 | | | (16) | |
Commercial | Commercial | 1,021 | | | 1,004 | | | 2 | | Commercial | 1,015 | | | 1,021 | | | (1) | |
Industrial | Industrial | 561 | | | 527 | | | 6 | | Industrial | 567 | | | 561 | | | 1 | |
Governmental | Governmental | 96 | | | 95 | | | 1 | | Governmental | 92 | | | 96 | | | (4) | |
Total retail | Total retail | 2,973 | | | 2,975 | | | — | | Total retail | 2,763 | | | 2,973 | | | (7) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Non-associated companies | Non-associated companies | 535 | | | 1,452 | | | (63) | | Non-associated companies | 1,564 | | | 535 | | | 192 | |
Total | Total | 3,508 | | | 4,427 | | | (21) | | Total | 4,327 | | | 3,508 | | | 23 | |
See Note 13 to the financial statements herein for additional discussion of Entergy Mississippi’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increased primarily due to:
•an increase of $3.3 million in non-nuclear generation expenses primarily due to a higher scope of work performed during plant outages in 2023 as compared to prior year;
•an increase of $1.6 million in power delivery expenses primarily due to higher reliability costs; and
•several individually insignificant items.
The increase was partially offset by:
•a decrease of $2 million in compensation and benefits costs primarily due to a revision to estimated incentive compensation expense in the first quarter 2023, lower healthcare claims activity in 2023, and a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rates used to value the benefit liabilities. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K, Note 6 to the financial statements herein, and Note 11 to the financial statements in the Form 10-K for further discussion of pension and other postretirement benefits costs; and
•a decrease of $1.7 million in transmission expenses primarily due to a decrease in the amount of transmission costs allocated by MISO. See Note 2 to the financial statements in the Form 10-K for further information on the recovery of these costs.
Taxes other than income taxes increased primarily due to increases in ad valorem taxes resulting from higher assessments and millage rate increases.assessments.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Interest expense increased primarily due to borrowings of $100 million in 2023 on Entergy Mississippi’s credit facility.
Net loss attributable to noncontrolling interest reflects the issuanceearnings or losses attributable to the noncontrolling interest partner of $200the tax equity partnership for the Sunflower Solar facility under HLBV accounting. Entergy Mississippi recorded a regulatory charge of $1.5 million in first quarter 2023 to defer the difference between the losses allocated to the tax equity partner under the HLBV method of 3.50% Series mortgage bonds in March 2021accounting and the issuance
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
earnings/loss that would have been allocated to the tax equity partner under its respective ownership percentage in the partnership. See Note 1 to the financial statements in the Form 10-K for discussion of 2.55% Series mortgage bonds in November 2021.the HLBV method of accounting.
Income Taxes
The effective income tax rates were 24.4% for the first quarter 2023 and 20.2% for the first quarter 2022 and 22.2% for the first quarter 2021. of 2022. The differences in the effective income tax rates for the first quarter 20222023 and the first quarter 20212022 versus the federal statutory rate of 21% were primarilyprimarily due to the accrual for state income taxes, partially offset by certain book and tax differences related to utility plant items, partially offset by state income taxes.items.
Entergy Mississippi, LLCSee “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the Inflation Reduction Act of 2022.
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | $47,627 | | | $18 | | Cash and cash equivalents at beginning of period | $16,979 | | | $47,627 | |
| Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
Operating activities | Operating activities | (4,340) | | | 54,311 | | Operating activities | 36,861 | | | (4,340) | |
Investing activities | Investing activities | (61,154) | | | (162,802) | | Investing activities | (111,842) | | | (61,154) | |
Financing activities | Financing activities | 17,895 | | | 185,189 | | Financing activities | 94,154 | | | 17,895 | |
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | (47,599) | | | 76,698 | | Net increase (decrease) in cash and cash equivalents | 19,173 | | | (47,599) | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $28 | | | $76,716 | | Cash and cash equivalents at end of period | $36,152 | | | $28 | |
Operating Activities
Entergy Mississippi’s operating activities usedprovided $36.9 million of cash for the three months ended March 31, 2023 compared to using $4.3 million of cash for the three months ended March 31, 2022 compared to providing $54.3 million of cash for the three months ended March 31, 20212022. The increase was primarily due to the following activity:
•higher collections from customers, partially offset by higher fuel costs in 2023 and timing of payments to vendors;
•income tax refunds of $8 million received in 2021 in accordance with an intercompany income tax allocation agreement;
•higher collections from customers; and
•a decrease of $7.2 million in storm spending in 2022 primarily due to spending on Winter Storm Uri restoration efforts in 2021.vendors.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Investing Activities
Net cash flow used in investing activities decreased $101.6increased $50.7 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to:
•a decreasean increase of $51.3$19.3 million in distribution construction expenditures primarily due to higher capital expenditures for storm restoration in 2023 and a higher scope of work performed in 2023 as compared to 2022;
•an increase of $16.6 million in transmission construction expenditures primarily due to a higher scope of work performed in 20212023 as compared to 2022; and
•money pool activity.
Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased $25.4 million for the three months ended March 31, 2023 compared to decreasing by $40.5 million for the three months ended March 31, 2022 compared to increasing $9.7 million for the three months ended March 31, 2021.2022. The money pool is an inter-companyintercompany borrowing arrangement designed to reduce the Utility’s subsidiaries’ need for external short-term borrowings.
Financing Activities
Net cash flow provided by financing activities decreased $167.3increased $76.3 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 20212022 primarily due to the issuanceborrowings of $200$100 million of 3.50% Series mortgage bonds in March 2021,2023 on Entergy Mississippi’s credit facility, partially offset by money pool activity.
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
Increases in Entergy Mississippi’s payable to the money pool are a source of cash flow and Entergy Mississippi’s payable to the money pool increased by $22.4 million for the three months ended March 31, 2022 compared to decreasing by $16.5 million for the three months ended March 31, 2021.2022.
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.
Capital Structure
Entergy Mississippi’s debt to capital ratio is shown in the following table.
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 53.9 | % | | 54.3 | % | Debt to capital | 54.4 | % | | 53.4 | % |
Effect of subtracting cash | Effect of subtracting cash | — | % | | (0.5 | %) | Effect of subtracting cash | (0.4 | %) | | (0.2 | %) |
Net debt to net capital | 53.9 | % | | 53.8 | % | |
Net debt to net capital (non-GAAP) | | Net debt to net capital (non-GAAP) | 54.0 | % | | 53.2 | % |
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance 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 its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition. The net debt to net capital ratio is a non-GAAP measure. Entergy Mississippi also uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Mississippi’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
Entergy Mississippi’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31, 2022 | | December 31, 2021 | | March 31, 2021 | | December 31, 2020 |
(In Thousands) |
($22,386) | | $40,456 | | $9,683 | | ($16,516) |
| | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
(In Thousands) |
$1,498 | | $26,879 | | ($22,386) | | $40,456 |
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
As of March 31, 2022, Entergy Mississippi hadhas three separate credit facilities in the aggregate amount of $82.5$95 million scheduled to expire in April 2022. No borrowings were outstanding under the credit facilities asJuly 2023. As of March 31, 2022. In April 2022,2023, there were no cash borrowings outstanding under these credit facilities. Also, Entergy Mississippi renewed the three separate existing credit facilities and increased the aggregate amount available under the facilities to $95 million, and extended the expiration date of each credit facility to April 2023. Also in April 2022, Entergy Mississippi entered intohas a credit facility in the amount of $150 million with an expiration datescheduled to expire in July 2024. As of July 2024.March 31, 2023, there was $100 million in cash borrowings outstanding under the credit facility. In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility primarily as a means to post collateral to support its obligations to MISO. As of March 31, 2022, $2.32023, $6.7 million in MISO letters of credit and $1$9.2 million in non-MISO letters of credit were outstanding under this facility. See Note 4 to the financial statements herein for additional discussion of the credit facilities.
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
Entergy Mississippi had $33.2 million in its storm reserve escrow account at March 31, 2022.
Sunflower Solar Facility
As discussed in the Form 10-K, in November 2018, Entergy Mississippi announced that it signed an agreement for the purchase of an approximately 100 MW solar photovoltaic facility that will be sited on approximately 1,000 acres in Sunflower County, Mississippi. 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. Entergy Mississippi will purchase the facility upon mechanical completion and after the other purchase contingencies have been met. In April 2020 the MPSC issued an order approving certification of the Sunflower Solar Facilityfacility and its recovery through Entergy Mississippi’sthe interim capacity rate adjustment mechanism, subject to certain conditions including: (i) thatconditions. In May 2022 both Entergy Mississippi pursue aand the tax equity investor made capital contributions to the tax equity partnership structure through which the partnership would acquire and own the facility under the build-own-transfer agreement, and (ii) that if Entergy Mississippi does not consummate the partnership structure under the termswere then used to make an initial payment of $105 million for acquisition of the order, there will be a cap of $136 million on the level of recoverable costs. In April 2022, Entergy Mississippi confirmed mechanical completion offacility. Commercial operation at the Sunflower Solar Facility. The initial closing is targeted to occurfacility commenced in MaySeptember 2022. In conjunction with closing,April 2023 the final payment of $30.4 million for acquisition of the facility was made. See Note 14 to the financial statements in the Form 10-K for a discussion of Entergy Mississippi is executing a partnership structure through which the partnership will acquire and ownMississippi’s investment in the Sunflower Solar Facility. Final payment of the purchase price will be made upon substantial completion of the facility, which is currently expected in third quarter 2022.facility.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of the formulastate and local rate planregulation and fuel and purchased power costfuel-cost recovery. The following are updatesis an update to that discussion.
2022Retail Rates
2023 Formula Rate Plan Filing
In March 2022,2023, Entergy Mississippi submitted its formula rate plan 20222023 test year filing and 20212022 look-back filing showing Entergy Mississippi’s earned return on rate base for the historical 20212022 calendar year to be below the formula rate plan bandwidth and projected earned return for the 20222023 calendar year to be below the formula rate plan bandwidth. The 20222023 test year filing shows a $69$39.8 million rate increase is necessary to reset Entergy Mississippi’s earned return on common equityrate base to the specified point of adjustment of 6.70% return on rate base,6.67%, within the formula rate plan bandwidth.The change in formula rate plan revenues, however, is capped at 4% of retail revenues, which equates to a revenue change of $48.6 million. The 20212022 look-back filing compares actual 20212022 results to the approved benchmark return on rate base and reflects the need for a $34.5$19.8 million interimtemporary increase in formula rate plan revenues. revenues, including the refund of a $1.3 million over-recovery resulting from the demand-side management costs true-up in 2022.In fourth
Entergy Mississippi, LLC and Subsidiaries
Management's Financial Discussion and Analysis
quarter 2021,2022, Entergy Mississippi recorded a regulatory asset of $19$18.2 million to reflect the then-current estimate in connection with the look-back feature of the formula rate plan. plan to reflect that the 2022 estimated earned return was below the formula rate plan bandwidth.In accordance with the provisions of the formula rate plan, Entergy Mississippi implemented a $24.3$27.9 million interim rate increase, reflecting a cap equal to 2% of 20212022 retail revenues, effective in April 2022, subject to refund, pending a final MPSC order. A final order is expected in the second quarter 2022, with the resulting final rates, including amounts above the 2% cap of 2021 retail revenues, effective July 2022.2023.
COVID-19 Orders
As discussed in the Form 10-K, in April 2020 the MPSC issued an order authorizing utilities to defer incremental costs and expenses associated with COVID-19 compliance and to seek future recovery through rates of the prudently incurred incremental costs and expenses.As of March 31, 2022, Entergy Mississippi had a regulatory asset of $14.1 million for costs associated with the COVID-19 pandemic.
Entergy Mississippi, LLC
Management's Financial Discussion and Analysis
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for a discussion of nuclear matters.
Environmental Risks
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Environmental Risks” in the Form 10-K for a discussion of environmental risks.
Critical Accounting Estimates
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates” in the Form 10-K for a discussion of the estimates and judgments necessary in Entergy Mississippi’s accounting for utility regulatory accounting, impairment of long-lived assets, 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, LLC |
INCOME STATEMENTS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | |
| | | | |
| | | | | | 2022 | | 2021 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $349,029 | | | $336,619 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 67,277 | | | 60,197 | |
Purchased power | | | | | | 61,212 | | | 68,591 | |
Other operation and maintenance | | | | | | 65,811 | | | 67,831 | |
| | | | | | | | |
Taxes other than income taxes | | | | | | 32,730 | | | 25,899 | |
Depreciation and amortization | | | | | | 60,084 | | | 55,036 | |
Other regulatory charges (credits) - net | | | | | | 3,907 | | | 8,129 | |
TOTAL | | | | | | 291,021 | | | 285,683 | |
| | | | | | | | |
OPERATING INCOME | | | | | | 58,008 | | | 50,936 | |
| | | | | | | | |
OTHER DEDUCTIONS | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 1,078 | | | 1,668 | |
Interest and investment income | | | | | | 64 | | | 42 | |
Miscellaneous - net | | | | | | (1,153) | | | (2,313) | |
TOTAL | | | | | | (11) | | | (603) | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 20,434 | | | 17,613 | |
Allowance for borrowed funds used during construction | | | | | | (465) | | | (677) | |
TOTAL | | | | | | 19,969 | | | 16,936 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 38,028 | | | 33,397 | |
| | | | | | | | |
Income taxes | | | | | | 7,673 | | | 7,425 | |
| | | | | | | | |
NET INCOME | | | | | | $30,355 | | | $25,972 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | |
| | | | |
| | 2023 | | 2022 | | | | |
| | (In Thousands) | | |
OPERATING REVENUES | | | | | | | | |
Electric | | $412,428 | | | $349,029 | | | | | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | 161,285 | | | 67,277 | | | | | |
Purchased power | | 63,814 | | | 61,212 | | | | | |
Other operation and maintenance | | 69,818 | | | 65,811 | | | | | |
| | | | | | | | |
Taxes other than income taxes | | 35,734 | | | 32,730 | | | | | |
Depreciation and amortization | | 64,029 | | | 60,084 | | | | | |
Other regulatory charges (credits) - net | | (32,843) | | | 3,907 | | | | | |
TOTAL | | 361,837 | | | 291,021 | | | | | |
| | | | | | | | |
OPERATING INCOME | | 50,591 | | | 58,008 | | | | | |
| | | | | | | | |
OTHER INCOME (DEDUCTIONS) | | | | | | | | |
Allowance for equity funds used during construction | | 1,884 | | | 1,078 | | | | | |
Interest and investment income | | 464 | | | 64 | | | | | |
Miscellaneous - net | | (2,083) | | | (1,153) | | | | | |
TOTAL | | 265 | | | (11) | | | | | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | 23,944 | | | 20,434 | | | | | |
Allowance for borrowed funds used during construction | | (783) | | | (465) | | | | | |
TOTAL | | 23,161 | | | 19,969 | | | | | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | 27,695 | | | 38,028 | | | | | |
| | | | | | | | |
Income taxes | | 6,755 | | | 7,673 | | | | | |
| | | | | | | | |
NET INCOME | | 20,940 | | | 30,355 | | | | | |
| | | | | | | | |
Net loss attributable to noncontrolling interest | | (2,141) | | | — | | | | | |
| | | | | | | | |
EARNINGS APPLICABLE TO MEMBER'S EQUITY | | $23,081 | | | $30,355 | | | | | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
(Page left blank intentionally)
| ENTERGY MISSISSIPPI, LLC | |
STATEMENTS OF CASH FLOWS | |
For the Three Months Ended March 31, 2022 and 2021 | |
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES | | ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $30,355 | | | $25,972 | | Net income | | $20,940 | | | $30,355 | |
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 (used in) operating activities: | | Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | |
Depreciation and amortization | Depreciation and amortization | | 60,084 | | | 55,036 | | Depreciation and amortization | | 64,029 | | | 60,084 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 3,979 | | | 22,593 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 8,142 | | | 3,979 | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | (6,379) | | | 4,557 | | Receivables | | 36,802 | | | (6,379) | |
Fuel inventory | Fuel inventory | | 23 | | | 1,736 | | Fuel inventory | | (3,014) | | | 23 | |
Accounts payable | Accounts payable | | 989 | | | 26,391 | | Accounts payable | | (33,508) | | | 989 | |
Taxes accrued | Taxes accrued | | (63,785) | | | (75,886) | | Taxes accrued | | (80,166) | | | (63,785) | |
Interest accrued | Interest accrued | | 10,613 | | | 4,238 | | Interest accrued | | 11,078 | | | 10,613 | |
Deferred fuel costs | Deferred fuel costs | | (24,076) | | | (25,722) | | Deferred fuel costs | | 67,005 | | | (24,076) | |
Other working capital accounts | Other working capital accounts | | (46,494) | | | (3,425) | | Other working capital accounts | | (9,515) | | | (46,494) | |
Provisions for estimated losses | Provisions for estimated losses | | (179) | | | (7,689) | | Provisions for estimated losses | | 1,900 | | | (179) | |
Other regulatory assets | Other regulatory assets | | 16,301 | | | 11,015 | | Other regulatory assets | | 1,020 | | | 16,301 | |
Other regulatory liabilities | Other regulatory liabilities | | 21,689 | | | 19,147 | | Other regulatory liabilities | | (44,487) | | | 21,689 | |
Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (3,906) | | | (5,668) | | Pension and other postretirement liabilities | | (4,062) | | | (3,906) | |
Other assets and liabilities | Other assets and liabilities | | (3,554) | | | 2,016 | | Other assets and liabilities | | 697 | | | (3,554) | |
Net cash flow provided by (used in) operating activities | Net cash flow provided by (used in) operating activities | | (4,340) | | | 54,311 | | Net cash flow provided by (used in) operating activities | | 36,861 | | | (4,340) | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (102,686) | | | (154,788) | | Construction expenditures | | (138,760) | | | (102,686) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 1,078 | | | 1,668 | | Allowance for equity funds used during construction | | 1,884 | | | 1,078 | |
| Changes in money pool receivable - net | Changes in money pool receivable - net | | 40,456 | | | (9,683) | | Changes in money pool receivable - net | | 25,381 | | | 40,456 | |
| Other | Other | | (2) | | | 1 | | Other | | (347) | | | (2) | |
Net cash flow used in investing activities | Net cash flow used in investing activities | | (61,154) | | | (162,802) | | Net cash flow used in investing activities | | (111,842) | | | (61,154) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | Proceeds from the issuance of long-term debt | | — | | | 200,573 | | Proceeds from the issuance of long-term debt | | 99,916 | | | — | |
| | Changes in money pool payable - net | Changes in money pool payable - net | | 22,386 | | | (16,516) | | Changes in money pool payable - net | | — | | | 22,386 | |
| Common equity distributions paid | | Common equity distributions paid | | (12,500) | | | — | |
| Other | Other | | (4,491) | | | 1,132 | | Other | | 6,738 | | | (4,491) | |
Net cash flow provided by financing activities | Net cash flow provided by financing activities | | 17,895 | | | 185,189 | | Net cash flow provided by financing activities | | 94,154 | | | 17,895 | |
| Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | | (47,599) | | | 76,698 | | Net increase (decrease) in cash and cash equivalents | | 19,173 | | | (47,599) | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | 47,627 | | | 18 | | Cash and cash equivalents at beginning of period | | 16,979 | | | 47,627 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $28 | | | $76,716 | | Cash and cash equivalents at end of period | | $36,152 | | | $28 | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
Cash paid (received) during the period for: | | |
Cash paid during the period for: | | Cash paid during the period for: | |
Interest - net of amount capitalized | Interest - net of amount capitalized | | $9,160 | | | $12,757 | | Interest - net of amount capitalized | | $12,211 | | | $9,160 | |
Income taxes | | $— | | | ($8,045) | | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $888 | | | $26 | |
Temporary cash investments | | 35,264 | | | 16,953 | |
Total cash and cash equivalents | | 36,152 | | | 16,979 | |
Accounts receivable: | | | | |
Customer | | 100,813 | | | 99,504 | |
Allowance for doubtful accounts | | (2,235) | | | (2,472) | |
Associated companies | | 4,226 | | | 37,673 | |
Other | | 17,245 | | | 34,564 | |
Accrued unbilled revenues | | 60,510 | | | 73,473 | |
Total accounts receivable | | 180,559 | | | 242,742 | |
Deferred fuel costs | | 76,206 | | | 143,211 | |
| | | | |
Fuel inventory - at average cost | | 18,562 | | | 15,548 | |
Materials and supplies - at average cost | | 91,576 | | | 84,346 | |
| | | | |
Prepayments and other | | 10,409 | | | 9,603 | |
TOTAL | | 413,464 | | | 512,429 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Non-utility property - at cost (less accumulated depreciation) | | 4,508 | | | 4,512 | |
Storm reserve escrow account | | 33,896 | | | 33,549 | |
Other | | 911 | | | 910 | |
TOTAL | | 39,315 | | | 38,971 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 7,143,328 | | | 7,079,849 | |
| | | | |
| | | | |
Construction work in progress | | 218,611 | | | 170,191 | |
TOTAL UTILITY PLANT | | 7,361,939 | | | 7,250,040 | |
Less - accumulated depreciation and amortization | | 2,309,803 | | | 2,264,786 | |
UTILITY PLANT - NET | | 5,052,136 | | | 4,985,254 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets | | 518,440 | | | 519,460 | |
Other | | 26,109 | | | 22,650 | |
TOTAL | | 544,549 | | | 542,110 | |
| | | | |
TOTAL ASSETS | | $6,049,464 | | | $6,078,764 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $400,000 | | | $400,000 | |
| | | | |
Accounts payable: | | | | |
Associated companies | | 61,557 | | | 60,532 | |
Other | | 139,804 | | | 176,162 | |
Customer deposits | | 90,130 | | | 89,668 | |
Taxes accrued | | 44,739 | | | 124,905 | |
| | | | |
Interest accrued | | 29,287 | | | 18,208 | |
| | | | |
| | | | |
| | | | |
| | | | |
Other | | 36,741 | | | 38,908 | |
TOTAL | | 802,258 | | | 908,383 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 788,820 | | | 780,030 | |
Accumulated deferred investment tax credits | | 14,492 | | | 14,591 | |
| | | | |
Regulatory liability for income taxes - net | | 199,383 | | | 202,058 | |
| | | | |
Other regulatory liabilities | | 38,052 | | | 79,865 | |
Asset retirement cost liabilities | | 7,903 | | | 7,797 | |
Accumulated provisions | | 39,409 | | | 37,509 | |
Pension and other postretirement liabilities | | 19,573 | | | 23,742 | |
Long-term debt | | 2,031,365 | | | 1,931,096 | |
Other | | 59,232 | | | 53,156 | |
TOTAL | | 3,198,229 | | | 3,129,844 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
| | | | |
| | | | |
EQUITY | | | | |
Member's equity | | 2,047,771 | | | 2,037,190 | |
Noncontrolling interest | | 1,206 | | | 3,347 | |
TOTAL | | 2,048,977 | | | 2,040,537 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $6,049,464 | | | $6,078,764 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, LLC |
BALANCE SHEETS |
ASSETS |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $26 | | | $29 | |
Temporary cash investments | | 2 | | | 47,598 | |
Total cash and cash equivalents | | 28 | | | 47,627 | |
Accounts receivable: | | | | |
Customer | | 86,389 | | | 84,048 | |
Allowance for doubtful accounts | | (3,396) | | | (7,209) | |
Associated companies | | 5,008 | | | 42,994 | |
Other | | 17,994 | | | 14,609 | |
Accrued unbilled revenues | | 50,404 | | | 56,034 | |
Total accounts receivable | | 156,399 | | | 190,476 | |
Deferred fuel costs | | 145,954 | | | 121,878 | |
| | | | |
Fuel inventory - at average cost | | 10,288 | | | 10,311 | |
Materials and supplies - at average cost | | 75,509 | | | 69,639 | |
| | | | |
Prepayments and other | | 40,847 | | | 6,394 | |
TOTAL | | 429,025 | | | 446,325 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Non-utility property - at cost (less accumulated depreciation) | | 4,523 | | | 4,527 | |
Escrow accounts | | 48,888 | | | 48,886 | |
TOTAL | | 53,411 | | | 53,413 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 6,650,580 | | | 6,613,109 | |
| | | | |
| | | | |
Construction work in progress | | 120,538 | | | 95,452 | |
TOTAL UTILITY PLANT | | 6,771,118 | | | 6,708,561 | |
Less - accumulated depreciation and amortization | | 2,159,949 | | | 2,127,590 | |
UTILITY PLANT - NET | | 4,611,169 | | | 4,580,971 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets | | 446,131 | | | 462,432 | |
Other | | 18,880 | | | 14,248 | |
TOTAL | | 465,011 | | | 476,680 | |
| | | | |
TOTAL ASSETS | | $5,558,616 | | | $5,557,389 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | | |
| | | | | |
| Noncontrolling Interest | | Member's Equity | | Total |
| | | (In Thousands) | | |
| | | | | |
Balance at December 31, 2021 | $— | | | $1,839,568 | | | $1,839,568 | |
| | | | | |
Net income | — | | | 30,355 | | | 30,355 | |
| | | | | |
Balance at March 31, 2022 | $— | | | $1,869,923 | | | $1,869,923 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Balance at December 31, 2022 | $3,347 | | | $2,037,190 | | | $2,040,537 | |
| | | | | |
Net income (loss) | (2,141) | | | 23,081 | | | 20,940 | |
Common equity distributions | — | | | (12,500) | | | (12,500) | |
Balance at March 31, 2023 | $1,206 | | | $2,047,771 | | | $2,048,977 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Financial Statements. | | | | | |
| | | | | | | | | | | | | | |
ENTERGY MISSISSIPPI, LLC |
BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
| | | | |
| | | | |
Accounts payable: | | | | |
Associated companies | | $62,229 | | | $42,929 | |
Other | | 104,367 | | | 113,000 | |
Customer deposits | | 87,307 | | | 86,167 | |
Taxes accrued | | 42,488 | | | 106,273 | |
| | | | |
Interest accrued | | 27,896 | | | 17,283 | |
| | | | |
| | | | |
| | | | |
| | | | |
Other | | 29,735 | | | 36,731 | |
TOTAL | | 354,022 | | | 402,383 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 724,154 | | | 720,097 | |
Accumulated deferred investment tax credits | | 10,857 | | | 10,913 | |
| | | | |
Regulatory liability for income taxes - net | | 209,758 | | | 212,445 | |
| | | | |
Other regulatory liabilities | | 73,689 | | | 49,313 | |
Asset retirement cost liabilities | | 10,458 | | | 10,315 | |
Accumulated provisions | | 37,849 | | | 38,028 | |
Pension and other postretirement liabilities | | 55,101 | | | 59,065 | |
Long-term debt | | 2,180,197 | | | 2,179,989 | |
Other | | 32,608 | | | 35,273 | |
TOTAL | | 3,334,671 | | | 3,315,438 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
| | | | |
| | | | |
EQUITY | | | | |
Member's equity | | 1,869,923 | | | 1,839,568 | |
TOTAL | | 1,869,923 | | | 1,839,568 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $5,558,616 | | | $5,557,389 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | |
ENTERGY MISSISSIPPI, LLC |
STATEMENTS OF CHANGES IN MEMBER'S EQUITY |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | |
| | |
| | Member's Equity |
| | (In Thousands) |
| | |
Balance at December 31, 2020 | | $1,672,734 | |
| | |
Net income | | 25,972 | |
| | |
Balance at March 31, 2021 | | $1,698,706 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Balance at December 31, 2021 | | $1,839,568 | |
| | |
Net income | | 30,355 | |
| | |
Balance at March 31, 2022 | | $1,869,923 | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
See Notes to Financial Statements. | | |
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income increased $13.4decreased $5 million primarily due to lower volume/weather, higher taxes other than income taxes, and a higher effective income tax rate, partially offset by higher retail electric price and lowerhigher other operation and maintenance expenses.income.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20222023 to first quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $169.3198.3 | |
Fuel, rider, and other revenues that do not significantly affect net income | 15.911.3 | |
Retail electric price | 10.34.0 | |
Volume/weather | 2.8 (4.8) | |
20222023 operating revenues | $198.3208.8 | |
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 retail electric price variance is primarily due to a rate increase effective November 2021September 2022 in accordance with the terms of the 20212022 formula rate plan filing. 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 commercial usage. The increase in commercial usage was primarily due to the effect of the COVID-19 pandemicless favorable weather on businesses in first quarter 2021.residential sales, partially offset by increased commercial usage.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Total electric energy sales for Entergy New Orleans for the three months ended March 31, 20222023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | (GWh) | |
Residential | Residential | 538 | | | 538 | | | — | | Residential | 453 | | | 538 | | | (16) | |
Commercial | Commercial | 465 | | | 446 | | | 4 | | Commercial | 487 | | | 465 | | | 5 | |
Industrial | Industrial | 94 | | | 94 | | | — | | Industrial | 99 | | | 94 | | | 5 | |
Governmental | Governmental | 178 | | | 172 | | | 3 | | Governmental | 182 | | | 178 | | | 2 | |
Total retail | Total retail | 1,275 | | | 1,250 | | | 2 | | Total retail | 1,221 | | | 1,275 | | | (4) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Non-associated companies | Non-associated companies | 716 | | | 89 | | | 704 | | Non-associated companies | 1,043 | | | 716 | | | 46 | |
Total | Total | 1,991 | | | 1,339 | | | 49 | | Total | 2,264 | | | 1,991 | | | 14 | |
See Note 13 to the financial statements herein for additional discussion of Entergy New Orleans’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses decreased primarily due to a decrease of $2.4 million in non-nuclear generation expenses primarily due to the timing of the scope of work performed during plant outages in 2022 as compared to the same period in 2021 and a decrease of $2 million in energy efficiency expenses due to the timing of recovery from customers.
Depreciation and amortization expensesTaxes other than income taxes increased primarily due to additions to plantincreases in service.local franchise taxes.
Interest expenseOther income increased primarily due to the issuance of $90 million of 4.19% Series mortgage bonds and the issuance of $70 million of 4.51% Series mortgage bonds, each in November 2021.higher interest earned on money pool investments.
Income Taxes
The effective income tax rate was 32% for first quarter 2023. The difference in the effective income tax rate for first quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes and the amortization of state accumulated deferred income taxes as a result of tax rate changes, partially offset by certain book and tax differences related to utility plant items.
The effective income tax rate was 17.8% for first quarter 2022. The difference in the effective income tax rate for first quarter 2022 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 Notes 2 and 3 to the financial statements in the Form 10-K for a discussion of the effects of and regulatory activity regarding the Tax Cuts and Jobs Act.
The effective income tax rate was 33.9% for first quarter 2021. The differenceIncome Tax Legislation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the effective income tax rateForm 10-K for first quarter 2021 versusa discussion of the federal statutory rateInflation Reduction Act of 21% was primarily due to the provision for uncertain tax positions and state income taxes, partially offset by certain book and tax differences related to utility plant items.2022.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | $42,862 | | | $26 | | Cash and cash equivalents at beginning of period | $4,464 | | | $42,862 | |
| Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
Operating activities | Operating activities | 41,811 | | | (14,114) | | Operating activities | 71,578 | | | 41,811 | |
Investing activities | Investing activities | (53,401) | | | 14,875 | | Investing activities | 85,156 | | | (53,401) | |
Financing activities | Financing activities | (107) | | | 14,825 | | Financing activities | 14,688 | | | (107) | |
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | (11,697) | | | 15,586 | | Net increase (decrease) in cash and cash equivalents | 171,422 | | | (11,697) | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $31,165 | | | $15,612 | | Cash and cash equivalents at end of period | $175,886 | | | $31,165 | |
Operating Activities
Entergy New Orleans’sNet cash flow provided by operating activities provided $41.8increased $29.8 million of cash for the three months ended March 31, 20222023 compared to using $14.1 million of cash for the three months ended March 31, 20212022 primarily due to the following activity:to:
•higher collectionsthe refund of $34 million received from customers;System Energy in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion of these refunds and the related proceedings;
•the timing of payments to vendors;recovery of fuel and purchased power costs; and
•an increasea decrease of $9.3$11.8 million in storm spending in 2022, primarily due to Hurricane Ida storm restoration efforts.efforts in 2022. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” and Note 2 to the financial statements, each in the Form 10-K, for a discussion of hurricanestorm restoration efforts; andefforts.
•
the timing of recovery of fuel and purchased power costs.
The increase was partially offset by higher receipts from associated companies in 2022.
Investing Activities
Entergy New Orleans’s investing activities usedprovided $85.2 million of cash for the three months ended March 31, 2023 compared to using $53.4 million of cash for the three months ended March 31, 2022 compared to providing $14.9 million of cash for the three months ended March 31, 2021 primarily due to the following activity:
•an increasemoney pool activity;
•a decrease of $50.2$29.2 million in distribution construction expenditures primarily due to higherlower capital expenditures for Hurricane Ida storm restoration efforts, partially offset by higher spending on the reliability and infrastructure of Entergy New Orleans’s distribution system as compared to the same period in 2022. The increase in storm restoration spending is primarily due to Hurricane Ida restoration efforts.prior year. See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” and Note 2 to the financial statements, each in the Form 10-K, for a discussion of hurricanestorm restoration efforts;
•$44.2 million in receipts from storm reserve escrow accounts in 2021; and
•money pool activity.an increase of $6.2 million in transmission construction expenditures primarily due to a higher scope of work performed in 2023.
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 $18.3$134.7 million for the three months ended March 31, 2022. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
2023 compared to decreasing by $18.3 million for the three months ended March 31, 2022. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Entergy New Orleans’s financing activities usedprovided $14.7 million of cash for the three months ended March 31, 2023 compared to using $0.1 million of cash for the three months ended March 31, 2022 compared to providing $14.8 million of cash for the three months ended March 31, 2021 primarily due to money pool activity.
Increasesa $15 million advance received in 2023 related to Entergy New Orleans’s payable to the money pool areconstruction of a source of cash flow,New Orleans Sewerage and Entergy New Orleans’s payable to the money pool increased $15 million for the three months ended March 31, 2021.Water Board substation.
Capital Structure
Entergy New Orleans’s debt to capital ratio is shown in the following table.
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 54.8 | % | | 55.4 | % | Debt to capital | 52.2 | % | | 52.6 | % |
Effect of excluding securitization bonds | Effect of excluding securitization bonds | (1.0 | %) | | (1.0 | %) | Effect of excluding securitization bonds | (0.5 | %) | | (0.6 | %) |
Debt to capital, excluding securitization bonds (a) | 53.8 | % | | 54.4 | % | |
Debt to capital, excluding securitization bonds (non-GAAP) (a) | | Debt to capital, excluding securitization bonds (non-GAAP) (a) | 51.7 | % | | 52.0 | % |
Effect of subtracting cash | Effect of subtracting cash | (1.0 | %) | | (1.4 | %) | Effect of subtracting cash | (6.6 | %) | | (0.1 | %) |
Net debt to net capital, excluding securitization bonds (a) | 52.8 | % | | 53.0 | % | |
Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | | Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 45.1 | % | | 51.9 | % |
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.
Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, finance 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. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. 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’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31, 2022 | | December 31, 2021 | | March 31, 2021 | | December 31, 2020 |
(In Thousands) |
$18,122 | | $36,410 | | ($25,229) | | ($10,190) |
| | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
(In Thousands) |
$12,584 | | $147,254 | | $18,122 | | $36,410 |
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
See Note 4 to the financial statements in the Form 10-K for a description of the money pool.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in June 2024. 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, 2022,2023, there were no cash borrowings and no letters of credit were outstanding under the credit 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, 2022,2023, 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.
System Resilience and Storm Hardening
As discussed in the Form 10-K, in October 2021 the City Council passed a resolution and order establishing a docket and procedural schedule with respect to system resiliency and storm hardening. In FebruaryJuly 2022, Entergy New Orleans filed with the City Council a securitization application requesting thatresponse identifying a plan for storm hardening and resiliency projects, including microgrids, to be implemented over ten years at an approximate cost of $1.5 billion. In February 2023 the City Council review Entergy New Orleans’s storm reserve and increase the storm reserve funding level to $150 million, to be funded through securitization. A City Council decision is expected in third quarter 2022.
Hurricane Ida
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Hurricane Ida” in the Form 10-K forapproved a discussion of Hurricane Ida, which caused significant damage to Entergy New Orleans’s service area, including Entergy’s electrical grid.revised procedural schedule requiring Entergy New Orleans expects to initiate its storm cost recovery proceeding in late second quarter 2022.make a filing containing a narrowed list of proposed hardening projects, with final comments on that filing due July 2023. In April 2023, Entergy New Orleans filed the required application and supporting testimony seeking City Council approval of the first phase (five years and approximately $559 million) of a ten-year infrastructure hardening plan totaling approximately $1 billion.Entergy New Orleans also sought, among other relief, City Council approval of a rider to recover from customers the costs of the infrastructure hardening plan.
State and Local Rate Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – State and Local Rate Regulation” in the Form 10-K for a discussion of state and local rate regulation. The following are updates to that discussion.
Retail Rates
20222023 Formula Rate Plan Filing
In April 2022,2023, Entergy New Orleans submitted to the City Council its formula rate plan 20212022 test year filing. The 20212022 test year evaluation report produced an electric earned return on equity for each of 7.34% and a gas earned return on equity of 6.88%3.52% compared to the authorized return on equity of 9.35%. Entergy New Orleans seeks approval of a $40.2$25.6 million rate increase based on the formula set by the City Council in the 2018 rate case. The formula results in an increase in authorized electric revenues of $32.3$17.4 million and an increase in authorized gas revenues of $3.2$8.2 million. Entergy New Orleans also seeks to commence collecting $4.7$3.4 million in electric revenues that were previously approved by the City Council for collection through the formula rate plan. The filing is subject to review by the City Council and other parties over a 75-day review period, followed by a 25-day period to resolve any disputes among the parties. Resulting rates will be effective with the first billing cycle of September 20222023 pursuant to the formula rate plan tariff. For any disputed rate adjustments, however, the City Council would set a procedural schedule that would extend the process for City Council approval of disputed rate adjustments.
COVID-19 Orders
As discussed in the Form 10-K, in May 2020 the City Council issued an accounting order authorizing Entergy New Orleans to establish a regulatory asset for incremental COVID-19-related expenses. As of March 31, 2022, Entergy New Orleans had a regulatory asset of $14.5 million for costs associated with the COVID-19 pandemic.
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
Reliability Investigation
As discussed in the Form 10-K, 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. Entergy New Orleans responded to this resolution in June 2018 and filed a revised reliability plan with the City Council in July 2018. The City Council also approved a resolution that opened a prudence investigation into whether Entergy New Orleans was imprudent for not acting sooner to address outages in New
Entergy New Orleans, LLC and Subsidiaries
Management's Financial Discussion and Analysis
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 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 disagreed with the recommendation and submitted rebuttal testimony and rebuttal comments in June 2019. In November 2019 the City Council passed a resolution that penalized Entergy New Orleans $1 million for alleged imprudence in the maintenance of its distribution system. In December 2019, Entergy New Orleans filed suit in Louisiana state court seeking judicial review of the City Council’s resolution. In MarchJune 2022 the Orleans Civil District Court issued a written judgment that the penalty be set aside, reversed, and vacated. In August 2022 the Orleans Civil District Court issued written reasons for its judgment and also granted a post-judgment motion to remand for the City Council to take actions consistent with its judgment. In April 2023 the City Council approved a scheduling order with briefing through May 2022 and oral argumentresolution that established a procedural schedule to allow for the submission of additional evidence regarding the penalty discussed above. Entergy New Orleans is considering its legal options in June 2022.response to the resolution.
System Resiliency and Storm Hardening
As discussedAlso in the Form 10-K, in October 2021 the City Council passed a resolution and order establishing a docket and procedural schedule with respect to system resiliency and storm hardening.The docket will identify a plan for storm hardening and resiliency projects with other stakeholders.In MarchAugust 2022 the City Council grantedapproved a resolution establishing a 30-day comment period on proposed minimum reliability standards and an associated penalty mechanism. In September 2022, Entergy New Orleans filed comments to the proposed plan including a request for an additional round of comments. In February 2023 the City Council approved a resolution adopting the proposed reliability standards, including a minimum annual performance level for Entergy New Orleans’s requestdistribution system, as well as associated penalty mechanisms. Under the resolution, while compliance filings will be required for an extension of time to filecalendar year 2023, the first year for which the City Council may assess a response until July 2022.penalty for distribution system reliability performance is calendar year 2024.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for 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, 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 SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS | CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2022 and 2021 | |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | | | | 2022 | | 2021 | | | 2023 | | 2022 |
| | | (In Thousands) | | | (In Thousands) |
OPERATING REVENUES | OPERATING REVENUES | | | | OPERATING REVENUES | | | |
Electric | Electric | | | $154,646 | | | $139,148 | | Electric | | | $169,695 | | | $154,646 | |
Natural gas | Natural gas | | | 43,626 | | | 30,187 | | Natural gas | | | 39,125 | | | 43,626 | |
TOTAL | TOTAL | | | 198,272 | | | 169,335 | | TOTAL | | | 208,820 | | | 198,272 | |
| OPERATING EXPENSES | OPERATING EXPENSES | | | | OPERATING EXPENSES | | | |
Operation and Maintenance: | Operation and Maintenance: | | | | Operation and Maintenance: | | | |
Fuel, fuel-related expenses, and gas purchased for resale | Fuel, fuel-related expenses, and gas purchased for resale | | | 43,397 | | | 19,012 | | Fuel, fuel-related expenses, and gas purchased for resale | | | 52,024 | | | 43,397 | |
Purchased power | Purchased power | | | 56,470 | | | 68,670 | | Purchased power | | | 66,620 | | | 56,470 | |
Other operation and maintenance | Other operation and maintenance | | | 33,652 | | | 38,178 | | Other operation and maintenance | | | 33,227 | | | 33,652 | |
Taxes other than income taxes | Taxes other than income taxes | | | 13,989 | | | 12,556 | | Taxes other than income taxes | | | 16,424 | | | 13,989 | |
Depreciation and amortization | Depreciation and amortization | | | 19,815 | | | 18,161 | | Depreciation and amortization | | | 19,575 | | | 19,815 | |
Other regulatory charges (credits) - net | Other regulatory charges (credits) - net | | | 4,185 | | | 3,130 | | Other regulatory charges (credits) - net | | | (1,101) | | | 4,185 | |
TOTAL | TOTAL | | | 171,508 | | | 159,707 | | TOTAL | | | 186,769 | | | 171,508 | |
| OPERATING INCOME | OPERATING INCOME | | | 26,764 | | | 9,628 | | OPERATING INCOME | | | 22,051 | | | 26,764 | |
| OTHER INCOME (DEDUCTIONS) | | | | |
OTHER INCOME | | OTHER INCOME | | | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | | 369 | | | 258 | | Allowance for equity funds used during construction | | | 450 | | | 369 | |
Interest and investment income | Interest and investment income | | | 24 | | | 9 | | Interest and investment income | | | 2,051 | | | 24 | |
Miscellaneous - net | Miscellaneous - net | | | (271) | | | (302) | | Miscellaneous - net | | | (227) | | | (271) | |
TOTAL | TOTAL | | | 122 | | | (35) | | TOTAL | | | 2,274 | | | 122 | |
| INTEREST EXPENSE | INTEREST EXPENSE | | | | INTEREST EXPENSE | | | |
Interest expense | Interest expense | | | 8,694 | | | 7,029 | | Interest expense | | | 9,619 | | | 8,694 | |
Allowance for borrowed funds used during construction | Allowance for borrowed funds used during construction | | | (199) | | | (116) | | Allowance for borrowed funds used during construction | | | (219) | | | (199) | |
TOTAL | TOTAL | | | 8,495 | | | 6,913 | | TOTAL | | | 9,400 | | | 8,495 | |
| INCOME BEFORE INCOME TAXES | INCOME BEFORE INCOME TAXES | | | 18,391 | | | 2,680 | | INCOME BEFORE INCOME TAXES | | | 14,925 | | | 18,391 | |
| Income taxes | Income taxes | | | 3,265 | | | 909 | | Income taxes | | | 4,783 | | | 3,265 | |
| NET INCOME | NET INCOME | | | $15,126 | | | $1,771 | | NET INCOME | | | $10,142 | | | $15,126 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | | | See Notes to Financial Statements. | | | |
(Page left blank intentionally)
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS | CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2022 and 2021 | |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | OPERATING ACTIVITIES | |
Net income | Net income | | $15,126 | | | $1,771 | | Net income | | $10,142 | | | $15,126 | |
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: | | Adjustments to reconcile net income to net cash flow provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | | 19,815 | | | 18,161 | | Depreciation and amortization | | 19,575 | | | 19,815 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 9,558 | | | 4,572 | | Deferred income taxes, investment tax credits, and non-current taxes accrued | | 5,147 | | | 9,558 | |
Changes in assets and liabilities: | Changes in assets and liabilities: | | Changes in assets and liabilities: | |
Receivables | Receivables | | 39,328 | | | (1,975) | | Receivables | | 26,040 | | | 39,328 | |
Fuel inventory | Fuel inventory | | 446 | | | 2,234 | | Fuel inventory | | 2,920 | | | 446 | |
Accounts payable | Accounts payable | | (14,168) | | | (27,777) | | Accounts payable | | (14,313) | | | (14,168) | |
Taxes accrued | Taxes accrued | | (2,803) | | | 13 | | Taxes accrued | | 1,687 | | | (2,803) | |
Interest accrued | Interest accrued | | (613) | | | (3,203) | | Interest accrued | | (361) | | | (613) | |
Deferred fuel costs | Deferred fuel costs | | (9,959) | | | (4,886) | | Deferred fuel costs | | 6,965 | | | (9,959) | |
Other working capital accounts | Other working capital accounts | | (10,876) | | | (11,103) | | Other working capital accounts | | (12,303) | | | (10,876) | |
Provisions for estimated losses | Provisions for estimated losses | | 6,224 | | | (40,680) | | Provisions for estimated losses | | 1,645 | | | 6,224 | |
Other regulatory assets | Other regulatory assets | | 25,499 | | | 28,879 | | Other regulatory assets | | 2,267 | | | 25,499 | |
Other regulatory liabilities | Other regulatory liabilities | | (16,667) | | | 8,728 | | Other regulatory liabilities | | 31,170 | | | (16,667) | |
| Pension and other postretirement liabilities | Pension and other postretirement liabilities | | (2,782) | | | (4,397) | | Pension and other postretirement liabilities | | (1,113) | | | (2,782) | |
Other assets and liabilities | Other assets and liabilities | | (16,317) | | | 15,549 | | Other assets and liabilities | | (7,890) | | | (16,317) | |
Net cash flow provided by (used in) operating activities | | 41,811 | | | (14,114) | | |
Net cash flow provided by operating activities | | Net cash flow provided by operating activities | | 71,578 | | | 41,811 | |
| INVESTING ACTIVITIES | INVESTING ACTIVITIES | | INVESTING ACTIVITIES | |
Construction expenditures | Construction expenditures | | (68,959) | | | (26,165) | | Construction expenditures | | (46,098) | | | (68,959) | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | | 369 | | | 258 | | Allowance for equity funds used during construction | | 450 | | | 369 | |
| Changes in money pool receivable - net | Changes in money pool receivable - net | | 18,288 | | | — | | Changes in money pool receivable - net | | 134,670 | | | 18,288 | |
Receipts from storm reserve escrow account | | — | | | 44,200 | | |
| Payments to storm reserve escrow account | Payments to storm reserve escrow account | | — | | | (3) | | Payments to storm reserve escrow account | | (811) | | | — | |
Changes in securitization account | Changes in securitization account | | (3,099) | | | (3,415) | | Changes in securitization account | | (3,055) | | | (3,099) | |
| Net cash flow provided by (used in) investing activities | Net cash flow provided by (used in) investing activities | | (53,401) | | | 14,875 | | Net cash flow provided by (used in) investing activities | | 85,156 | | | (53,401) | |
| FINANCING ACTIVITIES | FINANCING ACTIVITIES | | FINANCING ACTIVITIES | |
| Changes in money pool payable - net | | — | | | 15,039 | | |
| Contribution from customer for construction | | Contribution from customer for construction | | 15,000 | | | — | |
| Other | Other | | (107) | | | (214) | | Other | | (312) | | | (107) | |
Net cash flow provided by (used in) financing activities | Net cash flow provided by (used in) financing activities | | (107) | | | 14,825 | | Net cash flow provided by (used in) financing activities | | 14,688 | | | (107) | |
| Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | | (11,697) | | | 15,586 | | Net increase (decrease) in cash and cash equivalents | | 171,422 | | | (11,697) | |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | | 42,862 | | | 26 | | Cash and cash equivalents at beginning of period | | 4,464 | | | 42,862 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | | $31,165 | | | $15,612 | | Cash and cash equivalents at end of period | | $175,886 | | | $31,165 | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
Cash paid during the period for: | Cash paid during the period for: | | Cash paid during the period for: | |
Interest - net of amount capitalized | Interest - net of amount capitalized | | $8,957 | | | $9,921 | | Interest - net of amount capitalized | | $9,630 | | | $8,957 | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
ASSETS | ASSETS | ASSETS |
March 31, 2022 and December 31, 2021 | |
March 31, 2023 and December 31, 2022 | | March 31, 2023 and December 31, 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
CURRENT ASSETS | CURRENT ASSETS | | CURRENT ASSETS | |
Cash and cash equivalents: | Cash and cash equivalents: | | Cash and cash equivalents: | |
Cash | Cash | | $26 | | | $26 | | Cash | | $367 | | | $27 | |
Temporary cash investments | Temporary cash investments | | 31,139 | | | 42,836 | | Temporary cash investments | | 175,519 | | | 4,437 | |
Total cash and cash equivalents | Total cash and cash equivalents | | 31,165 | | | 42,862 | | Total cash and cash equivalents | | 175,886 | | | 4,464 | |
Securitization recovery trust account | Securitization recovery trust account | | 5,098 | | | 1,999 | | Securitization recovery trust account | | 5,290 | | | 2,235 | |
Accounts receivable: | Accounts receivable: | | | Accounts receivable: | | |
Customer | Customer | | 61,442 | | | 69,902 | | Customer | | 67,827 | | | 93,288 | |
Allowance for doubtful accounts | Allowance for doubtful accounts | | (7,702) | | | (13,282) | | Allowance for doubtful accounts | | (8,334) | | | (11,909) | |
Associated companies | Associated companies | | 21,557 | | | 74,146 | | Associated companies | | 14,502 | | | 149,927 | |
Other | Other | | 12,590 | | | 13,668 | | Other | | 7,258 | | | 6,110 | |
Accrued unbilled revenues | Accrued unbilled revenues | | 24,481 | | | 25,550 | | Accrued unbilled revenues | | 32,737 | | | 37,284 | |
Total accounts receivable | Total accounts receivable | | 112,368 | | | 169,984 | | Total accounts receivable | | 113,990 | | | 274,700 | |
Deferred fuel costs | Deferred fuel costs | | 2,352 | | | — | | Deferred fuel costs | | 3,188 | | | 10,153 | |
Fuel inventory - at average cost | Fuel inventory - at average cost | | 2,499 | | | 2,945 | | Fuel inventory - at average cost | | 2,952 | | | 5,872 | |
Materials and supplies - at average cost | Materials and supplies - at average cost | | 20,610 | | | 19,216 | | Materials and supplies - at average cost | | 23,868 | | | 22,498 | |
| Prepayments and other | Prepayments and other | | 15,621 | | | 5,428 | | Prepayments and other | | 18,567 | | | 6,312 | |
TOTAL | TOTAL | | 189,713 | | | 242,434 | | TOTAL | | 343,741 | | | 326,234 | |
| OTHER PROPERTY AND INVESTMENTS | OTHER PROPERTY AND INVESTMENTS | | OTHER PROPERTY AND INVESTMENTS | |
Non-utility property at cost (less accumulated depreciation) | Non-utility property at cost (less accumulated depreciation) | | 1,016 | | | 1,016 | | Non-utility property at cost (less accumulated depreciation) | | 1,050 | | | 1,050 | |
| Storm reserve escrow account | | Storm reserve escrow account | | 75,811 | | | 75,000 | |
Other | | Other | | 675 | | | 675 | |
TOTAL | TOTAL | | 1,016 | | | 1,016 | | TOTAL | | 77,536 | | | 76,725 | |
| UTILITY PLANT | UTILITY PLANT | | UTILITY PLANT | |
Electric | Electric | | 1,964,963 | | | 1,976,202 | | Electric | | 1,963,198 | | | 1,934,837 | |
Natural gas | Natural gas | | 377,826 | | | 373,983 | | Natural gas | | 392,815 | | | 390,252 | |
Construction work in progress | Construction work in progress | | 23,047 | | | 22,199 | | Construction work in progress | | 23,011 | | | 39,607 | |
TOTAL UTILITY PLANT | TOTAL UTILITY PLANT | | 2,365,836 | | | 2,372,384 | | TOTAL UTILITY PLANT | | 2,379,024 | | | 2,364,696 | |
Less - accumulated depreciation and amortization | Less - accumulated depreciation and amortization | | 785,381 | | | 774,309 | | Less - accumulated depreciation and amortization | | 817,324 | | | 808,224 | |
UTILITY PLANT - NET | UTILITY PLANT - NET | | 1,580,455 | | | 1,598,075 | | UTILITY PLANT - NET | | 1,561,700 | | | 1,556,472 | |
| DEFERRED DEBITS AND OTHER ASSETS | DEFERRED DEBITS AND OTHER ASSETS | | DEFERRED DEBITS AND OTHER ASSETS | |
Regulatory assets: | Regulatory assets: | | Regulatory assets: | |
| Deferred fuel costs | Deferred fuel costs | | 4,080 | | | 4,080 | | Deferred fuel costs | | 4,080 | | | 4,080 | |
Other regulatory assets (includes securitization property of $22,924 as of March 31, 2022 and $25,761 as of December 31, 2021) | | 223,118 | | | 248,617 | | |
Other regulatory assets (includes securitization property of $10,700 as of March 31, 2023 and $13,363 as of December 31, 2022) | | Other regulatory assets (includes securitization property of $10,700 as of March 31, 2023 and $13,363 as of December 31, 2022) | | 199,845 | | | 202,112 | |
Other | Other | | 60,565 | | | 56,101 | | Other | | 50,425 | | | 46,778 | |
TOTAL | TOTAL | | 287,763 | | | 308,798 | | TOTAL | | 254,350 | | | 252,970 | |
| TOTAL ASSETS | TOTAL ASSETS | | $2,058,947 | | | $2,150,323 | | TOTAL ASSETS | | $2,237,327 | | | $2,212,401 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES | ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS | CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | LIABILITIES AND EQUITY |
March 31, 2022 and December 31, 2021 | |
March 31, 2023 and December 31, 2022 | | March 31, 2023 and December 31, 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
CURRENT LIABILITIES | CURRENT LIABILITIES | | CURRENT LIABILITIES | |
| Currently maturing long-term debt | | Currently maturing long-term debt | | $170,000 | | | $170,000 | |
Payable due to associated company | Payable due to associated company | | $1,326 | | | $1,326 | | Payable due to associated company | | 1,306 | | | 1,306 | |
Accounts payable: | Accounts payable: | | Accounts payable: | |
Associated companies | Associated companies | | 41,135 | | | 45,057 | | Associated companies | | 47,327 | | | 53,258 | |
Other | Other | | 59,501 | | | 146,921 | | Other | | 43,464 | | | 57,291 | |
Customer deposits | Customer deposits | | 29,470 | | | 28,539 | | Customer deposits | | 32,161 | | | 31,826 | |
Taxes accrued | Taxes accrued | | 1,582 | | | 4,385 | | Taxes accrued | | 11,995 | | | 10,308 | |
Interest accrued | Interest accrued | | 7,378 | | | 7,991 | | Interest accrued | | 7,719 | | | 8,080 | |
Deferred fuel costs | | — | | | 7,607 | | |
Current portion of unprotected excess accumulated deferred income taxes | | — | | | 1,906 | | |
| Other | Other | | 6,019 | | | 6,204 | | Other | | 7,547 | | | 6,560 | |
TOTAL | TOTAL | | 146,411 | | | 249,936 | | TOTAL | | 321,519 | | | 338,629 | |
| NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | NON-CURRENT LIABILITIES | |
Accumulated deferred income taxes and taxes accrued | Accumulated deferred income taxes and taxes accrued | | 375,056 | | | 365,384 | | Accumulated deferred income taxes and taxes accrued | | 386,218 | | | 385,259 | |
Accumulated deferred investment tax credits | Accumulated deferred investment tax credits | | 16,297 | | | 16,306 | | Accumulated deferred investment tax credits | | 16,475 | | | 16,481 | |
Regulatory liability for income taxes - net | Regulatory liability for income taxes - net | | 39,208 | | | 40,589 | | Regulatory liability for income taxes - net | | 42,398 | | | 39,738 | |
Asset retirement cost liabilities | | — | | | 4,032 | | |
| Accumulated provisions | Accumulated provisions | | 12,553 | | | 6,329 | | Accumulated provisions | | 88,693 | | | 87,048 | |
| Long-term debt (includes securitization bonds of $29,721 as of March 31, 2022 and $29,661 as of December 31, 2021) | | 777,590 | | | 777,254 | | |
Long-term debt (includes securitization bonds of $17,757 as of March 31, 2023 and $17,697 as of December 31, 2022) | | Long-term debt (includes securitization bonds of $17,757 as of March 31, 2023 and $17,697 as of December 31, 2022) | | 596,242 | | | 596,047 | |
Long-term payable due to associated company | Long-term payable due to associated company | | 9,585 | | | 9,585 | | Long-term payable due to associated company | | 8,279 | | | 8,279 | |
Other | Other | | 28,406 | | | 42,193 | | Other | | 64,545 | | | 38,104 | |
TOTAL | TOTAL | | 1,258,695 | | | 1,261,672 | | TOTAL | | 1,202,850 | | | 1,170,956 | |
| Commitments and Contingencies | Commitments and Contingencies | | Commitments and Contingencies | |
| EQUITY | EQUITY | | EQUITY | |
Member's equity | Member's equity | | 653,841 | | | 638,715 | | Member's equity | | 712,958 | | | 702,816 | |
TOTAL | TOTAL | | 653,841 | | | 638,715 | | TOTAL | | 712,958 | | | 702,816 | |
| TOTAL LIABILITIES AND EQUITY | TOTAL LIABILITIES AND EQUITY | | $2,058,947 | | | $2,150,323 | | TOTAL LIABILITIES AND EQUITY | | $2,237,327 | | | $2,212,401 | |
| See Notes to Financial Statements. | See Notes to Financial Statements. | | See Notes to Financial Statements. | |
| | | | | |
ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY |
For the Three Months Ended March 31, 20222023 and 20212022 |
(Unaudited) |
| |
| |
| Member's Equity |
| (In Thousands) |
| |
Balance at December 31, 2020 | $606,917 | |
| |
Net income | 1,771 | |
| |
Balance at March 31, 2021 | $608,688 | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Balance at December 31, 2021 | $638,715 | |
| |
Net income | 15,126 | |
| |
Balance at March 31, 2022 | $653,841 | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Balance at December 31, 2022 | $702,816 | |
| |
Net income | 10,142 | |
| |
Balance at March 31, 2023 | $712,958 | |
| |
| |
| |
| |
| |
| |
| |
| |
| |
See Notes to Financial Statements. | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
Results of Operations
Net Income
Net income remained relatively unchanged, increasing $0.3decreased $8.7 million primarily due to lower volume/weather, higher taxes other than income taxes, and higher interest expense, partially offset by higher retail electric price partially offset by higherand lower other operation and maintenance expenses and higher depreciation and amortization expenses.
Operating Revenues
Following is an analysis of the change in operating revenues comparing the first quarter 20222023 to the first quarter 2021:2022:
| | | | | |
| Amount |
| (In Millions) |
20212022 operating revenues | $480.2472.5 | |
Fuel, rider, and other revenues that do not significantly affect net income | (28.3) | |
Volume/weather | 0.129.4 | |
Retail electric price | 20.511.7 | |
2022Return of unprotected excess accumulated deferred income taxes to customers | 6.5 | |
Volume/weather | (12.6) | |
2023 operating revenues | $472.5507.5 | |
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 volume/weather variance is insignificant and primarily due to an increase in industrial usage, an increase in weather-adjusted commercial usage, and the effect of more favorable weather on residential and commercial sales. The increase in industrial usage was primarily due to an increase in demand from cogeneration and mid-to-small customers and an increase in demand from expansion projects, primarily in the transportation and chemicals industries. The increase in commercial usage was primarily due to an increase in customers and the effect of the COVID-19 pandemic on businesses in first quarter 2021. The increased usage from these industrial and commercial customers has a relatively smaller effect on operating revenues because a larger portion of the revenues from those customers comes from fixed charges.
The retail electric price variance is primarily due to:
•increasesto an increase in the transmission cost recovery factor rider effective March 2021 and March 2022;
•an increase in the distribution cost recovery factor rider effective January 2022; and
•an increase in the generation cost recovery rider effective January 2022.
See Note 2 to the financial statements herein and in the Form 10-K for further discussion of the generation cost recovery rider and transmission and distribution cost recovery factor rider filings.filing.
The return of unprotected excess accumulated deferred income taxes to customers resulted from the return of unprotected excess accumulated deferred income taxes through a rider effective October 2018 in response to the enactment of the Tax Cuts and Jobs Act. In the first quarter 2022, $6.5 million was returned to customers through reductions in operating revenues. There was no return of unprotected excess accumulated deferred income taxes to customers for the first quarter 2023. There was no effect on net income as the reductions in operating revenues
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
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 sales.
Total electric energy sales for Entergy Texas for the three months ended March 31,2022 2023 and 20212022 are as follows:
| | | 2022 | | 2021 | | % Change | | 2023 | | 2022 | | % Change |
| | (GWh) | | | | (GWh) | | |
Residential | Residential | 1,460 | | | 1,394 | | | 5 | | Residential | 1,247 | | | 1,460 | | | (15) | |
Commercial | Commercial | 1,059 | | | 1,004 | | | 5 | | Commercial | 1,061 | | | 1,059 | | | — | |
Industrial | Industrial | 2,264 | | | 1,963 | | | 15 | | Industrial | 2,193 | | | 2,264 | | | (3) | |
Governmental | Governmental | 64 | | | 62 | | | 3 | | Governmental | 63 | | | 64 | | | (2) | |
Total retail | Total retail | 4,847 | | | 4,423 | | | 10 | | Total retail | 4,564 | | | 4,847 | | | (6) | |
Sales for resale: | Sales for resale: | | Sales for resale: | |
Associated companies | Associated companies | 190 | | | 296 | | | (36) | | Associated companies | — | | | 190 | | | (100) | |
Non-associated companies | Non-associated companies | 144 | | | 341 | | | (58) | | Non-associated companies | 104 | | | 144 | | | (28) | |
Total | Total | 5,181 | | | 5,060 | | | 2 | | Total | 4,668 | | | 5,181 | | | (10) | |
See Note 13 to the financial statements herein for additional discussion of Entergy Texas’s operating revenues.
Other Income Statement Variances
Other operation and maintenance expenses increaseddecreased primarily due to:
•an increasea decrease of $7.7$4.6 million in non-nuclear generation expenses primarily due to higherlower long-term service agreement expenses associated with the Hardin County Peaking Facility, which was purchased in June 2021, and the Montgomery County Power Station and a higherlower scope of work performed during outages in 20222023 as compared to the same period in 2021;prior year;
•an increasea decrease of $1.7$2.2 million in distribution operationstransmission expenses primarily due to higher contractora decrease in the amount of transmission costs higher vegetation maintenanceallocated by MISO;
•a decrease of $2.1 million in compensation and benefits costs primarily due to a revision to estimated incentive compensation accruals in the first quarter 2023 and higher safety and training costs;lower healthcare claims activity in 2023; and
•several individually insignificant items.a decrease of $1.4 million in power delivery expenses primarily due to lower vegetation maintenance costs.
The increase was partially offset by a decrease of $1.1 millionTaxes other than income taxes increased primarily due to increases in meter reading expenses as a result of the deployment of advanced metering systems.ad valorem taxes primarily resulting from higher assessments.
Depreciation and amortization expenses increased primarily due to additions to plant in service.
Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2023 as compared to prior year and higher interest earned on money pool investments.
Interest expense increased primarily due to the issuance of $325 million of 5.00% Series mortgage bonds in August 2022 and the issuance of $290.85 million of senior secured system restoration bonds in April 2022.
Income Taxes
The effective income tax rates were rate was 18.99.3%% for the first quarter 2022 and2023 9.1% for the first quarter 2021.. The differencesdifference in the effective income tax ratesrate for the first quarter 2022 and2023 the first quarter 2021 versus the federal statutory rate of 21% werewas primarily due to the allowance for
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
equity funds used during construction and certain book and tax differences related to utility plant items, partially offset by the accrual for state income taxes.
The effective income tax rate was 9.3% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 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. 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 of and regulatory activity regarding the Tax Cuts and Jobs Act.
Income Tax Legislation
128
TableSee “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of Contentsthe Inflation Reduction Act of 2022.Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | $28 | | | $248,596 | | Cash and cash equivalents at beginning of period | $3,497 | | | $28 | |
| Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
Operating activities | Operating activities | 82,338 | | | (28,864) | | Operating activities | 198,102 | | | 82,338 | |
Investing activities | Investing activities | (144,536) | | | (223,696) | | Investing activities | (108,019) | | | (144,536) | |
Financing activities | Financing activities | 62,196 | | | 3,989 | | Financing activities | (1,416) | | | 62,196 | |
Net decrease in cash and cash equivalents | (2) | | | (248,571) | | |
Net increase (decrease) in cash and cash equivalents | | Net increase (decrease) in cash and cash equivalents | 88,667 | | | (2) | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $26 | | | $25 | | Cash and cash equivalents at end of period | $92,164 | | | $26 | |
Operating Activities
Entergy Texas’sNet cash flow provided by operating activities provided $82.3increased $115.8 million of cash for the three months ended March 31, 20222023 compared to using $28.9 million of cash for the three months ended March 31, 20212022 primarily due to the following activity:
•the timing of recovery of fuel and purchased power costs including increased fuel costs in 2021 as a resultand higher collections from customers, partially offset by the timing of Winter Storm Uri.payments to vendors. See Note 2 to the financial statements herein and in the Form 10-K for a discussion of fuel and purchased power cost recovery;
•the timing of payments to vendors; and
•higher collections from customers.recovery.
Investing Activities
Net cash flow used in investing activities decreased $79.2$36.5 million for the three months ended March 31, 20222023 compared to the three months ended March 31, 2021 primarily due to:
•a decrease of $49 million in distribution construction expenditures2022 primarily due to lower capital expenditures for storm restoration in 2022money pool activity and lower spending on advanced metering infrastructure. The decrease in storm restoration spending is primarily due to Hurricane Laura restoration efforts in 2021;
•a decrease of $21.4 million in transmission construction expenditures primarily due to a lower scope of work on projects performed in 2022 as compared to 2021; and
•a decrease of $19.4 million in non-nuclear generation construction expenditures primarily due to a lower scope of work on projects performed in 2022 as compared to 2021.
The decrease was partially offset by cash collateral of $12 million posted in March 2022 to support Entergy Texas’s obligations to MISO.
Financing Activities
Net cash flow provided The decrease was partially offset by financing activities increased $58.2an increase of $21 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021in non-nuclear generation construction expenditures primarily due to money pool activity.
higher spending on the Orange County Advanced Power Station project and a higher scope of work performed in 2023 and
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
an increase of $20.5 million in transmission construction expenditures primarily due to higher scope of work performed in 2023.
Decreases in Entergy Texas’s receivable from the money pool are a source of cash flow, and Entergy Texas’s receivable from the money pool decreased $92.9 million for the three months ended March 31, 2023. The money pool is an intercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
Financing Activities
Entergy Texas’s financing activities used $1.4 million of cash for the three months ended March 31, 2023 compared to providing $62.2 million for the three months ended March 31, 2022 primarily due to money pool activity.
Increases in Entergy Texas’s payable to the money pool are a source of cash flow, and Entergy Texas’s payable to the money pool increased by $91.8 million for the three months ended March 31, 2022 compared to increasing by $30.9 million for the three months ended March 31, 2021. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.2022.
Capital Structure
Entergy Texas’s debt to capital ratio is shown in the following table.
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Debt to capital | 47.9 | % | | 48.7 | % |
Effect of excluding the securitization bonds | (0.2 | %) | | (0.5 | %) |
Debt to capital, excluding securitization bonds (a) | 47.7 | % | | 48.2 | % |
Effect of subtracting cash | — | % | | — | % |
Net debt to net capital, excluding securitization bonds (a) | 47.7 | % | | 48.2 | % |
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
Debt to capital | 51.6 | % | | 52.0 | % |
Effect of excluding securitization bonds | (2.5 | %) | | (2.5 | %) |
Debt to capital, excluding securitization bonds (non-GAAP) (a) | 49.1 | % | | 49.5 | % |
Effect of subtracting cash | (0.8 | %) | | — | % |
Net debt to net capital, excluding securitization bonds (non-GAAP) (a) | 48.3 | % | | 49.5 | % |
(a)Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.
Net debt consists of debt less cash and cash equivalents. Debt consists of finance 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. The debt to capital ratio excluding securitization bonds and net debt to net capital ratio excluding securitization bonds are non-GAAP measures. Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements in the Form 10-K. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of Entergy Texas’s uses and sources of capital. Following are updates to information provided in the Form 10-K.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Entergy Texas’s receivables from or (payables to) the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31, 2022 | | December 31, 2021 | | March 31, 2021 | | December 31, 2020 |
(In Thousands) |
($171,393) | | ($79,594) | | ($30,858) | | $4,601 |
| | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
(In Thousands) |
$6,536 | | $99,468 | | ($171,393) | | ($79,594) |
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 June 2026.2027. 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, 2022,2023, there were no cash borrowings and $1.3$1.1 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, 2022, $79.62023, $8.8 million in letters of credit were 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.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Orange County Advanced Power Station
As discussed in the Form 10-K, in September 2021, Entergy Texas filed an application seeking PUCT approval to amend Entergy Texas’s certificate of convenience and necessity to construct, own, and operate the Orange County Advanced Power Station, a new 1,215 MW combined-cycle combustion turbine facility to be located in Bridge City, Texas at an initially-estimated expected total cost of $1.2 billion inclusive of the estimated costs of the generation facilities, transmission upgrades, contingency, an allowance for funds used during construction, and necessary regulatory expenses, among others. The project includes combustion turbine technology with dual fuel capability, able to co-fire up to 30% hydrogen by volume upon commercial operation and upgradable to support 100% hydrogen operations in the future. In December 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2022 certain intervenors filed testimony opposing the hydrogen co-firing component of the proposed project and others filed opposing the project outright. Also in March 2022, PUCT staff filed testimony opposing the hydrogen co-firing component of the proposed project, but otherwise taking no specific position on the merits of the project. The PUCT staff also proposed that the PUCT establish a maximum amount that Entergy Texas may recover in rates attributable to the project. In April 2022, Entergy Texas filed rebuttal testimony addressing and rebutting these various arguments. Also in April 2022 the ALJs with the State Office of Administrative Hearings approved a continuance of the hearing on the merits from April 2022 to June 2022, providing Entergy Texas an opportunity to accelerate the determination and fixing of pricing for the Orange County Advanced Power Station prior to the hearing. A final order by the PUCT is expected in third or fourth quarter of 2022. Entergy Texas also is pursuing environmental permitting that is required prior to the commencement of construction. Subject to receipt of required regulatory approvals, permits, and other conditions, the facility is expected to be in service by May 2026.
Hurricane Laura, Hurricane Delta, and Winter Storm Uri
As discussed in the Form 10-K, in August 2020 and October 2020, Hurricane Laura and Hurricane Delta caused extensive damage to Entergy Texas’s service area. In February 2021, Winter Storm Uri also caused damage to Entergy Texas’s service area. The storms resulted in widespread power outages, significant damage primarily to distribution and transmission infrastructure, and the loss of sales during the power outages. In July 2021, Entergy Texas filed with the PUCT an application for a financing order to approve the securitization of certain system restoration costs, which were approved by the PUCT as eligible for securitization in December 2021. In November 2021 the parties filed an unopposed settlement agreement supporting the issuance of a financing order consistent with Entergy Texas’s application and with minor adjustments to certain upfront and ongoing costs to be incurred to facilitate the issuance and serving of system restoration bonds. In January 2022 the PUCT issued a financing order consistent with the unopposed settlement. As a result of the financing order, in first quarter 2022, Entergy Texas reclassified $153 million from utility plant to other regulatory assets.
In April 2022, Entergy Texas Restoration Funding II, LLC, a company wholly-owned and consolidated by Entergy Texas, issued $290.85 million of senior secured system restoration bonds (securitization bonds). With the proceeds, Entergy Texas Restoration Funding II purchased from Entergy Texas the transition property, which is the right to recover from customers through a system restoration charge amounts sufficient to service the securitization bonds. Entergy Texas began cost recovery through the system restoration charge effective with the first billing cycle of May 2022 and the system restoration charge is expected to remain in place up to 15 years. See Note 4 to the financial statements herein for a discussion of the April 2022 issuance of the securitization bonds.
State and Local Rate Regulation and Fuel-Cost Recovery
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - State and Local Rate Regulation and Fuel-Cost Recovery” in the Form 10-K for a discussion of state and local rate regulation and fuel-cost recovery. The following are updates to that discussion.
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
Distribution Cost Recovery Factor (DCRF) Rider
As discussed in the Form 10-K, in August 2021, Entergy Texas filed with the PUCT a request to amend its DCRF rider. The proposed rider is designed to collect from Entergy Texas’s retail customers approximately $40.2 million annually, or $13.9 million in incremental annual revenues beyond Entergy Texas’s currently effective DCRF rider based on its capital invested in distribution between September 1, 2020 and June 30, 2021. In September 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing scheduled in December 2021. In December 2021 the parties filed an unopposed settlement recommending that Entergy Texas be allowed to collect its full requested DCRF revenue requirement and resolving all issues in the proceeding, including a motion for interim rates to take effect for usage on and after January 24, 2022. Also, in December 2021, the ALJ with the State Office of Administrative Hearings issued an order granting the motion for interim rates, which went into effect in January 2022, admitting evidence, and remanding the proceeding to the PUCT to consider the settlement. In March 2022 the PUCT issued an order approving the settlement.Retail Rates
Generation Cost Recovery Rider
As discussed in the Form 10-K, in October 2020, Entergy Texas filed an application to establish a generation cost recovery rider to begin recovering a return of and on its generation capital investment in the Montgomery County Power Station through August 31, 2020, which was approved by2022 the PUCT on an interim basis in January 2021. In March 2021, Entergy Texas filed to update its generation cost recovery rider to include its generation capital investment in Montgomery County Power Station after August 31, 2020 and an unopposed settlement agreement filed on behalf of the parties by Entergy Texas in October 2021 was approved by the PUCT in January 2022. In February 2022, Entergy Texas filed a relate-back rider to collect over five months an additional approximately $5 million, which is the difference between the interim revenue requirement approved in January 2021 and the revenue requirement approved in January 2022 that reflects Entergy Texas’s full generation capital investment and ownership in Montgomery County Power Station on January 1, 2021, plus carrying costs from January 2021 through January 2022 when the updated revenue requirement took effect. In April 2022, Entergy Texas and PUCT staff filed a joint proposed order that supports approval of Entergy Texas’s as-filed request.
In December 2020, Entergy Texas also filed an application to amend its generation cost recovery rider to reflect its acquisition of the Hardin County Peaking Facility, which closed in June 2021. Because Hardin was to be acquired in the future, the initial generation cost recovery rider rates proposed in the application represented no change from the generation cost recovery rider rates established in Entergy Texas’s previous generation cost recovery rider proceeding. In July 2021 the PUCT issued an order approving the application. In August 2021, Entergy Texas filed an update application to recover its actual investment in the acquisition of the Hardin County Peaking Facility. In September 2021 the PUCT referred the proceeding to the State Office of Administrative Hearings. A procedural schedule was established with a hearing scheduled in April 2022. In January 2022, Entergy Texas filed an update to its application to align the requested revenue requirement with the terms of the generation cost recovery rider settlement approved by the PUCT in January 2022. In March 2022, Entergy Texas filed on behalf of the parties an unopposed motion, which motion was granted by the ALJ with the State Office of Administrative Hearings, to abate the procedural schedule indicating that the parties had reached an agreement in principle. In April 2022, Entergy Texas filed on behalf of the parties a unanimous settlement agreement that would adjust itsadjusting Entergy Texas’s generation cost recovery rider to recover an annual revenue requirement of approximately $92.8 million which is $4.5 million in incremental annual revenue above the $88.3 million approved in January 2022, related to Entergy Texas’s actual investment in the acquisition of the Hardin County Peaking Facility.Facility, and rates became effective. In September 2022, Entergy Texas filed a relate-back rider designed to collect over three months an additional approximately $5.7 million, which is the revenue requirement, plus carrying costs, associated with Entergy Texas’s acquisition of Hardin County Peaking Facility from June 2021 through August 2022 when the updated revenue requirement took effect. In April 2023 the PUCT approved Entergy Texas’s as-filed request.
COVID-19 Orders
As discussed in the Form 10-K, in March 2020 the PUCT authorized electric utilities to record as a regulatory asset expenses resulting from the effects of the COVID-19 pandemic. In future proceedings, the PUCT will consider whether each utility's request for recovery of these regulatory assets is reasonable and necessary, the appropriate period of recovery, and any amount of carrying costs thereon. As part of its 2022 base rate case filing, Entergy Texas requested recovery of its regulatory asset over a three-year period beginning December 2022. As of March 31, 2023, Entergy Texas had a regulatory asset of $10.4 million for costs associated with the COVID-19 pandemic.
Fuel and purchased power recovery
As discussed in the Form 10-K, in September 2022, Entergy Texas filed an application with the PUCT to reconcile its fuel and purchased power costs for the period from April 2019 through March 2022. During the reconciliation period, Entergy Texas incurred approximately $1.7 billion in eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. As of the end of the
Entergy Texas, Inc. and Subsidiaries
Management's Financial Discussion and Analysis
appropriatereconciliation period, of recovery, and any amount of carrying costs thereon. As of March 31, 2022,Entergy Texas’s cumulative under-recovery balance was approximately $103.1 million, including interest, which Entergy Texas hadrequested authority to carry over as the beginning balance for the subsequent reconciliation period beginning April 2022, pending future surcharges or refunds as approved by the PUCT. In November 2022 the PUCT referred the proceeding to the State Office of Administrative Hearings. In March 2023 municipal intervenors filed testimony proposing a regulatory asset of $10.4$5.2 million disallowance for costs associated with the COVID-19 pandemic.
fuel purchased during Winter Storm Uri.
Green Pricing Option Tariffs
In January 2022,PUCT staff proposed no disallowance. Entergy Texas filed an application requesting approval to implement two voluntary renewable option tariffs, Rider Small Volume Renewable Option (Rider SVRO)rebuttal testimony in April 2023 and Rider Large Volume Renewable Option (Rider LVRO). Both tariffs are voluntary offerings that give customers the ability to match some or all of their monthly electricity usage with renewable energy credits that are purchased by Entergy Texas and retiredhearing on the customer’s behalf. Voluntary participationmerits is set for May 2023. A PUCT decision is expected in either Rider SVRO or Rider LVRO and the charges assessed under the respective tariff would be in addition to the charges paid by customers under their otherwise applicable rate schedules and riders. In April 2022, Entergy Texas filed on behalf of the parties an unopposed settlement agreement supporting approval of Entergy Texas’s proposed green pricing option tariffs. As part of the settlement agreement, Entergy Texas agreed to revise the cost allocation between the rate tiers of Rider SVRO and committed to collaborating with and considering the input of customers to develop an asset-backed green tariff program. This matter is awaiting placement on an open meeting agenda for PUCT consideration of the settlement.September 2023.
Federal Regulation
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS – Federal Regulation” in the Form 10-K for a discussion of federal regulation.
Nuclear Matters
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Nuclear Matters” in the Form 10-K for discussion of nuclear matters.
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.
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 Texas’s accounting for utility regulatory accounting, impairment of long-lived assets, 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 SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | |
| | | | |
| | | | | | 2023 | | 2022 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $507,506 | | | $472,482 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 167,530 | | | 73,920 | |
| | | | | | | | |
Purchased power | | | | | | 107,758 | | | 161,090 | |
Other operation and maintenance | | | | | | 64,430 | | | 74,977 | |
| | | | | | | | |
Taxes other than income taxes | | | | | | 27,996 | | | 20,449 | |
Depreciation and amortization | | | | | | 59,391 | | | 56,061 | |
Other regulatory charges (credits) - net | | | | | | 10,924 | | | 13,446 | |
TOTAL | | | | | | 438,029 | | | 399,943 | |
| | | | | | | | |
OPERATING INCOME | | | | | | 69,477 | | | 72,539 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 5,089 | | | 2,596 | |
Interest and investment income | | | | | | 1,417 | | | 188 | |
Miscellaneous - net | | | | | | 439 | | | 307 | |
TOTAL | | | | | | 6,945 | | | 3,091 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 26,962 | | | 20,912 | |
Allowance for borrowed funds used during construction | | | | | | (1,896) | | | (865) | |
TOTAL | | | | | | 25,066 | | | 20,047 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 51,356 | | | 55,583 | |
| | | | | | | | |
Income taxes | | | | | | 9,683 | | | 5,180 | |
| | | | | | | | |
NET INCOME | | | | | | 41,673 | | | 50,403 | |
| | | | | | | | |
Preferred dividend requirements | | | | | | 518 | | | 518 | |
| | | | | | | | |
EARNINGS APPLICABLE TO COMMON STOCK | | | | | | $41,155 | | | $49,885 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
(Page left blank intentionally)
| | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Net income | | $41,673 | | | $50,403 | |
Adjustments to reconcile net income to net cash flow provided by operating activities: | | | | |
Depreciation and amortization | | 59,391 | | | 56,061 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | (6,536) | | | (1,175) | |
Changes in assets and liabilities: | | | | |
Receivables | | 63,210 | | | (1,674) | |
Fuel inventory | | (8,445) | | | 8,039 | |
Accounts payable | | (44,804) | | | 4,492 | |
Taxes accrued | | (21,586) | | | (15,188) | |
Interest accrued | | (12,656) | | | (11,195) | |
Deferred fuel costs | | 107,238 | | | (8,440) | |
Other working capital accounts | | 9,245 | | | 4,832 | |
Provisions for estimated losses | | 522 | | | 54 | |
Other regulatory assets | | 21,535 | | | (135,079) | |
Other regulatory liabilities | | (3,283) | | | (11,491) | |
Effect of securitization on regulatory asset | | — | | | 153,383 | |
Pension and other postretirement liabilities | | (1,960) | | | (4,146) | |
Other assets and liabilities | | (5,442) | | | (6,538) | |
Net cash flow provided by operating activities | | 198,102 | | | 82,338 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction expenditures | | (205,191) | | | (155,948) | |
Allowance for equity funds used during construction | | 5,089 | | | 2,596 | |
| | | | |
| | | | |
Litigation proceeds from settlement agreement | | — | | | 4,134 | |
Changes in money pool receivable - net | | 92,932 | | | — | |
Changes in securitization account | | (849) | | | 16,631 | |
Increase in other investments | | — | | | (11,949) | |
| | | | |
Net cash flow used in investing activities | | (108,019) | | | (144,536) | |
| | | | |
FINANCING ACTIVITIES | | | | |
| | | | |
Retirement of long-term debt | | — | | | (29,064) | |
| | | | |
| | | | |
Changes in money pool payable - net | | — | | | 91,799 | |
Dividends paid: | | | | |
| | | | |
Preferred stock dividends paid | | (518) | | | (505) | |
Other | | (898) | | | (34) | |
Net cash flow provided by (used in) financing activities | | (1,416) | | | 62,196 | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | 88,667 | | | (2) | |
Cash and cash equivalents at beginning of period | | 3,497 | | | 28 | |
Cash and cash equivalents at end of period | | $92,164 | | | $26 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $38,923 | | | $31,513 | |
Income taxes | | $— | | | ($1,913) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | |
| | | | |
| | | | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED INCOME STATEMENTS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | |
| | | | |
| | | | | | 2022 | | 2021 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $472,482 | | | $480,220 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 73,920 | | | 112,396 | |
| | | | | | | | |
Purchased power | | | | | | 161,090 | | | 141,362 | |
Other operation and maintenance | | | | | | 74,977 | | | 62,955 | |
| | | | | | | | |
Taxes other than income taxes | | | | | | 20,449 | | | 21,875 | |
Depreciation and amortization | | | | | | 56,061 | | | 50,936 | |
Other regulatory charges (credits) - net | | | | | | 13,446 | | | 15,840 | |
TOTAL | | | | | | 399,943 | | | 405,364 | |
| | | | | | | | |
OPERATING INCOME | | | | | | 72,539 | | | 74,856 | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 2,596 | | | 2,445 | |
Interest and investment income | | | | | | 188 | | | 224 | |
Miscellaneous - net | | | | | | 307 | | | (423) | |
TOTAL | | | | | | 3,091 | | | 2,246 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 20,912 | | | 23,038 | |
Allowance for borrowed funds used during construction | | | | | | (865) | | | (984) | |
TOTAL | | | | | | 20,047 | | | 22,054 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 55,583 | | | 55,048 | |
| | | | | | | | |
Income taxes | | | | | | 5,180 | | | 4,990 | |
| | | | | | | | |
NET INCOME | | | | | | 50,403 | | | 50,058 | |
| | | | | | | | |
Preferred dividend requirements | | | | | | 518 | | | 470 | |
| | | | | | | | |
EARNINGS APPLICABLE TO COMMON STOCK | | | | | | $49,885 | | | $49,588 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $1,004 | | | $500 | |
Temporary cash investments | | 91,160 | | | 2,997 | |
Total cash and cash equivalents | | 92,164 | | | 3,497 | |
Securitization recovery trust account | | 11,728 | | | 10,879 | |
Accounts receivable: | | | | |
Customer | | 79,086 | | | 115,955 | |
Allowance for doubtful accounts | | (1,847) | | | (2,352) | |
Associated companies | | 13,824 | | | 115,549 | |
Other | | 11,512 | | | 21,587 | |
Accrued unbilled revenues | | 61,230 | | | 69,208 | |
Total accounts receivable | | 163,805 | | | 319,947 | |
Deferred fuel costs | | 150,877 | | | 258,115 | |
Fuel inventory - at average cost | | 35,195 | | | 26,750 | |
Materials and supplies - at average cost | | 88,560 | | | 93,031 | |
| | | | |
Prepayments and other | | 14,622 | | | 20,568 | |
TOTAL | | 556,951 | | | 732,787 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Investments in affiliates - at equity | | 222 | | | 250 | |
Non-utility property - at cost (less accumulated depreciation) | | 376 | | | 376 | |
Other | | 19,129 | | | 18,975 | |
TOTAL | | 19,727 | | | 19,601 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 7,497,285 | | | 7,409,461 | |
Construction work in progress | | 486,164 | | | 339,139 | |
TOTAL UTILITY PLANT | | 7,983,449 | | | 7,748,600 | |
Less - accumulated depreciation and amortization | | 2,180,743 | | | 2,135,400 | |
UTILITY PLANT - NET | | 5,802,706 | | | 5,613,200 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $262,481 as of March 31, 2023 and $269,523 as of December 31, 2022) | | 557,147 | | | 578,682 | |
| | | | |
Other | | 97,837 | | | 99,694 | |
TOTAL | | 654,984 | | | 678,376 | |
| | | | |
TOTAL ASSETS | | $7,034,368 | | | $7,043,964 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Net income | | $50,403 | | | $50,058 | |
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
Depreciation and amortization | | 56,061 | | | 50,936 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | (1,175) | | | (1,522) | |
Changes in assets and liabilities: | | | | |
Receivables | | (1,674) | | | (16,424) | |
Fuel inventory | | 8,039 | | | 3,509 | |
Accounts payable | | 4,492 | | | (42,511) | |
Taxes accrued | | (15,188) | | | (5,123) | |
Interest accrued | | (11,195) | | | (10,989) | |
Deferred fuel costs | | (8,440) | | | (62,970) | |
Other working capital accounts | | 4,832 | | | 1,118 | |
Provisions for estimated losses | | 54 | | | (31) | |
Other regulatory assets | | (135,079) | | | 40,484 | |
Other regulatory liabilities | | (11,491) | | | (13,649) | |
Storm restoration costs approved for securitization recognized as regulatory asset | | 153,383 | | | — | |
Pension and other postretirement liabilities | | (4,146) | | | (5,434) | |
Other assets and liabilities | | (6,538) | | | (16,316) | |
Net cash flow provided by (used in) operating activities | | 82,338 | | | (28,864) | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction expenditures | | (155,948) | | | (238,903) | |
Allowance for equity funds used during construction | | 2,596 | | | 2,445 | |
| | | | |
Litigation proceeds from settlement agreement | | 4,134 | | | — | |
| | | | |
Change in money pool receivable - net | | — | | | 4,601 | |
Changes in securitization account | | 16,631 | | | 8,161 | |
Increase in other investments | | (11,949) | | | — | |
| | | | |
Net cash flow used in investing activities | | (144,536) | | | (223,696) | |
| | | | |
FINANCING ACTIVITIES | | | | |
| | | | |
Retirement of long-term debt | | (29,064) | | | (27,951) | |
| | | | |
| | | | |
Changes in money pool payable - net | | 91,799 | | | 30,858 | |
| | | | |
| | | | |
Preferred stock dividends paid | | (505) | | | (470) | |
Other | | (34) | | | 1,552 | |
Net cash flow provided by financing activities | | 62,196 | | | 3,989 | |
| | | | |
Net decrease in cash and cash equivalents | | (2) | | | (248,571) | |
Cash and cash equivalents at beginning of period | | 28 | | | 248,596 | |
Cash and cash equivalents at end of period | | $26 | | | $25 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid (received) during the period for: | | | | |
Interest - net of amount capitalized | | $31,513 | | | $33,394 | |
Income taxes | | ($1,913) | | | ($836) | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | |
| | | | |
| | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
| | | | |
Accounts payable: | | | | |
Associated companies | | $59,669 | | | $70,321 | |
Other | | 203,742 | | | 201,982 | |
Customer deposits | | 38,953 | | | 38,764 | |
Taxes accrued | | 71,447 | | | 93,033 | |
Interest accrued | | 11,272 | | | 23,928 | |
| | | | |
| | | | |
| | | | |
| | | | |
Other | | 15,745 | | | 16,963 | |
TOTAL | | 400,828 | | | 444,991 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 740,360 | | | 744,227 | |
Accumulated deferred investment tax credits | | 8,559 | | | 8,711 | |
Regulatory liability for income taxes - net | | 127,872 | | | 132,647 | |
Other regulatory liabilities | | 46,739 | | | 45,247 | |
Asset retirement cost liabilities | | 11,274 | | | 11,121 | |
Accumulated provisions | | 8,115 | | | 7,593 | |
| | | | |
Long-term debt (includes securitization bonds of $275,154 as of March 31, 2023 and $275,064 as of December 31, 2022) | | 2,896,522 | | | 2,895,913 | |
Other | | 73,483 | | | 74,053 | |
TOTAL | | 3,912,924 | | | 3,919,512 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
EQUITY | | | | |
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2023 and 2022 | | 49,452 | | | 49,452 | |
Paid-in capital | | 1,050,125 | | | 1,050,125 | |
Retained earnings | | 1,582,289 | | | 1,541,134 | |
Total common shareholder's equity | | 2,681,866 | | | 2,640,711 | |
Preferred stock without sinking fund | | 38,750 | | | 38,750 | |
TOTAL | | 2,720,616 | | | 2,679,461 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $7,034,368 | | | $7,043,964 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
ASSETS |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
| | | | |
| | | | |
| | | | |
Cash and cash equivalents | | $26 | | | $28 | |
Securitization recovery trust account | | 9,998 | | | 26,629 | |
Accounts receivable: | | | | |
Customer | | 88,964 | | | 83,797 | |
Allowance for doubtful accounts | | (2,783) | | | (5,814) | |
Associated companies | | 15,868 | | | 31,720 | |
Other | | 23,315 | | | 13,404 | |
Accrued unbilled revenues | | 61,658 | | | 62,241 | |
Total accounts receivable | | 187,022 | | | 185,348 | |
Deferred fuel costs | | 56,720 | | | 48,280 | |
Fuel inventory - at average cost | | 34,673 | | | 42,712 | |
Materials and supplies - at average cost | | 73,415 | | | 72,884 | |
| | | | |
| | | | |
Prepayments and other | | 23,902 | | | 17,515 | |
TOTAL | | 385,756 | | | 393,396 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Investments in affiliates - at equity | | 287 | | | 300 | |
Non-utility property - at cost (less accumulated depreciation) | | 376 | | | 376 | |
Other | | 17,730 | | | 18,128 | |
TOTAL | | 18,393 | | | 18,804 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 7,071,317 | | | 7,181,567 | |
Construction work in progress | | 207,167 | | | 183,965 | |
TOTAL UTILITY PLANT | | 7,278,484 | | | 7,365,532 | |
Less - accumulated depreciation and amortization | | 2,053,212 | | | 2,049,750 | |
UTILITY PLANT - NET | | 5,225,272 | | | 5,315,782 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets (includes securitization property of $11,221 as of March 31, 2022 and $23,818 as of December 31, 2021) | | 556,412 | | | 421,333 | |
| | | | |
Other | | 119,734 | | | 112,096 | |
TOTAL | | 676,146 | | | 533,429 | |
| | | | |
TOTAL ASSETS | | $6,305,567 | | | $6,261,411 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | | | | |
| | | Common Equity | | |
| Preferred Stock | | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| (In Thousands) |
| | | | | | | | | |
Balance at December 31, 2021 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,344,879 | | | $2,483,206 | |
| | | | | | | | | |
Net income | — | | | — | | | — | | | 50,403 | | | 50,403 | |
| | | | | | | | | |
Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
Balance at March 31, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,394,764 | | | $2,533,091 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,541,134 | | | $2,679,461 | |
| | | | | | | | | |
Net income | — | | | — | | | — | | | 41,673 | | | 41,673 | |
| | | | | | | | | |
| | | | | | | | | |
Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
Balance at March 31, 2023 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,582,289 | | | $2,720,616 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | |
| | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
| | | | |
Accounts payable: | | | | |
Associated companies | | $225,441 | | | $142,929 | |
Other | | 140,760 | | | 164,981 | |
Customer deposits | | 37,535 | | | 37,271 | |
Taxes accrued | | 33,830 | | | 49,018 | |
Interest accrued | | 7,807 | | | 19,002 | |
Current portion of unprotected excess accumulated deferred income taxes | | 20,059 | | | 27,188 | |
| | | | |
| | | | |
| | | | |
Other | | 15,797 | | | 16,120 | |
TOTAL | | 481,229 | | | 456,509 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 695,150 | | | 692,496 | |
Accumulated deferred investment tax credits | | 9,172 | | | 9,325 | |
Regulatory liability for income taxes - net | | 137,959 | | | 144,145 | |
Other regulatory liabilities | | 38,884 | | | 37,060 | |
Asset retirement cost liabilities | | 8,638 | | | 8,520 | |
Accumulated provisions | | 8,296 | | | 8,242 | |
| | | | |
Long-term debt (includes securitization bonds of $24,953 as of March 31, 2022 and $53,979 as of December 31, 2021) | | 2,325,371 | | | 2,354,148 | |
Other | | 67,777 | | | 67,760 | |
TOTAL | | 3,291,247 | | | 3,321,696 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
EQUITY | | | | |
Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2022 and 2021 | | 49,452 | | | 49,452 | |
Paid-in capital | | 1,050,125 | | | 1,050,125 | |
Retained earnings | | 1,394,764 | | | 1,344,879 | |
Total common shareholder's equity | | 2,494,341 | | | 2,444,456 | |
Preferred stock without sinking fund | | 38,750 | | | 38,750 | |
TOTAL | | 2,533,091 | | | 2,483,206 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $6,305,567 | | | $6,261,411 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
ENTERGY TEXAS, INC. AND SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | | |
| | | Common Equity | | |
| Preferred Stock | | Common Stock | | Paid-in Capital | | Retained Earnings | | Total |
| (In Thousands) |
| | | | | | | | | |
Balance at December 31, 2020 | $35,000 | | | $49,452 | | | $955,162 | | | $1,117,964 | | | $2,157,578 | |
| | | | | | | | | |
Net income | — | | | — | | | — | | | 50,058 | | | 50,058 | |
| | | | | | | | | |
Preferred stock dividends | — | | | — | | | — | | | (470) | | | (470) | |
Balance at March 31, 2021 | $35,000 | | | $49,452 | | | $955,162 | | | $1,167,552 | | | $2,207,166 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2021 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,344,879 | | | $2,483,206 | |
| | | | | | | | | |
Net income | — | | | — | | | — | | | 50,403 | | | 50,403 | |
| | | | | | | | | |
| | | | | | | | | |
Preferred stock dividends | — | | | — | | | — | | | (518) | | | (518) | |
Balance at March 31, 2022 | $38,750 | | | $49,452 | | | $1,050,125 | | | $1,394,764 | | | $2,533,091 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
See Notes to Financial Statements. | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC.
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS
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. As discussed in “Complaints Against System Energy” below and in Note 2 to the financial statements in the Form 10-K, System Energy is currently involved in proceedings at the FERC commenced by the retail regulators of its customers regarding its return on equity, its capital structure, its renewal of the sale-leaseback of 11.5% of Grand Gulf, the treatment of uncertain tax positions in rate base, the prudence of its operation of Grand Gulf, and the rates it charges under the Unit Power Sales Agreement. The claims in these proceedings include claims for refunds and claims for rate adjustments; the aggregate amount of refunds claimed in these proceedings substantially exceeds the net book value of System Energy. In the event of an adverse decision in one or more of these proceedings requiring the payment of substantial additional refunds, System Energy would be required to seek financing to pay such refunds which may not be available on terms acceptable to System Energy, or may not be available at all, when required.
Results of Operations
Net Income
Net income increased $7.6decreased $3.9 million primarily due to the disallowance of the recovery of sale-leaseback renewal costs from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans per the December 2022 FERC order related to the Grand Gulf sale-leaseback renewal complaint and the lower authorized rate of return on equity and capital structure limitations on monthly bills issued to Entergy Mississippi per the June 2022 settlement agreement with the MPSC. The decrease was partially offset by an increase in operating revenues resulting from changes in rate base.
Income Taxes
The effective income tax rate was 23.5% for the first quarter 2023. The difference in the effective income tax rate for the first quarter 2023 versus the federal statutory rate of 21% was primarily due to the accrual for state income taxes and provisions, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was 23.2% for the first quarter 2022. The difference in the effective income tax rate for the first quarter 2022 versus the federal statutory rate of 21% was primarily due to state income taxes, partially offset by book and tax differences related to the allowance for equity funds used during construction.
The effective income tax rate was (79.5%) for the first quarter 2021. The difference in the effective income tax rate for the first quarter 2021 versus the federal statutory rate of 21% was primarily due to the amortization of excess accumulated deferred income taxes, certain book and tax differences related to utility plant items, the amortization of investment tax credits, and book and tax differences related to the allowance for equity funds used during construction, partially offset by state income taxes. Income Tax Legislation
See Note 10 to the financial statements herein and Notes 2 and 3 to the financial statements“MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation” in the Form 10-K for a discussion of the effects and regulatory activity regarding the Tax Cuts and Jobs Act.Inflation Reduction Act of 2022.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Liquidity and Capital Resources
Cash Flow
Cash flows for the three months ended March 31, 20222023 and 20212022 were as follows:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| | (In Thousands) | | (In Thousands) |
Cash and cash equivalents at beginning of period | Cash and cash equivalents at beginning of period | $89,201 | | | $242,469 | | Cash and cash equivalents at beginning of period | $2,940 | | | $89,201 | |
| Net cash provided by (used in): | Net cash provided by (used in): | | Net cash provided by (used in): | |
Operating activities | Operating activities | 40,011 | | | (29,242) | | Operating activities | (32,839) | | | 40,011 | |
Investing activities | Investing activities | (94,802) | | | (23,437) | | Investing activities | 48,231 | | | (94,802) | |
Financing activities | Financing activities | 63,845 | | | (57,563) | | Financing activities | 241,671 | | | 63,845 | |
Net increase (decrease) in cash and cash equivalents | 9,054 | | | (110,242) | | |
Net increase in cash and cash equivalents | | Net increase in cash and cash equivalents | 257,063 | | | 9,054 | |
| Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $98,255 | | | $132,227 | | Cash and cash equivalents at end of period | $260,003 | | | $98,255 | |
Operating Activities
System Energy’s operating activities providedused $32.8 million of cash for the three months ended March 31, 2023 compared to providing $40 million of cash for the three months ended March 31, 2022 primarily due to the following activity:
•the aggregate payment of $103.5 million made in January 2023 related to the sale-leaseback renewal costs and depreciation litigation as calculated in System Energy’s January 2023 compliance report filed with the FERC. See Note 2 to the financial statements herein and in the Form 10-K for further discussion on these refunds and the related proceedings;
•a decrease in spending of $12.8 million on nuclear refueling outages in 2023 as compared to using $29.2the same period in 2022; and
•the timing of payments to vendors.
Investing Activities
System Energy’s investing activities provided $48.2 million of cash for the three months ended March 31, 2021 primarily due to income tax payments of $39.1 million in 2021 and timing of payments to vendors, partially offset by an increase in spending of $12.7 million on nuclear refueling outages in 2022 as2023 compared to the same period in 2021 and timingusing $94.8 million of collections of receivables. System Energy had income tax payments in 2021 as a result of the amended Mississippi tax returns filed based on federal adjustments related to the resolution of the 2014-2015 IRS audit, as well as a portion of the payments made in accordance with an intercompany income tax allocation agreement. See Note 3 to the financial statements in the Form 10-K for discussion of the 2014-2015 IRS audit.
Investing Activities
Net cash flow used in investing activities increased $71.4 million for the three months ended March 31, 2022 comparedprimarily due to the three months ended March 31, 2021 primarily due to:following activity:
•an increasemoney pool activity;
•a decrease of $71.9$53.3 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 services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
•an increasea decrease of $31.3$21.8 million in nuclear construction expenditures primarily due to increasedhigher spending on various nuclearin 2022 for Grand Gulf outage projects in 2022.and upgrades.
The increase was offset by money pool activity.
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 $76.4 million for the three months ended March 31, 2023 compared to decreasing by $18.6 million for the three months ended March 31, 2022 compared to increasing by $12.7 million for the three months ended March 31, 2021.2022. The money pool is an inter-companyintercompany borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
Financing Activities
System Energy’sNet cash flow provided by financing activities provided $63.8increased $177.8 million of cash for the three months ended March 31, 20222023 compared to using $57.6 million of cash for the three months ended March 31, 20212022 primarily due to:to the issuance of $325 million of 6.00% Series mortgage bonds in March 2023.
The increase was partially offset by:
•the repaymentnet repayments of $16.7 million in February 20212023 compared to net long-term borrowings of $100$63.9 million of 3.42% Series J notes byin 2022 on the System Energy nuclear fuel company variable interest entity;entities’ credit facilities; and
•a decreasethe repayment, prior to maturity, in March 2023 of $21the $50 million in common stock dividends and distributions. No common stock dividends or distributions were made in 2022 in order to maintain System Energy’s capital structure.term loan due November 2023.
See Note 4 to the financial statements herein and Note 5 to the financial statements in the Form 10-K for more details on long-term debt.
Capital Structure
System Energy’s debt to capital ratio is shown in the following table. The increase in the debt to capital ratio is primarily due to the net repaymentissuance of long-term debt in 2021.2023.
| | | March 31, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Debt to capital | Debt to capital | 41.8 | % | | 40.4 | % | Debt to capital | 51.1 | % | | 45.0 | % |
Effect of subtracting cash | Effect of subtracting cash | (3.2 | %) | | (3.0 | %) | Effect of subtracting cash | (7.3 | %) | | (0.1 | %) |
Net debt to net capital | 38.6 | % | | 37.4 | % | |
Net debt to net capital (non-GAAP) | | Net debt to net capital (non-GAAP) | 43.8 | % | | 44.9 | % |
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. The net debt to net capital ratio is a non-GAAP measure. System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.
Uses and Sources of Capital
See “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Liquidity and Capital Resources” in the Form 10-K for a discussion of System Energy’s uses and sources of capital. Following are updates to the information provided in the Form 10-K.
System Energy’s receivables from the money pool were as follows:
| | | | | | | | | | | | | | | | | | | | |
March 31, 2022 | | December 31, 2021 | | March 31, 2021 | | December 31, 2020 |
(In Thousands) |
$57,139 | | $75,745 | | $16,682 | | $4,004 |
| | | | | | | | | | | | | | | | | | | | |
March 31, 2023 | | December 31, 2022 | | March 31, 2022 | | December 31, 2021 |
(In Thousands) |
$18,590 | | $94,981 | | $57,139 | | $75,745 |
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 June 2024.2025. As of March 31, 2022, $1002023, $55.9 million in loans were outstanding under the
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements herein for additional discussion of the variable interest entity credit facility.
Federal Regulation
See the “Rate, Cost-recovery, and Other Regulation - Federal Regulation” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis in the Form 10-K and Note 2 to the financial statements herein and in the Form 10-K for a discussion of federal regulation.
Complaints Against System Energy
See Note 2 to the financial statements in the Form 10-K for information regarding pending complaints against System Energy. The following are updates to that discussion.
Return on Equity and Capital Structure Complaints
As discussed in the Form 10-K, in March 2021 the FERC ALJ issued an initial decision in the proceeding initiated by the LPSC, the MPSC, the APSC, and the City Council against System Energy regarding the return on equity component of the Unit Power Sales Agreement. With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% is no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity. The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due. With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio is excessive and that the just and reasonable equity ratio is 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint. The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September 2018-December 2019) based on the difference between the actual equity ratio and the 48.15% equity ratio. If the ALJ’s initial decision is upheld, the estimated refund for this proceeding is approximately $61$38 million, which includes interest through March 31, 2022,2023, and the estimated resulting annual rate reduction would be approximately $45approximately $31 million. As a result of the 2022 settlement agreement with the MPSC, both the estimated refund and rate reduction exclude Entergy Mississippi's portion. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement.The estimated refund will continue to accrue interest until a final FERC decision is issued. Based on the course of the proceeding to date, System Energy has recorded a provision of $38 million, including interest, as of March 31, 2022.
The ALJ initial decision is an interim step in the FERC litigation process, and an ALJ’s determinations made in an initial decision are not controlling on the FERC. In April 2021, System Energy filed its brief on exceptions, in which it challenged the initial decision’s findings on both the return on equity and capital structure issues. Also in April 2021 the LPSC, APSC, MPSC, City Council, and the FERC trial staff filed briefs on exceptions. Reply briefs opposing exceptions were filed in May 2021 by System Energy, the FERC trial staff, the LPSC, APSC, MPSC, and the City Council. Refunds, if any, that might be required will only become due after the FERC issues its order reviewing the initial decision.
Grand Gulf Sale-leaseback Renewal Complaint and Uncertain Tax Position Rate Base Issue
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. The APSC, the MPSC, and the City Council subsequently intervened in the proceeding. A hearing was held before a FERC ALJ in November 2019. In April 2020 the ALJ issued the initial decision. Among other things,decision, and in December 2022 the ALJ determined that refunds were dueFERC issued an order on three main issues. First, with regard to the lease renewal payments, the ALJ determined thatALJ’s initial decision, which affirmed it in part and modified it in part. The FERC’s order directed System Energy is recovering an unjust acquisition premium through the lease renewal payments, and that System Energy’s recovery from customers through rates should be limited to the cost of service based on the remaining net book value of the leased assets, which is approximately $70 million. The ALJ found that the remedy for this issue should be the refund of lease payments (approximately $17.2 million per year since July 2015) with interest determined at the FERC quarterly interest rate, which would be offset by the addition of the net book value of thecalculate
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
leased assets inrefunds on three issues, and to provide a compliance report detailing the costcalculations. The FERC’s order also disallows the future recovery of service.sale-leaseback renewal costs, which is estimated at approximately $11.5 million annually for purchases from Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans through July 2036. The ALJ did not calculate a valuethree refund issues are rental expenses related to the renewal of the sale-leaseback arrangements; refunds, if any, for the refund expected as a resultrevenue requirement impact of this remedy. In addition, System Energy would no longer recover the lease payments in rates prospectively. Second, with regard to the liabilities associated with uncertain tax positions, the ALJ determined that the liabilities areincluding accumulated deferred income taxes resulting from the decommissioning uncertain tax positions from 2004 through the present; and refunds for the net effect of correcting the depreciation inputs for capital additions attributable to the portion of plant subject to the sale-leaseback.
In January 2023, System Energy filed its compliance report with the FERC. With respect to the sale-leaseback renewal costs, System Energy calculated a refund of $89.8 million, which represented all of the sale-leaseback renewal rental costs that System Energy recovered in rates, with interest. With respect to the decommissioning uncertain tax position issue, System Energy calculated that no additional refunds are owed because it had already provided a one-time historical credit (for the period January 2016 through September 2020) of $25.2 million based on the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position, and because it has been providing an ongoing rate base credit for the accumulated deferred income taxes that resulted from the IRS’s partial acceptance of the decommissioning tax position since October 2020. With respect to the depreciation refund, System Energy calculated a refund of $13.7 million, which is the net total of a refund to customers for excess depreciation expense previously collected, plus interest, offset by the additional return on rate base that System Energy previously did not collect, without interest. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the regulatory charge and corresponding regulatory liability recorded in June 2022 related to these proceedings. In January 2023, System Energy paid the refunds of $103.5 million, which included refunds of $41.7 million to Entergy Arkansas, $27.8 million to Entergy Louisiana, and $34 million to Entergy New Orleans. Based on the December 2022 FERC order and analysis of the remaining litigation, management determined that System Energy’s rate base should have been reduced for those liabilities. If the ALJ’s initial decision is upheld, the estimated refund for this issue throughregulatory liability related to complaints against System Energy as of March 31, 2022,2023 is approximately $422 million, plus interest, which is approximately $135 million through March 31, 2022. The ALJ also found that System Energy should include liabilities associated with uncertain tax positions as a rate base reduction going forward. Third, with regard to the depreciation expense adjustments, the ALJ found that System Energy should correct for the error in re-billings retroactively and prospectively, but that System Energy should not be permitted to recover interest on any retroactive return on enhanced rate base resulting from such corrections. If the initial decision is affirmed on this issue, System Energy estimates refunds of approximately $19 million, which includes interest through March 31, 2022.adequate.
The ALJ initial decision is an interim stepIn January 2023, System Energy filed a request for rehearing of the FERC’s determinations in the FERC litigation process,December 2022 order on sale-leaseback refund issues and an ALJ’s determinations made in an initial decision are not controllingfuture lease cost disallowances, the FERC’s prospective policy on uncertain tax positions, and the FERC. The ALJproper accounting of System Energy’s accumulated deferred income taxes adjustment for the Tax Cuts and Jobs Act of 2017; and a motion for confirmation of its interpretation of the December 2022 order’s remedy concerning the decommissioning tax position. In January 2023 the retail regulators filed a motion for confirmation of their interpretation of the refund requirement in the initial decision acknowledges that these are issues of first impression before the FERC.The case is pending beforeDecember 2022 FERC order and a provisional request for rehearing. In February 2023 the FERC issued a notice that the rehearing requests have been deemed denied by operation of law. The deemed denial of the rehearing request initiates the sixty-day period in which willaggrieved parties may petition for federal appellate court review of the case and issue an order on the proceeding, andunderlying FERC orders; however the FERC may accept, reject, or modifyissue a substantive order on rehearing as long as it continues to have jurisdiction over the ALJ’s initial decisioncase. In March 2023, System Energy filed in whole orthe United States Court of Appeals for the Fifth Circuit a petition for review of the December 2022 order. In March 2023, System Energy also filed an unopposed motion to stay the proceeding in part.the Fifth Circuit pending the FERC’s disposition of the pending motions, and the court granted the motion to stay.
Refunds, if any, that might be required will only become due afterIn February 2023, System Energy submitted a tariff compliance filing with the FERC issuesto clarify that, consistent with the releases provided in the MPSC settlement, Entergy Mississippi will continue to be charged for its order reviewingallocation of the initial decision.sale-leaseback renewal costs under the Unit Power Sales Agreement. See “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement. In March 2023, the MPSC filed a protest to System Energy’s tariff compliance filing. The MPSC argues that the settlement did not specifically address post-settlement sale-leaseback renewal costs and that the sale-leaseback renewal costs may not be recovered under the Unit Power Sales Agreement. Entergy Mississippi’s allocated sale-leaseback renewal costs are estimated at $5.7 million annually for the remaining term of the sale-leaseback renewal.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
LPSC Authorization of Additional Complaints
As discussed in the Form 10-K, in May 2020 the LPSC authorized its staff to file additional complaints at the FERC related to the rates charged by System Energy for Grand Gulf energy and capacity supplied to Entergy Louisiana under the Unit Power Sales Agreement. The following are updates to that discussion.
Unit Power Sales Agreement Complaint
TheAs discussed in the Form 10-K, the first of the additional complaints was filed by the LPSC, the APSC, the MPSC, and the City Council in September 2020. The first complaint raises two sets of rate allegations: violations of the filed rate and a corresponding request for refunds for prior periods; and elements of the Unit Power Sales Agreement are unjust and unreasonable and a corresponding request for refunds for the 15-month refund period and changes to the Unit Power Sales Agreement prospectively. In May 2021 the FERC issued an order addressing the complaint, establishing a refund effective date of September 21, 2020, establishing hearing procedures, and holding those procedures in abeyance pending the FERC’s review of the initial decision in the Grand Gulf sale-leaseback renewal complaint discussed above. System Energy agreed that the hearing should be held in abeyance but sought rehearing of the FERC’s decision as related to matters set for hearing that were beyond the scope of the FERC’s jurisdiction or authority. The complainants sought rehearing of the FERC’s decision to hold the hearing in abeyance and filed a motion to proceed, which motion System Energy subsequently opposed. In June 2021, System Energy’s request for rehearing was denied by operation of law, and System Energy filed an appeal of the FERC’s orders in the Court of Appeals for the Fifth Circuit. The appeal was initially stayed for a period of 90 days, but the stay expired. In November 2021 the Fifth Circuit dismissed the appeal as premature.
In November 2021 the LPSC, the APSC, and the City Council filed direct testimony and requested the FERC to order refunds for prior periods and prospective amendments to the Unit Power Sales Agreement.The LPSC’s refund claims include, among other things, allegations that: (1) System Energy should not have included certain sale-leaseback transaction costs in prepayments; (2) System Energy should have credited rate base to reflect the time value of money associated with the advance collection of lease payments; (3) System Energy incorrectly included refueling outage costs that were recorded in account 174 in rate base; and (4) System Energy should have excluded several accumulated deferred income tax balances in account 190 from rate base.The LPSC is also seeking a retroactive adjustment to retained earnings and capital structure in conjunction with the implementation of
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
its proposed refunds.In addition, the LPSC seeks amendments to the Unit Power Sales Agreement going forward to address below-the-line costs, incentive compensation, the working capital allowance, litigation expenses, and the 2019 termination of the capital funds agreement.The APSC argues that: (1) System Energy should have included borrowings from the Entergy System money pool in its determination of short-term debt in its cost of capital; and (2) System Energy should credit customers with System Energy’s allocation of earnings on money pool investments. The City Council alleges that System Energy has maintained excess cash on hand in the money pool and that retention of excess cash was imprudent.Based on this allegation, the City Council’s witness recommends a refund of approximately $98.8 million for the period 2004-September 2021 or other alternative relief.The City Council further recommends that the FERC impose a hypothetical equity ratio such as 48.15% equity to capital on a prospective basis.
In January 2022, System Energy filed answering testimony arguing that the FERC should not order refunds for prior periods or any prospective amendments to the Unit Power Sales Agreement. In response to the LPSC’s refund claims, System Energy argues, among other things, that (1) the inclusion of sale-leaseback transaction costs in prepayments was correct; (2) the filed rate doctrine bars the request for a retroactive credit to rate base for the time value of money associated with the advance collection of lease payments; (3) an accounting misclassification for deferred refueling outage costs has been corrected, caused no harm to customers, and requires no refunds; and (4) its accounting and ratemaking treatment of specified accumulated deferred income tax balances in account 190 has been correct. System Energy further responds that no retroactive adjustment to retained earnings or capital structure should be ordered because there is no general policy requiring such a remedy and there was no showing that the retained earnings element of the capital structure was incorrectly implemented. Further, System Energy presented evidence that all of the costs that are being challenged were long known to the retail regulators and were approved by them for inclusion in retail rates, and the attempt to retroactively challenge these costs, some of which have been included in rates for decades, is unjust and unreasonable. In response to the LPSC’s proposed going-forward adjustments, System Energy presents evidence to show that none of the proposed adjustments are needed. On the issue of below-the-line expenses, during discovery procedures, System Energy identified a historical allocation error in certain months and agreed to provide a bill credit to customers to correct the error. In response to the APSC’s claims, System Energy argues that the Unit Power Sales Agreement does not include System Energy’s borrowings from the Entergy System money pool or earnings on deposits to the Entergy System money pool in the determination of the cost of capital; and accordingly, no refunds are appropriate on those issues. In response to the City Council’s claims, System Energy argues that it has reasonably managed its cash and that the City Council’s theory of cash management is defective because it fails to adequately consider the relevant cash needs of System Energy and it makes faulty presumptions about the operation of the Entergy System money pool. System Energy further points out that the issue of its capital structure is already subject to pending FERC litigation.
January 2022. In March 2022, the FERC trial staff filed direct and answering testimony in response to the LPSC, APSC,recommending refunds and City Council’s direct testimony. In its testimony, the FERC trial staff recommends refunds for two primary reasons: (1) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with rate refunds; and (2) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with a deemed contract satisfaction and reissuance that occurred in 2005. The FERC trial staff recommends refunds of $84.1 million, exclusive of any tax gross-up or FERC interest. In addition, the FERC trial staff recommends the following prospective modifications to the Unit Power Sales Agreement: (1) inclusion of a rate base credit to recognize the time value of money associated with the advance collection of lease payments; (2) exclusion of executive incentive compensation costs for members of the Office of the Chief Executive and long-term performance unit costs where awards are based solely or primarily on financial metrics; and (3) exclusion of unvested, accrued amounts for stock options, performance units, and restricted stock awards. With respect to issues that ultimately concern the reasonableness of System Energy’s rate of return, the FERC trial staff states that it is unnecessary to consider such issues in this proceeding, in light of the pending case concerning System Energy’s return on equity and capital structure. On all other material issues raised by the LPSC, APSC, and City Council, the FERC trial staff recommends either no refunds or no modification to the Unit Power Sales Agreement.
In April 2022, System Energy filed cross-answering testimony in response to the FERC trial staff’s recommendations. In June 2022, the FERC trial staff submitted revised answering testimony, in which it recommended additional refunds associated with the accumulated deferred income tax balances in account 190. Also in June 2022, System Energy filed revised and supplemental cross-answering testimony to respond to the FERC trial staff’s testimony and to oppose its revised recommendation.
In May 2022, the LPSC, the APSC, and the City Council filed rebuttal testimony and asserted new claims. In June 2022 a new procedural schedule was adopted, providing for additional rounds of testimony and for the hearing to begin in September 2022. The hearing concluded in December 2022. Also in December 2022, a motion to extend the briefing schedule and the deadline for the initial decision was granted. The initial decision is due in May 2023.
In November 2022, System Energy filed a partial settlement agreement with the APSC, the City Council, and the LPSC that resolves the following issues raised in the Unit Power Sales Agreement complaint: advance collection of lease payments, aircraft costs, executive incentive compensation, money pool borrowings, advertising expenses, deferred nuclear refueling outage costs, industry association dues, and termination of the capital funds agreement. The settlement provides that System Energy will provide a black-box refund of $18 million (inclusive of interest), plus additional refund amounts with interest to be calculated for certain issues to be distributed to Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans as the Utility operating companies other than Entergy Mississippi purchasing under the Unit Power Sales Agreement. The settlement further provides that if the APSC, the City Council, or the LPSC agrees to the global settlement System Energy entered into with the MPSC (see “System Energy Settlement with the MPSC” in the Form 10-K for discussion of the settlement), and such global settlement includes a black-box refund amount, then the black-box refund for this settlement agreement shall not be incremental or in addition to the global black-box refund amount. The settlement agreement addresses other matters as well, including adjustments to rate base beginning in October 2022, exclusion of certain other costs, and inclusion of money pool borrowings, if any, in short-term debt within the cost of capital calculation used in the Unit Power Sales Agreement. In April 2023, the FERC approved the settlement agreement. The refund provided for in the settlement agreement will be included in the May 2023 service month bills under the Unit Power Sales Agreement.
System Energy Resources, Inc.
Management's Financial Discussion and Analysis
System Energy Formula Rate Annual Protocols Formal Challenge Concerning 20202021 Calendar Year Bills
System Energy’s Unit Power Sales Agreement includes formula rate protocols that provide for the disclosure of cost inputs, an opportunity for informal discovery procedures, and a challenge process. In February 2022,March 2023, pursuant to the protocols procedures discussed in Note 2 to the financial statements in the Form 10-K, the LPSC, the APSC, the MPSC,and the City Council and the Mississippi Public Utilities Staff filed with the FERC a formal challenge to System Energy’s implementation of the formula rate during calendar year 2020.2021. The formal challenge alleges: (1) that it was imprudent for System Energy to accept the IRS’s partial acceptance of a previously uncertain tax position; (2) that System Energy should have delayed recordingused incorrect inputs for retained earnings that are used to determine the result of the IRS’s partial acceptance of the previously uncertain tax position until after internal tax allocation payments were made;capital structure; (3) that the equity ratio charged in rates was excessive; (4) that sale-leaseback rental payments should have been excluded from rates; and (5)(4) that all issues in the ongoing Unit Power Sales Agreement Complaintcomplaint proceeding should also be reflected in calendar year 20202021 bills. While System Energy disagreesThe first, third, and fourth allegations are identical to issues that any refunds are owed for the 2020 calendar year bills,were raised in the formal challenge estimatesto the calendar year 2020 bills. The formal challenge to the calendar year 2021 bills states that the financial impact of the first through fourth allegationsallegation is approximately $53 million;“tens of millions of dollars,” but it does not provide an estimate of the financial impact of the fifth allegation.remaining allegations.
In March 2022,May 2023, System Energy filed an answer to the formal challenge in which it requested that the FERC deny the formal challenge as a matter of law, or else hold the proceeding in abeyance pending the resolution of related dockets.
Unit Power Sales Agreement
See Note 2 to the financial statements in the Form 10-K for information regarding proposed amendments to the Unit Power Sales Agreement.
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, 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, 2023 and 2022 |
(Unaudited) |
| | | | |
| | | | |
| | | | | | 2023 | | 2022 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $171,572 | | | $141,376 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 18,847 | | | 7,923 | |
Nuclear refueling outage expenses | | | | | | 6,619 | | | 5,927 | |
Other operation and maintenance | | | | | | 50,200 | | | 43,904 | |
Decommissioning | | | | | | 10,287 | | | 9,917 | |
Taxes other than income taxes | | | | | | 7,282 | | | 7,851 | |
Depreciation and amortization | | | | | | 37,137 | | | 29,923 | |
Other regulatory charges (credits) - net | | | | | | (6,459) | | | (8,524) | |
TOTAL | | | | | | 123,913 | | | 96,921 | |
| | | | | | | | |
OPERATING INCOME | | | | | | 47,659 | | | 44,455 | |
| | | | | | | | |
OTHER INCOME (DEDUCTIONS) | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 1,818 | | | 2,047 | |
Interest and investment income | | | | | | 5,764 | | | 5,232 | |
Miscellaneous - net | | | | | | (9,078) | | | (1,639) | |
TOTAL | | | | | | (1,496) | | | 5,640 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 10,491 | | | 9,481 | |
Allowance for borrowed funds used during construction | | | | | | (355) | | | (327) | |
TOTAL | | | | | | 10,136 | | | 9,154 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 36,027 | | | 40,941 | |
| | | | | | | | |
Income taxes | | | | | | 8,482 | | | 9,509 | |
| | | | | | | | |
NET INCOME | | | | | | $27,545 | | | $31,432 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Net income | | $27,545 | | | $31,432 | |
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 63,793 | | | 46,566 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | 10,801 | | | (8,690) | |
Changes in assets and liabilities: | | | | |
Receivables | | (8,198) | | | (3,845) | |
Accounts payable | | (21,866) | | | (15,017) | |
Prepaid taxes and taxes accrued | | (15,836) | | | 5,939 | |
Interest accrued | | (58) | | | (475) | |
Other working capital accounts | | 2,837 | | | (20,646) | |
Other regulatory assets | | (3,247) | | | (2,331) | |
Other regulatory liabilities | | (47,212) | | | (85,655) | |
Pension and other postretirement liabilities | | (1,652) | | | (4,542) | |
Other assets and liabilities | | (39,746) | | | 97,275 | |
Net cash flow provided by (used in) operating activities | | (32,839) | | | 40,011 | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction expenditures | | (26,472) | | | (46,509) | |
Allowance for equity funds used during construction | | 1,818 | | | 2,047 | |
Nuclear fuel purchases | | (21,994) | | | (75,251) | |
Proceeds from sale of nuclear fuel | | 24,976 | | | 11,257 | |
Increase in other investments | | (4) | | | — | |
Proceeds from nuclear decommissioning trust fund sales | | 60,067 | | | 62,717 | |
Investment in nuclear decommissioning trust funds | | (66,551) | | | (67,669) | |
Changes in money pool receivable - net | | 76,391 | | | 18,606 | |
| | | | |
Net cash flow provided by (used in) investing activities | | 48,231 | | | (94,802) | |
| | | | |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of long-term debt | | 473,687 | | | 225,956 | |
Retirement of long-term debt | | (232,016) | | | (162,111) | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Net cash flow provided by financing activities | | 241,671 | | | 63,845 | |
| | | | |
Net increase in cash and cash equivalents | | 257,063 | | | 9,054 | |
Cash and cash equivalents at beginning of period | | 2,940 | | | 89,201 | |
Cash and cash equivalents at end of period | | $260,003 | | | $98,255 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid during the period for: | | | | |
Interest - net of amount capitalized | | $11,304 | | | $9,749 | |
| | | | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
INCOME STATEMENTS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | | | |
| | | | |
| | | | | | 2022 | | 2021 |
| | | | (In Thousands) |
OPERATING REVENUES | | | | | | | | |
Electric | | | | | | $141,376 | | | $117,746 | |
| | | | | | | | |
OPERATING EXPENSES | | | | | | | | |
Operation and Maintenance: | | | | | | | | |
Fuel, fuel-related expenses, and gas purchased for resale | | | | | | 7,923 | | | 16,859 | |
Nuclear refueling outage expenses | | | | | | 5,927 | | | 6,718 | |
Other operation and maintenance | | | | | | 43,904 | | | 41,960 | |
Decommissioning | | | | | | 9,917 | | | 9,529 | |
Taxes other than income taxes | | | | | | 7,851 | | | 6,825 | |
Depreciation and amortization | | | | | | 29,923 | | | 28,194 | |
Other regulatory charges (credits) - net | | | | | | (8,524) | | | 11,550 | |
TOTAL | | | | | | 96,921 | | | 121,635 | |
| | | | | | | | |
OPERATING INCOME (LOSS) | | | | | | 44,455 | | | (3,889) | |
| | | | | | | | |
OTHER INCOME | | | | | | | | |
Allowance for equity funds used during construction | | | | | | 2,047 | | | 1,111 | |
Interest and investment income | | | | | | 5,232 | | | 27,442 | |
Miscellaneous - net | | | | | | (1,639) | | | (2,024) | |
TOTAL | | | | | | 5,640 | | | 26,529 | |
| | | | | | | | |
INTEREST EXPENSE | | | | | | | | |
Interest expense | | | | | | 9,481 | | | 9,535 | |
Allowance for borrowed funds used during construction | | | | | | (327) | | | (188) | |
TOTAL | | | | | | 9,154 | | | 9,347 | |
| | | | | | | | |
INCOME BEFORE INCOME TAXES | | | | | | 40,941 | | | 13,293 | |
| | | | | | | | |
Income taxes | | | | | | 9,509 | | | (10,571) | |
| | | | | | | | |
NET INCOME | | | | | | $31,432 | | | $23,864 | |
| | | | | | | | |
See Notes to Financial Statements. | | | | | | | | |
| | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
BALANCE SHEETS |
ASSETS |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $723 | | | $78 | |
Temporary cash investments | | 259,280 | | | 2,862 | |
Total cash and cash equivalents | | 260,003 | | | 2,940 | |
Accounts receivable: | | | | |
Associated companies | | 89,804 | | | 158,601 | |
Other | | 6,749 | | | 6,145 | |
Total accounts receivable | | 96,553 | | | 164,746 | |
| | | | |
Materials and supplies - at average cost | | 138,039 | | | 135,346 | |
Deferred nuclear refueling outage costs | | 26,344 | | | 33,377 | |
Prepaid taxes | | 8,239 | | | — | |
Prepayments and other | | 10,600 | | | 9,097 | |
TOTAL | | 539,778 | | | 345,506 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Decommissioning trust funds | | 1,204,762 | | | 1,142,914 | |
TOTAL | | 1,204,762 | | | 1,142,914 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 5,434,346 | | | 5,425,449 | |
| | | | |
Construction work in progress | | 122,510 | | | 102,987 | |
Nuclear fuel | | 162,124 | | | 193,004 | |
TOTAL UTILITY PLANT | | 5,718,980 | | | 5,721,440 | |
Less - accumulated depreciation and amortization | | 3,446,204 | | | 3,412,257 | |
UTILITY PLANT - NET | | 2,272,776 | | | 2,309,183 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets | | 418,368 | | | 415,121 | |
| | | | |
Other | | 848 | | | 1,422 | |
TOTAL | | 419,216 | | | 416,543 | |
| | | | |
TOTAL ASSETS | | $4,436,532 | | | $4,214,146 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
STATEMENTS OF CASH FLOWS |
For the Three Months Ended March 31, 2022 and 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
OPERATING ACTIVITIES | | | | |
Net income | | $31,432 | | | $23,864 | |
Adjustments to reconcile net income to net cash flow provided by (used in) operating activities: | | | | |
Depreciation, amortization, and decommissioning, including nuclear fuel amortization | | 46,566 | | | 53,433 | |
Deferred income taxes, investment tax credits, and non-current taxes accrued | | (8,690) | | | (10,197) | |
Changes in assets and liabilities: | | | | |
Receivables | | (3,845) | | | 9,255 | |
Accounts payable | | (15,017) | | | (21,296) | |
Taxes accrued | | 5,939 | | | (33,364) | |
Interest accrued | | (475) | | | (1,088) | |
Other working capital accounts | | (20,646) | | | 2,347 | |
Other regulatory assets | | (2,331) | | | 20,923 | |
Other regulatory liabilities | | (85,655) | | | (12,591) | |
Pension and other postretirement liabilities | | (4,542) | | | (7,424) | |
Other assets and liabilities | | 97,275 | | | (53,104) | |
Net cash flow provided by (used in) operating activities | | 40,011 | | | (29,242) | |
| | | | |
INVESTING ACTIVITIES | | | | |
Construction expenditures | | (46,509) | | | (14,890) | |
Allowance for equity funds used during construction | | 2,047 | | | 1,111 | |
Nuclear fuel purchases | | (75,251) | | | (4,745) | |
Proceeds from the sale of nuclear fuel | | 11,257 | | | 12,626 | |
| | | | |
Proceeds from nuclear decommissioning trust fund sales | | 62,717 | | | 211,481 | |
Investment in nuclear decommissioning trust funds | | (67,669) | | | (216,342) | |
Changes in money pool receivable - net | | 18,606 | | | (12,678) | |
| | | | |
Net cash flow used in investing activities | | (94,802) | | | (23,437) | |
| | | | |
FINANCING ACTIVITIES | | | | |
Proceeds from the issuance of long-term debt | | 225,956 | | | 189,244 | |
Retirement of long-term debt | | (162,111) | | | (225,807) | |
| | | | |
| | | | |
| | | | |
Common stock dividends and distributions paid | | — | | | (21,000) | |
| | | | |
Net cash flow provided by (used in) financing activities | | 63,845 | | | (57,563) | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | 9,054 | | | (110,242) | |
Cash and cash equivalents at beginning of period | | 89,201 | | | 242,469 | |
Cash and cash equivalents at end of period | | $98,255 | | | $132,227 | |
| | | | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | | | | |
Cash paid during the period for: | | | | |
Interest - net of amount capitalized | | $9,749 | | | $10,720 | |
Income taxes | | $— | | | $39,085 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2023 and December 31, 2022 |
(Unaudited) |
| | 2023 | | 2022 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $250,046 | | | $300,037 | |
| | | | |
Accounts payable: | | | | |
Associated companies | | 12,901 | | | 21,701 | |
Other | | 55,406 | | | 58,178 | |
Taxes accrued | | — | | | 7,597 | |
| | | | |
Interest accrued | | 11,533 | | | 11,591 | |
| | | | |
Sale-leaseback/depreciation regulatory liability | | — | | | 103,497 | |
Other | | 4,067 | | | 4,071 | |
TOTAL | | 333,953 | | | 506,672 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 386,757 | | | 376,070 | |
Accumulated deferred investment tax credits | | 44,348 | | | 44,692 | |
Regulatory liability for income taxes - net | | 110,068 | | | 110,840 | |
Other regulatory liabilities | | 722,081 | | | 665,024 | |
Decommissioning | | 1,052,748 | | | 1,042,461 | |
Pension and other postretirement liabilities | | 39,098 | | | 40,750 | |
Long-term debt | | 770,165 | | | 477,868 | |
Other | | 2 | | | 2 | |
TOTAL | | 3,125,267 | | | 2,757,707 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
COMMON EQUITY | | | | |
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2023 and 2022 | | 1,086,850 | | | 1,086,850 | |
Accumulated deficit | | (109,538) | | | (137,083) | |
TOTAL | | 977,312 | | | 949,767 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $4,436,532 | | | $4,214,146 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
BALANCE SHEETS |
ASSETS |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT ASSETS | | | | |
Cash and cash equivalents: | | | | |
Cash | | $72 | | | $87 | |
Temporary cash investments | | 98,183 | | | 89,114 | |
Total cash and cash equivalents | | 98,255 | | | 89,201 | |
Accounts receivable: | | | | |
Associated companies | | 102,258 | | | 118,977 | |
Other | | 8,961 | | | 7,003 | |
Total accounts receivable | | 111,219 | | | 125,980 | |
| | | | |
Materials and supplies - at average cost | | 124,639 | | | 127,093 | |
Deferred nuclear refueling outage costs | | 32,250 | | | 10,123 | |
| | | | |
Prepayments and other | | 2,843 | | | 1,870 | |
TOTAL | | 369,206 | | | 354,267 | |
| | | | |
OTHER PROPERTY AND INVESTMENTS | | | | |
Decommissioning trust funds | | 1,308,172 | | | 1,385,254 | |
TOTAL | | 1,308,172 | | | 1,385,254 | |
| | | | |
UTILITY PLANT | | | | |
Electric | | 5,357,646 | | | 5,362,494 | |
| | | | |
Construction work in progress | | 149,025 | | | 97,968 | |
Nuclear fuel | | 210,446 | | | 171,438 | |
TOTAL UTILITY PLANT | | 5,717,117 | | | 5,631,900 | |
Less - accumulated depreciation and amortization | | 3,414,249 | | | 3,396,136 | |
UTILITY PLANT - NET | | 2,302,868 | | | 2,235,764 | |
| | | | |
DEFERRED DEBITS AND OTHER ASSETS | | | | |
Regulatory assets: | | | | |
| | | | |
Other regulatory assets | | 397,877 | | | 395,546 | |
| | | | |
Other | | 1,728 | | | 1,793 | |
TOTAL | | 399,605 | | | 397,339 | |
| | | | |
TOTAL ASSETS | | $4,379,851 | | | $4,372,624 | |
| | | | |
See Notes to Financial Statements. | | | | |
| | | | | | | | | | | | | | |
SYSTEM ENERGY RESOURCES, INC. |
BALANCE SHEETS |
LIABILITIES AND EQUITY |
March 31, 2022 and December 31, 2021 |
(Unaudited) |
| | 2022 | | 2021 |
| | (In Thousands) |
CURRENT LIABILITIES | | | | |
Currently maturing long-term debt | | $50,335 | | | $50,329 | |
| | | | |
Accounts payable: | | | | |
Associated companies | | 11,736 | | | 23,682 | |
Other | | 70,571 | | | 62,573 | |
Taxes accrued | | 38,857 | | | 32,918 | |
| | | | |
Interest accrued | | 11,239 | | | 11,714 | |
| | | | |
Other | | 4,101 | | | 4,101 | |
TOTAL | | 186,839 | | | 185,317 | |
| | | | |
NON-CURRENT LIABILITIES | | | | |
Accumulated deferred income taxes and taxes accrued | | 373,447 | | | 382,931 | |
Accumulated deferred investment tax credits | | 42,684 | | | 43,003 | |
Regulatory liability for income taxes - net | | 111,511 | | | 113,165 | |
Other regulatory liabilities | | 660,943 | | | 744,944 | |
Decommissioning | | 1,017,520 | | | 1,007,603 | |
Pension and other postretirement liabilities | | 71,562 | | | 76,104 | |
Long-term debt | | 755,018 | | | 690,967 | |
Other | | 37,535 | | | 37,230 | |
TOTAL | | 3,070,220 | | | 3,095,947 | |
| | | | |
Commitments and Contingencies | | | | |
| | | | |
COMMON EQUITY | | | | |
Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2022 and 2021 | | 951,850 | | | 951,850 | |
Retained earnings | | 170,942 | | | 139,510 | |
TOTAL | | 1,122,792 | | | 1,091,360 | |
| | | | |
TOTAL LIABILITIES AND EQUITY | | $4,379,851 | | | $4,372,624 | |
| | | | |
See Notes to Financial Statements. | | | | |
| SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. | SYSTEM ENERGY RESOURCES, INC. |
STATEMENTS OF CHANGES IN COMMON EQUITY | STATEMENTS OF CHANGES IN COMMON EQUITY | STATEMENTS OF CHANGES IN COMMON EQUITY |
For the Three Months Ended March 31, 2022 and 2021 | |
For the Three Months Ended March 31, 2023 and 2022 | | For the Three Months Ended March 31, 2023 and 2022 |
(Unaudited) | (Unaudited) | (Unaudited) |
| | Common Equity | | |
| Common Stock | | Retained Earnings | | Total | |
| (In Thousands) | |
| Balance at December 31, 2020 | $951,850 | | | $128,696 | | | $1,080,546 | | |
| Net income | — | | | 23,864 | | | 23,864 | | |
Common stock dividends and distributions | — | | | (21,000) | | | (21,000) | | |
Balance at March 31, 2021 | $951,850 | | | $131,560 | | | $1,083,410 | | |
| | | | | Common Equity | |
| | | Common Stock | | Retained Earnings (Accumulated Deficit) | | Total |
| | | (In Thousands) |
| Balance at December 31, 2021 | Balance at December 31, 2021 | $951,850 | | | $139,510 | | | $1,091,360 | | Balance at December 31, 2021 | $951,850 | | | $139,510 | | | $1,091,360 | |
| Net income | Net income | — | | | 31,432 | | | 31,432 | | Net income | — | | | 31,432 | | | 31,432 | |
| Balance at March 31, 2022 | Balance at March 31, 2022 | $951,850 | | | $170,942 | | | $1,122,792 | | Balance at March 31, 2022 | $951,850 | | | $170,942 | | | $1,122,792 | |
| | | Balance at December 31, 2022 | | Balance at December 31, 2022 | $1,086,850 | | | ($137,083) | | | $949,767 | |
| Net income | | Net income | — | | | 27,545 | | | 27,545 | |
| Balance at March 31, 2023 | | Balance at March 31, 2023 | $1,086,850 | | | ($109,538) | | | $977,312 | |
| | See Notes to Financial Statements. | See Notes to Financial Statements. | | 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 Notes 1 and 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
SeeThere have been no material changes to the risk factors discussed in "Part I, Item 1A. RISK FACTORS" in the Form 10-K, which could materially affect Entergy's and its Registrant Subsidiaries' business, financial condition, or future results. The information set forth in this report, including the risk factor presented below, updates and should be read in conjunction with the risk factors and information disclosed in the Form 10-K.
The completion of capital projects, including the construction of power generation facilities, and other capital improvements involve substantial risks. Should such efforts be unsuccessful, the financial condition, results of operations, or liquidity of Entergy and the Utility operating companies could be materially affected.
Entergy’s and the Utility operating companies’ ability to complete capital projects, including the construction of power generation facilities, or make other capital improvements, in a timely manner and within budget is contingent upon many variables and subject to substantial risks. These variables include, but are not limited to, project management expertise, escalating costs for materials, labor, and environmental compliance, reliance on suppliers for timely and satisfactory performance, and pandemic-related delays and cost increases. Delays in obtaining permits, shortages in materials and qualified labor, levels of public support or opposition, suppliers and contractors not performing as expected or required under their contracts and/or experiencing financial problems that inhibit their ability to fulfill their obligations under contracts, changes in the scope and timing of projects, poor quality initial cost estimates from contractors, the inability to raise capital on favorable terms, changes in commodity prices affecting revenue, fuel costs, or materials costs, downward changes in the economy, changes in law or regulation, including environmental compliance requirements, trade and tariff issues associated with imported solar panels, supply chain delays or disruptions, and other events beyond the control of the Utility operating companies or the Entergy Wholesale Commodities business may occur that may materially affect the schedule, cost, and performance of these projects. If these projects or other capital improvements are significantly delayed or become subject to cost overruns or cancellation, Entergy and the Utility operating companies could incur additional costs and termination payments, or face increased risk of potential write-off of the investment in the project. In addition, the Utility operating companies could be exposed to higher costs and market volatility, which could affect cash flow and cost recovery, should their respective regulators decline to approve the construction of the project or new generation needed to meet the reliability needs of customers at the lowest reasonable cost.
For further information regarding capital expenditure plans and other uses of capital in connection with capital projects, including the potential construction and/or purchase of additional generation supply sources within the Utility operating companies’ service territory, see the “Liquidity and Capital Resources - Capital Expenditure Plans and Other Uses of Capital” section of Management’s Financial Discussion and Analysis for Entergy herein and in the Form 10-K and the “Liquidity and Capital Resources - Uses of Capital” section of Management’s Financial Discussion and Analysis in the Form 10-K and the “Liquidity and Capital Resources - Uses and Sources of Capital” section of Management’s Financial Discussion and Analysis herein for each of the Registrant Subsidiaries.
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 $Dollar Amount of Shares that May Yet be Purchased Under a Plan (b) |
| | | | | | | | |
1/01/2022-1/2023-1/31/20222023 | | — | | | $— | | | — | | | $350,052,918 | |
2/01/2022-2/2023-2/28/20222023 | | — | | | $— | | | — | | | $350,052,918 | |
3/01/2022-3/2023-3/31/20222023 | | — | | | $— | | | — | | | $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 2022,2023, Entergy withheld 79,73871,722 shares of its common stock at $110.35$108.71 per share, 77,20727,533 shares of its common stock at $111.16$107.69 per share, 35,94012,265 shares of its common stock at $111.77$107.59 per share, 1,219551 shares of its common stock at $109.01 per share, 577 shares of its common stock at $106.62$103.72 per share, 232 shares of its common stock at $110.77$106.07 per share, 87and 100 shares of its common stock at $109.01 per share, and 82 shares of its common stock at $111.47$105.79 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 dollar 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 20222023 filings with the NRC were made reporting on decommissioning funding for Palisades and the Big Rock Point dry fuel storage facility. all of Entergy’s subsidiaries’ nuclear plants.Those reports showed that decommissioning funding for those facilitieseach of the nuclear plants met the NRC’s financial assurance requirements.
Environmental Regulation
Following are updatesis an update to the “Environmental Regulation” section of Part I, Item 1 of the Form 10-K.
National Ambient Air Quality Standards
See the Form 10-K for discussion of the National Ambient Air Quality Standards (NAAQS) set by the EPA in accordance with the Clean Air Act. Following are updatesis an update to that discussion.
Hazardous Air Pollutants
The EPA released the final Mercury and Air Toxics Standard (MATS) rule in December 2011, which had a compliance date, with a widely granted one-year extension, of April 2016. The required controls have been installed and are operational at all affected Entergy units. In May 2020 the EPA finalized a rule that finds that it is not “appropriate and necessary” to regulate hazardous air pollutants from electric steam generating units under the provisions of section 112(n) of the Clean Air Act. This is a reversal of the EPA’s previous finding requiring such regulation. The final appropriate and necessary finding does not revise the underlying MATS rule. Several lawsuits have been filed challenging the appropriate and necessary finding. In February 2021 the D.C. Circuit granted the EPA’s motion to hold the litigation in abeyance pending the agency’s review of the appropriate and necessary rule. In February 2022 the EPA issued a proposed rule revoking the 2020 rule and determining, again, that it is “appropriate and necessary” to regulate hazardous air pollutants. The EPA is seeking additional information, which it could use to further tighten the standard. Entergy will continue to monitor this situation.
Good Neighbor Plan/Cross-State Air Pollution Rule
As discussed in the Form 10-K, the Cross-State Air Pollution Rule (CSAPR) has been remanded to and modified byIn March 2023 the EPA on multiple occasions. In April 2022released its final rule, known as the EPA published a ruleGood Neighbor Plan, to address interstate transport for the 2015 ozone NAAQS and which will increase the stringency of the CSAPRCross-State Air Pollution Rule program in all four of the states where the Utility operating companies operate. If finalized as proposed, theThe rule will significantly reduce emission allowances and would likely require the installation of post-combustionozone season nitrogen oxides (NOx) emission allowance budgets and allocations for electric generating units. Entergy is currently assessing its compliance options for the final rule. This may include the installation of post-combustion NOxemissions controls on anycertain coal or large legacy gas units that will operate beyond 2026 and are not currently equipped with such controls, including certaincontrols. Prior to issuance of Entergy’s plants. Additionallythe final rule, in February 2023 the EPA is proposing controls on certain non-electric generating NOx sources. Since releasing the proposed rule, the price for Group 3 allowances has increased to $8,500 per allowance. Comments on the proposed rule are due in June 2022, and Entergy is currently evaluating the publication.
Regional Haze
As discussed in the Form 10-K, the second planning period (2018-2028) for the regional haze program required states to examine sources for impacts on visibility and to prepareissued related State Implementation Plans (SIPs) by July 31, 2021Plan (SIP) disapprovals for many states, including the four states in which the Arkansas DepartmentUtility operating companies operate, and these SIP disapprovals are the subject of Energy and Environment, Division of Environmental Quality (ADEQ) did not meet. The ADEQ releasedmany legal challenges, including a draft proposed SIP in February 2022. The ADEQ reviewed Entergy’s Independence plant, but determined that additional air emission controls would not be cost-effective considering the facility’s commitment to cease coal-fired combustion by December 31, 2030. The ADEQ is expected to finalize this SIP and submit to the EPApetition for review filed by Entergy Louisiana challenging the enddisapproval of 2022.
Louisiana’s SIP.
The Texas Commission on Environmental Quality has completed its second-planning period SIP and submitted it to the EPA for review. There were no Entergy sources selected for additional emission controls. The Mississippi Department of Environmental Quality continues to develop its SIP, but there are no Entergy sources that are expected to be impacted.
Item 6. Exhibits
| | | | | | | | |
| 4(a) - | |
| | |
| 10(a) - | Forty-first Assignment of Availability Agreement, Consent and Agreement, dated as of AprilMarch 14, 2022,2023, among System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and The Bank of New York Mellon, as Borrower, the banks and other financial institutions listed on the signature pages thereof, as Lenders, and Citibank, N.A., as Administrative Agent (4.1successor trustee (4.77 to Form 8-K filed AprilMarch 14, 20222023 in 1-31508)1-09067). |
| | |
| *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 - | 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 Label Linkbase Document. |
| | |
| *101 CAL - | Inline XBRL 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/ Kimberly A. FontanReginald T. Jackson |
Kimberly A. FontanReginald T. Jackson Senior Vice President and Chief Accounting Officer (For each Registrant and for each as Principal Accounting Officer) |
Date: May 5, 20224, 2023